German government officials have agreed how they could restrict the use of Huawei’s telecoms equipment when phone companies start building up their high-speed 5G networks in Germany.
Following up on US warnings that Huawei equipment could be used for Chinese spying, the Federal Network Agency and the Federal Office for Information Security, known by its German acronym as BSI, will propose tougher security standards, people familiar with the matter told Handelsblatt. The measures should be drafted within weeks ahead of Germany’s 5G auction in mid-March.
Ministries involved in the talks declined to comment, but the BSI confirmed that a high-level meeting had taken place on Wednesday, without elaborating.
The BSI and Network Agency will draft rules that would force any telecoms company to have its equipment certified by the BSI as well as to disclose the source codes operating the gear, sources said. The latter measure would allow regulators to discover so-called backdoors and detect monitoring of otherwise encrypted data flows. German officials will also discuss a change of the telecommunications law
The new policy would effectively block Huawei devices from the core 5G networks in Germany as well as existing 2G, 3G and 4G networks. The core network consists of the computers, routers and switches that manage data flows; it excludes network towers or Wi-Fi routers for instance.
A complete ban of Huawei, founded by a former officer of the People’s Liberation Army, Ren Zhengfei, in 1987, is not under consideration. With stricter security policies, Germany would follow more or less in Britain’s footsteps, although UK's IT regulator has banned Huawei from certain sensitive areas, such as technology to transmit data to prosecutors.
The US has banned Huawei (pronounced “wah-way”) from government procurement, discourages domestic companies from using the Chinese supplier, and urges allies to do the same. US security experts fear China’s government could use Huawei equipment to eavesdrop on Western nations – a concern Huawei has dismissed as unfounded. Australia and New Zealand have banned the Chinese company from supplying its 5G network.
Huawei has also become embroiled in allegations money laundering and sanctions violations that led to the December arrest in Canada of the company’s chief financial officer, Meng Wanzhou, who is also the daughter of company founder Ren Zhengfei. She is being held pending extradition to the US.
What concerns German policymakers is their belief that Chinese companies are legally obliged to share data with Beijing. "Of course, Huawei is a Chinese company and is also subject to Chinese legislation," said a Foreign Office spokesman. "There are some passages that worry us. This also applies to the obligation of Chinese companies to cooperate with intelligence services."
Preparing for a ban
Telecoms companies are trying to prevent a ban on Huawei equipment, industry sources said. However, Deutsche Telekom and Telefónica, which operates the O2 network in Germany, are already running through scenarios how to remove all Huawei equipment from their core networks, Handelsblatt has learned. Vodafone, the third operator in Germany, barely uses Huawei gear in its core network.
If Huawei equipment were to be banned from the whole core network (from 2G to 5G), Telefonica Germany would need more than a couple of months to do so, a company spokesman said. The telecoms operator also uses equipment from Nokia and Ericsson, respectively based in Finland and Sweden, for its German core network.
German experts say banning Huawei from supplying 5G networks in Europe, even from just the sensitive core networks, would significantly delay construction and add massively to costs since other suppliers are not in a position replace its equipment. The measures Berlin is now considering are largely in line with what Deutsche Telekom had proposed.
Executive board members of telecoms companies met with government officials, before the latter decided to focus on restricting security standards. The discussions involved representatives and deputy ministers from four ministries as well as from Angela Merkel’s office.
Asked about the plans in Germany, Huawei said it welcomes any initiative to set objective security criteria and inspection mechanisms that would scrutinize the technology of every supplier regardless of country of origin.
In addition to stricter German rules, European telecom operators may face even more regulations coming from the European Union, diplomatic sources said. Officials in Brussels are thinking of extending a 2016 cybersecurity law prohibiting companies suspected of espionage from supplying projects deemed to be essential infrastructure. This could affect Huawei as well as ZTE, another Chinese telecommunications equipment maker.
The European Commission could also set new standards for procurement or recommend countries to favor equipment from Nokia and Ericsson. “It is clear, that the Commission has to act,” said an EU source.
New policies from Brussels, however, are not expected until after the EU parliamentary election in May. In Germany, this is a different story: telecoms companies want clarity ahead of the 5G auction next month. Restrictions on which suppliers they can turn to, could impact how much they are willing to bid.
Dana Heide covers digital policy for Handelsblatt in Berlin. Till Hoppe is a Brussels correspondent. Stephan Scheuer covers the telecommunications sector. Darrell Delamaide adapted this story into English for Handelsblatt Today. To contact the authors: [email protected], [email protected], and [email protected]