U.K. to Ban New Huawei 5G Equipment

The U.K. government has confirmed a ban on using equipment from Chinese supplier Huawei in 5G networks, due to national security risks. Under the new plan, U.K. operators will be barred from acquiring new Huawei 5G equipment after 31 December 2020 and will have until the end of 2027 to replace existing Huawei equipment in their 5G networks. The government also plans to recommend that fiber networks not use Huawei equipment. 

In January the U.K. decided to exclude so-called high-risk vendors from core parts of the country’s 5G networks and limit the role of risky suppliers in other parts of mobile networks. Huawei was expected to fall under the designation of high-risk vendors, after having already been subject to increased security checks in the U.K. for several years.

The government sought new advice from the National Cyber Security Centre (NCSC) after the U.S. imposed new sanctions against Huawei in May. These sanctions are expected to limit the company’s access to components from U.S.-based suppliers and increase its reliance on Chinese elements. The NCSC found that “there are no alternatives [to U.S. suppliers] which we have sufficient confidence in,” and this makes it “impossible to continue to guarantee the security of Huawei equipment in the future,” according to the U.K.’s digital secretary, Oliver Dowden. 

After having resisted U.S. pressure to eliminate Huawei components from its 5G infrastructure, the U.K. has decided to comply with the Trump administration’s demands on the matter. Two main factors were at work here. For one, Prime Minister Boris Johnson was under pressure from members of his Conservative party to take a harder line against China. And for another, the U.S. sanctions affecting Huawei’s supply chain isolated the Chinese manufacturer and made its components even harder to trust.

Although there is a good deal of Huawei technology already in place in 5G network infrastructure in the U.K., the ban on any further use of it beginning with the start of 2021 is certain to have a major effect on the country’s rollout of the high-speed technology, and on mobile operators. Digital Secretary Dowden, in remarks announcing the ban, did not shy away from mentioning the negative consequences. He said that the decision would delay the roll-out of 5G networks by around a year—on top of the year’s delay already caused by the imposition of restrictions on “core” parts of the networks back in January—and add up to £500 million (US $627 million) in costs. Dowden also said that requiring operators also to scrap existing Huawei equipment by 2027 will increase the bill by around £2 billion (US $2.5 billion) and extend the delay in 5G networks to two to three years, although he added that the 2027 deadline should provide enough time to ensure there are no disruptions to services.

Whether the ban and the phase-out will ultimately protect the U.K. against cyber-intrusions from China remains to be seen, of course. The connected mobile world is an exceedingly complex place, and technology is constantly changing. In any case, though, the present policy will have the effect of bolstering the business of 5G equipment suppliers outside China, such as Nokia and Ericsson, and even of promoting further innovation among them.

Tarifica is a global SaaS company and a market leader in the real-time collection, analysis and delivery of telecom plan and pricing data worldwide. Through a mix of AI, modeling and market expertise, Tarifica tracks hundreds of thousands of plan and pricing data points daily. No other company tracks more. Tarifica's mission is to continuously convert data into the dynamic intelligence that fuels opportunities for its clients, the world's leading operators, regulators and consultants. 

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TPG Stops Mobile Network Rollout Due to Huawei Equipment Ban

Australian operator TPG Telecom has announced that “due to factors outside TPG control, it has decided to cease the rollout of its mobile network in Australia.” Since the announcement of its mobile network strategy in April 2017, TPG has been designing and implementing a mobile network based mainly on small-cell architecture. The principal equipment vendor selected for use in the network was Huawei, and the Chinese vendor was supposed to enable TPG’s upgrade to 5G. However, TPG said, in light of the Australian government’s announcement last August that it would prohibit the use of Huawei equipment in 5G networks, that upgrade path has now been blocked.

Since that announcement, TPG has continued to deploy equipment which it had ordered from Huawei prior to the government’s ban, but having reached the decision point as to whether or not to place orders for additional Huawei equipment, TPG has concluded that “it does not make sense to invest further shareholder funds in a network that cannot be upgraded to 5G.”

The operator says it has already invested around AUD 100 million (US $71.8 million) in the network rollout. Prior to August 2018, it had acquired equipment for 1,500 sites, and to date it has fully or partially completed the implementation of around 900 small-cell sites. Additional capex of AUD 30 million (US $21.5 million) is already committed, TPG added.

In last week’s Story of the Week, we wrote about the Dutch government’s consideration of a plan to place restrictions on Chinese suppliers of equipment to build out 5G networks in the Netherlands. We pointed out that development of next-generation network technology without sufficient concern for security is risky, and that the particular risk of spying and disruption from China—to be achieved through Chinese-made equipment—makes it imperative to take seriously the idea of restricting the role of such equipment in 5G projects.

However, as the present example from Australia shows, that course of action is not without risks of its own—including foreclosing the possibility of 5G development in the case of some operators.

Australia did not ban all Chinese-made equipment, but last summer it did impose a total ban on equipment from one Chinese supplier, Huawei, which happens to be the biggest telecom equipment maker in the world. The resulting lack of access to its devices was enough to doom the 5G development of one operator, TPG, and as a consequence, of TPG’s entire mobile-network project.

TPG is an internet service provider and also owns Australia’s largest MVNO; it had been planning on becoming an MNO, as well—an ambition that now cannot be achieved. We should bear in mind that restrictions on Chinese equipment such as Australia’s will not necessarily have such as dramatic effect on other operators’ plans; TPG was building a network from the ground up, and since it was a new entrant into the MNO market, it was of course more vulnerable than established actors. Still, the case contains a lesson, which is that banning access to equipment, while potentially a very sound idea in terms of cybersecurity, can have a chilling effect on 5G and even 4G development, under certain circumstances.

Therefore, governments should bear that in mind and do whatever they can to make alternatives available and encourage technological development by every means possible. Just this week, German operator Deutsche Telekom warned that Europe would fall behind the U.S. and China if European governments ban Huawei equipment. The German government is currently considering a ban, and DT estimates that if enacted, it would delay the rollout of 5G by at least two years.

As a side note, we should point out that last week we quoted the former chief regulator of the U.S., Tom Wheeler, to the effect that in its effort to win the 5G “arms race,” the U.S. government is not doing enough to promote security. This week, a U.S. media report states that the U.S. is about to come out with a sweeping ban on U.S. companies using Chinese-made 5G equipment and is pressuring allies such as Britain and Poland to do likewise.

 Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance.  If you have any questions about this article, feel free to contact our Editor-in-chief John Dorfman at jdorfman@tarifica.com

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Dutch Government Mulls Restrictions on Chinese 5G Suppliers

The Dutch government may look at restricting the use of Chinese network equipment suppliers such as ZTE and Huawei in the conditions of the upcoming 5G tender, according to a news report. The China strategy that the state presented last year will also be taken into account, according to a spokesperson for the economic affairs ministry.

The Netherlands’ strategy looks to protect sensitive technology from Chinese state-supported companies. The Dutch intelligence service AIVD has already warned of Chinese spying activity in the Netherlands. 

Tim Sweijs, at the Centre for Strategic Studies in The Hague (HCSS), an organization that advises the Dutch government on international security trends, said that the 5G networks will be a utility to be used as vital infrastructure for the economy and society in the future. As such, it is not advisable to leave such networks to untrustworthy parties, he said.

Sweijs noted that Chinese suppliers do not need to be completely excluded from the roll-out of 5G networks, pointing to the example of BT, which uses Chinese suppliers for parts of its radio network, but not the core network.

Historically, mobile operators, technology suppliers, and national governments have been extremely motivated to pursue maximum speed in the deployment of next-generation networks, within the confines of economic feasibility. In the case of 5G, which is expected to be rolled out in advanced markets during 2019, there are reasons to believe that matters are different.

That is largely because of the nature of 5G itself and because of some of the purposes to which it can and will be put. It is also due in part to greater awareness across the board about the dangers of hacking.

5G networks offer higher speeds, of course—indeed, up to 100 times higher than 4G/LTE. But the 5G era, when it fully arrives, will offer more than just increased speed to make current applications of mobile technology work faster and more efficiently. It will enable technologies to operate that simply would not have been feasible under 4G. In other words, it will bring about a quantum leap rather than an incremental improvement.

This situation was explained lucidly in an article by former chief U.S. regulator Tom Wheeler, published this week in the New York Times. Wheeler, who chaired the Federal Communications Commission from 2013 to 2017, cited self-driving cars as a key example, writing, “The autonomous car is something vastly different, in which the 5G network allows computers to orchestrate a flood of information from multitudes of input sensors for real time, on-the-fly decision-making. It is estimated that the data output of a single autonomous vehicle in one day will be equal to today’s daily data output of three thousand people.” Wheeler argues that since 5G will enable this and other complex systems, many of which will profoundly affect the safety of human lives, the imperative to protect it from hacking is greater than with any mobile network to date. Because of 5G’s capacity to link devices and create a “smart” future, the stakes have been very significantly raised.

Wheeler, like the Dutch government regulators, points to China as a particular risk—in fact, the biggest risk right now. He believes that the U.S. is pursuing hurried development of next-generation networks while neglecting cybersecurity, in large part because of a Trump administration policy of treating the process as an “arms race” with China to be first in 5G. This is particularly ironic in that industry watchers generally identify China as the number-one cybersecurity threat to future U.S. 5G networks.

The government in the Netherlands is considering a more cautious approach. Aware that cooperation with Chinese technology companies could lead to introducing spyware into the country’s emerging 5G ecosystem, they may move to limit—though not entirely eliminate the involvement of these companies and their products, which are building blocks for 5G. Considering the degree of Chinese government control of Chinese companies, this would appear to be a wise strategy. While looking for technology partners other than Huawei and ZTE may slow down the development process to some extent, the delay, if there is one, would end up being very worthwhile in the long run. Mobile operators, of course, stand to benefit hugely from the development and widespread adoption of 5G, but we believe that caution is necessary—more so than ever before. 

 Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance.  

To learn more about Tarifica, please visit www.tarifica.com 

Telefónica Deutschland Partners With Huawei for Real-Time Data-Use App

Customers of Telefónica Deutschland will soon be able to view their data consumption in real time thanks to a new partnership between Telefónica and Chinese device manufacturer Huawei. The operator will use Huawei’s newest online charging system (New Generation OCS) to deliver invoices of users’ data consumption and thus meet increasing customer demand for such information.
 
All of Telefónica’s prepaid and postpaid customers will have access to their consumption data in real-time, either via Huawei’s app or a customer portal of the operator’s. Huawei’s New Generation OCS will provide the technical underpinning for these invoices, as well as for future voice and data services.
 
In today’s mobile markets, especially the developed ones such as Germany but not limited to them, consumers are using more and more data. They are also demanding and getting more choice with respect to their data packages, which operators are offering with ever-growing focus and variations.
 
With these two trends in mind, it stands to reason that users want to know the particulars of their data usage as it occurs. While budget-minded users—and indeed pretty much anyone not on a truly “unlimited” plan—would ideally want to have this information, in this era of plan flexibility and design-your-own bundles, real-time information about data use is even more important and desirable. With it, users are able to have the metrics they need to make informed choices not only about their data usage patterns and spending but also about plan choice going forward.
 
The Telefónica–Huawei app will allow customers of the operator to do their own analysis, seeing not only how much data they used and when but also to distinguish between various applications and functionalities on the basis of relative data consumption.
 
We believe that this partnership, while it will not directly drive large amounts of revenue to Telefónica, it's a good idea because of it's positive impact on customer relations and by extension, on customer retention and acquisition. Providing this kind of transparency in real-time format is attractive to many different types of subscribers. It is an excellent idea to make it available to both prepaid and postpaid users. If the app ends up being as easy to use as promised, it will give a big boost to customer satisfaction and confidence in the operator.

Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance.  

To learn more about Tarifica, please visit www.tarifica.com 

Huawei Romania Smartphone Sales Up 48 Percent in First Half of 2015

Huawei Romania’s sales of smartphones increased by 48 percent year-on-year in the first half, to 130,000 units, according to a report that cited the country manager of Huawei Devices Romania, Sorina Macarescu. In spite of the increase in sales, the average selling price for handsets is declining, Huawei said. Mobile operators represent the most important sales channel for the company, Macarescu said. Huawei’s smartphone models are offered by all Romanian mobile operators—Orange Romania, Vodafone Romania, Telekom Romania Mobile Communications and RCS & RDS’ Digi Mobil. The success of Huawei indicates a salient fact about today’s global smartphone market—that as technologies develop, budget-priced devices are closing the gap with high-priced premium devices like the iPhone and Samsung Galaxy in terms of features and reliability. Huawei has been particularly aggressive in expanding beyond China and other Asian markets into the rest of the world. In Romania, a less-affluent European market, Huawei’s smartphones have clearly taken on a dominant role. The lesson for mobile operators, in Romania as elsewhere, is that they can expect to rely less and less on smartphone sales as a revenue driver in the future. In this particular market, for example, prices are falling even as sales are rising. However, while low-priced devices will drive less revenue in terms of sales, they will drive revenue in the long term by virtue of their ability to increase demand for data among a widening user base.

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Cell C to Invest ZAR 8 Billion in LTE Network

South African mobile operator Cell C has said it will invest ZAR 8 billion (US $667 million) in building an LTE network over the next three years as it seeks to improve its position in the country’s highly competitive market. Cell C is South Africa’s third-largest operator. The MNO, which has partnered with Chinese vendors Huawei and ZTE as its primary network equipment suppliers, plans to deploy more than 4,000 LTE sites; however, it will continue to use 3G service in the country’s less populated areas. According to Cell C CEO Jose Dos Santos, the operator wants to ensure that every LTE site is linked to its fiber backbone in order to provide customers with the highest level of service.

South Africa’s dynamic mobile market has one of the most robust mobile broadband infrastructures on the continent, despite its lack of LTE licensing due to a year’s delay in spectrum allocation. According to recent reports, all of South Africa’s operators have been making heavy investments in mobile networks. In addition to Cell C’s ZAR 8 billion deployment, Vodacom, which has the largest number of LTE sites (about 2,000 stations), is investing ZAR 8.5 billion (US $708 million) in its network. MTN currently has 1,000 LTE sites and it is investing ZAR 10 billion (US $833 million) to improve its grid. This amount almost doubles MTN’s capex in 2014. Telkom has around 1,300 LTE sites and a very extensive fiber network.

We believe it is not only smart but also necessary for Cell C to invest in LTE infrastructure. As the demand for data services continues to increase in South Africa, we will not be surprised to see all of the country’s operators making further investments. As South African consumers experience their first access to the internet, spurred by the uptake of affordable smartphones, and learn that mobile data can be used to access financial services as well as information and entertainment content, their demands for larger data packages are increasing. Additionally, South Africans’ increased use of OTT services has led to the need for larger data allowances. While mobile packages that satisfy users’ demands for larger data allowances will bring in revenue for the country’s operators, there is the risk that this demand will outpace investment. So while Cell C is trying to bring its level of LTE deployment up to that of South Africa’s other major MNOs, its strategic rollout, particularly in heavily populated urban areas, is a good way to justify and receive a better rate of return on its investment. As time progresses the country’s operators may engage in network sharing as a way to build out infrastructure in rural areas.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: Click here.

Warid Telecom, Bank Alfalah Partner on LTE Handset Offer

Pakistani mobile operator Warid Telecom has launched an LTE handset offer in partnership with the country’s Bank Alfalah. Warid’s postpaid customers who have a Bank Alfalah credit card with an adequate line of credit can avail themselves of an offer to purchase select smartphones on either of two installment plans—6 months or 12 months. The seven available devices include handsets from Huawei, Nokia, Samsung and Sony. Monthly costs for 6-month installment plans range from PKR 8,207.00 (US $81.34) for the Huawei Ascend P7 to PKR 15,513.00 (US $153.75) for the Samsung Galaxy Note 4. The 12-month installment plans, with the same range of devices, cost from PKR 4,503.00 (US $44.63) to PKR 8,157.00 (US $80.84) per month. Warid Telecom is also giving 8 GB of mobile data at no cost to customers who purchase any of the handsets on an installment plan.

Warid Telecom’s 26 December launch of 4G service made it the second of the country’s operators to launch 4G service, after Zong. It is not surprising that the country’s smaller operators launched 4G ahead of the larger ones. Pakistan experienced delays for many years in launching 3G service—it issued its first 3G licenses in April 2014—and with the country being so late in launching 3G compared to other nations in South Asia, it makes sense for the relatively small operators to move ahead faster with 4G deployment so as to gain advantage over their larger competitors. Warid Telecom’s strategy to promote 4G handsets in a partnership with Alfalah Bank, as well as the 8 GB of mobile data that customers who purchase these devices on installment receive at no cost, will likely help increase the operator’s 4G subscribers.

Although this offer requires the use of a credit card, it is interesting that Warid has chosen to partner with a banking institution, perhaps as a first step in trying to spark more use of mobile money by its subscribers. While the expansion of mobile money applications has been occurring quite dramatically in developing countries, Pakistan has witnessed relatively little of it in comparison with other emerging markets, particularly with regard to mobile wallet use by consumers. Warid’s offer, which appears to have been strategically developed to expand the ability to use 4G service, may also drive an increase in the use of mobile wallets by the country’s unbanked and underbanked population.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx