UK Allows Huawei Limited Access to Its 5G Infrastructure – What Will Be Trump’s Reaction?
After days of frenzied speculation, Britain has allowed a limited role to the Chinese telecommunication giant Huawei in the domestic rollout of the next generation 5G wireless network. The move, however, represents a symbolic defeat for the campaign by the U.S. to prevent the Chinese tech giant from participating in the deployment of this wireless technology within the geographical jurisdictions of America’s allies.
The National Security Council (NSC) of Britain deliberated on two options: either impose a blanket ban on Huawei or impose limits on its market share and the extent of the tech giant’s participation in ‘core’ network areas. The council appears to have opted for the latter option.
According to the emerging reports, the NSC has stipulated that Huawei’s telecommunication gear will not be deployed near sensitive geographical locations such as nuclear sites and military bases. Moreover, the Chinese tech giant will be "limited to a minority presence of no more than 35 percent in the periphery of the network, known as the access network ..."
Bear in mind that the Theresa May’s government considered the imposition of market share caps last year on Huawei vis-à-vis its participation in UK’s 5G network deployment. However, now that this threshold of 35 percent has been finalized, it will increase the total cost of the next-gen network rollout in the country as a proportion of Huawei’s gear that has already been installed will have to be swapped with that sourced from Ericsson (STO:ERIC-B), Nokia (HEL:NOKIA) and Samsung (KRX:005930).
Huawei decision will inflame tensions with the U.S.
The U.S. has been engaged in a public campaign for months in order to prevent further entrenchment of Huawei within the territories of its allies. As an illustration, the U.S. Secretary of State Mike Pompeo sent out the following tweet over the weekend:
“The U.K. has a momentous decision ahead on 5G”
In his tweet, Pompeo appears to be agreeing with an opinion article from British Conservative lawmaker, Tom Tugendhat, who said:
“The truth is that only nations able to protect their data will be sovereign.”
The officials in the U.S are concerned that an active role of Huawei in UK’s 5G network will compromise the ability of the two nations to securely exchange intelligence. After all, this ability forms one of the cornerstones in the ‘special relationship’ that has existed between the U.S and UK for decades.
UK’s stance on Huawei might also complicate its negotiations with the Trump administration on another thorny issue – digital taxes. As a refresher, efforts are presently underway at the OECD to carve out new tax rules that limit the propensity of tech giants to engage in tax shielding practices. The forum had proposed in October that governments should tear up a century of taxation precedent by allowing individual countries to tax operations in their jurisdiction even if those companies have no physical presence there.
Nonetheless, given that UK’s NSC excluded Huawei from participating in the critical portions of the 5G network, the Trump administration might be able to claim partial victory in that its concerns were heeded.
Readers should remember that Washington has repeatedly stressed that Huawei provides Beijing a ‘backdoor’ access to sensitive network information. These claims are bolstered by the existence of Chinese laws that require domestic companies to assist Beijing in intelligence collection. Huawei, for its part, has consistently denied providing China’s government any access to sensitive information.