16 October 2020
Our government’s decision to ban Chinese tech equipment maker Huawei from all British communications networks by 2027 has thrown serious doubt into what had only recently seemed a settled national plan on how we would migrate our critical telecommunications to the next level: 5, for 5th, generation mobile comms.
Digital Secretary Oliver Dowden said we needed to do this as a country because, "5G will be transformative for our country, but only if we have confidence in the security and resilience of the infrastructure it is built upon.” Undoubtedly so, but this decision has also created a real difficulty: since 5G is still expected to unlock significant economic benefits for the nation, there is now an urgent need to secure alternative partners to ensure that these benefits can be realised. Plus, not only do operators now have to plan for the removal of Huawei from their networks, they must also cope with the retirement of many existing platforms from vendors such as Alcatel-Lucent and Siemens.
These headaches reflect a complex procurement picture. The final decision to ban Huawei was based on UK-wide security concerns, but industry insiders had long been concerned about the risk that leading operators were increasingly dependent on a single supplier. And the story of how a G7 economy like the UK’s ended up in such a precarious position reflect decades of poor judgment and a woeful lack of long-term industrial planning.
Arguably, we already had our ‘own’ Huawei’. In 2005, when BT announced the supplier list for a major series of upgrades that would transform its network and operations, Marconi, an independent UK vendor with a broad ecosystem of suppliers and partners, was expected to deliver a major part of the key contracts. However, Marconi was edged out in favour of a new entrant from China, Huawei, which had few major European customers—something seen - even back then - as a “fatal decision” for the company.
So it proved to be. Within a year, directly as a result of this decision, this local champion was gone, and with it, a hard-won reputation for innovation, as well as a lot of UK talent and skills. Huawei eagerly filled the vacuum and now most mobile service operators use it, somewhere in their networks. Marconi was a much bigger strategic loss than MG Rover, which ended up dominating the headlines of the day, although few realised it at the time.
In any case, BT’s decision almost killed off the UK telecom industry, certainly disrupting a useful telco infrastructure ecosystem that had grown up around the manufacturer over decades. Choosing a provider on what were largely cost grounds led to massive value destruction in a key sector, and created a future security problem that has led to the current situation.
Today, with 5G on the horizon, with all of its potential to digitally enhance post-Brexit UK industry – spanning a host of sectors, such as smart cities, utilities, manufacturing and the like - the impact is still being felt. (There are other puzzles about the original BT decision to back Huawei for 5G that many in the sector also felt unconvinced by, such as trying to restrict it to the core. 5G is distributed, with much of the action taking place at the edge, so as a result, the line between edge and core is too blurred to maintain such a clear distinction).
But that’s the past, and we have to deal with the reality of where we are now. On the one hand, pursuit of ever-lower prices has eliminated much of the UK’s telecoms supplier industry. On the other, barriers to entry (compliance to international mobile standards, for example), mean new suppliers struggle. Investing in R&D is expensive, and procurement cycles favour large incumbents.
Dealing with post-Huawei realities
Our options are now constrained, for sure, but we do still have some. In the UK, 5G will not be ‘greenfield’ (built afresh) for the dominant operators. It will be added to existing infrastructure. Consequently, suppliers must have to be able to address all generations of mobile technology, increasing barriers to entry for new stakeholders (and even some established providers). Samsung, for example, is eying the British 5G opportunity but is hampered by lack of coverage for legacy 2G and 3G technologies, which restricts the domains in which its solutions can be deployed.
However, there are some grounds for optimism. First, there are still a few independent vendors that can deliver proven solutions. The barrier to accepting these lies with the operators, that are used to cosy single-vendor relationships. Second, there are now various open initiatives for the Radio Access Network – the wireless part of the mobile network - which may create a new generation of UK suppliers, with increasingly competitive solutions.
Third, power may shift from operators to private industry. Why? Because industrial 5G may be delivered through private, not public networks, which do not demand the scale that a tier one vendor offers. In this sector, greenfield opportunities mean that there is no need to wrestle with legacy issues. In fact, it’s quite likely that there will be hundreds, if not thousands of relatively small, self-contained 5G networks, which will have nothing to do with the country-wide deployments of the leading operators.
But if these activities are to be sustained and nurtured and if the UK is to seize the 5G opportunity and ensure it is properly adopted where it really makes a difference, HMG must do more to rebuild and protect the fragmented supply chain in compensation for the elimination of a key vendor. It can do this and open the 5G door, as well as creating thousands of new, high-skill, high-paying jobs by:
• better supporting R&D like beefing up Innovate UK
• incentivise local purchasing Having told operators that it can’t choose one vendor, government can do more to help operators find relevant suppliers
• create a national 5G plan Put some real budget behind helping independent British vendors to foster and grow a UK-wide digital/5G market
• promote trade With a real budget that will assist smaller vendors and new entrants; while some subsidies have long been available, they do not reach the levels enjoyed by some peers from other countries
• identify and nurture critical future industries You only exclude a foreign firm from your networks if you believe telecoms is clearly central to our future; what others also need to be similarly ring-fenced?
• build a credible post-Brexit hi-tech trade story
• work with the operator base to change out-dated procurement processes that favour incumbents, not innovators or agile companies Many UK SMEs and challengers can already meet the stiffest 5G technical requirements, but onerous conditions imposed on vendors mean that few can really handle the pressure of a lengthy selection process.
Summing up: you can get rid of Huawei, but it leaves a hole. We need 5G to happen if we have any chance of negotiating any kind of positive post-EU tech-powered global economic, but to get there, creative planning, some imagination and concerted effort at the top of Government will be needed.
At least for now, politicians must take on some responsibility for helping the UK telco market find a new, solid way forward post-Huawei.
By Sanjeev Verma, MD of Squire Technologies