Michael Geist:
This is Law Bytes, a podcast with Michael Geist.
CBC News:
Front and centre in Beijing today, a report from Reuters that the U.S. president is preparing to sign an executive order making it impossible for American companies to use Huawei’s equipment. A purely political move made without a shred of evidence, China says. The order would be confirmation of the U.S. stance that Huawei’s equipment could easily be used by the Chinese government to spy on Americans. The U.S. Australia and New Zealand have all banned Huawei from their networks. Canada hasn’t gone that route nor has Britain. But that may soon change.
Michael Geist:
What to do about Huawei? The Chinese telecom giant has emerged as one of Canada’s most challenging policy issues, raising concerns involving competition, communications, security, and trade. Not to mention kidnappings and arrests of corporate personnel. The government has repeatedly promised to articulate a policy on the use of Huawei equipment in Canada’s next generation wireless networks only to regularly delay doing so. Despite the attention and discussion around the company, the issues are often poorly understood by the public and even by some politicians.
Michael Geist:
Here to help sort through the exceptionally complex issues is Dr. Christopher Parsons, a senior research associate at the Citizen Lab, the world famous cybersecurity lab located at the Munk School of Global Affairs and Public Policy at the University of Toronto. Christopher specializes in third party access to telecommunications data as a research specialty, making him ideally suited to sort through fact from fiction when it comes to one of the world’s most challenging global tech policy issues.
Michael Geist:
Chris welcome to the podcast.
Christopher Parsons:
Thanks so much for having me.
Michael Geist:
I’m really glad you’ve come on because the issue that we’re going to talk to vote today – Huawei – is one where that’s generated I think an enormous amount of political and business attention both in Canada and certainly around the world. And yet despite the attention it certainly feels a bit like it’s a fairly poorly understood issue, certainly by the public and perhaps by some of the politicians as well. So I was hoping you could. Certainly at the beginning help unpack things a little bit and so why don’t we start with the basics. What is Huawei?
CBC News:
Huawei is the world’s largest supplier of everything related to telecom it sells more smartphones than Apple but is also a leader in cloud storage and cyber security. Sales for 2018 are projected to reach one hundred and two billion dollars. Ren Zhengfei founded the company in 1987. He was a former engineer for China’s People’s Liberation Army and a member of the Communist Party.
Christopher Parsons:
Huawei is a massive massive Chinese company. So they produce a large range of telecommunications products everything from core networking equipment, edge networking equipment, handsets. I think they’re doing. They’re starting to move in to video stuff as well. Really they just if it’s telecommunications related they either have a hand in it one of their product offerings or offerings that are then built in other companies products or at least prior to some of the issues with the Americans, they had intent of moving into that space right.
Michael Geist:
It feels like they’ve come a little bit out of nowhere. I mean to the extent to which consumers have heard of the company it’s probably from the smartphones because they are I think the second largest smartphone maker in the world. But it seemed like overnight you had this massive technology company suddenly now dominating business pages and is as you say in every part of the communications market.
Christopher Parsons:
Yeah I think that for a lot of people they’re sort of shocking especially people who have been in telecommunications space. Those who have been looking at routing or you know anyone who’s been looking to purchase carrier grade telecommunications equipment. I mean they’ve known Huawei for quite some time. Huawei began quite sometime ago in the way that they got it was selling carrier grade equipment and they have a whole bunch of features over some of their competitors. One of them is Huawei has enormously benefited from the relatively protected Chinese market which has meant that they’ve had a huge market that they can sell into with limited competition. And they’ve also had the advantage of a bunch of very advantageous state loans that have been provided to them at different points in their development which is facilitate facilitate both R and D, and production and then the sale of goods often at a rate that is just a better market price than something from Ericsson, Nokia, or Nortel, when Nortel was still around.
Michael Geist:
So better pricing and significant by the sounds of it support from their own government from the Chinese government. What’s their presence in Canada. I mean certainly if you walk into your local phone store you Rogers or your Bell you’ll find some of their devices. But do we find them within Canada’s large networks or are they part of the broader communications infrastructure in Canada.
Christopher Parsons:
Yeah they’re very much. So Telus is based on business reporting predominantly running a Huawei stack. Bell has included it. There is a little bit as memory serves and Rogers’s networks although they’re principally running on Ericsson kit and then for the smaller wireless providers that’s subsequently been gobbled up I’m not entirely certain what equipment they’ve they’ve invested in.
Michael Geist:
Okay but we’ve got at least a couple of the largest telecom companies two of the Big Three with significant investments in this equipment. Given that that’s the case there they’re here in Canada people are using them as their devices. I guess the question then becomes well what’s the concern. We’ve seen investment we’ve seen Canadians buy their products and we’re seeing large companies use them to run their networks.
Christopher Parsons:
Yeah. So the concern runs a whole bunch of different lines. So there is questions that have been percolating for a very long time around national security that have sort of bubbled up to the fore with 5G. There is concerns about the way that Huawei is involved in Canadian academic institutions and there’s also concerns more broadly around the potential for Huawei to grow and grow and grow grow to the extent that it threatens Western telecommunications companies who provide competitive services such as Nokia and Ericsson. So there’s a bunch of different things and part of the challenge with Huawei and addressing it is. I mean this is to say nothing of course as the the current status of their CFO in Vancouver. Part of the difficulty is there’s all these issues there that are happening simultaneously and they blend together but are simultaneously distinct. And I think that’s part of the reason why there’s a lot of confusion as to is this an economic issue. It’s a national security issue. Is it an IP issue. Is it a trade issue. Because in parts its all of these things but if you don’t break them out of those discrete parts, it’s very nebulous as to what you’re actually talking about.
Michael Geist:
I think you hit on a great point. I mean which may help explain why this has become so poorly understood. We’re talking about multiple issues that blend one from the next. Why don’t we try to unpack them a little bit. Let’s start with the competition related issue, security is where I thought we would generally go, but why do we try to just pick off at least several of the other ones starting with some of the concerns from a competition related perspective. What are some of those and should Canada be concerned, are we competing in that space?
Christopher Parsons:
Yes. So with competition the concern is that there really aren’t that many providers that can do top to bottom full stack 5G deployment. Nokia has capabilities there. Ericsson has some capabilities there, Huawei has capabilities there and then there’s a bunch of other players that do discrete elements but that aren’t going to build a beautiful stack. So the worry is that if Huawei becomes dominant it’s going to starve Western companies or Western allied companies and that could have the effect of ultimately moving into almost a monoculture where Huawei is the predominant international supplier of 5G that could subsequently have implications for pricing implications for conditions of access or license so you can get this but you must buy this as well. So many of the concerns that are associated with monopolies typically is one of the fears linked with this. And also because the R&D that go into building this telecommunications network is so significant that when the competitors or rather should the competitors truly become starved of capital their ability to invest is going to be challenged.
Christopher Parsons:
And that correlates with in some respects with IP related issues. Because as you know I suspect much better than I do, certain patents that are developed which Huawei is developing over 10 or 15 percent of the core patents for 5G at the moment as they obtain more and more patents, there is the concern that they could then build hedges to also prevent their competitors from from coming in. And so this is another way where they might be able to build a moat around any research advantages that they develop and certainly within the Canadian context on that latter point around patents, Huawei is a very active investor in Canadian academic institutions. I should note that one of them is the University of Toronto although the Citizen Lab has never and would not take money from any corporate body including Huawei. And so when that money is assigned to research labs, professors, and graduate students go do their work and in some universities the patents that have been generated are automatically ceded back to Huawei. And so that’s where there’s sort of an academic tie to patent development and also tied to the potential for Huawei to grow bigger and bigger if they’re able to develop actual market monopoly status.
Michael Geist:
Ok. I just want to you’ve you’ve hit on a bunch of things there and so I’m going to try to bring it down just one level just to ensure that that everyone’s got it. We’re fundamentally by the sounds of it talking about next generation networks especially around so-called 5G, the faster telecom networks that we often hear about and that carriers are making significant investments there. And by the sounds of it the concern is that you could have a single company in this case a large Chinese company, leveraging significant control at least on a global, potentially on a global basis when it comes to 5G both in terms of being able to control or controlling much of the technology compared to what some of their competitors are able to do as these things get implemented and able to do that both by leveraging their size and economic power as well as seeking to leverage the intellectual property that they develop over time by in a sense creating a patent thicket or patents around many of the kinds of technologies that will go into 5G. Do I largely have it right?
Christopher Parsons:
Yeah. You’ve got it right there.
Michael Geist:
Okay so so while we’ve seen these investments from companies as you mentioned like Telus and Bell to date, I suppose that one of the reasons we are hearing more and more about it is that some large countries and companies have really turned their attention to 5G and suddenly they see a giant competitor that that has the potential capability of really controlling what most see as the next generation market for telecommunications.
Dan Albas:
Every day we get more reasons to ban well away from our 5G network.
CBC News:
The big concern is its powerful 5G capability, the next generation technology is expected to deliver internet speeds that are tens of times faster than what we have now. And it will support networks that run major infrastructure like self-driving cars, connected homes, even factories and power grids.
Christopher Parsons:
When we’re talking about 5G we’re talking about massive investments you know billions and billions and billions of dollars and where there’s some contention at the moment and it’s not entirely clear who is right is you have certain certain business leaders that are coming out and asserting that the Huawei 5G equipment goes on top typically of other Huawei 4G equipment because it’s an upgrade system as opposed to a totally new like rip out infrastructure and that it is not possible to add in say Ericsson or Nokia equipment on top of Huawei 4G equipment. And further to the point should we say in five years or six years. Oh while this was a big mistake to put Huawei in and we need to replace it again there’s the stated concern that there’s actually an inability to make a switch out of that type.
Christopher Parsons:
Now there is some doubt associated with that. So at least the some of the senior executives in both Nokia and Huawei as well some independent talk medications experts who I’ve done reading about it they have asserted that it is possible to actually where Ericsson or Nokia on top of Huawei or vice versa. But while we’re on top of an Ericsson or Nokia kit so there is some question about how much it would cost to replace and indeed whether it whether we’re in a path dependent situation with companies like Telus in particular or whether we can do a course correction without massively just ripping out infrastructures there and rebuilding.
Michael Geist:
All right. So it sounds like there’s this potential strategy there of both locking in and locking out. Locking out through the on the patent side by stopping some from entering into the marketplace, locking in basically by using your existing technology to try to lock people into future upgrades.
Christopher Parsons:
That’s certainly the concern and it remains to be seen how effective that particular lock in is. And it’s definitely an evolving element of this space right now it’s it’s almost changing week to week.
Michael Geist:
Right now if this was purely an economic issue one can understand why there would be concerns although of course there would be counterarguments that this cheaper pricing and more efficient implementation of some of these systems makes it perhaps more likely that we’ll see the necessary investments, perhaps more competitors come into the marketplace if it’s cheaper to institute 5G, but those are the kinds of battles that we see from time to time of course when it comes to antitrust related issues. But what makes this particular case I think particularly interesting and perhaps particularly challenging is that as you suggest earlier on there is a security gloss that that comes with this is very often the issue isn’t framed so much as a threat from an economic perspective but rather first and foremost a security one.
Sky News:
The first 5G pilots are launching in the U.K. promising everything from smart cities to hologram calls. Yet the rush to build the superfast wireless network comes with a risk. Because the best technology comes from Chinese manufacturers such as Huawei and ZTE, raising the fear the Chinese government will gain ground level access to, even control of, the U.K. critical data infrastructure.
Michael Geist:
You sit there the Citizen Lab, leading the world in unpacking and discovering security related issues in the network. Let’s talk a bit about what the security concerns are and whether or not they’re legitimate.
Christopher Parsons:
Yeah. So I think that one thing that’s helpful to frame it to begin with is there are certain technical security concerns and there’s national security concerns. And the latter is politicized and the former is sort of a standard bread and butter technical assessment. So with national security all the pieces that we just talked about fit into a national security concern. So you know economic or sorry monopolization of a core technology that’s going to in theory you know advantage Western economies. You know that’s a national security issue by default because of the core networking technology that’s that’s the infrastructure the way that the world might turn out to be. But in addition there are concerns that under Chinese legislation that was passed a few years ago that Huawei could be compelled to modify the operation of its systems and it really doesn’t have a choice as legal experts who have assessed that element of Chinese legislation have asserted. If the Chinese government asserts that we’re going to be compelling a backdoor or more likely simply don’t patch this thing. And so it’s not a deliberate insertion. It’s just you leave some particular bit of leaky code in place in perpetuity and just encourage the company to not patch it. So those are the core concern types of concerns like technically what might be done. And so this is again where the national security concerns blend into technical security because at a national level we’d be concerned about Chinese intelligence or military or other elements of the government or bodies associate with the government taking advantage of 5G networks or 4G networks or any other Huawei system for that matter, to the advantage of the Chinese government to the disadvantage of presumably Canada their competitors.
Christopher Parsons:
And then at the technical level we have what is the actual robustness and security that is afforded by these pieces of equipment and on that front the UK which has been doing assessments of Huawei for many many years, an element to the GCHQ does this now, center that’s built up between GCHQ, the British equivalent of the NSA and Huawei and the technical assessments that they’ve done on Huawei equipment is being sold into the UK has been absolutely terrible with very senior members of GCHQ fairly recently, in the past month or so, coming out and saying that the security culture and security practices that is evident when they do these tests of Huawei equipment is something like security circa 2000. And just as absolutely not meeting the expectations that you would have for any company today selling mass infrastructure to the world.
Michael Geist:
And are those conclusions. Is there a sense that those conclusions in terms of the weaknesses security is that driven. Is there a thought that that’s being driven by government pressure to create kind of the sort of leaky or weak security or it’s just a company that’s trying to dominate or rush out as much gear as it can as quickly as it can and security may not have been a priority along the way.
Christopher Parsons:
The assessment by the GCHQ is that there is no evidence that they have detected that there is compulsion on the part of the Chinese government to code badly and that it’s just an absolute lack of security processes that are embedded in you know to be to be fair to Huawei and Huawei engineers you know if you go back to around the 2000s and you think of Microsoft at the time and their security culture was equally just abysmal and that it took a massive transformation of Microsoft and other major software vendors to really start prioritizing security. The concern however is in the case of Huawei, GCHQ which which went and traveled to Huawei’s headquarters in China and did spot tests of certain practices and processes. The report came out this year from the evaluation of Huawei so (a) there hadn’t been a change year over year and two there were serious doubts that a change could happen. And so they are basically asserting that the culture of security within Huawei was so inadequate that they were uncertain that they could bootstrap their way up to an adequate and adequate security position.
Michael Geist:
Now before we get to how company countries rather have responded to this you know I guess a market based approach to this would say if I’m a telecom provider concerned about potential liability that could arise from some of these kinds of issues. I wouldn’t want to be buying security equipment or telecommunications equipment that is 2000 circa security but yet it seems like many telecom providers including some of Canada’s largest are buying. Is it that price trumps all in this environment?
Christopher Parsons:
I suspect there’s a few pieces that go on with regards to it. One I’m certain that the decreased capital expenditure is attractive to anyone especially in a publicly traded company. Two, security is always something that no one wants to talk about. Security only cost you things and ultimately you can never know if having a more secure product actually saved you money or not, because if it worked you don’t know and if it didn’t work you also may not know unless your detection systems are up to snuff. And third most telecommunications networks. Well you know they have abstract conceptual commonalities. They are boutique and that they there’s a lot of individual individual development for all of them. And so it is possible in some cases that you know telecoms can see some of these deficiencies and they can try and shore up their own defences internal or make modifications to how the equipment works. But one of the issues that was pointed out again in this most recent GCHQ report was that Huawei didn’t have an ability to reliably issue patches to all systems with with a common vulnerability. And so that means that let’s say security folk in Telus are doing audits of their equipment and they find a vulnerability or a problem in one of the boxes that they have. They can go to Huawei in theory over time, look at a patch but there isn’t no guarantee that the patch that then is issued to those Telus boxes are then also going to go to Bell or AT&T or Vodafone or anyone else even in the same country when you know obviously when you’re talking about Europe or Italy there when you have multiple major competitors because phones clearly not here. So there’s this is what I mean by like there’s a deficiency in culture and I suspect other elements is this probably isn’t getting up to executive ears. You know this is a boutique security issue. And until probably past a year and a half or so in Canada, I would be sort of surprised if this was top of mind for for executives when they’re trying to evaluate how to move their companies forward.
Michael Geist:
So if we can’t count on the companies to act for some of the reasons you’ve just articulated, then I suppose it falls to governments to set regulations and it would appear that some governments have done so by seeking to ban the company from being part of their networks.
Christopher Parsons:
That’s definitely one approach that has been taken. One of the difficulties is that many of the times when these bans have been asserted, their asserted on national security grounds with spooky waving behind a behind a curtain and you’re you’re asking well what exactly is the what exactly is the concern that you’re pointing to and it’s it’s never revealed in open settings and indeed it’s not. It’s not immediately apparent that there has been an instance to date that showcases that Huawei is behaving or has behaved in the past as a national security threat. The concern in fact as it’s been pointed out by the US – the House Intelligence body – has come out and stated that the issue is that a good position they take rather is that a good piece of Huawei equipment is only good until its first malevolent firmware update. And so once again to say.
Michael Geist:
Sorry could you just explain what that means.
Christopher Parsons:
Yeah absolutely. So a firmware update is just some of the base code that operates these routers so much like you know the computer that you have at home with your smartphone or something like that. There’s all sorts of different components that can receive updates and firmware is sort of very close to the the silicon or the metal of the machine. So it’s different from your from the operating system itself. And so all it would take would be one deliberate bad firmware patch that you know would enable a foreign actor to do any number of things. Right. And this is where that whatever you’re wherever your imagination, goes whatever sci fi you’ve seen, it’s not necessarily the worst place to go to run your imagination. So can it be anything from slight modification to the way that data traffic is moving. It could mean certain packets are dropped. It could collect certain packets and shuttle them to a given location, were there a situation where the routing equipment was dependent on a random number generator or a pseudo random number generator to develop encrypted streams then there would be the concern that maybe the number generator was tampered with so that third party who is capturing data could subsequently decrypt the traffic. It could cause issues with the way that the virtual systems that are put up on top of some of these routers operate such that rather than having actual perfect isolation between them that you might be able to bleed data from one to the other which would be useful for actual trading data and then moving it elsewhere or potentially modifying data and one of the virtual systems. So really the concern is that Huawei routers could be transformed similar in manner to the way that the NSA has targeted and transformed quite frankly or taken advantage of exploits in Cisco routers and all the other major providers as part of their national security activities through the NSA and partnership with Canada and the CSE.
Michael Geist:
So there is a bit of irony here in terms of trying to imagine what some of the threats are often take a look at what we’re doing or with the United States is doing and say hey they could do that too. I do want to just make sure that we touch on where Canada stands on this so we have seen some of the some countries respond to the kinds of threats you’ve just identified. Canada for the moment hasn’t taken a strong position. Can you just elaborate a little bit on on where we are and where you anticipate things might head?
Ralph Goodale:
The advent of this of this new technology 5G is about to revolutionize the information technology that we deal with in our in our daily lives. That revolution has been ongoing what with with 5G compared to 4G the pace and the magnitude of change are going to be enormous. We want to ensure that Canadians enjoy the full benefits of this incredibly powerful technology but at the same time we want to ensure that Canadians and our systems are sound and safe and secure.
Christopher Parsons:
To some extent there have been some commentators have criticized Canada for not taking a position. I suspect that us not taking a position is probably the best thing that we could be doing at the moment because we’re actually seeing natural experiments play out. We currently haven’t decided whether we’re going to ban, whether we’re going to permit, or whether we’re going to partially ban. And so a full ban is something like what Australia has done where Huawei is not permitted to engage in the 5G network. A partial ban is where you have Huawei systems which are not permitted in the core of the networks of the telco companies, but they can provide edge based services and so IP radio network radios and things of that nature. And there’s an other approach which is they’re allowed in, but they get audited and that’s what the British are doing right now is as deep audits to evaluate then certainly a catch and release. They they look at the equipment, assess the equipment, then release into the market for use. The difficulty is that the catch and release doesn’t seem to I mean again the UK government’s assessments are relatively bleak. They are not confident they are going to be able to mitigate the harms to national security that are associated with what was equipment full on bans are potentially very expensive and in the case in context with the Canadian governments historical efforts over the past decade or so to expand trade with China banning Huawei, which is one of their champion companies, would be probably very deeply problematic for those trade negotiations. To say nothing of the fact that China has demonstrated a willingness to engage in hostage taking and other activities principally in response to the seizure of Huawei’s CFO. But China’s generally demonstrated both in the region and internationally, a willingness to flex their muscles. And so if we ban or block, Canada will probably continue to see the sorts of economic difficulties that we’ve had for the past several months: blocking of pork, inability to send our agriculture products and such into China. So what is Canada going to do? Prior to their CFO being seized this was an issue that was more squarely to my assessment in the security domain and less in the trade domain, less in the domain of politics. But now it’s a front and centre political issue and it’s a front in centre trade issue. So what we do is I have no idea. I would be surprised if whatever decision is reached, is reached on the basis of security although it may be presented as such. This has become a massive political football or a hand grenade. And I think we’re watching the Liberal government try and figure out what exactly to do with it which is in part why they’ve they continue to defer when they’re going to have a decision they keep pushing it further and further out. So I believe that a decision now is due right around the election either shortly before or shortly after. But it’s it’s a challenging issue and it’s not apparent how the government’s going to move.
Michael Geist:
Well based on the way you’ve described and we haven’t even got into the issues around phone bans and obviously the kidnapping issues and broader trade issues. It’s one that is so complicated with a country that has been viewed for some time is critically important as part of a diversification of Canada’s economy and trade strategy. And at the same time dealing with all these challenges on top of the desire to ensure that we get the next generation 5G networks and see the kinds of investments that the government is hoping to see from a number of players to help create and foster a more competitive environment.
Christopher Parsons:
Yeah it’s again I think that the fact that Canada’s waiting on the one hand if we’ve made a decision we wouldn’t be in quite the same political mess we’re in now but because we have we can actually evaluate what systems work. So the one to to watch for is how effective the partial ban is in the network level. So if it actually turns out that you know the various spy agencies which you know hack these things, if they think that that might be a way of keeping things secure then maybe that’s a way of threading this particular needle. But there are some pretty severe concerns that because we haven’t seen this equipment that hasn’t been deployed yet in any meaningful numbers that we may end up finding vulnerabilities or difficulties in the way that any company puts it in and the concern becomes do we want to work with a western country and company who we think is probably quote unquote on our team and sort of the world of international politics or do we want to instead rely on Huawei continuing to behave as a good corporate citizen but one that may well the one that operates out of the country but frankly doesn’t respect the rule of law and could very significantly engage with Canada on both economic, military, and intelligence matters. You know at any time in the future.
Michael Geist:
Yes indeed well you know I started off by by commenting on how poorly understood and how challenging the issue is and I think if anything over the last half hour of this discussion you’ve highlighted that it is perhaps even more complex than people appreciate. But the the notion that Canada might even benefit from late mover advantages by being able to see how this plays out elsewhere is interesting because we’ve seen that in some other policy areas as well. Chris thanks so much for joining me on the podcast.
Thank you so much for having me.
Michael Geist:
That’s the Law Bytes podcast for this week. If you have comments suggestions or other feedback, write to lawbytes.com. That’s lawbytes at pobox.com. Follow the podcast on Twitter at @lawbytespod or Michael Geist at @mgeist. You can download the latest episodes from my Web site at Michaelgeist.ca or subscribe via RSS, at Apple podcast, Google, or Spotify. The LawBytes Podcast is produced by Gerardo LeBron Laboy. Music by the Laboy brothers: Gerardo and Jose LeBron Laboy. Credit information for the clips featured in this podcast can be found in the show notes for this episode at Michaelgeist.ca. I’m Michael Geist. Thanks for listening and see you next time.
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