Research Notes

A Chinese virus has shown why telecommunications networks are vital infrastructure for modern society. What can we learn from it?

Over the past two years, much has been written about the use of Chinese equipment in modern telecommunications networks. Huawei, given its coziness with the Chinese government and threat of backdoors, has been deemed untrustworthy by countries like UK, Australia, Japan, USA, among others. Some countries have banned the equipment all together, such as Australia, while others, such as England and France, restrict its use in critical locations and in sensitive parts of the network. This research note describes how the recent virus from China, Coronavirus disease (COVID-19), will affect the telecommunications industry. It also reviews how telecom companies can turn this situation into something positive.
Access to modern telecommunications infrastructure is the foundation for the modern society.
When it became clear that the Chinese virus hit pandemic proportions, organizations around the world sent employees home. Though some consumer-facing industries closed (airlines, hotels, restaurants, etc.), many have been able to keep running because of the ubiquity of telecom networks. Europe is hard-hit not just because of the high rate of infection, but because so many small and medium sized enterprises are not digital.
The quality of telecom networks and the use of mobile broadband technologies is so high that many enterprises are fully digitized. Telecom providers around the world have invested significantly in their networks, and this helps ensure that customers can access the tools, services, and platforms necessary for remote work such as broadband subscriptions, software as a service platforms, virtual private networks, telephone/video conferencing, security solutions, and so on. Some firms are more resilient than others, depending on the quality of their information technology and their ability to manage remote workers. Indeed, few, if any, planned to work under crisis circumstances for an extended period.
A key challenge for some enterprises is that their IT platforms are not designed to be operated in extreme circumstances (60–90 percent of staff working from home etc.)This puts a strain on networks which must manage this increase in traffic, potentially compromising the quality of the experience. End users, not knowing this, may blame the network provider, not realizing that it’s the fault of the platform. 
Many ask whether Huawei poses a security risk?

In a world in which the security risk of Huawei is discussed, and many talk about the possibility of using Chinese equipment to spy, one sometimes forgets the risk of Beijing using a kill switch to punish countries that do not comply with its wishes.
China has grown increasingly belligerent and intolerant as shown by the threats made by Chinese ambassadors to nations declining to do business with Huawei and toward those who criticize the crackdown on Hong Kong protesters; the mass incarceration of Uighur Muslims, and the mysterious disappearance of critics of the Chinese government’s handling of the virus.

Strand Consult has long said that espionage is not the biggest threat from the Chinese government, but rather the kill switch, the potential of paralyzing a nation’s telecommunications infrastructure. If one believes it’s safe to use Huawei equipment in vital infrastructure, then would it be ok for NATO to use Chinese fighter planes?  NATO prohibits all procurement from China because it could undermine safety and security.
Strand Consult talks to telecommunications companies all over the world on a daily basis and have had a dialogue with those responsible for corporate customers in a number of countries. Based on that dialogue, we made this research note: The pressure to restrict Huawei from telecom networks is driven not by governments, but the many companies which have experienced hacking, IP theft, or espionage. Our conclusion is that the security threats combined with the fact that telecommunications infrastructure is becoming more important in our society means that we must look at security differently.
We have already seen the havoc wreaked by the Chinese virus. That the world can continue under these circumstances is a testament to the resilience of telecom networks. Imagine if the networks themselves were attacked.  A kill switch would be even worse than the virus that is paralyzing the world right now. Many nations of the world share the consensus of the security threat posed by China, and consequently consider Chinese network suppliers untrustworthy.
Denmark tasked the Ministry of Defense’s Center for Cyber Security with implementing the EU’s 5G toolbox 
In contrast to the outright restrictions placed by the US government on companies like Huawei, the European Union chose the toolbox box model, a set of tests, practices, and protocols for European nations to evaluate risks and to secure networks. Both models should lead to the same conclusion of excluding harmful elements from networks.
European nations take different approaches to implementing the 5G toolbox. Some assign it to telecom regulators. Others are taking the approach of Denmark, elevating the concern of cybersecurity from the telecom regulator to the military and intelligence services. This is where it belongs. National security and defense, the protection of the nation state, its citizens, economy, and institutions, is an essential duty of government. Telecom regulators, people generally trained in law and economics to deliver economic regulation of networks, do not have the necessary defense and security expertise.
The Danish government decided that the EU’s 5G toolbox should be implemented by Center for Cyber Security (CFCS) which is under the Ministry of Defense. This is a very important decision and reflects the seriousness with which the government sees the issue and the important role that telecom networks play. CFCS’s report on cyber threats details the threats about telecommunications infrastructure and not least in relation to China.
There is no doubt that the future costs associated with cybersecurity will be huge. The alternative is gigantic bills like the ones that have hit many Danish companies such as Maersk, William Demant, ISS etc. where cyberattacks have cost shareholders hundreds of millions dollars.
How a Latvian operator found a local alternative to Huawei for 4G / 5G CPE equipment
Huawei, Ericsson, Nokia and ZTE may be the biggest infrastructure equipment providers, but there is a long tail of suppliers which complement and compete with the big guys. In the coming period, there will be focus on “the other” suppliers as well as suppliers outside China.
There is no doubt that many countries and operators will look at their entire supply chain for opportunities maximize quality and minimize price. Moreover, telecom providers want to improve security and be less dependent on Chinese providers.
Consider the deal made in Latvia with the local mobile operator LMT and local equipment manufacturer Mikrotik, founded in 1996 by American John Tully and by the Latvian Arnis Riekstins. Mikrotik has developed many products that operators around the world use to ensure that their broadband customers can get online. With production in Latvia and Lithuania, Mikrotik can compete with players like Huawei and earn a profit.  
From a security policy perspective, the LMT/Mikrotik/Qualcomm partnership shows how to move production away from a high-risk country like China and untrustworthy vendor like Huawei. LMT is now able to source locally with trusted vendors and world class technology.  When Qualcomm makes partnerships with players like Mikrotik, they help make the world less dependent on suppliers like Huawei.
The Chinese virus COVID-19 will change the way we look at telecommunications infrastructure and increase its importance in society. It will force policymakers to reassess the telecommunications supply chain. Even though military and intelligence actors should do more on cybersecurity, telecom operators will likely be expected to take greater responsibility to secure their networks. We expect this will be costly. Just as banks and financial institutions are now regulated for the control of money laundering and other  financial crimes, the telecommunications companies will be charged with cybersecurity. See Strand Consult’s research note The biggest taboo in European telecom industry is the cost of cybersecurity – just ask the banks.
As bad as the COVID-19 crisis is, it would be even worse if telecom networks were disabled. It would intensify the crisis, cost even more jobs, and make essential communication almost impossible. The crisis shows that telecommunications infrastructure is even more important than previously believed.
Business opportunities: There are many small and medium enterprises which lag behind in digital solutions. Operators can use the situation to market to these enterprises by offering three-month trials and other promotions. Right now, there is an opportunity to talk about the value of digitalization and to teach people about the value of the digital society.
Recommended communication: Telecom operators should tell their customers that networks are running and will keep running despite the increasing traffic. Operators have a big responsibility during this crisis and can earn trust and credibility by delivering.  It is also important to tell the customers that quality of experience is highly related to the use of platforms, applications, and end user equipment, not the network itself.
If you want to know more, read Strand Consult´s research notes on China and cybersecurity or contact us
John Strand
About me:

Contact us to get a copy of the report

Request the report