A leaked report by telecoms lobby group GSMA, seen by Reuters, estimates the cost of banning equipment from Chinese vendors like Huawei and ZTE from Europe’s 5G networks would cost as much as €55bn ($62bn).
The United States has called on its allies to ban the Chinese telecommunication giant after adding it to a trade blacklist last week.
The US claims that companies like Huawei could be used by the Chinese government to spy on foreign nations. Likewise, it is feared that if Chinese companies play a major role in the development of next-generation networks, they may be used to launch cyberattacks and espionage against citizens, businesses and government agencies in future.
However, GSMA, which represents more than 750 mobile operators across Europe, has voiced concerns about the impact that a ban on Huawei would have. It is feared that banning Chinese tech would reduce competition, increase costs and slow down deployment.
Too late to ban Huawei
Europe saw its first commercial 5G network launch by Swisscom in May, and EE has since followed that up in the United Kingdom. According to GlobalData, 5G is set to arrive in Denmark, Hungary, Poland and Romania next year too.
However, banning Huawei would significantly impact the deployment of 5G in Europe, Dmitry Kurbatov, chief technology officer for Positive Technologies, told Verdict, as many mobile network operators have already purchased or ordered equipment from Huawei.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
Aside from writing off the cost of this unusable equipment, it would also mean that companies have to start from scratch, rebuilding their networks using different components and retesting them before they are able to launch.
“This issue can’t be solved with a solution as idealistically simple as just swapping it for an alternative vendor immediately,” Kurbatov said. “If Huawei is taken away as an option, this whole process –including testing – would have to be started all over again.”
Impacting competition, or the lack of it
Part of the $62bn cost estimated by GSMA would be due to high input costs, with mobile operators likely to pay the price for a “significant loss” of competition in the market. Demand goes up, and so do prices.
“The real issue is that, at present, non-Chinese companies don’t have much ability to build these radios,” Aaron Zander, head of IT at HackerOne, told Verdict.
Currently, more than 40% of the market is served by either Huawei or ZTE, and GSMA believes that banning them would put pressure on rival equipment makers that they will be unable to cope with in the short-term.
However, the costs of poor security could add up
Huawei strongly denies that its products pose a security threat. In December rotating chairman Ken Hu said that “over the last thirty years, there’s been no major cybersecurity incident; there’s been no cybersecurity threat; and there’s been no evidence showing that Huawei is damaging cybersecurity”.
So far, with little to suggest that there is a credible threat, Europe appears to have taken Huawei’s word for it.
However, according to Steve Patton, Director and Cyber Security Specialist for Telesoft Technologies, operators can’t afford to ignore potential security risks, no matter where they might originate from or how much they might cost to protect against.
“Mobile providers need to ensure they have an absolutely best-in-class and highly trusted supply chain contributing to 5G networks,” Patton told Verdict. “If they don’t then they will end up dealing with huge costs – both monetary and reputational – if a major security incident occurs.”
One UK operator, Patton said, made £6bn in 2018, and if service is disrupted for as little as a day, they would stand to lose approximately £16m in revenue.
Then there’s the cost of compensation claims, as well as regulatory action that may arise from such incidents. A data breach involving European customers, for example, would see an operator fall foul of the General Data Protection Regulation (GDPR), which can result in fines of up to €20m or 4% of global annual turnover.
However, perhaps the biggest cost would be monetary, Patton said:
“Monetary impact is easy to estimate, but what is not as easy to quantify is the impact a breach would have on an organisation’s reputation and brand; from negative headlines to a social media led outcry – all of which could affect future subscriber sign-up and retention rates, all negatively affecting the bottom line.”
Read more: How do you solve a problem like Huawei?