U.K. Telecom Regulator Fears Over Lack of Supply Competition

(Bloomberg) -- The U.K.’s telecommunications regulator said that the small number of equipment suppliers created systemic risks to the country’s networks that may need to be addressed with future regulation.

Sharon White, the chief executive of U.K. regulator Ofcom, made the remarks amid tensions with the U.S. over whether Britain will permit equipment from Chinese vendor Huawei to be used in the backbone for next-generation 5G telecom services.

The government is currently conducting a review of the telecom industry supply chain to consider issues around security, but also around network resilience. Britain is set to toughen the rules under which Huawei operates in the country while stopping short of an outright ban on the Chinese telecom equipment maker, according to people familiar with the matter.

Rivals Nokia Oyj and Ericsson AB are trying to capitalize on the woes of their Chinese rival. U.S. officials have voiced doubts over whether sensitive parts of the telecom infrastructure can really be walled off from non-sensitive segments in a new 5G architecture and they have been pressuring allies to ban the use of Huawei equipment completely due to concerns that the company’s ties to the Chinese government present a security risk.

White, who was speaking at a government-hosted cybersecurity conference in Glasgow, Scotland, implied banning Huawei equipment outright would create other vulnerabilities for U.K. mobile networks. She said that consolidation among telecommunications equipment vendors had left mobile carriers with little choice over which equipment to choose for some critical parts of their networks.

She said that Ofcom wants these carriers to think harder about diversifying their equipment supply chain in order to make their future networks more resilient.

"We are responsible for much tougher guidance to the telecom industry on this," she said, without specifically referencing the Huawei debate. "We need to ask, can our guidance encourage companies to start looking at these areas of fragility much earlier."

She said that last year’s outage on Telefonica’s O2 mobile network in the U.K., which stemmed from a licensing issue with Ericsson software, was an example of the problems with carriers being dependent on a single supplier for critical components, software and services.

White’s comments echo those also made by Jeremy Wright, the U.K. culture secretary, Thursday in response to lawmakers’ questions about the supply chain review. Wright warned that improving the number of suppliers for key pieces of equipment "will not be a quick fix."

"It will take some time to broaden the market out beyond what is essentially now three suppliers in this space, and three only,” Wright said, referring to Huawei, Ericsson and Nokia.

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