Britain’s Embrace of Huawei Is Really About Brexit

(Bloomberg Opinion) -- British Prime Minister Theresa May’s decision not to ban Huawei Technologies Co. outright was the easier choice. That doesn’t mean it was the right one.

The U.S. has been vociferously pushing for countries to exclude telecommunications equipment made by the Chinese firm, saying it’s vulnerable to hacking by state-sponsored actors from its home nation. But Huawei also has some of the most advanced gear for next-generation 5G networks. It’s a conundrum.

May had a case for ignoring considerable pressure from President Donald Trump. First, her own intelligence advisers — the National Cyber Security Centre — have stopped short of publicly advocating a ban.

Second, Britain’s telecoms industry, whose most prominent firms are BT Group Plc and Vodafone Group Plc, is adamant that forbidding the use of Huawei’s 5G equipment will slow down the rollout of new networks.

Third, the U.K. wants to maintain a strong trading relationship with Bejing. That would be more difficult were Britain to outlaw products from one of China’s most prominent companies. It also wants to remain a hub for technology investment after its split from the European Union, and a lack of 5G networks could hinder that.

There are, nevertheless, grounds for skepticism regarding the last two points.

Vodafone Chief Executive Officer Nick Read is among those who have said publicly that there is little immediate demand for 5G networks. This somewhat undermines the urgency of retaining access to Huawei gear. For telecoms operators, Huawei’s importance is likely as much to do with providing competition to the supplier’s European rivals Ericsson AB and Nokia Oyj as it is with the pace of 5G rollout. More competition means carriers pay lower prices for the equipment.

Britain’s Embrace of Huawei Is Really About Brexit

And if developing next-generation networks really isn’t of immediate importance, a lack of them shouldn’t make a huge difference to technology investment in Britain.

Now consider the risks May faces after her decision. Chinese state actors might seek to access and disrupt Britain’s critical infrastructure and secure networks. Perhaps more significantly in the short term, she might anger Trump, who could make good on his threat to withhold intelligence from the U.K. 

You can see how the prime minister arrived at the choice that she did. The risks to the economy seem to have carried the day.

Huawei equipment will be restricted from the core parts of the network, the hubs and servers through which data is transferred, but allowed in non-core parts such as antennae, according to the Daily Telegraph. But that distinction might prove moot, given the distributed nature of 5G, where antennae can more easily sidestep core parts of the network and communicate with each other directly.

May is clearly trying to thread the eye of the needle. She’ll hope that excluding Huawei gear from the key part of the network might keep the U.S. happy, and allowing it elsewhere might avoid aggravating the Chinese.

Her choice seems to have been dictated by the pressures of Brexit. Were the divorce from the European Union not on its way, perhaps it would be easier for May to succumb to U.S. pressure and crack down on Huawei. But now that Britain will be standing on its own, it needs to keep China as a trade partner more than it did when it was a member of the EU. 

The prime minister is leaving Britain’s critical infrastructure more vulnerable to Chinese incursions. But May probably feels she didn’t have another choice.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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