U.K. Bans Installation of Huawei 5G Gear From September

(Bloomberg) -- The U.K. will ban the installation of 5G equipment from China’s Huawei Technologies Co. by the end of next September.

The restriction, first reported by Bloomberg last Monday, is part of an “initial” 250 million-pound ($333 million) package of measures brought in to diversify Britain’s wireless supply chain announced by the Department for Digital, Culture, Media and Sport. The stricter rules may also help fend off a challenge from lawmakers in the ruling Conservative Party seeking even tighter restrictions on the Chinese network equipment maker.

British ministers announced in July that Shenzhen-based Huawei would be banned from Britain’s next-generation mobile networks in 2027, with purchases barred from January 2021. To comply with those rules, phone companies would have had to stop adding Huawei components eventually, but the new ban may accelerate their plans to overhaul systems. Maintaining existing equipment will be allowed.

The crackdown followed a U.S. push for allies to exclude Huawei on the grounds it was an unacceptable security threat, which the company denies. In January, British officials said Huawei could play a limited role with manageable risks. They since reversed that stance and backed a ban following U.S. sanctions introduced in May, saying the American squeeze on Huawei’s silicon supply chain meant its security could no longer be guaranteed.

Telecommunications carriers like BT Group Plc will now be reliant on a duopoly of Nokia Oyj and Ericsson AB, and those Nordic companies have already won big contracts in the wake of the Huawei ban. To help cut that dependency, the government will start a National Telecoms Lab by 2022 to research security and increase compatibility between vendors, as well as fund trials with potential challengers like Japan’s NEC Corp. to make it easier for competitors to enter the market. Setting out a path to phase out older 2G and 3G technology would also speed up the diversification process, according to the government’s statement.

Carriers will be banned from outsourcing service management to Huawei from April 2021 apart from in limited circumstances, the government said. A consultation on rules for the fixed broadband network is also underway.

The U.K. will consider commercial incentives to help operators diversify, according to the 5G supply chain strategy published Monday. Officials will work with “like-minded countries” to stimulate demand, as the U.K. only accounts for 2% of vendors’ global revenues, it added.

The Nokia and Ericsson duopoly “represents an intolerable resilience risk and absent intervention it is unlikely that the market will diversify,” so “measures will need to be taken to address barriers to entry such as aggressive commercial practices, closed interfaces and control over standards setting bodies,” said the statement.

The study said the global ‘radio access network’ market for crucial equipment like antennas is 80% made up by Nokia, Ericsson and Huawei, with another 11% sold by China’s ZTE Corp, another vendor deemed “high-risk” by the U.K., and 5% by Korea’s Samsung Electronics Co Ltd. The document name-checked new potential alternatives including NEC, Fujitsu Ltd, Parallel Wireless Inc and Mavenir Systems Inc.

©2020 Bloomberg L.P.