Geopolitics Driving Industry Changes in Mobile Communications March 2020
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Larry Kudlow, Director of the National Economic Council, recently indicated to journalists that the US government is engaging in a multivendor public-private effort to create interoperable software that embodies 5G technology. Kudlow quoted one of the supporters of the project, Dell founder Michael Dell: "Software is eating the hardware of 5G." Microsoft and AT&T are also reportedly onboard, and Kudlow invited Nokia and Ericsson to participate. Kudlow also expressed hope that the United Kingdom would use the software instead of procuring 5G infrastructure from Huawei. Policy makers in the United Kingdom recently approved some uses of Huawei equipment for 5G networks. US government sources recently provided other governments with information about purported hacking capabilities built into Huawei equipment, but the United States declined to disclose details publicly. The United States has blacklisted Huawei imports, but US makers of chips and other components continue to export supplies to Huawei.
In other news related to geopolitics and communications, during February 2020, Switzerland's government suspended exports of equipment from domestic cryptographic-equipment supplier Crypto AG after journalists discovered that the US Central Intelligence Agency was secretly among the owners of the company for decades. Many national governments that relied on the equipment had a false sense of security.
Many players in the United States want to increase the country's share of value captured from 5G infrastructure deployments domestically and worldwide. A national strategy that favors generic white-box hardware might accomplish the goal while also disrupting traditional supply chains. For years, equipment suppliers have resisted their customers' desires for cellular infrastructure that relies on software to the maximum possible extent. In fact, the suppliers' profit margins are slim, and they don't wish to invite more competition. No one knows whether suppliers can come to terms with one another on a deal aimed at transforming hardware solutions into software for generic computers. But the US government subsidizes favored constituencies in various cases, and the high-tech sector might benefit from an arrangement that aims to accelerate onshore production of 5G infrastructure.
If a national software-virtualization strategy emerges, one winner would likely be Intel, which has doggedly maintained a strategy of building the most generic chips possible. One of the losers could be Qualcomm, which has been equally persistent in making use of proprietary intellectual property for telecommunications offerings.
As the Crypto AG affair demonstrates, many nations monitor communications. Since 2010, the UK's National Cyber Security Centre has been auditing Huawei's internal cybersecurity-testing facility in Banbury, Oxfordshire. In early 2019, the watchdog group's annual report indicated that it "does not believe that the defects identified are a result of Chinese state interference." Vulnerabilities that the group found were accessible to various parties, not just governments. Similarly, the types of vulnerabilities that US government officials reportedly shared with other nations do not seem to be unique to Huawei.
Generally, hackers have a number of vectors to gain unauthorized access to 5G networks, leading Finland's government to take a most cautious approach. Despite Nokia's abiding presence in that nation, Finland presently limits its 5G deployments mainly to pilot, trial, and fixed-communications services. Finland's government organized an international hackathon in November 2019. Five teams of programmers won recognition for discovering vulnerabilities in 5G systems from Ericsson and Nokia.