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Aussies Cut Huawei Off $38B Broadband Project

Australia is shutting China's {complink 2430|Huawei Technologies Co. Ltd.} out of the largest infrastructure program in the country's history. Citing national security concerns, the Australian government says it won't allow Huawei to bid for any part of a $38 billion telecommunication project “intended to connect 93 percent of homes and workplaces with fiber-optic cable, providing broadband service in urban and rural areas,” the New York Times reported.

Ouch! Huawei said it wanted to submit a bid for about $1 billion (for part of the project) but was promptly informed it would not be allowed to participate.

Australian Prime Minister Julia Gillard confirmed the decision. “You would expect as a government that we make all of the prudent decisions to make sure that the infrastructure project does what we want it to do, and we've taken one of those decisions,” she said.

Apparently, Huawei's close connection with China's military got the Aussies thinking they wouldn't like to have the Red Army infiltrate their brand new network via a Trojan implantation by an entity many consider a surrogate for (or at least heavily indebted to) the Chinese government. Huawei insists it's an independent enterprise operating above board, but some countries don't seem to believe it.

A former Australian foreign minister quoted in the NYT criticized his country's decision. A few other countries — not including the United States, the UK, Germany, or any of the major Western powers — have allowed Huawei to bid on contracts for similar projects.

What else can Huawei do to win Western governments' trust?

21 comments on “Aussies Cut Huawei Off $38B Broadband Project

  1. _hm
    March 26, 2012

    Australian Prime Minister is taking some of landmark decision for her country. They are bold and beautiful. She is quite candid in her communication. I like all counrty should take lessons to protect itself from other foreign power.

     

     

  2. FLYINGSCOT
    March 27, 2012

    Whilst I find it somewhat surprising they did this I can also understand the sentiment behind it.  China does not have the greatest track record when it comes to electronic interchange transparency.

  3. Eldredge
    March 27, 2012

    Each government has the right to make the decision that they believe is in the best interest of national security. I'm sure China has made similar decsions regarding contract awards.

  4. rohscompliant
    March 27, 2012

    The Aussies are justified in their decision. They did the right thing. I wish our gvt would do more of that to protect our technologies and our country.

  5. bolaji ojo
    March 27, 2012

    Flyingscot, The Australian government is footing the bill so it may also believe local companies and Western counterparts should benefit more. However, what happens if a local company was investing this capital in its network? Will the government have the right to by fiat insist Huawei cannot participate due to “national security concerns?” I believe Australia definitely is right to be concerned and China itself probably wouldn't allow a foreign company to be involved in such a major IT project, but Australia is a democracy, China is not.

  6. bolaji ojo
    March 27, 2012

    rohscompliant, I can just imagine the case before the US Supreme Court if Verizon signs on Huawei to build a $38 billion fiber optic network and the executive branch says “heck no” because of national security concerns! The difference here is that the Australian government is spending its own money and “national security concerns” aside, it can decide who gets a slice of the business. It doesn't even have to say why.

    I think the Australian government purposely announced why it denied Huawei a piece of the business because it wanted to send a message to the Chinese government: Stop trying to snoop. We know you want to access our network!

  7. Houngbo_Hospice
    March 27, 2012

    China itself probably wouldn't allow a foreign company to be involved in such a major IT project , but Australia is a democracy, China is not.”

    Hmm… if China can pretend security concerns to prevent other countries from involving into its “major IT projects”, I think that it is fair to accept such stand from those countries as well. As you said, Australia may want its local companies to benefit more, but their argument about “national security concerns” seems to be valid.

  8. Houngbo_Hospice
    March 27, 2012

    @rohscompliant 

    The Aussies are justified in their decision.

    I share your opinion. Prevension is better than cure. Huawei already works with all of Australia's major operators. If the australian government is preventing the company from applying for the new broadband project, they certainly have a valid reason for that.

     

  9. Barbara Jorgensen
    March 27, 2012

    I believe the US government faced the same dilemma and also said no to Huawei. I believe Huawei appealed the ruling or asked for an investigation. Althuogh the US and Aussie governments are within their rights to make their own decisions, if you operate in an open-market society, you have to play by the rules of an open market. If China were to shut out foreign companies–and they have–it is not as surprising because of historic trade practices. It is a dilemma that Western compnaies and government have brought on themselves. But I agree that Australia is within its right to do what it did.

  10. Daniel
    March 28, 2012

    Bolaji, I think Huawei has faced similar problems with some of other Asian countries also. Sometimes back I had read an allegation from an agency that, most of the communication and networking equipments from Huawei are embedded with malwares, which can periodically send statics and datas to a preconfigured receiving centre. Its more or less like a spy work.

  11. elctrnx_lyf
    March 28, 2012

    I do really wonder how Huwaei can erase all this black mark and be able to get into US, Europe and Australian market. I feel sorry for Huawei for their inability to get a chance to bid for such a prestigious project. 

  12. Barbara Jorgensen
    March 28, 2012

    It looks like Huawei is willing to make concessions to the Aussie government. Huawei is willing to allow the Aussies to see its code and a variety of other things I don't understand all that well. But a willingness to open the kimono is a step in the right direction.

  13. Anna Young
    March 28, 2012

    Well that sounds great. Huawei may have decided to allow Aussies to view its code of practice and other things, can it manage to twist the Aussies hands? I doubt this step will make much difference now..

  14. Ashu001
    March 28, 2012

    Guys,

    This just in.

    Huawei is exiting its Joint Venture with Symantec in Network Security and moving outside the US.

    This was the most important part of the exit

    People with knowledge of the venture, who would speak only on condition of anonymity because they were not authorized to speak, said Huawei had already laid off several workers in Huawei Symantec's Silicon Valley offices this month and planned to move its entire operation out of the United States, largely because of increased American government oversight.

    http://www.nytimes.com/2012/03/27/technology/symantec-dissolves-alliance-with-huawei-of-china.html?_r=3&ref=business

    Think about it,if Huawei had nothing to hide,Why would they exit the US???

    I think its foolish to say that the US Govt will have a hidden agenda against Huawei.

    Regards

    Ashish.

  15. Ashu001
    March 28, 2012

    Barbara,

    This is most certainly a Good Move on Huawei's part.

    Hopefully the Australian Govt will take up on their offer and let them bid in the auction(after they have satisfied themselves about their Security concerns).

    After all,just because they bid does'nt mean that they will win the Auction-They can always be disqualified for some other Techical reason later on.

    This move will help build up mutual Trust between Huawei(and by extension other major Chinese Manufacturers) and the West.

    Hopefully it will stop the current protectionist wave we are facing today in Global Markets.

    Regards

    Ashish.

  16. Ashu001
    March 28, 2012

    As I had posted on this issue here previously;

    http://www.ebnonline.com/messages.asp?piddl_msgthreadid=247319&piddl_msgid=597013#msg_597013

    Australia is not the first and neither will it be the last to bar Huawei from competing for Telecom Contracts Globally.

    Part of the reason is Legitimate Security concerns,Part of the reason is under pressure from Domestic Concerns(protectionism) and part of it is unneccesary fear of the Rising Power of the Chinese Economy.

    Its important that countries sit down and analyse this event in its totality.

    Because as this article below from the Financial Times clearly states,China is too important for some of the Biggest(& Fastest) Growing countries in the world today including Australia,Brazil,Korea,Taiwan,India,Indonesia,Singapore,Russia,      The US ,Japan and Germany.

    http://ftalphaville.ft.com/blog/2012/03/26/936551/china-as-the-worlds-unreliable-importer/

    Only a foolish Politician will try to antagonize the Chinese today without offering Legitimate Reasons for it.

    Because the backlash on their own economy would be most devastating today.

    Regards

    Ashish.

  17. bolaji ojo
    March 28, 2012

    Ashish, Perhaps Huawei is existing simply because they aren't making any money. If you build and they don't come, you pack up and do something else. Huawei tried building but it's not getting the contracts it wants from Western governments.

  18. Ashu001
    March 28, 2012

    Bolaji,

    I don't know if that is the case.

    If it is the case that Huawei threw in the towel on America primarily because they got exasparated by hostility/opposition to them selling their products in America then the  Biggest loser is the US Economy(& especially the Taxpayer) as it means one less Market player/competitor and ultimately less choice for consumers and Taxpayers.

    Ultimately Competition benefits everybody by reducing slack in the system and encouraging innovation.

    Its most most unfortunate that a Major Player had to exit the US market for this reason .

    Ashish.

     

  19. bolaji ojo
    March 28, 2012

    But it is true in the case of Huawei. When you have the door repeatedly slammed in your face it may not make sense to keep knocking on the door. It may be better to call first and resolve the problem with your expected host. Perhaps Huawei just wants to regroup. As you noted, though, the loss is bigger at the customers but the government has other considerations too and we shouldn't wave aside concerns about national security implications.

  20. Ashu001
    March 29, 2012

    Bolaji,

    As I have previously stated;the only information I have on this case is what the media provides me with-I do not have any special Access to either US Govt Research or Files(which may/maynot clearly show the Security threat from Huawei's products);I also have No Special Access to Huawei's Security Code as well their software which can tell me descively whether or not there is Malware/Spyware embedded in their products.Neither do I have any insight into how their Senior Management thinks and exactly why they made this decision.

    The Statement given in the Media(NYT) clearly states that Huawei was forced to exit their US JV because of “Threat of Increased US Govt Oversight”.

    You could potentially spin that in any number of ways

    One)They actually don't want to expose their Code/Technology to increased Govt scrutiny because it actually has Spyware embedded in it.

    Two)This is a way for  Huawei's US Management  to save face in front of the parent company in China in light of their failure to Generate Sufficent Deals despite the obvious Investments pumped into the US.

    Three)They just want to re-group and re-think their US Strategy before re-entering the US Market with US specific products.

    or Four)The US Govt put real pressure on them to exit the American Market immediately(for Non-National Security reasons-Protectionism).The Chinese are known to be extremely polite about these issues.

    As I said before I don't have any special insight into either the US Govt or Huawei so I have to go with what the Media says here.

    If it is either Reasons One,Two or Three;I am fine with it.But if it is Reason Four then I think its most unfortunate.

    Regards

    Ashish.

  21. t.alex
    April 1, 2012

    With the strong presence of Huwei in Asia markets, it might be possibly indirectly involved in big projects, but not as a main bidder.

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