Mobile telecommunications operator 2degrees says the decision to ban Huawei from involvement in the roll-out of the country’s 5G network for national security reasons “will be a real disappointment for competition”.

The Government Communications Security Bureau announced today that it had assessed the use of the Chinese company’s equipment in the 5G network after an approach from Spark New Zealand and had “informed Spark that a significant network security risk was identified”.

The decision means New Zealand is lining up with two of its allies in the Five Eyes global signals spy network, the United States and Australia, in effectively banning the use of Huawei equipment in the roll-out of the next generation of high-speed, mobile telecommunications known as 5G.

In a statement to the NZX, Spark said the director-general of the GCSB had informed the company that its proposal to use Huawei 5G equipment in its Spark’s planned 5G Radio Access Network – part of its cell tower infrastructure – would raise “significant national security risks”.

“This means Spark cannot implement or give effect to its proposal to use Huawei RAN equipment in its planned 5G network” under the terms of the Telecommunications (Interception Capability and Security) Act 2013.

A 2degrees spokesman said it was seeking clarification from the GCSB as to whether that meant it also couldn’t use Huawei gear.

“Our comments on the importance of multiple vendors to deliver price competitiveness still stand, so if this announcement has a similar impact on 2degrees it will be a real disappointment for competition,” the spokesman said. “2degrees is, however, committed to building a 5G network.”

Just last week, Huawei sought to demonstrate its willingness to stay out of ‘core’ elements of the 5G network, as it had done in the 4G network, where it only supplies cellsite technology.

In concert with Spark, it deployed a ground-breaking experimental 5G network that used equipment from US-owned Cisco in the core of the network and Huawei equipment in the RAN services.

The opposition to use of Huawei and other Chinese vendors’ equipment has long been assumed to reflect a mixture of genuine concerns about pressure to spy for the Chinese government that such companies could face, and a desire by non-Chinese equipment vendors to knock Huawei out of competition. Huawei equipment is regarded by Spark as being cheaper and working better than that available from other vendors.

Spark has announced plans to get its 5G network up and running in July 2020, in time for the next America’s Cup challenge in Auckland in 2021. A critical part of that process is for the government to announce its timetable for auctioning the radio spectrum the network will need to run on. Announcements are due early next year.

Spark said it had not yet had an opportunity to review the detailed reasoning behind the director-general’s decision.

“Following our review, Spark will consider what further steps, if any, it will take”, the company said. It was confident it would not affect plans to launch its 5G network by July 1, 2020, subject to spectrum allocation.

Multi-national telco Vodafone, New Zealand’s other mobile provider, does not use Huawei equipment in its global operations.

While Huawei equipment was acceptable in the 4G network, there had been speculation that it would not be allowed to participate in 5G because the ‘core’ elements of the super-fast network will be much more decentralised than in the 4G network, making them more susceptible to potential infiltration.

Spark shares were trading at $4.16 before the announcement. They ended the day unchanged at $4.12.

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