Huawei’s U.S. competitors among those pushing for scrutiny of Chinese tech firm

2012-10-12 14:10:54

Companies in the cutthroat field of telecommunications received a remarkable marketing document recently, one aimed at causing suspicion about one of their biggest competitors, the Chinese firm Huawei.

“Fear of Huawei spreads globally,” the report reads. “Despite denials, Huawei has struggled to de-link itself from China’s People’s Liberation Army and the Chinese government.”

The paper’s author was Huawei’s main U.S. rival, the California-based company Cisco Systems.

The marketing campaign got a boost this week when a report from Congress said much the same thing, raising national security concerns about Huawei’s alleged use of its technology to help the Chinese government expand its overseas spying operations. U.S. suspicions surrounding Huawei have presented a business opportunity for Cisco and other firms in the hyper-competitive world of telecom. Senior Hill staffers at three separate congressional offices say an array of American tech firms have lobbied them to increase scrutiny of Huawei, using language similar to Cisco’s campaign.

Some analysts say the efforts to discredit Huawei illustrate a wariness among U.S. firms of highly successful, low-priced competitors from China that are roiling telecommunications — once a distinctly American industry.

China has complained that the hurdles faced by Huawei in particular have amounted to the kind of arbitrary trade barrier that the United States has complained about on behalf of its companies around the world.

No charges have been formally brought. And any evidence of whether Huawei is a threat to national security has been locked in a classified report that can be viewed only by a select few in government.

That has created an ideal environment for U.S. businesses to gain an upper hand. U.S. lawmakers have warned companies to stop doing business with Huawei and ZTE, another Chinese telecom equipment provider. In recent years, U.S. officials have thwarted two attempts by Huawei to buy U.S. firms.

In April 2011, lawmakers sent a letter to President Obama, criticizing the Agriculture Department’s contract with Huawei. In November 2010, Sprint Nextel chief executive Dan Hesse was asked by then-Commerce Secretary Gary Locke to reject bids from Huawei.

“Huawei has been extremely successful and disruptive around the world, but the one market it hasn’t been able to penetrate is the U.S.,” said Mark Fabbi, a vice president of research at Gartner. “And that’s mainly because of politics and lobbyists pushing really, really hard to put up barriers.”

The seven-page September 2011 presentation distributed by Cisco was obtained by The Washington Post from a person familiar with Cisco’s sales strategy who was not authorized to comment publicly and spoke on the condition of anonymity. Titled “Huawei’s & National Security,” the document was used to lure clients away from Huawei, the person said.

Cisco did not respond to requests for comment about its lobbying activity or the sales document. Spokesman John Earnhardt said, “In the last couple years, 18 months or so, we’ve taken a more competitive stance against competitors including HP, Huawei and Juniper.”

Huawei faces exclusion from planned Canada government network

* Canada invokes "national security exception"

* Suggests Huawei may be excluded from building network

* U.S. House report urged U.S. firms not to deal with Huawei

By Randall Palmer

OTTAWA, Oct 9 (Reuters) - The Canadian government hinted strongly on Tuesday it would exclude Chinese telecom equipment giant Huawei Technologies Co Ltd from helping to build a secure government communications network because of possible security risks.

Ottawa has invoked a national security exception to allow it to discriminate, without violating international trade obligations, against companies it deems to be too risky to be involved in putting together the network for carrying government phone calls, emails and data center services.

"The government's going to be choosing carefully in the construction of this network, and it has invoked the national security exception for the building of this network," Andrew MacDougall, spokesman for Conservative Prime Minister Stephen Harper, told a news conference.

"I'll leave it to you if you think ... Huawei should be a part of a Canadian government security system," MacDougall said.

MacDougall was speaking in reaction to a report on Monday from the U.S. House of Representatives' Intelligence Committee, which urged U.S. firms to stop doing business with Huawei and another Chinese company, ZTE Corp . It warned that China could use their network equipment for cyber-espionage.

CBC television reported that the committee chairman, Rep. Mike Rogers, is also urging Canadian companies not to do business with Huawei.
Huawei has a thriving business in Canada. It won a contract in 2008 to build telecommunications networks for domestic operators Telus Corp and BCE Inc's Bell Canada, and it has even received a C$67 million ($68 million) research grant from the province of Ontario.

"The national security exception only applies to foreign companies," said Huawei Technologies Canada Co Ltd spokesman Scott Bradley.
"Huawei is fully incorporated in Canada, and operates as a subsidiary Canadian company. This alone effectively enables us to bid on any potential procurement opportunities."

In invoking the security exception for the government network, Canada has not gone as far as Australia, which has barred Huawei from taking part in contracts to build the government's $38 billion national broadband network.

Bradley suggested the Australian decision was taken for other reasons.

"Australia has made pretty clear direction that they are trying to cozy up to the United States right now in terms of their trade relationship," he said, adding that Australia has also agreed to have 2,500 U.S. troops stationed there.

David Skillicorn, Internet security expert at Queen's University in Kingston, Ontario, said he supports the U.S. recommendation not to deal with Huawei and said Ottawa should revisit its decision to let it operate in Canada.

"The Harper government is putting Canadian telecommunications companies at risk. We shouldn't be rolling out the red carpet for this company," he said.
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