The Risks of China’s Huawei to Canada

Huawei’s rise coincided with Canadian telecom giant Nortel’s demise
By Omid Ghoreishi, Epoch Times
September 14, 2018 Updated: September 21, 2018

NEWS ANALYSIS

Chinese telecom giant Huawei’s footprint in the development of the next generation of mobile technology in Canada has been a sore point for the country’s relations with its intelligence and security partners.

There are also allegations that have lingered since 2012, when news broke that Huawei may have benefited from the persistent Chinese hacking and IP theft that experts say played a part in the eventual demise of Nortel Networks Corp., the crown jewel of Canada’s high-tech industry for decades.

Senior U.S. officials have been warning that Canada should shut out the Chinese firm from Canada’s 5G network, the next evolution in wireless technology. And while a Globe and Mail report claims Canadian Prime Minister Justin Trudeau is reportedly alarmed by Huawei’s potential threat to national security, Huawei hasn’t been shown the door yet like it has in Australia and the United States.

The majority of Canadians don’t want Huawei involved in the 5G broadband network, that much is clear from a Nanos poll commissioned by the Globe released last month. According to the poll, the ratio of those wanting Huawei shut out to those wanting it involved is three to one.

There may be plenty of reasons for Canadians to want Huawei’s hands off of the country’s networks.

Warnings against Huawei and the other Chinese telecom giant ZTE have been raised by prominent figures in the Canadian and American intelligence communities.

Former CIA director Michael Hayden testifies during a hearing before Senate Armed Services Committee Aug. 4, 2015, on Capitol Hill in Washington, D.C. (Alex Wong/Getty Images)

“[Huawei] is essentially under the control of the Chinese government,” was the caution by the former head of the Canadian Security Intelligence Service Ward Elcock in a CBC interview.

Former CIA head Michael Hayden said in an interview with the Australian Financial Review that there is hard evidence that Huawei spies for Beijing.

A scathing report published in July by an agency of the intelligence apparatus in the U.K.—where Huawei has been allowed to be part of the phone and internet network—concluded that the country’s network is at risk because of shortcomings in Huawei’s processes.

But there are other events in recent memory that should have Canadians concerned about a firm linked to Beijing being active in Canada’s telecom sector.

A Tale of Two Telecom Giants

Nortel was the big success story of Canada’s technology industry. At its height, it employed close to 100,000 people worldwide and reached a market cap of $283 billion.

The failure of the firm has been the subject of academic studies and attributed to multiple factors. But Brian Shields, a former senior security adviser at Nortel, thinks IP theft by Chinese hackers that presumably aided Nortel’s competitors was one of them.

“It really hurt a lot of people here, because we had jobs and we lost them,” Shields said in a 2014 interview with NTD Television. “These were the people who we worked with for many years, and it just hurts.”

A man walks past a company sign at a NortelNetwroks office tower in Toronto on Feb. 25, 2009. (The Canadian Press/Nathan Denette)
A man walks past a company sign at a Nortel Networks office tower in Toronto on Feb. 25, 2009. (The Canadian Press/Nathan Denette)

Shields first learned about the hacking in 2004, and saw it continue through to 2009, when he left the company. At first, the hackers were using accounts of executives, including the CEO, to access files, Shields told NTD Television. Once discovered, the hackers changed tactics, and instead used accounts of employees based in China, as Nortel had operations there.

From the level of sophistication of the hacking operation, it was clear to Shields that it was the state that was behind the hackings.

“It was very organized what they were doing over there, it was very advanced,” he said. “A 16- year-old hacker isn’t going to take an electronic document on some diode and its transmissions … what is he going to do with that?”

He alleges that the main benefactor of the data would have been Huawei.

While Shields provides no proof that Huawei was receiving the data, he raises the question, “Where was the manufacturer that was reaping the benefits of this? Was it the companies in Russia or France that were suddenly doing real good? No.”

“It was economic espionage, and we lost an industry here in Canada. That’s what happened.”

Nortel filed for bankruptcy in 2009 and its stock price dropped below $1, leaving thousands of employees without jobs and pensioners in a state of limbo.

On the other side of the world, Huawei was celebrating its expansion outside of China throughout the 2000s. By 2010, the company was listed among the Global Fortune 500 corporations.

Mark Anderson, a well-known US technology guru and CEO of Strategic News Service that offers research and information on technology and economics, said it was no coincidence that Huawei was rising at the same time that Nortel was going down.

“Huawei took the international telecoms equipment market by storm by charging about an average of 40 percent less than the market rates. They were able to do that because they were a [Chinese Communist] Party-related company,” Anderson said in an interview.

Thanks to government subsidies and “gift contracts” from the Chinese military, the company was under no pressure to achieve a profit, he noted.

There were other factors in Huawei’s success, too, he said.

“It was using stolen IP at the same time, so it didn’t have any sunken costs in research and development, and the result was you could charge anything you wanted to.”

In Anderson’s assessment, Nortel was Canada’s best company, but IP theft by China “absolutely destroyed the company.”

A Huawei sign is seen during the Consumer Electronics Show (CES) 2018 at the Las Vegas Convention Center in Las Vegas, Nevada on January 12, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
A Huawei sign is seen during the Consumer Electronics Show at the Las Vegas Convention Center in Las Vegas, Nevada on Jan. 12, 2018. (Mandel Ngan/AFP/Getty Images)

Huawei has been sued by Motorola over allegations that its former employees stole trade secrets and provided them to Huawei. It has also been sued by Cisco for allegedly copying its source code. Both cases were settled out of court.

A more recent lawsuit in California launched by a former Huawei employee alleges that he was fired after refusing to use a fake identity and pose as an employee of a fake company to gain entry to a tech summit hosted by Facebook, which had previously refused entry to Huawei. The lawsuit alleges that other Huawei employees who did attend the event compiled a report that included integration plans from competitors at the summit, and transferred the plans to the company’s product teams in China.

The Epoch Times contacted Huawei Canada for comment, but the company did not respond by press time.

In a previous interview with The Epoch Times, Scott Bradley, Huawei Canada’s vice president of corporate affairs, said Huawei is a private company and is not a state-owned enterprise.

At a Senate Intelligence Committee hearing in February, FBI Director Chris Wray referred to Huawei and ZTE as companies “beholden to foreign governments,” urging against allowing them to “gain positions of power inside our telecommunications networks.”

‘Huge Disservice’

Under the leadership of then-premier Kathleen Wynne, Ontario launched a partnership with Huawei in 2016 to help develop the province’s 5G connectivity, investing $16 million in the plan.

According to Huawei, the company has been active in 5G in Canada for a number of years, and has a presence in Markham, Calgary, Edmonton, Vancouver, Ottawa, and Montreal. Huawei and Bell have also partnered to test 5G technology in rural communities.

The government agency in charge of protecting Canada’s critical networks, Communications Security Establishment (CSE), has recently confirmed that it ensures Huawei’s telecom equipment is tested for any potential security threats.

“Since 2013, the Security Review Program has been in place to test and evaluate designated equipment and services considered for use on Canadian 3G and 4G/LTE networks, including Huawei equipment,” CSE spokesperson Evan Koronewski said in an email.

The testing is done by third-party labs accredited by the CSE. Few additional details are provided by the tight-lipped organization whose existence was a secret for over three decades before the public learned about it in a CBC program in the 1970s.

Gary S. Miliefsky, CEO of Cyber Defense Media Group and a breach prevention cybersecurity expert, said no government tests will be enough to prevent security breaches.

“When any government agency tells me they’re going to help with security, they usually get breached,” he said.

“Think about Huawei and connections to government agencies, and how serious it would be to hide their ability to eavesdrop.”

But even if government testing could ensure the equipment doesn’t have security breach risks, the fact remains that Chinese companies are required by law to collaborate with the regime on intelligence work.

What happened in the U.K., where Huawei’s broadband and mobile infrastructure equipment allowed into the nation’s network was found in a recent report to pose a risk, should be a cautionary tale, Anderson said.

“I think it was unfortunate that Britain sold itself out,” he said, adding that Canada can learn a lesson from it.

“I would hope that Trudeau would have learned from [then-British prime minister David] Cameron’s really public mistake, and not do the same thing,” he said.

“I don’t think any of this is confusing. A very straightforward, black-and-white question for every nation and for the leaders of each nation: If you decide to trade off money for national security, you’re doing a huge disservice to the people of your country and to your own legacy.”

Follow Omid on Twitter: @OGhoreishi
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