A ban on using Huawei gear for Spark's pending 5G mobile network upgrade could mean the technology is more expensive for consumers, the head of a major telco says.
Yesterday, Spark said it had been notified by Government Communications Security Bureau (GCSB) Director-General Andrew Hampton that it could not use Huawei gear for the upgrade to fifth generation technology.
The upgrade would increases the speed at which data can be transferred across the wireless network and make it easier to upload large files.
The director-general told Spark he considered the company's proposal to use Huawei 5G equipment would, if implemented, raise significant national security risks, the telco said.
2degrees chief of corporate affairs Mathew Bolland said the decision could see price increases for consumers. A Huawei ban would leave only two big telco infrastructure providers to bid for 5G work — Nokia Networks and Ericsson — which would make the market less competitive. Resulting price increases would ultimately be passed on to the consumer.
When Huawei entered the market a few years ago the company undercut Nokia Networks and Ericsson to gain market share which forced prices down, Bolland said.
Because it was such a small market already, with only three players, losing one would make a significant difference.
Bolland said 2degrees had not had a discussion with the GCSB on how the decision impacted its plans for 5G and was "seeking clarity", he said. "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."
GCSB Minister Andrew Little said the "national security risks" identified by the agency in regards to Spark's planned 5G roll-out related to "intervention in an unauthorised way".
Under the Telecommunications (Interception Capability and Security) Act 2013, technology used by telecommunication network operators for upgrades need to be vetted and approved by the security agency.
Little said the agency had identified technology that Spark wished to introduce for 5G constituted "what would create a national security risk". But he stayed mum on details of what those risks were, citing "classified information".
The next part of the process was for Spark and the GCSB to work together and see if any "outstanding issues could be resolved," Little said.
Spark said it had not yet had time to review the decision in detail.
"While we are disappointed with this decision, we are confident that the decision will not affect our plans to launch Spark's 5G network by 1 July 2020, subject to the necessary spectrum being made available by the New Zealand Government."
At Spark's annual meeting on November 2, managing director Simon Moutter made an impassioned speech in support of Huawei, saying the company should be allowed to bid for 5G upgrade business unless the government could supply "incontrovertible proof" that the company was a security threat.
Huawei NZ deputy chief executive Andrew Bowater said his company had a policy of full co-operation with the GCSB. As in the UK and Canada, no issue had ever been raised with its technology, he told the Herald last week.
The GCSB's move comes after reports on Friday that the US was pressuring allies to drop Huawei.
US officials were reportedly worried about the prospect of Chinese telecom-equipment makers spying on or disabling connections to an exponentially growing universe of things, including components of manufacturing plants.
The Wall Street Journal quoted an un-named US official who said, "There are additional complexities to 5G networks that make them more vulnerable to cyberattacks."
While the US and Australia have long-standing bans on Huawei, former Prime Minister John Key was an active booster of the Chinese company, encouraging companies involved in the Ultrafast Broadband (UFB) rollout to consider its gear as a quality, cost-competitive auction.
Trade and Export Growth Minister David Parker said New Zealand and China had a mature relationship, which was much broader than this issue.
Yesterday's decision could mean fresh scrutiny of the Huawei hardware that is sprinkled through the UFB and Rural Broadband Initiative (RBI) rollouts as well as Spark, Vodafone and 2degrees' networks.
Telecommunications Users Association head Craig Young earlier warned the cost and disruption of ripping it out would be considerable.