U.S. Scrambles to Outrun China in New Arms Race

Adapter from an article by David E. Sanger, Julian E. Barnes, Raymond Zhong and Marc Santora, Jan. 26, 2019 | Original New York Times article here.

Huawei’s offices in Warsaw. Polish officials recently came under pressure from the United States to bar Huawei from building its 5G communications network.

Jeremy Hunt, the British foreign minister, arrived in Washington last week for a whirlwind of meetings dominated by a critical question: Should Britain risk its relationship with Beijing and agree to the Trump administration’s request to ban Huawei, China’s leading telecommunications producer, from building its next-generation Internet and telephone networks?

Britain is not the only American ally feeling the heat. In Poland, officials are also under pressure from the United States to bar Huawei from building its fifth generation, or 5G network. Trump officials suggested that future deployments of American troops — including the prospect of a permanent base labeled “Fort Trump” — could hinge on Poland’s decision.

And a delegation of American officials showed up last spring in Germany, where most of Europe’s giant fiber-optic lines connect and Huawei wants to build the switches that make the system hum. The Americans' message: Any economic benefit of using cheaper Chinese telecom equipment is outweighed by the security threat to the NATO alliance.

Over the past year, the United States has embarked on a stealthy, occasionally threatening, global campaign to prevent Huawei and other Chinese firms from selling to Western allies — the fiber optic cables, routers and switches that are at the base of the Wired Internet (which represents 95% of the data-path from Data Centers to neighborhoods) — and which feeds all wired-to-the-premises Broadband Internet endpoints and all Wireless endpoints (the last 5% of the data-path).

 

The administration contends the following:

1. The world is engaged in a new arms race — one that involves technology, rather than conventional weaponry

2. This digital arms race poses a real danger to America’s national security.

The story goes . . . that in an age when powerful weapons are cyber-controlled and use Radio-Frequency ElectroMagnetic Microwave Radiation (RF-EMR) for surveillance, crowd-control and directed energy weapons, whichever country develops the most expertise in 4G and 5G weapons systems, will gain an economic, intelligence and military edge for much of this century.

Our allies must be asking themselves . . .

. . . is this a “real danger”, or just more fear-mongering by Trump to deliver to US-based Telecom and Cable companies what it wants: a foothold in your neighborhood to build a 24/7 surveillance, crowd-control, 4G and 5G directed energy weapons system that will be pointed at your home?

Has Trump now finally cried Wolf! one too many times?

The transition to 5G — already beginning in prototype systems in cities from Dallas to Atlanta — is really a 4G system with some 5G sprinkled in for bragging rights in the press. Make no mistake . . . this bait-and-switch scheme is really about a market-share battle between large Telecom and Cable companies, wishing to switch customers from

• Lower-priced, more secure, more reliable and more defensible (Title II-regulated) wired Internet and telephone service (provided by a State Telecommunications Utility)

— over to —

• Higher-priced less secure, less reliable and less defensible (but unregulated) Wireless (provided by private companies)

This bait-and-switch scheme is “dressed up” in military/national security terms to make it easier for the medicine to go down: the government will do whatever it takes in order to get the 24/7 surveillance, crowd-control, 4G and 5G directed energy weapons system that it wants, but does it have to be in your neighborhood?

No, it doesn't.

This is mostly about extracting more money from well-healed customers, who are already adequately-served by Wired and Wireless endpoints. There are no provisions in recent FCC rules and proposed Federal legislation which force Telecom providers to improved Internet access to those living on the other side of the Digital Divide.

The Telecoms say that the extreme density 4G and 5G cell tower network is the first network built to serve the sensors, robots, autonomous vehicles and other devices that will continuously feed each other vast amounts of data, allowing factories, construction sites and even whole cities to be run more efficiently.

The questions you need to answer is: Do you want a 24/7 surveillance, crowd-control, 4G and 5G directed energy weapons system in your neighborhood? Do you really want autonomous vehicles, robots and sensors collecting and selling information about you and your family? Are we just heading to an autocratic mass-surveillance and social credit/grading scheme, similar to the one that is already being rolled out in China?

So what is being sold as good for consumers is actually better for intelligence services and cyber-attackers. The 5G system is 95% a physical network of fiber optic cables [built by State Telecommunications Public Utility companies with money collected from their customers], connected to switches and routers. But it is more reliant on layers of complex software that are far more adaptable, and constantly updating, in ways invisible to users — much as an iPhone automatically updates while charging overnight.

In interviews with current and former senior American government officials, intelligence officers and top telecommunications executives, it is clear that the desire for extreme density 4G and 5G infrastructure has created a zero-sum calculus in the Trump White House — a conviction that there must be a single winner in this arms race, and the loser must be banished. This is beginning to sound a lot like the fight for a border wall.

For months, the White House has been drafting an executive order, expected in the coming weeks, that would effectively ban United States companies from using Chinese-origin equipment in critical telecommunications networks. That goes far beyond the existing rules, which ban such equipment only from government networks.

Nervousness about Chinese technology has long existed in the United States, fueled by the fear that the Chinese could insert a “back door” into telecom and computing networks that would allow Chinese security services to intercept military, government and corporate communications. And Chinese cyber-intrusions of American companies and government entities have occurred repeatedly, including by hackers suspected of working on behalf of China’s Ministry of State Security.

The prospect of Chinese cyber-intrusions has taken on more urgency as countries around the world begin deciding which equipment providers will build their extreme density 4G and 5G infrastructure.

American officials say the old process of looking for “back doors” in equipment and software made by Chinese companies is the wrong approach, as is searching for ties between specific executives and the Chinese government . The bigger issue, they argue, is the increasingly authoritarian nature of the Chinese government — (ahem, and the US Government) — the fading line between independent business and the state and new laws that will give Beijing — (ahem, and Washington, DC) — the power to look into, or maybe even take over, networks that companies like Huawei have helped build and maintain.

William R. Evanina, the director of America’s National Counterintelligence and Security Center:

“It’s important to remember that Chinese company relationships with the Chinese government aren’t like private sector company relationships with governments in the West. China’s 2017 National Intelligence Law requires Chinese companies to support, provide assistance and cooperate in China’s national intelligence work, wherever they operate.”

This, however, sounds a lot like the US Government leaning on AT&T, Verizon, Amazon, Google, Facebook, Microsoft and Apple to assist the US Government in its intelligence work, wherever they operate.

The White House’s focus on Huawei coincides with the Trump administration’s broader crackdown on China, which has involved sweeping tariffs on Chinese goods, investment restrictions and the indictments of several Chinese nationals accused of hacking and cyber-espionage. President Trump has accused China of “ripping off our country” and plotting to grow stronger at America’s expense.

Mr. Trump’s views, combined with a lack of hard evidence implicating Huawei in any espionage, have prompted some countries to question whether America’s campaign is really about national security or if it is aimed at preventing China from gaining a competitive edge.

Bingo . . . but Administration officials see little distinction in those goals.

John R. Bolton, Mr. Trump’s national security adviser told The Washington Times on Friday:

“President Trump has identified overcoming this economic problem as critical, not simply to right the balance economically, to make China play by the rules everybody else plays by, but to prevent an imbalance in political/military power in the future as well. The two aspects are very closely tied together in his mind.”

The administration is warning allies that the next six months are critical. Countries are beginning to auction off radio spectrum for new, 5G cellphone networks and decide on multibillion-dollar contracts to build the underlying switching systems. This past week, the Federal Communications Commission announced that it had concluded its first high-band 5G spectrum auction.

The Chinese government sees this moment as its chance to wire the world — especially European, Asian and African nations that find themselves increasingly beholden to Chinese economic power.

Both the United States and China believe that whichever country dominates 5G will gain an economic, intelligence and military edge for much of this century.

A New Red Scare?

So far, the fear swirling around Huawei is almost entirely theoretical. Current and former American officials whisper that classified reports implicate the company in possible Chinese espionage but have produced none publicly. Others familiar with the secret case against the company say there is no smoking gun — just a heightened concern about the firm’s rising technological dominance and the new Chinese laws that require Huawei to submit to requests from Beijing.

Ren Zhengfei, Huawei’s founder, has denied that his company spied for China and he said earlier this month.

“I still love my country. I support the Communist Party of China. But I will never do anything to harm any other nation.”

Australia last year banned Huawei and another Chinese manufacturer, ZTE, from supplying 5G equipment. Other nations are wrestling with whether to follow suit and risk inflaming China, which could hamper their access to the growing Chinese market and deprive them of cheaper Huawei products.

Government officials in places like Britain note that Huawei has already invested heavily in older-style networks — and has employed Britons to build and run them. And they argue that Huawei isn’t going away — it will run the networks of half the world, or more, and will have to be connected, in some way, to the networks of the United States and its allies.

Yet BT Group, the British telecom giant, has plans to rip out part of Huawei’s existing network. The company says that was part of its plans after acquiring a firm that used existing Huawei equipment; American officials say it came after Britain’s intelligence services warned of growing risks. And Vodafone Group, which is based in London, said on Friday that it would temporarily stop buying Huawei equipment for parts of its 5G network.

Nations have watched warily as China has retaliated against countries that cross it. In December, Canada arrested a top Huawei executive, Meng Wanzhou, at the request of the United States. Ms. Meng, who is Mr. Ren’s daughter, has been accused of defrauding banks to help Huawei’s business evade sanctions against Iran. Since her arrest, China has detained two Canadian citizens and sentenced to death a third Canadian, who had previously been given 15 years in prison for drug smuggling.

Philippe Le Corre, nonresident senior fellow at the Carnegie Endowment for International Peace said:

“Europe is fascinating because they have to take sides. They are in the middle. All these governments, they need to make decisions. Huawei is everywhere.”

A Huawei store in Warsaw. This month, the Polish government made two high-profile espionage arrests, including an employee of Huawei.

Growing Suspicions

This month, the Polish government made two high-profile espionage arrests: a former intelligence official, Piotr Durbajlo, and Wang Weijing, an employee of Huawei. The arrests are the strongest evidence so far that links Huawei with spying activities.

Mr. Wang, who was quickly fired by Huawei, has been accused of working for Chinese intelligence agencies, said a top former Polish intelligence official. Mr. Wang, according to American diplomats, was the handler of Mr. Durbajlo, who appears to have helped the Chinese penetrate the Polish government’s most secure communications network.

A senior American official said the case was a prime example of how the Chinese government plants intelligence operatives inside Huawei’s vast global network. Those operatives potentially have access to overseas communications networks and can conduct espionage that the affected companies are not aware of, the official said.

Huawei said Mr. Wang had brought “disrepute” on the company and his actions had nothing to do with its operations.Mr. Wang’s lawyer, Bartlomiej Jankowski, says his client has been caught up in a geopolitical tug of war between the United States and China.

American and British officials had already grown concerned about Huawei’s abilities after cybersecurity experts, combing through the company’s source code to look for back doors, determined that Huawei could remotely access and control some networks from the company’s Shenzhen headquarters.

On careful examination, the code that Huawei had installed in its network-control software did not appear to be malicious. Nor was it hidden. It appeared to be part of a system to update remote networks and diagnose trouble. But in some circumstances, it could also route traffic around corporate data centers — where firms monitor and control their networks — and its mere existence is now cited as evidence that hackers or Chinese intelligence could use Huawei equipment to penetrate millions of networks.

American officials and academics say Chinese telecommunications companies have also temporarily hijacked parts of the internet, rerouting basic traffic from the United States and Canada to China.

One academic paper, co-written by Chris C. Demchak, a Naval War College professor, outlined how traffic from Canada meant for South Korea was redirected to China for six months. That 2016 attack has been repeated, according to American officials, and provides opportunity for espionage.

Last year, AT&T and Verizon stopped selling Huawei phones in their stores after Huawei begin equipping the devices with its own sets of computer chips — rather than relying on American or European manufacturers. The National Security Agency quietly raised alarms that with Huawei supplying its own parts, the Chinese company would control every major element of its networks. The N.S.A. feared it would no longer be able to rely on American and European providers to warn of any evidence of malware, spying or other covert action.

An assembly line at Huawei’s cellphone plant in Dongguan, China. The company has already surpassed Apple as the world’s second biggest cellphone provider.

The Rise of Huawei

In three decades, Huawei has transformed itself from a small reseller of low-end phone equipment into a global giant with a dominant position in one of the crucial technologies of the new century.

Last year, Huawei edged out Apple as the second-biggest provider of cellphones around the world. Richard Yu, who heads the company’s consumer business, said in Beijing several days ago that “even without the U.S. market we will be No. 1 in the world,” by the end of this year or sometime in 2020.

The company was founded in 1987 by Mr. Ren, a former People’s Liberation Army engineer who has become one of China’s most successful entrepreneurs.

American officials say the company started through imitation, and even theft, of American technology. Cisco Systems sued Huawei in 2003, saying it had illegally copied the American company’s source code. The two companies settled out of court.

But Huawei did not just imitate. It opened research centers (including one in California) and built alliances with leading universities around the world. Last year, it generated $100 billion in revenue, twice as much as Cisco and significantly more than IBM. Its ability to deliver well-made equipment at a lower cost than Western firms drove once-dominant players like Motorola and Lucent out of the telecom-equipment industry.

While American officials refuse to discuss it, the government snooping was a two-way street. As early as 2010, the N.S.A. secretly broke into Huawei’s headquarters, in an operation, code-named “Shotgiant,” a discovery revealed by Edward J. Snowden, the former N.S.A. contractor now living in exile in Moscow.

Documents show that the N.S.A. was looking to prove suspicions that Huawei was secretly controlled by the People’s Liberation Army — and that Mr. Ren never really left the powerful army unit. It never found the evidence, according to former officials. But the Snowden documents also show that the N.S.A. had another goal: to better understand Huawei’s technology and look for potential back doors. This way, when the company sold equipment to American adversaries, the N.S.A. would be able to target those nations’ computer and telephone networks to conduct surveillance and, if necessary, offensive cyberoperations.

In other words, the Americans were trying to do to Huawei the exact thing they are now worried Huawei will do to the United States.

President Trump met with Andrzej Duda, his Polish counterpart, last year. Mr. Duda has suggested that the United States build a `$2` billion base and training area, which Mr. Duda only half-jokingly called “Fort Trump.”

A Global Campaign

After an uproar in 2013 about Huawei’s growing dominance in Britain, the country’s powerful Intelligence and Security Committee, a parliamentary body, argued for banning Huawei, partly because of Chinese cyberattacks aimed at the British government. It was overruled, but Britain created a system to require that Huawei make its hardware and source code available to GCHQ, the country’s famous code-breaking agency.

In July, Britain’s National Cyber Security Center for the first time said publicly that questions about Huawei’s current practices and the complexity and dynamism of the new 5G networks meant it would be difficult to find vulnerabilities.

At roughly the same time, the N.S.A., at a series of classified meetings with telecommunications executives, had to decide whether to let Huawei bid for parts of the American 5G networks. AT&T and Verizon argued there was value in letting Huawei set up a “test bed” in the United States since it would have to reveal the source code for its networking software. Allowing Huawei to bid would also drive the price of building the networks down, they argued. The director of the N.S.A. at the time, Adm. Michael S. Rogers, never approved the move and Huawei was blocked.

In July 2018, with these decisions swirling, Britain, the United States and other members of the “Five Eyes” intelligence-sharing alliance met for their annual meeting in Halifax, Nova Scotia, where Chinese telecommunications companies, Huawei and 5G networks were at the top of the agenda. They decided on joint action to try to block the company from building new networks in the West.

American officials are trying to make clear with allies around the world that the war with China is not just about trade but a battle to protect the national security of the world’s leading democracies and key NATO members.

On Tuesday, the heads of American intelligence agencies will appear before the Senate to deliver their annual threat assessment, and they are expected to cite 5G investments by Chinese telecom companies, including Huawei, as a threat.

In Poland, the message has quietly been delivered that countries that use Chinese telecommunications networks would be unsafe for American troops, according to people familiar with the internal discussions. That has gotten Poland’s attention, given that its president, Andrzej Duda, visited the White House in September and presented a plan to build a $2 billion base and training area, which Mr. Duda only half-jokingly called “Fort Trump.”

Col. Grzegorz Malecki, now retired, who was the head of the Foreign Intelligence Agency in Poland, said it was understandable that the United States would want to avoid potentially compromising its troops.

“And control over the 5G network is such a potentially dangerous tool,” said Mr. Malecki, now board president of the Institute of Security and Strategy. “From Poland’s perspective, securing this troop presence outweighs all other concerns.”

Adam Satariano, Joanna Berendt and Katie Benner contributed reporting.

A version of this article appears in print on Jan. 27, 2019, on Page A1 of the New York edition with the headline: U.S. Scrambles to Outrun China in New Arms Race