a business thwarted by sovereignty issues

This July 23, 2019, French telecom operators do not hide their annoyance. That day, in a final vote, the Senate passed a bill to roll out 5G. On paper, this is aimed at ” to ensure “ next generation mobile network. But in reality, this text, borne by the government, has only one goal: to limit the footprint of Huawei, the Chinese giant of telecommunications equipment, in France, whose products arouse distrust among the executive and intelligence services.

Two operators paid the price for this “Huawei law”. These are SFR and Bouygues Telecom. Unlike Orange and Free, they would already use the Shenzhen Group’s 3G and 4G services on half of their networks. Both have received several bans on switching mobile sites to 5G. As a result, they are now forced to disassemble thousands of antennas to replace them with other equipment manufacturers, which are considered less risky. In the summer of 2020, Bouygues Telecom in particular announced that it would gradually withdraw its 3,000 Huawei antennas, located in cities and very dense areas, back in 2028. Furious at this treatment, the latter and its rival SFR have been fighting ever since for the state to compensate them.

Suspicion of espionage

Months before its adoption, and even today, this Huawei law was the subject of heated battles between the telecommunications sector and the executive. Specifically, this text obliges Orange, SFR, Bouygues Telecom to Free to seek the approval of the National Agency for Security of Information Systems (Anssi), which is dependent on Matignon, for the installation of any new antenna in ‘Hexagon. This new law clearly allows the Prime Minister to remove these requests “if he considers that there is a serious risk of damage to defense and national security”. If this procedure is not officially directed at any equipment manufacturer in particular, it is unofficially Huawei, and that alone, which is in the eyes of the executive.

The Chinese telecom giant may be a technological leader on the 5G front, but it arouses the greatest distrust among the intelligence services of many Western countries. They fear that its equipment will be used for espionage purposes on behalf of Beijing. They also fear that in the event of a conflict, China could disrupt or even turn off mobile networks. Which would be a disaster for France and its economy, which today is heavily dependent on digital infrastructure. It is for these reasons that several countries – such as the United States, Australia, the United Kingdom or even Sweden – have decided to ban it.

Network security, a national priority

This “Huawei affair” illustrates this: In the field of telecommunications, the choice of a mobile network equipment provider is not just about the quality of its products, its prices or its customer service. His nationality and the geopolitical context matter. This is all the more true as the coronavirus epidemic and the war in Ukraine have apparently marked the end of the golden age of globalization. This is reflected in the concern of many countries, including France, to ensure at all costs their “sovereignty” and their independence in the most vital and strategic sectors of the economy.

Telecommunications is, of course, one of them. The “digital economy” has invaded all areas, public and private, and this trend will increase further with 5G. Exclude in this context that the networks “fall” or that they are too dependent on a foreign power, especially if it is not considered a friend. Their safety has more than ever become a national priority. This applies to France as to most Western powers. This is one of the reasons why the telecommunications equipment sector is now under high voltage.

When Washington sees Nokia or Ericsson

Today, the situation is simple: Europe is fortunate to have two manufacturers of telecommunications equipment. These are Finnish Nokia and Swedish Ericsson. China also has two via Huawei and its rival ZTE. But the United States has no more. After driving Huawei and ZTE out due to security issues, they are now dependent on Europeans for their mobile networks. A situation that does not suit them at all. Washington’s priority is clear: Uncle Sam’s country must definitely regain its sovereignty here.

That’s why the United States would welcome a “made in the USA” manufacturer to get hold of a European equipment manufacturer. For several years, rumors of a takeover of Nokia by Cisco, the US network infrastructure master, have returned regularly. In February 2020, Bill Barr, the then US Attorney General, was extremely transparent: he publicly suggested during a symposium that the United States “take control” from Nokia or Ericsson, “either directly or through a consortium of private US and allied companies”.

After failing to see this dream come true, Washington supports another initiative. In telecom jargon it is called “Open RAN (Radio Access Networks)”. Behind this barbaric name hides an innovation: In the coming years, part of the mobile infrastructure will be replaced by software that will run in the cloud. Its aim is also – and above all – to enable a host of specialized actors to deliver one or more of these software or infrastructure blocks thanks to the harmonization of norms and standards. This will open up the market while current equipment manufacturers each today operate with closed proprietary systems.

The United States wants to regain its sovereignty

Presented as a solution for the future, Open RAN must above all enable the United States to regain control, even leadership, in telecommunications equipment. And with good reason: they already have many key assets at different levels. This is especially the case in cloud and software where they have world leaders. “We also see it with the American operator AT&T, which has entrusted Microsoft with the administration of its core network”notes Michaël Trabbia, Orange’s Innovation Director.

The danger for Europe and its operators is to see its mobile network equipment sector beaten by the United States and thus lose its sovereignty in this area. If certain European intelligence services claimed the Chinese origin of certain equipment, it is highly likely that they would also crawl if “made in the US” was imposed … To avoid giving birth to such a scenario, several major European operators are mobilizing. This is especially the case for Orange.

If Open RAN tomorrow becomes the norm, then the operator wants to have the opportunity to get supplies for each software or infrastructure component from several players, including Europeans. “For the different bricks of the ecosystem, we must not be dependent on one or two actors. This is where there is a riskwarns Michaël Trabbia. You need at least three or four players on each of the essential technological blocks. » In this perspective, Orange would like the EU to support an internal ecosystem. “We are working with the telecommunications industry and the European Commission to find funding for this sector”continues Michaël Trabbia.

Europe wants to be less dependent on China

At the same time, telecom operators are now concerned about their dependence on China and Asia for the supply of products high-tech, including network equipment. The health crisis has particularly undermined the supply circuits. As a result of severe confinement, the port of Shanghai, the first in the world to transport goods, suffered very severe disruptions in the spring. Hundreds of ships were stranded. Telecom operators have suffered greatly from this mess, insofar as a lot of telecommunications materials and equipment are produced in the Middle Kingdom or its neighbors, such as Taiwan. “This is a problem for us because there is nowhere else to pick up our equipment”says Michael Trabbia. “I believe we need to move towards a more balanced globalization with an approximation of production sites”he adds, and welcomes the initiatives taken by Nokia and Ericsson to strengthen their capacity in Europe.

asked by The gallerya director from another French operator also deplores the difficulties in obtaining supplies after this “blocked in China”. “The situation has worsened in the supply of telecommunications equipment and components that we need for our boxes and our antennas.he adds. There are tensions everywhere. » Same story for a leader of a competing operator. He says he is particularly concerned about the supply of semiconductors, “essential for the functioning of the network”and of which 80% of world production comes from Asia. “The war in Ukraine has increased the uncertainty in the logistics circuits”he adds.

These difficulties are taken very seriously by Brussels. That is why, in February last year, the EU launched a nearly € 50 billion plan to reduce its reliance on semiconductors. The goal is to double the share that the old continent represents in world production of chips to 20%. An initiative that was not surprisingly welcomed by the telecommunications industry.