On Thursday, Ottawa announced that it was banning Chinese telecommunications equipment giant Huawei Technologies from 5G wireless development in Canada due to security concerns, ending years of controversy in the telecom sector. The Financial Post’s Barbara Shaker breaks down five things you need to know about this decision, from its impact on 5G to Huawei’s future in Canada.
How does the ban change things for the Big 3?
At the moment, the Ottawa announcement is not expected to have a material impact. When the controversy started, the telecom sector split, Rogers Communications Inc. Announces that it plans to partner with Swedish tech giants Ericsson and Bell and Telus in their 5G rollout with Huawei. However, as the federal government began studying Huawei’s ban on wireless network upgrades, and some key Canadian allies, including the United States and the United Kingdom, took steps to reduce Chinese companies’ participation in their markets, pressure on Bell and Telus increased. . In 2020, both announced that they were leaving Huawei and choosing other partners. As a result, they have several years to plan for the future of 5G without Huawei.
Will it slow down the rollout of 5G?
Again, not really. Since they changed partners, Big 3 has moved on with their rollout. Although neither Bell nor Telas responded to requests for comment, a Rogers spokesman confirmed that the ban “has no effect on our plans and deployments.” Industry observers say delays in rollout delays in Canada are more likely to be due to the “bottleneck” in wireless spectrum auctions, noting that Canada lags behind other countries, including the United States, in allowing telcos to bid for new spectrum. The COVID-19 epidemic has delayed a planned 5G spectrum auction for six months, pushing it to June 2021. Last December, Innovation, Science and Economic Development Canada (ISED) asked for comments on policy and licensing considerations – including auction formats, rules and procedures, as well as licensing terms – for the next round of spectrum in the 3800 MHz band.
What does this mean for existing 4G networks?
It is more complicated. The federal government has set a December 31, 2027, 4G D-Commission deadline, which means that any Huawei device must be removed by that date. For Telus and Bell, this could be a problem, as they have had a relationship with a Chinese supplier since 2008. In its latest annual report, Telus noted that it has “chosen to replace many Huawei products” in its network with “advanced” devices from 5G providers Ericsson, Samsung and Nokia. However, Telus said that some of the components removed would be used as replacement parts for the rest of the network as needed, “thus ensuring the supply of the necessary materials.” During Huawei’s government review, Bell and Telus pressed for compensation if their technology needed to be removed, but Ottawa has not yet embraced the idea.
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Initial estimates suggested removing Huawei’s equipment could cost companies up to $ 1 billion, but industry observers have indicated that Bell and Telus are shutting down Huawei as they switch to other network partners – and have five years until the decommissioning deadline. Likely to be much less. According to one analyst, getting rid of the remaining 4G devices is not expected to change the direction of any company’s capital expenditure. A former telecom executive added that the banned equipment could become obsolete by 2027, meaning there would be no business lawsuits to keep it in place.
What about small telecom and internet service providers?
Huawei has offered small, rural players a cheaper alternative to a tough business, and telecom analyst Mark Goldberg says they are likely to be the hardest hit by the ban announced this week. “Small rural wireless ISPs (Internet service providers) are using impressive 5G gear for fixed-wireless access,” he said, adding that the combination of “great price” and “great technology” has led many to choose Huawei. “These small rural companies have business challenges, and now they need to tear and replace their network gears on an accelerated schedule,” Goldberg said. The CEO of Iristel, a partner with Huawei in 3G and 4G networks in northern Canada, told the National Post in an earlier interview that it would be “disastrous” for the company if existing equipment needed to be torn down.
What about other Huawei pursuits in Canada, such as R&D funding?
It is unclear how Huawei and its research partners will respond. In February 2019, as Ottawa was considering banning Huawei from participating in 5G development, the company announced a 15 percent increase in its $ 180 million R&D spending in Canada and promised to add 200 higher paying jobs. At the time, the company’s chairman, Dr. Liang Hua, said the measures were not specifically tied to participation in 5G development in Canada. Through a translator, he told reporters that his “belief” in political leaders was “to make smart decisions… and not to let good technology go to waste.” Concerns over the Canadian government’s consideration of banning Huawei from 5G could affect research and development partnerships with universities across the country, including projects aimed at developing advanced communication technologies, including 5G. On its website, Huawei estimates that about 10 percent of the company’s annual R&D investment in Canada went directly to research partnerships with Canadian research institutes.