Why Controlling 5G Could Mean Controlling the World

From The New York Times, I’m Michael Barbaro. This is “The Daily.”

Today: The United States believes that whoever controls 5G, the fifth generation of wireless communication, will have a global advantage for decades to come. The fear is that China is almost there. It’s Monday, February 25.

[CAMERAS CLICKING] [INAUDIBLE]

David, tell us about what happened in Germany earlier this month.

Michael, it was a really remarkable scene at the Munich Security Conference, which is an annual meeting of the major allies.

David Sanger covers national security for The Times.

Basically, the entire national security establishments of the Western allies, the United States, NATO — they’re all in the room.

Mm-hmm.

It is my honor to join you for the 55th Annual Munich Security Conference.

And they were sent Mike Pence.

Under President Donald Trump, the United States will seize every opportunity to achieve peace. But we will approach every challenge with our eyes wide open. We will deal with the world as it is, not as we wish it to be.

The vice president, not known for his foreign policy background, he gave this very combative speech in which he demanded that the Europeans follow the United States out of the Iran deal and so forth. And then he added one more demand, Michael.

The United States has also been very clear with our security partners on the threat posed by Huawei and other Chinese telecom companies.

America is calling on all our security partners to be vigilant and to reject any enterprise that would compromise the integrity of our communications technology or our national security systems.

Do not let Chinese companies and the Chinese government into your communications systems, because you will forever poison the security of your countries and perhaps your relationship with the United States.

We must protect our critical telecom infrastructure. We cannot ensure the defense of the West if our allies grow dependent on the East.

So what is the danger that the vice president thinks China is posing?

Michael, the vice president was talking about the emergence of 5G or fifth-generation networks.

Self-driving cars, smart cities, fully connected homes, robots — this is the future. And it will be powered by 5G. [MUSIC]

These are the networks that will connect the internet of things, the billions of different devices we’re now attaching to the internet to the central networks and to the cloud.

5G is the next generation of wireless service. And it may be closer than many people think.

It’ll be the way that our autonomous vehicles run. It’ll be the way our machinery runs. It’ll be the way our gas pipelines, our water systems run. All of them connected into these networks. And what concerns many in America, and the vice president was just giving voice to this, is that whoever dominates these fifth-generation networks will have an economic intelligence and military edge for decades to come.

We cannot ensure the defense of the West if our allies grow dependent on the East.

Because in future conflicts, the war starts not with nuclear weapons, not with artillery. It starts with unplugging a country — their electricity. And it starts, of course, with their communication networks.

And the United States believes that China might dominate this 5G network, and they want to stop that?

That’s right. We’re at a really critical turning point. The 5G networks are getting ready to get rolled out. It’s billions and billions of dollars of investment. And the decisions on those investments will be made in the next 6 to 18 months.

Wow.

And so the contracts that get awarded by governments, those are all going to get decided very soon. And once a country decides who is going to build their network, there’s no going back, because they’d lose way too much time. So the big decisions on who’s going to have control over these networks is right upon us.

China is way out ahead of the rest of the world in deploying this within its own nation. And the companies that produce 5G in China are becoming the main supplier of that technology to the rest of the world. So right now —

This is the new arms race. In the old Cold War, people counted missiles.

Mm-hmm.

In the new era, you’re going to count who controls which networks.

The thing is, Huawei is producing an incredible amount of 5G technology. It is the main supplier right now of 5G technology to a whole host of European nations. [MUSIC] Huawei was not particularly well known by customers globally. But in recent years, once the Chinese firm moved into mobile phones, it became one of the fastest growing tech companies in the world.

So if this is an arms race, what is China doing to win? What are they offering countries that would encourage them or compel them to allow China in to lay down this network for them, knowing the security threats that the vice president and others have outlined?

Well, what they’re largely offering, Michael, is a lower price.

Hm.

It’s not unusual for Huawei officials to show up at government offices in countries around the world with an official from the local Chinese embassy or consulate, who can explain how they might qualify for low-interest or no-interest loans. They’re doing, essentially, what the United States did in the ‘50s and ‘60s,

when our big industrialists, dam builders, road builders, military equipment providers would show up to allies and potential partners and say, boy, do we have a deal for you.

And for many of these countries, they’re thinking, this is a way they get in good with the Chinese government, especially at a moment that a good number of them are alienated from the United States.

What are some interesting examples of countries who are open to this offer from Huawei and who the U.S. thinks might be susceptible to these kinds of offers?

Well, they’re in a couple of different categories, Michael. First, there are developing countries that just don’t have very much money to go build these networks. So if the Chinese come along with incredibly good terms, that’s pretty appealing, right?

Mm-hmm.

But the really interesting cases are the countries on the edges or in the middle of our alliances. So I’ve been in a couple, recently. In the Czech Republic, Huawei built a good number of the older 3G and 4G networks. In fact, if you go into the old castle in the middle of Prague where the Czech president works, the communications network is all built by Huawei.

Wow.

So Huawei’s in now saying, we want to build the 5G network right on top of what we’ve already built for you. And the Americans are stepping in and saying, not so fast. If you really want to build up an alliance with the United States, with the rest of Europe, you better think twice about letting the Chinese build the core of the networks that connect the political and military leadership to the rest of the world. Let me give you another interesting example:

Poland. Poland’s a new member of NATO and a very enthusiastic one. And there were these discussions underway about whether Poland would use the Huawei networks. The Poles want to build what the Polish president calls “Fort Trump,” in other words, a permanent American base in Poland. And the U.S. has been very clear to them. They said, we haven’t made a decision on building a permanent base in Poland. But we can tell you this — there’ll be no permanent base in Poland if that base has to communicate over a Chinese network. We don’t really want all of our messages going directly to Beijing.

David, are they literally going to call it “Fort Trump“?

The Polish president was in the United States a number of months ago. And he’s the one who first used the term. I think somebody told him that the president likes to have buildings named after him.

Hm.

A lot of noise in the markets right now with regard to weakness due to a major developing story in the corporate world.

So this was all happening in quiet, diplomatic conversations, until the chief financial officer of Huawei landed in Vancouver one day and gets detained at the airport.

One of China’s biggest tech execs has been taken into police custody in Canada and could be extradited to the United States.

Canadian authorities in Vancouver have arrested Huawei’s C.F.O. Her name is Meng Wanzhou.

She has been the public face of Huawei. But more importantly —

The news has sent shockwaves through the business community here, because Meng is not just any old senior executive. She is the daughter of Huawei’s founder, Ren Zhengfei. So that has raised a lot of eyebrows as to exactly what it all means.

She was arrested on the basis of a complaint by the United States — not that Huawei had diverted data, not that Huawei had back doors, but that Huawei had violated the American sanctions on Iran.

In Iran, we’ve known for some time that the U.S. Department of Justice has been looking into Huawei and its activities in relation to Iran.

And that they had done this because Huawei had set up, basically, a shell company, denied it was connected to it, and used it to sell their equipment to the Iranian government.

Hm. David, does your reporting suggests that that is really why the U.S. asked Canada to arrest the C.F.O. of Huawei? Or was this ultimately about the larger set of fears around the 5G network?

Well, I think there’s no question that it was part of a larger set of fears around Huawei, generally. But it was a really fascinating moment because the charge was an unusual one. Because while the United States has gone after companies around the world for breaking sanctions against Iran, including big financial firms like Deutsche Bank, they’ve always just fined them.

Mm-hmm.

So the speculation here has been that this is a message from the United States, a warning shot, if you will.

They’ve never actually arrested their executives. But here, the United States was asking a Canadian court to extradite Ms. Meng to the United States so that she could stand trial.

And what has China done in response to the arrest of this very high-profile figure from Huawei?

It has leaned on the Canadians. Suddenly, Canadian executives and Canadian workers who are in China have found that they, too, are under arrest. So they are taking hostages, in a way, to pressure Canada into not extraditing Ms. Meng to the United States.

So if the U.S. asked Canada to detain this Huawei executive, why is China punishing Canada rather than the U.S. so far? Why aren’t the U.S. and China fighting this arms race more directly?

Well, it’s a great question. It’s not entirely clear. But President Trump said something quite strange at one point shortly after Meng was arrested.

Here’s what the president said in an interview late yesterday with Reuters about the Huawei C.F.O., Meng Wanzhou. He said —

Well, you know, if I strike a really good trade deal with Xi Jinping, the Chinese president, maybe we’ll just release Ms. Meng.

Hm.

China and the United States are engaged in the last stages of this enormously complex set of trade talks that President Trump has escalated.

If I think it’s good for the country — if I think it’s good for what will be, certainly, the largest trade deal ever made, which is a very important thing, what’s good for national security — I would certainly intervene if I thought it was necessary.

So suddenly, he was sort of corrupting what the Justice Department was describing as a legal process with the possibility that she was going to be a pawn in these trade talks. So there are many in the administration who were not happy to hear the president say that.

And you have to imagine that the Chinese side will see that as another poker chip on the bargaining table here, as they sort of hash out what kind of a deal they can come to by March 1.

Their concern is that President Trump will take the easy political out of getting an agreement from the Chinese to buy hundreds of billions of dollars in American goods and that, as the price for that, he’ll ignore these longer-term issues surrounding Huawei. Now, this hasn’t happened yet. And maybe it won’t happen. We don’t know, because it’s all in the black box of the China negotiations right now.

Right. But I have to imagine that national security officials, if the president were to pursue this kind of deal, would tell him that what he would be giving up is far greater than what he would be getting in return.

That’s exactly right.

Well, David, you have been covering cybersecurity for a really long time. Do you believe that the level of threat here that national security officials believe exists with Huawei is as significant as they believe it is?

You know, Michael, I believe there is a potential threat for the diversion of data, because all countries do this, and countries want to go dominate the telecommunications lanes for the same reason that, in a previous era, the British wanted to dominate sea lanes. And then we wanted to dominate sea lanes. And then we came to dominate air power. And then the competition over who would dominate space. So you have to think of the internet as just another domain in which this battle is being fought out.

But it’s got the hints of a larger problem that I don’t think we’ve been debating in the course of this. Over the past few years, we’ve actually seen the internet begin to get Balkanized. It’s getting divided between East and West. We’re seeing the Chinese throw out gradually or make life hard for Google, Facebook, other American companies — recently, Microsoft — and replace those firms with their Chinese equivalents. Then we saw them begin to spread out with equipment that would not only tie together like-minded countries, but that would lend themselves to the kind of social control that the Chinese have been exercising. In Chinese networks, of course, they’re now using artificial intelligence and facial recognition to keep track of dissidents, to make sure that there are social credit scores that can get transmitted around easily to figure out who’s the most loyal citizen. So the Chinese networks may become the favorite of authoritarians around the world. And if that happens, we could end up with a sort of new Berlin Wall, but one that is built around these networks — a highly controlled part of the internet that’s run by the Chinese, and then a Western internet that’s more like what we’re all accustomed to when you type into the search engine, tell me about Tiananmen Square, you get a real Wikipedia entry that answers it — that you wouldn’t get if you typed those same questions in over a Chinese network.

So the fight over Huawei, you’re saying, fits into that. The U.S. is discouraging kind of our half of the world from letting Huawei in, which may further this division of these two internets, the East and the West.

Absolutely. The Chinese have been trying to do this for a long time, but we may actually be feeding that process by barring Huawei and other Chinese companies from building key parts of the Western internet. And the oddity about this is, if you’re going to have a global telecommunications network, sooner or later the United States is going to have to plug in to the Huawei-built 5G networks, as well. Now, that’s not the same as having them build the core of your own network. But it’s not as if you’re going to be able to say, we’re never going to talk to a 5G network built by the Chinese.

I wonder, is there an argument for letting Huawei — in a controlled way — help develop networks around the world, including in the United States, so that there is a truly integrated internet? I understand the risks you’re outlining, and they seem very real. But if everybody goes off into their corner and builds their own internet, that would seem like its own giant set of national security risks.

It does seem that way to me. And I think there’s one strong argument in favor of letting Huawei compete in some of these Western countries, and maybe even compete in the United States. It’s that if they want to have their equipment and their software inside the United States, they have to show it to American authorities.

Mm-hmm.

Right? They have to bring that software over, let the United States poke through it, let it examine it for back doors. And in fact, in private, you’ve heard many people in U.S. industry say to the National Security Agency, hey, the smart way to go about this is let Huawei compete. It’ll drive the price down, and you’ll see their work.

Hm.

And the N.S.A.‘s answer, at least so far, has been, we’re sorry, the risk is just too great. [MUSIC]

David, thank you very much. We appreciate this.

Great to be with you, Michael.

In an interview with “CBS This Morning” late last week, the founder and C.E.O. of Huawei, Ren Zhengfei, said that opposition to his company from Trump administration officials like Vice President Mike Pence had actually helped his company by raising awareness of the 5G network and of Huawei’s technology.

[SPEAKING MANDARIN]

First of all, I would like to thank them, because they are great figures. 5G was not known by common people. But now these great figures are all talking about 5G. And we’re becoming more influential and getting more contracts.

I sense a little bit of sarcasm there.

[SPEAKING MANDARIN]

Oh, please tell them I’m actually thanking them for promoting us.