Tony Poulos Tony Poulos Market Strategist - TM Forum

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Free trade, globalization and flying pigs

  • I am not a great fan of over-regulation. After many years of deregulation in almost every national telecommunications market of the world it seems that governments believe we still need to be told what to do, constantly, almost like naughty school children. Regulation is one thing, but when governments step in and use CSPs as pawns in games of international oneupmanship, things may be going a little too far.

    I refer, of course, to the recent ‘decision’ by Sprint Nextel to block Chinese network vendors, Huawei and ZTE, from its multi-million dollar network modernization project. If Wall Street Journal reports are correct, and nobody has denied them yet, the directive came from none less than the U.S. Commerce Secretary, Gary Locke. He cited mounting concern over national security because the two vendors had close ties with the Chinese Government and military.

    The Wall Street Journal also reported that a group of four U.S. lawmakers sent a letter to the FCC last month explaining potential risks posed by the deployment of Huawei and ZTE’s equipment by U.S. carriers. The letter said the two companies could be subject to “significant influence by the Chinese military which may create an opportunity for manipulation of switches, routers, or software embedded in American telecommunications network so that communications can be disrupted, intercepted, tampered with, or purposely misrouted.”

    Why that should be made an issue implies that the USA cannot secure its own networks. Conversely does that mean any US firm supplying goods and services to US and foreign governments and militaries should be avoided by other countries? It’s hard to believe that in 2010 and the era of globalization, free trade and rampant capitalization that the world’s leading exponent of all three should suddenly change tack, albeit because of security concerns. Some feel it could well be a ‘tit-for-tat’ response to the ongoing success of the Chinese suppliers across the globe.

    On the other hand, it could simply be a matter of national pride and a way of building a flagging national spirit in taking such a jingoistic, scare-mongering stand. Maybe it’s retaliation to the restrictions placed on Google by Chinese authorities, a means of stemming the trade imbalance or retribution for not devaluating the Chinese currency. Whatever it is, why pick the telecommunications industry as the scapegoat?

    Back in the late 80s, Singapore’s defiant Lee Kuan Yew addressed both houses of government in the USA and berated them soundly for introducing textile levies on imports from Asia. How could the bastion of capitalism that had spent a century pushing the system suddenly backtrack and put growing Asian economies at risk, the very same ones it had diverted from communism?  His emotional and thoroughly sensible arguments won the day, but who will fight for China in this case?

    For Sprint Nextel, the lowest bidders are now taken out and they have to either renegotiate other vendors down or lose money. Of course, that won’t stop other countries and CSPs from continuing to buy Chinese products and services. Even the Indian government backed down on its China bans earlier this year. Did common sense prevail or was it simply good business sense? And what of all those CSPs from diverse countries that have already acquired from Huawei and ZTE? Should they rip out their networks and start again using more ‘secure’ vendors from Europe and the USA? As the old saying goes – pigs might fly.

    For the USA, only time will tell what the real reasons behind such a targeted attack were. Who will suffer or benefit from it may also be a revelation in years to come, presuming the decision is not reversed soon. For Sprint Nextel, it is probably wondering why it was the ‘chosen one.’ Perhaps the government will subsidize their choice of a more palatable vendor?

    Tony Poulos
    About Tony Poulos Tony Poulos works as Market Strategist at TM Forum
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