Australian operator TPG Telecom has announced that “due to factors outside TPG control, it has decided to cease the rollout of its mobile network in Australia.” Since the announcement of its mobile network strategy in April 2017, TPG has been designing and implementing a mobile network based mainly on small-cell architecture. The principal equipment vendor selected for use in the network was Huawei, and the Chinese vendor was supposed to enable TPG’s upgrade to 5G. However, TPG said, in light of the Australian government’s announcement last August that it would prohibit the use of Huawei equipment in 5G networks, that upgrade path has now been blocked.
Since that announcement, TPG has continued to deploy equipment which it had ordered from Huawei prior to the government’s ban, but having reached the decision point as to whether or not to place orders for additional Huawei equipment, TPG has concluded that “it does not make sense to invest further shareholder funds in a network that cannot be upgraded to 5G.”
The operator says it has already invested around AUD 100 million (US $71.8 million) in the network rollout. Prior to August 2018, it had acquired equipment for 1,500 sites, and to date it has fully or partially completed the implementation of around 900 small-cell sites. Additional capex of AUD 30 million (US $21.5 million) is already committed, TPG added.
Tarifica’s Take
In last week’s Story of the Week, we wrote about the Dutch government’s consideration of a plan to place restrictions on Chinese suppliers of equipment to build out 5G networks in the Netherlands. We pointed out that development of next-generation network technology without sufficient concern for security is risky, and that the particular risk of spying and disruption from China—to be achieved through Chinese-made equipment—makes it imperative to take seriously the idea of restricting the role of such equipment in 5G projects.
However, as the present example from Australia shows, that course of action is not without risks of its own—including foreclosing the possibility of 5G development in the case of some operators.
Australia did not ban all Chinese-made equipment, but last summer it did impose a total ban on equipment from one Chinese supplier, Huawei, which happens to be the biggest telecom equipment maker in the world. The resulting lack of access to its devices was enough to doom the 5G development of one operator, TPG, and as a consequence, of TPG’s entire mobile-network project.
TPG is an internet service provider and also owns Australia’s largest MVNO; it had been planning on becoming an MNO, as well—an ambition that now cannot be achieved. We should bear in mind that restrictions on Chinese equipment such as Australia’s will not necessarily have such as dramatic effect on other operators’ plans; TPG was building a network from the ground up, and since it was a new entrant into the MNO market, it was of course more vulnerable than established actors. Still, the case contains a lesson, which is that banning access to equipment, while potentially a very sound idea in terms of cybersecurity, can have a chilling effect on 5G and even 4G development, under certain circumstances.
Therefore, governments should bear that in mind and do whatever they can to make alternatives available and encourage technological development by every means possible. Just this week, German operator Deutsche Telekom warned that Europe would fall behind the U.S. and China if European governments ban Huawei equipment. The German government is currently considering a ban, and DT estimates that if enacted, it would delay the rollout of 5G by at least two years.
As a side note, we should point out that last week we quoted the former chief regulator of the U.S., Tom Wheeler, to the effect that in its effort to win the 5G “arms race,” the U.S. government is not doing enough to promote security. This week, a U.S. media report states that the U.S. is about to come out with a sweeping ban on U.S. companies using Chinese-made 5G equipment, and is pressuring allies such as Britain and Poland to do likewise.