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Chinese Fibres: The Influence of Five Eyes Allies in NZ Infrastructure

Mid-July in 2012, as day broke on Australia, former director of the United States CIA and NSA Michael Hayden was published in print claiming unequivocally that Chinese telecommunications company Huawei was a spy arm of the Chinese government.

Huawei Technologies, which in 2012 unseated Sweden’s Ericsson as the largest manufacturer of telecommunications infrastructure on earth, has been a competitive supplier to many New Zealand projects in the last decade.

Huawei’s New Zealand subsidiary opened in 2005, providing infrastructure to the 2degrees startup network. It is bankrolling a new 4G network for 2degrees this year, and has won contracts to supply equipment to Telecom, to Chorus, and to ultrafast broadband (UFB) network developers Enable in Christchurch and Waikato Networks in the central North Island.

John Key visited China in 2010, met with Huawei officials, and returned to say the company had “certainly got the capacity” to supply New Zealand’s UFB project.

Huawei boasts partnership with 45 of the world’s 50 largest telecom operators, and its total 2012 revenue amounted to $42 billion, about 20 percent of New Zealand’s GDP that year.

Together, the two UFB projects for which Huawei will provide fibre cables and components make up 29 percent of New Zealand’s future coverage.

The comments from Michael Hayden last year were prompted by an outright ban on Huawei tendering for Australia’s $37.4 billion national broadband network, a decision made by the Australian Attorney General on advice from the Australian Security Intelligence Organisation.

They cited concerns of a cyber security attack from China.

Huawei addressed these allegations, including links to the Chinese military or Chinese government, calling them “inaccurate and ungrounded”.

 

‘HIGH-POWERED VISITS’

 

In New Zealand, the government insisted that there were no concerns about Huawei, according to Labour’s opposition spokesperson for IT and communications Clare Curran, a position in stark contrast to Australia banning Huawei “sternly and publicly”.

“But [Labour] believed that there were links with the security concerns that have been raised, and that it was logical, since this all about security partners voicing concern, that there would be a flow on through to New Zealand.”

Green Party co-leader Russell Norman wrote to John Key at the time, requesting an investigation into Huawei’s involvement in UFB, and ICT spokesman Gareth Hughes said it would be prudent for New Zealand to consider similar intervention to that in Australia and America.

“The New Zealand taxpayer will be purchasing hundreds of millions of dollars worth of equipment and services off Huawei, and the Government needs to demonstrate that this doesn’t have any strings attached that will harm our cyber security,” Hughes said at the time.

Curran said Labour had not been critical of Huawei or its operations, rather more concerned with the inconsistency of the government position.

“Why is it that there are security concerns being raised in all of the other jurisdictions with which we have very strong security links, and yet that seems to have been ignored here?”

American influence did see Huawei excluded from segments of New Zealand UFB infrastructure, according to Paul Buchanan, a former Pentagon defence analyst who worked in signals intelligence under Reagan, Bush and Clinton. Buchanan now lives in New Zealand, lectures at Auckland University and operates a private consulting firm.

“In 2012, the National government was assuring us that we had absolutely no concerns about Huawei whatsoever. And now, a year later, Huawei has withdrawn its bid from very significant portions of the critical infrastructure rollouts,” Buchanan said.

These “significant portions” of infrastructure were the fibre optic cables being laid in Auckland and Wellington, he said, necessarily including anything that “might impact on government computers, the computers of leading firms such as Fonterra, anything that would be of strategic importance to New Zealand”.

The areas Buchanan identified are under the jurisdiction of UFB network developer Chorus, which is being supplied by Alcatel-Lucent and Finnish company Comptel. This partnership will provide 17,000 kilometres of fibre optic cable, connecting 70 percent of homes and businesses to UFB.

“The operative term here is critical. They have lost out to Alcatel-Lucent on the critical aspects, and that follows a series of very high-powered visits by Five Eyes partners, particularly NSA.”

Buchanan said NSA director Keith Alexander had been to New Zealand “four or five times” over an 18-month period.

“Incredibly unusual that he would come down this frequently.”

 

‘AN ABSOLUTE DISGRACE’

 

A source in the New Zealand telecommunications industry with more than three decades at Telecom believes American concerns about cyber security are only the public part of a wider position, and that American intelligence agencies have their own concerns that Huawei equipment will compromise their network of interception.

“I believe that the Americans’ interest in Huawei is that Huawei can’t be hacked.”

“It’s a very tightly-built system, and that of course can create problems with the Americans,” the source said, referring to the massive metadata interception and internet surveillance systems revealed by NSA whistleblower Edward Snowden in May.

The release of the NSA material including details of PRISM and Project Tempora was called the most significant leak in U.S. history by Pentagon Papers-leaker Daniel Ellsberg.

“I remember that conversation came up before the Edward Snowden thing and of course now you realise that the Americans don’t need to get into Huawei, they just hack Telecom, hack Vodafone and hack 2degrees.”

“It’s an absolute disgrace. I have come from an environment where privacy with the customer is utterly and totally sacrosanct. It was in your DNA that you would never, never dispense anything about the customer.”

But it was accepted that there were very important reasons for being able to retrieve metadata “in the case of crime”.

Public metadata had been available to police since the early nineties, beginning with Telecom call records that were “sucked into a central billing computer”, the source said.

“We had to go through a court case where we had to prove to a judge that our metadata was very accurate, completely defensible. After that, metadata really became legal data. And that was my first exposure to the power of metadata.”

The source said that while metadata had only very recently been introduced to the public consciousness, its power was immense and had only grown since call logging became a tool for police last century.

“Before then, to prove a received phone call, they had to actually rush in, in the middle of the call.”

“For a whole year they were collecting data, and I think they ended up prosecuting 50 people who had been logged receiving incriminating phone calls.”

“We were asked not to tell anybody, the media, that we had that capability, and just to respond to queries.”

Nowadays, cell phones have provided another valuable piece of metadata, allowing location tracking based on unique areas of network coverage.

“Every time a cell phone travels in or out of a cell site, it registers,” the source said.

Paul Buchanan said that in the last 20 years, the signals intelligence business had moved from intercepting radio waves and cellular signals increasingly to tapping fibre-optic cable to intercept data.

“That’s why we have one particular program is called PRISM, because it siphons off – quite literally – the light coming through the fiber-optic cable; that’s why they called it that.”

Global surveillance and NSA interests would always take precedence over a value-for-money business deal, Buchanan said, and that was the way it had to be if New Zealand was to remain part of the Five Eyes alliance.

“Had they gone with Huawei in the critical infrastructure, we would be excluded from intelligence streams emanating from our partners. You can be assured of that.”

“And so my impression is they let Huawei find a diplomatic way to save face, and withdraw from the bidding after giving them signals that they would not be successful with that bid no matter what they bid.”

 

‘MADE TO COME INTO LINE’

 

Buchanan said it had been a lesson for the government, “that when it comes to highly-classified sensitive intelligence sharing, you don’t necessarily sell to the lowest bidder.”

“John Key, as much as he may be versed in issues of international monetary policy and finance, is an individual who has been exposed as being very under-prepared when it comes to matters of intelligence and security,” he said.

In October, an intelligence select committee in the United States Congress released a report on the risks of Huawei infrastructure, listing a series of compliance failures on the part of Huawei to provide sufficient information on its corporate structure and relationship to the Chinese government..

And in June, the UK Intelligence and Security Committee released a scathing report of private contracts with Huawei that had been in place since 2003, concluding that ministers should have blocked Huawei’s bid for a ten billion-pound infrastructure project, but at the time were unaware they had to power to do so.

Buchanan said New Zealand leaders don’t treat our place in global signals intelligence with enough seriousness, suffering from an attitude that we are small, distant, and don’t matter.

“New Zealand is the weak link in the Five Eyes system when it comes to operational security and that’s why it would be a target of Huawei if they were able to get into the critical infrastructure system.”

“In a globalised world with these sort of telecommunications networks it doesn’t matter that we’re small and far away physically from any of those types of threats, we can be reached out and touched by hostile actors.”

“So we’ve been made to come into line,” Buchanan said.

Clare Curran said she had heard “weak link” used in reference to New Zealand’s place in the Five Eyes arrangement, and suggested that the controversial security bills at home could have been a response to this.

“It’s interesting that the GCSB legislation and the TICS legislation are being pushed through with such undue haste and lack of public scrutiny in order to perhaps disprove that.”

“You could look at it as an attempt to say ‘we’re not the weak link, look, we’ve got really strong legislation’. But unfortunately it’s not good legislation.”

The legislation is one of two major changes in the last 12 months, according to Seeby Woodhouse, founder of Orcon and current chief executive of Voyager Internet.

“One is that the world is now aware that America does most of the spying on foreign countries and not China.”

“And the other is the fact that essentially what the government is saying, by pushing through the GCSB without public support, is that we are on the American side of that and we want that to continue.”

Woodhouse said the “American hand in our interests” was made clear by the public disdain for the GCSB bill, and that if New Zealanders truly didn’t want it, a higher authority must be setting the agenda.

“It’s relatively obvious that the reason that Americans don’t want any other kind of company coming in is possibly not so much that they’re worried about Chinese spying, but that they want to have [access] so that they can spy.”

 

‘GLOBAL MARKETS AND OPPORTUNITIES’

 

Perhaps the ‘American hand’ in New Zealand affairs is unshakeable, but New Zealand’s relationship with China was formed under an assumption of U.S. influence, according to Jason Young, political science and international relations lecturer at Victoria University and research fellow at the New Zealand Contemporary China Research Centre.

“When New Zealand established diplomatic relations with China in the early 1970s it was already very clear where New Zealand’s alliances were, so I don’t think China ever presumed that New Zealand wasn’t within that security alliance.”

“In fact, I would argue that New Zealand’s relationship with China is only made possible by China’s relationship with the United States and the western world.”

Young said China had been made to accept the way the world order stood, and had “bought into it” to open up global markets and opportunities.

“Now, as it becomes more and more powerful, I think within that order it will seek to have more influence.”

There was a “grace period” for new companies, Young said, and it would take time for people to get used to Chinese foreign direct investment in their countries.

“If everything’s okay, we’ll slowly keep building trust.”

Security spokesman for Internet NZ and manager of security policy at the Domain Name Commission Barry Brailey said there was “clearly no smoking gun” with Huawei, and scrutiny in the company was “just concern”.

“But there’s certainly enough information there to want to be careful with that vendor. Not because it’s necessarily deliberate, but there have been a number of publicised issues where there were undisclosed capabilities in equipment, or potentially inadvertent – but nonetheless substantial – configuration errors.”

Brailey said increased scrutiny of an IT company is nothing new, and likened this situation to the shaky beginnings of Microsoft.

“If you think back 10 or 15 years ago, Microsoft products were full of holes, and buggy and everyone was complaining that Microsoft was the big demon. And Microsoft then spent ten years really working or making sure it could improve its game around the security of its products.”

“The companies then need to go through a learning cycle of what it means to be more responsive to those sorts of security issues and other problems.”

While Nokia Siemens, Ericsson and Alcatel-Lucent have announced more than 24,000 job cuts in total since 2011, the meteoric rise of Huawei continues.

Huawei has expressed plans to have 13,000 employees in Europe in five years, and boost its Indian workforce by two-thirds to 10,000 by 2015.

On the Australian Huawei ban, global technology research and consulting company OVUM concluded: “while it is impossible for outsiders to assess the merits of national security issues because there is too much we don’t know, it is clear that there has been a lack of consistency and transparency in the way that Huawei has been treated.”

New Zealand ICT Minister Amy Adams has refused to comment on “specific vendors” when questioned about Huawei, but told NBR the government would “address any security concerns that may be identified, and is committed to working with operators and suppliers to protect the integrity and confidentiality of the UFB and RBI networks”.

Clare Curran said John Key needed to answer questions about the American influence in this process.

“I think it would be good to have that directly put to John Key as to whether or not the NSA director has come four times, and does he meet with him? And if so what about?”

Throughout this process of infrastructure development, intelligence partnerships and Chinese fibers, New Zealand seems to have balanced status quo among security partners and avoiding waves in Chinese relations. As New Zealand’s trade, cultural and diplomatic relationships develop, and as China seeks more influence in the world, will there be a shift in the national interest, to subvert the goals and practices of its intelligence allies and pursue autonomous New Zealand policy?

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