(Bloomberg Opinion) -- How would you feel if your doctor, on hearing you’ve got diet-related health concerns, just told you to watch your diet? “I know,” you respond. “But which parts of my diet? What should I cut out and how much?” The reply: You should closely study the list of ingredients in anything you eat and decide for yourself.
This is pretty similar to the European Union’s recommendations for dealing with Huawei Technologies Co., the world’s largest maker of telecommunications equipment. The Chinese firm has become a source of concern, not least in the U.S., over risks that it could create backdoors in the networks it helps build for exploitation by Chinese state actors.
The EU’s executive body on Wednesday unveiled its much-anticipated guidelines for how the bloc’s national governments should handle cybersecurity in the era of fifth-generation mobile networks. The suggestions are sensible. They include assessing the risk profile of suppliers, putting restrictions on those that don’t pass the smell test, auditing operators and ensuring a diversity of suppliers. Crucially, it fails explicitly to name Huawei or China, instead referring to “high-risk suppliers.” Member states have the leeway to determine what constitutes such a supplier and then implement any solutions themselves.
The problem is that some countries are far better equipped to tackle the challenge than others, as exhibited by the U.K.’s measured and well-considered solution to tackling Huawei unveiled on Tuesday. The soon-to-be-former EU member’s plan will clearly require constant ongoing work and revisions, but Britain has been proactively tackling the issue for more than a decade. Back in 2010, it set up a center in Oxfordshire that evaluates all of Huawei’s products before they enter the British network.
Along the way, the U.K. has been proactive about limiting Huawei’s role in its domestic telecoms industry. So when Prime Minister Boris Johnson said the Chinese firm would be kept out of the core network and restricted to 35% of the radio-access network, he was to an extent simply reaffirming the existing reality.
The situation is significantly different in Germany. The country’s incumbent operator, Deutsche Telekom AG, is dependent upon Huawei products for half of its network equipment, perhaps more. A similar lab to the one in Oxfordshire was only set up in 2018 in Bonn, and is considered less advanced.
“We’re very late to wake up,” Thorsten Benner, co-founder of the Global Public Policy Institute in Berlin, told me. “The U.K. intelligence services saw it as a problem all along. Germany just went for the cheapest supplier.”
So as much as the measures outlined by the European Commission make sense, following them effectively is a tougher proposition. And if it’s hard for Germany, Europe’s largest and most prosperous nation, the prospects are dimmer for smaller states. Take Hungary, for instance, where Huawei employs 2,000 people and has a major logistics center.
Some of the responsibility for the quandary must be borne by the Commission itself. Competition policy has repeatedly blocked mergers in the region that might have helped carriers’ profitability: Average revenue per user has fallen from 21.60 euros ($23.75) a month in 2008 to 12.80 euros in 2018. That has forced carriers to find cost-savings elsewhere, providing an opening for Huawei to make inroads with its low-cost gear (thanks to subsidies from the Chinese state), and displace the pricier European rivals, Ericsson AB and Nokia Oyj.
The situation is exacerbated in markets such as Poland or Romania, where revenue per user averages less than 10 euros. The contrast with the U.S., where AT&T Inc. and Verizon Communications Inc. enjoy income of close to $50 per user, is stark. They enjoy far healthier returns on investment.
The EU is finally proposing checks and balances that should have been in place a long time ago. But they are little more than a starting point. Don’t be surprised if the likes of Germany, France, Spain and Italy lean more heavily on the U.K.’s lead. For the rest, there’s still plenty of scope for member states to continue voraciously gobbling down the Chinese candy.
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This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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