Don’t ban Huawei. Do this instead

Formally preventing U.S. companies and universities from conducting business and research with Huawei—the next step beyond the current pressure on the company from Congress and the Trump administration—will not make America’s communications networks safer. Instead, it will hurt U.S. businesses and consumers, while creating an illusory sense of security that could actually increase risk.

An official ban of the use of Chinese telecommunications equipment by U.S. companies might come in the form of a “national emergency” based on an “extraordinary threat.” But the real threat is that unsubstantiated accusations against Huawei will prevent the U.S. from having a more important, more rational conversation about the need to manage cyber risk. This failure may prevent the U.S. from achieving the technological and economic progress it could have made, had it chosen to look more closely at the facts. This is particularly true at places like my university, MIT, which had to stop research with Huawei, the most advanced partner we had in the telecommunications field.

The desire to ban companies like Huawei has little to do with technology, and nothing to do with effective risk management. Huawei has an unblemished 30-year cybersecurity record and more than 500 satisfied telecom customers around the world. None of them has ever experienced a security breach related to Huawei’s equipment. Furthermore, the company’s research today leads the world and is widely copied.

LISTEN TO THE DHS

Concerns about Huawei based on geopolitics are understandable, but are best addressed by collaboration, as well as a comprehensive risk management approach, as recommended by America’s own Department of Homeland Security (DHS). A ban, by contrast, would create several harmful effects and a guarantee that we will fall further behind.

First, a ban would exclude a major source of innovation—ideas, people, and products—from the U.S. technology market. Last year, Huawei was the fifth-largest investor in R&D worldwide, outspending companies such as Apple, Intel, and GE. Huawei began researching 5G wireless technology 10 years ago, and so far has invested more than $2 billion in 5G research, including $800 million last year alone. This led an expert at Britain’s largest telecom operator, BT, to call Huawei the “only true 5G supplier right now.”

When governments block major vendors from their markets, competition is reduced. Costs go up, businesses curtail their investments, and there is less innovation overall, which means that consumers pay higher prices for inferior products and services. Reducing competition is especially problematic in the United States, where more than 90% of wireless equipment is sold by just two companies, Ericsson and Nokia (neither of which is based in the U.S.). This market concentration has led small wireless operators to complain for years about the high prices they would pay for network equipment if they had to use either of those vendors.

But the benefits of competition go far beyond price. Excluding Huawei would prevent many small U.S. wireless carriers from expanding their networks and upgrading to more advanced 5G technology in the coming years, keeping them from offering new and better services, and more innovative products. This would mean fewer new jobs created, and fewer improvements in efficiency for U.S. industries.

A ban would also hurt small U.S. operators by forcing them to scrap the hundreds of millions of dollars’ worth of equipment they bought from Huawei and purchase replacement equipment. Some smaller carriers could be driven into bankruptcy by the cost of ripping out existing gear and repurchasing it from larger vendors that charge higher prices.

But the harm done by a ban would extend beyond small telecom operators and would also affect their customers: the homes, schools, libraries, and small businesses that rely on the operators to provide connectivity in parts of the U.S. not served by the big telecom companies.

In particular, American farmers would suffer. Farming provides a livelihood for 2 million American families, and today’s farms need broadband mobile connections to analyze crop yields, soil conditions, and other data. But net income at American farms income fell last year to a 12-year low. Without reliable data connections, American farmers will not benefit from the productivity gains enjoyed by their counterparts elsewhere in the world, or the even more important gains expected from the technology represented by 5G.

TEST, DON’T BAN

Instead of a ban, a better approach would be to test—rigorously and comprehensively–the software code of all vendors that goes into U.S. networks. Some countries already do this. Last December, Germany encouraged telecom equipment vendors to set up independent verification labs where third-party experts could scrutinize code for vulnerabilities. Huawei opened a testing facility in Bonn last November and another in Brussels earlier this year. In the U.K., government representatives have overseen a Huawei testing center for the past eight years, which U.K. government representatives have characterized as the “most rigorous” in the world.

America’s own security experts advocate a more sophisticated approach to managing cyber risk than simply banning companies based on where they are headquartered. A strategy document released last spring by the U.S. Department of Homeland Security did not target particular countries in the misguided belief that threats originate only in designated parts of the world, or that only the products of companies from certain countries are vulnerable. And on March 18 of this year, senior Trump administration officials, speaking to reporters on background, emphasized that U.S. cybersecurity efforts are “country- and company-agnostic.”

To enhance its position as a global technology leader, the U.S. should collaborate with leading technology companies and their research labs, rather than banning them. Then, in the marketplace, it should establish an objective standard for deciding whether a company’s technology can be trusted—a standard that applies to all technology vendors, including American ones, that want to sell to the U.S. market. This would be a far more effective strategy than banning vendors based on their country of origin. Unlike a ban, a comprehensive approach that applies to all vendors would make America’s digital networks more secure and great again.