Europe wants to move away from using Chinese suppliers for 5G networks, but getting there will take time.
On Wednesday, the European Union released a set of “tools” that aim to limit the bloc’s dependence on Chinese telecom giant Huawei while boosting its domestic 5G industry.
The new measures are a far cry from a hard ban on Huawei — something that U.S. President Donald Trump and his administration have repeatedly urged EU countries to put in place over the past year.
But the measures are still a big step for Brussels and national capitals toward safeguarding networks from any perceived risks linked to Chinese companies as the bloc seeks to reshape relations with Beijing.
“With 5G we’re entering into a new world,” said Thierry Breton, the EU’s internal market commissioner and cybersecurity chief. “Member states decided, for the first time in our history, that it would be appropriate to have a coordinated approach on protecting our infrastructure.”
The EU texts do not mention Chinese 5G equipment-maker Huawei by name. But the list of recommended actions would allow EU capitals to limit Huawei’s role in 5G networks across the Continent in coming years.
The toolbox comes one day after the U.K.’s decision to keep Huawei’s market access limited to peripheral, non-sensitive parts of 5G networks — a decision closely in line with the EU’s measures.
The plans are the latest — and arguably strongest — move by European lawmakers to reshape the EU-China relationship ahead of two critical summits this year that will feature discussions on trade tensions, technology and competition practices.
POLITICO guides you through the main questions surrounding the new 5G security measures.
Where’s the Huawei ban?
The U.S. campaign to convince allies of the security risks linked to Chinese vendors largely boiled down to one question: To ban or not to ban Huawei.
If that’s the question, Europe’s new toolbox is likely to disappoint advocates of a full-blown ban. The document does not point fingers at Huawei or single out China, and it doesn’t impose binding restrictions.
Click Here: Golf special
However, it does give European lawmakers a how-to guide if they want to proceed with bans and restrictions.
The suggested rules ask national governments to assess the risks associated with vendors, taking into account elements like: Where its headquarters is based; what surveillance rules the firm is subject to; and whether it can challenge governments’ requests for espionage through “democratic checks and balances.”
Those elements are, without a doubt, targeted at China and its vendors, Huawei and the smaller rival ZTE.
“There is zero discrimination. I’m very honest when I’m saying this,” said European Internal Markets Commissioner Thierry Breton, refusing to mention Chinese vendors by name.
But, he added, “I’m not naïve. I know that for some it will be easier to comply than for others.”
‘Exclusions’ are advised, and they go beyond ‘core’ parts
The new measures range from imposing “audits” and regulatory checks on the telecom industry’s cybersecurity policies to having EU countries peer-review their policies.
But the attention-grabbing part is that the document calls on capitals to apply new “restrictions — including necessary exclusions” for high-risk vendors in “critical or sensitive” parts of 5G networks.
Those parts include “core” networks that form the backbone of the internet, critical network management services and parts of the core networks that manage data traffic to base stations and antennas.
This means Huawei is likely to face bans across Europe similar to the ones announced in the U.K., limiting its sales to “radio access networks” (RAN) that consist of antennas and base stations, and additional restrictions on whether it can provide software and maintenance services, too.
The question is which national governments are interested in walking down this path.
“It is not me. It is the member states who have the abilities and the tools to act. The new thing is they all voted together on what is the risk and what to do to mitigate the risk,” Breton said. He said the risks “cannot be ignored by anyone.”
Toolbox squares circle of national laws
The EU’s new toolbox squares the circle of measures taken by some European governments in the past months, and invites the others to follow suit.
In France, legislators finalized a new law last summer that grants the office of the president far-reaching powers to intervene in telecom contracts and block procurement of high-risk vendors. It also includes limits on Huawei equipment from being used in critical and sensitive parts of the network, including imposing geographical restrictions.
The Dutch government released new requirements in December.
Much like the new U.K. rules, the Dutch rules imply that Chinese vendors Huawei and ZTE could face partial blocks in the country in coming years.
In Germany, regulators in October published a draft set of new requirements that raise the bar for operators and vendors on cybersecurity. But the requirements — known as the “security catalogue” — drew criticism from security hawks who dubbed it “toothless.”
The German coalition government is still at odds over how to handle Huawei specifically. Chancellor Angela Merkel’s Conservative CDU-CSU party on Tuesday postponed a decision on criteria for the rollout of the 5G network by two weeks to February 11, two persons with knowledge of the decision told POLITICO.
The EU toolbox collects these different measures, calling for short-term action to regulate the telecom sector’s cybersecurity policies.
Europe’s response will come in steps
The toolbox caps a year of EU legislating on 5G security, but its effectiveness will depend on capitals’ actions in coming months and years.
The Commission said a lot of the measures apply to so-called standalone 5G. Today’s 5G connections are in fact 4G internet connections with 5G antennas to speed things up. Standalone 5G is expected in two to three years time and would run on new software applications and hardware equipment.
“We’re not rushing. We’re talking about two or three years for the application,” Breton said. “By 2023-2024 you will have a lot of antennas with smart applications and a lot of computing power … When it’ll be a full 5G deployment, standalone, in three to five years, everybody will have done it with this tool,” he said.
In the first stage, national governments are asked to report back on “concrete and measurable steps” to implement the measures by end-April, and report back to the EU’s cooperation group of cybersecurity authorities by end-June.
Telecom companies would have to take into account these new measures when they’re making business deals and rolling out 5G in coming years.
Toolbox takes into account telco industry’s balance sheets
For over a year now, operators have warned that banning Huawei would mean huge extra costs for rolling out 5G.
The Chinese vendor has longstanding business deals with European operators and already worked with many on testing 5G connections. If governments decide against Huawei, that would mean those investments are lost.
The EU’s main telecom lobby association ETNO in a statement asked governments to “avoid disproportionate actions that negatively impact the investment climate, and which could in turn harm both Europe’s competitiveness.”
Another reason to keep Huawei in the game is competition: Huawei’s equipment is not always cheaper than that of its competitors, the Swedish Ericsson and Finnish Nokia, but operators fear cutting the Chinese vendor from bidding processes would mean the other two won’t price their gear as competitively.
The majority of European countries are likely to allow Huawei to continue to compete for things like mobile network antennas and other, less sensitive network functions. The Dutch government already came out saying it would allow this, Belgium is likely to do so as well, as is Germany and others.
As for Huawei, keeping market access to so-called radio access networks in Europe would mean it can still sell a lot in Europe for now: RAN consists of about 80 percent of operators’ procurement spending at the moment, industry experts estimate.
The Chinese vendor said in a statement it “welcomes Europe’s decision, which enables Huawei to continue participating in Europe’s 5G roll-out.”
Europe wants to live without Chinese kit — but not yet
The telecom equipment market for now is dominated by Huawei, closely followed by Ericsson and with Nokia playing a highly competitive role. Chinese vendor ZTE — a smaller, partially state-owned rival to Huawei — also boasts having sold 5G equipment in Europe.
Market watchers and security officials tip Korean manufacturer Samsung as an important player: It sells specific types of 5G networking gear but is looking to expand its presence in the global market — which, according to security officials, would take pressure off operators to procure Chinese gear.
Throughout the Commission’s communication, and the toolbox measures, European officials said the bloc needs to boost and maintain its local leadership on telecom technology.
“Europe holds half of all the patents in the world when it comes to 5G,” Breton said previously. “China holds around 30 percent and the U.S. 14 percent of patents.”
But Ericsson and Nokia have struggled financially in recent years and are under huge pressure from Chinese rivals.
Breton said 5G and the next generations of internet networks would be part of the new Commission’s plans for an industrial policy.
The Commission plans to use its trade defense instruments, competition policy, foreign investment screening mechanism and public procurement policies to the benefit of the European 5G market, it said in the communication.
US dismay masks long-term victory
European officials are bracing themselves for reactions from the U.S. The Trump administration has pushed for a blanket ban on Huawei for over a year.
It’s unclear if U.S. lawmakers would seriously consider retaliating against countries that allow Huawei in.
The U.S. State Department has warned European countries it intends to cut intelligence sharing with countries that allow Huawei. But following Tuesday’s U.K. decision to do so, the initial reaction from Washington was that it would continue to work on “a way forward” and keep pressing allies about the security risks involved.
But behind the public message of disapproval, U.S. officials can claim a victory.
Their diplomatic campaign against Huawei in Europe has united EU countries behind a strategy that will ultimately bring it closer to the U.S. line on security, and on China.
According to Breton, Trump “is perfectly aware of the European strategy. He’s perfectly aware of what we’re doing … We explained very clearly what we were doing.”
“Now, let’s see what happens,” Breton said.
Want more analysis from POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to trade, technology, cybersecurity and more, Pro delivers real time intelligence, deep insight and breaking scoops you need to keep one step ahead. Email email@example.com to request a complimentary trial.