A 'failure of capitalism' in the Western world helped Chinese tech giant Huawei become the leading player in 5G technology, a policy expert told the UK's Science and Technology Committee on Wednesday.
Last week, the British government announced its decision to ban Huawei from 5G infrastructure from 2021. The government said it has also directed mobile carriers to remove Huawei equipment for their 5G networks by 2027.
New US sanctions against Huawei, announced in May, triggered the British ban. Under new measures, the USA restricted Huawei's ability to use US software and technology that the Chinese firm needs to make 5G equipment and advanced smartphones. The move forced British officials to review the sustainability and security aspects of using the Huawei equipment in UK's 5G networks.
The National Cyber Security Centre reportedly directed British mobile carriers to stockpile networking equipment sold by Huawei in the wake of US trade sanctions.
Many western governments are now considering how they became so dependent on one particular vendor.
And the reason is clear: they don't have a domestic telecommunication firm able to match Huawei's capabilities - with the exception of Finnish firm Nokia, and Ericsson in Sweden.
"The reason that we are experiencing this gap is that free markets essentially failed the US, Canada and the UK in creating this market - free markets being capitalism," Amy Karam, fellow at the Canadian Global Affairs Institute, told the UK's Science and Technology Committee, according to The Register.
According to Karam, "tight coupling" between Huawei and the Chinese government also enabled Huawei to become a global leader in telecoms sector.
"They created their own system that was a competitive disadvantage for our system," Karam said.
She also gave examples of firms like Cisco that decided not to invest in "not very lucrative" radio access networks (RAN) technology because its shareholders would not like such decisions.
"Creating Radio Access Network (RAN) equipment is not very lucrative. So when you look back and ask why the US doesn't have this, it's because its network providers - Cisco was the giant over the last - didn't invest. They were beholden to shareholders, Wall Street," Karam said.
She added that individual governments also failed to pay attention to saving their own domestic competitors from bankruptcy.
"Canada could have had Nortel with a $2 billion - $4 billion bailout and chose not to," she said.
According to Karam, Western governments now need to shift their mindset from 'free markets' into how they can help national security with economic policies.
Dr Dritan Kaleshi, the head of technology at UK's Digital Catapult innovation centre, also addressed the Committee. He told MPs that the IT and telecoms worlds were like "tectonic plates moving against one another", and that Western governments need to invest more in IT research and development.
"This is a good time to have a very in-depth look into the strategy and what needs to be done…in both the medium and the long term," said Dr Kaleshi.
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