Another China cyber-security flap

The Pentagon’s purchase of bandwidth on the majority Chinese-owned Apstar 7 satellite has prompted another bout of Washington handwringing.

Mike Rogers, the GOP Congressman who led the inquiry into Huawei last October, has complained that it “exposes our military to the risk that China may seek to turn off our ’eyes and ears’ at the time of their choosing.”

The US Defence Department’s Africa Command tapped Apstar 7 through a satellite contractor, Harris CapRock Communications, last May.  The contract expires on May 14, with an option for a three-year renewal.

HKSE-listed APT Satellite is 61%-owned by the state-owned China Satellite Corporation, according to Bloomberg.

Same old story. If it’s China government-linked, it’s a security threat.

Would a commercial satellite operator truly wish to threaten its business by hacking into its customers’ data?  Certainly, the Singaporeans and Taiwanese who are also investors and make up a third of the APT board would be unimpressed, as would other customers and stockholders.

If there’s a slight surprise here it is that the US military’s routinely uses commercial satellites for much if not a majority of its unclassified communications.

Steve Hildreth, a military space policy expert with the nonpartisan Congressional Research Service, said in an e-mail that U.S. officials have told him “a very high percentage of U.S. military communications use commercial satellites on a regular and sustained basis.”

“The U.S. military does not have major concerns with this arrangement,” he said.

So the Pentagon, which knows a thing or two about security, figures that it's encrypted and it's not highly sensitive, so why not take advantage of a cost-effective commercial service like we usually do?

China might be a well-documented source of network attacks, but that doesn’t mean every Chinese company is a security threat. The recent Mandiant report, for one, specifically fingered a PLA hacking team and not companies like Huawei or APT.

As this blog has argued before, such evidence-free grandstanding merely reinforces the Beijing view that the US is using the issue to bully China.

If you still think this is anything but rolled-gold BS, then how about Rogers linking it to sequestration, the budget cuts forced on the Obama Administration primarily by the recalcitrance of he and his Republican colleagues?

Referring to the sequester, he told Bloomberg that the use of a foreign commercial satellite “sends a terrible message to our industrial base at a time when it is under extreme stress.”  Right. Instead of cutting costs as the GOP demanded, the Pentagon should be ponying up to build more satellites. That's really off the planet.

Aust PM hints door is still open for Huawei

Just months after it declared Huawei a security threat, the Australian government now appears to be inviting the Chinese vendor back into the market.

Australian Prime Minister Julia Gillard has encouraged the company to "seek opportunities to grow its commercial business in Australia,” according to a Huawei account of her meeting with Huawei chairwoman Sun Yafang in Beijing on Tuesday.

In a press conference later, Gillard was less effusive, simply stating that Huawei was a major employer and had a substantial business in Australia.

But Gillard’s private meeting with Sun, at the end of a series of high-profile meetings with Chinese leaders, suggests the government has not closed the door on the Chinese firm, even though it has been ruled out of the NBN project.

Australia is significant because it is a junior partner in the US-led security alliance and is the only country other than the US to have blocked Huawei from major contracts on security grounds.

In Britain, the biggest US ally, Huawei is helping BT roll out its fibre network. A UK parliamentary committee review of Huawei, due to conclude by last Christmas, appears not to have made any adverse findings.

In another win for Huawei in a country close to the US, it yesterday was awarded Telecom NZ's major LTE contract, replacing 3G supplier Alcatel-Lucent.

A quick guide to s how Huawei stacks up among key agencies in the US and its allies:

FOR: White House, UK government, NZ government

AGAINST: US Congress, Pentagon, MI5, ASIO

UNDECIDED: Australian government, Canadian government.

Whoa, Huawei & ZTE say they're not spies

Who saw this coming? Huawei and ZTE appeared before a Congress committee and denied spying on the US.

Here's the money quote from Mike Rogers, chair of the House of Reps intelligence committee:

"Our sources overseas have told us that there is a reason to question whether the companies are tied to the Chinese government or whether their equipment is as what it appears," he said.

Not only does he have no specific information, he doesn't even have a specific allegation. The phrasing puts as much distance as possible between himself and an actual position. This is a guy with the world's largest intelligence-gathering machine at his disposal.

Huawei invites feds to investigate it

Huawei has taken the extraordinary step inviting an investigation by the US government to clear up “any concerns it may have” about the Chinese telecom vendor.

The privately-held firm said claims that it was closely connected to the PLA and threatened US national security “have had a significant and negative impact on our business activity.”

The appeal, in an open letter published on its website, follows Huawei’s ham-fisted attempt 12 days ago to force President Obama to make a decision over its acquisition of Silicon Valley firm 3Leaf. Instead of taking Cfius’ advice and divesting the assets as virtually every other company had done, Huawei had escalated the issue by calling on the White House to overturn the ruling.

In doing so it added another topic to the crowded US-China bilateral slate, as well as more closely identifying itself with the government it was trying to distance itself from.

Whether by accident or design - or under the advice of Chinese officials – Huawei made an about-face four days later, declaring it would unwind the 3Leaf deal.

The one revelation in today’s 2,000-word appeal, which appears under the name of US chairman Ken Hu, is Huawei had notified the Department of Commerce at the time of the acquisition last year and was told no export licence was required. Previously, the company had been reported to have not notified the US government about.  

In the letter Huawei says the sole basis for the claims that it is tied to the Chinese military is CEO Ren Zhengfei, who left the PLA in 1987 to set up the company.

It is a matter of fact that Mr. Ren is just one of the many CEOs around the world who have served in the military, and it is also a matter of fact that Huawei has only offered telecommunications equipment that is in line with civil standards. It is also factual to say that no one has ever offered any evidence that Huawei has been involved in any military technologies at any time.

However, Huawei did not elaborate on the core issue - its ownership - structure other than to use its traditional formulation that it is "owned entirely by its employees."

It said the allegation that it posed a threat to US security derived from “a mistaken belief that our company can use our technology to steal confidential information…  or launch network attacks.”

If the United States government has any real concerns of this nature about Huawei we would like to clearly understand those concerns, and whether they relate to the past or future development of our company.

The rejection of the 3Leaf deal is the latest in a series of setbacks for Huawei in the US market because of security concerns. Its planned minority acquistion of 3Com in 2008 collapsed, and last year it was ejected from a Sprint Nextel wireless tender, both on security grounds.