Telecommunications (Security) Bill (First sitting)
The Committee consisted of the following Members:
Chairs: † Mr Philip Hollobone, Steve McCabe
† Britcliffe, Sara (Hyndburn) (Con)
† Cates, Miriam (Penistone and Stocksbridge) (Con)
† Caulfield, Maria (Lewes) (Con)
Clark, Feryal (Enfield North) (Lab)
Crawley, Angela (Lanark and Hamilton East) (SNP)
† Johnston, David (Wantage) (Con)
† Jones, Mr Kevan (North Durham) (Lab)
† Lamont, John (Berwickshire, Roxburgh and Selkirk) (Con)
† Matheson, Christian (City of Chester) (Lab)
† Onwurah, Chi (Newcastle upon Tyne Central) (Lab)
† Richardson, Angela (Guildford) (Con)
† Russell, Dean (Watford) (Con)
† Sunderland, James (Bracknell) (Con)
Thomson, Richard (Gordon) (SNP)
† Warman, Matt (Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport)
West, Catherine (Hornsey and Wood Green) (Lab)
† Wild, James (North West Norfolk) (Con)
Sarah Thatcher, Huw Yardley, Committee Clerks
† attended the Committee
Patrick Binchy, Technical Services Director, Three
Derek McManus, Chief Operating Officer, O2
Andrea Donà, UK Head of Networks, Vodafone
Howard Watson, Chief Technology Officer, BT Group
Alex Towers, Group Policy and Public Affairs Director, BT Group
Public Bill Committee
Thursday 14 January 2021
[Mr Philip Hollobone in the Chair]
Telecommunications (Security) Bill
Before we begin, I have a few preliminary announcements. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings of this Committee. I would also like to remind Members of the need to observe the rules on physical distancing, both in this room and when entering and leaving via the marked entrance and exit doors. It is important that Members find their seats and leave the room promptly in order to avoid delays for other Members and staff.
Today we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication, and then a motion to allow us to deliberate in private about our questions, before the oral evidence session. In view of the time available, I hope, but cannot insist, that we take those matters without debate. I call the Minister to move the programme motion standing in his name, which was discussed on Tuesday by the Programming Sub-Committee for this Bill.
Motion made, and Question proposed,
(1) the Committee shall (in addition to its first meeting at 11.30am on Thursday 14 January) meet—
(a) at 2.00 pm on Thursday 14 January;
(b) at 9.25 am and 2.00 pm on Tuesday 19 January;
(c) at 11.30 am and 2.00 pm on Thursday 21 January;
(d) at 9.25 am and 2.00 pm on Tuesday 26 January;
(e) at 11.30 am and 2.00 pm on Thursday 28 January;
(2) the Committee shall hear oral evidence in accordance with the following table:
Date Time Witness Thursday 14 January Until no later than 12.30 pm Three; O2; Vodafone Thursday 14 January Until no later than 1.00 pm British Telecommunications Thursday 14 January Until no later than 2.45 pm Mobile UK; TechUK Thursday 14 January Until no later than 3.30 pm Mavenir; NEC Europe Ltd Thursday 14 January Until no later than 4.15 pm Small Cell Forum; Digital Policy Alliance Thursday 14 January Until no later than 4.45 pm British Standards Institution; Royal United Services Institute Tuesday 19 January Until no later than 10.10 am Webb Search; Oxford Information Labs Tuesday 19 January Until no later than 10.45 am Dr Alexi Drew, the Centre for Science and Security Studies, King’s College London Tuesday 19 January Until no later than 11.25 am The Office of Communications Tuesday 19 January Until no later than 2.45 pm Catapult Compound Semiconductor Applications; Dr Nick Johnson; UtterBerry Tuesday 19 January Until no later than 3.30 pm MWE Media Ltd; Lumenisity; Dr David Cleevely CBE Tuesday 19 January Until no later than 4.00 pm Information Technology and Innovation Foundation
Thursday 14 January
Until no later than 12.30 pm
Three; O2; Vodafone
Thursday 14 January
Until no later than 1.00 pm
Thursday 14 January
Until no later than 2.45 pm
Mobile UK; TechUK
Thursday 14 January
Until no later than 3.30 pm
Mavenir; NEC Europe Ltd
Thursday 14 January
Until no later than 4.15 pm
Small Cell Forum; Digital Policy Alliance
Thursday 14 January
Until no later than 4.45 pm
British Standards Institution; Royal United Services Institute
Tuesday 19 January
Until no later than 10.10 am
Webb Search; Oxford Information Labs
Tuesday 19 January
Until no later than 10.45 am
Dr Alexi Drew, the Centre for Science and Security Studies, King’s College London
Tuesday 19 January
Until no later than 11.25 am
The Office of Communications
Tuesday 19 January
Until no later than 2.45 pm
Catapult Compound Semiconductor Applications; Dr Nick Johnson; UtterBerry
Tuesday 19 January
Until no later than 3.30 pm
MWE Media Ltd; Lumenisity; Dr David Cleevely CBE
Tuesday 19 January
Until no later than 4.00 pm
Information Technology and Innovation Foundation
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 28 January.—(Matt Warman.)
I have no problem with the programme motion, because it is sensible, but I want to put it on record that it is frankly nonsense for us to come in today and sit in a room to take evidence from virtual witnesses, as we will do next week as well. There is no reason why evidence sittings, particularly, could not happen remotely. I have attended two meetings this week, including a meeting on Tuesday of the Defence Committee, which took evidence from witnesses virtually.
I understand that things are being done in this way at the insistence of the Leader of the House. I think he is hiding behind the usual channels having sorted it out. I want to put it on the record that that is not true and that objections have been raised by the official Opposition, certainly about evidence sittings being done in this way. If we are to travel long distances, as many of those present have, to get here today and next week, that flies in the face of the advice of not only the Government but Public Health England about moving between areas.
I do not know whether, at this late stage, we could at least consider whether next week’s evidence could be taken virtually, because it is a bit ironic that we are sitting in a room here—I accept your rulings about social distancing and so on, Mr Hollobone—and that the evidence that we shall listen to from the witnesses today and next week will be given virtually.
Mr Jones, I note your remarks and know that many others will share your view. As the Chair of the Committee I can operate only under the rules that I have been given by the House.
Question put and agreed to.
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Matt Warman.)
Copies of written evidence that the Committee receives will be circulated to Members by email and made available here in the Committee Room.
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Matt Warman.)
We will now go into private sitting.
The Committee deliberated in private.
Examination of Witnesses
Patrick Binchy, Derek McManus and Andrea Donà gave evidence.
All our witnesses today will be giving evidence by video link. Before calling the first panel of witnesses, I should first like to remind all hon. Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme order that the Committee has just agreed. For this first panel, we have until 12.30 pm. Secondly, may I ask whether any hon. Members on the Committee wish to declare now any relevant interests in connection with this Bill?
I now call the first panel of witnesses: Patrick Binchy, technical services director at Three, Derek McManus, chief operating officer at O2 and Andrea Donà, UK head of networks at Vodafone. Would the witnesses please be kind enough to introduce themselves for the record?
Patrick Binchy: Good morning. I am Patrick Binchy, and I work for Three, as you said, as the technical services director. I do not know what happened previously, but we lost some degree of ability to hear what you were saying. I think it was Chi Onwurah who was talking, but we could not hear what she was saying, and then it went completely silent for about two minutes.
Patrick, I think that was because we were in private session, deciding how we were going to conduct our affairs. You were not cut off out of any rudeness; it was simply that we were going through some procedural matters. May I ask Derek McManus to introduce himself, please?
Derek McManus: Good morning. My name is Derek McManus; I am the chief operating officer of O2 in the UK, and part of my responsibility is therefore network.
Thank you. Andrea Donà?
Andrea Donà: Good morning, everyone. I am Andrea Donà; I head up networks for Vodafone UK. I would like to thank you all for inviting us today; I appreciate the opportunity to give evidence to the Committee.
Patrick Binchy: Other than thanking you for the ability to represent the industry here, I do not have anything to add, thank you.
Derek McManus: I will add my thanks too. As I have said, my name is Derek McManus, chief operating officer. My teams run the network and the roll-out of 5G and maintain the security and integrity of the network. I am here to answer questions on the Bill and the impact from a business and operational perspective. The security Bill and associated diversification strategy need to be viewed as part of wider powers and requirements being introduced via the Telecommunications (Security) Bill.
The telecoms sector faces considerable costs—resources and time, among other things—in introducing new security measures in the Bill while removing HRVs from networks and looking into diversifying. A balanced approach that gives the sector time to implement the new measures in a cost-effective manner is essential if the Government want the same individuals and companies to develop and roll out ORAN while maintaining and building a secure network.
Andrea Donà: Vodafone accepts the UK Government’s policy on high-risk vendors and continues to work actively with the NCSC and the Government on maintaining the highest security standards in our network. We want to ensure that the objectives of the Bill are fulfilled. We also welcomed the Government’s recently published 5G diversification strategy and the policy framework that comes with it. The strategy sets out ways in which the Government plan to work with industry, and we very much welcome that. We also support the Government’s drive for higher minimum security standards in the telecoms network, and we are continuing to work with DCMS, the NCSC and Ofcom to ensure that all those relevant measures to protect our customers are implemented.
Thank you. We have three superb witnesses from Three, O2 and Vodafone. I am now in the hands of Members.
I should have mentioned, as an interest, that I spent 20 years working in the telecoms industry within four network operators and vendors, as well as Ofcom, the regulator. I also may know personally some of the witnesses.
It sounds like you might be dangerously over-qualified to take part in this Committee.
You make a very good point, Mr Hollobone. I am going to try to keep my engineering and technical interest as much to the back as possible.
I am the shadow Minister for digital, and I am leading for Labour on this Bill. I will focus on the costs of removing Huawei and the diversification strategy, and Opposition colleagues will be focusing on different areas. I thank you for your presence and expertise. I want to ask two somewhat related questions.
First, some have given estimates of the costs of removing Huawei from your networks, and I want to verify whether those are the most up-to-date estimates. I also want to know whether they include opportunity costs, and the time and resources from your boards and others in your organisations. Are they the full costs, if you like, of the removal of Huawei? How can we minimise the economic impact, in your view? Are there other significant costs associated with the Bill and the implementation of a new security framework?
Secondly, your mobile network procurement is currently made through what I will call full-service providers, such as Huawei, Ericsson and Nokia. They basically design and make a network, and provide it to you—I know it is not quite as simple as that. Do you think the removal of Huawei or the develop of open RAN will change that? Critically, is the Government’s diversification strategy likely to lead to the emergence of significant full-service suppliers that will compete head on with the remaining suppliers, Ericsson and Nokia? If not, what other measures should the Government consider taking? How best can the Government work with partners around the world to achieve their goals? That is quite a lot in two questions.
Patrick Binchy: There was quite a lot in those questions. I guess the first thing is that the costs are obviously commercially sensitive, and we cannot disclose them in a public environment, but we would be very happy to respond to any of the Members or the Committee in private to give the detail behind that. At a more generic level, there will, of course, be cost to the industry and to Three. We had selected Huawei to build our 5G network, and we have now selected a second vendor, Ericsson. We have to go through the process of mobilising Ericsson and removing the Huawei equipment, which has a cost to it and will have an impact.
In terms of the diversification of the market, there are really only two players in the UK market now. As you rightly point out, there are service as well as equipment capabilities within those suppliers. As we look for diversification, we need to diversify across all those aspects of the market. We are working with the Government, NCSC and DCMS in terms of how to approach that and how to build that. We will continue to support that as we go forward.
Derek McManus: We have similar commercial sensitivities on cost. You may or may not be aware that we are not indebted to Huawei. For our network, the cost of removing from the radio network is relatively small compared to some of our competitors. So, I will focus more on your second question, if that is okay.
You are absolutely right that we tend to buy end-to-end service in the current mobile environment. ORAN today is set up with a quite separate and different supply chain, with different companies specialising in software, different companies specialising in hardware and specialists doing the integration. It is likely to change the nature and relationship that we will have with supplies. ORAN is relatively immature in its development. As it is technically and commercially ready for scale deployment, that may well change. But we see today that the leaders in ORAN tend to be smaller companies specialising in the hardware or, more specifically, the software.
Andrea Donà: Very much like my colleagues, I am more than happy to write to the Committee in the future, once we have completed our procurement process, with the details on the cost for replacing our high-risk vendor. More specifically, when it comes to the diversification strategy and the role that open RAN has, we at Vodafone believe that the UK should seek to be a leader in open RAN. We are, indeed, leading the way, and have committed to swapping out 2,600 of our base stations to an open RAN technology.
In order to fulfil that ambition, the current timescales for removing the high-risk vendor equipment must remain unchanged. We need the stability and the time, as Derek rightly points out, to allow industry and Government to develop a diverse supply chain and allow the technology to mature, both in its functionality and its capability, as well as the possibility of scaling industrially. The legacy vendors have had a lot of time in the market to develop their competence. We need to support any new entrants in the open RAN space with appropriate investment incentives and a policy framework that attracts and supports new entrants in the open RAN space.
Three Members have indicated that they would like to ask questions. We will take them in the following order: James Sunderland, Miriam Cates and Kevan Jones.
Patrick Binchy: I think, initially, it is not for the industry to comment on and define national security and risk. That is for the Government. However, we absolutely support whatever is put in place beyond that. I think that this Bill, in the way that it is structured, very much helps with that, because not giving a definition, and the way that it will be able to include additional vendors and additional technologies, gives it the flexibility to move forward and to adapt to threats, whether they are technical or through suppliers in the future. In that way, it is well constructed.
Irrespective of the Bill itself, we work with the security bodies on a regular basis—on a day-to-day basis—and we continue to do that, to protect the British public from any and all security threats. And I would add that the UK is actually very well advanced in terms of protecting itself and its security posture.
Derek McManus: Similarly, I am the COO of a commercial organisation; I am really not best placed to answer that point specifically. But what I will say is that we run our business by security by design—it is a key part of the evolution of our network and all of our services. I believe that as an industry we are actively engaged with the security forces to deliver a good track record in terms of national security from telecoms. It is important that we continue to do that. Everyone who is connected closely to security knows that it constantly evolves as technology evolves, and the continued collaboration between the industry, the Government and the security forces is essential beyond the completion of the Bill.
Andrea Donà: Similarly to my colleagues, I am not in a position to comment on national security. What I would say is that Vodafone worked very closely with Government on how the Bill best enables us to secure our networks in practice. I think it is very important that we maintain a very close collaboration as we work in implementing the Bill.
We believe the Bill is sufficiently flexible for the Secretary of State and Ofcom to interpret the security threats and issue notices to providers to deal with them. Reviewing the legislation at regular intervals to assess its efficacy in the face of new technological challenges, and also in the light of new strategic aims by Government and that constant review involving the industry, will be very welcome for us. Our continual engagement will enable us to ensure that the new regulations can be enforced in practice effectively to achieve the scope of the Bill.
Thank you. We will come to Miriam Cates next. Then, after Miriam, the order will be Kevan Jones, David Johnston, Christian Matheson, Dean Russell and James Wild.
Patrick Binchy: In line with the previous answer, I cannot go through the specific commercials—they are commercially and competitively sensitive. But I would be happy to take such questions offline if you want to follow up on that.
Regarding the 2027 deadline, I think there is a balance here between UK connectivity and UK security. First and foremost, I would say that we have a security regime in place today. We use the Huawei cyber-security evaluation centre to check all of the technology that comes through Huawei and goes into UK networks, and we work closely with the security authorities to make sure that we are protecting the UK public today. We also have full visibility of any traffic that is transiting our network, either incoming or outgoing, so we are confident that we have the security in place today that is necessary.
In terms of achieving the 2027 timeline, that is a challenge. It is not going to be easy, because we need to balance that national connectivity against security and do it in a way that ensures that we continue to provide good-quality connectivity to the public.
There are a number of timelines within the legislation. We do not think the timeline for 2021 in terms of using equipment is a major issue. The 2023 35% cap and the 2027 are challenging, but we have plans in place. We have put our second vendor in place. They are already rolling our 5G network out in Manchester, Glasgow and Reading, and we are confident that we can meet those timelines and supply good-quality connectivity to the UK public.
Derek McManus: I think everybody, particularly in this environment, understands the immediate value of connectivity in the situation that we as UK society face. In terms of the opportunity for that connectivity to be part of economic growth as we evolve 5G and help build the economy, those are two of the competing challenges that we have to balance, while also removing HRVs and delivering diversification.
Yes, it is a matter of balancing costs in terms of investment, but we also have to recognise the customer disruption caused by removal of equipment. It is important that we maintain those other two key criteria—that important connectivity and that support to economic growth. By working together and taking the right balance, the Bill’s timescales are appropriate. I cannot, obviously, talk about the plans of individual businesses to meet the deadlines, but as an industry, I think it is appropriate.
Andrea Donà: At Vodafone, we believe that the Government’s decision to set a timeframe of 2027 truly reflects the complexity of what we have been asked to do. It is important that the deadline of 2027 does not change further. We need certainty and a fixed time plan so that we can plan for the future. Any further changes will disrupt our investment plans and will also cause undesired further disruption, as we attempt to accelerate a swap out that is, in itself, very complex, and will deliver inevitable disruption to our customers—the businesses and the public services. We are actively working with all the involved parties—the Government, Ofcom, NCSC and DCMS—to ensure that we minimise disruption. It is a complicated and difficult effort from a technology perspective, but also from the perspective of the practical implementation on the ground.
If the Government truly share our ambition to be a leader in digital infrastructure, we need to ensure that we give the high-risk vendor enough time to carry out the plans, under a very well-defined timescale and, as I said earlier, in parallel, allow the diversification agenda to grow, as well as the stability, to allow new entrants to come in and be a viable alternative to the incumbent high-risk vendor that we are swapping out.
We will come on to Kevan Jones. Now I am getting the hang of this now, I do not think it is fair to always ask Patrick to be the first out of the blocks to answer the questions, so I will try to rotate so that everyone has a chance of going first.
Having met many of you at a previous Committee and taken evidence from you, it is clear that there is little profit to be made on the hardware side because we all want cheaper phone calls, and you obviously react to customer demand to try to get costs down. What are the realistic prospects of any UK-based company or other vendor coming into the hardware side? On open RAN, I accept that it is for the future, but what timescales are we talking about for that having an impact on how our telecoms networks are organised?
Derek McManus: On timescales for ORAN, I think we are very early in the evolution of that technology. There are trials in the UK, as there are in various markets across the world. In our view, it will be at least a couple of years before you have a viable technical and commercial product, focused initially on rural. To have diversification in a meaningful way, you have to have scale, and scale will take a number of years beyond that—I would say five to eight years to get a real, viable-scale vendor to challenge the two incumbents.
On your previous question about the likelihood of there being UK players in that market, the UK used to have a very healthy telecoms supply industry, which sadly over time has faded away. I think it is more likely that the UK could play in the software part of the future of radio, and particularly ORAN, than in the hardware part. I cannot see today a viable UK hardware provider. Actually, there are not that many UK telecoms suppliers around. But software is a bigger opportunity. Part of the diversification work that is going on with the industry and Government is looking at ways to encourage the inclusion of UK business in that emerging opportunity.
Derek McManus: Yes, and if you look at the scale of mobile growth, the fact that there are only two remaining viable competitors is an indication of how difficult it is to have competition in today’s marketplace. That is technical and, to meet the economic challenges, that requires scale, too. There are other providers in the marketplace, but only two provide the 2G, 3G, 4G and 5G capability that the current UK markets require.
Andrea Donà: To answer the specific question on timescales, Vodafone UK is pioneering the development of open RAN. We were the first operator to achieve a commercial open RAN solution, in August last year, having delivered the first commercial open RAN unit on the ground radiating and carrying traffic at the Royal Welsh showground. We recently developed and announced plans to deploy open RAN across 2,600 sites. It is a promising innovation, but it is not yet mature enough to match the traditional vendors in terms of functionality and efficiency on an industrial scale.
However, if the UK wants to lead in this field and take advantage of the existing advantage that it has when it comes to design, it should continue putting its weight behind this promising technology and allow partnerships to be formed, where the incumbent vendors are asked to play a role in the architecture of this new technology. That will allow other parts of the technology chain—as Derek said, software, the baseband or the antennas—to attract and welcome new entrants through appropriate policy frameworks and the diversification strategy.
With new entrants, as we open this technology, we fuel innovation. If the UK keeps ahead of that, it will be able to be at the forefront of exciting new innovation. We welcome the steps that were outlined by Government to try to press this technology ahead. You could do that through trials or through incentives for the MNOs to use their technology. We can work together to create local research and development centres to fuel this new technology.
Andrea Donà: There is an opportunity for British companies to play an active role in the open RAN ecosystem. As we open up the interfaces of the technology, it creates a golden opportunity for British companies, with British support and know-how, to come and contribute to the development of this new technology.
Patrick Binchy: My views are broadly aligned with the previous answers. The reality of the situation that we find ourselves in is that there are only two practical vendors for the next couple of years. As both my colleagues have said, beyond that there is opportunity for ORAN.
I am not sure if it came across in the previous answers, but I would stress strongly that the first thing we need is the R&D. We need to understand how we can move this technology forward. As Derek said, trials are primarily operating in rural capacity, but to be a true competitor to the incumbents we have to be able to use it in deep urban areas, under significant loads, which needs a lot of development.
The Government can support trials and help build the ecosystem around them, but the first thing that we need is to get the research and development that will feed the trials. In terms of the Government’s development of opportunities in ORAN, it is key that they look at working with international partners. This has to be scaleable; otherwise, it is never going to be commercially viable. The UK market will not be big enough to drive that scale and commerciality.
Andrea Donà: Specifically on the incident you are referring to, which was in April 2019, it was a Telnet protocol, which is used by many vendors in the industry to perform diagnostic functions. It is important to note that it would have not been accessible from the internet. Detailed analysis showed that it was simply a failure to remove a function that is used, as I said, for performing diagnostics after it had been developed.
On the broader question of security and our concerns, we have always maintained the very highest level of security policies, security processes and security procurement mechanisms and frameworks. We use a layered approach to our security needs, whereby we secure by design. All our systems and process put in place guarantee the highest security standards, end to end. The UK networks and standards are the highest in the world. We constantly work hand in glove with the NCSC, and abide by all the latest NCSC guidance and policies to keep those minimum standards high every time. We have worked very closely with the NCSC to set up HCSEC, an ad hoc centre where any new Huawei equipment or software goes through rigorous checks, audits and assurances, in line and in close collaboration with NCSC.
Patrick Binchy: I do not have much to add to that. We are similarly aligned in terms of our processes, from procurement to deployment. We have security checks throughout, and separate functions to make sure that we are adhering to those. We work very closely with the NSCS and HCSEC in terms of the technologies that are in the network. Going forward, we will continue to do so. We will be reviewing the software and hardware versions that we have in place and ensuring that those are fully checked and validated. As I said earlier, we also have a full, independent view of the traffic traversing our network, so if something untoward were to start happening, we would immediately have a view of it, and would be able to shut it down independently.
Derek McManus: As I said earlier, we do not have sufficient numbers in the UK. We have fewer than 10 Huawei base stations, so although we perform all the necessary checks, we are not exposed on the scale of others in the market.
I propose drawing this part of our deliberations to a close at 12.30 pm. We have five Members seeking to ask questions. If our panellists keep each of their answers to one minute, we will get everybody in—and we will get all the answers as well. I call Christian Matheson.
Gentlemen, can I assume that you have done an audit—an asset register, if you like—and that you know where all the at-risk equipment is in your networks, so that once the Government push through an order, you know exactly where to go to address the requirements of that order? How interconnected are your networks? Are you as confident as Mr McManus, who says that the integrity is fairly good? Do you all rely on each other to maintain an overall integrity? What if one is insecure ?
Patrick Binchy: Of course, the networks are interconnected. As I said, we have full visibility and control of what transverses between the networks, so we can maintain full control over that. I do not think there are any significant risks in this space, because of all the security checks that we do on the equipment that comes into the network. We maintain a regular relationship with NCSC in terms of any future threats or concerns that it has. We all have our asset registers, and an understanding of what we have in our networks. We maintain and update those on an ongoing basis as the technology changes and evolves.
Patrick Binchy: We know where all the equipment is for our main supplier, yes.
Derek McManus: On the question on the asset register, absolutely. As for whether networks are interconnected, Patrick gave a good answer. The O2 and Vodafone networks are somewhat different, in that we work together on a network share; the O2 team manages and maintains a network in a certain geography, and the Vodafone team manages and maintains a physical network in another geography. In that sense, the O2 and Vodafone networks are very interconnected.
Andrea Donà: It is vital that the secondary legislation that accompanies the Bill clarifies assets in the telecoms network architecture that will be in scope of the security requirement, so that we can work knowing what we have audited, and knowing that the auditors always shared with NCSC. We need a clear understanding between Ofcom and us as providers before the legislation is enforced, so that we understand exactly the boundaries and the scope, and we all work together, having done the audits, to close any vulnerabilities that we might have. That is a clear aspect of our working together: ensuring that the assets in the telecoms network infrastructure that are in scope are very well defined.
Derek McManus: There are a number of different security threats. I will talk about network from a physical point of view, though there are obviously also scams and threats through direct human contact. It is mostly penetration of the physical network either from attack or from virus software. Attack is where foreign agencies or bodies look for vulnerabilities or holes in your defences. The role of the telecoms operator is to ensure that all its physical equipment and software are of the highest support and variation that defends from attack. We see quite a high volume of attack, either DDoS or penetration, on a regular basis. As I said, we do cyber-security by design. It is built into the fundamental processes of expanding and adding to our network, to protect us from those very things.
Andrea Donà: To add to what Derek says, it is also important that Government play a role in securing the additional security needs across the whole ecosystem of the supply chain, including the vendors. With the ever-changing nature of the threats we are exposed to, as Derek explained in layman’s terms, we have to change the protocols and the rules by which we and our vendors implement our defence mechanisms.
It is important that the Government do not leave providers such as us alone to reinforce these additional minimum security standards; they should play an active role in ensuring that vendors adapt their technology road map, so that things are done in a much more future-ready, cyber-security-compliant manner, because we face an ever-changing picture and ever-changing scenarios.
Patrick Binchy: In terms of the threats and penetration, as Derek said, the key things are that they get into the networks, either to bring the networks down and create chaos for the UK economy, or to extract information from the networks. All our security, as both my colleagues have said, is built into design, right from the very start of the procurement process. How do we protect against, and build networks that are able to detect, avoid and block, any of those risks and threats? We do that through our knowledge, the knowledge of NCSC and the authorities, and the knowledge of the wider industry on what is going on beyond the UK and in the international regime. We are constantly reviewing and updating our capability to protect against any of those threats.
Gentlemen, we are right up against the clock. We have seven minutes left. Your answers are superb, but they need to be pithy, because we have three sets of questions coming and we need to get the answers in, and I am afraid that 12.30 pm is a hard cut-off; I am not allowed to extend beyond that.
Patrick Binchy: I do not think it is quite as simple as yes or no; there are some challenges in how those rules and laws are articulated, and whether that allows us to move away from our commercial obligations. Of course we work with NCSC, and so far, what is in place is fully aligned with the direction taken by the Government and the Bill, so in this case, we believe it is sufficient.
Derek McManus: I refer you to Patrick’s answer. I have nothing specific to add. It depends on the circumstances. We continue to collaborate, and to speak with the authorities to ensure that we align with current and future needs, from a security point of view.
Andrea Donà: We will abide by the requirements.
Derek McManus: Basically, we have not seen anything directly like the UK legislation, although various forms of it can be seen internationally. The second question was on standards. We operate in 23 countries, and as you can imagine, their standards are key to us. We hold a lot of expertise, from a Telefónica group point of view, that the UK team is able to rely on and work with to ensure that we are at the very edge of developing the right standard.
Andrea Donà: As the Government plan to take a lead in enhancing the minimum security requirements, and in diversifying their telecoms strategy, we as a global company are happy to support the standard setting, and to advise on the practical implementation of the additional security requirements.
Patrick Binchy: I refer to Derek’s answer. We have a very similar position with regard to the UK legislation: we have not seen quite the same in the other countries. On standards, we play an active role, and we have a number of UK staff who act actively in standards setting.
Andrea Donà: We need the clarification that I mentioned of what is, and what is not, in scope, so that we have absolute clarity from the word go. We all work together to understand the profile of that implementation. It cannot be a big bang—everything complying from day one. We obviously need to do a detailed risk assessment of the areas that we need to work on immediately on the Bill’s coming into force, and of what can afford to be done at a secondary stage, based on the risk assessment and the risk management analysis of the various assets in our network.
Derek McManus: As I said in my opening remarks, collaboration to date on getting the Bill to this stage has been positive. We should continue that. My request is for flexibility to help us execute effectively, while balancing the other demands on the industry.
You have 30 seconds, I am afraid, Patrick Binchy.
Patrick Binchy: Again, very similarly, we have to balance good connectivity with security. We are confident that our plans will meet the needs, but we will continue to work with Government and security on how we achieve and deliver that. It will be challenging, but we are confident that we can do it.
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. On behalf of the Committee, I thank all our witnesses very much indeed for their evidence this morning.
Examination of Witnesses
Howard Watson and Alex Towers gave evidence.
Howard Watson: Good afternoon, Mr Chairman. My name is Howard Watson, and I am BT Group’s chief technology officer.
We at BT support the principles of the Bill. We echo what the other operators have said—I have just listened in to the previous session—about the importance of having realistic timeframes, and we are pleased that the Government have listened on that. We have some outstanding questions, but they are pretty much about the detail of the implementation of the Bill. There is also need for some further reassurance about the proportionality across the rich landscape of operators that we have in the UK in how that regulation will be applied.
Alex Towers: Hello, my name is Alex Towers and I am director of policy and public affairs at BT Group. I have not really got anything to add to Howard’s opening statement. I think that covers it.
Lovely. I am now in the hands of Members. I am very happy to give preference to Members who did not ask a question in the previous session. First out of the blocks is Sara Britcliffe.
Howard Watson: I note that some of this was answered by my colleagues earlier. Threats to the network include physical access. We all saw earlier this year a lot of attacks on our physical infrastructure, which were highly regrettable. I mean by that the setting alight of some of our infrastructure. We also faced logical threats, such as malware implants, DDoS attacks and what are called advanced persistent threats, which is an actor embedding themself into parts of the environment, staying hidden for a while and potentially collecting credentials—think of the SolarWinds hack that is in the news at the moment.
We take all those threats extremely seriously at BT. For as long as we have operated, we have worked very closely with all aspects of Government, and in particular with the National Cyber Security Centre. We take a sort of defence in depth approach. We have a red team who are ethically hacking us, and we are part of the TBEST scheme.
We think that the UK has a good track record here, but we also welcome the strengthening of that in the Bill. We think that some of the specific items about protecting even more against potential insider threat, looking hard at the vendors we use in the supply chain and having specific rigour about that, and the reporting mechanisms and requirements in the Bill, specifically around telecoms security requirements, will enhance that for all operators in the UK.
Alex Towers: I do not have much to add to that, except to say that, as Howard says, lots of the attention in the debate in the run-up to this Bill has been focused on a small number of very specific, clearly high-risk vendors. It is right that we take steps to protect ourselves around them, but just as important in the Bill will be the telecoms security requirements that stretch well beyond those specific vendors into all manner of aspects in which operators run their networks. Putting those two things together will be important.
Thank you. The running order is Dean Russell, Miriam Cates, Kevan Jones, Christian Matheson and Chi Onwurah.
Alex Towers: I think we see long term that diversification of vendors would be good for the operators in the marketplace if we can get to that point. It is important to say, I suppose, as the other operators were doing earlier on, that we are not at that point right now, so we are having to manage a situation where with the market as it stands we have a small number of very large-scale, important vendors and suppliers and we are having to remove one of them, clearly, from the 5G marketplace. That creates a degree of complexity and engineering difficulty that we need to just work our way through; so there is a lot of work to do just to manage within the current market framework to replace Huawei and to bring Nokia and Ericsson to the point we want. While we are doing that, if we can at the same time create the prospects of, in the longer term, a more open marketplace with a wider range of vendors—with other-scale vendors that do not quite work at the minute in the UK market, and Howard could probably explain exactly why that is, as well as with the potential for open RAN and other types of technology and software-based models to be developed—that is good for the whole industry and could be good for UK jobs and potential UK companies and therefore also for the citizen.
Howard Watson: I certainly welcome the Government’s supply chain diversification initiative here. It is concerning that we are moving from, essentially, three suppliers in the mobile supply chain down to only two. Our network going forward will use both of those. So widening that choice over time, for all the operators in the UK, is I think a critical opportunity. Please bear in mind that most operators quite like to have a primary source and a second source. It is unlikely that we will all start deploying equipment from four or five different vendors, because the operational challenge of the person in the van maintaining that tends to limit you to a choice of two; but being able to choose two from six is a lot better than choosing two from two, of course.
We welcome the three initiatives, which I will summarise. The first is whether we can we encourage Samsung, NEC and other large vendors who build mobile networks elsewhere to enter the UK market. The second is open RAN and it really just creates through more open standards the ability to have more players in that end-to-end solution. The third area really is to have a thriving research agenda for the UK. We really welcome the £250 million allocated in the recent spending review. We already have a thriving research capability in the UK and I think continuing to focus that on antenna design, optoelectronics and semiconductors will have a role to play in diversification going forward.
Howard Watson: I actually think the structure of the Bill accommodates that quite well. It allows secondary legislation and guidelines to be upgraded. We note the critical role of the National Cyber Security Centre working with Government in doing that. I think, actually, you have taken care of that well with the way the Bill is structured.
Alex Towers: Yes, I would completely agree with that. I suppose our concern, slightly, at the minute, is to see some of the detail that is going to sit underneath the Bill in terms of a code of practice, in particular, and secondary legislation, because that is where it will become clear exactly what the implications are for operators. The sooner we can see some of that detail and get into the teeth of that, that would be great; but the way the Bill is structured, to allow that sort of detail to be updated on a regular basis as the world changes around us, seems totally sensible.
Howard Watson: Let me work through that. First, from our perspective, given that we do have quite a large amount of BT in our mobile network, which is with the high-risk vendor, we have a large swap-out programme already under way. Effectively, we already use Nokia to extend their reach, but also to introduce Ericsson. That essentially means that I will be replacing a significant amount of my network over the next seven years.
It is quite difficult for me to start introducing new opportunities and new options into that, certainly in the early part of that. For my network, I see the opportunities in the latter part of this decade, not the early part. That does not mean that there will not be opportunities to try open RAN in some of the rural areas or to conduct some trials with the other vendors that we have talked about. It is very much an industry approach that we are taking here. Some of my colleagues may be able to move a bit earlier. It is important that we collaborate and work as a UK set of operators with the Government to make sure that we have the right rich set of solutions.
We would not want to come down to just one vendor. That would certainly be a worry for many reasons, so we need to continue to ensure that, in the short term, we absolutely have the choice of two.
Alex Towers: Given the timeframes that Howard has described, it is a five to seven-year cycle of replacement for the vendor. That is why it makes sense, we think, to go big now on large-scale trials of things like open RAN. The important investment in R&D and the £250 million is a good step towards that, but we will probably need some more, because we need to be ready for the next cycle if it is going to be a workable solution in future.
Secondly, we heard from Sir Richard Dearlove, the previous head of MI5, that when Huawei was first used as a vendor or equipment supplier by BT, it was not considered worth informing Ministers of that fact, despite what he considered to be evident security concerns. Can you say what in the Bill changes that so that the Government of the day will be better aware of ongoing and future security concerns?
Thirdly, on behalf of Catherine West, on international collaboration, what presence do you have on standards bodies? Can you say what your budget is for research and development so that we can see how that compares with the £250 million on offer?
Alex Towers: I will defer to Howard on the questions about standards and technical details. On your point about the relationship with Government, I do not think that any of us were around in 2005, but I know that there is some sort of contested story about exactly who was told what about the introduction of Huawei. You would—[Inaudible.] We have moved a long way on that. We have a very close working relationship with the NCSC and with other parts of Government, and we would be very confident that we are constantly in contact with them about exactly the mix of suppliers that we are using. The introduction through the Bill of TSRs will take that even further, so we would be very confident that we have got a good enough structure there to ensure that any concerns that any part of Government had would be captured and dealt with, and Ofcom is also now in a position to regulate.
The question about relying on just the one supplier is less a concern about security and more one about the commercial resilience of that position. Howard can probably say a little bit more about the standards and the technical questions around that.
Alex Towers: I think they overlap and that is one of our questions about the drafting of the Bill. There is clearly a relationship between those two things, and the concern about the timeframes for the removal of Huawei, for example, has been partly about ensuring that we have operational resilience during what is going to be a very complicated engineering programme to take out all its kit without losing resilience, in the sense of outages and blackouts for customers. Some of the Bill’s provisions talk about outages, but there is a difference between outages for operational maintenance and updating of kit and outages because of a security issue or attack. It is going to be quite important to pull those threads apart a little bit.
Howard Watson: On the vendor point, to summarise the approach that we are taking, we stopped purchase at the end of December, we will stop deployment in September of this year, we get down to 35% by two years hence from the end of next week, and then we have it removed from the mobile network by December 2027. I think that timeframe works well for us with introducing effectively a third supplier into our mobile network in terms of that 2027 point. It certainly helps mitigate any future steps in terms of a two-to-one.
I would not bank on it taking a full eight years to have an open RAN opportunity. As we heard from Andrea, colleagues at Vodafone have already started deployment . The real challenge there is about being able to use open RAN in dense urban areas where the technology works at its hardest, shall we say.
On your final question about research, we are in the top five investors in R&D in the UK—we invest in excess of £500 million a year across both research and development. In fact, the only companies that research more than us in the UK are the pharmaceuticals. I have 280 researchers based in the BT labs at Adastral Park near Ipswich and they, plus a standards organisation —we also draw in from engineers across my organisation—remain really actively involved in the standards bodies. I welcome what colleagues from the other operators say and think it is really important that we maintain that as a UK presence and as a European presence to ensure that we are not lost in the middle of any risk of divergence between the US and eastern and Asian countries and China. I would implore us all to work hard to ensure that that does not happen.
Howard Watson: Let me take the final part of that question first, Minister. We are very much aware that that is a deadline, not a target, but we welcome the fact that the deadline is 2027. I have given evidence previously and have talked with Government significantly about the real risks to the availability of service if we pull that date forward.
We have a lot of infrastructure. That deadline allows us to plan carefully how we can switch off a site, if we have to, to replace it and swap it out, so that the spike has overlapping coverage from adjacent sites. Were we to be required to bring those timescales forward, we would be talking about mobile blackouts in the UK, which clearly we all want to avoid, given the increasing dependence of UK citizens on networks. We have a plan that gets us to that. The 35% by 28 January 2023, just two years away, is a little bit more challenging, but we have a plan to get us there. The pandemic is making that challenging, but right now we are on track for that too. I think that answers the second question.
In answer to your first question, the ambition that we have, and what will become requirements across the TSRs, will put the UK ahead of the pack, in being a safe place for people to work and run businesses, secure in the knowledge that we have a high level of protection against cyber-threats. We welcome that, particularly in the environment in which we are now operating.
We have remaining questions—we raised some of those in our written evidence—about the sequence by which the requirements will be applied. We think it is critically important that there is a strong baseline level of compliance that applies to everybody who operates a network in the UK. We do not want to have entry points through weak links across our environment.
Alex Towers: A large majority of what is in the TSRs reflects current best practice and we are already complying with it. There are some places where there is a stretch for us to do more, which is good. The key point, I suppose, concerns Howard’s point about making sure that the baseline for all operators is higher and strong enough, given that these are inter-connected network, as you have already heard this morning. The whole edifice is only as strong as its weakest point. We are concerned about the idea that the code of practice might not apply to some operators, for example. That is the sort of detail that we will begin to see debated further as the Bill goes through.
Are there any further questions from Members?
Howard Watson: We do believe that fixed networks, whether full-fibre or fibre-to-the-cabinet, have a different risk profile—a lower risk profile—from mobile networks. Please remember that it is only in the access part of the network, so the fibre—the device in the exchange that connects to that. In the core of the fixed network, we have no presence of high-risk vendors. So we do believe that is manageable. We worked really closely with DCMS and NCSC to arrive at the 35% threshold that was published a year ago, and we think maintaining that in the fixed network is proportionate and sufficient to ensure security there, combined with the oversight that, again, we continue to support from the HCSEC and NCSC to ensure that we are inspecting everything that goes into the network.
I will also say that it is essential that we do take that approach because, as you know, we have large ambitions to increase full-fibre coverage in the UK. Ofcom reported in December that that was now at 18%. We at BT have now built for 3.5 million homes. We have a plan, which we have talked about—this is with the right conditions—to get to 20 million. We do need that 35% to be part of that plan because, again, introducing alternative vendors is challenging.
Howard Watson: Fundamentally, you are dealing with a customer that is a fixed end point, so you are not having to provide handover between different sites as you do in mobile. Essentially, we are taking an electrical signal, modulating it into optical and converting it back to electrical at the other end, in very standard ethernet-based protocols. It is therefore really easy to see if there is a problem, so if something was infiltrating the network, we would spot it very quickly. Also, it is a very segmented network. The FTTC network has a granularity of over 85,000 cabinets in the UK, and the FTTP network has splitters for every 32 homes. Any issues are very easy to spot and so it is much easier to keep secure.
I am afraid you have only about a minute to respond. Which of you gentlemen would like to answer?
Howard Watson: I will take that. You are right. We want two vendors to be consistently in the market, so that we can continue to deploy. If one of them were to fail—well, we insist on commercial and physical measures being in place such that we could step in and run the equipment that was already in the network, so it would not be switched off in the short term or anything like that; there would be no immediate threat to the existing network. It is the ability to build forward that is important.
As I think Alex mentioned earlier, the primary reason, which relates to the second part of your question, is that we want competition on pricing. As we have looked to have the two remaining vendors compete with each other for replacement of our Huawei estate, that has actually worked quite well as we have put in place contracts for that replacement.
Gentlemen, I am afraid we have reached the limit of our own bandwidth this morning. That brings us to the end of the time allotted for the Committee to ask questions. I thank both gentlemen for their evidence. The Committee will next meet in this room at 2 o’clock this afternoon to take further evidence. Members will be delighted to know that they will have a far more accomplished and competent Chairman present.
Ordered, That further consideration be now adjourned. —(Maria Caulfield.)
Adjourned till this day at Two o’clock.
Telecommunications (Security) Bill (Second sitting)
The Committee consisted of the following Members:
Chairs: Mr Philip Hollobone, † Steve McCabe
† Britcliffe, Sara (Hyndburn) (Con)
† Cates, Miriam (Penistone and Stocksbridge) (Con)
† Caulfield, Maria (Lewes) (Con)
Clark, Feryal (Enfield North) (Lab)
Crawley, Angela (Lanark and Hamilton East) (SNP)
† Johnston, David (Wantage) (Con)
† Jones, Mr Kevan (North Durham) (Lab)
† Lamont, John (Berwickshire, Roxburgh and Selkirk) (Con)
† Matheson, Christian (City of Chester) (Lab)
† Onwurah, Chi (Newcastle upon Tyne Central) (Lab)
† Richardson, Angela (Guildford) (Con)
† Russell, Dean (Watford) (Con)
† Sunderland, James (Bracknell) (Con)
Thomson, Richard (Gordon) (SNP)
† Warman, Matt (Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport)
West, Catherine (Hornsey and Wood Green) (Lab)
† Wild, James (North West Norfolk) (Con)
Sarah Thatcher, Huw Yardley, Committee Clerks
† attended the Committee
Hamish MacLeod, Director, Mobile UK
Matthew Evans, Director, Market Programmes, TechUK
Stefano Cantarelli, Global Chief Marketing Officer, Mavenir
John Baker, Head of RAN Business Development, Mavenir
Pardeep Kohli, CEO, Mavenir
Chris Jackson, President and CEO, NEC Europe Ltd.
Julius Robson, Chief Strategy Officer, Small Cell Forum
Dr Louise Bennett, Director, Digital Policy Alliance
Dr Scott Steedman CBE, Director of Standards, British Standards Institute
Charles Parton, Royal United Services Institute
Public Bill Committee
Thursday 14 January 2021
[Steve McCabe in the Chair]
Telecommunications (Security) Bill
Examination of Witnesses
Hamish MacLeod and Matthew Evans gave evidence.
Order. We will now hear from Hamish MacLeod, the director of Mobile UK, and Matthew Evans, the director of market programmes at techUK. We have until 2.45 pm for this session, and I will try to alternate as best I can. May I ask the witnesses in turn to introduce themselves for the record?
Hamish MacLeod: I am Hamish MacLeod, and I am the director of Mobile UK, which is the trade body for the UK’s four mobile network operators.
Matthew Evans: My name is Matthew Evans, and I am director of markets at techUK, the trade association for the wider technology sector, which has several telecom-related members.
Who would like to have the first question?
Matthew Evans: I am happy to take that question. From the principle point of view, the principles of cyber-security are the same regardless of the network: having security built in by design, but also having a zero-trust principle and good assurance that your defences are looking inwards as well as outwards. On a principle basis, they are very similar.
Hamish MacLeod: I have nothing to add to what Matt said.
Thank you. Who is next?
Matthew Evans: I am happy to take that as well. We completely agree with the overall objective of the Bill, which we think provides clarity to the sector and helps us to further enhance the security and resilience of the UK’s telecommunication networks. Obviously, as more and more services and applications are used over our fixed and mobile networks, ensuring their security and resilience is incredibly important. That is why we are pleased to welcome the Bill and the associated diversification strategy alongside it, which is obviously separate to the Bill but intrinsic to matters of resilience as we seek to broaden the supply chain.
Hamish MacLeod: I should perhaps reiterate what my colleague said this morning—that the mobile sector very much welcomes the Bill. Security has always been a top priority for mobile operators. We have always worked closed closely with the National Cyber Security Centre, but this is a great opportunity to formalise the arrangements and to make them more structured and transparent.
Chi Onwurah, did I detect that you were going to ask questions on behalf of Catherine West?
Matthew Evans: From techUK’s point of view, obviously our members—you heard from some of them this morning, and you have more this afternoon—operate across a number of different territories. We seem to be the furthest, or the most advanced, in bringing into place quite a holistic security regime. That is in the first half of the Bill. Obviously, the conversation about high-risk vendors is prevalent in other areas, but I would say that in terms of bringing in a regime that covers the entire telecoms sector, this seems to be a world-leading initiative.
Hamish MacLeod: Chi, I am certainly aware of what other countries are doing as regards high-risk vendors. The operators absolutely accept the Government’s policy and the 2027 timeline. The important thing now is to stick to that timeline, because it allows not only for an orderly removal of the HRV equipment, but for alternatives to develop and emerge as viable competitors to the remaining companies.
Matthew Evans: Thank you for that question. As I said at the start, we welcome the Government’s diversification strategy. It looks to tackle four issues, really, which are supporting incumbent suppliers to the UK market; attracting other global-scale suppliers; accelerating open interfaces and interoperability; and then the fourth area, which we could probably do with more detail on, which is really building on that domestic capability. I know that the taskforce that helped Government to frame the strategy is working on that aspect of it. As I say, I think we could do with some more detail.
However, we welcome the funding that has come alongside that strategy, and I think that we have a real opportunity in the UK in some of the areas where we have traditional strengths, in the software side in particular, to build some world-leading capability. As for the Bill itself, I do not think that it necessarily presents a barrier to that domestic capability; it is more in how we develop the strategy that sits alongside the Bill.
Hamish MacLeod: Just to add to what Matt said, yes, we very much welcome the diversification strategy. It is an absolutely necessary step to mitigate the risks of having to rely on two incumbents. It gives the UK an opportunity to have a leadership role in the development of exciting new technologies, such as open RAN, and, as Matt said, to grow the supplier base in the UK in the mobile sector.
Hamish MacLeod: Yes. As I just said, the 2027 deadline is very important, because that will give time for realistic competitive alternatives to develop. The open RAN is being deployed in the UK in sort of rural areas and in the less high-performance environments, and that will change over time. The investments that this diversification strategy talks about in research and development will help to develop open RAN, and also in the test bed programmes. All these things will help to build the capability of alternative vendors.
Matthew Evans: Just to add to Hamish’s answer, there is a reason that we have a relatively constricted number of scale providers for telecoms, and it is the level of R&D required—that is the risk associated with each generation of technology if it is not taken up on a global scale by operators. To be realistic, we are likely to be focused around two incumbent vendors in the short term.
I think that what the diversification strategy sets out, though, and in fairness it is a strategy and not a complete plan, is a path to open up the UK market to those scale providers who at the moment do not participate in it. That is through trying to reduce the commercial and regulatory barriers that we face, such as on spectrum defragmentation and on providing a single RAN solution —at the moment in the UK, there are obviously 2G, 3G, 4G and 5G. But it also then opens up the possibility of greater use of technologies such as open RAN, which really breaks away from that proprietary architecture, whereby we have both the hardware and the software from the same provider.
That will be a challenge in the short term, but in the medium to long term there are actions that can be taken both to attract the scale providers not in the UK market and to make the UK market attractive to people who work in the open RAN area as well. So I think a dual-track approach helps to bring diversification to the UK market.
Mr Evans, let us go to you first.
Matthew Evans: Is it going to be easy? No is the short answer. Is it possible to increase that diversification? Yes. We would like to see more commercial incentives for operators, who will have to change and adapt. This will be a change for operators as they diversify their vendor base. Part of the strategy has to be around the scales and the commercial incentives for operators to do so. We have certainly seen, as we heard from the witnesses this morning, UK operators really pushing the boundaries in terms of what open RAN trials can deliver. As I said, I suspect it will not be a short-term solution, but it is promising to see the trials that are already under way in the UK.
Hamish MacLeod: I would also like to highlight the Government’s commitment to taking a greater part in the process of international standard setting and driving scale across the global market. Although we expect the operators to do the technical heavy lifting, the Government can leverage our international relationships, and the actual resource makes the whole standardisation process move along more quickly.
Matthew Evans: I think the £250 million is clearly initially focused on the R&D ecosystem. That is a big commercial barrier when you look at the testing environment and the time it often takes for operators, understandably, to feel confident in deploying equipment into their networks, because they are ultimately responsible for the integrity of them. If we can supercharge the testing environment in the UK, we should be able to shorten the time to market, but open RAN in particular is going to require a boost in funding to accelerate the maturity of that technology.
The other part of the diversification strategy is the scale vendors that may be operating in other parts of the world but are not present in the UK today. That is why it is also important to tackle some of the regulatory or commercial barriers that exist and prevent them from entering the market today.
Hamish MacLeod: I do not think I really have anything to add to what Matt just said.
Hamish MacLeod: One of the things about open RAN and more open architecture generally is that you generate competition in the hardware and in the software—it is not one package—so I think it is realistic to expect more competition, particularly in the software side of things.
Do you have anything to add, Mr Evans?
Matthew Evans: Not too much. It is hard to put a number on it, but success would be where we clearly have a greater number of vendors than today, and that is a mix of open and proprietary technology. As Hamish says, the reason it is hard to put a number on it is that in that open stack, you could have competition within the stack, rather than between vendors that sell the consolidated package.
Hamish MacLeod: The analogy that has sometimes been used with me is looking back 40 years to the computer market. We all used to buy IBM computers and you got the computer and all the software integrated, and then the two separated out. There was interoperability and you create a lot more competition and innovation. That is a potential analogy—a rough analogy, I would say.
Anything to add, Mr Evans?
Matthew Evans: No, that is a good analogy.
Matthew Evans: The strategy sets out the outline of what the industry would like to see. There are commercial and regulatory barriers that need to be removed or analysed. That includes things like how the lifespan of 2G, 3G and 4G in the UK is going to exist, and setting out a road map. That will allow people to develop technologies in 5G and future generation without having to invest in what are still very good technologies—those that have already been deployed.
What we would like to see in the strategy—this is where the funding is really important—is the R&D and testing ecosystem. We would like to see something like the Future Networks Initiative, which is a proposal for a series of test centres around the UK specialising in different areas of telecoms, particularly open RAN. As I said before, that should help accelerate the adoption of new products and services when utilised in conjunction with the National Telecoms Lab. That is key. As Hamish has said, standards are also really important. Again, we need closer collaboration between the Government and industry, because the technical side is naturally going to be driven by industry.
Mr MacLeod, do you have anything to add?
Hamish MacLeod: Very little to add. Personally, I can say that the recent 5G testbed programme that the Government have been initiating to generate interest, applications and scale is a good model. We expect to see that being replicated; indeed, the two might work hand in hand going forward.
Thank you. I am going to switch to the Minister and shadow Minister. If there is time left, I will come back to other Members, but I want to be sure that we do this fairly. I call Chi Onwurah.
I am also really interested in what you said, Mr Evans, with regard to research and development. I absolutely agree with you that we clearly need investment in research and development if we are to lead in hardware and in open RAN and software. You said that the £250 million was focused on R&D, but it is actually focused on testing. It does not really do much for research at all, as far as I can see. You also referred to the diversification strategy as a strategy and not a plan, so do we need investment in research and development? Is the £250 million, which I think—I am looking at the Minister now—is over five years, a significant amount of investment in research and development for the mobile sector and tech sector generally?
Finally, the Bill gives the Secretary the State a huge amount of powers to set out requirements to remove vendors and for Ofcom to inspect what operators are doing. Do you think that might have an impact on international foreign investment in the UK telecoms sector, and are you confident that the right sort of technical, security and democratic scrutiny is in place? That is three things: hardware, research and development, and scrutiny.
Shall we start with you, Mr MacLeod?
Hamish MacLeod: I think the question that was directed at me was whether it is possible to have a secure supply chain. I will not try to gainsay Chi’s knowledge on this, but my understanding is that that is the role that the proposed National Telecoms Lab will perform, to validate that security aspect.
Matthew Evans: I agree with Hamish on that first point, to answer Chi’s questions on R&D. We do not yet know how the £250 million is going to be spent. We believe that we will need to accelerate the maturity of technologies such as open RAN, to make them deployable and commercially viable. Yes, we do need to see more, but as I said, that has to be alongside testing, because accelerating the maturity of it does not really matter if the operators do not get that confidence in either the hardware or the software.
In terms of the Secretary of State’s powers, we are broadly comfortable. We would like to see some thresholds on what amounts to a security compromise, particularly in terms of Ofcom’s powers of oversight. From our point of view, and this is also relevant to the foreign direct investment question, if it is evidence-based, as transparent as possible—we know that we will not see all that evidence, particularly that element in the security services—and the actions are proportionate, that is also important. We believe that that builds into the best practice that we see in other areas of national security.
In terms of the technical expertise, we know that NCSC is going to work closely with Ofcom, in terms of providing that oversight. We are comfortable with the experience that we have had over the past couple of years, as the telecoms supply chain has gone through, in terms of the expertise and the overall regime that this Bill seeks to put in place.
Matthew Evans: I think it sends quite a strong signal to the market of the Government’s intent. If we published the strategy without the funding, it would not have sent the same signal. We have seen NEC, for instance, commit to opening an open RAN test centre in the UK. I think that is a signal of how the market is starting to react. This needs to work with the grain of industry, so it is important that industry is able to participate in this funding. I think it sent a strong signal.
Do you have anything you want to add, Mr MacLeod?
Hamish MacLeod: No.
I will switch to the Minister at this point.
Hamish MacLeod: My meeting following this hearing is with the operators addressing that very point. This is something that we want to work extremely closely with the Government on. We are meeting officials next week to continue the conversation on doing things such as setting out the road map for what needs to be done R&D-wise to develop open RAN, what needs to be done from the point of view of the test programme, and what needs to be done on the standardisation road map. We will be taking a very close interest, both as individual operators and jointly.
Matthew Evans: To add to that, I echo that we have had excellent engagement with the Minister’s officials. It is about keeping the momentum up while working with the grain of industry and making sure that we are getting the incentives on the supply side, in the R&D and in the testing, and also in the demand side. That is all about making sure that we have the right commercial incentives for operators, but also that we have the right skills and, if necessary, reinforcing the operators on some of those points as well.
I respect your reluctance, if you like, to voice criticisms at this stage, but can I just get a further idea on the level of R&D spend in the sector? We heard from British Telecom this morning that it spends £500 million a year. I imagine it is not the only company to spend. Do you have a view of the level of R&D spend? You talk about the £250 million being a signal. Am I right in thinking that a lot more investment needs to be attracted into the UK telecoms sector in order to really move the dial? That is what we are talking about, is it not—really moving the dial on UK telecoms capability?
Hamish MacLeod: Absolutely. The £250 million was very much described as an initial £250 million, because you are right that moving the dial will take significant investment. With R&D, there is pure R&D—what you do in labs—but there is also the testbed activity, which is a very important aspect, and trials at scale and all those things. Working with the operators, bringing in international partners and leveraging what is going on elsewhere in the world will all be important.
Matthew Evans: The important word there is “leveraging”. Telecom spend on R&D, both traditional and in open RAN, runs into billions and billions of pounds each year, but we can use that £250 million to leverage greater investment. It has to be with the grain of what the industry is delivering, so we can attract more of that investment. If we can be world leaders in the adoption of open RAN, that is key, and we will attract that investment. That is why I think the supply has to match up with the demand side fully.
Does anyone else have any other questions? No. In that case, I thank both our witnesses for their evidence. We are extremely grateful to you. We will end this session and move on to the next panel.
Examination of Witnesses
Stefano Cantarelli, John Baker, Pardeep Kohli and Chris Jackson gave evidence.
We are now going to hear from Stefano Cantarelli, global chief marketing officer, John Baker, head of RAN business development, and Pardeep Kohli, chief executive officer, of Mavenir. Joining them is Chris Jackson, president and chief executive officer of NEC Europe Ltd. We will use the same format as last time, although if you want to direct your question to a specific witness, that might be helpful. We have until 3.30 pm for this session. I ask the witnesses to introduce themselves.
Stefano Cantarelli: Good afternoon everybody. My name is Stefano Cantarelli. I am the chief marketing officer for Mavenir. I have spent the last 30 years of my life in telecommunications, of which 20 years have been in the UK, in both fixed and mobile networks.
John Baker: Good afternoon. I head up business development for Mavenir. I was instrumental in setting up the UK industry back in the ’80s for manufacturing and R&D for Nokia, and with Vodafone and Orbitel. I have long experience in the industry and I have been leading the open RAN initiatives from the US globally. I am a member of the open RAN policy coalition board.
Pardeep Kohli: I am Pardeep Kohli, President and Chief Executive Officer of Mavenir. I have been with the company since 2005. The company is over 20 years old and employs about 4,500 people. We have a good presence in the UK. We have been providing software for telecoms applications to UK operators for over 20 years. All operators use our software today for making phone calls, sending messages and voicemail. We started working on open RAN five years ago and now we have deployment in the UK, which has been provided in the test sites. We are building networks in other parts of the world as well, based on open RAN.
Chris Jackson: Good afternoon. I am Chris Jackson, CEO of NEC Europe. I have worked for NEC for 12 years. I took on the role of CEO for Europe on 1 April last year. In terms of my opening statement, I fully support the principles of the Bill. It has been well constructed. The additional powers that the Government and Ofcom now have are much more wide-ranging, and we absolutely support that. We very much promote the vendor diversification strategy, and we are supportive of the aims and objectives behind it.
Who wants to go first? It looks like it is Mr Johnston. Can I just ask you to say which of the witnesses you are directing your question to?
There is always one.
John Baker: Perhaps I could take that one. This is falling in line with what is going on globally. We see initiatives coming from Spain, the EU and the US. The US is further ahead in terms of passing law on trusted suppliers, and it is now setting timelines and budgets for taking suppliers out of the network. That rip-and-replace programme is now under way. The money for that was approved in December, and operators are looking at open RAN as solutions for that. That is very similar to the activities that you are planning through this Bill in the UK.
Chris Jackson: What we have seen in Japan is strong support for this direction, but I think the UK Government have taken the lead in terms of putting forward an aggressive stance on this to ensure that the security of the country is protected. The UK is doing everything that we would expect it to, and we fully support that.
Stefano Cantarelli: Some of the things said about the diversification of the supply chain are particularly important in terms of the ability to create competition and, as such, innovation. The interoperability of interfaces is fundamental in order to boost data and to be able to create more competition. We strongly believe that competition is based in innovation, and innovation these days can create a very powerful cycle of technology. It is not like how it was in the old days when it took maybe a year, two years or three years to get things into deployment; today, in less than a year a trial can become a commercial deployment.
Pardeep Kohli: I agree with the other gentlemen. In a number of countries, operators have made the decision that, going forward, they will only buy open RAN-based solutions. Governments are supporting that in many parts of the world.
Pardeep Kohli: Let me start. You are right that until now it was all about hardware, because people were building proprietary hardware to supply radio products. When you do hardware-based solutions, the scale matters, because you need logistics, manufacturing capability and factories, and obviously Huawei, Ericsson and Nokia had a strong base and the logistics set up.
When you do open RAN, it is more software leaning on general-purpose hardware. Companies like us do not need manufacturing plants any more because we are only providing software, and we have the advantage that our software can run on a private cloud that an operator can build on, for example, standard Dell servers—there are plenty of them, and people can build those—or we can run it on a public cloud on Amazon or Google. If you look at the scale that Google, Amazon and Azure have, Huawei is nowhere close to their scale. In that sense, the whole matter of Huawei’s scale does not matter at all the moment you move a hardware problem to a software problem.
The same thing happens with logistics and people. For us, hardware-based solutions need people to carry the hardware around, bolt it and everything. For software, with the click of a button you can distribute it to 2,000 sites; you do not need people and logistics to drive hardware around. This is how with what we are doing—for example, we are working with Dish to build a nationwide network, and we will have 50,000 sites deployed in less than two years—not that many people are required to do all this, because the problem has moved from hardware to software.
We would like the Government and other people to understand that there is no way any company can beat Huawei with the presence it has in China alone if they take on the problem as a hardware problem. It must be converted into a software problem—that is the only way it can be solved.
On your question about how we convince operators, it is always on the point about proof. We are a 20-year-old company working with operators all over the world. We handle 60% of the world’s operators’ messaging. If you look at SMS, for example, we carry that traffic for all the operators in the UK, and voice calling. We already do more critical services: radio is important, of course, because of the connectivity, but operators are relying on us for the day-to-day services. Now we are working with them to prove that our software is as good or better than what they can get on from the incumbents. Of course, we are expecting them to participate in the journey and work with us so that we can prove to them that we are good. We have done that in all other layers of the software, so we feel that if somebody engages with us, within six to nine months we will prove to them that we are good and it works.
That is working; in terms of the whole idea that the technology does not exist, we have crossed that hurdle. Now it is more about, “Okay, does it work for this use case or that use case?”, or, “In my network, I may have some proprietary stuff I have done with existing vendors, and I want you to do that as well.” So it may take six to nine months, or even 12 months, to get there, but I think we are beyond the point where we need to prove that it works. We know it works.
Pardeep Kohli: If you look at investments, because of Dish, the US is making the most investments; the Government have now surpassed $1.9 billion on rip-and-replace to replace Huawei equipment, so that will create an ecosystem. In Japan, with Rakuten, they are building a whole nationwide network based on open RAN. We have seen Deutsche Telekom, for example, announce in Germany that it is building an ORAN town, so it will have a whole city that will have only ORAN components in a due timeframe. We have systems applied now in Sri Lanka, in India and in Malaysia. A lot of countries are looking at the economics: obviously, volume makes the numbers different, and with higher volume you will improve the economics further, but if you include the opex cost as well to go along with the capex cost, there is no way to compare what you can get with this technology compared with the legacy one.
I am just conscious of time; do any of the other witnesses have anything they want to add to what we have heard from Mr Kohli?
John Baker: I would just like to add that Vodafone has been very much in the lead with the development of open RAN solutions. We have been engaging with Vodafone for three and a half years in test labs and specifying the technology, and so on. The UK has been very much part of bringing this technology forward, as well as BT with the Telecom Infra Project labs.
Chris Jackson: Coming back to your question, I would not like to speculate as to how long it would take for open RAN to become standardised and commonplace within the UK. The Government are setting up a national telecoms lab and SONIC. There are a number of companies like ourselves, NEC, who have just set up our 5G global centre of excellence here in the UK, and the operators have all set up laboratories. If we can start to encourage and bring all those parties together, that is the key to accelerating the technology.
Incentives definitely play a part in this; to comment on Japan for a moment, I know the Japanese Government have incentivised companies to embrace open RAN, and that might well explain why companies such as Rakuten and NTT DOCOMO have been very successful in launching the technology. That proves it can be done and shows that where there is a willingness, there is a way, but if we can drive all those different parties coming together, that is how we will get traction.
Stefano Cantarelli: I just want to say quickly that we are part of some of the initiatives Chris has mentioned, such as SONIC with DCMS and so on, and we think they are particularly useful to give visibility on the status of open RAN. My last comment is about the hardware; I heard a few comments this morning, and I want to underline that hardware is still quite a profitable business. If we look at what happened to IT servers in the IT industry, there are companies that are much more than profitable in those spaces. Commoditisation of a hardware does not mean that there is no profitable business behind it.
Thank you. I am going to Mr Sunderland. I will come back to you if you want to come back later.
Is this question for all the witnesses?
Who do you want to go first?
Mr Baker is the obvious candidate.
John Baker: I think the legislation, as you have it written, is good and supportive. The underlying thread of this is all about open interfaces. Having open interfaces fully specified makes the ability for testing of elements in the network simpler and easier, because you open up the testing community, the vendors, to produce interoperable equipment, so you can compare equipment side by side. This has been the basis of the whole open RAN discussion. Open RAN is about open and interoperable interfaces. If you follow that philosophy through into this Bill, you should be able to test each of the elements and the network end to end, from a security perspective, so we are fully supportive of the activities that you have in place.
Stefano Cantarelli: I will just add that of course, when we say “open interfaces” and “open and interoperable”, “open” means standardised and well known, not open in the sense of open sources or whatever else people can think of. As far as the Bill is concerned, I believe that it is quite appropriate for the specific actions and conditions that will be triggered. I would just suggest that you make sure that it is followed up by secondary legislation to make sure that in some cases there are very tangible and specific examples that will be able to make it a bit more specific and will give directions within the framework that the Bill itself provides.
What about Mr Jackson or Mr Kohli? Do you have anything to add to that?
Pardeep Kohli: I was about to read something to you about the example offered by the Government of Japan. I am just reading the wording of the document. It says:
“The Government of Japan cites the need for equipment to be interoperable, based on open architecture, and utilize international standards to be certified. MNOs and private network owners are eligible for tax benefits, which include the following…Tax deductions of 15% or special depreciation of 30%... Fixed property tax exemption of 50% for 3 years”.
That is how the Government of Japan have passed the law.
Chris Jackson: I have nothing further to add to what Pardeep has just said. He has succinctly put basically what we need to do.
Do we have any Catherine West questions in this round?
In that case, let us go to Miriam Cates, please.
Chris Jackson: First of all, the answer is yes in terms of, “Do I think it is a game changer?” Absolutely. You only have to look at what happened in the IT industry to see what open standards have done for that, so I absolutely think it is the right thing to do and we very much support it.
In terms of NEC’s capability, if you look at the work that we have done with Rakuten and NTT DOCOMO in Japan, we have shown that we have proven experience and open RAN capabilities. We also have a long history of R&D capability, and we have the capability on the ground now, with the launch of the global open RAN centre of excellence, to take that development further forward in the UK. Those are the main reasons I think the NEC is well placed to take advantage.
A final point that I would make is that, one of the things that we are going to see, which we would want to see, is a lot of smaller companies coming into this marketplace. That is very healthy, and they would certainly play an important part in driving innovation. There is also definitely a need for large companies with strong balance sheets, and NEC certainly ticks that box.
John Baker: Yes, I will jump in. Mavenir is heavily invested in the UK as well. We have addressed the 2G, 3G, 4G solution with the recent acquisition of ip.access in Cambridge. We are building up a significant open RAN solution centre in the UK and we have made several press announcements about that.
In terms of hardware versus software, we have demonstrated that with some of the networks that we have deployed, such as T-Mobile in the US, which has 150 million subscribers essentially running on disaggregated software and hardware platforms. That demonstrates that you can build secure, reliable mobile networks with a software architecture. That is the way of the future. Obviously, that now has to fit into the cycles of deployment and rip and replace that the various carriers have.
Who is next? If there are no pressing answers, I will go to the shadow Minister.
Pardeep Kohli: Maybe I can take that. To answer your question, if there is a greenfield operator in the UK that is similar to Dish, which we are working with in the US, we can definitely provide that. Dish, for example, is doing only 5G, but we obviously look at requirements all over the world and we appreciate that, in certain parts of the world, there is still a lot of 2G and 3G presence, and, of course, 4G will be there for a long time. We have a solution that can handle 2G, 3G, 4G, 5G, and if you are talking about a 12-month window, we can definitely provide a complete greenfield solution for those four technologies.
Regarding the hardware aspect, everything other than the real radio that goes on the tower and does the transmitting and receiving is largely general computing open silicon—
It is computing—it is processors.
Pardeep Kohli: That is correct. You get processors for CPU or general-purpose computing, or even if there are some accelerators, which we use for some specific algorithms, even though they are openly available from companies like Xilinx and Nvidia. They make those chips and we can use them to do some of the functions; but they are openly available, and you can buy that today. That is what carriers are doing. They are building the new networks.
Regarding the hardware that goes on the tower, that depends on the frequency band you allocate, so if there is an operator coming in that is on a frequency band that the existing operators do not have, whoever the vendor is would have to build those radios anyway, and it takes about nine to 12 months to build those.
Pardeep Kohli: Today, because it has always been proprietary solutions, that is where the challenge comes for companies like us, because it is demand and supply. Until open RAN came in, you really could not build this channel on radio, because there was no demand for it. So today the radios get built only by companies like Huawei, Ericsson, Nokia—I know NEC is building a few of them; but now, with open RAN, there are new players coming up. NEC, for example, is building radios outside of the Japan market. Fujitsu has now started building radios. We are actually building some radios ourselves for the frequency bands that are not available from our partners, so if NEC has a radio we use the NEC radio, but if it does not have a radio and Fujitsu does not have a radio and if you want to get into that market, we start building some of those radios ourselves. So we actually have, now, opened a centre in the UK, to build some of those radios, and we are working with Facebook and together we are building some of the radios for a frequency band not currently open.
Pardeep Kohli: So if the frequency band radios are available today, which are right, then we can actually build it in 12 months—the complete network; but if the bands are not available and we have to build those radios then, maybe, by the end of next year.
Chris Jackson: Just to add to what Pardeep has been saying, I think open RAN is not about, necessarily, any one company providing an all-encompassing solution. So at the moment, for NEC, we would provide 4G and 5G radios, but in terms of 2G and 3G we will work with our partners to provide that solution, so we would leverage third parties in order to provide that all-encompassing solution. I think that is the way that open RAN will work moving forward. As I say, you will not see any one company dominating one particular area. It is about bringing best of breed together. In terms of the actual hardware platform, in terms of 4G and 5G, NEC will provide that radio, but as I mentioned for 2G and 3G we would look to other vendors to provide.
Chris Jackson: The majority would be US-based now, but again, we are not restricted to that. As a systems integrator, which is what you will basically need, moving forward, we would work with whichever vendors were the best of breed for that particular scenario.
Chris Jackson: We would not compete with Nokia and Ericsson in terms of standard RAN, but the whole idea is that we would look to bring open RAN technology. That is the direction that NEC is supporting. If you ask me whether we could step in today and provide that capability, we believe yes, we could.
Chris Jackson: First of all, thank you very much indeed, Minister, for support in that particular trial. We believe that this is very important, because it has given us the opportunity to showcase 4G and 5G open RAN capability with multi vendors, and we are doing it in supporting the share of your network, which we know is an important KPI for the UK Government, in terms of increasing that capability across the UK. They want to ensure that the investment is targeted at areas within the UK—where the UK will receive the most benefit—and, more importantly, or as importantly, an opportunity for a trial that brings multiple companies together. So, although NEC is leading this particular trial, we are working with a number of other companies to bring this overall solution together. That is exactly what open RAN is trying to embrace, and that is the way forward. We would be delighted to work with Mavenir; we are already involved with Mavenir as well. That is not a hurdle or obstacle for us.
Stefano Cantarelli: There are several angles. The first one is the neutral hosting. I would like to draw attention to the fact that we have already done work with British Telecom, two years back, on neutral hosting, so that has now been talked about for a long time. Also, you might have noticed in the market that companies—the one that comes to mind is Vilicom—have been doing this type of thing, where they deploy Mavenir infrastructure to provide neutral hosting capabilities. So, we are fully supportive and believe that this kind of funding is particularly important.
We understand that that there is some interesting funding. We are in discussion with DCMS. We are discussing some projects that we believe will boost a lot of the innovation in this space. For example, we are trying to get funding for our R&D activities for open source software that could boost the availability of radio units. We say that the radio unit is hardware, but in reality there is of course a bit of software on top. This type of software, which is mainly interfaced towards the rest of the software and the control of the operation and maintenance activities, is not differentiated for each radio unit; it is just standard. By having an open source like that, you can fundamentally get the radio vendors to focus on their IPR for analogue development and being able to produce a radio unit with different frequencies, as Pardeep said before, which we believe could boost the market. That type of funding is particularly useful, because it is aimed at boosting the market and giving availability in the open RAN of these radio units.
I would also like to add that most of the frequencies that are used today in the UK are available in our view for open RAN, so I do not see that as a problem. But that type of investment is particularly important—in R&D—so the trial that you have funded in the first round of the 5G Create programmes is particularly useful to get learning and experience. As I said, in the SONIC, we are particularly active, although that is not a 5G Create programme but a different one. We believe that in the second round, you can focus on funding some R&D specifically to boost the ecosystem of the open RAN.
Stefano Cantarelli: First, remember that, as John mentioned, we acquired ip.access, which is a British company that has been in hardware for some time, so there is still space for hardware as well. Software is definitely where the majority of the innovations are. That is particularly clear—Chris mentioned this—in the IT space, where they moved from generic servers. I want to reinstate that, with servers generically available everywhere. The whole thing has really flipped on to different software. That will definitely boost the ability of a lot of companies to bring innovation.
As we always repeat, competition means innovation, and innovation is the only way. Many years ago, I was part of Vodafone. I built the 3G network for Vodafone in the UK, and at that time I had only one supplier in my network—I will not say who. I introduced another one, and it was only then that the other suppliers started to be active. Some legacy suppliers—I would say most of them—start to sit down and lie back if they are the only one in the network, because there is no motivation. From my experience from all these 30 years, that component is so important.
Stefano Cantarelli: Let me just address that initially before anyone else. We are a supplier in other places in the network, so they consider us a reliable supplier. We supply voice services, messaging services and everything else. You mentioned the initial deployment of open RAN by Vodafone this morning. That relates to us, because we are the supplier that it has deployed and is continuing to deploy. We are actually deploying sites for it.
I think that you have to look at two aspects when you are on an operator’s side. I am speaking from experience. It is not just about the technology; it is also about your processes and how you are able to move forward and change your mindset. I think that operators have a lot of complexity. We sympathise with them, of course—it is not an easy environment—but there are a couple of mindsets that they need to over-pass, if you let me use that word.
First, the world is changing. It is not hardware and software together; it is software and hardware disaggregated, and that of course requires some different capabilities. It is the same as when we passed from circuit voice to packet voice. Some people here may not get the example completely, but it is just a different point of view. That does not mean that it is more complex or whatever; it is just a different point of view, and you need to change. We know that change is not an easy thing. That is the first aspect that we need to take into consideration.
The second aspect is that, despite the technology that is available, you still need to consider the in-life service that you need to swap over. You have to consider that you did some planning or design based on certain principles that were available before, and you need to rethink how you are going to do that. For example, most of the 5G deployed today just uses additional frequencies on the existing sites that they have deployed with 4G, 3G and 2G. This is not what I consider full 5G, with all the characteristics of low latencies and so on. You need to start to think about the densification of sites. The Government can help a lot—with policies, by helping to define new capabilities, and by allowing the operators to change their architecture by enabling them to get more sites, and get permits more easily to build new sites.
These sites will not be like sites today; on these sites, there will be lot of carriers, a lot of technologies, and a lot of frequencies. As Pardeep said, a site today is probably just a radio unit that connects, through an internet connection—not necessarily just fibre—to a software data centre. These things are more important, and they are the reason why, although operators are in the middle of that transformation, it is taking a bit of time.
Stefano Cantarelli: Not only with fibre. The open RAN interface is such that you are not forced to use fibre only. You can also use internet connectivity. The internet is what you use when you are in a building.
Stefano Cantarelli: I add that this transformation in the core infrastructure has already almost happened. Already, most of the core infrastructure of the MNOs is running on general-purpose hardware, such as Dell servers and so on, with software on top of it. The RAN is really the last one to be transformed, for the reason that I gave, and also because, as I said, the market has been dominated by some suppliers who have been providing hardware and software, because they work with better interfaces between the radio access component.
Thank you. That is very helpful. That makes me think that there are security issues arising from, for example, having our cloud infrastructure dominated by one vendor, such as Amazon Web Services. Those are perhaps future security issues that we need to look at. I now understand much better what you need to support your transition, so thank you very much for that.
Pardeep Kohli: I would just add that I understand the operators’ point of view as well. They are familiar with these vendors; they have been using them and they understand their processes. The vendors know each other. Obviously, we have to gain their trust. We spend over $300 million on research and development every year on open RAN, so we are fully committed, and we will seek any help that you can provide on engaging with operators in the UK market.
Chris Jackson: Can I come in on the NEC side of things? Frankly speaking, we are re-entering this market, and one of the reasons why is because we believe that open RAN, and particularly the Bill, now provides the framework and conditions to enable us to compete. It is probably similar for the operators; it is a change for them to actively work with companies such as NEC, as opposed to the companies they have previously been working with, but we are starting that process. We are actively engaged with the operators, and more support from the Government, through the Bill, is the way to move this forward.
John Baker: One last comment. Open RAN is all-inclusive, so this is not excluding the incumbents of the network. As soon as Nokia and Ericsson add open RAN interfaces to their products, we will be very happy to work with those guys. That will speed up the ability to deliver open RAN solutions in the marketplace.
If there are no further questions, it remains for me to thank all our witnesses. We are extremely grateful to you.
Examination of Witnesses
Julius Robson and Dr Louise Bennett gave evidence.
We will now hear from Julius Robson, who is the chief strategy officer of the Small Cell Forum, and Dr Louise Bennett, who is the director of the Digital Policy Alliance, and we have until 4.15 pm for this session. May I ask the witnesses to introduce themselves for the record? Julius, could we start with you?
Julius Robson: I am Julius Robson, the chief strategy officer for the Small Cell Forum. We are a global organisation of component, equipment and service providers, all working to make mobile infrastructure more accessible to public and private sector organisations of all sizes. We see diversity as being really essential if we are to deliver on the promise of 5G connecting cities and communities, and to provide smart industry and the internet of things.
We welcome the publication at the same time of the Bill and the 5G diversification strategy; it is really important to consider both together, so that we can arrive at the best of both worlds. Two angles have not really been represented to the Committee so far, but are important to diversification. To fuel open RAN, we need chipsets for base stations. We also need to think about diversification at service provider level, so that in addition to mobile operators there are other service providers, particularly neutral hosts and private networks, which can help with this diversification agenda. Those are the topics of which I would like the Committee to be aware.
Thank you. Dr Bennett?
Dr Bennett: I am Louise Bennett, and I have worked in computers all my career, with a focus on security and risk management. I am attending as a director of the Digital Policy Alliance. The DPA is an independent, not-for-profit membership organisation that alerts parliamentarians and policy makers to the potential impacts, implications and unintended consequences of policies associated with online and digital technologies. I am very grateful to have been asked to give evidence.
DPA is broadly supportive of the intentions of the Bill, because it baselines the security measures required by law in the UK telecoms network, and anything that encourages security to be top of mind for vendors in multiple supply chains is a very good idea.
There are four areas that are absolutely key to telecoms security and on which I hope to answer questions in this sitting. The first is the security of network architecture. The Bill really focuses on this, but in our opinion it does not cover everything adequately. The second is the security of data—both data about the network and data going across the network. The latter is covered to quite a large extent, but the former, which I would characterise as begin about the network asset database, is not adequately covered, and if it is not properly covered, I do not think that you will succeed in your intentions.
The third area is the processes for maintaining, over time, the security needed time—that is not adequately covered, either—and appropriate scrutiny of how that is done. The fourth area is operational costs and other impacts of compliance, which I do not think have been fully considered.
Thank you very much. Okay, who wants to go first?
Dr Bennett: I am happy to go first.
I think it is possibly better if I get one of the Members to put a question to you first. David.
I think that is primarily to Dr Bennett.
Dr Bennett: It is because I care very much about you succeeding with this. I think everyone in the telecoms industry wants your intentions to be met, but we have to remember that when it comes to something as complex as security in the UK telecoms network, even if everyone follows best practice, it is a question of not if there will be a security breach, but when, and how quickly you can mitigate it. The reason is that our communications network has grown like Topsy. It has multiple digital infrastructures sitting on a lot of legacy systems, including analogue systems and copper. It is a very complex system of systems, with multiple, ill-defined interfaces and literally billions of end points, many of which have no security at all; the internet of things is an example.
The question is how you can minimise the likelihood of breaches. To do that in this very complex situation, you need a balance between light-touch regulation, which Ofcom seems to prefer, particularly with tier 3 suppliers, and the absolute need for security. Looking at our absolute need for security and the recent SolarWinds compromise, the inclusion of SolarWinds Orion products in networks was considered by everyone to be perfectly sensible. It was a trusted supplier. However, the latest things that I have seen say that thousands of networks have been compromised by that. As it seems to have been a spying attack, only about 10 networks are known to have been breached, but it will take months for all of those networks to be secured, and there are other potential breaches. The NCSC recently put out a note about that to all end users.
That is typical of the kind of things we will face. If we want an infrastructure that can cope with that, we need to do a lot of things. There needs to be a very honest and open dialogue between all the telecoms suppliers, their supply chains, their subcontractors, the Government, Ofcom and other agencies.
Julius Robson: Security is about resilience, and it is not a question of whether something will go wrong; it is a question of when. When we realise that one of our vendors is high-risk, will it take seven years to fix that problem? That is not a healthy place for our industry to be in. We want a rich diversity of suppliers working together, so that when we identify a suspect component or part in our network, there is something sitting there, warmed up and already integrated, ready to be swapped over. That is where we want to get to.
Dr Louise Bennett pointed out that there are many parts to this network; it has lots of legacy pieces. It is not a bad thing that our network is comprised of many diverse parts—that makes it less vulnerable to a single point of failure. Someone pointed out earlier that there is the idea of the weakest link—something is only as good as its weakest link—but actually, a diverse system with many different types of vendors involved is harder to take down. Maybe you can take down part of that network, but the whole thing will not fail if just one part is compromised. I think diversity is the answer to resilience in this case, and we should be looking to head in that direction.
Dr Bennett: It is partly to do with what the whole sector is doing, but I think some things have not had enough emphasis in the Bill. One of them is what I have called the asset database. Those of us who were involved with the millennium bug know that we spent a hell of a lot of time trying to understand what the asset database for all our networks was, in order to find the components that were likely to cause a problem. I assume that the tier 1 suppliers and our main network suppliers have a comprehensive asset database, but you actually need a well-secured asset database that goes down to the component level. Over time, as you maintain it and move some components out and other components in, you need to be clear about what has happened to them.
At a subcontractor level, that can often be extremely difficult to do. You can find someone who thinks, “Oh, it’s okay; I’ve replaced that with something, and the spec looks similar.” The spec may look similar, but when someone says, “Actually, it is version so and so of such and such a component from such and such a supplier that you now need to take out,” you will find that you do not know in your asset database that you have some of those components in it. I could not see anything in the Bill that talks about the asset databases of the companies that supply the networks we are using, and I think that omission needs to be dealt with.
That leads to another point, which is about the processes for maintaining security over time. You may now be taking out all the Huawei kit and putting other things in its place, but that is happening all the time—that maintenance is going on all the time. There is no mention in the Bill of a technical advisory board focused on the provisions of the Bill, and that would be a very helpful addition. The board would perhaps be able to point out that there were new types of components coming in that ought to be looked at or considered and that ought to be recorded in people’s asset databases, and people should make sure that happens.
Leading on from that, I also think that the processes are not as transparent as they ought to be for Parliament. It would be helpful if there was a commissioner, such as the Information Commissioner or the Investigatory Powers Commissioner. That would be helpful in keeping an eye on what is going on here, and in order to be able to help policy makers and the Secretary of State to make the right changes.
I am just going to interrupt you there, because I am conscious of time and a couple of Members are indicating that they want to come in. I call Christian Matheson.
Dr Bennett: I would hope that those at the top level are clear about it, but I would be surprised if there were not occasions when they had used subcontractors to do maintenance and the imperative had been to sort out the fault ASAP. Knowing precisely what components had gone in could be wrong, and that might come up in an audit. I think it becomes more important as you flow down the levels.
When there is this desire, quite rightly, to bring in new and additional suppliers, those suppliers will need help to ensure that their parts of the network are working well. Again, I would suggest that something that is not in the Bill but should be there is the type of sandpit that the City of London has done for FinTech companies, where new entrants can test their equipment against the type of networks that they will be interacting with. That would reduce the risks of security problems in that area and give everyone confidence that the lower tier suppliers are compatible and have the same level of security as the top level of suppliers.
Dr Bennett: This is the type of thing that would be done by a commissioner. I think NCSC is well placed to be involved in that and things like sandpits. I am not sure whether Ofcom has all the resources it would need to be able to do that. But we also must remember that audits and responses to audits are quite expensive things. If we want the infrastructure to be secure over time, as we all do, we have to agree that that is an expense that we will have. That will make the whole system more expensive to maintain, because it is an important job.
Thank you. Mr Robson, do you want to add anything to that?
Julius Robson: I think it is very important. One of our angles on this security Bill is that we see diversity as important not just for building resilience, but for delivering on the promise of 5G, which is to take mobile—which currently is about voice and data for people—and deliver it into organisations, to have e-health, smart industry and connected communities. To do that, you need a diversity in service providers. It is fair to say that mobile operators have done a great job of the outdoor national network, but perhaps not so much delivering into enterprise.
We want to ensure that when we implement new policies, like the telecoms security Bill, we are not introducing large barriers to entry to those smaller players that will come in and diversify our network. This talk of making everyone auditable is a workload that will drive us back towards a monolithic industry, where you have a small number of service providers, and only the largest vendors are able to service that. We need to ensure that whatever policy we implement looks forward and is workable for this diverse ecosystem that we aim for in 2025 and beyond, not the monolithic one we have today.
Who wants to go first? Dr Bennett, I think that was mostly directed at you.
Dr Bennett: I appreciate that it is a framework, but it is a framework that does not say that powers in certain areas are going to happen and how you might do it. I think the Secretary of State and the whole industry actually needs a lot of help to do this. The whole tenor of wanting to have things like the telecoms diversification taskforce and the 5G diversification strategy is absolutely right, but as you do that you are bringing in people to do these things who have less resources than the people currently in there. As Mr Robson said, they can afford the expense of the barriers to entry, whereas smaller players require assistance from the Government to enter this world without going out of business because of the impacts of the cost of compliance.
Julius Robson: It is a good point. I recognise that the Bill essentially describes a process of setting codes of practice and does not actually say what those codes of practice are. One thing I noticed is that the language of the Bill speaks very much to the problem we have today that there are only one or two viable vendors of networks. The open RAN movement is about ensuring that your network is comprised of parts from many different vendors, with hardware from some people and software from others, and a mix of providers doing similar things. The Bill must ensure that it represents that world. So where it talks of “public electronic communications network” providers, do we assume that you have to be a network provider—an end-to-end network—to play in this game.
I did read that the code of practice will define three tiers of telecom providers, with the biggest and most important providers subject to the most intense scrutiny and oversight. That is not expressed in the Bill—it is in the notes—so I assume it will come out in the codes of practice, but at the moment we do not have visibility of what that will look like. From our point of view, it is important to encourage companies of all sizes to be able to play in this game, so proportionate legislation is important.
Do you want to come back, Mr Sunderland?
I have questions for both of you, but let me start with Dr Bennett. I was impressed by your structured list of things that are missing from the Bill, because we are here to scrutinise the Bill and see how we can improve it. I think you talked about the breadth of the security challenge and how this Bill, as it stands, might not meet the full breadth of it. You had four areas, and I think you have run through two of them in more detail. Could I ask you to summarise again the areas that you think are missing? In particular, could you talk a little bit more about the need for improved scrutiny? Could you just summarise that and then go into more detail on the ones where you have not yet?
Dr Bennett: I said that the areas that needed to be covered were network architecture, which is the Bill’s focus, the security of the asset databases that make up the network, how to ensure security of the data passing over the network, the maintenance of security over time, and the operational costs and other impacts of compliance. I have touched on all of them, but perhaps not very much on the operational costs and impacts of compliance.
The more diversified your network, and the more small vendors there are, the harder it will be for them to maintain the level of scrutiny, record-keeping and general security that is required as their bits of the network develop and the interfaces they have with other bits of the network change over time. That is an area where the Government should consider giving help to people to cover those costs. I have said that audit is needed of the assets in the network. The costs of being audited and of dealing with audits are very high, and they are costs that small companies may not have the resources to meet.
If the Government suddenly say, “All components from supplier X must now be removed from the network because of x, y and z,” it is incumbent on the Government to have some funding to help people to do that and to ensure that that really does happen, because it could be a step too far if you have a lot of very small suppliers that do not have the resources of skills, time or money to do it. You need to think about that and about how you can ensure that they are not squeezed out of the network—this diverse network that we want—by those costs.
Dr Bennett: I think most people would agree that the diversity of end points, of interfaces and of applications running over complex networks all pose security problem areas. The more of those you have, the more resilient your network might be on the one hand, because there are multiple parts, but on the other hand, the harder it is to maintain them adequately.
We see some of these problems today in the decision to move the copper out of the network. Applications that are very important to many users, notably alarm signals, are ones that often assume they have an underlying network of a particular type, and if it is not there those applications do not work and they do not work suddenly. These types of things are very complicated but are actually very important for the end users. It may be an alarm that says an elderly person has fallen in their home; it may be an alarm that says your bank has been attacked by a criminal gang. Who knows what it may be? But those types of things are the types of applications that run over these very complex networks, and unintended consequences can happen as you change the network architecture. If those tier 3 suppliers and the people providing key applications over the network are not involved in this conversation at the CNI level with the top-level suppliers, all sorts of unintended things can happen.
It is a question of how you make sure that you minimise the number of these unintended consequences and support people to realise what they need to do early on, so that they are not caught out by them.
Julius Robson: We are discussing the use of the mobile network for new and innovative services, such as worker alarms or falling-over alarms. Actually, there are some smaller players working in specialised industries that understand those customer requirements probably better than mobile operators, and that are very used to dealing with them. In fact, many of the applications for mobile are those that already exist in proprietary and bespoke wireless systems today and that we would want to move on to mobile. Some of the newcomers probably understand these things better than others and the diversification policy is about bringing in that expertise—those industry specialists who understand these requirements.
I would also say that, yes, the network is complicated—radio wireless networks, with lots of endpoints—but intrinsically the wireless medium is insecure. Anyone can listen in to it; it is possible to modify the signal. It has been designed so that everything going over it is secure and protected, and those security paradigms are locked up in the core, so that there are parts of the network that you do not have to worry about, because the information has been secured at a higher level.
I think this was mentioned by Andrea from Vodafone this morning: it is really important for us to understand which parts of the network are in scope of the security rules and which bits we do not need to worry about. The air—anything in the airwaves—is intrinsically already easy to eavesdrop on or modify. So obviously that is out of scope. I think we do not have to get too worried about certain parts of the network.
I am just going to go to the Minister; if there is time, I will come back. Minister.
Julius Robson: I think it is important. What we are looking at in the 5G era is the application of mobile technologies for specialist industries, and it is entirely relevant that those industries have their own requirements for security and other requirements that apply on top of what is necessary in the basic mobile network. I do not think we need to duplicate that effort. Where we are using mobile in certain scenarios, the scenario should define the requirements. The base level of mobile connectivity should be something suitable, and affordable, for the consumers and the masses.
Dr Bennett: I am aware of the work you have been doing on security for the internet of things. I think it is complementary and extremely important. Everything should have security by design in it. It is very important to cover these types of points.
I would have expected you to say, if I can put words in your mouth, that you would like the agility of the regulator’s ability to update those codes of practice, to be able to say to networks, “This is what secure looks like. If you are complying with these kinds of codes of practice, then we will be able to understand that you are meeting the requirement.” You seem to actually be saying that you want greater rigidity. I am interested to understand whether you would like the codes of practice to have the flexibility offered by the writing from the regulator or whether you would like to see them on the face of the Bill.
Dr Bennett: I think we actually want both. There should be mention in the Bill of some of the ones that I think are key, so that people realise that there is going to be a code of practice on that they should follow. It is very important to be able to be agile and to get early information, from something like a technology reference panel, about things that are coming along, in order that you think about them before they get attached to the network. Trying to do it after you have attached something to the network is frankly a nightmare, so you need to be anticipating. It is not clear that there are mechanisms for that anticipation in the Bill.
Given the SolarWinds Orion hacking, which is a recent example of something that will take a long time to sort out and is precisely what you do not want to happen in the future, it would be sensible to get someone like NCSC to test whether the things in the Bill, and things that should be in the Bill, would have enabled the mitigation of that problem to happen faster than it has. The Bill ought to be doing something like what the Americans are doing in response to that now. The Government should consider a rapid response, co-ordinated unit to deal with similar incidents in the future, because they will happen. That is the kind of thing that ought to be in the Bill to say, “This is how we are going to be able to mitigate these problems when they happen, as quickly and sensibly as possible.”
Dr Bennett: Yes, and anticipating things as early as possible.
Chi, we have time for another quick question. I think you had a point that you wanted to come back to.
Julius Robson: Thank you for that question. I have mentioned chipsets, which are important, and lots of people have talked about software and open RAN. The specialist base station chipsets are an important component, and if we can make them available at scale, which is something that we work on with our FAPI—our functional application programming interface—I think that will really help to fuel the diversity of equipment providers. That is one aspect.
Another aspect—I am not sure how well it is coped with in the consideration of the supply chain—is diversification at service provider level. As I have mentioned, mobile operators are the main service providers for mobile services, but they partner with other providers, particularly ones that work in specialist environments. There is a particular type called neutral hosts that can offer multi-operator services. If you wanted to connect to a hospital, it would not be any good to have just one operator service and have only a quarter of the people served. You need all of them served, and that needs to be done affordably. We want to make sure that the partners of mobile operators, such as neutral hosts, are supported in legislation.
It is also about recognising, as has been mentioned, the challenges of getting the hardware out. You can scale software just by selling it to more people, but hardware needs more feet on the streets and more deployers. We have to look at how we go about enabling more people to deploy mobile infrastructure into communities and industry, so that more people are aware of how it works, which means making the system simpler. From a security perspective, we need to recognise that there are parts of the network that need to be kept secure, and there are parts of the network that are out of scope of that.
Julius Robson: Just to make the point that you do not have to worry about every last resistor—components were mentioned—and every piece of equipment you have. As I pointed out, the radio airwaves themselves are also not secure. The whole system is designed to securely operate over an untrusted environment. In standards, we have the concepts of trusted and untrusted networks. Typically, you can operate your mobile network over the internet, which is considered untrusted. It is important that we recognise that paradigm.
I would say that all service providers are well accustomed to working with the level of security that the mobile operators and the regulatory regime demand, so we are happy with that. I just hope that we do not introduce new burdens with this legislation that stand in a way of diversification.
Looking around the room, I think that is it. In that case, I thank Dr Bennett and Mr Robson for their evidence. We are extremely grateful to you. Thank you both very much indeed. That brings this session to a close.
Examination of Witnesses
Dr Scott Steedman and Charles Parton gave evidence.
We now move to the sixth and final panel of the day, which consists of Dr Scott Steedman CBE, who is the director of standards for the British Standards Institution, and Charles Parton from the Royal United Services Institute. We have until 4.45 pm for this session. Again, I ask the witnesses to introduce themselves for the record. May we start with Dr Steedman, please?
Dr Steedman: Good afternoon, everyone, and thank you for the opportunity to attend the Committee this afternoon. My name is Scott Steedman. I am director-general of standards at BSI, the British Standards Institution. In my role, I have primary responsibility for the activities of the National Standards Body, which provides the UK experts—industry, Government and consumer experts—to participate in the development and maintenance of standards at the national, regional and global level.
Thank you. Mr Parton?
Charles Parton: Good afternoon. My name is Charlie Parton. I used to work as a diplomat, for 37 years, and the vast majority of that was working on China. Since I left diplomacy in 2017, I have continued to work on China. My “Mastermind” special subject, I suppose, is the Chinese Communist party and domestic politics, but of late, in the past couple of years, I have also been looking at strategy—UK relations with China—and, in that context, the question of Huawei and how we deal with technology and divergence.
Thank you both, gentlemen. Let us start.
Charles Parton: I think you are absolutely right to focus on our Five Eyes allies, in particular America and Australia—Canada and New Zealand at the moment are a little bit undeclared—which have come out very forthrightly to say that we really should not be entertaining Huawei in our systems. We have now followed them—even if only by 2027—and I think that is very much the right decision for a number of reasons, which I could go into if you wish me to.
I am not a technologist, and look at it much more from the political angle. It seems to me, if I may say briefly on the technology and the 5G system that is going to last us for the best part of 25 years and on which, no doubt, 6G will be built, that the idea that we can stay ahead in technology and be absolutely certain for the next two or three decades that we are ahead of the game and can keep them out of manipulating our data or using it in some advantageous fashion, is one of very great trust in our own abilities—first, they are putting enormous resources into it.
There are other reasons why the decision to get rid of Huawei was correct, and one is what I call the “black vulture of policy”. We have seen the way in which China will bully and sit on those countries that go against its wishes, in whatever field—way outside telecom. If you are dependent on another country’s systems, whether for getting equipment on time, or upgrades—let alone the more devious aspects of possible interference—I think that you will be looking at that black vulture and thinking, “Is it safe to pursue a policy that is very much in my interests, on telecoms, if I am going to be hit hard in other areas?” We have seen that: Australia, at the moment, is under the cosh; the UK was under the cosh when the Dalai Lama visited in 2012; Norway has been under the cosh, and so on.
In that context, are we saying that Huawei rules the Chinese Communist party’s policies? Of course not, but they are very intimately linked. I think that if the Chinese Communist party says to Huawei, “Jump!”, the only response from Huawei is, “Yes, sir! In what direction and how high?” You might look at the national security laws and say that those of course oblige them to co-operate and all that, but I do not think that matters so much—if the Communist party says, “Do it!”, they have no choice. If you look at how close they are, as another illustration, look at what is happening in Canada with the two hostages and the chief financial officer, Meng Wanzhou. Again, I could go into more detail if you want.
Also, there is the financial support that Huawei has received over the years, in terms of cheap finance, loans to customers, tax rebates and so on. Why does it do that? Because the Communist party wants to dominate the technology of the future, and Huawei is its tool for doing that. So I think that to trust Huawei in the long term would be a very unwise decision.
Dr Steedman: Can I take us back to the Bill and talk in that context? We are in a period of very rapid technological development and evolution. Many countries, including the Five Eyes countries, have allowed the market to drive this forward and not perhaps paid attention to it. While this was a hardware-driven sort of infrastructure, that was possibly manageable, and we have managed it over the last few years fairly satisfactorily. But looking ahead to the 5G and, perhaps—who knows?—the 6G world, we have moved to a much more vulnerable position away from hardware and towards software.
I welcome this Bill because I think it is incumbent on countries that want to protect themselves with secure and resilient infrastructure, and because it puts in place a structure of regulation, guidance and standards, which I represent, that will enable a transformation in the industry of the United Kingdom. It will enable us to use technology and software from providers all over the world, but also from SMEs and start-ups in the UK that we can encourage, and create a really innovation-friendly future. But to do that we have to create a market framework that is structured under a quality piece of regulation that enables that to take place in a clear way—clear for the market, clear for the regulator Ofcom, and clear for the Department that manages it on behalf of the Government.
In this Bill we see clear statements about new duties, codes of practice and guidance—another form of standard —to be approved by a Secretary of State for the industry, and also indications about the use of industry standards to support and deliver a new policy. We can really play to our strength in the UK, where we work in a very performance-based market structure, and we can enable a pro-innovation culture that will stimulate and deliver the diversification, security and resilience that we are looking for.
It is not unusual in the world that major commercial players, given free rein, try to influence things in the direction that suits them best. It is not unusual. We are talking about China specifically, but it is not unusual. The key to this is ensuring that in the standards landscape, which is used to support the delivery of regulatory bodies, the governance and processes of the development of those standards is managed and influenced with UK stakeholder interest at heart. In the big landscape of standards, which we might want to talk about further, there is a very wide range of organisations developing standards, from the fringes to the formal systems, and we can discuss and deploy that in a coherent and consistent way.
There is evidence from other Departments of how this works in a co-regulatory manner, supporting industry, Government, Departments and the regulator to deliver the outcomes that we as a nation desperately want.
Charles Parton: Of course, Huawei got the headlines because of the urgent need for 5G, but you are absolutely right that it is not the only player in telecoms, and indeed telecoms is not the only subject. I think that we need to look much more seriously at the whole question of technological co-operation with China. This gets into the whole question of divergence, or decoupling if you are American.
We have to recognise that, whereas our aim in China relations is to maximise trade, investment, global goods and so on, there are increasingly limits because divergence is happening. The intention of the Chinese Communist party is to dominate. As Xi Jinping in fact said in his first speech to the Politburo, the intention is to dominate western capitalism. He said that the Chinese system will take the superior position. Clearly, technology and its advance is a very important way of doing that, so it is not just Huawei and 5G. Therefore, we have to look very carefully at the whole question—that, I suppose, is what lies behind the National Security and Investment Bill—of how we co-operate on technology with China.
I have called for this a number of times, as many others have. The Government will need to set up a body and give much clearer guidance on which subjects in this field of technology we can co-operate happily with China, as well as which organisations—many are connected with the military, and the distinction between civil and military technology is eroding—and which individuals, because there are a number of individuals who have taken back or collected technology to help the Chinese security apparatus develop it.
You are absolutely right that it is really important to look much more broadly than Huawei. The company that comes immediately to mind is Hikvision, because it has such a large amount of the CCTV market. Secretary of State Dominic Raab made an interesting point in his speech the other day about the reputational harm that could be done to some of our companies if they are co-operating with Chinese companies that are deeply involved in the surveillance state, of which of course Huawei and Hikvision are two. Huawei has three laboratories with the public security bureau in Xinjiang, and is devising for them technology that will enable them to pick out Uyghur faces in crowds. That is on that side.
I think your second question was, why has Huawei been successful?
Charles Parton: I think the Chinese state very strongly supported Huawei through its financing provisions and tax breaks, and indeed worldwide by giving cheap tied loans to countries and companies that would use its equipment. Of course, Huawei has been very successful because it is enabled thereby to provide very cheap goods, and it works extremely hard and quickly. I have to say also that there have been times when we have helped it. I am not a great supporter of the Huawei security cell that checks it. I think Huawei must be delighted with that, because some of the best brains in Britain are paid to pick out the holes in its shoddy system. It does not necessarily have to do the work and it can plough ahead with speed, in the knowledge that the Brits will very kindly point out where its systems are deficient and demand that it fills them. It is a great model, and we need to think a bit more carefully about that in future.
Dr Steedman: Technology companies that secure major positions in the market, wherever they come from, do so either because the market is not being monitored or regulated carefully enough, or because they win the contracts. You would need to ask market experts about why Huawei achieved the position that it did.
Perhaps I could focus on the diversification question and looking to the future. There are very effective ways and means to manage the market structures in our country, and they require a combination of regulation, guidance and standards. You can do that through procurement routes on both the technical side and the supply chain side, and you can do it through the contractual routes. Although we have a very successful and professional regulator in Ofcom—its role is to police the regulatory environment—we can also encourage, through the supply chain channels, the use of standards on specific technical requirements and on specific contractual requirements which encourage better business behaviour.
The Government in the UK use a small proportion of the British standards catalogue—perhaps 10% or 15% of the 37,000 standards that I am responsible for—in support of regulation. This is the area where co-operation can take place in a very effective way between UK experts, industry experts, consumer experts, regulators, academics and other countries of our choosing. Indeed, in the international domain, I have 1,200 committees. The UK chairs, hosts and manages 200 international committees, and a lot of the action, in terms of co-operation outside individual companies and universities working in their laboratories, takes place in the international standards system. It is in this system that we can seek to increase UK participation, co-ordination and influence, in order to get the results that we want. We want to ensure that the standards used are open and interoperable, that their governance is managed in an independent and neutral way, and that British stakeholders have the opportunity to influence the content of those standards.
The key to international co-operation is managing and influencing the international standards through which technologies, software and business processes are all delivered around the world. That is the plug- and-play global economy—trade, innovation and so on. It is an enabler; it is not a level playing field. The Telecommunications (Security) Bill will provide the level playing field for parties in the UK, and standards provide the opportunity. I would encourage us to see beyond the Bill’s provisions on rules, guides and guidance and to see the role of standards as a tool for us to help stimulate the diversification, security, resilience and quality that we are looking for in a future market environment in the UK. That is an area where the diversification taskforce under Lord Livingston, which I am privileged to be a member of, has been working very hard. We have some ideas emerging from that taskforce to support the 5G strategy, which I hope in the medium term will see British influence in international co-operation on standards really ramped out. We look forward to that.
I think I might interrupt you there, because we have only until 4.45 pm. I would really like to bring in Mr Sunderland, the Minister and the shadow Minister, so we need very tight questions and very succinct answers.
One quick question, I think. Seriously.
The important question from me is: what will be the reaction to the Bill within the Five Eyes community?
Dr Steedman: I will lead on that. I think the Five Eyes community will welcome the Bill, and it may well begin to set a model for the way that the UK and like-minded nations can create a pro-innovation market framework which has sufficient regulatory powers, backed up by industry standards, to deliver the environment that we want and that will, particularly in the UK’s case, stimulate new entrants, SMEs and innovation. That is a really critical part of future diversification, because we have no incumbent major players based out of the UK, so we need to stimulate our own industry as well.
Charles Parton: I do not have a great deal to add to that, other than, as a side note, that I do not think we should underestimate American bipartisan attitudes to the whole question of China and technology. I think we are going to have to take that into account in the broader context, because they are long-standing allies and sharers of the same values as us.
Thank you. I see Dr Steedman nodding assent.
I start with a question to Mr Parton on behalf of Catherine West, which relates to the last point you made. As we know, the Government were moved to ban Huawei entirely from the network following US sanctions instigated by President Trump. What changes do you see the Biden Administration having on the US’s outlook on China, if any? Can you also squeeze in a reference to Chinese influence on academic research and development in this country? Then I have another question for Dr Steedman, which I will ask afterwards, if I may.
Charles Parton: A very quick response to that. I am more an expert on China than America, but nothing in the last couple of years has suggested to me that the Democrats will take a very much different position from the Republicans on the question of technology. I think they see it as a very great threat, as the Chinese have said. I think nothing will change there.
On the question of academic influence, I really do not think we should underestimate that. I wrote a paper on it about two years ago and much of what I sketched out there exists. For that reason, if I may repeat the point I made earlier, a great deal of effort has to be made, particularly in the STEM subjects. We could talk about the arts subjects and the clampdown, or the influences, on the freedom of speech and the self-censorship there, but in the STEM subjects it is really very urgent that we give our universities good guidance on what subjects, what organisations and what people they can co-operate with in the China context. As some of the research has shown, in terms of what is going on in our universities, there are subjects that we perhaps should not be helping on. GAIT technology with Huawei is an example. What can GAIT technology be used for? Surveillance. Not always, but it is very important in surveillance when you cannot see someone’s face because they are wearing a mask or it is bad weather. We have to be very much more on the ball in that area.
As I said, I am a massive fan of standards development. I have worked in the area, with the ITU. I agree that it is essential to enable open RAN and diversification. The Government have said that standards are driven by vendors. We heard this morning from the network operators that their standards presence was driven by their headquarters—their owners. We do not have a UK vendor. When you say that we need to improve our presence in standards bodies, who is going to do that and how is it going to be funded?
Dr Steedman: Actually, we have excellent people in the UK who participate in international standards work. The challenge is that there is a huge breadth of organisations, fora, consortia and formal bodies that generate, develop and maintain the standards that are then used in the evolution of the equipment—hardware, software and so on. We need to pick those organisations that are doing the critical work, particularly perhaps the ones around security, and ensure that we have British voices in there. It is true that if you look at a consortia model, you will find that the consortia that develop standards are what we call pay to play: companies pay to join a consortium, and together they sit and write a standard. But actually there are other organisations that have more governance and more formal mechanisms for national representation, national voice and consumer voice, as well as industry voices. This spectrum is the piece that is often not well understood.
Our ambition, on the diversification taskforce, is to look to co-ordinate UK voices, which are currently fragmented in these multiple organisations, and to see what we can do to target, to focus, on the areas of standards development that we know are going to support the ambition of security, resilience and diversification in the UK—and, frankly, to allow other areas of standards development to carry on as they will. People write standards to suit themselves. But where we need formal standards to support a market structure in the UK, we must be absolutely sure that those standards have had UK stakeholder voices in the process, and that is part of the formal process.
You mentioned the ITU-T. That is where the DCMS, of course, is representing the Government. And the BSI represents the UK in ISO/IEC JTC 1 and in and the European regional organisations, including ETSI. So there is a big opportunity for us to take those lessons that we have learned in influencing these great international organisations and extend that policy of influence through co-ordination of the UK voice in other spaces. The ORAN-ALLIANCE is one example of where we need to improve our co-ordination. Who is going to pay for it?
I am going to interrupt you. I am sorry, but I want to let the Minister get a last question in. My apologies.
Dr Steedman: Thank you, Minister. I might suggest that this is very much a matter of horses for courses. There is a range of organisations. I mentioned the ORAN-ALLIANCE; that is clearly one. We know, obviously, about 3GPP and the role of ETSI and 3GPP; that is another. And there may be roles for the formal bodies. We need to discuss the ITU-T, the UK participation in ITU-T and how we can strengthen that. With respect, this is an area that we need to work further on; and in the diversification taskforce, we are talking about the detail of that and how we might approach it from a United Kingdom perspective.
I am optimistic that the initiatives that have been taken today with the diversification taskforce, under Lord Livingston’s leadership, are going to produce for you really quite powerful ideas and initiatives to be taken forward in the years ahead. This is possibly the first time that the UK has really co-ordinated its input in this way to try to achieve some industry transformation and behavioural change.
The other areas I have mentioned, Minister, that are really important are in the area of procurement. This is not just about the technical standards; it is also about the way standards are used in the supply chain to stimulate behaviours and to enable SMEs to participate, rather than our just being locked into large-scale providers. I am very keen that we should comment on and discuss that, and those standards are not in the technical environment; they tend to be more in the business environment, where the UK has a very strong position already in global business standards. So there is another tool in our tool shed, to be used when we come to looking at shaping the market. I am looking forward to discussing that further with you in the taskforce.
Charles Parton: I cannot possibly deal with this in one minute. Obviously, telecoms is a very crucial—an increasingly crucial—part of critical national infrastructure, so they are very closely linked. It goes back to what I was saying earlier. There is this question of where in the science and technology field and our research and development we allow ourselves to co-operate with China, given that its attitude is one, I think, that is really quite risky. So, when the DCMS talks about the extremely fine idea of setting up a national telecoms laboratory, I do hope that, in setting it up—it talks about co-operating widely internationally—it takes that sort of thing into account, too. I think that there will have to be great restrictions there.
This might be another example. I am well out of my field here, but we have designated high-risk and non-high-risk vendors, but what happens if some of the Chinese—they do not have to be Chinese—higher-risk vendors try to sneak under the wire by purchasing or using proxies? Again, I think that needs to be considered.
I am afraid that brings the time for this witness session to a close. I think that we could all have done with a bit longer with both of you gentlemen, but thank you very much for your evidence. We are extremely grateful to you. That brings the formal part of the proceedings to a close.
Ordered, That further consideration be now adjourned. —(Maria Caulfield.)
Adjourned till Tuesday 19 January at twenty-five minutes past Nine o’clock.
Written evidence reported to the House
TSB 01 techUK
TSB 02 BT Group
TSB 03 Junade Ali CEng
TSB 04 Three
TSB 05 ITSPA (Internet Telephony Services Providers’ Association)
TSB 06 ISPA UK (Internet Services Providers’ Association)