Chinese spy fears on broadband frontrunner

ESPIONAGE : Chinese spy fears on broadband frontrunner

Cameron Stewart

December 18, 2008

The Australian

http://www.theaustralian.news.com.au/story/0,24897,24816607-601,00.html

National security concerns about Chinese espionage could threaten the new frontrunner for Australia's $15 billion publicly backed national broadband network.

Security agencies will closely examine the bid lodged by Singtel Optus, which is believed to propose the involvement of Chinese telecommunications equipment-maker Huawei Technologies to help build its network. Huawei was the subject of a US congressional investigation on national security grounds this year after legislators expressed concern about its links to the Chinese military and intelligence apparatus. The concerns led Huawei to withdraw from its joint $US2.2billion ($3.3billion) bid to buy a stake in US internet router and networking giant 3Com.

Optus emerged this week as the surprise frontrunner for the national broadband network tender when the Government excluded Telstra from the tender process after its bid failed to meet some of the project's stated requirements.

Huawei, the shadowy company based in Shenzen and founded by former People's Liberation Army officer and Communist Party member Ren Zhengfei, has triggered debate in the US, Britain and India about whether it is a legitimate international telecom player or a company bent on doing Beijing's bidding.

Intelligence agency concerns about Chinese cyber-espionage prompted India to scrap a planned $US60 million Huawei investment in its telco in 2005.

Britain granted the company a $US140 million contract in that same year to build part of British Telecom's 21st Century Network.

Many mainstream global telecommunications companies, including Singtel Optus, already have close links with Huawei. Optus last month gave the Government its 900-page bid for the new national broadband network, which is understood to propose Huawei as one of several vendors to set up the network.

A spokeswoman for Optus confirmed the company had been working with Huawei as part of trials for the network, but would neither confirm nor deny Huawei was part of last month's final bid.

"We are not releasing the names of any potential vendors we may be working with on NBN," she said. "Huawei is a significant vendor partner of Optus and we are working with them in our test lab."

A spokesman for Huawei Australia did not return The Australian's calls but the company, the largest networking and telecommunications equipment supplier in China, has previously denied links with the Chinese Government or with the PLA.

The national security statement released by Kevin Rudd this month warned of the growing danger of cyber-espionage by foreign countries, saying Australia would take new measures to protect against hackers. The federal Government has said it will investigate the national security implications of the remaining bids from Optus, Acacia and Axia.

"The Attorney-General's Department will co-ordinate an assessment of the national security implications of the proposals in consultation with national security and law enforcement agencies," the Government's Request for Proposals states.

An eight-person expert panel is assessing the bids and will recommend a winner late next month.

However, a study by global think tank the Rand Corporation states: "Huawei maintains deep ties with the Chinese military, which serves as a multi-faceted role as an important customer, as well as Huawei's political patron and research and development partner."

The conservative US think tank the Heritage Foundation claimed in a paper this year that the PLA had direct access to Huawei's training and technology infrastructure.

Huawei set up a regional head office in Sydney in June 2004. Its Australian division employs 100 staff and reported a 66.5 per cent rise in revenue to $70 million last year.

It is a key vendor in constructing Optus's 3G mobile network in rural areas, and is supplying hardware to Queensland electricity utility Powerlink for a network launch.