May 29, 2013
Related to points raised in previous post...
Today's CNBC Closing Bell coverage (ever-so-slightly hostile) of unique U.S. Government approval provisions related to Softbank-Sprint transaction: http://video.cnbc.com/gallery/?play=1&video=3000171992
May 23, 2013
CFIUS, Softbank and Sprint: Prelude to a Trade War
On March 19,
I posted to expose a clever U.S. Government head-fake use of the
Federal Communications Commission (FCC) to effectively cement an
anti-competitive telecommunications infrastructure market in the U.S. via a
wink-and-nod “notice and negotiate” provision designed to chill any
potential purchases of network gear from select (e.g. China-based) vendors. (Link
to March 19 post)
On April 6,
I blogged on powerful U.S. industry objections to an overreaching paragraph in the
late March Federal funding bill that would have crippled their global
operations - which all rely to some extent on facilities and supply chains in China - and perhaps shut them out of doing business in that market altogether. Notably, the White House echoed the concerns
expressed by eleven major U.S. industry associations. (Link
to April 6 post)
Today (May
23), the Wall Street Journal reported that the Committee on Foreign Investment
in the United States (CFIUS) – which is currently reviewing the purchase of
Sprint by Japan-based Softbank for any national security concerns – is seeking the
right to approve the post-transaction company’s equipment purchases, as well demanding the
removal of already-deployed Huawei gear in Sprint’s Clearwire affiliate's
network, based on supposed “national security” grounds. (Link
to WSJ article)
If what the WSJ reports is true, I emphatically call
bullshit.
The U.S.
Government has never – not once - substantiated any of its vague concerns about
security issues associated with Huawei and is well aware that vendors
headquartered outside China are also conducting R&D and coding and building
in that market, and are just as vulnerable to penetration as Huawei. Simply put, given the globalized nature of the
industry, the U.S. Government knows full well that precluding Huawei from U.S.
networks will do absolutely nothing to make those networks more secure.
Indeed, the
White House seemed to quite clearly validate those latter two points in its April
5 statement reported in The Hill related to the offensive section in the
funding bill referenced above which would have banned select Federal procurement of China-originated
IT gear. To wit:
"It could prove highly
disruptive without significantly enhancing the affected agencies’
cybersecurity. While the Administration has raised concerns about the cyber
threats emanating from China, resolving this issue requires open dialogue
between the U.S. and China."
Granted, the context of the remarks is slightly different, but,“Open dialogue?”
Then what’s with the CFIUS initiative to rip out and ban Huawei gear as
a contingency to approving the Softbank-Sprint deal? “…Highly
disruptive without significantly enhancing…cybersecurity?” True that.
Indeed, highly disruptive doesn’t begin to describe the coming trade war that U.S. authorities seem to be ever-so-blithely inviting.
So what’s
going on here? The CFIUS-contemplated
ban won’t make anything more secure, network- or otherwise, but it could very likely
prompt a trade war at the very costly expense of American jobs, exports, innovation
and economic growth. Granted, I don’t
know what quid pro quo with China they may be seeking to achieve, but can it possibly justify
jeopardizing our economic national security?
Someone in
Government should be held accountable – today better than after-the-fact - for the unprecedented and
unnecessary mess they seem to be in the process of making.
May 02, 2013
25% of World's Wireless Capex on 5% of Users? Why?
Today, the leading U.S. wireless industry association –
CTIA - released a report trumpeting that U.S. wireless service providers had
increased their annual network investments from $25.3 billion in 2011 to $30.1
billion in 2012 (up 19%).
The press release announcing the report proudly
proclaimed that the $30.1 billion invested in network equipment was the
highest amount since CTIA began tracking such data in 1985, adding that U.S.
carrier spend represented “25% of the
world’s total wireless capital expenditures, even though the U.S. has only five
percent of the world’s wireless users.”
There is a reason why, as the report highlights, that “U.S. wireless providers invested
approximately $94 per subscriber, compared with $16 per subscriber for the rest
of the world.”
And, in correlation,
there is a reason why U.S. consumers pay two to three times as much for
wireless service than do consumers in Europe.
A lack of competition.
On the service provider side of the equation, the
President of the Competitive Carrier Association (CCA) – the second largest
U.S. wireless association – summed up the situation nicely in his April 25,
2013 testimony to the U.S. Senate Subcommittee on Communications, Technology,
and the Internet. In describing the
charter of his organization, the CCA President declared: “CCA’s diverse membership is bound together by a shared goal for
competitive policies and a shared concern over the growing market power of the
“Twin Bells”— AT&T and Verizon. Through a steady stream of acquisitions,
these two dominant carriers have turned what once was a robustly competitive
wireless marketplace into an industry marching towards duopoly.”
He’s right, and his comments to some extent explain why
American consumers are shelling out hundreds rather than tens of dollars a
month for wireless service. But that’s
not the whole story.
The fleecing of American wireless consumers is also a
direct result of government policies and actions that have precluded U.S.
carriers from having a competitive field of equipment vendors, which would lead
not just to more innovative technologies, but also more rational and
market-based pricing for network gear, which in turn would translate to savings
for everyday American mobile phone users.
Indeed, the network investment data in the CTIA report released today should
not be seen as something we herald with pride, but, rather, as a sad reflection of unnecessary costs incurred by U.S. carriers and consumers due to government
policies that actually discourage the type of competition that would drive more
innovative and more affordable broadband for America.
For anyone who has tracked this blog or otherwise followed the travails of my employer Huawei, you’ll know where this is going.
In every country in which Huawei competes around the
globe – over 150 markets – we have seen telecom infrastructure vendor margins
decline to more rational levels as former incumbent vendors have been forced to price their gear to competitive market realities. Is this
because we sell our stuff at below market costs? Nope.
Is this because we're subsidized by some government? Nope.
It’s because we don’t suffer the historical and geographical and
economic baggage and inefficiencies that pain our Western-based competitors.
Again, there is a reason why - as CTIA reports - that “U.S.
wireless providers invested approximately $94 per subscriber, compared with $16
per subscriber for the rest of the world.”
The competitive market benefit that Huawei has introduced
across the planet has been largely denied to U.S. carriers and consumers by a
series of both formal and informal - generally murky - U.S. Government policies and
practices. Is this because Huawei, by
virtue of its heritage in China, represents some sort of national security
threat to the U.S.? No. Such concerns have never amounted to anything
beyond political bluster and buffoonery.
No, American carriers and consumers are being denied
competition and more innovative and affordable broadband due to:
1) Mis-guided protectionism (there’s little domestic industry
left to protect);
2) Rueful sour grapes (how did we let that happen to our
domestic industry?);
3) Cyber-noia and Sinophobia (keep the people scared and
justify the budget), and;
4) Ill-thought foreign policy (holding a legitimate
multinational hostage based on its country of heritage will force a change in
China’s cyber-behavior?).
So far, the cost of such ill-inspired anti-competitive
policies and practices has been the higher prices and undue investment that
CTIA seems to be celebrating in its report.
The perpetuation, however, of such policies and practices will doubtless
mean greater and more far-reaching costs, in terms of American jobs, investment, innovation and the ability of American companies to compete fairly in increasingly global
markets.
Sadly, the old adage holds true: What goes around, comes
around.
Subscribe to:
Posts (Atom)