Telecommunications (Security) Bill (Fourth sitting)

David Johnston Excerpts

Committee Debate: 4th sitting: House of Commons
Tuesday 19th January 2021 Public Bill Committees

[The Chair]

I am sure Members would appreciate further details on the Intel example, if you can provide that.

[David Johnston (Wantage) (Con)]

Q Can I ask about the diversification strategy, which is a question I asked some of the other witnesses? The Government are rightly investing a significant amount in this. We all agree that it is needed. What do you think success looks like? Our problem at the moment is that if we take out Huawei, we have only two vendors we can use. What range would you like to see, and in what sort of timeframe?

Heba Bevan: The problem with Huawei is a bigger problem. The technology was freely created by BT and got sold to Huawei. I think that such an important technology should not have been allowed to be sold in the first place. I am sorry; this is my personal view, not a company view. I think certain technology should be kept within the country because it has a certain importance and all of us use it, so it should be kept in a certain way.

On replacing Huawei with something else, currently we do not have many options, to be honest, in terms of 5G. We have Ericsson, which is a provider of a chip. There are other providers, but they have not come out. Even looking into modules currently, UtterBerry is working on a 5G project with DCMS and the Welsh Government, and we are basically creating the first IoT solution that is completely compatible with 5G.

In terms of supplier for the chip, we have one option, which is Qualcomm. We have Ericsson as well, but they are not at the same speed as Qualcomm, so in terms of options to go with 5G, I do not think there are many suppliers in that market. The capabilities within the—

[David Johnston]

Q May I briefly interrupt? I accept that there are not many suppliers now. Given the money that the Government are going to invest in trying to support having more suppliers, how many would you like to see and by what timeframe?

Heba Bevan: That depends on competition law. The more the merrier probably, at least to give each of us a choice. It would be great to have a choice and to pick the best for the situation. The problem is, given the speed at which we want to roll out 5G, I do not think we will have enough time to create many companies that can provide 5G. We have the capabilities to do it in the country, but we do not have the capability to manufacture that number and roll it out to the entire country. Perhaps Dr Andy Sellars or Nick can comment on that.

Dr Johnson: Let me chip in for a bit. In terms of diversification, there is an issue with scale. Derek McManus made this point—I listened to his contributions from Thursday—about scale. In order to serve the global telecoms operator network, you need scale. You need enough financial and technical muscle to withstand the procurement practices. There is an issue around how much you can afford to deliver, at certain profit margins, in order to make a business. It is very difficult for small companies to achieve that scale.

Speaking for myself, we are a case in point. We achieved a certain degree of scale but did not get to the point where we could compete effectively with Ericsson, Nokia or anybody else in that space. There are quite a few second-tier players around, Mavenir and Airspan, which have 5G technology that could be deployed. Is that scalable to the degree that Vodafone Group would require? Do they have the financial backing to withstand Vodafone procurement organisation? I think that is a major issue.

If you look for the sentiment of the investment community around telecoms, I do not think you will get very positive feedback. Investors are, with one or two exceptions, looking elsewhere to make money. It is a very mature market. Finding new growth in that market is very challenging. I do not have an obvious answer to how, globally, you would achieve diversification. Doing from the UK is a big challenge.

The only crumb of comfort I can offer is that we should, I think, focus on core intellectual property, as a country, strategically. If you just focus on the software, and the implementation of the technology, we will get outrun by people with much bigger and much cheaper workforces, which are as highly skilled. The only way to cement the position in the global economy is by intellectual property and ensuring that you own it, it is well protected, and you can leverage it and exploit it appropriately in that space. Some of the work that Andy is doing at the Catapult is looking at not necessarily software, but technology that could be used in 5G to improve the efficiency of radios and so on. Paradoxically, hardware-centric IP may well be very important to the effective operation of a network.

I am not giving you a very good answer here. It is a very challenging political goal, to say that we want to diversify. What is in it for us as an investment community and a technology community? I think everyone is looking elsewhere at the moment.

[The Chair]

I am conscious of the time. Dr Sellars, do you have anything to add to that?

Dr Sellars: Absolutely. We are in a situation where we have three monolithic suppliers—we are actually down to two monolithic suppliers. With telecom diversification, we have an opportunity to look at disaggregating parts of the network, especially for newer 5G and other services.

My background is similar to Heba’s. I am an electronic engineer by trade. I have designed electronic systems that have been manufactured in the UK and I have written software to drive those systems. In the UK we have something like 5,000 companies that design and manufacture electronic systems. Something like 600 of them are involved in telecoms. I am not suggesting that all of those 600 become equal players. That would be a crazy scenario. But there are certainly some parts of the telecom network where the UK is pre-eminent. There are some backhaul and fibre technologies that we are very good at. As we deploy 5G into rural communities, that is likely to require low Earth orbit satellites; we are very good at satellite communications.

We have clusters of activity with these things around the UK. There is a cluster of radio frequency, backhaul and satellite communications in the north-east, and of satellite manufacturing in the central belt of Scotland. We have clusters of activity in the Western Gateway and around small-cell base stations. In south Wales, we have clusters of activity in compound semiconductors, which are the next generation of chips required for 5G and other high-data rates communications. So, I think the diversification strategy goals of opening up and disaggregating the markets are certainly going in the right direction.

Ultimately, it comes to the telecom operators and how many suppliers they would like in their vendor supply chain. If we can disaggregate the network and come up with open standards for various parts of the network, such as open RAN and backhaul network gateways, that opens the playing fields and enables companies to compete equally. As I say, there are a number of UK companies that could compete. They are globally competitive and could compete on equal grounds with other companies to get access to those markets.

In terms of the timescale to do this, at the moment we have three monolithic suppliers and we are going down to two. Patching that scenario feels like a very short-term timescale, but I would indicate that a broader diversification would probably be in the order of three to five years.