BROADBAND ALLEGATIONS - CHINESE TELCOM

C O N F I D E N T I A L CANBERRA 001291 NOFORN SIPDIS E.O. 12958: DECL: 12/18/2018 TAGS: ECPS AS SUBJECT: BROADBAND ALLEGATIONS - CHINESE TELCOM MANUFACTURER HUAWEI A VENDOR? REF: CANBERRA 1277 Classified By: DEP ECONCOUNS W ALBRIGHT, REASONS 1.4 B, D ¶1. (C/NF) Summary. A major Australian daily ran an article today reporting that Optus was believed to have included China's Huawei Technologies as a vendor in its bid for the National Broadband Network (NBN) and claiming it could threaten Optus' bid. The GOA is conducting a review of all NBN bids that will include looking at national security. Privately, the GOA told Embassy they are aware of issues related to Huawei and will look at this closely during the review. End summary. ¶2. (SBU) Today the national newspaper "The Australian" ran an article (headline: "Chinese Spy Fears on Broadband Frontrunner") reporting that the presumed frontrunner (following Telstra's abrupt ouster from the bidding, ref A) for the National Broadband Network, Singtel's Australian subsidiary Optus, was believed to have proposed involving Chinese telecommunications equipment manufacture Huawei Technologies as a vendor in its bid. "The Australian" claims this could threaten the Optus bid on national security grounds. Optus had no comment but did say they worked with Huawei in their test lab. The Department of Broadband, Communications, and the Digital Economy (DBCDE) has appointed a committee headed by its Secretary, Patricia Scott, to assess each of the bids and will recommend a winner in late January; one of the factors the panel will consider is the relative national security risks of the proposals. ¶3. (C/NF) Econoff met today with the office for cybersecurity at the Attorney General's Department (AGD),which is conducting the "real" national security review of the NBN bids, which will be presented to the GOA in by mid-January but (unlike the Scott report) will not made public. Director Lionel Markey told econoff that they were always aware there would be "contention" about components for the NBN. AGD is consulting with a range of Australian government agencies, including the Defence Signals Directorate (DSD) and the Australian Security Intelligence Organisation (ASIO). Although he could not confirm whether or not Huawei was included in Optus' bid due to strict GOA guidelines concerning disclosure of information related to the NBN tender process, Markey said the GOA was well aware of issues related to Huawei. He indicated that GOA agencies would likely contact USG counterparts for further information. AGD has wide latitude in how it prepares its report; they could for example tell a bidder that most of their bid is acceptable on security grounds but the bidder would have to change specified elements of the bid to pass. ¶4. (C) Comment: The NBN process gets even uglier. There is speculation that Telstra leaked this story, coming so soon after Telstra's bid was disqualified; a Telstra official told econoff in mid-November that Optus would use Huawei and implied that would be a security risk for Australia. Others speculate it could be from competing equipment manufacturers seeking part of the A$4.5 billion pie. In any case, if DBCDE doesn't select the Optus bid for the NBN, this could give Optus another reason to cry foul. MCCALLUM