Canada’s 5G future now in hands of European vendors

Big Three telecoms select Ericsson and Nokia for next generation network

Cell tower in Metro Vancouver | rob kruyt

It took only a single morning for Huawei Technology Co. Ltd.’s 5G ambitions for Canada to implode following years of courting the country’s biggest carriers.

Bell Canada [BCE Inc. (TSX:BCE)] revealed in the pre-dawn hours of June 2 it was opting to build its next-generation wireless network using equipment from Swedish manufacturer Telefonaktiebolaget LM Ericsson (Nasdaq:ERIC).

By 10:30 a.m., Vancouver-based Telus Corp. (TSX:T) announced it had selected Ericsson as well as Nokia Corp. (HEL:NOKIA) to build out its 5G network.

Huawei found itself left in the dust after both Canadian telecom companies spent years investing in its 5G equipment while Ottawa conducted a security review of the Chinese tech giant.

Telus and Bell are now on the same side of the fence as Rogers Communications Inc. (TSX:RCI.B), which had already been aligned with Ericsson’s 5G technology.

“Just the sheer fact a choice has been made and that the Canadian 5G industry is moving out of indecision is great news,” said Patrick Ostiguy, founder and executive chairman of Quebec-based network performance provider Accedian Networks Inc.

“Canada is already relatively behind other worldwide jurisdictions in regards to rolling out 5G radios. Having made those decisions now starts the clock to play catch-up with the rest of the world.”

Uncertainty over the future of 5G in Canada has centred on a precarious political situation in which Ottawa is being pressed by intelligence allies to ban Huawei’s 5G equipment over espionage concerns.

But Canada also faces pressure from Beijing following the arrest of Huawei chief financial officer Meng Wanzhou at Vancouver International Airport in December 2018 in connection with a U.S. extradition request.

Two Canadians living in China, Michael Kovrig and Michael Spavor, were detained soon after by Chinese authorities but no formal charges have been filed after more than 500 days.

As for 5G’s future deployment in Canada, Ostiguy said Telus’ decision to go with dual vendors – Ericsson and Nokia – will pay dividends.

“The fact that Nokia is in at Telus and has a chance to prove itself should keep Ericsson honest overall,” he said. “But in the grand scheme of things in Canada with the low density, and the wide extent of the required underlying infrastructure, the relative cost of the 5G radios is not the most significant contributor to the expensive prices Canadians are paying for mobile services compared to the rest of the world.”

Matthew Hatfield, campaigns director at Vancouver-based advocacy group OpenMedia, said he does not believe the decision to go with Ericsson and Nokia – both of which have a 5G equipment portfolio more expensive than Huawei’s – will make a significant difference in terms of prices and competition.

Telus cautioned investors in February 2019 that if Huawei 5G equipment and software were to be banned in Canada over security concerns, it would likely seek government compensation for the money and resources poured into this deployment before the Chinese company was made off limits. But because Ottawa has not banned Huawei, it’s unclear if Telus will seek that compensation.

Business in Vancouver reached out to Telus multiple times, but a company spokesman did not respond to the newspaper’s questions prior to press time.

As for universities and other organizations, Ostiguy does not believe their investments in Huawei 5G equipment will have been in vain.

“The Huawei political situation for the past couple of years has allowed the European options to catch up with Huawei in terms of 5G radio technology, while Huawei is already working on 6G. At this time, 5G radio technology is more or less levelled, fully standardized and compatible inter-vendor. From that standpoint, if Ottawa does not move to ban Huawei, then universities, etc., should not lose their investments. And to the contrary, will be a great test bed for research on inter-vendor interoperability and performance assurance.”

Jason Turner, senior director of global carriers at Seattle-based NetMotion Software Inc., said there’s only a low chance Huawei is officially banned from Canada.

“But as [Prime Minister Justin] Trudeau navigates the narrow pathway between appeasing both the U.S. and China, the trend is almost certain to shift away from Huawei,” he said.

“With the U.K. still stumbling through the same maze, the wisest move for those that still have agency would be to pay the price premium to avoid the political one. For others, it may be too late, which may not be a problem in the short term, but it inevitably will be in the long term.” •