Hoo boy. Chinese telecom equipment provider Huawei has been having a rough couple of months what with all the speculation about spying coming from places as high up as the US government and the Indian government. But if you thought that was damaging to Huawei’s image and overseas business plans, wait until you get a load of this Reuters investigation (h/t to Sinocism for pointing this out):
Documents seen by Reuters show that a partner of China’s Huawei Technologies Co Ltd offered to sell a Huawei-developed “Lawful Interception Solution” to MobinNet, Iran’s first nationwide wireless broadband provider, just as MobinNet was preparing to launch in 2010.
The system’s capabilities included “supporting the special requirements from security agencies to monitor in real time the communication traffic between subscribers,” according to a proposal by Huawei’s Chinese partner seen by Reuters.
Huawei also gave MobinNet a PowerPoint marketing presentation on a system that features “deep packet inspection” – a powerful and potentially intrusive technology that can read and analyze “packets” of data that travel across the Internet. Internet service providers use DPI to guard against cyber attacks and improve network efficiency, but it also can be used to block websites, track internet users and reconstruct email messages.
The article goes on to say that MobinNet is actually using some of Huawei’s DPI equipment, although the company has denied selling it and it’s not clear how MobinNet acquired it. Last year, Huawei promised to restrict its business development in Iran by not signing new customers, but since MobinNet is not a new customer, it’s quite possible the companies are still working together.
If this is all sounding very familiar, it’s because Reuters released a similarly damning report about ZTE back in March. The report found that ZTE had sold “a powerful surveillance system capable of monitoring landline, mobile and internet communications” to Iran’s state-owned TCI.
Anyway, as far as international PR goes, helping Iran spy on (and subsequently arrest, torture, and kill) its own citizens is pretty high on the list of don’ts. At this point, it’s hard to imagine that either Huawei or ZTE have any hope of winning over Western countries that are considering allowing them to work in the local telecommunications industry. And while China seems to be taking the scrutiny of Huawei and ZTE personally, this report is just the latest in a long list of reasons why that scrutiny is pretty well-deserved. It’s also a good reason why the official scrutiny is probably irrelevant; even without official hoops to jump through, it’s doubtful that Huawei would be able to dig itself out of the PR hole that is “we helped Iran spy on its own people.” The Reuters story, for example, opens with a vignette in which Iranian authorities beat a college student with an iron bar, which is then immediately followed by the section about Huawei quoted above. That’s not the sort of thing a company can come back from quickly, especially when it didn’t have much PR good will to lose in the first place.
So Huawei and ZTE are toast in the US, and probably most of Europe, for the foreseeable future. But the real shame here is that this news will stigmatize other Chinese tech companies looking to expand too. Most Chinese companies don’t have internal Party committees and they certainly haven’t sold surveillance equipment to Tehran, but that isn’t going to matter much. That people will judge companies by their country of origin is biased and unfair, but that doesn’t make it any less of a reality, and every time news like this breaks, it makes it that much harder for the next Chinese company to gain any traction or trust outside China’s borders. There’s a reason major tech firms like Tencent are already rebranding when they expand beyond China’s borders. Brand China is poison, and it’s not all the Chinese government’s fault.