Clearwire, Leap downplay Huawei's role in their networks following security report

Both Clearwire (NASDAQ:CLWR) and Cricket provider Leap Wireless (NASDAQ:LEAP) downplayed the role that Huawei equipment has in their networks in the wake of a U.S. government report that said Huawei and ZTE pose a security risk because their equipment could be used for espionage.

The report, from the House Permanent Select Committee on Intelligence, recommended the U.S. block acquisitions and mergers involving the two firms and also recommends that the U.S. government and U.S. companies avoid using equipment from the two Chinese companies.

"Clearwire employs a multi-vendor approach for our current 4G network," the company said in a statement to FierceWireless. "We remain committed to ensuring that our network is safe and secure and that our customers' data is protected. Among other things, we require each of our infrastructure vendors to submit their equipment and software to extensive testing by a leading third party recognized  for vetting critical infrastructure systems for security purposes before incorporating it into our network."

Clearwire noted that Cisco Systems supplies its core IP network and that its radio access network uses gear from Nokia Siemens Networks, Samsung and Huawei, and that the radios "do not have direct connectivity to the backhaul and core network systems that process and manage our network traffic." Ciena supplies base station switching equipment for Clearwire, and DragonWave and Nokia Siemens provide microwave backhaul equipment.  

Leap uses network gear form Huawei,  Ericsson (NASDAQ:ERIC) and Alcatel-Lucent (NASDAQ:ALU) and Leap spokesman Greg Lund told FierceWireless  that Huawei has "the smallest share of our business" from a network perspective. Leap sells Huawei handsets, but the report said handsets were not a cause for concern. 

Lund said Leap is studying the report and takes the issue very seriously. Leap is planning on expanding its LTE network and it is unclear if Huawei will remain a supplier as it moves ahead  with that deployment.

In the fall of 2010 Sprint Nextel (NYSE:S) reportedly decided to exclude Huawei and ZTE as vendors for its Network Vision project because of national security concerns. Sprint eventually chose Ericsson, Alcatel-lucent and Samsung.

A senior  Verizon Communications (NYSE:VZ) executive, Randall Milch, said that Verizon  does not use Huawei and ZTE network equipment and has no plans to do so. "The fact that they (Huawei and ZTE) are big and the fact that they may offer attractive pricing doesn't necessarily mean that it's the best thing for your network," Milch told the Wall Street Journal. "We have an embedded base of technology that is very large, so there are many technical factors. Things might be different if you are a smaller company, but for us, we make technical decisions about what we want to put in our network."

Huawei and ZTE pushed back aggressively against the report's conclusions, and have repeatedly said they do not pose a security threat and have no ties to the Chinese military or government. Huawei is a privately held company and ZTE is a publicly traded firm. The Chinese government has also pushed back strongly and suggested Tuesday that the report could set back relations between the United States and China.

Meanwhile, international fallout from the report continues, even as the intelligence committee said it would be looking into fresh waves of complaints against Huawei and ZTE. According to a Reuters report, which cited an unnamed staff member of the committee, the panel has received "dozens and dozens" of calls from current and former employees and customers reporting allegedly suspicious equipment behavior, mainly from Huawei.

Separately, Canada's government invoked a national security exception that allows it to not do business with companies deemed as too risky to be part of an effort to deploy a secure government communications network. "The government's going to be choosing carefully in the construction of this network, and it has invoked the national security exception for the building of this network," Andrew MacDougall, spokesman for Canadian Prime Minister Stephen Harper, said at a news conference. "I'm not going to comment on any one company in particular. I'll leave it to you if you think Huawei should be a part of a Canadian government security system."

For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Reuters article
- see this separate Reuters article
- see this CBC article

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