James Slaby, Director of Cyber Protection, Acronis
SO WHAT EXACTLY IS 5G?
Short for “fifth-generation”, 5G wireless is the next evolutionary step in the development of broadband wireless services. It offers much faster download speeds (especially for mobile users, but also for fixed services like residential internet access), boasts lower latency (which means real-time apps like video work better), provides much greater capacity for providers, and uses less power on mobile devices. US telecom carriers like AT&T, Verizon, T-Mobile and Sprint have just barely begun their rollouts of 5G services, but it should see much wider rollout (including many options for 5G-capable mobile devices) and better geographic coverage over the next two to three years.
Typical 5G speeds will increase by a factor of ten to twenty over today’s 4G speeds, meaning peak speeds will reach 20GB per second and typical speeds will be around 100MB per second. Combined with greatly increased network capacity, these faster speeds should enable a flood of new applications, including autonomous vehicles, telemedicine, virtual and assisted reality, and more highly-distributed machine learning (ML) and artificial intelligence (AI) engines. Mobile devices will become much more capable, and it will be easier and cheaper to deploy smart sensors (so-called Internet of Things, or IoT) devices everywhere.
WHAT DOES 5G MEAN FOR FINANCIAL TECHNOLOGY FIRMS?
The potential impact of 5G on fintech, both good and bad, is enormous. For a historical example, consider one big development that was enabled by the speed increase from 3G to 4G (LTE) wireless mobile: ride-share apps. 4G’s additional bandwidth made Uber and Lyft possible, creating a new transportation option while massively disrupting the taxi and limo industry. 5G will enable similar disruption and opportunity in fintech: the only question is whether you ride the wave or get swept under by it. (As with surfing, timing will be crucial.)
Better video performance should have a transformative impact on financial services marketing, particularly for the younger consumers that have driven over half of mobile traffic to video. More ubiquitous, higher-performing AI and ML will touch fintech everywhere, from delivery of smart agents for investment advice to providing greater protection against security threats like phishing, ransomware attacks, identity theft and payment-card fraud. 5G’s greater bandwidth, ability to support more devices, and lower power consumption make it a great fit with wearable computers. Thus, new financial apps (e.g., micropayment agents) on smartwatches and similar devices should be much more feature-rich and appealing. Innovators might also start planning now for how to enable banking apps with virtual or assisted reality elements.
DOES CHINESE FIRM HUAWEI HAVE THE CAPACITY TO SPY ON CHINA’S BEHALF WITH 5G TECHNOLOGY AND WHAT ARE THE BIGGEST SECURITY RISKS?
Huawei makes equipment used by telecom companies, including the wireless infrastructure that many telcos are currently installing to upgrade to the new, faster mobile phone standard 5G. The concern is that in these very complex systems, it is theoretically possible that Huawei, which has longstanding ties to the Chinese military, could secretly embed software that could be used to eavesdrop on mobile phone calls, track the location of high-value individuals, or bring down a country’s mobile phone service on demand.
HOW DOES THE 5G TECH ENABLE THAT AND IS THE TRUMP ADMIN RIGHT TO CRACK DOWN ON IT?
The issue is not that the 5G standard has anything inherently vulnerable in it, but that many telecom companies around the world are moving to upgrade their wireless networks so that they can deploy faster 5G wireless services in the near future. Huawei is a very competitive supplier in this space, often winning deals because its solutions are less expensive than those of Western competitors. The US has long been sensitive to potential mischief here – the Feds prevented Sprint from buying Huawei gear for its mobile network a few years ago — but many other countries have been lured into deploying Huawei for its technical sophistication at cheaper prices.
HOW ACCURATE/CONVINCING IS THE US ARGUMENT THAT THIS IS A MASSIVE SECURITY BREACH?
The security risk is only theoretical at the moment, but it is certainly credible. Given the complexities of these systems, the notion that malicious code for eavesdropping or other network tampering could be hidden in Huawei wireless gear is real. It’s also important to understand that state actors like China are investing huge amounts of money and human capital into cyberweapons of every kind. Examples we have already seen include viruses used to steal sensitive information and intellectual property, or to infiltrate and control or damage critical infrastructure like power, water, and telecom systems. Cyberwarfare is becoming as important as conventional warfare for countries that want to project their economic and political advantage around the world and disadvantage other nations, and China is one of the most sophisticated, powerful and strategic forces in the world on this front.
IF COMPANIES SUCH AS UK AND GERMANY GO AHEAD AND ALLOW HUAWEI, HOW WILL THIS EFFECT THE FIVE EYES INTELLIGENCE SHARING AND INTEL SHARING WITH EUROPE?
There is the potential to harm this important intelligence-sharing alliance among Western powers. It is conceivable that US might be more reluctant to share sensitive intelligence with some members of the alliance for fear that it could be compromised. That weakens every member of Five Eyes.
IS THERE MORE TO THE US CRACKDOWN ON THIS THAN SECURITY CONCERNS?
There’s always a political dimension to these maneuvers. Remember that President Trump is in the middle of negotiating a new trade deal with China, and there are several ancillary objectives he could be pursuing here: like showing his ability to hurt China economically by damaging the prospects of one its biggest, most successful tech companies; and projecting strength, leadership, and technological solidarity with our Western allies. But the potential security risks of allowing Huawei’s telecom hardware and software to be installed throughout the West have been discussed by Western security analysts for years. The current migration to 5G wireless and the popularity of Huawei gear outside the US has made this threat more urgent and timely.
James R. Slaby is a Director at Acronis. Previously, Slaby was an industry analyst covering IT security, cloud computing and network technology for Forrester Research, Yankee Group, and HfS Research. With over 300 published research pieces, his findings have been quoted in The Economist, The Wall Street Journal, the New York Times, and countless tech publications.