Alarm bells sounded over cyber espionage threats

IT security | Local expert says Canadian telecoms should heed U.S. Intelligence Committee alerts of Chinese technology spy dangers

Despite stark warnings from the Canadian Security Intelligence Service (CSIS) and the U.S. House Intelligence Committee, local and national telecoms like Telus (TSX:T) and Bell Canada (TSX:BCE) don't appear overly worried that Chinese-made hardware in their networks could be used for corporate espionage.

But they should be, says a local expert in cyber crime and security.

"Industrial espionage is rampant, and companies are just not getting the message," said Dale Jackaman, president of Amuleta Computer Security Inc., which specializes in cyber crime, computer security and industrial espionage.

Just last month, CSIS published a report that stated Canadian corporations and government are being routinely hacked by foreign entities.

"The Government of Canada is now witnessing serious attempts to penetrate its networks on a daily basis," the report states.

Last week, the U.S. intelligence committee singled out two Chinese technology companies – Huawei and ZTE Corp. – identifying them as particular security threats and warning American telecoms to avoid doing business with them.

Telus has been using ZTE's mobile devices since about 2007, and in February Prime Minister Stephen Harper was on hand when Telus signed an agreement with Huawei to provide equipment for the telecom's LTE network. SaskTel and the government of Ontario have also signed agreements with Huawei.

All have downplayed the concerns being raised by the U.S. intelligence committee, which a Telus representative characterized as "fear-mongering."

Erin Dermer, director of media relations and social media for Telus, said the company thoroughly checks out its suppliers before it buys their equipment.

"When we choose to work with suppliers that might be international, like Huawei, we do so only after a really thorough and complete analysis of their capabilities and their organization," she said.

The U.S. intelligence report says the telecommunications industry is uniquely vulnerable to foreign corporate espionage, because the equipment used in telecom networks can be coded to create back doors to access proprietary intellectual property.

In a statement posted on its website, Huawei echoes observations of some analysts that the U.S. report might be motivated by protectionism because Huawei and ZTE are now major competitors with companies like Cisco Systems Inc. (Nasdaq:CSCO).

"We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT [information and communications technology] companies from entering the U.S. market," the Huawei statement reads.

Mark Goldberg, a Canadian telecommunications consultant, dismissed the U.S. report as "98% rhetoric, 2% substance."

"There's an awful lot of innuendo without an awful lot of facts," Goldberg told Business in Vancouver.

But Jackaman insisted the threats are real. He said it's not widely known outside of the intelligence and security community just how widespread – and costly – corporate espionage and cyber crime in North America has become, because most jurisdictions don't have laws that compel companies to publicly disclose when they have been hacked.

"The number of companies out there that I know of that have been exploited, either by organized crime or state-sponsored espionage, is a lot bigger than people realize," he said.

"It's not just the hacking of a single company that's the issue. It's the hacking of multiple companies. If you can deprive or collect together the intellectual property of a number of telecom companies, you can build a super telecom company that would be very, very difficult for other companies to compete with."

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