How Nortel

The acquisition by LM Ericsson of Nortel Networks Corp.’s carrier wireless assets could make Canada “more susceptible to a breach of national security,” according to the company that wanted to buy the wireless Long Term Evolution (LTE) patents of Nortel.

During testimony before the House of Commons Standing Committee on Industry, Science and Technology, members of parliament asked Mike Lazaridis, co-CEO of Research in Motion (RIM), to explain how Ericsson’s bid could harm national security.

But in subsequent interviews, two Canadian analysts questioned RIM’s claims.

Ronald Gruia, program leader for emerging telecoms at Frost & Sullivan said in an interview with Network World Canada there are few security aspects to Nortel’s LTE patents.

Ericsson has offered to acquire for US$1.1 billion the Nortel division that makes products for wireless carriers using code division multiple access (CDMA) technology. Nortel is trying to sell its business units and has been operating under bankruptcy protection since Jan. 14.

The Ericsson deal resulted from an auction July 24 that stemmed from an earlier bid from Nokia Siemens Networks.

On July 20, Waterloo, Ont.-based RIM complained it was effectively shut out of the auction process, and called on the federal government to review the sale. That day, RIM stated in a press release “the loss of Canadian ownership of Nortel’s CDMA and Long Term Evolution businesses may significantly, adversely affect national interests, with potential national security implications ….”

After politicians weighed in last month, members of parliament called for Friday’s emergency meeting of the committee.

Nortel officials testified Friday their LTE patents will not be transferred to Ericsson. Instead, Ericsson would get the right to use the technology in exchange for paying Nortel licensing fees.

However, a submission by RIM to the committee states: “If adequate know-how and expertise is not accessible within Canada, it may be difficult to maintain the LTE networks in a crisis. In the event of a national emergency such as a terrorist attack, natural disaster, military attack or epidemic, our Canadian government officials, elected officials, emergency personnel and military personnel will be heavily dependent on wireless networks for communication in order to reduce public panic and coordinate the operations of emergency and public safety personnel and the military.”

In response to a question Friday from Marc Garneau, a Liberal member of parliament and former astronaut, Lazaridis said a wireless network based on LTE uses Internet Protocol.

“Just as we protect our land based IP network at our borders with firewalls, this opens us up to a wireless access point” that could be accessed by anyone, he said. “There will have to be carefully designed security technology and standard built into this to ensure it is used for positive means” and can be used by law enforcement, government and industry.

Committee member Mike Lake, conservative member for Edmonton-Mill Woods-Beaumont, said his BlackBerry is provided by Rogers Communications Inc.

“Rogers network was setup by Ericsson in 1984,” Lake said. “They continue to maintain it. Are we facing a national security risk by using Blackberries on Rogers’ network?

Lazaridis replied: “If you didn’t use BlackBerry, you’d be facing a national security issue. We designed security into these products.”

He added when RIM acquired Certicom Corp. last year, the U.S. government vetted the sale because Certicom makes Elliptic Curve Cryptography encryption algorithms.

“He used examples that in my view are not quite applicable,” Gruia said. “Pardon me, but the whole business of Certicom revolves around security.

LTE is different, Gruia added.

“It’s not like Nortel as part of its LTE (intellectual property) have some special encryption algorithm that are part of that.”

It does not matter who operates an LTE network, said Mark Tauschek, lead analyst at Info-Tech Research Group of London, Ont. He said the quality and reliability of public wireless networks in Canada are not going to be changed if a different manufacturer owns the underlying patents.

Lazaridis is calling for a meeting among officials representing his company, Industry Canada, Ericsson and Nortel.

“It’s my belief there is enough room in the current situation to make sure .. if all the parties got together we have an opportunity to come up with something that is more palatable to all the parties.”

In his opening comments, Lazaridis likened Nortel’s selloff to the cancellation by then Prime Minister John Diefenbaker in 1959 of the Avro Arrow project. The Arrow, had it been purchased, would have been a Canadian-designed airplane used by the Air Force to intercept enemy bombers.

“Comparing (the Nortel-Ericsson deal) to the Avro Arrow. My God. That was way over the top,” Gruia said.

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