Structural Separation and National Security

Last week I had a fascinating (though short) discussion with one of my tech friends in Sweden. The discussion moved on to structural separation. He said to me that back in the days when France Telecom was looking to buy Telia Sonera, a discussion arose in political circles about the consequences of the national telecom network not being owned by national money. It was concluded back then that because of who France Telecom was, it wasn't such a big deal, and in any case FT ended up not buying Telia Sonera.

He explained though that the line of thought didn't die there and then. What if, he surmised, the acquirer was not French but Chinese ? Would the Swedish government be happy with a network owned by foreign assets perceived to be 'not so friendly' and 'not so private' entering every one of their defense facilities ?

It's not a trivial question, and strangely enough, not one that I had ever thought about. This, my friend suggested, has changed the nature of the regulatory debate on separation from a business and economic development argument to a national security argument. And this is, of course, not just about Sweden, far from it. While it looks unlikely that Telecom giants like DT, FT, Telefonica or BT be taken over by Chinese or Russian companies in the near future, it's not such an improbable perspective for TI, Telia Sonera, TDC, maybe even KPN. It's got nothing to do with their health and all to do with their size.

What happens in that case? Do countries run the risk of going head on against WTO and protect their "national assets"? Or do they start thinking pre-emptively and structurally seperate the actual physical asset to ensure that even if the service incumbent is taken over, their national security is no longer at risk, it's just a matter of finding another service provider?

While I was in Italy (where the perspective of TI falling into the hands of Telefonica is very real) another response scenario was suggested to me: the national network falls into the hands of a foreign company (not necessarily hostile in this case), the government invests in a separate national fiber network. Could work, but very expensive if you can't leverage the copper network assets.

Why not separate in the first place ?