US Phone Carriers Warn FCC Of "Prohibitive" Costs To Replace Huawei, ZTE Gear

While some have tied today's China court-ordered ban of some iPhone sales with the arrest, and ongoing hearings, of Huawei's CFO, there is an even more direct consequence for American business from the Trump administration's potential crackdown on various Chinese tech companies.

Bloomberg reports that some small U.S. phone companies fear they’ll be forced to rip out network equipment made by Huawei as tensions rise following the arrest of the Chinese gear maker’s chief financial officer.

The FCC is considering barring some subsidy funding for carriers that use Huawei gear (which is generally regarded as less expensive than competitors’ equipment) out of security concerns.

In April 2018, the Commission released an NPRM in which it proposed and sought comment on a rule to prohibit, going forward, the use of universal service funds to purchase equipment or services “from any communications equipment or service providers identified as posing a national security risk to communications networks or the communications supply chain.”

While the proposed rule text did not specifically refer to Huawei or ZTE, the NPRM discussed the two companies in detail and left little doubt that, if adopted, the rule would prohibit Universal Service Fund (“USF”) support recipients from using USF funds to purchase equipment or services from either company.

And in a filing response to the U.S. Federal Communications Commission, The Rural Wireless Association asked for transitional funding and time to “rip and replace” if U.S. officials order carriers to remove equipment from Huawei, which Congress has identified as a security threat for its ties to the Chinese government.

“Rip-and-replace costs vary by carrier, but are significant,” the trade group representing carriers with fewer than 100,000 subscribers.

One carrier - Sagebrush Cellular Inc.of Scobey, Montana - estimated it would cost $57 million to replace its network, an amount that “for a small rural carrier is prohibitive without replacement funding” the trade group said.

As we noted earlier, this comes after Japan’s top three carriers - NTT Docomo, SoftBank, and KDDI - will ban telecommunications equipment by Huawei and ZTE, Kyodo News reported. The news agency didn’t offer any specifics beyond saying that the ban would impact equipment at base stations.

For now, the FCC hasn’t indicated when it may vote on the measure; but it seems clear that if and when they do, the Rural Wireless Association will need a bailout?

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Full Rural Wireless Association Comments below: