FCC Officials, Industry Say It's Time for Hill Money to Replace Chinese Gear

Getting Congress to fund the estimated $1.62 billion it would cost to rip and replace Huawei and ZTE equipment in U.S. networks could be a heavy lift this year, but industry is hopeful lawmakers will act. The FCC released cost estimates Friday and a list of some 50 carriers that use the gear (see 2009040022). The agency noted some may not have participated in the data collection. With the Trump administration focusing more generally on China, the commission in June barred the two Chinese vendors from participating in the USF (see 2006300078).

Commissioner Geoffrey Starks has met with “dozens of small carriers that bought this equipment legally & in good faith,” he tweeted. “It's time they got the $ to fix this issue so they can focus on their customers.”

“Knowing is only half the battle,” tweeted Commissioner Jessica Rosenworcel: “Now the agency needs funding from Congress to help get this equipment out so we can build a safer and more secure 5G future.” FCC Chief of Staff Matthew Berry tweeted it's “imperative” Congress act. Huawei and ZTE didn't comment.

The amount of money required to replace the equipment “is still a lot … even in these COVID free-spending days,” said Shane Tews of the American Enterprise Institute. Congress would be paying carriers for making a “bad decision” and “going with a lower cost vendor before Huawei and ZTE had been fully villainized,” she said. Tews supports spending based on national security but noted it must be balanced against spending on rural broadband.

Congress is planning to appropriate at least $1 billion for rip and replace, and FCC Chairman Ajit Pai says $2 billion will be needed, said Carri Bennet, counsel to the Rural Wireless Association. “This will happen,” she said. Support is likely "in Congress and elsewhere to help these companies replace critical aspects of their supply chains,” said Zack Cooper, China expert at AEI.

The Competitive Carriers Association “strongly supports efforts to protect and secure our nation’s communications networks,” emailed President Steve Berry: “Today’s release further underscores the need for Congress to fully fund the Secure and Trusted Communications Networks Reimbursement program to ensure that carriers, especially those serving rural areas, have the resources needed to remove covered equipment and services while keeping Americans connected.”

The estimate “shows just how prevalent suspect equipment is -- particularly among smaller carriers who cannot afford to replace it on their own,” said lead Secure and Trusted Communications Networks Act (HR-4998) sponsor House Commerce Committee Chairman Frank Pallone, D-N.J., in a statement. “It’s critical Congress fund” the law and “continue to take an active, bipartisan role in tackling this issue head-on.” His Utilizing Strategic Allied Telecom Act (HR-6624/S-3189) would require the FCC to create an NTIA-managed open radio access network R&D grant program (see 2004240032).

It’s unclear how the FCC’s estimate will affect Congress’ calculus for appropriating funds to implement HR-4998, officials and lobbyists told us. The House-passed FY 2021 appropriations bills, including FCC funding (HR-7617) and a proposal from Senate Appropriations Committee Chairman Richard Shelby, R-Ala., cover $1 billion for HR-4998 implementation. The FCC earlier sought $2 billion (see 2003230066). Shelby floated his plan as part of GOP leaders’ proposal for the next COVID-19 aid package. Lobbyists noted Republican leaders more recently floated a proposal that would include only half of the aid money they originally proposed in July, so it’s unknown if the HR-4998 money makes the cut.

The Trump administration “is not going to lift the hammer when it comes to China,” said AEI's Tews. “It’s an election year,” she noted, and combating Huawei and ZTE is a “really political agenda item.”

The cost estimate is "realistic, assuming that most eligible carriers make use of the subsidy and replace their equipment using current technology offered by the major infrastructure suppliers -- Nokia, Ericsson and Samsung,” said Thomas Duesterberg, a trade expert at the Hudson Institute. Many small carriers are starting to experiment with software-based virtualized networks and ORANs, he said.

“Early results from the rollout of the newer systems promise less costs and more flexibility,” Duesterberg said. “Eligible operators include Alaska- and Idaho- based operators." Some are retrofitting 2G-4G infrastructure with the new architectures, he said.