Ripping Huawei out of US networks could be a nightmare for rural providers

Joe Franell is a fan of Huawei’s equipment. As the CEO of Eastern Oregon Telecom, he’s responsible for providing internet to about 4,000 customers, many in small communities or remote farmland. He’s been lucky: the Huawei equipment he uses has never failed, which he hasn’t been able to say about everything else in the company’s network. Plus, it’s affordable, both of which are reasons why he estimates the Oregon company uses about $500,000 worth of Huawei products.

Still, the uncertainty around Huawei has left him wondering what will happen next. Franell says Eastern Oregon Telecom stopped buying Huawei equipment about a year ago, as controversy heated up around the Chinese telecom giant. Since then, Huawei has faced a government crackdown in the United States, as officials argue the company could be used by the Chinese government for espionage. Lawmakers first barred the company’s products from government use, and since then, the Trump administration has effectively blacklisted its products, requiring government approval for any transactions with US companies.“WE’RE THINKING THROUGH THE SCOPE OF THIS PROBLEM”

But rural wireless carriers like Eastern Oregon Telecom are also looking ahead to another potential setback: being forced to cut Huawei products out of their networks entirely, a process known as “rip and replace.”

Last year, the Federal Communications Commission started considering how to apply the government ban, and put out the idea of ending some federal funding for carriers that use Huawei equipment. Small carriers now fear that they’ll be forced to entirely replace the Chinese-made equipment in their networks, a natural extension of the security concerns that have already been aired.

FCC Commissioner Geoffrey Starks told The Verge in May he was looking into just what that would mean for rural carriers. “I’m focused on it,” he said. “I have my team focused on it. We’re thinking through the scope of this problem, how much of this infrastructure is going to be at issue, how much is it going to cost.”

Franell says the costs to replace that equipment would be high. Huawei equipment can be much cheaper than equivalent parts from other companies, and hiring someone with the expertise to make the switch would also be costly. Despite having just $500,000 of Huawei equipment, he estimates that buying new parts and hiring a contractor to replace the equipment could cost between $1.2 million and $1.5 million. Even if the government were to reimburse the company later, he says he’s not sure he’d have enough credit to carry the cost.FRANELL SAYS REPLACING HUAWEI COULD COST BETWEEN $1.2 MILLION AND $1.5 MILLION

A project that size would have costs beyond just money. Eastern Oregon Telecom has been trying to bring gigabit fiber to more remote parts of Oregon, Franell says. If a rip and replace order did come down, those plans would have to be pushed back as much as a year while the company dealt with replacing equipment. In the meantime, improving service for those customers would be put on hold. And while Franell says the company would work to make sure the problems were limited, shutting off equipment to replace it would inevitably result in some outages.

The Rural Wireless Association, a trade group representing smaller companies, as well as Huawei, have pushed back at the FCC, arguing that rip and replace would damage internet access in rural America — an issue that FCC leadership has repeatedly said it’s committed to improving.

“RWA estimates that at least 25 percent of its carrier members would be impacted,” the trade group told the agency in a December filing. “Estimated rip-and-replace costs vary by carrier, but are significant across the board.” One carrier in the association suggested it would cost them between $7 million and $13 million to make the changes. Another member said it would cost them about $57 million to replace its network.

“Anything can be fixed with time and money, except death,” says Carri Bennet, general counsel for the RWA, which has asked the FCC to take additional time to understand the costs that rip and replace would require. But as she and the RWA have pointed out, the financial costs on the industry would be substantial.“ANYTHING CAN BE FIXED WITH TIME AND MONEY, EXCEPT DEATH”

Congress has put some plans on the table to reimburse carriers for removing Huawei equipment. In a bill introduced in May, a bipartisan group of senators proposed allocating about $700 million in grants, part of a plan that would also block Huawei from being used in the US’s next-generation 5G networks. But RWA has estimated it could cost its members up to a billion dollars just to replace equipment from Huawei and another Chinese telecommunications company, ZTE. Amid growing Congressional gridlock, smaller carriers may end up simply swallowing the extra cost.

Some officials and lawmakers, however, argue that the risks of not replacing Chinese equipment are too great. Should the espionage concerns come to fruition, they argue, China will have a backdoor into sensitive American communications. Sen. Mark Warner (D-VA), in a statement announcing the funding plan, said “the federal government failed to effectively communicate the economic and national security risks of Huawei and ZTE communications equipment — and even adopted broadband grant policies that incentivized rural carriers to use this equipment because it was the cheapest around.”

Huawei has repeatedly denied that its equipment would be used for spying, and as the company is fond of pointing out, the US hasn’t produced any public evidence to substantiate the fears. Franell describes himself as “a patriot,” and says if there was proof of a national security threat, “I’d be ripping this stuff out of the network myself.” But without it, he wonders whether Huawei is being used as a bargaining chip in trade negotiations with China — a fear that President Trump exacerbated when he said the company might “be included in some kind of a trade deal.”

That leaves carriers like Eastern Oregon in an uncertain place. If the government is going to ban the products, Franell says, he hopes it’ll happen soon, so Eastern Oregon Telecom can deal with the problem. Running a rural carrier is a tough business, and not knowing what’s next doesn’t make things easier. “Distractions are a big deal,” Franell says, “because it’s hard enough already.”