Ripping Out Huawe
In March of 2020 the then President signed the ‘Secure & Trusted Communications Networks Act of 2019’ that prohibited the use of federal funds to obtain communications equipment or services from companies that ‘pose a national security risk to US communications networks.’ This requires that the FCC publish and maintain a list of all such equipment and services and each provider must submit an annual report to the FCC specifying whether it has ‘purchased, rented, leased, or otherwise obtained any prohibited equipment, and if so, provide a detailed justification for such actions.’ The bill also provides for a reimbursement program for providers with 2m or less customers to offset the cost of removing the equipment, which is being developed by the FCC, however the funding, while approved, seems to be delayed until 2022.
Small operators are required to use their own capital if they would like to start the removal and replacement of equipment from Huawei (pvt) and ZTE (000063.CH) the two main suppliers that are on the list, which will be untenable for many small operators, although the FCC is expected to finalize the plan by this summer. The global semiconductor shortage has made the competition for components that much more difficult for small carriers as large carriers have the leverage to negotiate with foundries for fab time. Even those suppliers who benefit from the replacement have indicated their support for an extension of the deadlines associated with the bill and funding. The Rural Wireless Association, a representative organization for small carriers, while relieved that $1.9b in funding for the replacement plan was approved, is also requesting the same, although with small operators in the forefront, stating that “This is a national security issue that has been brewing for more than three years. It should be more urgent to replace insecure equipment and services in the network of small operators, and put the needs of these operators ahead of the needs of large operators, which will help the equipment replacement plan and is in the public interest.”
It seems that every faction hear has a soapbox and a reason to believe that they are the most important faction in this meld of government and industry. What it really comes down to is the necessity of the replacement during a period when replacement equipment is both scare and costly. We expect much of the industry to rally around the potential for delaying implementation, not only for small carriers but for the entire industry as raw material and component prices increase the cost of the replacement cycle. If the equipment suppliers are on the side of an extension, they know that it is in their best interests to slow the process down, and while they might tread a bit more lightly than those that are required to spend, they can see that while pushing out the program might spread sales over an extended period, not being able to obtain components means no sale at all.
Small operators are required to use their own capital if they would like to start the removal and replacement of equipment from Huawei (pvt) and ZTE (000063.CH) the two main suppliers that are on the list, which will be untenable for many small operators, although the FCC is expected to finalize the plan by this summer. The global semiconductor shortage has made the competition for components that much more difficult for small carriers as large carriers have the leverage to negotiate with foundries for fab time. Even those suppliers who benefit from the replacement have indicated their support for an extension of the deadlines associated with the bill and funding. The Rural Wireless Association, a representative organization for small carriers, while relieved that $1.9b in funding for the replacement plan was approved, is also requesting the same, although with small operators in the forefront, stating that “This is a national security issue that has been brewing for more than three years. It should be more urgent to replace insecure equipment and services in the network of small operators, and put the needs of these operators ahead of the needs of large operators, which will help the equipment replacement plan and is in the public interest.”
It seems that every faction hear has a soapbox and a reason to believe that they are the most important faction in this meld of government and industry. What it really comes down to is the necessity of the replacement during a period when replacement equipment is both scare and costly. We expect much of the industry to rally around the potential for delaying implementation, not only for small carriers but for the entire industry as raw material and component prices increase the cost of the replacement cycle. If the equipment suppliers are on the side of an extension, they know that it is in their best interests to slow the process down, and while they might tread a bit more lightly than those that are required to spend, they can see that while pushing out the program might spread sales over an extended period, not being able to obtain components means no sale at all.
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