Congress close to approving funds to pay rural carriers for replacing Huawei, ZTE networking gear

Just a week and a half ago, we told you that departing FCC Chairman Ajit Pai ordered certain U.S. carriers to remove from their networks any telecom gear manufactured by Chinese companies such as Huawei and ZTE. The world’s largest and fourth largest global suppliers of such equipment respectively, the firms are considered national security threats in the U.S. because of a law in China that could reportedly force Huawei, ZTE, and other Chinese firms to spy on U.S. consumers and corporations.

U.S. to raise $1.9 billion for “Rip and Replace”

For years there have been rumors that Huawei and ZTE devices and equipment feature a backdoor that gathers this data and sends it to Beijing. We’re not saying that Huawei and ZTE have squeaky clean records because both have been involved in shady affairs. But to this day, the U.S. has not been able to find a smoking gun that proves the existence of a backdoor on handsets or networking gear made by the pair. That hasn’t stopped the Trump administration from banning Huawei from accessing U.S. suppliers including Google, and blocking international foundries from shipping  cutting-edge chipsets, including those designed by Huawei, to the company. This one act alone has placed the future of the world’s second largest smartphone manufacturer in doubt and forced it to sell the unit that develops Honor branded phones.

Once again citing security, the U.S. government is on the verge of approving a $1.9 billion program to remove any telecom equipment used in the U.S. that was produced by Huawei and ZTE. This summer, both were officially deemed security threats by the FCC. As a result, rural carriers were blocked from tapping into the $8.3 billion Universal Service Fund (USF) to buy networking gear from either supplier. And now the government is demanding that these smaller carriers “rip and replace” this gear. Many rural carriers used the USF fund to purchase Huawei equipment because it is considered to be among the best available. Additionally, the company has connections with China’s state-run bank allowing it to offer more affordable deals.

The $1.9 billion that the government says is needed to rip out Huawei and ZTE gear and replace it is basically the same amount of money that it estimated last year would be needed to complete this task. Last year’s estimate called for this process to take approximately two years to complete. Back on December 11th of this year, FCC Chairman Pai explained the goals of the program by stating, “…we adopted rules requiring certain carriers to remove from their networks equipment that poses a threat to our national security and the integrity of the country’s communications networks and implementing the Secure and Trusted Communications Networks Reimbursement Program that will help smaller service providers shoulder the cost of removing and replacing such equipment.”

Before the rural carriers start ripping and replacing telecom equipment, the project needs to be funded and today’s report suggests that this will happen soon as part of a larger bill. A source told Reuters that the bill “establishes a temporary, emergency broadband benefit program at the FCC to help low-income Americans, including those economically-challenged by the COVID-19 pandemic, get connected or remain connected to broadband.” Additionally, qualifying households will receive a $50 monthly subsidy “to help them afford broadband service and an internet-connected device.” Many rural Americans are not able to purchase such services and products because of the cost.

The COVID Relief Broadband Package totals $7 billion; the carriers that qualify to be reimbursed for the cost of ripping out offending networking gear must have fewer than 10 million subscribers. Priority goes to those wireless providers with 2 million subscribers or less. Also included in the bill is $250 million for telehealth support from the FCC and $1 billion for a program that backs tribal broadband connectivity. The bill is part of a year-end spending package that includes $3.2 billion in emergency broadband benefits for low-income Americans.