Rural telecoms, including Alaska, worry over Huawei order

  • Workers clean the front of the new Huawei flagship store due to open soon in Madrid, Spain, on May 22. The Trump administration sanctions against Huawei have begun to bite even though their dimensions remain unclear. U.S. companies that supply the Chinese tech powerhouse with computer chips face a drop in sales, rural telecoms rely on Huawei for equipment, and Huawei’s smartphone sales could get decimated with the anticipated loss of Google’s popular software and services. (Photo/Paul White/AP)

A new rule about how telecommunications companies can use some of their funding from the federal government may poke a hole in their wallets, especially as they are looking to migrate their networks to 5G.

From selling its cell phones and laptops to providing high-level networking equipment, the U.S. government has effectively banned the Chinese telecom company Huawei from doing business in the United States. President Donald Trump cited national security concerns in his May 15 executive order in response to worries from Congress and the Central Intelligence Agency regarding Huawei’s close relationship with the Chinese government and the potential for security breaches in network buildouts using Huawei equipment.

The Federal Communications Commission had its own rulemaking process already going on a similar topic, beginning almost a year earlier in March 2018, which would ban the use of Universal Service Fund monies in buying equipment from Huawei or a number of other Chinese telecommunications companies. The commission is citing national security threats to the communications supply chain in the proposed rule.

Huawei, the No. 2 smartphone maker in the world, is one of the largest telecom equipment providers in the world, and its equipment already helps deliver service to many areas of the United States. Because its equipment tends to be less expensive than its competitors, many smaller and rural telecom providers have bought the company’s equipment, and the rule means a huge economic cost to them.

Companies probably aren’t going to be able to cobble together networks with some Huawei equipment, though. According to a number of filings with the FCC about its proposed rule, companies are concerned about interoperability between Huawei equipment and other equipment they have to purchase in the future.

But they’re also concerned about the increased expense — according to an FCC filing in November 2018 from the Rural Broadband Association, some companies have been quoted two to four times as much for the same equipment from Lucent or Ericcson, two other primary suppliers.

Alaska’s rural geography presents a challenge for telecom providers. Much of rural Alaska is served by GCI along with a number of smaller local companies that also provide services in rural areas. AT&T is the largest provider of mobile phone service in the state.

Larger companies can spread their costs across multiple geographies and many customers; small rural companies don’t have that option, and swallowing millions in expenses to rip out and replace equipment that the U.S. government has now banned is a fairly large expense.

Sen. Dan Sullivan, R-Alaska, is co-sponsoring a bill to help address some of that cost. The United States 5G Leadership Act would set aside $700 million for U.S. telecom providers to replace Huawei equipment in their current infrastructure. The bill is dependent on the FCC finalizing its proposed rule banning companies from using Universal Service Fund monies to buy Huawei equipment.

Sullivan has heard directly from Alaska telecoms that are currently using Huawei and ZTE equipment, said Mike Anderson, communications director for Sullivan’s office. ZTE is the No. 2 Chinese telecom company behind Huawei.

“Senator Sullivan will very much be monitoring how any prospective legislation such as this bill or regulation will impact our carriers, and engaging policymakers like the FCC accordingly,” Anderson wrote in an email. “Part of why he was pleased to partner with (Mississippi Sen.) Chairman (Roger) Wicker on this bill is because unlike any other proposed solution, it included a funding mechanism for ripping and replacement.”

The $700 million figure isn’t set in stone, as the bill sponsors don’t have a precise inventory of equipment that needs to be replaced, in part because wireless equipment is more difficult to inventory, Anderson said. There is language in the bill allowing for additional funding if the original amount is not enough.

“We estimated that we needed $800 million to $1 billion for our carriers, but that only covers about a dozen companies,” Carrie Bennet, general counsel for the Rural Wireless Association, told NBC News in a May 27 story. “I don’t want to insult the bill they’ve introduced. It’s great that someone has focused on what this is going to cost, but this is not enough money.”

Alaska was significantly behind in implementing 4G infrastructure, particularly outside the urban areas of Anchorage, Juneau and Fairbanks. Network connection is expensive and the geography and distance makes it logistically difficult. However, companies are now catching up with faster speeds, particularly in urban areas, and newly installed cell towers in western Alaska as part of GCI’s infrastructure investment there.

But as they do, the country is looking toward 5G, the next generation of wireless communication standards with higher speeds and lower latency times.

AT&T included Anchorage in a 2018 announcement of its initial 5G network rollout, initially announced to be deployed in 2019 and 2020. A May 31 press release from the company stated it has spent $250 million in Alaska from 2016-18 to improve its network.

So far, the company has updated its network to 5G Evolution in Anchorage, Bethel and Kusilvak, which enables customers in those areas with 5G-enabled devices to access faster speeds, wrote AT&T spokesman Brent Camara in an email.

“While we have not yet announced specific plans for 5G cities in Alaska, we continue investing in building the network our customers need today and preparing for the future,” he said.

Like in the past, rural residents may not see the service their urban neighbors do from major carriers for a long time, even as speeds increase significantly in urban areas. That’s one of the reasons organizations like the Rural Wireless Association advocate for policies that support rural providers — because the small companies based in rural areas will build out those areas rather than focusing on the bigger, more valuable markets.

Daryl Zakov, senior counsel for the Rural Wireless Association, said the organization has a number of issues it advocates for to support rural networks as the world moves to 5G, including advocating for the FCC to auction off smaller license service areas so rural companies can more effectively bid on them and implement new rules on roaming service partnerships.

The telecom market has consolidated in the past decade, with regional companies going under or merging; four companies dominate the U.S. market while smaller rural companies serve more constricted areas, with two currently trying to merge. The four big companies — Verizon, AT&T, Sprint and T-Mobile — will likely be focusing their initial buildouts in urban areas rather than expanding coverage to rural areas, if they get there at all. Smaller rural companies, on the other hand, don’t have to choose between urban or rural settings for their infrastructure focuses, Zakov said.

“(Urban areas are) where (the big companies) are going to start their coverage,” he said. “When rural carriers start building out, that’s going to be in the rural areas. In every generation, urban areas have been built out before rural areas.”

Sprint and T-Mobile told the FCC in filings they will build out rural 5G coverage if their merger is approved.

Elizabeth Earl can be reached at [email protected].

06/05/2019 - 9:25am