Blue Mountain Networks, a regional broadband service provider based in Oregon, received unfortunate news a few weeks ago from its supply chain contractor.
The entrepreneur, who makes sure the company receives switches and other equipment on time, explained in an email that manufacturers of wireless products have sharply increased their prices – some by as much as 40%.
Factories have been hit by unprecedented disruption, sparking raw material prices, he said. And with freight containers stranded in ports for months due to shortages of truck drivers, suppliers had to pay $ 100 per container per day.
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The complication has turned a logistical headache – which stemmed from the US government’s efforts to rid the country of telecommunications infrastructure made by Chinese firms Huawei Technologies and ZTE – into something even worse.
“This is uncharted territory for our industry, for our world, and we are all affected,” said the email to Blue Mountain President Joseph Franell, adding that the chaos was the worst the company has ever had. known for decades.
Now that “tear and replacement funds” are available, he added, “it will only get worse.”
That’s the problem facing the roughly three dozen rural telecommunications operators who were ordered by the federal government last year to pull all equipment away from Huawei and ZTE.
Officially known as the “Secure and Reliable Communications Network Reimbursement Program,” the rip-and-replace initiative came into effect in March 2020 when President Donald Trump signed it into law.
The measure was a response to concerns among the intelligence community and lawmakers that such telecommunications equipment could contain spyware to transfer US data to Beijing. In December 2020, Congress approved $ 1.9 billion in reimbursement funds to help rural carriers cover the costs of removing and replacing these systems.
The program progressed under President Joe Biden; the Federal Communications Commission (FCC) began accepting claims on October 29.
The fund will cover expenses for operators under 10 million users to remove and replace Huawei and ZTE products purchased before June 30, 2020, including labor costs.
FCC Acting President Jessica Rosenworcel said this year that “there is a serious risk that this equipment will be manipulated, disrupted or controlled by foreign actors.”
“We will be evaluating network after network, base station after base station and router after router until we have uprooted our equipment that could harm national security,” she said. “It is a daunting task.”
It is estimated that more than 30 of those rural operators with the fewest available broadband connections will be affected.
These carriers are already struggling with slow installations of new systems to keep their regular operations going because they have to divert resources for moves. Today, they face significant delays and huge price increases for new products, all against a backdrop of labor shortages.
Many carriers who immediately filed the documents for the reimbursement fees – including Blue Mountain – are no longer sure the federal program will approve the new, higher prices.
“All quotes we sent from vendors for products to replace Huawei are now invalid,” said Franell, whose company provides wireless networks to up to 18,000 households and businesses in Washington and Oregon. “There is no real mechanism to deal with the price increases because no one saw it coming.”
As operators scramble for alternative systems, they find that most of the equipment approved by the government to replace Huawei and ZTE equipment contains Chinese components or is made in China.
For example, Blue Mountain is replacing Huawei switches with equipment made by the Alabama-based network provider and California-based Juniper Networks. Both manufacturers’ products contain Chinese parts, Franell said.
Representatives for Adtran, Juniper and ZTE did not respond to requests for comment.
Jim Kail, managing director of Laurel Highland Total Communications, a Pennsylvania-based broadband provider, said the company “is literally replacing these Huawei units with new equipment containing Chinese components as we speak.”
“We are replacing one Chinese product with another,” Kail said. “The difference is that the replacement does not have the Chinese tag on the outside.”
“We are replacing this elaborate system at spending a lot of money. And at the end of the day, are we safer? In my opinion, we are not,” Kail said.
Jim Lewis, director of the technology policy program at the Center for Strategic and International Studies, a Washington-based think tank, said he doesn’t believe products assembled in China or containing Chinese components pose the same risks.
“It’s not ‘made in China’ it’s the problem, it’s ‘connects to China’,” Lewis said. “Huawei and ZTE controlled the code, the software update process and, in some cases, some operational control of the network. That’s where the risk came from.”
“Having it connected to China could allow all kinds of trouble, including espionage and disruption,” he said. “The immediate success of the program lies in the absence of future purchases from Huawei or ZTE.
But for carriers who need to get new products before they can complete the replacement, there are immediate issues that need to be addressed.
Besides supply chain issues, there are service gaps when Chinese equipment is withdrawn and new equipment installed, as well as potential quality changes after the replacement is complete.
The removal mandate comes as rural America undergoes a general broadband upgrade; the manpower and time that these capital improvements require is now spent on dismantling the Chinese systems.
Franell of Blue Mountain said he expected the outages to last “several hours for several nights.”
John Nettles, president of Alabama-based Pine Belt Communications, said the program should be called “replace and tear,” because to avoid service disruptions, carriers must have new systems in place before removing the existing equipment.
Before prices went up, Huawei equipment was at least 30% cheaper than its competition, Franell said. Rural transporters face cash flow problems as they prepay for new equipment.
“It would cost us double or more,” Franell said. “Even with more money, it doesn’t get as good as Huawei.”
Franell said he had not been able to obtain equivalent equipment from Juniper or Cisco Systems to replace base electronics from Huawei. For example, he said, it takes two Juniper devices to achieve the same functionality as a similar Huawei device.
In the seven years that Blue Mountain has used Huawei, he said, there has only been one equipment failure, a record he called unbeatable.
The labor shortage is an additional challenge. The carriers say they have dozens of unfilled jobs for months; the labor costs they hope the government will reimburse will surely increase.
Paul Triolo, director of technology policy practice at political risk consultancy Eurasia Group, said part of the confusion was that even after the replacement, “it is not known in some cases what the carriers will be expected to know about the replacement equipment, which may not have a Chinese brand, but could contain a significant number of components of Chinese origin “.
A Huawei spokeswoman reiterated the company’s previous statement that “the so-called extract and replace rules are simply an unrealistic attempt to fix what is not broken.”
“The FCC initiative only creates extraordinary challenges for carriers in the most rural or remote areas of the United States to maintain the same level and quality of service that they provide to their customers without disruption,” said the spokeswoman said, calling the program a means for the US government “will use politics in an effort to make a geopolitical statement.”
An FCC spokeswoman declined to comment.
Rural carriers have acknowledged that the Chinese government can likely use its private companies to infiltrate U.S. systems and threaten national security. They said these were real dangers and Congress was right to beware.
Politics, instead, must “examine the guts of these electronic devices and equipment to determine if they contain Chinese components,” said Kail of Laurel Highland.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice on China and Asia for over a century. For more SCMP stories, please explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.