While it has been widely reported that U.S. government trade restrictions on Chinese-made telecom equipment could impact Tier 2 and 3 wireless carriers, smaller operators of wireline broadband networks will also feel the pinch.
Eastern Oregon Telecom (EOT) contracted China’s Huawei in 2015 to provide its Gigabit Passive Optical Network solutions. Part of EOT’s network upgrade included taking over a dormant network from another operator that served around 1,000 customers.
EOT chief executive Joe Franell told the Wall Street Journal that his company saved at least $150,000 by using Huawei equipment to upgrade the abandoned system.
According to research firm Dell’Oro Group, Huawei products make up less than 1% of the equipment in American cellular and landline networks.
But for smaller operators operating on much smaller budgets to upgrade networks, the much cheaper network equipment offered by Chinese suppliers like Huawei and ZTE Corp. have been a gamechanger.
“Our margins are pretty thin,” Franell told WSJ. “If you start dictating what kind of equipment I can use, it tips the scales.”
Since 2012, the U.S. government has discouraged larger telecom companies from buying gear from Chinese vendors like Huawei. But lately, the pressure to cut off supplies from these Chinese vendors has intensified.
In Congress, Rep. Liz Cheney, R-Wyo., has co-sponsored a bill that would restrict the U.S. government or any of its contractors from using Huawei and ZTE Corp. equipment.
Specifically, any U.S. military base would be banned from using any broadband services supplier that had Chinese telecom gear in its network. Cheney’s bill has 48 co-sponsors, many of them Democrats.
The fear among U.S. lawmakers: that the Chinese government will use the technology to hack into American networks and steal secrets.
“We cannot allow the Chinese government to use entities like Huawei to gain access to our communications networks, including on our military bases,” Cheney said in a statement.
For its part, Huawei has insisted that it’s employee-owned and that the Chinese government has never asked it to help spy on anyone. A company spokesperson told WSJ that networks using Huawei equipment are no more vulnerable to hacking than those who use Western-made gear sold in the same global supply chain.
For its part, the FCC is responding to Congress and putting up further obstacles to the Chinese manufacturers.
FCC Chairman Ajit Pai issued a response to Cheney’s bill on March 20, saying that he received a briefing on the issue from the U.S. intelligence community, and as a result he said he would “take proactive steps to ensure the integrity of the communications supply chain in the United States in the near future.”
Just days later, Pai said that the FCC next month would vote on a proposal that would would bar the use of money from the FCC’s Universal Service Fund to purchase equipment or services from companies that "pose a national security threat to United States communications networks or the communications supply chain.”
All of these actions, claimed to be in the interest of national security, come as the Trump administration has moved more forcefully against Chinese interests. Just this week President Trump said he will move to block $50 billion worth of Chinese imports, though the specific list of items that will be blocked won’t be released for another two weeks. Moreover, AT&T, Verizon and, most recently, Best Buy, have moved to drop active or pending sales of Huawei smartphones.