Tuesday, November 26, 2019

US Attempt to Oust Chinese Telecoms Firms Sacrifices Well-being of Rural Americans
By Zhou Qing
Global Times
2019/11/26 20:21:34

The US should stop banning Huawei and ZTE, which are major equipment suppliers for small, rural mobile phone carriers in the country. If China ceases product supply or raises prices, it will impair the interests of small rural carriers in the US.

The Federal Communications Commission (FCC) on Friday barred the use of its $8.5 billion a year Universal Service Fund (USF) to purchase equipment and services from Huawei Technologies and ZTE Corp.

Aside from the "big four" carriers in the US - namely Verizon, AT&T, T-Mobile and Sprint, which reportedly do not use Huawei's devices - there are many small, wireless operators in the country that only serve a few communities and bear the high costs of building networks in complex terrain. Devices from Chinese telecoms companies such as Huawei and ZTE are what they require.

In a draft statement released by the FCC on July 2, John Nettles, president of Alabama-based regional network operator Pine Belt Communications, explained that the company chose ZTE in the 3G build-out due to its price advantage. "ZTE's bid was almost one-third that of the highest bidder, and 25 percent below the second-lowest bidder" among the five bidding vendors at that time, according to Nettles.

With cost-efficient devices from Chinese providers, rural US operators managed to accumulate retained earnings to adopt 4G technology, and to explore technology of the next generation - 5G.

Huawei said the company's 5G cell sites, which are small, compact and can be installed anywhere, will save their customers about 10,000 euros ($11,000) when building a mobile phone tower. Huawei's equipment price is roughly 20 to 30 percent cheaper than that of its competitors including Ericsson, Nokia and Samsung.

The four major US carriers, which have offered their 5G networks in different cities in the US, have teamed up mainly with Ericsson. Ericsson provides T-Mobile with 5G network equipment as well as a 5G Core network and 5G RAN for Verizon. The company has also partnered with AT&T to launch mobile 5G.

However, the cost of not using Huawei is obvious for major telecoms carriers. In rural areas, there are fewer people to average out the cost while the land mass may require significantly more 5G base stations. The cost of launching 5G will be too great for small carriers to shoulder without more government funding. But will the government subsidies cancel out the cost of the switch for small carriers?

A Reuters report revealed that a US House of Representatives panel in September passed legislation to authorize $1 billion in funding for small and rural wireless providers to replace equipment from companies including Huawei and ZTE. The US Senate Commerce Committee approved $700 million to remove Huawei equipment, the report read.

Even such a vast sum will not be sufficient. The general counsel of the Rural Wireless Association (RWA), an organization representing rural US wireless carriers with fewer than 100,000 subscribers, claimed in the FCC release that approximately 25 percent of RWA members have deployed either Huawei or ZTE equipment in their networks. The RWA has also estimated that the cost of replacing Huawei and ZTE will be between $800 million and $1 billion for their members alone, which number just 12 to 13 companies.

But Huawei has at least 40 customers in the US which are mainly rural and not limited to wireless operators.

Taking a rough calculation, the US government should probably at least double the compensation for small rural carriers to replace Huawei or ZTE.

Moreover, the USF generally subsidizes telephone companies that serve high-cost areas, low-income customers, rural health care providers, eligible schools and libraries. With subsidies splitting into small shares for numerous businesses, the cost of switching from Huawei and ZTE may outweigh even USF grants.

As the FCC order takes effect, US rural wireless carriers will hardly be able to pull off profitability without China's telecoms equipment. For rural US areas to benefit from 5G technology, the involvement of Chinese service providers is indispensable.

Based on a complete lack of evidence and groundless accusations, the US government is attempting to deal a blow to Chinese companies at the cost of the well-being of people in the rural US. Against the US' constant battering, Huawei has nothing to lose in the US market. If the US goes its own way, the cost-efficient products that its small rural carriers enjoy may no longer be available.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

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