FCC proposes rip and replace of ZTE, Huawei gear in carriers who take USF funds: Who's paying?

The FCC says ZTE and Huawei should be removed from carriers that accept Universal Service Fund money. The problem is the fund is only $8.5 billion and carrier costs to replace gear will take time and potentially a lot more money.
Written by Larry Dignan, Contributor

The Federal Communications Commission plans to ban ZTE and Huawei networking equipment from any carrier that receives funds from the Universal Service Fund and proposes the removal of the gear.

And now comes the hard part: The logistics of what equates to a big rip and replace for networking gear that's already in production.

The FCC will vote on the proposal Nov. 19.

A draft of the order would bar communications companies that receive Universal Service Fund money to purchase suppliers posing a national security threat, notably ZTE and Huawei. Another rule is proposed to require carriers receiving funds to remove existing equipment from the likes of ZTE and Huawei and replace it with "more trusted suppliers."

The draft rule would also call for fact-finding to discover how many carriers deployed Huawei and ZTE equipment and costs to remove and replace it.

And that's where things will get sticky. Huawei's value proposition for many carriers is gear that works in remote and rural areas. Simply put, Huawei is likely installed in many carriers.

The biggest question is who will pay for this rip and replace effort and what's the costs. Will there be another carrier tax on your bill to pay for replacement gear? Or will carriers simply forgo FCC funds. After all, the Universal Service Fund is $8.5 billion. That's a large number, but may not be large enough for much FCC leverage.

FCC Chairman Ajit Pai said:

When it comes to 5G and America's security, we can't afford to take a risk and hope for the best.  We need to make sure our networks won't harm our national security, threaten our economic security, or undermine our values.  The Chinese government has shown repeatedly that it is willing to go to extraordinary lengths to do just that.  And Chinese law requires all companies subject to its jurisdiction to secretly comply with demands from Chinese intelligence services.

Now for carriers, the devil will be in the details. Those details will revolve around IT heavy lifting, labor costs, RFP processes and money.

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