A ban on equipment from certain manufacturers, under consideration by the FCC, would put some rural carriers out of business, argued Huawei in a letter to the commission this week. China-based Huawei is one of the companies that recipients of Universal Service Fund support could be prohibited from using if the FCC moves ahead with the proposed ban, which the FCC is considering as a means of enhancing network security.

Accompanying the Huawei FCC letter were quotes from numerous stakeholders arguing against the proposed ban.

The FCC’s proposed equipment ban came to light in a notice of proposed rulemaking (NPRM) adopted earlier this year. At that time, FCC Chairman Ajit Pai expressed concern that communications equipment from certain companies could have “hidden ‘back doors’ to our networks” and could provide “an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data and more.”

The proposal stops short of naming companies whose equipment would be banned but suggests that one possibility would be to comply with funding restrictions already imposed by other federal agencies such as the Department of Defense. The DOD is already prohibited from using certain telecom equipment from Huawei and another Chinese company, ZTE.

Huawei FCC Letter
In its letter to the FCC, Huawei notes that the company gets 60% of its revenue outside mainland China and supports more than 500 telecom operators in more than 170 countries. In the U.S. the company’s main customers are small rural service providers. “many of whom are attracted to Huawei as a result of Huawei’s commitment to affordable, quality products and attentive customer service,” the letter argues.

Huawei goes on to argue that its lack of presence in the U.S. would “raise prices, harm competition, hinder innovation, and ultimately delay 5G deployment” and that some carriers would incur costs in the hundreds of millions to comply with the NPRM, while others would go out of business entirely.

The letter also makes an argument that other opponents of the proposed ban have made.

“[A] blacklist on certain equipment vendors does not address the reality that cybersecurity risks arise from various points of vulnerabilities in an international supply chain,” the letter says.

“[T]he global and complex nature of the telecommunications supply chain necessitates a comprehensive security framework to protect against threats,” the company continues. “This framework should be developed as part of an inter-agency effort involving government entities with the authority and expertise to consider security issues.”

The supporting quotes included with the Huawei FCC letter came from telecom associations NTCA – The Rural Broadband Association, WTA – Advocates for Rural Broadband, Competitive Carriers Association and Rural Broadband Alliance, along with six individual service providers, most of whom are wireless providers.

Service providers noted that Huawei equipment was less expensive than other offerings and that the company provided a good product and good customer service. Several noted that their networks were highly reliant on Huawei equipment, representing 70% to 80% of network equipment or 100% of one company’s wireless core and wireless radios.

One of the strongest voices of support came from Nemont, which provides mobile service in rural Montana and North Dakota under the Sagebrush name. The company argued that if Sagebrush were to lose USF funding as a result of the proposed rule, it estimates the cost of replacing its network at around $57 million, which would reduce its network by almost two-thirds, shrinking from 161 to 55 cell sites.

“In some areas where Sagebrush is the only wireless carrier, 911 service, as well as voice and mobile broadband service, will be lost,” the company states.  Nemont/Sagebrush also notes that it covers 173 miles of the U.S.-Canadian border and provides service to more than 75 border patrol and U.S. customs agents.

It’s important to note that the NPRM does not propose requiring USF recipients to remove existing equipment from banned companies from their networks, but there are gray areas, including whether any equipment upgrades from those vendors would be prohibited.

Bloomberg’s Bombshell
A news story from Bloomberg yesterday provides ammunition for both sides in the Huawei FCC face-off.

According to Bloomberg, Amazon discovered evidence of possible spying into telecom networks by China in the form of a tiny microchip found on a circuit board used in a server from U.S.-based Elemental, a company Amazon was considering purchasing. Those servers were manufactured for Elemental by U.S.-based Super Micro Computer, but Super Micro apparently was unaware of the microchip on the circuit board, which was manufactured by a supplier in China and wasn’t part of the original design but instead was inserted during the manufacturing process.

Proponents of the FCC’s proposed ban may point to this story as an example of why the ban is needed. But opponents will argue that this development instead illustrates that a ban on certain manufacturer’s equipment is not the best way to enhance national security but instead illustrates the need for a security framework that encompasses all elements of the telecom supply chain – including components manufactured in other countries but used in equipment designed by domestic companies.

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