In recent years, the U.S. Department of Commerce has placed Huawei and ZTE onto its Entity List. As such, the agency barred American firms from selling their products to those companies without the government’s approval. However, Washington lifted its trade ban on ZTE last year. Chairman Pai’s proposal would also require U.S. carriers to rip out telecom equipment provided by the two Chinese corporations.
The FCC will hold a vote on Pai’s proposals during a November 14 open meeting.
Why the FCC is Taking Action Now
While the federal government has had issues with Huawei and ZTE for years now, the timing of the FCC’s proposal isn’t surprising. Indeed, all of America’s wireless carriers are planning to roll out fifth-generation data service this year. Moreover, Washington, via the Universal Service Fund, will subsidize the construction of 5G networks in low income and high-cost areas.
Accordingly, Chairman Pai is joining the Trump administration’s effort to push individual Chinese tech companies out of the U.S. market. Indeed, the politician mentioned Huawei and ZTE’s susceptibility to subversion by the Chinese government as reasons for implementing the equipment ban. The Commerce Department used the same rationale to cut off Huawei’s access to American semiconductors and software.
Thus far, Huawei and ZTE have established themselves as major suppliers of fifth-generation infrastructural equipment. Currently, Huawei has more than 60 5G deployment contracts lined up, and ZTE has secured 35 supply deals. Known for their high quality and low-cost equipment, the conglomerates would’ve likely inked deals with U.S. operators without intervention.
Given the mounting distrust of Chinese corporations in the U.S. government and the general populace, Pai’s proposal will probably pass without issue.
Tearing Down America’s Old Telecommunications Infrastructure
In the current climate, the FCC’s efforts to keep Huawei and ZTE out of America’s 5G networks probably won’t be controversial. However, the agency’s proposal to remove their old equipment from the U.S. might be.
In August, the Trump administration offered rural wireless carriers a Huawei trade ban exemption through November 19. The Commerce Department said it gave non-urban providers more time to find new telecom equipment suppliers. Consequently, the federal government knows how dependent regional operators are on the Sino manufacturer.
Now, rural carriers are facing the prospect of ripping up their existing networks to meet government standards. It’s hard to imagine many regional operators have the capital to complete such significant reconstruction projects. As such, those companies will need additional federal subsidies, a development that could become a political liability for the Trump administration next year.
The South China Morning Post reports U.S. carriers would need to spend millions of dollars on replacing Huawei equipment. President Trump’s critics have alleged his administration’s targeting of Huawei is politically motivated. With the 2020 Presidential Election drawing closer, the Commander-in-Chief’s rivals could argue his political maneuvering has hurt U.S. businesses
Regardless, if the FCC’s proposal passes, one thing is certain: U.S. friendly telecom equipment suppliers like Nokia and Ericsson will benefit immensely.