Congress gives small ISPs $1 billion to rip out Huawei, ZTE network gear

Huawei's logo seen at a technology conference.
Enlarge / Huawei’s logo at the Smart City Expo World Congress in Barcelona in November 2019.
Getty Images | SOPA Images

The US House and Senate approved legislation to create a $1 billion fund that will help small telecom providers remove and replace Huawei and ZTE networking equipment.

The bill, which awaits President Trump’s signature, also prohibits telcos from using Federal Communications Commission funding to purchase Huawei or ZTE equipment. But the Congressional action is largely duplicative, as the FCC had already approved a ban.

The Secure and Trusted Communications Networks Act was approved in voice votes by the House in December and by the Senate yesterday. It doesn’t mention Huawei or ZTE by name but says the FCC must produce a list of equipment providers “posing national security risks” and prohibits ISPs and phone companies from using FCC funding to purchase, rent, lease, or maintain equipment and services made by those companies.

The FCC already did that in November when it finalized its ban on using Universal Service funding on Huawei or ZTE equipment. Both the FCC action and the legislation allow the FCC to add providers to that list as necessary. Neither ban technically requires ISPs to remove Huawei or ZTE equipment they previously bought. But the FCC is working on another proposal to require removal of FCC-funded Huawei and ZTE equipment, and the legislation would help the FCC and ISPs make it happen.

Specifically, the bill directs the FCC to create a $1 billion reimbursement fund for ISPs that have 2 million or fewer customers. The funding would be used for “permanently removing,” “replacing,” and “disposing” Huawei or ZTE gear and equipment from any providers added to the prohibited list in the future. The FCC was already seeking public comment on how to pay for removal and replacement of equipment but hadn’t created a fund.

“The passage of this legislation comes at a critical time,” the Rural Wireless Association, a trade group that represents small ISPs, said yesterday. “Without this crucial funding, rural carriers would lack the financial means to effectuate rapid replacement of the banned equipment.”

Democratic and Republican members of the House Commerce Committee also praised the Senate action, saying, “The existence of Huawei’s technology in our networks represents an immense threat to America’s national and economic security.”

A Huawei spokesperson told Ars that the legislation “is considerably underfunded, would take longer than anticipated [to implement], and could put at risk some of our customers, who serve the most underserved areas… It does not address the most significant issues of network security, but sells out people and operators in rural areas at the expense of taxpayers.”

FCC will suggest replacement vendors

To help ISPs find replacement technology, the bill directs the FCC to “develop a list of suggested replacements of both physical and virtual communications equipment, application and management software.” The list is required to be “technology neutral.”

The $1 billion would presumably come from the FCC’s existing Universal Service Fund. But if the FCC determines that $1 billion won’t be enough “to fully fund all approved applications for reimbursements,” the commission is directed to “immediately notify” Congress, which would presumably consider adding money to the fund. The reimbursement funding can be used to purchase, rent, or lease replacement equipment and services. The bill attempts to prevent misuse of funds by requiring ISPs to provide a “detailed accounting” of how they spend the money.

The FCC this week opened an online portal for ISPs that receive FCC funding to submit information on their use of Huawei and ZTE equipment and services. The data collection is meant to determine how much Huawei and ZTE equipment is in FCC-funded networks and the costs associated with removing the equipment and replacing it.

Pai has justified the ban on Huawei and ZTE by saying they “have close ties to China’s Communist government and military apparatus. Both companies are subject to Chinese laws broadly obligating them to cooperate with any request from the country’s intelligence services and to keep those requests secret. Both companies have engaged in conduct like intellectual property theft, bribery, and corruption.”

Huawei in December sued the FCC in an attempt to stop the ban, but a US District Court judge ruled in favor of the FCC.

US government officials recently said they have “evidence that Huawei has the capability secretly to access sensitive and personal information in systems it maintains and sells around the world.” But they haven’t made that evidence public, and Huawei said it “has never and will never covertly access telecom networks, nor do we have the capability to do so.”

The FCC’s Universal Service Fund distributes about $8.5 billion a year and is paid for by Americans through fees on their phone bills. There are several Universal Service programs, but the ones most affected by the Huawei/ZTE ban are the Connect America Fund and Rural Digital Opportunity Fund, which give ISPs money to deploy broadband in rural areas.

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