Ripping out gear could be costly for phone firms

Some small US phone companies fear they’ll be forced to rip out network equipment made by Huawei as tensions rise following the arrest of the Chinese gear maker’s chief financial officer.

The Rural Wireless Association, in a filing to the US Federal Communications Commission, asked for funding and time to “rip and replace” if US officials order carriers to remove equipment supplied by Huawei. The US Congress has identified the company as a security threat because of its ties to the Chinese Government. Huawei’s chief financial officer Meng Wanzhou was arrested in Vancouver at the start of this month on the orders of US authorities for allegedly violating American sanctions on selling technology to Iran. The arrest has become a flashpoint in ties between the US and China that has rattled investors and sent stock markets tumbling.

The rural wireless trade group submitted its filing to the FCC, which is considering barring some subsidy funding for carriers that use Huawei gear, generally regarded as less expensive than competitors’ equipment, out of security concerns. “Rip-and-replace costs vary by carrier, but are significant,” said the trade group representing carriers with fewer than 100,000 subscribers.

One carrier — Sagebrush Cellular of Scobey, Montana — estimated it would cost US$57 million ($83m) to replace its network.

The agency has proposed barring telecommunications companies from using a federal subsidy to buy gear from Chinese companies such as Huawei and ZTE that are judged to be a national security risk. The agency hasn’t indicated when it may vote on that measure.