Cost of banning Chinese 5G gear soars to $5.6B

Network providers have asked for $5.6 billion to cover the cost of replacing deployed wireless equipment made by Huawei and ZTE, whose gear has been banned from US carrier networks.

Congress had set aside $1.9 billion for the program, but a preliminary total of applications for reimbursement revealed a shortfall of $3.7 billion. FCC Chairperson Jessica Rosenworcel seeks Congress to make up whatever the actual amount turns out to be.

Wireless equipment manufactured by Huawei and ZTE have been placed on a restricted list by the Commerce Department over concern that they could be a security threat to the US.

The ban affects smaller carriers disproportionately, according to experts, since they’re much more likely to have opted for the generally lower prices offered by the Chinese vendors. The reimbursement program, which limited funding to carriers with fewer than 10 million subscribers, stopped taking applications Jan. 28.

“We’ve received over 181 applications from carriers who have developed plans to remove and replace equipment in their networks that pose a national security threat,” Rosenworcel said in a statement. “While we have more work to do to review these applications, I look forward to working with Congress to ensure that there is enough funding available for this program to advance Congress’s security goals and ensure that the US will continue to lead the way on 5G security.”

At the time the program was announced, experts warned that the appropriated funds were unlikely to cover the  cost of ripping and replacing banned gear at smaller carriers, particularly since equipment from approved vendors is often considerably more expensive. Gartner director analyst Bill Menezes has said the government further contributed to the bind that small carriers find themselves in by encouraging them to provide services for the lowest possible cost, which helped prompt many to lower equipment costs by buying from Huawei and ZTE.

“You’re going from a low-cost provider to a market with fewer providers,” he warned at the time.

The underfunding was anticipated. IDC research manager Patrick Filkins said when the program was announced that  rural telcos suggested that the $1.9 billion then proposed was unlikely to cover the full costs.

“It’s hard to say what the gap is, but what I’m hearing from the rural wireless carriers and the others impacted by this, [is that] it won’t be enough,” he said.