US may subsidize Huawei alternatives with proposed $1.25 billion fund
The US government should spend at least $1.25 billion “to invest in Western-based alternatives to Chinese equipment providers Huawei and ZTE,” a bipartisan group of six US senators said yesterday.
The senators submitted legislation called the Utilizing Strategic Allied (USA) Telecommunications Act to make that happen, arguing that the US must counter the Chinese government’s investments in the telecom sector. The money would come from spectrum-auction proceeds, and the $1.25 billion in grants would be spread out over 10 years. The money would support development of new 5G technology, with a focus on equipment that complies with open standards to ensure “multi-vendor network equipment interoperability.”
The senators’ announcement said:
Heavily subsidized by the Chinese government, Huawei is poised to become the leading commercial provider of 5G, with far-reaching effects for US economic and national security. With close ties to the Communist Party of China, Chinese state-directed technology companies present unacceptable risks to our national security and to the integrity of information networks globally. However, US efforts to convince foreign partners to ban Huawei from their networks have stalled amid concerns about a lack of viable, affordable alternatives.
The senators who sponsored the legislation are Mark R. Warner (D-Va.); Richard Burr (R-N.C.); Bob Menendez (D-N.J.); Marco Rubio (R-Fla.); Michael Bennet (D-Colo.); and John Cornyn (R-Texas). Burr and Warner are the chair and vice chair of the Senate Select Committee on Intelligence, while Cornyn, Rubio, and Bennet are members of that committee. Menendez is ranking member of the Senate Foreign Relations Committee, and Rubio is also a member of the Foreign Relations Committee.
“Every month that the US does nothing, Huawei stands poised to become the cheapest, fastest, most ubiquitous global provider of 5G, while US and Western companies and workers lose out on market share and jobs,” Warner said.
Burr said it would be “disastrous if Huawei, a company that operates at the behest of the Chinese government, military, and intelligence services, is allowed to take over the 5G market unchecked.”
Two funds
The senators’ bill would create a Public Wireless Supply Chain Innovation Fund of at least $750 million and a Multilateral Telecommunications Security Fund of at least $500 million.
The $750 million fund would be administered by the National Telecommunications and Information Administration (NTIA), but the Federal Communications Commission and other agencies would help establish criteria for awarding grants. Those grants would pay for research into software, hardware, and microprocessor technology “that will enhance competitiveness” in 5G “and successor wireless technology supply chains.” This fund would also support “development and deployment of open interface standards-based compatible, interoperable equipment,” including equipment that meets the Open Radio Access Network standard (O-RAN). Individual grants could be as high as $20 million each.
The senators said they want to support O-RAN to “allow for alternative vendors to enter the market for specific network components, rather than having to compete with Huawei end-to-end.”
The $500 million multilateral fund would be administered by the Secretary of State and focus on projects involving the United States and other countries. The Secretary of State would have to strike “agreement[s] with foreign government partners” to fund projects that “support the development and adoption of secure and trusted telecommunications technologies.” Under this plan, the US would try to get funding commitments from countries involved in the proposed joint projects.
“Race” to 5G?
The senators said these funds will help the US win “the race for 5G.” The Federal Communications Commission’s Republican majority has repeatedly cited the “race to 5G” as justification for eliminating federal rules and preempting municipal regulations that cover deployment of wireless equipment in US cities and towns.
Whether there is actually a “race” between the US and China when it comes to deploying 5G to each country’s residents is debatable. The US switching from 4G to 5G slightly later than China wouldn’t prevent the US from getting the benefits of 5G, such as they are: carriers admit that 5G networks based on millimeter-wave frequencies won’t come close to covering the whole US and that 5G on lower-frequency bands will only be slightly faster than 4G.
Moreover, the US faces more pressing problems because many rural areas don’t even have consistent 4G access, and most US homes lack fiber broadband. Fiber, in addition to providing high-speed home Internet, is crucial for supplying bandwidth to 5G networks. But ISPs don’t want to spend the money to deploy nationwide fiber, and the FCC’s planned $20 billion rural-broadband fund will pay ISPs to deploy either fiber or services that are much slower and come with restrictive data caps.
But for both mobile and home broadband networks, expanding alternatives to Huawei and ZTE network gear is important for meeting the US government’s goal of phasing out Chinese telecom equipment. That’s particularly true for small, rural ISPs that have relied on the Chinese companies’ offerings.
The FCC in November voted unanimously to ban Huawei and ZTE equipment in projects paid for by the FCC’s Universal Service Fund (USF), saying the equipment could have backdoors installed at the behest of the Chinese government. This ban affects only future projects and the use of federal funding to maintain existing equipment, but the FCC may also eventually require removal of Huawei and ZTE gear from networks that have already been built. Huawei has sued the FCC in an attempt to overturn the ban, saying the commission “fail[ed] to substantiate its arbitrary findings with evidence or sound reasoning or analysis.”
How carriers, particularly small carriers, will pay for a move away from Chinese equipment is an open question. The FCC is seeking public comment on how to pay for removing and replacing the equipment.
The new bill for 5G research doesn’t allocate funding directly toward replacing Chinese equipment in current networks, but senators said the bill “create[s] a transition plan for the purchase of new equipment by carriers that will be forward-compatible with forthcoming O-RAN equipment so small and rural carriers are not left behind.” If the bill passes, recipients of FCC grants for replacing Chinese equipment with new 5G technology would have to submit plans outlining how they will switch to standards-based equipment.
