American politicians have talked tough about protecting the USA from Chinese network surveillance but sometimes politicians open their mouths more rapidly than their wallets. One troubling example stems from 2021, when the government ordered US telcos to remove equipment manufactured by Huawei and ZTE from their networks. The demand was backed by a promise to reimburse the cost but it soon became apparent that the USD1.9bn budget allocated by the government was well below the USD5bn needed to satisfy all the telco funding submissions that were vetted and approved by the Federal Communications Commission (FCC). No more money has been allocated in the two years that have elapsed since, leaving the FCC stalling for time and handing out only partial compensation to telcos. FCC Chair Jessica Rosenworcel wrote a letter to Congress this month, pleading that some rural telcos could shut down if forced to keep hobbling along without the compensation that was promised to them.
As my earlier correspondence explained, were the Commission to fund all reasonable and supported cost estimates in the approved applications, the Reimbursement Program would require approximately $4.98 billion, reflecting a $3.08 billion shortfall from the current appropriation of $1.9 billion.
Several recipients have recently informed the Commission that they foresee significant consequences that could result from the lack of full funding, including having to shut down their networks or withdraw from the program. Because Reimbursement Program recipients serve many rural and remote areas of the country where they may be the only mobile broadband service provider, a shutdown of all or part of their networks could eliminate the only provider in some regions.
Telcos that successfully applied for funding have to complete the removal of Huawei and ZTE equipment by a deadline, but the FCC has issued 52 deadline extensions either wholly or partially due to shortfalls in funding. Ironically, delaying replacement of equipment in some small rural providers will increase the national security risk because of where military bases tend to be located.
Rosenworcel’s letter is a genuine indictment of US government failings but it should also be read as a piece of political theater too. The letter is addressed to Senator Maria Cantwell, who is a Democrat ally of Rosenworcel as well as being the Chair of the Senate Committee on Commerce, Science and Transportation. The timing of the letter coincides with new legislation proposed by Cantwell that would close the budget gap for ‘rip and replace’ by restoring the FCC’s authority to auction commercial spectrum.
As the nation works to secure our telecommunications networks and remove unsecure Chinese Huawei and ZTE equipment from communities, states and rural providers are facing financial burdens in the process — some on the verge of bankruptcy. Without funding to “rip and replace” this equipment, many providers may be forced to cut off service to residents. By using proceeds from commercial auctions, this legislation provides $3 billion to continue funding the bipartisan Rip and Replace Program.
The lack of foresight by the US government contrasts sharply with the strategic mindset of their Chinese rivals. Smaller US telcos were freely able to purchase network equipment from Chinese suppliers during the 00’s and 10’s. This occurred at the same time that US corporate leaders were obsessed with curtailing manufacturing within their country and outsourcing as much manufacturing to countries like China as possible. Chinese businesses like Huawei invested heavily in the future and were rewarded accordingly. The foolishness of assuming nothing could interrupt smooth international relations has been demonstrated by Russia’s invasion of Ukraine, China’s support for their Cold War ally, and the looming threat posed to Taiwan.
The telecoms industry is inherently global in nature, but the transition to the new realities of a Second Cold War continues to be too slow and too tentative. A USD3bn shortfall in government funding for the rip and replace program also means USD3bn is not being spent on equipment from businesses that compete with Huawei and ZTE in other parts of the world. It should be a priority to strengthen alternatives to businesses that can be controlled by the Chinese Communist Party, and that means giving them the same kinds of government support and preferential treatment that Chinese manufacturers have long enjoyed.
Demanding the sale of TikTok is a sign that US leaders are waking up to the true extent to which international relations need to realign in order to preserve the security of the West, but they are still not being decisive enough about the investments needed to secure the foundations of liberal democracies. Safe and secure networks are essential to modern economies, and the USA needs to more rapidly reverse the damage done by a lack of strategic thinking in previous decades.
