FCC estimates it'll cost carriers $1.8 billion to replace Huawei, ZTE hardware

'Rip and replace' measures have put small carriers in a bind.

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Removing and replacing ZTE and Huawei equipment in US networks could cost carriers over $1.8 billion, according to estimates they gave to the Federal Communications Commission. Most of that (over $1.6 billion) could be eligible for reimbursement. However, Congress has yet to appropriate such funds, which could leave small carriers on the hook for hefty bills.

In June, the FCC deemed ZTE and Huawei to be national security threats. The FCC has blocked carriers from using money they receive from the Universal Service Fund to buy or maintain equipment from the Chinese companies. The USF is supposed to subsidize coverage in underserved (i.e. rural) areas.

Many carriers that serve rural areas use relatively inexpensive ZTE and Huawei equipment. After the FCC started collecting data about that in February, more than 50 carriers have told the agency they or their subsidiaries have tech from those companies in their networks.

However, it might be prohibitively expensive for them to tear all of that out and install equipment and services from other suppliers. The CEO of a small carrier in Oregon told The Verge in June that it could cost $1.5 million to replace Huawei equipment it bought for $500,000 in the first place — a price he might not be able to cover before he receives a reimbursement from the government.

A federal process to reimburse carriers for the cost of replacing such tech was established through the Secure and Trusted Communications Act, which President Trump signed into law in March. The legislation required telecoms to replace "suspect foreign network equipment." In other words, Huawei and ZTE tech.

Congress has yet to appropriate the reimbursement funds, however, and FCC Chairman Ajit Pai has urged it to do so. “By identifying the presence of insecure equipment and services in our networks, we can now work to ensure that these networks—especially those of small and rural carriers—rely on infrastructure from trusted vendors,” he said in a statement. “I once again strongly urge Congress to appropriate funding to reimburse carriers for replacing any equipment or services determined to be a national security threat.”

Meanwhile, in May, Trump extended an executive order that effectively bans American companies from buying and using equipment from the Huawei and ZTE. That order now runs through May 2021.