Congress Weighs $1 Billion for Small Carriers Purging Huawei Gear

(Bloomberg) -- Congress is considering setting aside $1 billion to help small wireless providers purge their networks of parts from Huawei Technologies Co. and ZTE Corp., Chinese companies that U.S. officials have deemed to be a security risk.

Lawmakers at a hearing Friday said it isn’t fair to impose costs on the rural providers that may operate on thin profit margins and built networks using federal subsidy programs that favored lowest-cost options including the Chinese manufacturers.

A bill would establish the fund for carriers with fewer than 2 million customers that are removing suspect equipment, and effectively bar small carriers that use federal subsidies from buying or maintaining gear from the Chinese gear makers. Large providers have avoided Huawei and ZTE gear.

The Trump administration, citing an espionage risk, in May barred Huawei from doing business with U.S. companies. Huawei has denied the allegations.

“Our legislation will prohibit the spending of federal dollars on suspect communications equipment and services that undermine national security,” Representative Frank Pallone, the New Jersey Democrat who is chairman of the Energy and Commerce Committee, told the hearing. “We must help smaller carriers remove suspect equipment for the good of the entire country.”

Buying ZTE gear was “was a no-brainer” because it cost one-third what the highest bidder asked, and was 25% below any other bidder, John Nettles, president of Pine Belt Communications, Inc., a rural Alabama wireless provider, testified. Help is appropriate to replace gear that needs to be replaced “for national security reasons due to certain vulnerabilities unknown at the time of purchase,” Nettles said.

Representative Greg Walden, the top Republican on the Energy and Commerce Committee, joined Pallone in sponsoring the legislation.

“Many of these providers don’t have an army of consultants with the necessary security clearances to understand what vulnerabilities exist,” Walden said. “We cannot set them up for failure by requiring them to select the lowest cost equipment option, only then for Uncle Sam to later say, ‘well, not that lowest cost equipment.’ “

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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