As a group of lawmakers reportedly prepares to voice concerns about how the proposed merger of Sprint and T-Mobile might be affected by China’s Huawei, there’s something they should know: Huawei already commands a substantial business among a range of smaller U.S. wireless carriers.
Moreover, a significant number of Huawei’s U.S. carrier customers—which offer wireless services to tens of thousands of Americans in rural locations across the country—are collectively happy with Huawei’s services and argue that the company poses no threat to U.S. national security.
“There is no evidence that Huawei equipment is a threat to national security, and southwestern Kansas residents rely on such equipment used by United TelCom to provide them with reliable wireless services not only for public safety purposes, but also for daily business and personal communications,” said Todd Houseman, the CEO of United TelCom, in a recent FCC filing.
United TelCom counts around 20,000 wireless customers across 17 southwest Kansas counties, and has said that Huawei supplies nearly all of its wireless network.
And United TelCom isn’t alone. The company is one of roughly half a dozen rural wireless network operators that have come out in support of Huawei (PDF). More importantly, these carriers are unapologetically current Huawei customers:
- SI Wireless counts 20,000 mobile customers across the western portions of Kentucky and Tennessee, and said the majority of its network has been constructed with Huawei equipment.
- Viaero counts 110,000 mobile customers across Eastern Colorado, Western Kansas, Nebraska and parts of Wyoming and South Dakota. It said roughly 80% of its network equipment, including core, wireless, microwave and fiber, was manufactured by Huawei.
- James Valley Telecommunications (JVT) counts nearly 10,000 customers in South Dakota and said that all of its wireless core and wireless radios were manufactured by Huawei.
- NE Colorado Cellular said 80% of its equipment in its network comes from Huawei.
- United Telephone Association said that its wireless network consists primarily of Huawei equipment.
- Nemont Telephone Cooperative, which counts nearly 12,000 mobile customers across Montana and Northwest Dakota through its Sagebrush Cellular subsidiary, said that over 70% of its core and RAN network comes from Huawei.
- Union Telephone Company, which offers mobile services to nearly 40,000 customers across Wyoming, Colorado, Utah and Idaho, said around 75% of its network equipment comes from Huawei.
Why are so many smaller U.S. wireless companies working with Huawei, even after a 2012 government report (PDF) warned that equipment from Huawei and ZTE could be used by the Chinese government for espionage? That’s simple: Huawei equipment is apparently good and cheap.
“JVT chose Huawei because it was the most cost-effective option with a 40% savings versus the 2nd most cost-effective option,” wrote James Groft, the carrier’s CEO. “Huawei is also consequently our primary provider of customer support services, such as installation of new equipment and software upgrades. Huawei is highly cost-effective and it provides excellent customer service. Before contracting with Huawei, JVT had a series of terrible experiences with another, higher priced vendor. Huawei's service record, while not perfect, has resulted in fewer and less severe coverage outages for our customers. Huawei is there when our customers need them.”
The Sprint/T-Mobile merger and Huawei
The fact that more than half a dozen smaller wireless operators across the United States are currently using Huawei equipment is important because a group of lawmakers in the U.S. House is reportedly preparing a letter related to the proposed merger of Sprint and T-Mobile. As noted by Bloomberg, the lawmakers are worried that Sprint’s parent, SoftBank, has ties to China’s Huawei.
"The Sprint, T-Mobile merger would increase telecommunications risks associated with third-party foreign entities, including Huawei, being utilized in the development of U.S. 5G infrastructure," the letter read.
The letter is bound for Treasury Secretary Steve Mnuchin, who leads the Committee on Foreign Investment in the U.S. (CFIUS). The CFIUS has already shown a willingness to step into the telecommunications industry—it stated that Broadcom posed a national security threat as that company worked to close a hostile takeover of Qualcomm. That paved the way for President Trump to scuttle Broadcom’s efforts.
Interestingly, as Recon Analytics analyst Roger Entner pointed out, the letter to Mnuchin apparently makes no mention of Deutsche Telekom, T-Mobile’s parent company and the firm that will own 42% of the combined Sprint and T-Mobile.
I wonder what will happen if the US recognizes that almost the entire internet backbone router system of Deutsche Telekom is from Huawei?https://t.co/aeiYLkoHBl— Roger Entner (@RogerEntner) July 5, 2018
Deutsche Telekom has made no secret of its ongoing work with China’s Huawei.
Huawei continues to fight back
Unsurprisingly, one of Huawei’s top wireless network executives in the United States, Thomas Dowding, argued the company does not threaten U.S. national security. He said in an FCC filing (PDF) that the company employs an internal cybersecurity lab that looks for security leaks, and that Huawei’s products “are intrinsically secure because they are incapable of routing or redirecting user data traffic or because they do not permit visibility into data or packets transmitted or handled by such equipment.”
Added Dowding: “In my 15-year tenure of executive positions at Huawei Technologies USA, the U.S. Government has never identified any particular deliberately compromised Huawei product. Likewise, I am not aware of any product backdoor identified by the U.S. Government to our customers. Also, the U.S. government has never requested a forensic examination of any Huawei product for security vulnerabilities. But the U.S. government is not alone. In fact, I’m not aware of any government in any country that has ever found an implanted backdoor in any of our products.”
So what to make of all this? First, for Huawei’s U.S. business and its U.S. customers, the situation is serious. The FCC is considering a ruling that would ban any U.S. company that receives government money—which would cover all of Huawei’s customers listed above—from using equipment from companies that are deemed a threat to national security. Such an action would “have a severe and detrimental impact on residents living in remote, underserved locations in United TelCom’s wireless service area,” according to United TelCom’s CEO.
That might not be enough to stop the anti-Huawei momentum though—consider the case of ZTE, Huawei’s fellow Chinese equipment supplier, which is right now in the process of completely overhauling its front office in order to re-enter the U.S. market.
The art of the deal
Finally, it’s hard not to link all the current noise over Chinese threats to national security back to Trump’s brewing trade war with the country. It seems clear that companies like ZTE and Qualcomm are probably being used as chess pieces in a broader game.
And if that’s the case, companies like United TelCom, Viaero and NE Colorado Cellular might need to prepare themselves to enter a chessboard where they will probably serve as pawns, not queens. – Mike | @mikeddano