Despite shifting focus away from U.S., Huawei still scores with Tier 2, Tier 3 carriers

Despite the national security concerns that have stymied Huawei in the U.S. network equipment market, the company continues to maintain strong relationships with Tier 2 and Tier U.S. carriers that have been buying equipment from Huawei and are pleased with their relationships with the vendor.

The Chinese vendor has for years worked with Tier 2 and Tier 3 carriers in the United States, something that is becoming more and more apparent as it has been shut out of working with Tier 1 carriers because of national security concerns. Huawei works with smaller carriers such as Nemont Telephone's Sagebrush Cellular, SpeedConnect, Union Wireless and United Wireless, providing radio access network and core networking equipment.

Huawei declined to list all of its U.S. carrier customers for its networks business or to say how much revenue its U.S. networks business takes in. "Our revenue from the carrier network business and enterprise business in the U.S. remains relatively stable year-on-year," Huawei spokeswoman Jannie Tong told FierceWireless. "We have been cooperating with Tier 2 and Tier 3 carriers in the U.S. on the network business and our business in this segment is expanding. We will certainly continue to serve our existing customers, including enterprises, and sell smartphones to consumers."

SpeedConnect, for instance, has worked with Huawei for about three years. The wireless service provider, which has been operating since 2002, controls 2.5 GHz spectrum across the Great Plains and Midwest and has at least 35,000 customers, according to John Ogren, the company's founder and managing partner. SpeedConnect worked with Huawei to deploy WiMAX services and its customers typically use the service in conjunction with TV service from either DirecTV (NASDAQ: DTV) or Dish Network (NASDAQ: DISH), Ogren said.

Ogren said the company was looking for WiMAX vendors and it was hard to ignore that Clearwire, at the time a Sprint (NYSE: S) wholesale partner, used Huawei gear. Huawei provided SpeedConnect with radio heads, baseband units and some modems and routers for in-home use. Cisco Systems, DragonWave and Juniper Networks are also vendors in the network, Ogren said.

SpeedConnect is looking to upgrade its network to TD-LTE technology in the near future and is looking at Huawei as a potential vendor among many for the job. Ogren said SpeedConnect has an ongoing relationship with Huawei and uses its SingleRAN BTS platform. "They have proven to be a very supportive vendor for us," he told FierceWireless.

SpeedConnect began its partnership with Huawei before the kerfuffle over security concerns with Huawei exploded. Still, Ogren said that he has never experienced any security issues or concerns related to Huawei equipment. "I have no signs of any of the things that have been reported in the popular press," he said, adding that security is a constant concern and that the company takes it "very, very seriously." Still, he said, "Huawei represents no particular risk--no more, no less" than any other vendor.

A 2012 U.S. government report labeled Chinese network vendors Huawei and ZTE as security threats that could be used as backdoors for Chinese espionage. Both companies have repeatedly said the claims are without merit.

Ogren noted that Huawei has a long way to go in the battle of perception. "I think it's Huawei's responsibility to solve this problem for both of us. I am a good customer of theirs and they need to support me," he said. "And one of the things they need to do is convince my country that they are OK." He said Huawei has made progress in doing so but needs to become more fully invested in the U.S. market, and until the company clears up the perception of security concerns "it is a bit of liability for them."

Huawei also highlighted its relationships with Nemont and United Wireless at the Competitive Carriers Association conference in April. Nemont, based in Montana, has worked with Huawei for the past two to three years and employs Huawei's SingleRAN platform, which supports GSM, CDMA, UMTS and LTE networks. Patrick Kaiser, director of wireless product marketing for Huawei's U.S. business, noted in the presentation on Nemont that Huawei is "enhancing multi-technology coverage in high-cost rural areas in an efficient and cost-effective manner."

United Wireless is using Huawei's SingleRAN platform as well, and used Huawei equipment to deploy LTE and CDMA services, and is contemplating deploying GSM and UMTS. The carrier operates on 700 MHz and 1900 MHz spectrum in the southwestern part of Kansas, and has tens of thousands of subscribers, according to Michael Laskowsky, United Wireless' wireless operations manager.

United Wireless has worked with Huawei for around three years and has never had any issues related to network security, Laskowsky said. He said the relationship has been a positive one. "We took all of [the security concerns] into consideration," he told FierceWireless, saying the company spoke with third parties about Huawei before making a decision to work with the vendor. "We just felt that the overall product and the capabilities of the product worked well for what we were trying to do."

"Since these networks are small and in sparsely populated areas, they generally avoid the kind of national security concerns that influence Tier 1 operators' vendor selections," Current Analysis analyst Ed Gubbins wrote in a recent blog post. "So, targeting them makes sense for Huawei; even if it's not very lucrative, it's a way to demonstrate that the fears surrounding its participation in the American market are unfounded. There are a lot of rural carriers in America, so there are a lot of chances to win deals, and those chances may be improved by the fact that major RAN vendors usually aren't as aggressive in chasing these smaller operators. Bottom line: it's a foot in the door of the U.S. infrastructure market that poses at least the theoretical possibility of future expansion."

For its part, Huawei has said it is moving its focus away from the U.S. market due to the government's concerns over security. "Right now we should not be expending too much effort in the United States as it might take 10 or 20 years for them to know that Huawei is a company with integrity," Huawei CEO and founder Ren Zhengfei told reporters at a briefing in London last week, according to Bloomberg. "We will accelerate efforts in countries that have accepted us."

Ren, who rarely gives interviews, said that his "reluctance to meet with the media has been used as a reason to label Huawei as a mysterious company," and that in a few years, "our idea is to make people perceive Huawei as a European company."

SpeedConnect's Ogren said that Huawei is a "fierce competitor" and that Huawei has been a strong partner in terms of service and support. "They are a solid company," he said.  "I hope Huawei resolves all of these issues and stays around for the long haul."

For more:
- see this Bloomberg article
- see this Reuters article
- see this WSJ article (sub. req.)
- see this Current Analysis blog post

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