As Wireless Carriers 'Rip and Replace' Chinese-Made Telecom Equipment, Who Pays?

"Deep in a pine forest in Wilcox County, Alabama, three workers dangled from the top of a 350-foot cellular tower," reports the New York Times. "They were there to rip out and replace Chinese equipment from the local wireless network..." As the United States and China battle for geopolitical and technological primacy, the fallout has reached rural Alabama and small wireless carriers in dozens of states. They are on the receiving end of the Biden administration's sweeping policies to suppress China's rise, which include trade restrictions, a $52 billion package to bolster domestic semiconductor manufacturing against China and the divestiture of the video app TikTok from its Chinese owner. What the wireless carriers must do, under a program known as "rip and replace," has become the starkest physical manifestation of the tech Cold War between the two superpowers. The program, which took effect in 2020, mandates that American companies tear out telecom equipment made by the Chinese companies Huawei and ZTE. U.S. officials have warned that gear from those companies could be used by Beijing for espionage and to steal commercial secrets. Instead, U.S. carriers have to use equipment from non-Chinese companies. The Federal Communications Commission, which oversees the program, would then reimburse the carriers from a pot of $1.9 billion intended to cover their costs. Similar rip-and-replace efforts are taking place elsewhere. In Europe, where Huawei products have been a key part of telecom networks, carriers in Belgium, Britain, Denmark, the Netherlands and Sweden have also been swapping out the Chinese equipment because of security concerns, according to Strand Consult, a research firm that tracks the telecom industry. "Rip-and-replace was the first front in a bigger story about the U.S. and China's decoupling, and that story will continue into the next decade with a global race for A.I. and other technologies," said Blair Levin, a former F.C.C. chief of staff and a fellow at the Brookings Institution. But cleansing U.S. networks of Chinese tech has not been easy. The costs have already ballooned above $5 billion, according to the F.C.C., more than double what Congress appropriated for reimbursements. Many carriers also face long supply chain delays for new equipment. The program's burden has fallen disproportionately on smaller carriers, which relied more on the cheaper gear from the Chinese firms than large companies like AT&T and Verizon. Given rip-and-replace's difficulties, some smaller wireless companies now say they may not be able to upgrade their networks and continue serving their communities, where they are often the only internet providers. "For many rural communities, they are faced with the disastrous choice of having to continue to use insecure networks that are ripe for surveillance or having to cut off their services," said Geoffrey Starks, a Democratic commissioner at the F.C.C. Last month, Senator Deb Fischer, a Republican of Nebraska, introduced a bill to close the gap in rip-and-replace funding for carriers... In January, the F.C.C. said it had received 126 applications seeking funding beyond what it could reimburse. Lawmakers had underestimated the costs of shredding Huawei and ZTE equipment, and new equipment and labor costs have risen. The F.C.C. said it could cover only about 40 percent of the expenses. Some wireless carriers immediately paused their replacement efforts. "Until we have assurance of total project funding, this project will continue to be delayed as we await the necessary funding required to build and pay for the new network equipment," United Wireless of Dodge City, Kansas, wrote in a regulatory filing to the F.C.C. in January.

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