As the trade war between the U.S. and China heats up, President Trump is considering issuing an executive order banning all U.S. companies from buying telecommunications gear from companies deemed to be a national security threat.
Right now this threat is deemed to be a targeted attack against two Chinese vendors – ZTE and Huawei.
The executive order would invoke the International Emergency Economic Powers Act and I would expect that if the order is issued, lawsuits will ensue.
I assume that China would reciprocate and ban, say, Cisco, which would not make John Chambers happy.
But that’s not the big issue.
It is also possible that the executive order could require telecommunications providers to remove existing banned gear at their own cost. It is not clear if that is legal.
While big telecom carriers have, for the most part stopped buying ZTE and Huewei gear, it is the little carriers that will be hurt the most.
The little carriers have used the Chinese gear because U.S. equipment sometimes cost them 400% of the cost of the Chinese gear.
That likely will translate to price increases for the customers of those carriers. In many cases, like with me, those carriers are the only choice that is available so switching to a different, less expensive carrier is not an option.
Part of the executive order under consideration is a requirement to replace existing Chinese telecom gear. The Rural Wireless Association, a trade group for these carriers estimated that it would cost those carriers up to $1 billion to replace the banned equipment, if that is required and would take several years. Two ways that cost could be paid are price increases or delays in rolling out new higher speed networks.
Currently, the fastest Internet connection I can get is 20 megabits per second, which is not even classified as broadband by the FCC (broadband is defined as 25 megabits or higher), so I am not really worried about the gigabit gear that this ban is targeting,
I am not a big fan of Chinese networking gear so I can’t really argue with the idea of a ban. I am not in favor of forcing private U.S. companies to replace existing equipment at their cost and I am sure that, if that happens, those companies will sue the government, which will be messy.
One thing that will likely happen out of this ban (if it happens) is a slower rollout of faster 5G network – possibly years or decades longer.
The U.S. currently ranks 44th in mobile download speed (see here), which is not very impressive.
This would continue the U.S.’s not very exciting role as a third world country when it comes to Internet access. Due to higher costs, only some people in very high density areas will get newer, faster service and the rest of us will get Internet service comparable to, say, Syria. That is not a very exciting prospect.
Information for this post came from Reuters.