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  • Writer's pictureThe San Juan Daily Star

‘Rip and replace’: The tech cold war is upending wireless carriers

A row of ZTE equipment, which will soon be replaced by Nokia equipment, at Pine Belt Cellular’s central networking hub in Selma, Ala., on May 2, 2023. The company is removing Chinese telecom equipment under a federal program known as “rip and replace.”

By Cecilia Kang

Deep in a pine forest in Wilcox County, Alabama, three workers dangled from the top of a 350-foot cellular tower. They were there to rip out and replace Chinese equipment from the local wireless network.

Three hours into the job, the team ran into a hitch. Replacement gear from a European company was obstructing a safety beacon for airplanes. “We’ve got a problem,” a crew member on the ground said. “They say it’s blocking the beacon.”

The project had already been delayed for months because of storms, slow equipment shipments and labor shortages. The new snafu, discovered early this month, would add at least two more days and blow the budget, said John Nettles, the president of the family-owned Pine Belt Cellular, who was standing at the base of the tower.

“People in Washington think it’s easy to just swap out the equipment, but there are always problems you didn’t expect, always more expenses and always delays,” he said.

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 U.S. companies tear out telecom equipment made by 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 AI and other technologies,” said Blair Levin, a former FCC 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 FCC, 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 FCC.

Last month, Sen. Deb Fischer, R-Neb., introduced a bill to close the gap in rip-and-replace funding for carriers. Passing it will be challenging, with similar legislation failing twice over the past year and fierce debate in Washington over government spending and the debt ceiling. But “we have to follow up,” Fischer said. “Some of these carriers could go out of business.”

The scrutiny of Chinese telecom companies goes back more than a decade. In 2012, a Congressional committee issued a report on Huawei and ZTE warning of the companies’ ties to Beijing. In 2019, former President Donald Trump restricted U.S. companies from selling goods to the Chinese firms, while the FCC banned companies that receive federal subsidies from buying Huawei and ZTE equipment. The agency expanded those restrictions last year to limit all imports from the Chinese companies.

Rip-and-replace rolled out after Congress passed a law in January 2020 creating the reimbursement effort. But costs from the program quickly soared.

In January, the FCC 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 FCC said it could cover only about 40% 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 FCC in January.

Huawei declined to comment; ZTE didn’t respond to a request for comment.

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