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Zhone Says 'Buy American'

Public comments filed by Zhone urge the government to temper its use of foreign firms when doling out Recovery Act broadband funds

Phil Harvey

April 22, 2009

5 Min Read
Zhone Says 'Buy American'

Expanding broadband services will help the U.S. with its economic recovery, but what if those services are delivered using telecom gear from -- gasp! -- the French or Chinese? How does that create jobs in the U.S.?

That's what some are asking the National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS) -- the agencies responsible for overseeing the more than $7 billion in loans and grants made available for telecom and broadband expansion projects as part of the American Recovery and Reinvestment Act. (See FCC Boots Up National Broadband Plan .)

Zhone Technologies Inc. (Nasdaq: ZHNE) is among the most vocal of the telecom gear companies urging the government to buy American with its Recovery Act funds and loans.

In a filing with the NTIA on April 2, Zhone CEO Mory Ejabat writes that Recovery Act "funding priority should be given to those proposals that show the highest expected American labor content in implementation — and that this metric should have at least equal if not higher weighting than metrics regarding expansion of broadband availability, increasing adoption, and increasing speed, in keeping with the priorities of the overall Act."

Several of Zhone's employees have followed their chief's lead and filed public comments asking the agencies in charge to consider enacting the "Buy American" provision.

"Stimulate America, not Asia!" pleaded the subject line of comments filed by Zhone employee Donna Scott.

"Since many manufacturers have off shored their manufacturing to Asia, failure to apply the Buy America provision could easily result in as much as $4 billion out of the total $7.2 billion in broadband stimulus funds going directly to sustain and create jobs in Asia," writes Charles Bauer, Zhone's director of operations, who failed to explain his figures.

Zhone sees itself as being positioned to create and sustain more American jobs if it is a supplier to carriers or municipalities using Recovery Act funds. The chart below, reproduced from Ejabat's letter, takes a whack at Zhone's competitors for having foreign headquarters and using offshore R&D and engineering facilities:

Table 1: Are They Located in the U.S.?

Vendors

Headquarters

Engineering

Manufacturing

CommScope

Yes

Yes

Yes

Corning

Yes

Yes

Yes

Huber+Suhner

No

No

No

Adtran

Yes

Yes

Partial

Alcatel-Lucent

No

Minimal

No

Calix

Yes

Partial

No

Motorola

Yes

Partial

No

Occam

Yes

Yes

No

Tellabs

Yes

Yes

No

Zhone

Yes

Yes

Yes

ZyXEL

No

No

No

Source: Zhone Technologies





The Telecommunications Industry Association (TIA) , which represents hundreds of manufacturers of communications equipment, disagrees with Zhone's assertion that the government should only source from American firms to boost its broadband penetration.

"In order to ensure that every possible technological solution be available to fulfill President Obama’s broadband goals, TIA urges the Office of Management and Budget (OMB), NTIA and RUS to implement the ARRA in a manner that will enable the widest possible access to available technologies, irrespective of their country of manufacture and the type of entity receiving BTOP [Broadband Technology Opportunities Program] or RUS funds," the pressure group writes in its public comment, filed on April 10.

Both Zhone and the TIA at times invoke section 1605 of the American Reinvestment and Recovery Act, which specifically states that the funds provided by the Act should be used for the "construction, alteration, maintenance, or repair of a public building or public work" only if all the "iron, steel, and manufactured goods used" were produced in the U.S. Many think other federal agencies will apply this language broadly to all aspects of the Recovery Act.

The NTIA itself couldn't be reached for comment for this story.

It's worth noting that the 1605 "Buy American" clause had some exceptions, including if the use of U.S. goods was found to be "inconsistent with the public interest," or if the use of U.S. goods caused the project's total cost to jump by "more than 25 percent."

The TIA asked federal agencies to apply the public interest waiver to the broadband procurement process, but failed to explain how buying solely from Zhone, CommScope Inc. , Corning Inc. (NYSE: GLW), or others, would harm the public interest. Steven Glapa, Zhone's VP of product management and marketing, drove that point home in his letter, dated April 14.

Glapa, noting that the TIA's board was made up of foreigners such as Ericsson AB (Nasdaq: ERIC), Nortel Networks Ltd. , and BlackBerry , writes that "the alignment of the TIA's interests with the interests of the United States and its taxpayers on this source-of-supply matter is certainly open to some question..."

Zhone, of course, doesn't limit its business to the U.S. The vendor gets more than half its revenues from carriers outside the U.S. and procures its components from "a variety of qualified suppliers in the U.S., Far East, Mexico, and other countries," according to its annual report.

— Phil Harvey, Editor-in-Chief, Light Reading

About the Author(s)

Phil Harvey

Editor-in-Chief, Light Reading

Phil Harvey has been a Light Reading writer and editor for more than 18 years combined. He began his second tour as the site's chief editor in April 2020.

His interest in speed and scale means he often covers optical networking and the foundational technologies powering the modern Internet.

Harvey covered networking, Internet infrastructure and dot-com mania in the late 90s for Silicon Valley magazines like UPSIDE and Red Herring before joining Light Reading (for the first time) in late 2000.

After moving to the Republic of Texas, Harvey spent eight years as a contributing tech writer for D CEO magazine, producing columns about tech advances in everything from supercomputing to cellphone recycling.

Harvey is an avid photographer and camera collector – if you accept that compulsive shopping and "collecting" are the same.

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