A tiny wireless network operator in Alabama said that its efforts to upgrade its 4G LTE network have essentially been stuck in limbo since last year because the operator's network is built exclusively by Chinese vendor ZTE.
And now -- given US government concerns over the potential security threat posed by Chinese vendors like ZTE and Huawei -- the company is considering whether it should simply exit the wireless business completely.
"Do I stay in the [wireless] business or do I just get what I can for it and walk away?" wondered John Nettles, president of Pine Belt Communications today during a House of Representatives hearing on US network security. The hearing comes just days after a group of House Republicans and Democrats introduced legislation that would allocate up to $1 billion to pay wireless network operators such as Pine Belt to rip equipment from suppliers like ZTE and Huawei out of their networks and replace it with equipment from vendors not deemed threats to national security.
In his testimony, Pine Belt's Nettles offered a clear look into the company's business, which he traced back to the 1950s when his father first launched commercial wireline operations, "just 22 days after I was born." He said Pine Belt first launched a wireless network in 1995, eventually upgrading to a 2G network with equipment from now-defunct Lucent a few years later.
"We relied on this equipment well past its manufacturer supported life, keeping it in operation during a time in which there was little emphasis on making cost effective capital available to pure rural market operators such as us," Nettles said. "Had it not been for the FCC's work to create the Mobility Fund Phase I (MFI) program pursuant to the 2011 Universal Service and Intercarrier Compensation reform order, it is almost a certainty that we would have had to shutter our wireless business."
The FCC's Mobility Fund provides government subsidies to rural wireless network operators like Pine Belt so they can expand and upgrade their wireless coverage areas. Nettles said Pine Belt upgraded to 4G with vendor ZTE after evaluating bids from five total vendors. He said that, at the time, there were no restrictions from the government on which suppliers Pine Belt could use, and he said the vendor's prices were 25% less than those from other vendors.
Pine Belt's ZTE-related issues surfaced in 2018
However, Nettles said Pine Belt's problems with ZTE started last year, which was when the Trump administration temporarily banned US business with the Chinese vendor. "As the uncertainties became public regarding whether we would be able to continue to use deployed ZTE equipment, however, we also began to encounter delays in our routine expansion efforts," Nettles said. "One such example comes from last year when we were wrapping up installation of a base station in a small town with a population of 26. As we approached project completion, we were significantly delayed in our ability to turn on LTE at the site due to uncertainty resulting from several Federal sanctions levied on ZTE for things of which we had no prior knowledge and absolutely zero involvement."
Nettles said Pine Belt's problems have continued into this year. He said the company's efforts to upgrade its network to Voice over LTE (VoLTE) technology have come to a "complete standstill," a potentially devastating situation for a rural wireless network operator considering both AT&T and Verizon are quickly moving to shutter their 3G networks, which will require their roaming partners to support VoLTE exclusively. Nettles said that a significant portion of Pine Belt's wireless revenues stem from roaming.
"So, one could say, much like many other small carriers providing service in rural areas, absent steps from Congress and other Federal agencies, our network strategies are frozen at a time when they should instead be focused on expansion and upgrades to the next generation services," Nettles said. "In many areas where Pine Belt provides service, because there is no other provider, this could mean the loss of service entirely and potential squandering of $20 million plus in investments in modern wireless services for rural Alabama."
During the House hearing, Nettles said that Pine Belt could potentially use components from other suppliers in its upgrade efforts, but that doing so could add significant integration costs that the company likely wouldn't be able to afford. Indeed, wireless equipment is generally not interoperable, such that carriers that use different vendors often simply divide their coverage areas into vendor-specific regions. In Sprint's 5G network, for example, Nokia supplies all the equipment for one city while Ericsson supplies all the equipment for a different city.
Pine Belt isn't the only operator facing worries over its decision to purchase equipment from a Chinese vendor. United TelCom, SI Wireless, Viaero, James Valley Telecommunications (JVT), NE Colorado Cellular, United Telephone Association, Nemont Telephone Cooperative and Union Telephone Company are among the rural wireless network operators that have said they use Huawei equipment.
A wide range of US officials continue to argue that equipment from vendors like Huawei and ZTE represents a threat to national security because the Chinese government could use it to spy on Americans. The companies have rejected those claims, and Huawei has embarked on a major public relations offensive on the issue. Hanging in the balance is the wider trade war between the US and China, and there are growing concerns that the move to block Huawei and ZTE from the US market over security concerns is in fact just a negotiating tactic in the trade war.
Those concerns have clouded recent US government actions to both block Huawei and ZTE from the US market and to remove their existing equipment from US telecom networks. Nonetheless, the House bill to pay US telecom operators to rip Huawei equipment out of their networks joins a similar push in the Senate, which would allocate $700 million toward the effort. Both the full House and Senate would need to send a unified version of the legislation to President Trump's desk before it could become law.