A litany of telecommunications issues before the federal government have the smallest U.S. carriers worried that Washington will hurt, or at least fail to protect, their businesses at a time when the divide between urban and rural providers is accelerating.
Among their biggest concerns is the Trump administration’s crackdown on the U.S. operations of ZTE Corp. and Huawei Technologies Co., which rural carriers rely on for low-cost telecommunications equipment. For years, both of the Chinese-owned firms have been accused by government officials of acting as conduits for Chinese espionage in the U.S.
Simultaneously, a pending $26.5 billion merger between T-Mobile and Sprint under scrutiny by federal regulators may make it tougher for rural carriers to provide roaming services for mobile customers who travel outside their home area.
The Federal Communication Commission, meanwhile, is considering a rule to adjust some wireless bandwith auctions that critics believe could make it more expensive for rural carriers to purchase licenses as well as barring users of the Universal Service Fund, which helps rural carriers expand, from spending its money on ZTE or Huawei products.
“The atmosphere right now is very tenuous,” said Derrick Owens, senior vice president at WTA-Advocates for Rural Broadband, a group that represents small rural telecom providers across the country. “From a telecom perspective, there are a number of things here in D.C. that we are following very closely that affect our members.”
Rural providers operate under thinner budgets and manage a much different coverage area than their larger, urban rivals. Companies like CenturyLink and Frontier Communications that serve heavily developed areas are dealing with a condensed population, whereas smaller carriers are managing customers who could be many miles away from each other.
In the latter case, economies of scale are more difficult to achieve, which can leave rural providers more vulnerable when the government makes sweeping regulatory changes.
A move by the Federal Communications Commission to overturn Obama-era net neutrality rules – which were aimed at preventing Internet providers from discriminating against different types of users — has sparked concern that connections in rural areas may now become less reliable or more expensive.
T-Mobile’s merger with Sprint might hurt the same customers, if the combined company follows the lead of larger rivals. Last year, Verizon Wireless sent termination notices to nearly 8,500 rural customers , claiming they used too much data while roaming on the carrier’s network.
“If those two companies consolidate and start behaving in a roaming capacity more like AT&T and Verizon do, it probably makes roaming less available or at the very least much more expensive,” said Phillip Berenbroick, senior policy counsel at nonprofit Public Knowledge.
Sprint declined to comment, but said previously that the new company would provide more choice and competition in rural areas. A spokesperson for T-Mobile did not respond to a request for comment.
While the merger has garnered the attention of rural carriers, it’s the U.S. efforts against the two Chinese telecommunications firms that have sparked the deepest immediate concern.
The Pentagon, officials from the top U.S. intelligence agencies and lawmakers from both political parties have all charged that products from ZTE and Huawei pose a national security risk and taken steps to counter it.
The latest move, by the Commerce Department’s Bureau of Industry and Security, is a seven-year ban on any sales of products or software by U.S. companies to ZTE. As a result, the Shenzhen-based company recently announced it would halt all its major U.S. operations while it works with the agency to overturn the decision.
Confusion about the process only deepened when President Donald Trump tweeted that he had ordered Commerce Secretary Wilbur Ross to get ZTE back into business.
Top associations for rural providers say they need more information to determine how much they’ll be affected.
“Once such details are made more clear, everyone can then assess the full impacts on smaller operators and the consumers they are serving,” Michael Romano, senior vice president of the Rural Broadband Association, said in a statement. “This sort of assessment will be especially important in rural areas where significant changes, if not carefully planned, could affect the continuing availability of services and the ongoing operation of small businesses.”
The ban was imposed after the Commerce Department found that ZTE broke an agreement with the U.S. government reached after the firm violated sanctions against Iran. The agency has not offered any supplemental information to back up its decision, and given the national security implications, may not do so.
A spokesman for the Commerce Department’s security office declined to comment.
“I worry about how fragmented some of these policies are towards these Chinese telecom suppliers,” said Doug Brake, director of broadband policy at the Information Technology and Innovation Foundation. “This administration has identified a target very broadly, and there’s an awful lot of action among various agencies to go after these suppliers, so we end up with a scattershot approach.”
While neither Huawei nor ZTE has a major sales contract with any large U.S. carrier, the lower-tier providers in their client base could be devastated by any service disruption.
Huawei and ZTE generally produce “high-performing, low-cost equipment and it would have an impact on rural carriers to have to source low-cost equipment to serve these economically challenging areas,” Brake said. “Perhaps unfairly over the years, but they have succeeded in creating an incredibly competitive company, especially Huawei. They have top-of-the-line equipment that’s considerably cheaper than what others have to offer.”
Both companies have also greatly expanded their global operations and are laying the groundwork to further capitalize on that growth through new technologies such as fifth-generation wireless systems, or 5G, which promises greater network speed.
In 2017, Huawei says, it performed 5G pre-commercial tests in over 10 cities around the world, spanning 30 different carriers. That year, the firm reported a 16 percent increase in revenue to $92.1 billion, its slowest growth in four years.
ZTE reported a 7.5 percent increase in revenue, to $16 billion the same year . The company said it rolled out 5G testing in North America, Europe, Japan and Korea.
