A program to have US carriers rip out Chinese-made networking equipment and replace it with American kit is almost three times oversubscribed.
The Federal Communications Commission (FCC) launched the US$1.9 billion (A$2.67 billion) fund last October to help US carriers with fewer than 10 million customers take out equipment made by Chinese vendors Huawei and ZTE, and replace it with American kit from the likes of Cisco, Juniper Networks and Arista.
Along with the subsidies as a carrot, the FCC has a stick: if carriers don’t comply, they can’t apply for the regulator’s universal service fund.
In an update, the FCC’s chair Jessica Rosenworcel said the program had received 181 applications and would in fact need US$5.6 billion to meet the demand.
Rosenworcel said the FCC will be reviewing the applications, but that she expects to seek additional funding.
“I look forward to working with Congress to ensure that there is enough funding available for this program to advance Congress’s security goals and ensure that the US will continue to lead the way on 5G security," Rosenworcel said.
Huawei and ZTE fought a long battle to prevent countries including North America and Australia from banning the use of their equipment on national security grounds.
Last year, US President Joe Biden signed the Secure Equipment Act into law. The act prevents Chinese-made equipment from receiving new licenses from US regulators.
Supply chain challenges
Frustrated customers won’t welcome the news that US carriers could spark a surge in demand for products like high-end routers.
“Small” US carriers, with fewer than 10 million customers, are larger than most Australian telcos, bar Telstra.
In November’s Q1 2022 earnings call, Cisco CEO Chuck Robbins warned that chip supply shortages would continue well into the second half of this year.
Other major vendors, like Juniper Networks and Arista Networks, have made similar statements.
iTnews has asked Cisco, Juniper and Arista whether they expect the FCC program to impact their supply chains.
Arista declined comment as the company is in its pre-financial reporting quiet period.