Smaller telcos could feel the pinch after Ottawa prohibits use of Huawei’s 4G gear

Experts say smaller, independent telecommunications companies will be hurt the most by a federal government decision to ban China’s Huawei Technologies and ZTE from involvement in Canada’s 5G wireless network, in a move that will also eventually prohibit their products from existing 4G services equipment.

Innovation Minister François-Philippe Champagne said Thursday that the government will not be reimbursing the companies which need to remove this equipment from their networks by Dec. 31, 2027.

Telecom experts say smaller companies like Ice Wireless, which serves northern Canada and partnered with Huawei in 2019, as well as British Columbia’s rural internet provider ABC Communications, which also partnered with Huawei in 2019, could be negatively affected.

“We’re not talking companies that are flush with cash. They are going to have to stop investing in the technology that they have in place and somehow come up with the money to replace the equipment over the next five years,” telecom consultant Mark Goldberg said in an interview.

“It’s a bigger deal for the smaller players, proportionate to their resources,” former Telus chief financial officer Robert McFarlane said in an interview.

McFarlane noted the United States’ creation of a fund to provide subsidies to rural carriers working with Huawei when they had banned the company, something Canada hasn’t established.

Canada’s biggest telecom companies, including Telus Corp. and Bell Canada parent BCE Inc. will likely be able to absorb the costs associated with having to pull out 4G Huawei gear, the experts said.

Telus and BCE each said in 2020 that they would be moving away from Huawei and working with Sweden’s Ericsson as a supplier for their 5G networks.

The experts also said Rogers Communications Inc., whose partnership with Ericsson began in 2018, is an even better position.

Even though rural internet provider Xplornet Communications Inc. announced in 2020 that it would no longer be relying on Huawei for its equipment, it could face financial hurdles as it transitions from 4G to 5G because it doesn’t have the same cash reserves as Canada’s major players, they add.

Huawei Canada has reacted to Ottawa’s move, saying that it is “an unfortunate political decision that has nothing to do with cybersecurity or any of the technologies in question.”

Huawei Canada added that the ban on its equipment and services could lead to “significant economic loss in Canada and drive up the cost of communications for Canadian consumers.”

In an interview Thursday, Huawei Canada vice-president Alykhan Velshi said that it would be “reckless and irresponsible” for the Canadian government to ask the company to stop supporting its existing equipment in the 5G network, noting that there are around 10,000 cellphone sites across Canada that have Huawei technology in them.

He also said that more conversations need to be had between Huawei and Ottawa.

ZTE also provided its thoughts on the decision in a statement saying that the company “reject(s) the premise of this announcement,” calling it “highly speculative.”

Meanwhile, the U.S. State Department says it welcomes Canada’s decision to ban China’s Huawei Technologies and ZTE from its next-generation mobile networks. 

In a statement, the U.S. says it supports efforts around the world to ensure consumers and customers can trust their wireless networks and providers. 

It says it will continue to collaborate with Canada and other allies to ensure shared security in the 5G era. 

“We welcome Canada’s decision,” the State Department said in writing Friday in response to a query from The Canadian Press. 

“The United States supports efforts to ensure countries, companies, and citizens can trust their wireless networks and their operators. We continue to collaborate with allies like Canada to ensure our shared security in a 5G future and beyond.”

This report by The Canadian Press was first published May 20, 2022.

The Canadian Press