The costs of ripping out and replacing soon-to-be-prohibited Chinese telecom equipment from Canada’s wireless networks will be manageable for large carriers such as Telus Corp. T-T and BCE Inc., BCE-T analysts say, though small rural providers could struggle.
BCE’s Bell Canada and Telus both used gear from Huawei Technologies Co. Ltd. extensively in their fourth-generation wireless networks, though they have moved away from the Shenzhen-based company for their 5G deployments.
On Thursday, Ottawa announced it will ban Huawei and ZTE, another Chinese company that produces telecom network equipment, from Canada’s 4G and 5G networks. The decision, citing potential security risks, followed similar moves by Canada’s Five Eyes intelligence-sharing allies – Australia, Britain, New Zealand and the United States.
Telecoms have until June 28, 2024, to remove the gear from their 5G networks and until Dec. 31, 2027, to remove 4G equipment.
Why is Canada banning Huawei from participating in the country’s 5G network?
“I don’t think this is a surprise,” said Edward Jones analyst Dave Heger, adding that while the government deliberated the decision during a three-year review, Canadian wireless carriers signed 5G deals with other suppliers, including Sweden’s Ericsson Inc., Finland-based Nokia Corp. and South Korean conglomerate Samsung Electronics Co. Ltd.
“There may be some incremental costs in terms of decommissioning,” Mr. Heger said, noting that the federal government has said it won’t provide any compensation for telecoms to rip out the gear.
“I have to think that BCE and Telus were already allowing for this in their capital plans.”
Rogers Communications Inc. has had a long-standing relationship with Ericsson and did not use Huawei gear extensively in its 4G network like its rivals did.
SaskTel said in a statement that it is actively working to replace Huawei gear from its 4G network with Samsung equipment to comply with the ban. Greg Jacobs, a spokesperson for the company, said that the decision is not expected to have a major impact on SaskTel’s business, as the Regina-based telecom has already chosen Samsung as its 5G vendor.
Rural internet provider Xplornet Communications Inc., which used Huawei gear previously, has also moved away from the supplier.
However, small rural telecoms are likely to be financially hit the hardest by Canada’s ban on Huawei and ZTE, said Samer Bishay, founder and CEO of Markham, Ont.-based Iris Technologies Inc. and its subsidiary, northern wireless carrier Ice Wireless.
That’s because larger telecoms typically replace a piece of network equipment after about five years anyway, Mr. Bishay said. But small rural providers such as Ice Wireless are likely to extend the lifespan of their equipment with software upgrades, he added.
“It’s still functional, it’s still usable, so why not get more juice of it?” he said, adding the government’s “one size fits all” approach hurts only the smaller players.
“You create this unlevel playing field once again that only benefits the incumbents.”
Laurie Bouchard, a spokesperson for Industry Minister François-Philippe Champagne, said the decision was made in order to keep Canadian networks secure.
“Our government will never compromise the safety and security of Canadians and we will take any action necessary to safeguard our critical telecommunications infrastructure,” Ms. Bouchard said in a statement.
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