Eideard

Runaway, runaway!

There are only so many companies left that can build a decent mobile network. Banning Huawei from the U.S. seriously skews the competitive balance in an already off-kilter industry.

Huawei has taken quite a political beating lately. Not only are U.S. lawmakers calling for sanctions against the Asian infrastructure maker due to its ties to the Chinese government, but Sprint and Softbank just brokered a deal with the federal government that could ban Huawei’s gear from their current and future U.S. networks.

Recently a frustrated Huawei EVP and co-CEO Eric Xu took a rather flip position on the matter, saying his company was no longer interested in the U.S. market and had essentially stopped paying attention to the controversy surrounding it here. Xu was obviously posturing. No global equipment maker would just simply ignore the world’s largest telecommunications market.

But there is a bit of truth to his words. Huawei has done quite well for itself without landing a single major U.S. infrastructure deal. Domestic operators may have resisted Huawei’s allure, but carriers in Canada, Europe, Asia, Latin America and Africa certainly haven’t. By some measurements, Huawei has already surpassed Ericsson as the largest telecom vendor in the world.

…If Huawei gets banned, then one of the key industry forces keeping equipment prices low suddenly disappears. That’s not a situation U.S. mobile industry wants to see.

There has been a lot of consolidation in the telecom equipment market in the last several years. In many ways, Huawei was directly responsible for that consolidation, driving smaller players out of the market or into mergers through its aggressive pricing. A decade ago there were about a dozen companies that could sell you a cellular base station. Today there are really only three or four dominant mobile players, and Huawei is one of them.

…The dwindling competitive landscape is particularly evident in the U.S. where historical reliance on CDMA technologies has led two companies to dominate: Ericsson and Alcatel-Lucent. No U.S. operator relies solely on a single network maker, so AT&T, Verizon Wireless and Sprint all use both vendors as primary suppliers.

But Alcatel-Lucent is suffering, and it might not be long before Alcatel-Lucent finds itself broken up and sold for parts. If that happens, there will be a big vacuum, and there aren’t that many companies capable of filling it. There’s Nokia Siemens Networks and Huawei, and that’s pretty much it. Smaller network players like Samsung have been asserting themselves of late, but they’re still small fish in an ever-shrinking pond…

All of the major U.S. operators have already named their LTE suppliers, so there won’t be much opportunity to disrupt the market for years to come. And when that time does come it will take a lot to pry those carriers away from their current suppliers. But the presence of Huawei would at least gives those operators leverage.

Look at this way: AT&T loves Ericsson and Alcatel-Lucent. It probably will never leave them. But if I’m AT&T, I want Huawei around to keep those two vendors honest. And if Alcatel-Lucent suddenly goes belly up, I’d rather have more than one choice to replace them than NSN.

From the coverage I’ve seen on biz TV shows, from what I’ve read here from Fritchard and Kevin Tofel, all I see is the same corrupt congressional politicians who babble about competitiveness in American capitalism – then turn their back on that standard to protect the corporate thugs who pick up the tab for their political careers.

Contemptible hypocrites.