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OTTAWA: Canada is signaling that it may not compensate major telecom providers if the federal government bans equipment made by China’s Huawei on 5G networks, sparking a potential fight over a bill that could reach $ 1 billion. Canadian dollars (758 million US dollars).
Canada, under pressure from the United States to ban Huawei Technologies equipment for security reasons, is studying whether to allow the company to enter the country’s next-generation 5G networks.
If Ottawa announces a formal ban, the affected companies have made it clear that they want compensation for starting their existing Huawei equipment, two sources close to the matter said.
But the liberal government, which is already pressuring wireless service providers to cut what it says are excessively high bills, seems less convinced.
“I’m not sure that there is a strong legal case that we have to compensate for by making a proper national security decision,” said a government source who requested anonymity given the sensitivity of the situation.
Federal politicians, the source said, must also be concerned about “the public perception of giving a billion dollars or more to very large companies.”
Ottawa has spent nearly two years studying whether to allow Huawei to enter 5G networks, and in June, with no sign of a decision being made anytime soon, impatient Canadian providers took matters into their own hands.
Bell Canada and Telus Corp said they would partner with Ericsson and Nokia Oyj, even though they use Huawei on their 4G networks.
Technical experts say that it is difficult to marry the 5G equipment of one company with the 4G equipment of another provider. This effectively means that the decision to opt for Ericsson would eventually force Telus and Bell to withdraw the 4G equipment from the Chinese company.
Bell and Telus do not have to act immediately, as a crucial auction of the spectrum needed for 5G networks won’t take place until June 2021.
In a February 2019 presentation, Telus said that a ban without compensation could increase the cost of implementing its 5G network and make services more expensive for consumers.
Telus didn’t respond to a question about whether he still felt the same way regarding compensation. Bell did not respond to a request for comment.
Scotiabank analysts said on June 2 that it would cost Bell a total of between C $ 300 million and $ 350 million over three to five years to remove the Huawei equipment. At the same time, BMO estimated that Telus had about twice the exposure of Bell’s.
In March, US President Donald Trump signed a bill to provide a billion dollars to help small suppliers replace equipment made by Huawei and Chinese firm ZTE.
Canada’s government is on track to run up the largest budget deficit since World War II as it tackles the coronavirus outbreak and Prime Minister Justin Trudeau will outline major steps to jump-start the economy on September 23.
“Obviously we want to spend money on things that we think are going to grow the economy instead of something like that (compensation),” the government source said.
A person directly familiar with the dossier took a more bitter stance, noting that while Britain had told companies to recall their Huawei equipment, it had given them until 2027.
The person said that this was also the time when the equipment would become obsolete and require replacement.
“I don’t think the Canadian government’s thinking is different on that issue,” the person said.
The office of Canada’s Innovation Minister Navdeep Bains, which will announce the decision on Huawei and 5G, said it would be premature to discuss future actions.
