Rural Montana’s China tech challenge

This story is excerpted from Capitolized, a weekly newsletter featuring expert reporting, analysis and insight from the reporters and editors of Montana Free Press. Want to see Capitolized in your inbox every Thursday? Sign up here.

Montana’s two largest telephone cooperatives took a multimillion-dollar hit in 2019 when the federal government pulled the plug on Chinese tech company Huawei. 

Not-for-profit rural telephone providers had spent millions on Huawei’s bargain-priced tech to improve cell phone service in rural areas where for-profit companies invested little if anything. 

Co-ops including Nemont, in Scobey, and Triangle Communications, in Havre, were already years into their installation of Huawei tech in 2019 when the Trump administration identified the corporation as an extension of the Chinese government, capable of spying on U.S. communications. By that time, Huawei’s chief financial officer had been arrested in Canada for extradition to the United States. 

The government put the clamps on Huawei’s products, while assuring the telcos that a solution was in the works. This week, the Senate approved $1 billion in compensation for affected phone companies by logrolling funding for the “Rip and Replace Act” into the National Defense Authorization Act, a major spending bill. 

U.S. Sen. Steve Daines, R-Montana, sponsored the effort. 

The money is still not enough to fully replace the cooperatives’ “unsecure tech,” according to Jessica Rosenworcel, chair of the Federal  Communications Commission. Rosenworcel told senators last month that another $3 billion is needed to make rural phone providers nationwide whole. 

Pointing specifically to Montana, the communications lobby warned that paving the cracks in America’s information superhighway requires money.

“This critical work cannot be completed with only 40 cents on the dollar, and costs incurred to date are reaching or surpassing the funding currently available,” Tim Donovan warned congressional leadership earlier this year. Donovan is CEO of the Competitive Carriers Association, the trade group for telecommunications carriers.

Without full funding, one Montana carrier “will be forced to reduce service by over 62%” (a coverage area of more than 1,500 square miles) Donovan warned. A large rural area in the upper plains won’t transition to 5G because it does not have full funding to remove the untrusted equipment. 

The Tuesday vote means an estimated $67 million for Nemont to cover its Huawei replacement costs, but that’s just a final installment in compensation that the federal government estimated at $111 million in 2022. Triangle’s costs for two entities were roughly $12.6 million, though, like Nemont, its total compensation was larger: $21 million spread over two votes years apart. Another Montana telco, Velocity Communications, will have received an estimated $3 million in total.

In addition to removing Huawei tech, the telcos must rid themselves of tech from ZTE, another China firm banned from U.S. phone communications.

Capitolized solicited comment for this article from Nemont and Triangle, which is to say, we called. They didn’t respond.