Canada is unlikely to compensate domestic telecom operators if the federal government bans equipment made by China’s Huawei from 5G networks, setting up a potential fight over a bill that could hit C$1 billion ($758 million).
Canada, under pressure from the United States to ban Huawei Technologies’ 5G network on security grounds, is studying whether to allow the firm into the country’s next-generation 5G networks, Reuters reported.
The United States and United Kingdom have already banned Huawei from the supply of 5G network to mobile operators.
Telecom service providers are looking for compensation for removing their network supplier if Canada bans the use of mobile equipment supplied by Huawei. China-based Huawei is the number one telecom network supplier.
“I’m not sure there is a solid legal case that we would have to compensate for making a proper national security decision,” said a government source. Federal politicians also had to worry about “the public perception of handing over a billion dollars or more to very large companies.
Ottawa has spent almost two years studying whether to allow Huawei into 5G networks and in June, with no sign of a decision coming any time soon, impatient Canadian providers took matters into their own hands.
Bell Canada and Telus said they would partner with Ericsson and Nokia for 5G networks, though they use Huawei in their 4G networks.
Technical experts say it is hard to marry one company’s 5G equipment with 4G gear from another provider. This effectively means the decision to go with Ericsson would eventually force Telus and Bell to remove the Chinese firm’s 4G equipment.
Bell and Telus do not have to act immediately, since a crucial auction of spectrum needed for 5G networks will not happen until June 2021.
In a February 2019 filing, Telus said a ban without compensation could increase the cost of its 5G network deployment and make services more expensive for consumers.
Scotiabank analysts said on June 2 it would cost Bell a total of between C$300 million and $350 million over three to five years to remove Huawei gear from its mobile network. BMO estimated Telus had roughly double the exposure than that of Bell.
In March, U.S. President Donald Trump signed a bill to provide $1 billion to help small providers replace equipment made by Huawei and Chinese firm ZTE.
The office of Canada Innovation Minister Navdeep Bains – which will announce the decision on Huawei and 5G network supply – said it would be premature to discuss future actions.