Georgetown U. Analyst: Comprehensive Rip and Replace Would Cost Tens of Billions
A senior research analyst from Georgetown University's Center for Security and Emerging Technology cautioned Thursday that in some locations the cost of replacing Chinese hardware in information technology networks with more expensive alternatives outweighs the benefits. Jack Corrigan told the China Economic and Security Review Commission at a Thursday hearing that procurement bans should be targeted at "high-risk sectors, networks and use cases."
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When asked where to start, Corrigan suggested the Department of Homeland Security's 16 critical infrastructure sectors, adding that even then it's context dependent. He noted that in the case of surveillance cameras made in China, similar products made in Japan, Canada or the U.S. cost at least twice, and sometimes three or four times, as much.
"The persistent demand for cheap ICTS [information and communications technology and services] has helped Chinese technology companies to entrench their market position and made it more difficult for non-Chinese competitors, whose products are often higher quality but more expensive, to achieve economies of scale that could ultimately drive down prices," Corrigan said in his written testimony.
Commissioner Neva Price asked Corrigan how much money would be needed to subsidize rip and replace programs. He said the initial wave of applications to the FCC included $5 billion worth of activity that was eligible, but it was funded at only $1.9 billion. If procurement bans expanded past the three companies now identified, "we would be talking about at least tens of billions of dollars," he said.
Corrigan said the new Office of Information and Communications Technology and Service in the Bureau of Industry and Security (BIS) has the authority to prohibit purchases of software or hardware from foreign entities of concern, but no bans have been issued. "These regulations have proven to be legally contentious, so it is important that the processes and procedures involved in their implementation are transparent, fair, and airtight," he said in his written testimony. At the hearing, he said it makes sense that the bureaucracy hasn't issued any orders yet. "It takes time to ensure the processes and procedures that you are using are robust enough to hold up in court," he said.
Another witness, Wiley's Nazak Nikakhtar, a former acting undersecretary-industry and security at BIS, was more critical of the lack of action. "We are struggling with the money to rip and replace," she said, complaining there's no import ban or sanctions on a Chinese drone maker that's known to be involved with forced labor. "It’s so emblematic of the fact that we’re really good at talking about the problem but terrified of using the laws" to do something about it, she said.
Nikakhtar said solutions aren’t complicated: "You have companies telling you over and over again: 'Well, I don’t know what’s in my third, fourth, fifth tier, so I can’t comply." She said it's possible to trace risky parts in hardware supply chains so the problem isn't lack of visibility into supply: "Across the board, from industry to government, the will does not exist."