Start Small, Think Big: Huawei's Grassroots Effort to Appeal to US Carriers

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Start Small, Think Big: Huawei's Grassroots Effort to Appeal to US Carriers

By Paula Bernier, Executive Editor, TMC  |  May 07, 2015

Chinese company Huawei has made some amazing inroads in the communications arena outside of its home country.

Huawei is now the world’s No. 2 network equipment maker, according to Dell’ (News - Alert)Oro Group, which says it’s second only to Ericsson. A few years back Huawei made headlines when it surpassed the revenues of Ericsson, which has since recaptured the lead on that front. And Huawei “stands out as a leader” and is “steadily gaining market share in major telecom infrastructure segments and staking out a strong position in software-defined networks and network functions virtualization,” according to a March report by Infonetics Research (News - Alert).

Such major carriers as BT and Vodafone now rely on Huawei gear to power their networks. Last year Huawei was among the top three vendors in terms of global LTE (News - Alert) network infrastructure market share, according to Dell’Oro, which has lauded the vendor for its pioneering efforts in small cell products. Huawei is also the market leader in optical networking and containerized data centers, according to Infonetics Research and its parent company, IHS (News - Alert). And a Gartner report released in December ranked Huawei the No. 3 provider of smartphones worldwide.

That has allowed Huawei – which reported $46.3 billion in revenue last year – to see very respectable growth in recent years.

Despite all its successes, however, Huawei has faced significant challenges in getting tier 1 carriers and government agencies in the U.S. to buy its network gear. That’s because federal officials, and some industry players and pundits, have voiced concern about allowing a Chinese vendor – and this company in particular – to provide key communications infrastructure.

The thinking, as noted in a report issued by the U.S. government a couple years ago, is that enabling Huawei to provide key communications infrastructure here would essentially give China the keys to our kingdom, and enable the superpower to more easily spy on us or even pull the plug on our communications networks. Huawei executives, meanwhile, have publicly stated that although they think U.S. consumers are missing out because some carriers elect not to use Huawei gear, the company is doing just fine without infrastructure business from the U.S. government and tier 1 carriers.

But growth at Huawei is now slowing, as the company’s operating profit rose less than 18 percent for the company in 2014 over 2013, according to The Wall Street Journal. And, like any successful company, Huawei continues to seek out opportunities for growth.

So Huawei is now attacking the U.S. communications infrastructure market from a different angle – starting with the smaller, rural service providers.

Huawei brought telecom veteran Bill Gerski aboard a little more than a year ago to help lead the new effort. Gerski, vice president of sales for Huawei USA, was previously a consultant with Dish Network, which offered rural telcos and wireless ISPs the ability to bundle the satellite TV service with their own offerings. He was also senior vice president of marketing and sales for the National Rural Telecommunications Cooperative from mid 2007 through 2011.

Those experiences – and Gerski’s gift for gab – are likely to serve him well as he works to convince the nation’s 1,100 rural telcos, 2,400 wireless ISPs, 800 rural electric companies, 800 rural cable TV providers, and eventually select municipalities, to consider Huawei infrastructure solutions.

The company’s Evolved Wireless Local Loop, or eWLL, microwave product is among the key offerings Huawei is proposing to the rurals. Gerski describes eWLL as an inexpensive fixed wireless solution that delivers LTE-based connectivity without the need for a core. He adds that Huawei is No. 1 in gigabit passive optical networking and LTE in the rest of the world, and aims to leverage that expertise and technology with tier 3 carriers here in the U.S.

The new rural initiative at Huawei could create new competition for ADTRAN and Calix. These vendors have a good foothold with small service providers in the U.S., Gerski comments, but he adds that these other companies “have become very complacent in working with the rural telcos.”

Gerski says Huawei is doing consultative selling, and that it hears that the solutions it presents in its bids deliver a 20 to 30 percent savings over those of the competition. What’s more, he says, Huawei equipment is very scalable, so it has a lifecycle of 10 to 20 years; that means carriers using its gear won’t have to rip and replace anytime soon.

At the moment, Huawei’s rural U.S. effort is very small. Of the company’s 1,100 U.S.-based employees, only three are focused on selling to the rural carriers. Those sales people are assisted by about 10 technical support staff members.

But Gerski is working to create a reseller channel, forging partnerships with the seven engineering firms that work with rural U.S. telcos, and is doing a lot of public speaking to get the word out about what Huawei can deliver to small service providers here.

One of the first things Gerski did after joining Huawei was to create an advisory committee made up of seven CEOs from the rural telcos, which he then escorted on a series of trips to Huawei locations both within the U.S. and to China.

The journey started with a trip to meet Huawei senior executives in Plano, Texas. Gerski called on a representative from NTCA – The Rural Broadband Association, to moderate the meetings. For the first two days the meetings centered mostly on the experiences of the rural telcos in the last 20 or 30 years, their challenges (such as losing Universal Service Fund dollars, shrinking landline businesses, and industry mergers and acquisitions), and the telco leaders’ visions for their businesses going forward. During the last three hours, Huawei inquired as to how it could build on the relationship the carriers had already established with a couple of other vendors, and asked if there was room for Huawei in the market.

Gerski then took the rural executives to Huawei’s research and development center in Santa Clara, Calif. (part of the company’s worldwide R&D effort, which employees 50,000 people around the world), to show them what the company was working on. Then, in September of 2014, they all traveled to Shenzhen, China, to visit headquarters and check out the company’s R&D centers in China. The expedition concluded with a wrap-up meeting in the U.S.

This multi-faceted excursion really helped Huawei understand what the rural service providers are looking for, Gerski said. What he learned was that many of these companies can probably best be served by a hybrid approach that combines both wireline and wireless infrastructure. For example, he said, you could use microwave in the last mile in environments with just a handful of homes, and then install fiber the last few feet to the homes.

“When we started coming up with these solutions, it made a lot of sense to these guys,” he says.

Huawei is already seeing its first converts.

In March, Huawei revealed that it’s been working with Eastern Oregon Telecom, which tapped the Chinese equipment supplier to provide it with GPON gear to bring a gigabit broadband network to more than 8,000 to rural homes and businesses in Hermiston, Ore.

The telco was receiving the Huawei gear as this article was being written in mid-March. The goal was to bring up 100 homes to test the solution first, followed by a broader aerial fiber deployment this year, and an underground fiber installation next year.

“Huawei is a great partner for rural carriers who are looking to develop robust broadband networks quickly but in a scalable and cost-efficient way,” says Joseph Franell, CEO of Eastern Oregon Telecom. “Huawei’s fast and scalable broadband solutions will allow for faster deployment and simpler maintenance, and we look forward to working with them to roll out our ultra-broadband network in Hermiston.”

Like most people in rural America, Franell didn’t know Huawei – and couldn’t even pronounce – the company’s name, when Gerski first approached him. Now a few months later, Gerski notes, he’s a customer. Franell was among the executives who went on the China trip, notes Gerski, adding Eastern Oregon Telecom is now “using Huawei for everything” and looking at how to build on those fast broadband connections with new revenue-generating services like IPTV (News - Alert).

“They’re opening up to us, and they like what they hear,” says Gerski, who was speaking to INTERNET TELEPHONY from the NTCA’s Rural Telecom Industry Meeting & Expo in Phoenix, one of the more than 20 shows he will attend this year.

Huawei expects to have 10 to 20 U.S. rural service providers on board by the end of this year.




Edited by Maurice Nagle
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