Can a Chinese tech giant speed up US networks?

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Rural America is stuck in the digital dark ages, lacking high-speed Internet access that's so familiar to big cities.

Federal Communications Commission Chairman Tom Wheeler calls it the "rural fiber gap," because 53 percent of residents in those areas can't access even the minimum level of broadband.

Leave it to a Chinese company to try and fix the problem.

Huawei, a 28-year-old telecommunications equipment company also known as the Cisco of China, is supplying fiber optic gear to provide gigabit-per-second Internet to the distant corners of the U.S., starting with about a dozen rural areas.

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In Walla Walla, Washington, a town of about 32,000 people located 270 miles southeast of the booming tech hub of Seattle, residents will soon experience the glory of high-quality Netflix streaming, Skype calls and online gaming. That's where local carrier PocketiNet Communications has employed Huawei for a multimillion dollar network buildout for gigabit Internet to the home.

A gigabit per second is about 20 times faster than the fastest Internet service currently available in the area and more than 100 times quicker than the 10 megabits-per-second speeds that many Walla Walla residents are able to access. It's the same power that Google fiber is bringing to metropolitan areas like Atlanta, Austin and Kansas City.

The U.S. Case Against Huawei

Todd Brandenburg, president and founder of Walla Walla-based PocketiNet, said he'd hardly heard of Huawei before being introduced to the company last year and certainly couldn't spell it. After he visited the company's Chinese operations and dug into its history, it all started to make sense: These are the types of buildouts Huawei has been doing for years in rural China and elsewhere.

"It's almost like we've had blinders on to not know and understand how much Huawei has done in the world," said Brandenburg. "There's no other company that has the breadth and depth of their product line."

In order to build this sort of network with U.S. equipment, Brandenburg said, it would require components from 10-20 vendors and the type of overhead that would make it cost prohibitive--a big reason why it hasn't been done yet.

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To crack the U.S. market, Huawei has to pick its spots. In addition to contending with networking giant Cisco and the less gigantic Juniper, Huawei was labeled a national security threat by the U.S. government in 2012 because of concerns about cyberattacks from China and questionable standards toward privacy and intellectual property.

Focusing on smaller networks is a less threatening tactic, but don't be fooled—Huawei is big. It has 150,000 employees, with about 45 percent in research and development. Revenue in 2014 jumped 21 percent to $46.5 billion, making it slightly smaller than Cisco, and the company plans to reach $70 billion by 2018.

In February, reported on Huawei's effort to jump into the U.S. smartphone market, with a new slate of Android-powered devices. While Huawei is the third-biggest smartphone manufacturer globally, according to IDC, it still ranks outside the top five in the U.S.

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The rural networking market offers a potentially large niche for Huawei if the company can find enough Walla Wallas. Rather than vying with Cisco and Juniper, competitors for the rural business are smaller names like Calix and Adtran.

Bill Gerski, Huawei's vice president of sales for the U.S., said there are 2,400 wireless internet service providers across the country, many suffering from the same limitations as PocketiNet. Rural markets are seeing increased demand for higher speeds to serve residents, small businesses and tourists.

The only other deal Huawei has announced thus far is with Eastern Oregon Telecom, to bring gigabit broadband to Hermiston, Oregon (population 17,000) and the surrounding area.

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"The challenge is to get us in front of the CEO and have him sit down with us so we can tell him how much we have to offer," said Gerski, a 40-year industry veteran who joined Huawei in 2013. "It's tough to advertise out to rural America."

Gerski's initial task is to get executives like Brandenburg familiar with the Huawei brand. To that end, he took a small group of industry CEOs, including Brandenburg, on an eight-day trip last year across China. Along with visiting the headquarters in Shenzhen, the group got to see some of the company's 16 R&D facilities.

The Walla Walla buildout, which should reach its first 100-200 homes over the next four months, is saving a ton of money compared with what Huawei rivals would charge, according to Brandenburg. The gigabit equipment is 30 percent cheaper, home equipment that converts light to electrical offers a 60 percent savings, raw fiber sent from China is 30 percent less and there's a 58 percent savings on core switches and routers.

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For a project that will likely take two to four years, PocketiNet needs the financial relief. After all, it's a small local carrier going up against much bigger competitors Charter Communications and CenturyLink, which have substantial balance-sheet advantages.

CenturyLink spokeswoman Stephanie Meisse said the company offers gigabit service to more than 100,000 households in Washington and has been available in parts of Walla Walla since mid-July.

"We welcome competition because it's good for customers," Meisse said. A Charter representative didn't respond to a request for comment.

At the very least, Huawei is serving to level the playing field.

"Access to high-quality, cost-effective equipment is what we need to be able to deliver this product," Brandenburg said.