FCC: Huawei, ZTE Are 'National Security Threats'Telecoms Cannot Use Federal Funds to Buy Gear from Chinese Firms
The U.S. Federal Communications Commission has officially designated China’s Huawei Technologies and ZTE Corp. as national security threats, barring American telecommunications companies from using certain federal funds to buy their equipment, such as for building 5G networks.
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In November 2019, the FCC voted to stop U.S. telecommunications companies and other firms from using federal dollars that are part of the commission's Universal Service Fund to buy networking and other products from companies that pose a security threat (see: FCC Takes Steps Toward Squeezing Out Huawei, ZTE).
On Tuesday, the FCC formally designated Huawei and ZTE, which are both based in China, as companies that pose such a threat. FCC Chairman Ajit Pai says both companies are seeking to exploit vulnerabilities in American's telecom networks to spy on communications at the behest of China's government.
"Today’s action will also protect the FCC’s Universal Service Fund - money that comes from fees paid by American consumers and businesses on their phone bills - from being used to underwrite these suppliers, which threaten our national security," Pai says.
In its public notice, the FCC states that effective immediately: "No universal service support may be used to purchase, obtain, maintain, improve, modify or otherwise support any equipment or services produced or provided by Huawei or ZTE."
With this decision, we are sending a clear message: the U.S. Government, and this @FCC in particular, cannot and will not allow the Chinese Communist Party to exploit vulnerabilities in U.S. communications networks and compromise our critical communications infrastructure. 4/4— Ajit Pai (@AjitPaiFCC) June 30, 2020
Tuesday's actions by the FCC are part of an ongoing effort by the White House and federal agencies to address security concerns over how Huawei and ZTE operate.
In 2019, the U.S. Commerce Department put both companies on its so-called "entity list," which effectively blacklisted both companies. The federal government also restricted Huawei's ability to gain access to U.S. chip technology (see: Huawei: US Trade Ban Will Make 2020 'Difficult').
In March, President Donald Trump signed legislation that banned U.S. telecommunication firms from using federal funds to buy equipment from companies that are deemed a "national security threat" while providing funding to replace gear that has already been installed (see: Trump Signs Law Banning Federal Funding to Buy Huawei Gear).
On Wednesday, the Chinese government, along with Huawei and ZTE, expressed their indignation with the FCC, demanding that the White House stop "oppressing Chinese companies," according to the Associated Press.
"We once again urge the United States to stop abusing the concept of national security, deliberately discrediting China and unreasonably oppressing Chinese companies," a spokesperson for China's foreign ministry told the AP.
The Perceived Threats
When the FCC announced its decision against Huawei and ZTE this week, the commission described why each company poses a national security threat to the U.S.
The FCC argued Huawei’s close ties to the Chinese government presented numerous security concerns.
Huawei is reported to have received "vast subsidies" from the Chinese government, including from state-controlled financial organizations, which subject it to coercive pressure, according to the FCC statement.
"We find that Huawei’s close ties to the Chinese government, both at the level of ownership and at the employee level, as well as its obligations under Chinese law, present far too great a risk to U.S. national security to continue to subsidize the use of Huawei equipment and services," the FCC notes.
The commission also argued that ZTE violated the U.S. embargo on Iran by sending about $32 million worth of U.S. goods to that nation and by obstructing the Justice Department's investigation into the matter.
In addition, the FCC argues that under Chinese National Intelligence Law, both Huawei and ZTE are obligated to comply with Chinese military and intelligence agency requests.
Collaboration on Standards Continues
Despite the FCC's actions this week, the U.S. government has still left the door open to American firms working with Chinese companies in a limited way.
Earlier this month, the U.S. Commerce Department issued a new rule that will allow U.S. technology companies to work with any company, including those based in China, on telecommunications sector standards development activities, including for 5G (see: White House: US Firms Can Work With Huawei on 5G Standards).
Since the FCC first started scrutinizing Huawei and ZTE in 2019, other Chinese companies have also come to the attention of various federal agencies. In April, for instance, the Justice Department, along with other federal executive branch agencies, asked the FCC to revoke China Telecom (Americas) Corp.'s license to provide international telecommunications services to and from the U.S., citing national security concerns (see: Trump Administration Wants China Telecom's US License Revoked).
A U.S. Senate report released earlier this month also found that several Chinese telecom companies have operated without proper government oversight (see: Senate Report: Chinese Telecoms Operated Without Oversight).