FCC blacklists Huawei and ZTE, preventing purchasing of equipment using federal funds
The Federal Communication Commission has completed the final stage of approval of its plan to end federal funding for foreign firms that it considers a threat to US national security. For now this extremely short blacklist includes only two companies, ZTE and Huawei.
To be more specific, federal funding refers to any money that US businesses received from the FCC’s Universal Service Fund, which totals roughly $8.5 billion. The fund is aimed at offsetting costs for US telecommunication companies in order to facilitate the implementation and expansion of the country’s communications infrastructure. It is now against the law for any US company that received money from this fund, to use it to buy hardware or software from the aforementioned Chinese tech firms.
“We take these actions based on evidence in the record as well as longstanding concerns from the executive and legislative branches,” said FCC Chairman Ajit Pai in a statement. “Both companies have close ties to China’s Communist government and military apparatus. Both companies are subject to Chinese laws broadly obligating them to cooperate with any request from the country’s intelligence services and to keep those requests secret. Both companies have engaged in conduct like intellectual property theft, bribery, and corruption.”
Both Huawei and ZTE have received criticism and scrutiny from the US government for many years, but late 2018 and early 2019 proved to be the straw that broke the camel’s back after Huawei CFO Meng Wanzhou’s controversial arrest. Aside from this, the Chinese tech firms have long been suspected of selling possible compromised equipment to the US, which the Chinese government could supposedly use to undermine US national security. It is rather obvious at this point that the companies have strongly denied all allegations.
Despite the growing tension between the two nations, business with the two tech giants is not banned in the US outright. The technicalities of the matter are actually more difficult that it would appear at first glance. For example, earlier this year the sale of products from US manufacturers to Huawei was going to be banned, but then it became legal again due to a technicality made by the USDC. Several US senators have already written to protest the Department of Commerce in an attempt to stop them from issuing licenses that would allow US companies to do business with Huawei.
Meanwhile, a separate proposal was also in discussion today but not yet passed which would obligate us businesses that received or will receive FCC money to remove any ZTE or Huawei hardware that they may have purchased and set up. If the proposal is passed, small carriers may struggle to deal with the financial burden that the new rules would impose. But according to Chairman Pai, there’s a plan for that as well, stating “To mitigate the financial impact of this requirement, particularly on small, rural carriers, we propose to establish a reimbursement program to help offset the cost of transitioning to more trusted vendors.”