U.S. agency votes 5-0 to bar China's Huawei, ZTE from
government subsidy program
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[November 23, 2019] By
David Shepardson
WASHINGTON (Reuters) - The U.S. Federal
Communications Commission (FCC) voted 5-0 Friday to designate China's
Huawei and ZTE as national security risks, barring their U.S. rural
carrier customers from tapping an $8.5 billion government fund to
purchase equipment.
The U.S. telecommunications regulator also voted to propose requiring
those carriers to remove and replace equipment from Huawei Technologies
Co Ltd and ZTE Corp <000063.SZ> from existing networks. The move could
eliminate a key source of funding for Huawei's biggest U.S. business -
telecoms equipment.
This is the latest in a series of actions by the U.S. government aimed
at barring American companies from purchasing Huawei and ZTE equipment.
Huawei and ZTE will have 30 days to contest the designation and a final
order compelling removal of equipment is not expected until next year at
the earliest.
Huawei called the order "unlawful" and asked the FCC "to rethink its
profoundly mistaken order." It argued the FCC's decision was based "on
nothing more than irrational speculation and innuendo."
In May, Trump signed a long-awaited executive order declaring a national
emergency and barring U.S. companies from using telecommunications
equipment made by companies posing a national security risk. The Trump
administration also added Huawei to its trade blacklist in May, citing
national security concerns.
FCC Commissioner Geoffrey Starks, a Democrat, said it could cost as much
as $2 billion to replace the equipment in U.S. rural networks.
FCC Chairman Ajit Pai first proposed in March 2018 to bar companies that
posed a national security risk from receiving funds from the FCC's
Universal Service Fund, but did not name Huawei or ZTE. The fund
provides subsidies to provide service in rural or hard-to-reach areas,
and to libraries and schools.
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A Huawei company logo is pictured at the Shenzhen International
Airport in Shenzhen, Guangdong province, China July 22, 2019.
REUTERS/Aly Song/File Photo
"Given the threats posed by Huawei and ZTE to America’s security and our 5G
future, this FCC will not sit idly by and hope for the best," Pai said on
Friday. "This is not a political issue."
The FCC argued the companies' ties to the Chinese government and military
apparatus, and Chinese laws requiring that such companies assist the Chinese
government with intelligence activities, pose a U.S. national security risk.
Congress has been considering legislation to authorize up to $1 billion for
providers to replace network equipment from the Chinese companies. The FCC could
tap its fund to pay for replacing equipment if Congress does not act.
About a dozen rural U.S. telecom carriers that depend on inexpensive Huawei and
ZTE switches and equipment were in discussion with Ericsson <ERICb.ST> and Nokia
<NOKIA.HE> to replace their Chinese equipment, Reuters reported in June.
On Monday, the Commerce Department issued a new 90-day temporary license to
allow U.S. firms to do business with Huawei to minimize the impact on rural U.S.
carriers.
The Rural Wireless Association said Friday it remains "cautiously optimistic"
that the order will allow carriers to "maintain existing critical communications
services so long" as government funds are not used to fund Huawei or ZTE
directly or indirectly.
The United States has been pressing nations not to grant Huawei access to 5G
networks and alleged Huawei's equipment could be used by Beijing for spying,
which the Chinese company has repeatedly denied.
U.S. Attorney General William Barr this week backed the FCC proposal, saying the
two Chinese firms "cannot be trusted" and calling them "a threat to our
collective security."
(Reporting by David Shepardson; Editing by Chizu Nomiyama and Marguerita Choy)
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