FCC chairman Ajit Pai has just issued a statement that confirms last week’s report from The Wall Street Journal on a coming proposal meant to deter US carriers and wireless providers from purchasing gear made by China-based companies such as Huawei and ZTE.
The proposal would “bar the use of money from the FCC’s Universal Service Fund to purchase equipment or services from companies that pose a national security threat to United States communications networks or the communications supply chain.” Pai’s statement never directly mentions Huawei or ZTE by name, but the initiative is clearly designed to keep them out of the backend of US network infrastructure.
Senior FCC officials confirmed that both companies are referenced in the proposal. In a March 20th letter to lawmakers, Pai said that he shared in mounting concerns over the “security threat that Huawei and other Chinese technology companies pose to our communications networks.” The FCC chair said he planned to take “proactive steps” to limit that threat. This can certainly be considered one of them.
I’m proposing to prohibit use of @FCC Universal Service Funds to purchase equipment or services from companies that pose national security risk to US communications networks or communications supply chain. My statement: https://t.co/knjWU9uKmw (Proposal to be released tomorrow.)
— Ajit Pai (@AjitPaiFCC) March 26, 2018
After it’s published tomorrow, the FCC will be seeking comment on many aspects of the proposal. One item in question is how to identify national security threats and add them to the list. Senior FCC officials said the commission could look to statutes and funding restrictions that Congress has passed with respect to other agencies. That would almost certainly include Huawei and ZTE, as there’s currently an effort in Congress to ban the US government from using smartphones and other telecommunications equipment provided by the Chinese companies.
Another subject up for comment is how to enforce the rule. For instance, should all of a carrier’s USF funding be stripped if they purchase gear from a company on the prohibited list, or just the amount that was spent on that order?
The Universal Service Fund is a pool of money built up from small fees on the mobile phone bills of consumers. It divides those funds in numerous ways, but one of them provides subsidies to assist companies that provide broadband in rural and remote areas. If the operators behind that service were to use hardware and networking technology from Huawei or ZTE, they would lose access to the USF subsidies. Years of espionage fears have left both companies with a minuscule presence in the chain of communications equipment used by mobile providers, but this is the FCC trying to weed them out entirely as carriers march toward 5G and the next generation of wireless networks.
Pai’s statement on the proposal follows below.
“Threats to national security posed by certain communications equipment providers are a matter of bipartisan concern. Hidden ‘back doors’ to our networks in routers, switches — and virtually any other type of telecommunications equipment — can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more. Although the FCC alone can’t safeguard the integrity of our communications supply chain, we must and will play our part in a government- and industry-wide effort to protect the security of our networks.
That’s why I’m proposing to prohibit the FCC’s $8.5 billion Universal Service Fund from being used to purchase equipment or services from any company that poses a national security threat to the integrity of communications networks or their supply chains. The money in the Universal Service Fund comes from fees paid by the American people, and I believe that the FCC has the responsibility to ensure that this money is not spent on equipment or services that pose a threat to national security. On April 17, I hope that my fellow Commissioners will join me in supporting this important proposal to help protect our national security.”
US intelligence agencies and lawmakers have frequently voiced concerns that Huawei and ZTE could help China compromise the security of networks in the United States. They’ve rooted these claims under national security, but so far, no evidence has publicly been made available to back the allegations.
Still, the pressure has been very effective and led major US carriers and retailers to cease business deals with Huawei. Consumers are still free to purchase Huawei smartphones unlocked and use them on US networks, however.