FCC Moves to Ban Huawei and ZTE from Receiving Federal Subsidies—But More Action Is Needed

Today the Federal Communications Commission formally designated Chinese telecommunication firms Huawei Technologies Company and ZTE Corporation—and their parents, affiliates, and subsidiaries—as posing national security threats. This move prohibits the use of the $8.3 billion Universal Service Fund, to acquire or maintain equipment from these companies. The FCC’s move to finalize this designation is an important step forward, and follows other actions by the agency. FCC Chairman Ajit Pai, Commissioner Brendan Carr, and others at the FCC should be commended for their ongoing leadership on this issue.

The FCC’s action represents the latest move by the federal government to counter the growing influence of Chinese technology companies, and the national security risks they present. Going back to 2012, the House Permanent Select Committee on Intelligence warned of the potential nefarious actions by Chinese telecommunications firms. A bipartisan investigative report of the committee concludes: “the risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests.”

More recently, in the spring of 2019, the Trump administration issued Executive Order 13873 prohibiting the acquisition or use of communications technology from firms under the direction of a foreign adversary. The order directed the Department of Commerce to work with federal agencies to identify the actors of high-risk technologies which subsequently led to Huawei being placed on the entities list. Although not specified in the executive order, China and its global firms, Huawei and ZTE, were the obvious targets. And most recently, in May 2020, President Trump issued a notice of continuation on that order. 

After Trump’s first executive order on May 15, 2019, the Department of Commerce acquiesced but quickly issued a three-month extension to allow Huawei to continue to operate on May 16, 2019. This extension gave room for rural communities, who were dependent on Huawei products, time to shift over and replace their infrastructure. Finishing this task required Commerce to make extensions in August 2019, November 2019, February 2020, and for Congress to approve a $1 billion fund to “rip and replace” the equipment. 

Importantly, removing Chinese technology from U.S. networks is not sufficient by itself to address the broader security challenges these firms pose to global telecommunications infrastructure. American policymakers and their allies around the world will need to consider a unified and standardized approach to fully secure our telecommunication ecosystem and provide real competition to Chinese firms. Indeed, the Chinese companies have said they don’t even need U.S. business for their bottom line.

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