The FCC Takes on Huawei and ZTE

In less than two weeks, the Federal Communications Commission (FCC) will vote on a proposal that would prevent telecommunications carriers from using subsidies to purchase equipment from Huawei or ZTE.  The plan, outlined in a Report and Order, Further Notice of Proposed Rulemaking, and Order, would also gather information on which equipment from companies deemed national security threats already exists in American telecommunications networks.  This proposal deserves unanimous support from the Commission.

Chairman Ajit Pai’s plan specifically addresses how the FCC’s Universal Service Fund’s (USF) subsidies are allocated to providers across the U.S.  It “prospectively prohibits the use of USF funds to purchase or obtain any equipment or services produced or provided by a company posing a national security threat to the integrity of communications networks or the communications supply chain (‘covered company’).”  The covered companies in this instance are Huawei and ZTE, but the rule leaves open the possibility of adding more companies to the list. The intent and text of the proposal shows the FCC clearly considers Huawei and ZTE as security risks, not actors caught up in a trade dispute.

Chairman Pai is heeding the warnings issued since 2012, when a House Permanent Select Committee on Intelligence report concluded  that “Huawei and ZTE cannot be trusted to be free of foreign state influence and thus poses a security threat to the United States and to our systems” and advocated that “the United States should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies.”

According the FCC’s analysis, 106 firms currently buy Huawei and ZTE equipment.  An estimated 32-53 of them currently receive universal service funds.  The Rural Wireless Association (RWA) claims that approximately 25% of its members have deployed either Huawei or ZTE in their networks.  The FCC’s plan would further clarify this data and ask for input from stakeholders on how the agency can help carriers rip out and replace Chinese equipment from their networks.

The Universal Service Fund disburses approximately $8.5 billion each year to develop and improve broadband capabilities in schools, libraries and for health care providers, especially in rural areas.  Since Congress, the Defense Department, Commerce Department and the White House have all taken steps to prevent government funds from being used to purchase Huawei and ZTE equipment, it is only logical that the agency most responsible for overseeing telecommunications in the U.S. does the same.