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US bars China's Huawei, ZTE from subsidy programme over security risks

This is the latest in a series of actions by the US government aimed at barring American companies from purchasing Huawei and ZTE equipment

Reuters  |  Washington 

Photo: Shutterstock

The US Federal Communications Commission (FCC) voted 5-0 Friday to designate China's and as national security risks, barring their US rural carrier customers from tapping an $8.5 billion government fund to purchase equipment.

The US telecommunications regulator also voted to propose requiring those carriers to remove and replace equipment from Technologies Co Ltd and Corp from existing networks. The move could eliminate a key source of funding for Huawei's biggest US business - telecoms equipment.

This is the latest in a series of actions by the US government aimed at barring American from purchasing and 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 US from using telecommunications equipment made by 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 US 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.

"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 US national security risk.

Congress has been considering legislation to authorise 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 US telecom carriers that depend on inexpensive Huawei and ZTE switches and equipment were in discussion with Ericsson and Nokia to replace their Chinese equipment, Reuters reported in June.

On Monday, the Commerce Department issued a new 90-day temporary licence to allow US firms to do business with Huawei to minimize the impact on rural US 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.

US 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."

First Published: Sat, November 23 2019. 20:22 IST