FCC chairman proposes ban on use of funds to purchase Huawei, ZTE products

Federal Communications Commission (FCC) Chairman Ajit Pai on Monday announced a two-part proposal that would ban the use of FCC funds to buy equipment from companies deemed national security threats, including Chinese telecommunications companies Huawei and ZTE.

The first proposal would bar U.S. telecom providers from using money from the FCC’s $8.5 billion Universal Service Fund (USF) to purchase equipment from telecom companies deemed national security threats, and would designate Huawei and ZTE as companies that pose a threat, along with creating a process to designate other companies as threats in the future.

{mosads}The second proposal would require U.S. telecom providers that have used money from the USF to rip out equipment from designated companies including Huawei and ZTE. It would also call for an assessment of how much equipment from Huawei and ZTE is already integrated into networks, and how much it would cost to rip out. 

As part of the proposals, the FCC will also look to establish a “reimbursement program” to help telecom carriers implement the changes. A senior FCC official told reporters during a call on Monday that money from the USF is used by hundreds of U.S. telecom providers. 

The FCC will vote on whether to approve the proposals during its next full commission meeting on Nov. 19.

Pai cited a Chinese intelligence law that requires any Chinese company or citizen to support and assist in state intelligence work as a key reason for banning the companies, particularly as the rollout of 5G wireless networks kicks off. 

“When it comes to 5G and America’s security, we can’t afford to take a risk and hope for the best,” Pai said. “We need to make sure our networks won’t harm our national security, threaten our economic security, or undermine our values.”

Pai added, “As the United States upgrades its networks to the next generation of wireless technologies — 5G — we cannot ignore the risk that the Chinese government will seek to exploit network vulnerabilities in order to engage in espionage, insert malware and viruses, and otherwise compromise our critical communications networks.”

Pai also wrote a separate op-ed in The Wall Street Journal on Monday on the proposals, noting that the goal of taking these steps was to “close security gaps in a fiscally responsible manner.”

Neither Huawei or ZTE immediately responded to request for comment.

At least one of the other of five FCC commissioners agreed with the proposals.

FCC Commissioner Brendan Carr, who was appointed to the FCC by President Trump, tweeted his support for the proposals, writing, “I have no doubt that China intends to spy on persons and businesses within our borders. We must secure our telecom networks from this threat.”

Both companies have been targeted by U.S. agencies previously due to security concerns, with the Commerce Department adding Huawei to its “entity list” in May. U.S. companies are banned from doing business with companies on that list. 

Trump also issued an executive order in May that declared a national emergency that empowered his administration to block foreign tech companies from doing business in the U.S. if deemed national security threats. 

The Commerce Department has delayed the full addition of the company to its entity list until Nov. 19, citing more time needed for wireless providers to stop doing business with the company. Trump also called the ban into question when he said at the Group of 20 summit in June that U.S. companies would be allowed to do business with Huawei in cases not deemed a national security threat.

There has been bipartisan pushback on Capitol Hill against Huawei and ZTE, with members of Congress united in deeming the companies threats. The senior FCC official cited congressional pressure on the FCC to ban the usage of its funds to purchase services or equipment from these companies as being a major factor in rolling out the proposals. 

The proposals are being rolled out over a year after the FCC put out a request for comment on a proposal to prohibit use of FCC USF funds in purchasing equipment or services from companies deemed threats to national security.