Building a slide deck, pitch, or presentation? Here are the big takeaways:

  • FCC Chairman Ajit Pai introduced a proposal which would prohibit using specific federal funds on purchases of equipment or services that “raise national security concerns.”
  • This regulation is aimed at Chinese telecom equipment firms Huawei and ZTE, which have been accused of collaborating with the Chinese government.

FCC Chairman Ajit Pai has introduced a new proposal (PDF link) that would prohibit using the Universal Service Fund (USF) to purchase networking equipment or services from organizations that “raise national security concerns.” This proposal is squarely aimed at Huawei and ZTE–both companies are expressly named in the proposal–which have been the subject of intense scrutiny due to alleged, yet unsubstantiated, ties with the Chinese government.

The USF was established as part of the Telecommunications Act of 1996, which requires service providers to pay a portion of their revenues into a pool that is used for connecting rural and underserved areas, as well as non-profit institutions to telephone and internet services. The USF is also used to subsidize telephone service charges for low-income households.

According to a report in the Wall Street Journal, Huawei has been aggressively seeking business from smaller cable operators, though overall represents “less than 1% of the equipment in American cellular and landline networks today,” referencing a research report from the Dell’Oro Group. The Journal quotes a senior FCC official as being concerned that this amount is “not zero.”

SEE: Cybersecurity in 2018: A roundup of predictions (Tech Pro Research)

The proposal is scheduled for a vote on April 17th. Specific details of implementation have not yet been determined, but a period of public comment will be opened regarding the proposal. How the FCC will determine the types of hardware and services that will be prohibited, as well as which suppliers are covered hasn’t yet been determined. Given that Pai leads with a 3-2 majority in the FCC, the proposal is anticipated to easily pass.

The scrutiny given to Huawei and ZTE is not new. In 2013, former NSA chief Gen. Michael Hayden stated that Huawei had engaged in espionage on behalf of China. At the time, Huawei called the comments “tired nonsense we’ve been hearing for years” and “politically-inspired and racist corporate defamation.” Of note, at that time Hayden was on the board of Motorola Solutions, a competitor of Huawei. Motorola Solutions paid an undisclosed sum to Huawei two years prior to settle an Intellectual Property dispute. From this context, the criticism bears more than a passing resemblance to a conflict of interest, if not outright economic protectionism.

In February, six US intelligence chiefs, including FBI Director Christopher Wray and CIA Director Mike Pompeo, cautioned against buying products or using services from Huawei or ZTE. This year, plans for carrier launches of Huawei phones with AT&T and Verizon were scuttled, and the company recently lost Best Buy as a retail partner.

Separately, US President Donald Trump has announced a plan to implement tariffs and investment restrictions on Chinese companies, as well as pursuing dispute resolution with China at the World Trade Organization. The White House is also responsible for halting the purchase of Qualcomm by Singapore-based rival Broadcom, claiming that “credible evidence” exists indicating the deal “threatens to impair the national security of the United States.”

Update: A representative from Huawei provided this statement to TechRepublic:

US authorities have made a series of allegations against Huawei that simply aren’t true. We pose no security threat in any country. Huawei is a 100% employee-owned company. No government agency has ever tried to intervene in our operations or decisions. US authorities should not base major legislative decisions on speculation and rumor. Our products and solutions are trusted in more than 170 countries and regions. In 30 years, not a single operator has experienced a security issue with our equipment. This includes US operators.

Today’s ICT industry relies on global supply chains. To meet the real challenges of global cybersecurity, we need collaboration across the entire ecosystem. Hostility and closed doors never solved anything.

Since entering the US market in 2001, Huawei has focused on providing local operators with innovative products and solutions. We help local operators extend network coverage to underserved rural areas and bridge the digital divide. We are disappointed by the FCC’s proposal. If adopted, rural operators will have fewer options available to them, and the consumers and businesses that depend on them will have less access to quality and convenient telecommunications services.