Smaller Carriers Worried About FCC Action Against Chinese Equipment Makers
The FCC will consider an NPRM at its April 17 meeting proposing to bar the use of money in any of the four USF programs to buy equipment or services from companies that “pose a national security threat” to U.S. communications networks or the communications supply chain. The NPRM appears mainly aimed at Chinese wireless equipment makers Huawei and ZTE, industry experts said. The biggest potential negative could be for smaller carriers, who sometimes find they must rely on Huawei as a low-cost handset provider for markets some larger companies don’t want to serve, industry officials said.
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“The changing communications landscape has not only elevated the importance of network security, but also created new challenges,” Chairman Ajit Pai said Monday in a blog post. “One such challenge is the integrity of the supply chain -- that is, the process by which products and services are manufactured, distributed, sold, and ultimately integrated into networks.”
“This is a huge concern,” said Carri Bennet, general counsel to the Rural Wireless Association. There's no evidence that rural carriers using equipment from China face security risks, she told us. “They deploy it because the deployment is good, the networks are good, it’s solid,” she said. William Levy, vice president-sales at Huawei Technologies USA, is on the RWA board. “If people have deployed Huawei or ZTE, what’s wrong with that?” Bennet asked. “Is there any evidence that by deploying Huawei or ZTE there are issues?”
“At this point in time we need to let cool heads prevail,” Bennet said. “The administration is tied up in a much bigger issue related to the trade talks with China. It’s filtering down.” If evidence turns up of problems, rural carriers would understand if the FCC then imposes a USF ban, she said. The Competitive Carriers Association didn’t comment Monday.
The USF ban would mean carriers no longer would be able to use devices like Huawei’s Mate 10 pro smartphone, said Roger Entner, analyst at Recon Analytics. “Some of their devices are very good devices,” he said. Without the two Chinese providers “it’s the status quo with Samsung and Apple basically running the roost,” he said. Other equipment makers have “to a large degree abandoned rural carriers,” Entner said. “If Huawei is not allowed to sell to the small rural carriers then how are the small rural carriers going to be able to compete?” he asked.
“Hidden ‘back doors’ to our networks in routers, switches -- and virtually any other type of telecommunications equipment -- can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more,” Pai said in a statement Monday. The money in the USF “comes from fees paid by the American people, and I believe that the FCC has the responsibility to ensure that this money is not spent on equipment or services that pose a threat to national security,” Pai said.
The FCC has been under Capitol Hill pressure to address the issue. Senate Majority Whip John Cornyn, R-Texas, Sen. Angus King, I-Maine, and others wrote Pai in December to raise concerns on reports Huawei was to begin selling products in the U.S. as early as this year “with little or no modifications" to address privacy and cybersecurity concerns (see 1803230063). Pai responded last week noting he shared their concerns, but saying AT&T and Verizon had “abandoned” plans to sell Huawei’s Mate 10 device.
FCC Commissioner Jessica Rosenworcel raised the issue last week in a statement opposing the wireless infrastructure order. “If we want to lead in 5G, we need serious policies to address our equipment supply chain challenges,” she said. “That means developing a real plan rather than relying on opaque decisions issued from behind the closed doors of the Committee on Foreign Investment in the United States [CFIUS]. We do not do that here.”
China experts warned at a Hudson Institute discussion last week that China is intent on leading the world on 5G and won’t play by the same rules as the U.S. (see 1803200036).
With tariffs, Section 301 investigation and CFIUS, “this is one more shoe falling in the Trump administration’s confrontation with China,” said Doug Brake, director-telecom policy at the Information Technology and Innovation Foundation. The big carriers apparently heeded the house Intelligence Committee’s “strong recommendation” not to use equipment from Huawei or ZTE, he said. “This has a huge impact for small, rural wireless companies,” Brake said. “Huawei cut their teeth on extremely low [revenue] rural areas, and dozens of tier 3 operators have found their mobile equipment compelling,” he said. Cutting Huawei as potential supplier “will have a significant impact on the costs of supplying rural mobile.”
But major industry associations expressed support for Pai. “USTelecom members have long considered network integrity a top priority and have worked closely with government partners to improve the security of communications networks,” said Jonathan Spalter, USTelecom president. “We will continue working with the FCC and other agencies to address supply chain vulnerability issues.”
“We strongly support efforts by the government to address concerns regarding certain communications equipment providers deemed to pose a heightened security risk,” said Cinnamon Rogers, senior vice president-government affairs at the Telecommunications Industry Association.