FCC bans purchase of Huawei, ZTE equipment for subsidized wireless networks

by Alan Friedman / Nov 23, 2019, 11:44 AM

FCC bans purchase of Huawei, ZTE equipment for subsidized wireless networks

Managed by the FCC, the Universal Service Fund (USF) collects fees charged to telecom companies quarterly and disburses $8.5 billion a year. Of course, most of these companies pass the charge along to consumers to pay each month. So what is this money used for, you ask? It is disbursed to help everyone in the U.S. gain access to telecommunication services. Among the beneficiaries of the fund are Americans living in rural areas that would otherwise be unable to access the internet. On Friday, the FCC voted (via ArsTechnica) to ban the USF from purchasing equipment made by Huawei and ZTE from certain projects paid for by the fund.

The ban deals with networks that have yet to be built, but the regulatory agency is currently in the process of receiving public comments on a proposal that would force carriers to remove any Huawei or ZTE networking equipment found in networks already built. But as pointed out by FCC commissioner Geoffrey Starks (one of two Democrats sitting on the five-member panel), wireless operators in rural areas already are using Huawei and ZTE networking gear for their 3G and 4G networks and will need help from the government to replace it. The commissioner says, "These carriers are made up of hard-working men and women that serve hard-to-reach communities that the major carriers can't or won't serve, operating with small teams and tight budgets."

Yesterday's action by the FCC will also prevent small, rural carriers from using USF funds to service the existing Huawei and ZTE equipment already in place. While the agency tries to figure out what will be allowed in this situation, FCC Chairman Ajit Pai said that these wireless operators are being asked to submit information to the commission that details all of the Huawei and ZTE equipment currently in use, and provide estimates of how much it would cost to remove and replace such gear. The FCC itself has already figured out that it will cost $1.89 billion to do this work, which would take two years to complete.

Huawei is the largest global provider of networking equipment

Huawei and ZTE are considered national security threats in the U.S. because of a law in China that would allow the Chinese government to demand that the companies gather intelligence for its behalf. As a result, U.S. lawmakers are concerned that phones and equipment produced by the pair contain backdoors that spy on American corporations and consumers and sent that data to Beijing. Both manufacturers have steadfastly denied these allegations numerous times. This is also the reason why Huawei was placed on the U.S. Commerce Department's Entity List in May preventing it from accessing its U.S. supply chain.

ZTE also was banned from its U.S. supply chain last year after it failed to comply with Commerce Department punishments imposed on it. The company had violated U.S. economic sanctions by doing business with North Korea and Iran. The U.S. export ban severely crippled ZTE, which was the fourth-largest shipper of smartphones to the U.S. before the ban. President Donald Trump, trying to curry favor with Chinese President Xi Jinping, pushed the Commerce Department to reach a deal with ZTE. The latter paid the U.S. $1 billion, placed $400 million in escrow (to cover future violations), revamped its Board, removed certain executives, and agreed to allow the U.S. to monitor these changes.

By the end of this year, ZTE will have over 100,000 5G base stations deployed globally

The FCC voted 5-0 in favor of the ban, which will take effect within the next 31 days unless Huawei and ZTE challenge it. In that case, it could take as long as 120 days for the ban to begin. While all five members of the commission agreed to the new rules, commissioner Jessica Rosenworcel, a Democrat, had some concerns. She wondered whether the Trump administration would "undermine" the ruling as it did with the ban on ZTE. She said, "When the United States government pursues action against Huawei or ZTE, its objective should be security. But in Washington right now, I fear these issues can easily get swept up into broader trade matters. Despite our actions today, we have to grapple with the fact that at any moment the administration could trade away our security objectives for some momentary advantage in bilateral trade negotiations. I hope that does not occur, but let's be honest, it has happened before, when this administration reversed course on banning ZTE from doing business in the United States. If it happens again, it will have serious consequences for our credibility."

Huawei is the world's largest supplier of networking equipment with a 28% market share while ZTE is the fourth largest global provider.

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14 Comments

1. meanestgenius

Posts: 22468; Member since: May 28, 2014

Not surprised by this decision at all, but as Huawei has been proving, they can and will get by without being able to sell their networking equipment to U.S. companies. It’s the companies in the U.S. that stand to lose the most.

posted on Nov 23, 2019, 3:48 PM 8

2. Venom

Posts: 3821; Member since: Dec 14, 2017

I support this decision. I don't think national security should be compromised just to give Huawei and others a free pass.

posted on Nov 23, 2019, 7:22 PM 3

3. meanestgenius

So you have evidence that Huawei has been spying and has backdoors in their networking equipment? Oh wait, you don’t, just like the U.S. government....

posted on Nov 23, 2019, 9:26 PM 5

8. ScottsoNJ56

Posts: 132; Member since: Oct 01, 2017

"Huawei and ZTE are considered national security threats in the U.S. because of a law in China that would allow the Chinese government to demand that the companies gather intelligence for its behalf." I think that says it all

posted on Nov 24, 2019, 12:49 PM 0

9. meanestgenius

“There are no laws in China that obligate us to work with the Chinese government with anything whatsoever.” I took that from here: https://www.scmp.com/news/china/article/3013936/huawei-not-bound-chinese-spy-laws-companys-cybersecurity-chief-john I think this has something to say about your “that says it all.” If Huawei were truly the threat that the U.S. government is making them out to be, they would banned them years ago. This is nothing mirror than this administrations attempt to get a leg up in the trade war with China, aka BS political propaganda.

posted on Nov 24, 2019, 1:36 PM 3

10. ScottsoNJ56

They were being investigated long before this so called trade war. That says it all

posted on Nov 24, 2019, 5:02 PM 1

11. meanestgenius

The investigations have yielded no proof of spying/back doors/malicious code on the part of Huawei, only fear, speculation, and protectionism on the part of the U.S. Even wireless carriers from around the globe have stated their is no evidence of anything that I just listed on the part of Huawei: https://www.androidheadlines.com/2018/02/no-evidence-of-huawei-spying-on-anyone-wireless-carriers.html THAT says it all.

posted on Nov 24, 2019, 5:30 PM 4

12. ScottsoNJ56

I can post s**t that people say all day long doesn't make it true THAT says it all

posted on Nov 24, 2019, 6:51 PM 1

13. meanestgenius

You’re right. YOU can post sht all day and it won’t be true. What I just posted is from the network carriers themselves. I post facts. THAT says it all.

posted on Nov 24, 2019, 8:53 PM 3

14. ScottsoNJ56

You're delusional That says it all lol

posted on Nov 25, 2019, 6:12 AM 0

15. meanestgenius

And you’re weak and insecure since you had to resort to name calling because you are clearly losing here. THAT says it all lmao!

posted on Nov 25, 2019, 8:03 AM 0

4. KingSam

Posts: 1504; Member since: Mar 13, 2016

They even agreed to license their IP and have the US build their own equipment. This is all trade war. Yes I agree that it's risky to have chinese tech in their networks but there have been no evidence. If its national security and networks are the issue then why ban suppliers. Why ban Google services. You kill the company's global business for "national security"?

posted on Nov 23, 2019, 10:14 PM 2

5. speedingcheetah

Posts: 93; Member since: Jul 22, 2017

"Huawei is the world's largest supplier of networking equipment with a 28% market share while ZTE is the fourth largest global provider." Where they pull that from? I have done thousands of corporate/enterprise and cellular network installs, and maintenance. never seen a single one of them. It all Cisco, Juniper, Extreme Networks around here.

posted on Nov 24, 2019, 1:12 AM 0

6. mootu

Posts: 1539; Member since: Mar 16, 2017

The US is a country of 350 million people, the world has around 7 billion people. There are whole countries that run on Huawei or ZTE networks, just because you don't see many where you are doesn't mean that the facts arn't true. And a network engineer not knowing who the largest network provider in the world is wouldn't instill much confidence in that engineer.