Almost every Chinese company in the mobile industry is looked at suspiciously by the U.S. government. Huawei and ZTE, both of which produce phones and networking equipment, are considered national security threats in the U.S. That's because both firms have ties to the communist Chinese government and the fear in the states is that these companies add back doors to their products that secretly collect information and send it to Beijing. Both companies have denied this and no back door has ever been found in any Huawei or ZTE product.
U.S. agencies cite ties between China Telecom and the communist Chinese government
The U.S. placed Huawei on the Commerce Department's entity list last May for security reasons preventing the company from accessing its U.S. supply chain. As a result, Huawei cannot license Google Mobile Services and that prevents it from installing Google's core Android apps on its phones. That doesn't matter in China where most of Google's apps are banned anyway, but it does impact Huawei's global sales.
Bloomberg reports that U.S. security agencies want the FCC to ban China Telecom from operating in the states. The wireless operator is the second largest in China with 336 million subscribers and in the U.S. it offers companies secure bandwidth to transmit highly sensitive data under the CTExcel name. The latter is headquartered in Herndon, Virginia and has offices in New York, Los Angeles and other cities in the country. Monthly plans start at $19 and include a free SIM card. Depending on the plan, subscribers get a certain amount of 4G LTE data; once that data cap is surpassed, the account still has unlimited data although it is at a lower data speed.
CTExcel subscribers also get dual phone numbers (one in China, one in the U.S.) and the web site states that these accounts offer "Unlimited free international call to Peoples Republic of China (including HK, Taiwan, and Macau), Canada, Mexico, India, Singapore, Japan, Korea, Thailand, Malaysia, Indonesia, Vietnam, Australia, New Zealand, England, France, Germany, Pakistan, Bangladesh, Laos, and Russ. The website can be accessed right here.
In a filing, the security agencies claimed that the Chinese government has "ultimate ownership and control" of the carrier. And its U.S. operations "provide opportunities for increased Chinese government-sponsored economic espionage." China Telecom fueled the U.S. agencies' suspicions by giving incorrect information about where it stores its records. And the agencies are concerned because there are 18 points at which China Telecom connects to the internet giving "Chinese government-sponsored actors with openings to disrupt and misroute U.S. data and communications traffic." The agencies behind the filing include the Departments of Justice, Homeland Security, Defense, State, Commerce, and the U.S. Trade Representative. Together, they wrote that "This recommendation reflects the substantial and unacceptable national security and law enforcement risks" that would result if China Telecom was allowed to continue its U.S business.
Of course, the Chinese are not pleased. According to Reuters, Chinese foreign ministry spokesman Zhao Lijian said that the U.S. needs to stop politicizing commercial matters. The spokesman said, "We urge the United States to respect market economy principles, to cease its mistaken practices of generalizing national security and politicizing economic issues, and to cease unjustifiable oppression of Chinese companies."
As you might expect, China Telecom has denied these claims. A China Telecom representative named Ge Yu stated, "The company has always been extremely cooperative and transparent with regulators. In many instances, we have gone beyond what has been requested to demonstrate how our business operates and serves our customers following the highest international standards."
Since 2007, China Telecom has had authorization to conduct business in the U.S. market. Last year, China Mobile sought FCC permission to act as a reseller of wireless service connecting U.S. customers and international wireless users. Not surprisingly, FCC Chairman Ajit Pai opposed the application.