Telecom aid barred for Chinese gear

WASHINGTON — U.S. telecom and internet providers can no longer use federal subsidies to buy network equipment from Chinese suppliers Huawei or ZTE, and might be forced to rip out existing gear at a cost of more than $2 billion, the Federal

Communications Commission ruled Friday.

“Given the threats posed by Huawei and ZTE to America’s security and our 5G future, this FCC will not sit idly by and hope for the best,” FCC Chairman Ajit Pai said during a public meeting at the agency’s headquarters.

The five FCC commissioners unanimously concluded that the national security risks of using the Chinese equipment are too great, and backed an order barring the use of $8.5 billion in annual subsidies to buy the gear.

The commissioners also voted to consider requiring subsidy recipients to remove and replace existing Chinese gear in their networks.

In a statement, Huawei called the order illegal because it singles out the company as a national-security threat without presenting any evidence, violating “bedrock principles of due process.” The order, Huawei said, “is based on nothing more than irrational speculation and innuendo.” Huawei repeated it’s oft-stated willingness to work with the FCC and “other U.S. agencies” to develop ways to protect communications security.

Use of Huawei and ZTE gear isn’t widespread in U.S. phone and internet networks. It is largely limited to small, rural telecom providers that have purchased the equipment over the years because it was cheaper. Those rural

companies rely on federal subsidies to make ends meet.

Small carriers have said a ban would deny them good, cheap equipment used to offer broadband in remote areas. They asked the FCC to make clear that they would be able to maintain existing equipment until it can be replaced.

If the FCC does ultimately force rural carriers to replace Chinese gear, it plans to establish a reimbursement program to help cover the cost, Pai said.

Commissioner Geoffrey Starks estimated the cost of removing and replacing the equipment in roughly two dozen rural networks could be $2 billion or more.

The FCC proposed setting up a program to reimburse the costs of replacing the gear, and estimated the expense at $160 million to $960 million, according to its order prepared for Friday’s meeting.

Separately, Congress is considering legislation to help small carriers purge

their networks of parts from Huawei and ZTE. A House bill would provide $1 billion, and a Senate measure offers $700 million, according to a summary distributed by FCC Commissioner Geoffrey Starks.

The FCC vote reflects concern among U.S. officials that China’s ruling Communist Party could tap into Chinese telecom gear to spy on or disrupt U.S. communications — concerns that Beijing and the Chinese companies have rejected.

Chinese gear “could suck up data, disrupt service or launch denial-of-service attacks,” Commissioner Jessica Rosenworcel said before supporting the measure. “I have only one complaint with this effort — that it took us so long to get here.”

Supporters of the FCC ban say the time is right to impose restrictions as the industry begins installing infrastructure for 5G, a next-generation network that could enable a profusion of applications including autonomous vehicles and connected homes and factories.

Because there could be billions of connected devices

on 5G, fears have been raised that so many points of vulnerability could be exploited by bad actors. The government is wary of employing foreign technology for vital communications for fear that the manufacturers could leave a back door that enables outsiders to access information, or that the companies themselves would hand over sensitive data to their home governments.

President Donald Trump has backed the spread of fast 5G networks, and said in a tweet Thursday that he had asked for help from Apple Inc.’s chief executive officer, Tim Cook, in building the U.S. networks.

“We do not have a coordinated national strategy in place for 5G, and we need one,” said Rosenworcel. She called for research into secure networks, and more vetting of devices to ensure they’re not vulnerable to exploitation.

Huawei is the world’s biggest supplier of telecom gear as well as a major cellphone manufacturer. The U.S. government has said that Huawei poses an espionage threat, but has

presented no evidence of its equipment being used for spying by the Chinese government. The U.S. has been pressuring allies to ban Huawei from their networks and has restricted exports of U.S. technology to Huawei, though numerous loopholes have been exploited.

The arguments over Huawei have been heightened by Trump’s apparent willingness to use the firm as a bargaining chip in his ongoing trade war with China, concerning critics who said trade talks should not be tied to national-security questions.

On Monday, the Commerce Department said that it would extend a temporary license that allows U.S. companies to continue working with Huawei, despite the export restrictions linked to its presence on the so-called entity list.