Subsidies for Huawei Gear Would Be Banned Under FCC Proposal

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(Bloomberg) -- Regulators set a vote on preventing U.S. government subsidies from being spent on gear from Huawei Technologies Co., ratcheting up pressure on the Chinese supplier already targeted as a security risk by the Trump administration.

The Federal Communications Commission is to vote Nov. 19 on the proposal from FCC Chairman Ajit Pai, the agency said in a news release. The proposed bar also would apply China’s ZTE Corp., and the FCC is to consider requiring U.S. companies to remove gear from the Chinese gear makers.

Huawei’s customers in the U.S. are largely limited to small carriers that rely on federal subsidies.

Pai said the proposal aims to make sure networks are secure as the country moves toward advanced, ultrafast 5G wireless systems.

“When it comes to 5G and America’s security, we can’t afford to take a risk and hope for the best,” Pai said. “We need to make sure our networks won’t harm our national security, threaten our economic security, or undermine our values. The Chinese government has shown repeatedly that it is willing to go to extraordinary lengths to do just that.”

Next month’s vote is intended to formalize the agency’s proposal last year to bar U.S. telecommunications subsidies from being spent on companies that pose a national security threat. It comes after continued ferment by U.S. diplomats and lawmakers who say Huawei poses a threat of espionage.

An FCC Democrat called for further steps.

“We need cybersecurity policies that target all our network providers,” Jessica Rosenworcel, the agency’s senior Democrat, said in an emailed statement. “In addition, we need to be mindful that in a global economy, our networks will still connect to insecure equipment abroad. So we should start researching how we can build networks that can withstand connection to equipment vulnerabilities around the world.”

Huawei argues the measures will hurt small carriers in rural areas. “Banning specific vendors based on country origin will do nothing to protect America’s telecommunications networks,” Huawei said in an emailed statement, adding that the company “remains open” to talks with Washington on the matter.

In a June filing, the company told the FCC that targeting specific vendors isn’t a sufficient step to ensure that telecommunications gear is secure, and may also cause violate international trade obligations.

Small carriers have said a ban would deny them good, cheap equipment used to offer broadband in rural areas.

Rural providers will need to be able to continue to use subsidies to support their networks until equipment from Huawei and ZTE can be replaced, Caressa Bennet, general counsel of the Rural Wireless Association, said in an email.

President Donald Trump’s administration in May moved to restrict U.S. companies from doing business with Huawei and ZTE. The administration has said Huawei gear could be used for spying -- an allegation denied by the Shenzhen-based company.

Five months after the action by Trump and the Commerce Department, the U.S. government has issued temporary licenses allowing some sales to Huawei, and American firms still aren’t sure whether they can work with the Chinese company, Bloomberg News reported Oct. 21.

U.S. and Chinese negotiators are working on a pause in an 18-month trade war that has hurt the economies of both countries, but falls short of the dramatic overhaul of Chinese economic policy Trump has sought. The agreement also doesn’t address Huawei.

©2019 Bloomberg L.P.

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