U.S. FCC Moves Toward Banning More Chinese Wireless Carriers
FCC Moves Toward Barring China Phone Operator From U.S. Over Security
(Bloomberg) -- The U.S. Federal Communications Commission moved toward barring China Unicom (Hong Kong) Ltd. and ComNet from the U.S., calling the Chinese telecommunications carriers a security risk controlled by Beijing.
The action against two of China’s three major telecommunications operators was decided by a 4-0 vote by agency. It continues a security crackdown that earlier touched Chinese gear makers Huawei Technologies Co. and ZTE Corp. In 2019, the FCC barred China Mobile Ltd. from the U.S. market over national security concerns.
ComNet, a subsidiary of Pacific Networks Corp., and the unit formally known as China Unicom (Americas) Operations Ltd. were told in April by the FCC to show they are independent from the Chinese government, or face a proceeding that could result in ejection from the U.S. market. With its vote Wednesday the FCC began those proceedings.
“These companies are indirectly owned and controlled by the Chinese government,” Acting Chairwoman Jessica Rosenworcel said at the meeting. “There is strong reason to believe that they will have to comply with requests from the Chinese government and advance its goals and policies.”
The move is another sign the Biden administration doesn’t plan to alter course when it comes to China, pushing ahead with measures started under Donald Trump, whose tenure was marked by a willingness to confront Beijing over longstanding grievances. The integrity of U.S. phone networks has emerged as a key point of contention as the world’s two largest economies continue to joust over a range of issues, including network security, trade and responsibility for the spread of the coronavirus.
The Chinese companies may present evidence in proceedings set in motion by the vote, the FCC said in news releases. Rosenworcel said U.S. agencies had “recommended to us that there are not mitigation measures that would be able to address this problem.”
China Unicom said in a statement after the FCC action that it has operated in the U.S. for nearly 20 years through a subsidiary that fully complies with the law. It said it “expects a thorough, fair and fact-based review of the company’s conduct by the FCC.”
In a June filing, China Unicom said it had followed rules and there was no basis to oust it from the U.S.
China’s three major state-owned carriers -- China Mobile Ltd., China Telecom Corp. and China Unicom -- have seen their shares whipsawed since the U.S. started targeting them last April. The New York Stock Exchange delisted the companies in January to comply with an executive order by Trump, triggering more declines in Hong Kong, but much of those losses have been recouped since, buoyed by growth in China, where they operate most of their business.
China Unicom rose as much as 2.4% Thursday in Hong Kong.
Contention Point
In a June 1 filing, Pacific Networks and ComNet told the FCC their operations aren’t subject to Chinese government control. They said their “successful business records have been matched by their record of compliance with the commission’s regulatory requirements.” Their parent company is state-owned Citic Group Corp., the companies said.
Citic Group didn’t immediately respond to emails requesting comment Thursday. Comnet didn’t reply to an email.
The FCC earlier commenced a proceeding asking whether to end China Telecom (Americas) Corp.’s permission to operate in the U.S.
U.S. security agencies in a Nov. 16 filing at the FCC said China Unicom is controlled by Beijing “and therefore is vulnerable to exploitation, influence, and control by that government.” Its operations in the U.S. provide opportunities for economic espionage, theft of trade secrets, and the potential for disrupting U.S. communications, officials with the Justice Department and Commerce Department said in the filing.
China Unicom links to U.S. networks at 11 places where it has installed routers, according to the security agencies’ filing. The company leases circuits from U.S. carriers, and has relationships with AT&T Inc., Verizon Communications Inc. and CenturyLink Inc., according to the filing.
In a separate Nov. 16 filing to the FCC that addressed Pacific Networks and ComNet, the U.S. agencies cited “potential use of Chinese information technology firms as routine and systemic espionage platforms.” Ownership by government-controlled Citic raises concerns the companies “will be forced to comply with Chinese government requests, including requests for communications intercepts,” the agencies said.
The Senate’s Permanent Subcommittee on Investigations in a report issued June 9 branded Chinese government-owned carriers as a threat, and urged the FCC to complete its review of the companies’ status in a “timely” manner.
Separately Wednesday, the U.S. Commerce Department issued subpoenas for multiple but unnamed Chinese communications providers as part of a review into potential national-security risks. The department called the subpoenas an important step for collecting information to make a determination for possible action to protect the security of American companies and workers, and said that it hopes to work cooperatively with the companies in the review.
©2021 Bloomberg L.P.