Broadband Leaders Push Back on Proposed Ban on ZTE, Huawei Gear

(Bloomberg) -- Trade groups representing the leading American broadband and wireless providers told the the Federal Communications Commission to go slow as it weighs banning the use of federal subsidies to purchase gear from Huawei Technologies Co. and ZTE Corp.

The FCC shouldn’t act before the Department of Homeland Security identifies equipment that might pose a threat to networks, one of the trade groups, USTelecom, which represents broadband giants AT&T Inc. and Verizon Communications Inc., said in a filing.

CTIA, a wireless trade group with members including the two carriers, called the FCC’s legal authority to act on the issue “unclear.” It said the FCC “can play an important, but consultative, role” and shouldn’t make its own security determinations.

The FCC is considering the proposal, advanced by its chairman, Ajit Pai, to bar use of funds from a program that subsidizes wireless service in rural areas to buy equipment or services from companies determined to be a risk to U.S. national security.

Huawei in a filing characterized the FCC’s proposal as “blacklisting a handful of suppliers” and called it “both improper and imprudent” because it exceeds the agency’s authority and relies on “unverified and unsupportable factual allegations.”

The FCC’s move follows increased scrutiny of Huawei and ZTE by American officials over fears that gear could be used for spying. President Donald Trump last month said he will soften a ban on component sales to ZTE, imposed over violations of sanctions on Iran and North Korea. Lawmakers in both parties have expressed concern over Trump’s decision.

The ZTE dispute is now entangled in a trade dispute between the world’s two largest economies, with Chinese officials pressing the U.S. to lift the ban. The moratorium has all but mothballed China’s second-largest telecoms gear maker because it depends on U.S. components -- such as Qualcomm Inc. chips -- to build its smartphones and networking equipment.

The turmoil creates a potential roadblock in the race between Verizon and AT&T, which may want to use Chinese gear as they offer 5G, the next generation of super-fast mobile service that will be used in everything from phones to autonomous cars.

USTelecom, in its filing, said the FCC and Homeland Security should work together to determine if equipment that doesn’t redirect or inspect data poses the same threat as “smart” equipment, “which may pose a more instant and impactful threat.”

Network providers should be allowed to use existing equipment over the component’s reasonable life cycle, the Washington-based trade group said.

Another broadband providers’ trade group, ITTA, with members that include CenturyLink Inc., called the proposal “misguided” in a filing.

"Addressing these concerns should continue to be left to governmental departments and agencies with expertise on national security matters rather than the FCC," ITTA said.

The Telecommunications Industry Association, representing gear makers including Intel Corp., Nokia OYJ, Ericsson AB, and Microsoft Corp., said it supports the FCC’s proposed ban.

FCC action “will set an example for other federal agencies, advance the discussion among policymakers in Congress and the executive branch, and guide the actions of other regulators around the world,” the association said. “In this rapidly-evolving environment, the commission is right to recognize that it has an important but targeted and specific role to play.”

Brian Hart, an FCC spokesman, declined to comment.

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