The U.S. Federal Communications Commission (FCC) voted 5-0 to designate China’s Huawei and ZTE as national security risks, barring their U.S. rural carrier customers from tapping an $8.5 billion government fund to purchase equipment or services.
The U.S. telecommunications regulator also voted to propose requiring those carriers to remove and replace equipment from Huawei Technologies and ZTE from existing networks.
Huawei and ZTE will have 30 days to contest the designation and a final order compelling removal of equipment is not expected until next year at the earliest.
Huawei called the order “unlawful” and asked the FCC “to rethink its profoundly mistaken order.” It argued the FCC’s decision was based “on nothing more than irrational speculation and innuendo.”
In May, US President Donald Trump signed a long-awaited executive order declaring a national emergency and barring U.S. companies from using telecommunications equipment made by companies posing a national security risk. The Trump administration also added Huawei to its trade blacklist in May, citing national security concerns.
FCC Commissioner Geoffrey Starks, a Democrat, said it could cost as much as $2 billion to replace the equipment in U.S. rural networks.
FCC Chairman Ajit Pai first proposed in March 2018 to bar companies that posed a national security risk from receiving funds from the FCC’s Universal Service Fund, but did not name Huawei or ZTE. The fund provides subsidies to provide service in rural or hard-to-reach areas, and to libraries and schools.
The FCC argued the companies’ ties to the Chinese government and military apparatus, and Chinese laws requiring that such companies assist the Chinese government with intelligence activities, pose a U.S. national security risk.
Congress has been considering legislation to authorize up to $1 billion for providers to replace network equipment from the Chinese companies. The FCC could tap its fund to pay for replacing equipment if Congress does not act.
About a dozen rural U.S. telecom carriers that depend on inexpensive Huawei and ZTE switches and equipment were in discussion with Ericsson and Nokia to replace their Chinese equipment, Reuters reported.