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Huawei and ZTE Equipment Use Must Be Reported Under FCC Order

Todd Shields

(Bloomberg) -- The Federal Communications Commission told U.S. telephone companies to report details on their use of equipment from Huawei Technologies Co. and ZTE Corp., Chinese gearmakers accused by the Trump administration of posing a risk of espionage.

The action is the next step in the FCC’s response to warnings about the the Chinese companies, which make parts vital to operating communications networks. The data can help inform further “potential actions” and will help design a reimbursement program for service providers that may need to remove and replace the gear, the FCC said in a news release.

Huawei equipment is cheaper than competitors’ and is popular with smaller, rural U.S. telecommunications providers, which often rely on government subsidies.

The FCC in November barred subsidy recipients from buying equipment made by carriers such as Huawei and ZTE. Wednesday’s action will help “to protect our networks and protect the American people,” FCC Chairman Ajit Pai said in the release. Carriers receiving subsidies must report to the FCC by April 22, the agency said.

The agency is considering making final its initial designation that Shenzhen-based Huawei and ZTE pose a national security threat. The agency also has proposed requiring the removal of existing equipment from providers deemed to pose a threat.

U.S. officials, diplomats and lawmakers have said Huawei and ZTE pose an espionage threat, especially as networks are transformed into faster 5G systems that can share masses of information quickly.

The campaign has stumbled, with Britain and the European Union recently rebuffing pleas from top aides to U.S. President Donald Trump, and deciding that Huawei could play a role in their 5G networks.

Huawei and ZTE have denied they pose a risk. Huawei in a Feb. 3 filing said the FCC’s actions were designed to implement a campaign “by certain government officials” that want to “single out Huawei for burdensome and stigmatizing restrictions, put it out of business in the United States, and impugn its reputation.”

The Rural Wireless Association in a Feb. 3 filing told the FCC that small carriers might be forced to shut service in some markets if they can’t spend subsidy funding on networks that include the equipment. The trade group said some older, slower networks should be allowed to operate until they wear out.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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