FCC Formally Bars Huawei, ZTE from U.S. Telecom Supply Chain

Chinese telecom giants Huawei and ZTE, long alleged by U.S. officials to be glaring threats to national security, are now formally designated personae non gratae as equipment suppliers, the Federal Communications Commission (FCC) said.

The formality updates a foregone finality. Last November, the FCC’s decision to bar U.S. companies from tapping the agency’s $8.3 billion Universal Service Fund to buy gear from entities threatening the country’s communications infrastructure set a foundation for the new decree as orated by the FCC’s Public Safety and Homeland Security Bureau. The text of the Huawei order is here and the ZTE order is here.

Both Huawei and ZTE had been tagged as unacceptable suppliers years earlier over Congressional concerns--reinforced by a 2017 Chinese law mandating citizens disclose sensitive information to the government--that each company could pry open U.S. network vulnerabilities if so prodded.

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FCC chairman Ajit Pai said the agency considered the “findings and actions” of Congress, the executive branch, the intelligence community, allies, and foreign telecom service providers in drafting and posting the order. “Both companies have close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services,” he said. “We cannot and will not allow the Chinese Communist Party to exploit network vulnerabilities and compromise our critical communications infrastructure.” Pai said the “totality of evidence” included filings submitted in the record by Huawei and ZTE.

Considering that Huawei is by far the world’s largest telecom supplier, striking it and ZTE from the U.S. supply chain opens a super highway for other companies to take command of the nation’s 5G network build outs. And, it delivers new opportunities for managed security service providers (MSSPs) versed in telecom. The stakes are high--spending on 5G-related network equipment will hit $26 billion in 2022, up from $528 million in 2018, delivering a compound annual growth rate of 118 percent, researcher IDC estimates.

FCC Commissioner Geoffrey Starks said it is not enough to merely list Huawei and ZTE as telecom adversaries but installations carrying their equipment need to be removed and replaced to fully diminish the threat. “Today’s actions will help secure our networks against new threats from Huawei and ZTE equipment,” he said. “We must not, however, lose sight of the untrustworthy equipment already in place. Last year, I called for the FCC to find the untrustworthy equipment in our networks, to fix the problem by instituting a replacement program, and to fund the replacement of that equipment. Find it. Fix it. Fund it. The Commission has taken important steps toward identifying the problematic equipment in our systems, but there is much more to do.”

Concern over the security of Huawei’s technology hasn't been confined to the U.S. Similar worries and actions have taken root in the U.K., Australia, Canada and Germany. A year ago, Congress urged European countries to refrain from using Huawei to build new 5G telecom networks. And, two years ago, both Huawei and ZTE faced intense scrutiny for allegedly trying to skirt U.S. sanctions on Iran.

Huawei and ZTE have previously pushed back on the accusations and could make some noise over the FCC’s move. In May, 2019, Huawei said it will sign a “no-spy agreement” with foreign governments to reassure skeptical lawmakers in Europe that it will not allow surveillance access into its technology. The olive branch went nowhere. In December, 2018, Huawei said it could spend upwards of $2 billion to overhaul its global software systems and reboot its cybersecurity efforts, hoping the investment might address fears in Europe that the company’s wireless equipment is tied to Chinese government surveillance. Officials' upturned eyebrows didn't relax.

Last December, Huawei said it would sue the FCC in the wake of its initial designation as a national security threat.

D. Howard Kass

D. Howard Kass is a contributing editor to MSSP Alert. He brings a career in journalism and market research to the role. He has served as CRN News Editor, Dataquest Channel Analyst, and West Coast Senior Contributing Editor at Channelnomics. As the CEO of The Viewpoint Group, he led groundbreaking market research.