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Tuesday, April 17, 2018
U.S. FCC Targets Huawei and ZTE With New Equipment Spending Controls

The Federal Communications Commission moved to extend a crackdown on China equipment makers as security risks, backing a ban on federal subsidies to buy networking gear from manufacturers such as Huawei Technologies and ZTE.

The FCC voted on Tuesday in favor of banning federal funds from being spent with companies determined to be a risk to U.S. national security.

"Threats to the nation's communications infrastructure from certain equipment providers have been a longstanding concern of those in both the Executive Branch and Congress. While the FCC alone can't safeguard our networks from these threats, it does have an important role to play in addressing this problem," the FCC said.

The FCC is seeking comment on a proposal to prohibit use of Universal Service Fund (USF) on the purchase of equipment or services from any company that "poses a national security threat to the integrity of U.S. communications networks or the communications supply chain."

The FCC also seeks comment on what types of equipment and services should be covered by the proposed rules.

"For years, U.S. government officials have expressed concern about the national security threats posed by certain foreign communications equipment providers in the communications supply chain," FCC Chairman Ajit Pai said. "Hidden 'backdoors' to our networks in routers, switches, and other network equipment can allow hostile foreign powers to inject viruses and other malware, steal Americans' private data, spy on U.S. businesses, and more."

President Donald Trump has threatened tariffs on $150 billion in Chinese imports in retaliation for alleged violations of intellectual property rights, while Beijing has vowed to retaliate on everything from American soybeans to planes. On Monday, the Commerce Department blocked ZTE from exporting sensitive technology from America, alleging the company made false statements to U.S. officials.

The U.S. Congress has also barred the Pentagon from buying gear from Huawei, ZTE and the Russian firm Kaspersky Lab.

The U.S. stance against Chinese networking equipment companies is threatening for them, as major wireless carriers prepare to roll out 5G networks worldwide.

Monday's decision to block ZTE from exporting sensitive technology from America is very negative for ZTE, as the Chinese company uses U.S.-made components - mainly made by Qualcomm - in gear provided to major clients like China Mobile Ltd. and Europe's Telefonica SA.

Following the ZTE ban, China's Ministry of Commerce on Tuesday said it would take necessary measures to protect the interests of its companies. And ZTE said it was aware of the sanctions and evaluating their impact.

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