The FCC’s Public Safety and Homeland Security Bureau released two similar orders on June 30 intended to protect America’s communications networks and the communications supply chain from the national security threat posed by ZTE Corporation (ZTE) and by Huawei Technologies Company (Huawei). According to the orders, effective immediately, money from the Commission’s $8 billion Universal Service Fund may no longer be used to purchase, obtain, maintain, improve, modify or otherwise support any equipment or services produced or provided by ZTE or Huawei.
The Bureau released a public notice announcing publication of initial designations of ZTE and Huawei as national security threats on Jan. 3. The federal agency said it found that they posed unique threats to the security and integrity of the United States’ communications networks and communications supply chain because of their size, their close ties to the Chinese government and the security flaws identified in their equipment. The FCC noted that the two companies’ ties to the Chinese government and military apparatus, along with Chinese laws obligating them to cooperate with requests by the Chinese government to use or access their systems and the Chinese government’s general non-adherence to the law in any event, make them susceptible to Chinese governmental pressure to participate in espionage activities.
The FCC said it also relied on reports highlighting known cybersecurity risks and vulnerabilities in ZTE and Huawei equipment, which have led other countries to bar the use of such equipment. Furthermore, steps taken by Congress and the executive branch to restrict the purchase and use of ZTE and Huawei equipment influenced the FCC to issue the orders, the Commission said, including the U.S. Department of Defense’s decision to remove ZTE and Huawei devices from sale at U.S. military bases and from its stores worldwide.
Pointing to legislation, the FCC order referred to the Secure and Trusted Communications Networks Act of 2019 (the Secure Networks Act) that became law on March 12. The Secure Networks Act directs the Commission to publish a list of covered equipment or services that pose an unacceptable risk to U.S. national security. The act requires the Commission to include on the list telecommunications equipment or services covered in the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (2019 NDAA).
This requirement includes telecommunications equipment produced by ZTE and Huawei or their subsidiaries and affiliates, as long as the equipment or service is capable of routing or redirecting user data traffic or permitting visibility into user data or packets, causing network traffic to be disrupted remotely, or otherwise poses an unacceptable risk to U.S. national security or the security and safety of U.S. persons. The Secure Networks Act further prohibits use of federal subsidy funds, such as the Universal Service Fund, to purchase, rent, lease, or otherwise obtain, or to maintain, listed communications equipment or services, and further designates reimbursement funds for eligible service providers to remove and replace such listed equipment or services.
On June 9, the National Telecommunications and Information Administration (NTIA) told the FCC that the executive branch fully supports the initial designations of Huawei and ZTE. NTIA provided the executive branch’s analysis of matters including the legal framework in China, the national security risks posed specifically by Huawei and ZTE, and the national security interests demonstrated by their violations of U.S. law.
Speaking about Huawei in July 2013 in an Australian Financial Review interview, Michael Hayden, former director of the Central Intelligence Agency and the National Security Agency, said, “I stand back in awe at the breadth, depth, sophistication and persistence of the Chinese espionage campaign against the West. … God did not make enough briefing slides on Huawei to convince me that having them involved in our critical communications infrastructure was going to be okay. This is not blind prejudice on my part. This was my considered view based on a four-decade career as an intelligence officer.”
Kadri Kaska, Henrik Beckvard and Tomáš Minárik, researchers at the NATO Cooperative Cyber Defence Centre of Excellence (CCDCOE), a NATO-accredited cyber defense hub focusing on research, training and exercises, authored “Huawei, 5G and China as a Security Threat,” a 2019 report.
“Huawei staff members have recently been linked to espionage allegations, with Australian intelligence reports in 2018 indicating that Huawei personnel were used ‘to get access codes to infiltrate a foreign network’ in an operation that took place within the last two years,” the report reads. “Canada and Poland have in recent months detained two Huawei officials, one related to the U.S. investigations involving Huawei’s chief financial officer, daughter of the founder and president of Huawei, and the other on grounds of espionage. Huawei has denied that the latter case had any relation to the company’s business. The Czech national cybersecurity authority (NCISA) relied on accessible findings of the cybersecurity community regarding Huawei and ZTE activities in the Czech Republic and around the world in issuing a warning for the use of the companies’ technologies.”
The FCC said it concluded that Huawei poses a national security threat based on its finding that Huawei is highly susceptible to coercion by the Chinese government; the risks highlighted by U.S. policymakers and the intelligence community, as well as allied nations and communications providers; and known security risks and vulnerabilities in Huawei’s equipment. The agency said it concluded that ZTE poses a national security threat based in part on its substantial ties to the Chinese government and military apparatus, as well as Chinese laws obligating it to cooperate with any Chinese government request to use or access its systems for intelligence surveillance.
Geoffrey Starks, an FCC commissioner affiliated with the Democratic Party, said the orders would help secure U.S. communications networks against new threats from Huawei and ZTE equipment. “We must not, however, lose sight of the untrustworthy equipment already in place,” he said. He stated that the FCC must establish an expedited plan for the removal and replacement of untrustworthy equipment. “That plan should seriously consider leveraging Open RAN technology, which will use standardized hardware and interoperable interfaces to enable networks to combine equipment from multiple vendors.”
The Open RAN approach, Starks said, could advance American technological leadership, enhance competition and reduce reliance on foreign vendors, all while bringing down replacement costs. He said he has long championed Open RAN technology as a potential solution to the security problem that will help to ensure that the next technological revolution advances safely and securely.
“Funding is the missing piece,” Starks said. “Congress recognized in the Secure Networks Act that many carriers will need support to transition away from untrustworthy equipment, but it still has not appropriated funding for replacements. I look forward to working with Congress and my colleagues to ensure there are sufficient funds to get the job done.”
An FCC commissioner affiliated with the Republican Party, Brendan Carr, said that the agency formally determining that Huawei and ZTE pose a national security threat is “the latest step that the FCC has taken to secure America’s communications networks from the threats posed by Communist China and bad actors that might do its bidding. Those efforts include prohibiting a company linked to Communist China from connecting to our communications networks, directing numerous other entities to show cause why their authority to remain connected to our networks should not be revoked, and launching a proceeding aimed at removing Huawei and ZTE gear from our communications networks.”
The commissioner said that the United States could not treat Huawei and ZTE as anything less than a threat to its collective security. “Communist China intends to surveil persons within our borders and engage in large-scale, industrial espionage,” Carr said. “Nothing short of prohibiting subsidized Huawei and ZTE gear from our networks could address this serious national security threat. After all, Chinese law does not meaningfully restrain the Communist regime, given its authoritarian nature.”
In Carr’s view, “the United States has turned the page on the weak and timid approach to Communist China of the past. We are now showing the strength needed to address Communist China’s threats. And our efforts will not stop here. The FCC will continue to take whatever steps are necessary to secure America’s communications networks from bad actors that would do us harm.”
Meanwhile, the Rural Wireless Association (RWA) said it was stunned by the FCC orders that finalize the designations of Huawei and ZTE as national security threats and that immediately barred the use of Universal Service Fund support to purchase, maintain or otherwise support Huawei or ZTE equipment and services in rural carriers’ networks.
“As a result, rural carriers who have deployed Huawei or ZTE equipment or services in their networks will now lack the ability to support their critical networks that are serving hundreds of thousands of rural Americans and those traveling through rural America,” an RWA statement reads. “Given the difficulty in demonstrating where specifically their USF support is being utilized in their networks, this puts rural carriers in a precarious situation while they strive to offer extended payment terms for their customers as requested by FCC Chairman Pai, adjust to the fallout of the merger of T-Mobile and Sprint, and continue to keep rural Americans connected to broadband and telephone services during the COVID-19 pandemic. RWA members appreciate the opportunity to submit waivers of this prohibition but ask the Commission to give them sufficient time to submit such waivers before pulling away their USF support, which is scheduled to start July 1.”
When she spoke in February at the Munich (Germany) Security Conference attended by foreign and security leaders, U.S. House Speaker Nancy Pelosi delivered remarks after the FCC already had initially designated Huawei and ZTE as national security threats on Jan. 3. “China is seeking to export its digital autocracy through its telecommunication giant, Huawei, threatening economic retaliation against those who do not adopt their technologies,” Pelosi said. “The United States has recognized Huawei as a national security threat by putting it on our entity list, restricting engagement with U.S. companies. Nations cannot cede our telecommunication infrastructure to China for financial expediency. Such an ill-conceived concession will only embolden [Chinese President] Xi [Jinping] as he undermines democratic values, human rights, economic independence and national security.”
Information posted on the website of the Ministry of Foreign Affairs of the People’s Republic of China includes a transcript of Foreign Ministry spokesperson Zhao Lijian’s July 1 press conference. A representative of Phoenix Television, a partially state-owned Chinese TV network, asked Lijian for a response to the FCC orders designating Huawei and ZTE as national security threats.
“The United States has made a habit of abusing its state power to oppress certain countries and companies for unjustified and untenable reasons in the absence of any evidence,” Lijian said. “Acting like a bully in the economic sector does not suit its self-portrayed image as a guardian of the market economy. Banning U.S. carriers from purchasing Huawei and ZTE products will not help improve the country’s cyber security in any meaningful way, but will certainly have profound negative effects on connectivity for Americans in rural and disadvantaged areas across the United States. The relevant U.S. agency knows that clearly.
“Once again, we urge the United States to stop making everything a matter of national security, stop its malicious slandering and accusation against China, and stop its unjustified oppression of certain Chinese companies. It should offer a fair, unbiased and non-discriminatory environment for the normal operations of Chinese companies in the United States,” Lijian said.