Citing National Security, FCC Blocks Huawei and ZTE From Federal Subsidies

The Verge is reporting that the Federal Communications Commission (FCC) has voted unanimously to block telecom companies from using federal funds to purchase equipment from Huawei or ZTE.

The Universal Service Fund (USF) provides $8.5 billion a year in subsidies for carriers to provide wireless services throughout the United States, especially in rural areas. Under the new ruling, carriers would not be able to use money from the USF to purchase equipment from the two companies, both whom have been deemed a threat to national security.

Huawei and ZTE have both been blacklisted by the U.S. government. In ZTE’s case, the company ran afoul by selling to North Korea and Iran, in violation of sanctions. The restrictions on ZTE were eventually eased in exchange for a $1 billion fine. Huawei, on the other hand, has been accused of being a possible conduit for spying by the Chinese government. Under Chinese law, all companies are required to help the government when prompted. Huawei, however, has been accused of much closer ties to the government and intelligence agencies than the average Chinese corporation.

Rural carriers may be hit especially hard by the FCC’s decision, as Huawei is widely considered to be one of the most cost-effective solutions, saving companies millions of dollars. The FCC may go even further, however, having voted to consider requiring rural carriers to remove installed Huawei equipment for alternatives.

At the hearing, FCC commissioner Brendan Carr said: “After all, if equipment poses a threat, it is not enough to stop subsidizing it. It must come out of the network.”

Huawei continues to deny it is a threat and has denounced the FCC’s ruling.

“Huawei believes this order is unlawful as the FCC has singled out Huawei based on national security, but it provides no evidence that Huawei poses a security risk,” a company spokesperson said in a statement.

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