Huawei says roadblocks to US market are being constructed by its rivals

As the trade tensions between the US and China heat up, Huawei is striking back against a proposal by the US Federal Communications Commission (FCC) that would prevent the companies that use Huawei equipment from accessing US federal funds aimed at developing telecommunications.

The Commission’s proposed rule would forbid US carriers that use equipment thought to pose a national security threat from receiving money from the Universal Service Fund (USF) that subsidizes carriers to provide broadband service to parts of the country with little or no internet access.

The 69-page-long comments published on July 2nd is Huawei’s second filing on this to the FCC. However, what is new about the document is that it claims that those who support FCC’s proposed ban on funds are mostly Huawei’s competitors.

“Those parties encouraging the Commission to blacklist a handful of companies from supplying equipment or services to Universal Service Fund (USF) support recipients are largely those companies’ competitors, who would directly benefit from such a rule,” wrote the company.

“Arbitrary and capricious”

Huawei argues that its facing restrictions based solely on misperceptions about Huawei’s relationship with the government of China and called the proposed rule “arbitrary and capricious.”

The company also said that the high costs of replacing or purchasing telecommunications equipment could harm Americans in remote and low-income areas. The proposed benefits target only one potential threat—that the product they sell is deliberately compromised by the manufacturer—and this threat is speculative, said Huawei. If allowed to sell equipment Huawei could save the US at least $20 billion in building mobile infrastructure between 2017 and 2020.

“Conversely, restrictions on Huawei will result in excessive profits for a handful of other equipment suppliers in this highly concentrated market, which will give those companies an incentive to transfer their US profits to improve their positions in other countries where they face more vigorous competition.”

Huawei also repeated that the proposed rule exceeds the Commission’s authority which does not include national security concerns and that it violates its rights to a hearing and other procedural rights. The rule also ignores the fact that every seller of telecommunications equipment relies on Chinese-manufactured components, the company adds.

Interestingly, back in 2016, Huawei itself released an extensive report on supply chain security saying that governments need to pick trusted suppliers since hostile actors can “insert malicious, unwanted and unauthorized functions or counterfeit elements or components into the global ICT supply chain, which could later be used to disrupt or degrade technology systems or to facilitate surveillance.”

Huawei’s resistance against the proposed fund access ban has been underway since the proposal in March. The company submitted its first filing to the FCC at the beginning of June in which it also criticized NPRM for failing to understand that blacklisting of companies based on their country of origin is inefficient.

Huawei US Security Chief Donald A. Purdy Jr. said in a recent article published by Forbes that stated that attackers don’t need to be in the US physically to launch a cyber attack, nor do they need to have telecommunications equipment present in the country.

“Because threats can originate anywhere, managing cyber risk is daunting,” said Purdy.

“Programmable code can be implanted in hardware and software by virtual means, allowing malicious actors to conduct surveillance or launch an attack whenever and however they choose,” he said, adding that the risk from all providers must be assessed.

Growing US suspicion

Huawei is already fighting another piece of legislation that would prohibit US federal agencies and contractors from doing business with Huawei and ZTE. The amendment to the National Defense Authorization Act which lays out the budget to the US Defense Department was proposed in June. In May, the Pentagon banned ZTE and Huawei products from being sold on military bases.

The company’s troubles started in 2012 when a government report was published stating that “Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems.”

Its failed partnership with telecom carrier AT&T in January this year was followed by Best Buy’s announcement to stop selling Huawei phones. In March, a report from Bloomberg revealed that three US government agencies are investigating Huawei for violating sanctions banning sales to Iran. The investigation grew out the probe into ZTE which concluded with a ban on trading with US companies.

The company’s partners are also facing pressures as five US lawmakers wrote letters to Google’s Sundar Pichai to reconsider their relationship with Huawei. The letter came as a reaction to Google’s announcement that it will not work with the US military.

The Chinese telecommunications giant has recently faced another serious allegation about buying data on Western users from Facebook. Huawei has denied the claims.

Huawei’s troubles have been spilling out from the US to Australia. Local lawmakers and media have been debating whether Huawei’s participation in a 5G mobile telecommunications roll-out would pose a security threat. Sino-Australian relationships have been strained during the past year over Beijing’s influence in domestic affairs and it seems unlikely that Huawei will catch a break.