US FCC to vote on excluding China Mobile from telecom market

4 min read
(Image credit: BigStock/TK Kurikawa)

At its May open meeting that will be held on Thursday, the United States Federal Communications Commission (FCC) will vote on an order to stop a Chinese state-owned carrier from providing telecommunications services in the US.

China Mobile USA, a subsidiary of China Mobile, filed an application in September 2011 to the FCC to carry international voice traffic between the US and other countries. The company stated that it doesn’t intend to provide telecom services within the US.

Now, nearly eight years later, the FCC will make its final decision on the application—the outcome doesn’t look good for the Chinese carrier.

Last month, FCC Chairman Ajit Pai said that he did not believe that approving China Mobile’s application would be in the public interest, citing national security concerns.

“It is clear that China Mobile’s application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks,” said Pai.

He also appealed to his colleagues to join him in voting to reject the application. Pai’s party, the Republican Party, holds three of the five commission seats.

Major risk

The draft order to be voted on Thursday cited national security risk as the reason for rejecting China Mobile’s application. It also implied China Mobile might be controlled by the Chinese government to conduct computer intrusions and attacks against the US.

“The Executive Branch agencies identify significantly enhanced national security and law enforcement risks linked to the Chinese government’s activities since the Commission last granted international Section 214 authorizations to other Chinese state-owned companies more than a decade ago,” said the draft order.

The FCC requires any person or entity that provides telecoms services to or from the US to receive an authorization under Section 214 of the Communications Act of 1934. This authorization is called an international Section 214 authorization, which China Mobile USA’s 2011 application was filed to obtain.

The US government also made a similar allegation against another Chinese telecom company, Huawei. The Trump administration has banned Huawei equipment in the construction of US cellular networks over concerns that the company could be compelled by the Chinese government to spy or for sabotage.

Whether Huawei is controlled or even owned by the Chinese government has been difficult to assess due to its vague organizational structure. The ownership of China Mobile, however, is clear.

China Mobile USA discloses in its application that its indirect controlling parent company, China Mobile, is 100% owned by the Chinese government, and China Mobile was subject to the supervision of the State-Owned Assets Supervision and Administration Commission, a Chinese government body.

China Mobile USA is owned by China Mobile International, a Hong Kong-based subsidiary that is wholly owned by China Mobile.

China Mobile USA argued that as a business registered in Delaware, California, it was immune from the Chinese government’s influence and control, the draft order revealed.

However, the executive branch agencies said that China Mobile USA’s status as a US-registered company “does not diminish the national security and law enforcement risks associated with the indirect ownership and control of China Mobile USA by the Chinese government.”

China Mobile USA did not respond to TechNode’s request for comment. An FCC representative declined to comment and said all information could be found in the draft order that was listed on the commission’s website.

China opens, US shuts

In a letter sent on May 1 to FCC Secretary Marlene Dortch, counsel for China Mobile USA Kent Bressie said that the company believed that the draft order was guided more by tensions in the bilateral US-China relationship than by American commitments to market access, transparency, and timeline elements in basic telecommunications under the General Agreement on Trade in Services.

Wang Chunhui, a professor at Nanjing University of Posts and Telecommunications, told TechNode that the US should be a free market, where the government should decide whether to accept foreign carriers to provide telecoms services by bidding processes, rather than administrative instructions.

“FCC’s voting on the order to deny China Mobile’s application without any legal processes will compromise the US’s principle of the rule of law, and also disagrees with international trade rules,” said Wang.

Legal precedents do exist: BT (British Telecom), Deutsche Telekom of Germany, and Telekomunikasi Indonesia International of Indonesia all have carrier businesses in the US.

As the US shuts its doors to Chinese telecom companies, China, by comparison, is opening its telecom industry up for foreign company participation.

The total number of foreign-invested telecom firms with operation permits in China totaled 121 at the end of 2018, up 39% year on year, according to Chinese state-run news agency Xinhua, citing data from the China Academy of Information and Communications Technology.

BT in January became the first non-Chinese telecom firm to get a nationwide operating license in China. The company attained two licenses that allowed it to provide internet connection services to domestic clients.

Though the licenses don’t allow BT to provide mobile phone service in China, where the wireless carrier market is dominated by three state-owned carriers, China Mobile, China Telecom, and China Unicom, it could signal that China is opening up its telecom sector to foreign companies, the same report from Xinhua said.