US to vote on barring Huawei, ZTE gear from subsidy program

2 min read
ZTE booth at the Mobile World Congress in Shanghai 2019. (Image credit: TechNode/Shi Jiayi)

The Federal Communications Commission will hold a vote on whether to ban US carriers from receiving federal subsidies when purchasing equipment from Chinese telecom equipment makers Huawei and ZTE, the Wall Street Journal reported on Monday.

Why it matters: If passed, the move would eliminate Huawei’s and ZTE’s sales to US carriers⁠—primarily rural carriers that source cheaper equipment.

  • Huawei already provides its gear to around a quarter of smaller American carriers. The Rural Wireless Association trade group said that the move could cost its members between $800 million and $1 billion to replace Huawei and ZTE products.
  • The US federal government subsidizes companies that offer broadband services in rural areas via the $8-billion-a-year Universal Service Fund supported by fees tacked onto individual phone bills.

Details: FCC chairman Ajit Pai proposed the order on Monday which names Huawei and ZTE as national security threats, and creates a process by which to designate other companies which pose a threat. The vote will take place at the FCC’s Open Meeting on Nov. 19.

  • Huawei lashed out against the FCC’s decision in a statement sent to TechNode on Tuesday, saying that a ban on specific vendors based on country of origin would not help protect American telecom networks.
  • The proposal “only impacts the broadband providers in the most unserved or underserved rural areas of the United States,” the company said. “Such action will further widen the digital divide; slowing the pace of economic development without further securing the Nations’s telecommunications networks.”
  • The proposal would bar US firms from buying equipment from the two Chinese companies using money from the federal fund.
  • If passed, the ban could take effect within 30 days, though it could take as long as 120 days if Huawei or ZTE voice an objection.
  • An FCC official said the agency is working to collect information on the costs that rural carriers would face to comply and how much funding has been paid out for ZTE or Huawei equipment in the past, according to the report.
  • The agency is also considering forcing US companies to remove Huawei and ZTE equipment from their existing networks. Pai called the use of their gear an “unacceptable risk” in a commentary published on Monday.
  • A ZTE spokeswoman declined to comment on the matter.

Huawei revenue for the first 3 quarters rises 24% despite US blacklisting

Context: Huawei was put on a US trade blacklist in May, effectively barring American companies from selling the telecom giant equipment and technology. A similar ban was imposed on ZTE in April 2018 and has since been lifted.

  • A federal bill signed by US President Donald Trump in August 2018 banned the federal government from purchasing equipment from Huawei and ZTE, citing national security concerns.
  • Despite the restrictions, ZTE said on Tuesday that it has secured 35 commercial contracts worldwide for next-generation 5G networks.
  • Huawei said on October 16 that it had signed more than 60 commercial 5G contracts globally.

Updated: the article was updated to include comments from Huawei.