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More Chinese telcos in the sights of US regulators

(ATF) US regulators have begun legal proceedings that could block three more Chinese state-owned telecom companies of the right to operate in the United States.

The three firms – China Unicom America, Pacific Networks and ComNet – failed to adequately prove their American operations were not subject to “undue influence” from Beijing, the Federal Communications Commission said last week.

FCC officials voted 4-0 to begin an investigation that could see the three companies stripped of their right to operate in the US.

“The threat to our networks from entities aligned with Communist China is one that we must address head on, and I am pleased that the FCC continues to show the strength and resolve necessary to meet this menace,” FCC commissioner Brendan Carr said in a statement. 

“When it comes to Communist China, we have set a high bar for action over the last few years,” he added.

The move is no surprise. It came days after the FCC designated five Chinese companies as posing a threat to national security under a 2019 law aimed at protecting US communications networks – Huawei Technologies, ZTE, Hytera Communications, Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology.

A 2019 law requires the FCC to identify companies producing telecom equipment and services “that have been found to pose an unacceptable risk to US national security.”

Acting FCC chairwoman Jessica Rosenworcel said in a statement: “This list provides meaningful guidance that will ensure that as next-generation networks are built across the country, they do not repeat the mistakes of the past or use equipment or services that will pose a threat to US national security or the security and safety of Americans.” 

In 2019, the US placed Huawei, Hikvision and other firms on its economic blacklist. And in 2020, it designated Huawei and ZTE as a national security threat to communications networks – which barred US firms from tapping an $8.3 billion government fund to purchase equipment from the companies.

Meanwhile, the US Commerce Department served subpoenas on a range of Chinese companies that provide information and communications technology services in the US to see if they pose a national security risk.

“Beijing has engaged in conduct that blunts our technological edge and threatens our alliances,” Commerce Secretary Gina Raimondo said in separate statement last week. The subpoenas, she said, would gather information to “allow us to make a determination for possible action that best protects the security of American companies, American workers, and US national security.”

The Commerce Department did not name the companies concerned, but they were assumed to include three firms delisted by the New York Stock Exchange in January – China Mobile, China Telecom and China Unicom.

China Unicom, which is one of the world’s largest carriers, insisted that it has never acted illegally and expected a “thorough, fair and fact-based review of the company’s conduct by the FCC,” Bloomberg reported.

Huawei filed an appeal last month with the 5th US Circuit Court of Appeal challenging the FCC’s decision that it is a national security threat, saying the FCC overstepped its authority. Huawei founder and CEO Ren Zhengfei has expressed hope that the Biden administration will take a fresh approach to his company.

But US concerns about Huawei and ZTE, which were key targets of the Trump administration, do not appear to have changed.

‘Untrusted vendors’

Biden’s press secretary Jen Psaki said recently that the new administration would work to “ensure that the American telecommunications network does not use equipment from untrusted vendors.”

While the Biden Administration is reassessing the policies of its predecessor, experts don’t believe there will be a major change.

Megan Stifel, executive director of the Americas for the Global Cyber Alliance and a former director of cyber policy at the National Security Council during the Obama administration, has said she doesn’t “expect a radical shift to holding China accountable for the theft of intellectual property or concerns about access to data about US citizens. But I do expect that the engagement may shift to a more comprehensive strategy that takes into account not only how China’s actions impact the United States”.

The US Chamber of Commerce and groups representing major industries raised concerns in a letter to the Commerce Department in January that the interim rule gave the government “nearly unlimited authority to intervene in virtually any commercial transaction between US companies and their foreign counterparts that involves technology.”

Business Roundtable, a group representing major US business leaders, said earlier the proposal is “unworkable for US businesses in its current form.”

However, President Joe Biden’s administration said last month it plans to allow a Trump-era rule targeting Chinese technology firms deemed a threat to the United States to go into effect despite objections from US businesses.

The Commerce Department issued an interim final rule in the final days of the Trump administration aimed at addressing information and communications technology supply-chain concerns and said it would become effective after a 60-day period of public comment.

Last month, the department said it would continue to accept public comment on the rule until Monday March 22, when it would go into effect. The subpoenas would not have an impact on the interim final rule’s timing, a department official said last Wednesday.

Meanwhile, the department has also begun a review on whether TikTok is a national security threat because it collects data from American citizens and could share that information with Chinese authorities.

In response, China urged the United States to “stop overstretching the concept of national security to politicise economic issues,” foreign ministry spokesman Zhao Lijian told a news briefing on Thursday. He said China would take measures to safeguard the rights and interests of Chinese companies.

With reporting by AFP and Reuters

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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