huawei corporate logoIn a move that was expected and is likely to significantly impact some rural broadband providers, the FCC’s Public Safety and Homeland Security Bureau has formally designated Huawei Technologies Company and ZTE as national security threats. The designations, which the FCC calls “final,” take effect immediately.

As a result, carriers are now prohibited from using funds from the Universal Service Fund (USF) to purchase, obtain, maintain, improve, modify or otherwise support and equipment or services from these companies. Several U.S. rural carriers have Huawei equipment, and also depend on USF for support. They now find themselves in a bit of a precarious situation.

Last November, the FCC adopted a ban on the use of USF funds for companies that pose risks to the integrity of telecommunications networks or telecommunications supply chains. At the same time, the FCC proposed that Huawei and ZTE be covered by it due to what the FCC says is “their substantial ties to the Chinese government, Chinese law requiring them to assist in espionage activities, known cybersecurity risks and vulnerabilities in their equipment, and ongoing Congressional and Executive Branch concern about this equipment.”

Huawei said in November the FCC misunderstood Chinese law, which likely was a reference to the idea that the company was required to cooperate with authorities.

In March, President Trump signed the Secure and Trusted Communications Network Act, which makes as much as $1 billion available to network operators to replace equipment that poses national security threats. At the time, no companies were named. However, the law mandated the FCC to publish a list of covered equipment and services on its website within one year. Today’s move fulfills that requirement.

The Rural Wireless Association said in a statement that it is “stunned” by the FCC’s move. In an unattributed statement, the RWA painted a picture of likely confusion at what is a difficult moment for many rural operators.

“[R]ural carriers who have deployed Huawei or ZTE equipment or services in their networks will now lack the ability to support their critical networks that are serving hundreds of thousands of rural Americans and those traveling through rural America,” the statement said. “Given the difficultly in demonstrating where specifically their USF support is being utilized in their networks, this puts rural carriers in a precarious situation while they strive to offer extended payment terms for their customers as requested by FCC Chairman Pai, adjust to the fallout of the T-Mobile/Sprint merger, and continue to keep rural Americans connected to broadband and telephone services during the COVID-19 pandemic.”

The FCC acknowledged an RWA request to delay the determination until the reimbursement mechanism rules for the Secure and Trusted Communications Network Act are established, but ultimately decided to oppose it. The FCC argues that the national security implications are too serious for any further delay. The RWA asked that the FCC give its members more time to submit waivers before USF support is cut off, which it says is slated to be July 1.

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