The FCC will vote next month on a proposal to ban equipment from Chinese manufacturers Huawei and ZTE from networks operated by service providers that receive support from the Universal Service Fund (USF). The move is driven by concerns that the equipment poses a threat to national security.

The commission also is considering requiring providers that already have deployed equipment from Huawei and ZTE to replace it and is seeking comment on that and on how service providers could be compensated for the cost of complying with that requirement.

In a prepared statement, FCC Chairman Ajit Pai summed up security concerns, noting that “Chinese law requires all companies subject to its jurisdiction to secretly comply with demands from Chinese intelligence services.”

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Pai also promoted the proposed action in an editorial published in the Wall Street Journal, in which he noted that “China could compel Huawei to spy on American individuals and businesses” and could “demand the installation of a ‘back door’ to allow secret access to the network, insert malware or viruses and receive all kinds of information –without Americans ever knowing.”

USF Equipment Ban
While the proposed equipment ban initially would apply only to Huawei and ZTE, it would leave the door open to additional equipment, potentially from other countries, to be banned in the future. The draft report and order that the commission will vote on would establish a process for potentially banning additional companies in the future.

On a call with reporters, senior FCC officials explained that any company the commission intends to ban would receive a notification explaining the rationale for the ban and would give the company 30 days to respond. Federal officials from Public Safety and Homeland Security would have 120 days from the issuance of the intended ban to issue the final ban.

The proposal to require USF recipients to replace existing equipment from banned manufacturers comes in the form of a further notice of proposed rulemaking (FNRPM) and draft Information Collection Order. The FNPRM would seek comment on the proposal to remove and replace equipment and on how that proposal might be funded. The Information Collection Order would seek information from service providers receiving USF on their use of Huawei and ZTE equipment, as well as the cost of removing and replacing that equipment.

Congressional Action Could be Required
Concerns that the Chinese government might use communications network equipment to spy on the U.S. have been voiced for years, but gained considerable momentum in April 2018, when the FCC adopted a notice of proposed rulemaking to ban certain equipment from networks that receive USF funding.

A bill introduced in the Senate would provide $700 million that would go toward the cost of removing and replacing banned equipment.

A study from rural lender CoBank estimates that $700 million would not be sufficient to cover those costs.

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