US bars Chinas Huawei, ZTE from subsidy programme over security risks

US bars Chinas Huawei, ZTE from subsidy programme over security risks

The FCC took action against the two companies today, citing an "even greater" risk that secret "backdoors" into the nation's next generation (5G) of communications networks will allow a "hostile foreign power to "engage in espionage, inject malware, or steal Americans' data".

FCC Chairman Ajit Pai first proposed in March 2018 to bar companies that posed a national security risk from receiving funds from the FCC's Universal Service Fund, but did not name Huawei or ZTE.

Additional companies could also fall under the rule, the FCC said.

Increasingly complicated relations between China and the USA generally compounded the difficulty of ZTE and Huawei operating in the States, as well as selling to or purchasing from American companies. The administration this spring announced plans to blacklist Huawei from doing business in the us, but a crucial step in doing so has been stuck in limbo, and Commerce Secretary Wilbur Ross noted earlier this week that his department is in the process of granting some export licenses to USA companies looking to continue to do business with Huawei.

FCC Commissioner Geoffrey Starks, a Democrat, said it could cost as much as $2 billion to replace the equipment in US rural networks.

On the same day, the FCC also approved a proposal that seeks to force the same U.S. carriers and ISPs to rip out and replace any existing Huawei and ZTE equipment in their networks. Nevertheless, the commission voted on Friday to adopt a rule that designates both companies as a security threat.

ZTE did not respond to requests for comment Friday.

In August, the United States government introduced a measure to ban government agencies from procuring devices from companies including Huawei.

"If equipment poses a threat, it is not enough to stop subsidizing it", FCC commissioner Brendan Carr said.

The FCC has finally put the seal of approval on its plan to cut funding going to equipment from companies it deems a "national security threat", now an exclusive club of two: Huawei and ZTE.

"Many carriers rely on Huawei for its high-quality, market-leading, and cost-effective equipment and services", the company said.

"With 5G technology ushering in unprecedented connectivity, ensuring global networks are safe and reliable is more important than ever before", said David Stehlin, CEO at the Telecommunications Industry Association.

The FCC will deny funds to any U.S. carriers or internet service providers that buy components from China's Huawei and ZTE.

"Rural schools, hospitals and libraries will feel the effects", Huawei said, adding that the FCC's decision would result in higher prices. One bill calls for $700 million, one calls for a billion.

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