The Federal Communications Commission on Tuesday formally designated Huawei and ZTE as national security threats, meaning telecoms can no longer use the FCC's Universal Service Fund to purchase equipment or services from the Chinese firms.
Back in November, the FCC implemented a rule barring any money from the fund from going to suppliers deemed a national security threat. At the time, it recommended the designation be applied to Huawei and ZTE. The USF provides over $8.5 billion a year in subsidies to help telcos provide adequate broadband to rural Americans that currently lack access.
In a statement Tuesday, FCC Chairman Ajit Pai said the designation is "based on the overwhelming weight of evidence."
"Both companies have close ties to the Chinese Communist Party and China's military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country's intelligence services," he said. "We cannot and will not allow the Chinese Communist Party to exploit network vulnerabilities and compromise our critical communications infrastructure."
The agency also considered recent actions from Congress, the executive branch, the intelligence community, US allies, and communications service providers in other countries. Last year, as the Trump administration ramped up its posture against China, the US Commerce Department added Huawei to its "Entity List," barring US companies from transferring technology to Huawei without a special license from the US government.
Then in March of this year, Trump signed legislation barring US companies from using federal funds to purchase equipment from companies that have been deemed as national security threats. The law also established a $1 billion reimbursement program to help smaller providers with the cost of ripping out and replacing the prohibited equipment from Huawei and ZTE.
Other countries including Australia, New Zealand, Japan, and Taiwan have also effectively banned Huawei.