Huawei refutes FCC claims of US national security concerns

Allowing Huawei to compete in the US could yield savings of around $20 billion over the next three years in the costs of building out mobile infrastructure, the Chinese company has said.
Written by Corinne Reichert, Contributor

Chinese tech giant Huawei has written to the Federal Communications Commission (FCC) arguing that the United States should not miss out on its market-leading technology, also pointing out that its exclusion would drive up consumer costs for mobile services.

Huawei's comments came in response to the FCC's notice of proposed rulemaking (NPRM) for Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs [PDF].

The FCC had used the NPRM to suggest that it ensure Universal Service Fund (USF) funding not be spent on "equipment or services from suppliers that pose a national security threat to the integrity of communications networks or the communications supply chain", with the FCC including direct references to Huawei and fellow Chinese company ZTE.

Similar to its warnings that being banned from providing 5G equipment to Australia's telcos would threaten the nation's ability to stay "ahead of the game" in its mobile networks due to restricting competition, Huawei's response to the FCC, sighted by ZDNet, said the US risks its "technological leadership" by banning Huawei.

According to Huawei, it has "played a key role in development of 5G standards and has been an innovation leader in 5G deployment" worldwide, including deploying technology used in trials and live networks.

However, it said its participation in the US carrier market has been "artificially restricted by unfounded allegations and suspicions based solely on misperceptions about Huawei's relationship with the government of China".

"The reality is that it is an independent, privately owned business that is no more subject to the control of the Chinese government than American companies are controlled by the US government," Huawei said.

"Huawei's products are sold in the US by its Texas-based subsidiary, which is an American corporation governed by American law."

Included in its response was a chart from GlobalData earlier this year showing Huawei as the global leader in LTE systems, in front of Ericsson, Nokia, ZTE, and Samsung -- with Huawei noting that Cisco did not receive a rating.


In addition to saying the US should not miss out on its leading 5G technology, Huawei again argued that there has never been evidence of its equipment causing "actual harm or even potential harm to the network".

"Those parties encouraging the commission to blacklist a handful of companies from supplying equipment or services to USF support recipients are largely those companies' competitors, who would directly benefit from such a rule," Huawei added.

"The extensive costs of the blacklist, by contrast, would be borne by carriers and institutions that receive USF support, a number of whom rely on equipment manufactured by Huawei, by their customers, and by the US economy as a whole."

When combined with the rising costs inherent in restricting competition in the market, Huawei said American consumers will be paying more for less telecommunications services.

"Where Huawei is allowed to bid, its presence restrains the pricing of other vendors, and consumers benefit regardless of who wins the bid. Because Huawei is often not allowed to bid in US procurements, average prices for network equipment are higher here than in most other countries, and US customers generally pay higher prices for a lower level of mobile service than consumers elsewhere," Huawei said.

"Allowing Huawei to compete freely could yield savings of at least $20 billion in building US mobile infrastructure between 2017 and 2020, which would likely be passed through to consumers."

Banning the carriers already using Huawei equipment in their networks would also impose hundreds of millions of dollars in additional costs on them if they were prevented from adding to their networks or obtaining replacement parts or services from Huawei.

"There are serious problems with a 'mix-and-match' network approach, so many of these carriers would have to retire existing equipment long before the end of its useful life, at huge expense," Huawei pointed out.

"Some rural carriers indicate they would likely forfeit USF support, and be forced to scale back their network coverage, rather than rip out and replace their core network.

"These high costs, which would particularly harm Americans in remote and low-income areas, cannot be justified by the supposed national security benefits of the proposed rule, because these are speculative."

Lastly, Huawei argued that the FCC does not have the legal authority or expertise across matters of national security to make such rules -- and even if it did have the statutory authority to do so, such a rule would be "arbitrary and capricious".

"The FCC's authority over the Universal Service Fund does not encompass national-security concerns, and interjecting such concerns into the funding process would violate the statutory universal service principles," Huawei argued.

"Further, it would contravene the established principle that any conditions attached to federal funds must be clearly expressed in the governing statute, not read in by interpretation."

Read more: Paranoia will destroy us: Why Chinese tech isn't spying on Americans

The Trump Administration is considering setting standards for a nationwide 5G mobile network to prevent Chinese dominance in the industry, alleged government documents leaked in January revealed.

According to the documents, Huawei and ZTE have become leaders in 5G technology due to support from the Chinese government -- with China itself "the dominant malicious actor in the information domain".

"Huawei has used market-distorting pricing and preferential financing to dominate the global market for telecommunications infrastructure. China sets aside up to 70 percent of its mobile infrastructure market for Huawei and ZTE, only allowing Western vendors to compete for the remainder," the alleged government memo said.

Trump's administration has been cracking down on Chinese involvement in the American tech sphere, including with draft legislation barring the sale of national security-sensitive technology to China and blocking government or contractors from buying telecommunications equipment and services from Huawei and ZTE.

The heads of the CIA, FBI, NSA, and the director of national intelligence to the Senate Intelligence Committee had also recommended in February that Americans not use products from Huawei and ZTE.

After ZTE was issued with an export ban by the US Department of Commerce, the Chinese company said "the major operating activities of the company have ceased"; however, Trump then said he would speak to the department on reversing this as a personal favour.

Earlier this week, meanwhile, the FCC was advised by the Executive Branch to deny China Mobile entry to the US telecommunications industry, citing "substantial and unacceptable risk to US law enforcement and foreign intelligence collection".

Huawei's Australia CEO George Huang yesterday responded to calls for the technology giant to be barred from taking part in 5G rollouts due to concerns over sharing data with the Chinese government, telling ZDNet that the company handles no personal data.

"Huawei doesn't own, doesn't manage, doesn't operate any data," Huang told ZDNet.

"Huawei is just a network equipment vendor to the operators. Operators, they manage, they operate the network. The application of Huawei is to support our customers -- that means operators -- to build the system to manage those things.

"Huawei is just a vendor of the pipeline."

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