FCC Bans China Telecom U.S. Business, Eyeing More Companies Soon

Huan Zhu -

On October 26, the FCC revoked the license for the state-owned China Telecom Corp.’s U.S. business China Telecom Americas to provide domestic interstate and international telecommunications services in the United States. Decisions on licenses for additional Chinese telecom companies, such as China Unicom Americas, Pacific Networks, and ComNet, are in the pipeline.

The FCC based its decision in part on the Trump administration’s recommendation last year to revoke China Telecom Americas’ license. It noted that “China Telecom Americas failed to rebut the serious concerns of the Executive Branch about its continued presence in the United States.” As a result, the company was ordered “to discontinue any domestic or international services that it provides pursuant to its Section 214 authority within sixty days following the release of the order.”

The FCC outlined some reasons for its decision. It noted that the company “is subject to exploitation, influence, and control by the Chinese government and is highly likely to be forced to comply with Chinese government requests without sufficient legal procedures subject to independent judicial oversight.”

The company’s “ownership and control by the Chinese government raise significant national security and law enforcement risks” because it allows “the Chinese government to access, store, disrupt, and/or misroute U.S. communications, which in turn allow them to engage in espionage and other harmful activities against the United States," according to the FCC.

In addition, “China Telecom Americas' conduct and representations to the commission and other US government agencies demonstrate a lack of candor, trustworthiness, and reliability that erodes the baseline level of trust.”

The FCC also noted that “further mitigation would not address these significant national security and law enforcement concerns,” a conclusion that was in part supported by classified evidence submitted by the executive branch.

The main users of China Telecom Americas are people in the United States with a connection to China. The company is reported to provide mobile network service to more than 4 million Chinese Americans, 2 million Chinese tourists a year, 300,000 Chinese students, and the more than 1,500 Chinese businesses in America.

The next step, according to FCC Chairwoman Jessica Rosenworcel, is to move on to other Chinese telecom service providers, including China Unicom Americas, Pacific Networks, and ComNet. In 2019, the FCC denied the application of China Mobile to provide telecom service in the United States.

The FCC is also looking at submarine cables “to make sure they do not raise national security concerns,” according to Rosenworcel. Chinese companies Huawei and S.B. Submarine Systems are two players in the market for submarine cables.

Commissioner Brendan Carr, in his statement, reiterated his calls for adding Chinese drone company DJI to the FCC's Covered List, citing security concerns. Commissioner Carr raised the issue at a China Tech Threat online event on “Unacceptable Risk: Expanding the FCC’s Covered List to Reflect Reality” last week.

The agency previously designated five Chinese companies — Huawei, ZTE, Hytera, Zhangzhou Hikvision, and Zhejiang Dahua — to its Covered List, as their telecommunications equipment and services “are deemed to pose an unacceptable risk to the national security of the United States or the security and safety of United States persons.” Telecommunications carriers that receive Universal Service Fund support are required to remove and replace equipment and services included on the list from their network and operations environments.

The spokesperson of China's Ministry of Foreign Affairs responded to the FCC decision by stating that “competent authorities in China will give a response. Please stay tuned.”

UPDATE October 29, 2021

The spokesperson of the Chinese Ministry of Commerce commented on the ban during a press conference (link in Chinese) on October 28:

China has noticed that the Federal Communications Commission (FCC) of the United States has decided to revoke the license for Chinese telecom companies to operate in the United States. This move has broadened the concept of national security, abused national power, maliciously suppressed Chinese companies without factual basis, violated market principles, and undermined the atmosphere of bilateral cooperation. China expresses serious concern about this. The Chinese economic and trade team has lodged solemn exchanges with the US side in this regard. The United States should immediately correct its wrongdoings and provide a fair, open, just, and non-discriminatory business environment for companies investing and operating in the United States. China will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.

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