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FCC set to block China Mobile bid to provide U.S. services

FILE PHOTO: A man walks past the China Mobile logo at the Mobile World Congress in Barcelona, Spain, February 28, 2018. REUTERS/Sergio Perez

By David Shepardson

(Reuters) - Federal Communications Commission chairman Ajit Pai said on Wednesday he opposes China Mobile Ltd's bid to provide U.S. telecommunications services, citing security risks, and said the commission will vote on whether to deny the company's application in May.

China Mobile is seeking approval to provide services for phone calls between the United States and other countries. It is not seeking approval to provide wireless services to U.S. consumers.

According to the FCC, China Mobile USA, which filed the application, is indirectly and ultimately owned and controlled by the Chinese government.

The five-member FCC is expected to back Pai's draft order, officials said on Wednesday.

"It is clear that China Mobile’s application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks," Pai said in a statement.

FCC officials said if successful China Mobile would be able to exploit the U.S. "telephone network to increase intelligence collection against U.S. government agencies and other sensitive targets that depend on this network."

FCC officials told reporters on a call, "There is a significant risk that the Chinese government would use the grant of authority to China Mobile USA to conduct activities that would seriously jeopardize the national security and law enforcement interests of the United States."

China Mobile did not immediately return a request for comment.

The comments come amid a broader U.S. campaign to limit the role of Chinese telecommunications firms in the build-out of 5G networks as Western governments grapple with the national security implications of moving to 5G, which promises to be at least 100 times faster than the current 4G networks.

The Trump administration said last year that China Mobile wanted to be able to "interconnect and have greater access to telephone lines, fiber-optic cables, cellular networks, and communication satellites throughout the United States’ telecommunications network."

China Mobile USA, which is a Delaware corporation, first applied for permission in 2011. The company sought FCC approval to provide international facilities-based and resale telecommunications services between the U.S. and foreign destinations.

In July 2018, after a lengthy review of the application and consultation with the U.S. intelligence community, a group of executive branch agencies recommended the FCC deny China Mobile’s application, citing "substantial national security and law enforcement risks that cannot be resolved through a voluntary mitigation agreement."

Pai has circulated a draft order that would deny the request and find that China Mobile "is vulnerable to exploitation, influence, and control by the Chinese government."

For more than a year, the White House has been considering an executive order to declare a national emergency that would bar U.S. companies from using telecommunications equipment made by China's Huawei and ZTE.

U.S. prosecutors in February unsealed charges against Huawei that it conspired to steal T-Mobile US Inc trade secrets. They have also charged Huawei and its affiliates with bank and wire fraud on allegations that they violated sanctions against Iran.

The FCC has also been considering for more than a year whether to require carriers to remove and replace equipment from firms deemed a national security risk. Pai said on Friday that proposal is still pending.


(Reporting by David Shepardson; Editing by Susan Thomas and Leslie Adler)