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FCC Wants to Know if Huawei Gear Is Near U.S. Military Bases

Todd Shields, Alyza Sebenius and Scott Moritz

(Bloomberg) -- U.S. officials plan to assess where equipment from Huawei Technologies Co. has been installed, and would be concerned if it’s found near domestic military bases, the head of the Federal Communications Commission said.

The FCC also will consider how to finance removing equipment made by the Chinese company considered a security risk by U.S. officials, Ajit Pai said in a meeting in New York with Bloomberg News reporters and editors. Pai has proposed reimbursing carriers for replacing the equipment.

“Any untrusted vendor with equipment in a network that is close to sensitive installations would raise a concern for me,” Pai said.

Pai has scheduled an FCC vote for Nov. 22 to bar spending U.S. telecommunications subsidies on equipment from Huawei and China’s ZTE Corp. Pai also wants U.S. companies to remove equipment from the Chinese gearmakers, and as part of that has asked the agency to begin examining the extent of Huawei’s deployment in U.S. networks.

Pai leads the Republican majority at the agency, where Democrats also back strong action on Huawei, so his proposals are considered almost certain to pass.

Huawei’s customers in the U.S. are largely limited to small carriers that rely on federal subsidies.

“What the commission is proposing is an immediate, seismic shift that will likely disrupt mobile communications in rural markets,” the Rural Wireless Association said in a Nov. 4 filing posted Tuesday on the FCC’s website. “The chairman is proposing an overly-simplified solution that might inadvertently cripple basic communications” as ill-financed carriers struggle without subsidies to cope with maintaining equipment already purchased.

Pai’s proposals follow continued pressure by U.S. diplomats and lawmakers who say Huawei poses a threat of espionage.

“If we see the Chinese government willing to use this leverage over things like basketball and flag emojis and gaming, what do you think is the appetite of the Chinese government to take a more restrained view when it comes to surveillance requests involving 5G networks?” he said.

The U.S. Department of Justice appears to share concerns voiced by the FCC.

“If you map out where the broadband is in the United States provided by Huawei, without going into detail, it doesn’t look charitable or unintentional in its distribution,” John Demers, assistant attorney general for national security, said at an Aspen Institute event in New York last month.

FCC Commissioner Jessica Rosenworcel last week said equipment made by Huawei and ZTE “lies next to military bases in this country.”

“It’s insecure and we need to move it out,” Rosenworcel, a Democrat, said at a hearing the Senate Committee on Homeland Security and Governmental Affairs.

Pai was asked for details Tuesday.

“I obviously can’t discuss classified information, but at a very high level, what I would say is that if you think about where wireless networks are deployed and what type of insights they can give on all kinds of commercial and noncommercial activities, you can imagine that the Chinese government would have very strong interests in knowing some of those things,” Pai said.

The U.S. Has been “monitoring closely” the issue of communicating securely with other countries that have not taken the same risk-mitigating measures in their 5G networks, said Pai.

“One of the things we’ve been looking at very extensively with some of our partners in the national security and intelligence community is how do we handle some of the traffic that goes on some of the international circuits” Pai said. “The question is always one about how do we address the risks that are present.”

While Huawei has been the focus of security concerns, it is also part of a broader issue: ongoing trade discussions between the U.S. and China.

“Our jurisdiction doesn’t extend to any of the trade negotiations,” Pai said in the interview. “All I can say is that from our perspective we want to make sure that we don’t expend federal funds on any untrusted vendors.”

Huawei has argued that restrictive measures will hurt small carriers in rural areas. “Banning specific vendors based on country origin will do nothing to protect America’s telecommunications networks,” Huawei said in an emailed statement Oct. 29 responding to news of the FCC vote, adding that the company “remains open” to talks with Washington on the matter.

Small carriers have said a ban would deny them good, cheap equipment used to offer broadband in rural areas.

Rural providers will need to be able to continue to use subsidies to support their networks until equipment from Huawei and ZTE can be replaced, Caressa Bennet, general counsel of the Rural Wireless Association, said in an Oct. 28 email.

President Donald Trump’s administration in May moved to restrict U.S. companies from doing business with Huawei and ZTE. The administration has said Huawei gear could be used for spying -- an allegation denied by the Shenzhen-based company.

Commerce Secretary Wilbur Ross on Nov. 3 said licenses allowing U.S. companies to do business with restricted firms such as Huawei would be granted soon. He expressed optimism the U.S. would reach a “Phase One” trade deal with China this month.

(Updates with Nov. 22 meeting date in fourth paragraph; objection from rural wireless group in sixth paragraph.)

To contact the reporters on this story: Todd Shields in New York at tshields3@bloomberg.net;Alyza Sebenius in Washington at asebenius@bloomberg.net;Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, John Harney

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