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Under Fire From Trump, Huawei Asks FCC to Stay Out of the Fight

Todd Shields and Edvard Pettersson
Under Fire From Trump, Huawei Asks FCC to Stay Out of the Fight

(Bloomberg) -- Huawei Technologies Co., already under siege by the Trump administration, on Wednesday urged the U.S. Federal Communications Commission not to join the fight.

The FCC last year gave preliminary approval to a proposal by Chairman Ajit Pai to bar mobile service providers from spending federal subsidies on equipment made by companies deemed a national security threat. The commission hasn’t scheduled a final vote on the measure but Huawei said it would file on Wednesday a 10-page response urging the agency to abandon the idea.

“Banning particular vendors on grounds of ‘national security’ will actually do little or nothing to protect the security of America’s telecommunications networks,” Huawei said in a the filing. “Rather, forcing network operators to rip out and replace their existing equipment would pose a greater threat to network stability and security.”

The overt stakes for Huawei in the FCC proceeding aren’t large: the company says its gear is used in the U.S. by about 40 providers of mobile communications, mainly in rural areas. But the FCC’s proceeding is a public, highly visible process being watched by agencies throughout Washington as the administration of President Donald Trump focuses economic and diplomatic pressure on the company, one of China’s biggest.

U.S. envoys have urged allies in Europe and Asia to spurn Huawei for advanced 5G communications networks, saying its gear could be used for surveillance. The Commerce Department last month placed Huawei on a blacklist that threatens to keep the Shenzhen-based manufacturer from buying essential components from U.S. suppliers including Qualcomm Inc. and Micron Technology Inc.

The Commerce Department’s move requires American suppliers of Huawei, a crown jewel of Chinese manufacturing, to seek U.S. government permission to do business with the company. It touched off immediate disruption, with Intel Corp., Qualcomm and Broadcom Inc. telling staff to cut contact with Huawei and not supply it with anything.

Huawei has insisted it poses no security threat, and has turned to U.S. courts for relief from steps. In March it filed a lawsuit in federal court in Texas challenging the constitutionality of a provision of a defense spending act that prohibits federal agencies, contractors and grant or loan recipients from purchasing or using certain Huawei equipment. The company is also defending itself against criminal charges filed by federal authorities, and its chief financial officer is fighting extradition to the U.S. to face sanctions-busting charges.

Commerce Secretary Wilbur Ross has said the Huawei sanctions are separate from trade talks, which hit an impasse last month. The two countries have since escalated their dispute, and Trump has threatened to raise tariffs on China again if President Xi Jinping doesn’t meet with him at the upcoming Group of 20 summit in Japan.

Huawei in Wednesday’s filing it said it “does not agree with the view that Chinese companies pose a threat simply because they are Chinese.” It said no FCC commissioner has agreed to meet with its executives.

“Huawei cannot and will not sabotage its customer networks. But recent actions by the United States Government are only one step away from doing so,” the company said in its filing, citing restrictions imposed by the Trump administration.“No evidence shows Huawei has the ability or intent to shut down its customer networks, yet this rulemaking threatens to do exactly that.”

Major nationwide U.S. carriers say they don’t use Huawei gear. Smaller providers, including some that rely on subsidies to serve scattered customers in rural areas, have bought equipment from Huawei and ZTE Corp., another Chinese manufacturer that has at times been considered a national security risk. Low prices and reliability are prime draws.

“While rural carriers have done everything right, they (along with rural consumers) could become collateral damage in a larger national security and trade debate,” the Rural Wireless Association said in a December filing. The group said if the FCC goes ahead with a ban, the agency should provide funding to remove and replace existing equipment.

The Commerce Department on May 20 granted a 90-day reprieve for some U.S. broadband companies, with a temporary license covering continued operation of existing networks and equipment. The move is intended to allow rural broadband networks to continue operating, Ross said.

Huawei in its filing said politicians in countries such as Germany and France had spoken against singling out a specific company.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net;Edvard Pettersson in Los Angeles at epettersson@bloomberg.net

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

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