The US Federal Communications Commission (FCC) officially designated Chinese telecommunications companies Huawei and ZTE as a risk to national security. The order went into effect on Tuesday. American telecom providers are no longer allowed to use government subsidy money to buy anything from these companies.
There has been tension between the US and Chinese companies like Huawei and ZTE for a while. Last year, president Trump claimed that Huawei is monitoring Western businesses on behalf of the Chinese government. That is why he banned American businesses from trade with Huawei and over seventy other Chinese companies. They were all blacklisted on the so called Entity List. For Huawei it meant that they could no longer offer American services developed by, for instance, Google on their smartphones. And without the Google Play Store and applications such as Maps and YouTube the phones made by the Chinese tech company can’t beat the competition.
And it’s not just Huawei’s smartphone department that is suffering because of the trade ban. The company has been working at its 5G technology for years, and are taking the lead in this development. Companies like Nokia and Ericsson aren’t anywhere as far in its developments as Huawei is. Now that governments and telecom providers are working to set up a national 5G network, they often ask Huawei for help. But because of the trade ban, Huawei cannot sell their technology in the US.
Threat to National Security
The vote about this issue happened back in November, but the order went into effect on Tuesday. Ajit Pai, the FCC chairman, said in a statement that the agency “cannot and will not allow the Chinese Communist Party to exploit network vulnerabilities and compromise our critical communications infrastructure.”
“With today’s Orders, and based on the overwhelming weight of evidence, the Bureau has designated Huawei and ZTE as national security risks to America’s communications networks — and to our 5G future,” Pai said. “Both companies have close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services.”
By designating Huawei and ZTE as national security threats, telecommunications providers are no longer allowed to use governmental subsidies to buy anything from these companies. These subsidies add up to $8.3 billion.
Affordable Service at Risk
The American government had previously promised that companies would be allowed to work on their 5G networks with Huawei, but the FCC’s decision makes that impossible. This could make it more difficult for smaller companies to provide affordable services to its users. It’s also likely to affect rural providers who rely on these subsidies. These areas usually don’t have enough customers to set up a profitable network, and the Chinese equipment needed is simply cheaper than the European equivalents.
Huawei has always denied that it threatens American national security in any way. The company has always stated that it is independent, and doesn’t work with or for the Chinese government. Huawei simply wants to sell its products and services abroad and wants to develop a fast and reliable 5G network. Neither Huawei nor ZTE have commented on the FCC decision.