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FCC Blocks China’s Huawei and ZTE from Billions in Federal Broadband Subsidies

Chairman Ajit Pai speaks at the Federal Communications Commission in Washington, U.S., December 14, 2017. (Aaron P. Bernstein/Reuters)

The Federal Communications Commission voted unanimously on Friday to block two Chinese telecommunications companies from accessing billions of dollars in federal broadband subsidies.

Wireless companies will not be able to use the government’s $8.5-billion-a-year Universal Service Fund to purchase equipment and services from Huawei and ZTE, and must rip out any equipment they already have in order to keep receiving funds. The subsidies are aimed at building up broadband infrastructure in the U.S.

“Given the threats posed by Huawei and ZTE to America’s security and our 5G future, this FCC will not sit idly by and hope for the best,” FCC Chairman Ajit Pai said in a statement.

Both companies have close relationships with the Chinese Communist Party, with which the Trump administration has been locked in trade battles as well as disputes over China’s theft of American intellectual property. The decision, backed by the Justice Department, was based on concerns that Huawei and ZTE could use their inroads into American broadband infrastructure to spy on the U.S. and steal sensitive data.

“We know the hidden backdoors to our networks, routers, switches, and other network equipment can allow a hostile adversary to inject viruses and other malware, steal private data of Americans, spy on U.S. companies and more,” Pai added. “If the Chinese government is willing to use its leverage over things like professional basketball and Taiwanese flag emojis, imagine what could happen if we allowed Chinese company equipment into our 5G networks.”

Huawei panned the FCC’s decision, saying it is “based on selective information, innuendo, and mistaken assumptions,” and will have “profound negative effects on connectivity for Americans in rural and underserved areas across the United States.”

Critics of the FCC’s decision to freeze out Chinese tech companies voiced concerns that the move could compromise the administration’s trade negotiations with China and said equipment from the companies are already deeply integrated into U.S. broadband infrastructure.

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