Huawei could face FCC obstruction in pursuit of smaller wireless carriers

The FCC may take steps that could impede the sale of Huawei equipment to Tier 2 and 3 wireless network operators in the United States.

Specifically, FCC Chairman Ajit Pai responded (PDF) to concerns raised among Congressional legislators that Huawei and ZTE continue to present a threat to the United States’ communication networks. He said that he received a briefing on the issue from the U.S. intelligence community, and as a result he said he would “take proactive steps to ensure the integrity of the communications supply chain in the United States in the near future.”

Just days later, Pai said that the FCC next month would vote on a proposal that would would bar the use of money from the FCC’s Universal Service Fund to purchase equipment or services from companies that "pose a national security threat to United States communications networks or the communications supply chain."

Said Pai in a statement announcing the move: "Threats to national security posed by certain communications equipment providers are a matter of bipartisan concern. Hidden ‘back doors’ to our networks in routers, switches—and virtually any other type of telecommunications equipment—can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more. Although the FCC alone can’t safeguard the integrity of our communications supply chain, we must and will play our part in a government- and industry-wide effort to protect the security of our networks."

USF money is often used by smaller, rural carriers to deploy services in remote locations in the United States in order to cross the digital divide.

Pai’s comments dovetail with a recent report from The Wall Street Journal.

The action by the FCC could well cut into Huawei’s relatively meager sales to Tier 2 and 3 telecom companies in the United States.

Indeed, just a few years ago, Huawei counted the likes of Union Wireless, United Wireless and Pioneer Telecom as customers in the United States for its equipment, and last year the company attended the Competitive Carriers Association trade show in an effort to continue to grow its sales to smaller wireless network operators.

But if the FCC moves against Huawei via a ban on USF money to Huawei customers, that could well further close the door to Huawei’s relatively paltry network equipment sales in the United States (Ericsson, Nokia and Samsung remain the nation’s dominant wireless gear suppliers).

To be clear, this latest development is just the latest in a long line of setbacks for Chinese suppliers Huawei and ZTE. In 2012, a House intelligence committee issued a report warning U.S. telecom companies from using equipment from the two vendors, for fear that would pave the way for Chinese espionage.

Those concerns have heated up in recent months as the Trump administration has moved more forcefully against Chinese interests. Just this week President Trump said he will move to block $50 billion worth of Chinese imports, though the specific list of items that will be blocked won’t be released for another two weeks. Moreover, AT&T, Verizon and, most recently, Best Buy, have moved to drop active or pending sales of Huawei smartphones.

Article updated March 26 with details from Pai's announcement.