FCC Eyes USF Funds Ban for Chinese Vendors

The FCC is considering a move that could potentially further the US government's drive to lock companies like Huawei and ZTE as completely as possible out of federal contracts and spending programs.

FCC Chairman Ajit Pai proposed a rule Monday to ban all US carriers from using the $8.6 billion in the Commission's Universal Service Fund (USF) for equipment or services from "companies that pose a national security threat to United States communications networks or the communications supply chain." The ban would cover all areas covered by the USF fund.

Pai's proposal didn't reference Huawei Technologies Co. Ltd. or ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) by name, but senior Federal Communications Commission (FCC) officals confirmed Monday that these two big Chinese vendors -- as well as Russia's Kapersky Labs -- could be companies the rules would apply to, if approved.

The proposed ruling was initially motivated by a December 20, 2017 letter from Sen. Tom Cotton (R-Ark.) and codified following a briefing with US intelligence agencies. The FBI and CIA have previously labelled the Chinese vendors' products as security risks. (See Will China React to Latest US Huawei, ZTE Slapdown? and Huawei, ZTE Face US Federal Ban.)

AT&T Inc. (NYSE: T), Best Buy and Verizon Communications Inc. (NYSE: VZ), meanwhile, have either dropped plans to carry Huawei devices or will drop its existing products from their stores. (See Best Buy to Drop Huawei in Another Blow to US Ambitions – Report.)

This ruling -- if passed -- would likely only affect smaller carriers, and block future deployment of equipment. Large operators have been warned that they would be blocked from federal contracts if they used the Chinese vendors because of security concerns since 2012.

The FCC is looking for comment on the proposal. The agency will vote on it on April 17.

The FCC move comes as industries wait to see which products and materials will be impacted by the $60 billion in new tariffs that President Trump intends to impose on Chienese tech imports. (See Trade Warmonger Trump May Slap Tariffs on Chinese Tech – Reuters.)

— Dan Jones, Mobile Editor, Light Reading

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