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U.S. Proposes Cutting Off Funds for Chinese Telecom Equipment

U.S. regulators have proposed cutting off funding for Chinese equipment in U.S. telecommunications networks, citing security threats.

The Federal Communications Commission will vote next month on a proposal to bar telecom companies from using government subsidies to pay for networking equipment from Huawei and ZTE. The move mostly affects small, rural companies, as larger U.S. wireless companies do not use equipment from those Chinese companies.

The agency is also exploring the impact of requiring companies to rip out their current Huawei and ZTE equipment. The government is seeking comments on how it can help companies financially if they have to do that. Bills in Congress have proposed setting $700 million to $1 billion aside for telecom companies to replace their networks.

A trade group for small rural wireless carriers has said that it would cost up to $1 billion for its dozen companies to replace their Huawei and ZTE equipment. It says that Huawei has 40 customers in the U.S. (Huawei is also a member of the trade group, the Rural Wireless Association.)

Huawei and ZTE did not immediately respond to requests for comment on the FCC proposal.

The U.S. government has said that Huawei poses an espionage threat, but has presented no evidence of its equipment being used for spying by the Chinese government. The company denies that its equipment is used for such purposes. ZTE has also denied that China uses its products for spying. A congressional report in 2012 labeled both Chinese companies as security risks.

The U.S. government also has been pressuring allies to ban Huawei from their networks and has restricted exports of U.S. technology to Huawei. Huawei is the world's biggest supplier of telecom gear as well as a major cellphone manufacturer.

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