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Federal Subsidy Ban for Purchases of Mainland Chinese Telecom Equipment Adopted

As expected, the U.S. Federal Communications Commission has banned the use of U.S. federal telecommunication subsidies for equipment purchases from Huawei Technology Company and ZTE Corp.  The rule adopting this ban will take effect immediately upon publication in the Federal Register.

The FCC has established a certification and audit regime to enforce this decision and is also considering a process to require carriers receiving USF funds to remove and replace existing equipment and services from the two barred companies. The agency will conduct an information collection to determine the extent to which eligible telecom carriers have equipment from Huawei and ZTE in their networks as well as the costs associated with removing and replacing any such equipment. The U.S. Rural Wireless Association has estimated that replacing Huawei and ZTE equipment would cost between US$800 million and US$1 billion.

The FCC claims in a press release that both Huawei and ZTE have close ties to the mainland Chinese government and military apparatus and are subject to mainland Chinese laws requiring them to assist with espionage, a threat recognised by other federal agencies and the government of other nations. According to the agency, the public funds in the US$8.5 billion USF, which subsidises U.S. broadband deployment and service through four separate programmes, must not endanger national security through the purchase of equipment from companies posing a national security risk.

Content provided by Picture: HKTDC Research
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