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U.S. Telecom Regulator Bars Mainland Chinese Company from Providing Phone Service over National Security Concerns

On 9 May, the U.S. Federal Communications Commission blocked China Mobile USA from providing phone service between the United States and other countries over national security concerns. This company had filed a Section 214 application with the FCC back in 2011 to provide international communications services. Approval as a “common carrier” would have allowed the firm to carry international voice traffic between the United States and foreign countries as well as to connect that traffic with the U.S. telecommunications network. China Mobile USA had told the FCC that it did not plan to provide domestic telephone or mobile services in the United States.

In 2018, the U.S. Department of Commerce’s National Telecommunications and Information Administration had recommended denial of this application to the FCC after consulting with intelligence agencies. Specifically, intelligence sources reported that China Mobile USA’s parent firm, China Mobile, is subject to the supervision of mainland China’s State-Owned Assets Supervision and Administration Commission. This is the first time that the executive branch has recommended to the independent FCC the denial of a Section 214 application due to national security concerns. The FCC’s Republican and Democratic commissioners voted unanimously to deny the permit; unanimous votes are unusual though not unprecedented for FCC votes.

Had the application been granted, the firm would have received greater access to U.S. telephone lines, cellular networks, fibreoptic cables and communication satellites. The FCC stated in a press release that “after an extensive review of the record in this proceeding, the Commission finds that due to several factors related to China Mobile USA’s ownership and control by the Chinese government, grant of the application would raise substantial and serious national security and law enforcement risks that cannot be addressed through a mitigation agreement between China Mobile and the federal government.” FCC Chairman Ajit Pai claimed that there is a “significant risk” that the mainland Chinese government could use the firm “to conduct activities that would seriously jeopardize the national security, law enforcement, and economic interests of the United States.” He added that China Mobile could potentially “exploit our telephone network to increase intelligence collection against U.S. government agencies and other sensitive targets that depend on this network.”

U.S. concerns focused on a mainland Chinese law that requires companies to co-operate with state intelligence agencies, which the United States has said could be used for economic espionage or intelligence activities. China Mobile’s size and technical resources make it particularly vulnerable to such demands, the government said.

China Mobile claimed it would not be required to comply with such requests, noting that it “is no more vulnerable to exploitation” than any other U.S. or foreign carrier that uses best-practices measures. “We comply with all applicable laws in the course of operations and have not engaged in any behavior that causes ‘substantial and serious national security and law enforcement risks,’” China Mobile said in an e-mailed statement prior to the vote. The law firm of Harris, Wiltshire, and Grannis, which represented China Mobile USA, said that the order to reject the company's application was guided “more by tensions in the bilateral U.S.-China relationship than an absence of effective mitigation options.”

Brendan Carr, one of the Republican FCC commissioners, called for an investigation of prior FCC authorisations granted to China Telecom and China Unicom. In a statement, he claimed that “the evidence I’ve seen in this case calls those existing authorizations into question” and mentioned reports that China Telecom “has been hijacking U.S. traffic and redirecting it through China.” Pai later told press sources that the FCC will indeed be re-examining these authorisations.

A Bloomberg reporter referred to China Unicom as a Hong Kong-headquartered firm, but other sources indicate that while a subsidiary China Unicom (Hong Kong) Limited was incorporated in Hong Kong in February 2000 and was listed on the Hong Kong Stock Exchange on 22 June 2000, China Unicom was founded as a mainland Chinese state-owned enterprise on 18 June 1994 by the Ministry of Railways, the Ministry of Electronics Industry and the Ministry of Electric Power Industry with its establishment approved by the State Council in December 1993. The moves by the FCC will not have an impact on China Unicom, Chairman Wang Xiaochu told reporters in Hong Kong on 10 May, claiming that his firm has not violated any law, international or local, and relies on partners in the United States, where it has no facilities.

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