Huawei files lawsuit against FCC over its decision to ban rural carriers from tapping US funds to buy gear

Li Tao

Huawei Technologies has mounted a challenge against the US Federal Communications Commission’s (FCC) decision on November 22 to ban carriers in rural America from tapping the Universal Service Fund (USF) to buy the Chinese telecom giant’s network equipment, adding to its legal battles with US authorities.

The Shenzhen-based company, which is mired in the middle of a widening tech war between the US and China as it seeks to take a lead in 5G networks globally, filed the lawsuit in the US Court of Appeals for the Fifth Circuit, saying the FCC’s order is unlawful as it does not give Huawei required due process protections in labelling the company as a national security threat.

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“Banning a company like Huawei, just because we started in China – this does not solve cybersecurity challenges,” Huawei’s chief legal officer Song Liuping said at a press conference in Shenzhen on Thursday. “Huawei also submitted 21 rounds of detailed comments, explaining how the order will harm people and businesses in remote areas. The FCC ignored them all.”

Song said the FCC did not present “solid proof and evidence... [its decision was] purely based on speculation”, which could in turn damage Huawei’s reputation and lead to “more losses in business”.

Huawei’s latest legal challenge opens a new front in its battle with US authorities. It is also challenging an earlier ban on federal agencies buying its gear on the grounds that this is unconstitutional, it remains stuck on the US Entity List which bans it from buying US-origin technologies, and founder Ren Zhengfei’s daughter Meng Wanzhou is battling banking fraud charges in Canada where she is under house arrest.

Meng Wanzhou, chief financial officer of Huawei, leaves her home for a court appearance wearing an electronic ankle tag in Vancouver, British Columbia, Canada. Photo: Bloomberg

Huawei also believes that the FCC has failed to substantiate its arbitrary findings with evidence or sound reasoning or analysis, in violation of the US Constitution, the Administrative Procedure Act, and other laws, according to a press release issued on Thursday.

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“Carriers across rural America, in small towns in Montana, Kentucky, and farms in Wyoming – they choose to work with Huawei because they respect the quality and integrity of our equipment,” said Song. “The FCC should not shut down joint efforts to connect rural communities in the US.”

Huawei and its crosstown rival ZTE Corp have both been ruled out of participating in the US build-out of 5G mobile network infrastructure amid national security concerns. Without a major presence in US network equipment and smartphone markets, Huawei’s partnerships with some rural US carriers form the only meaningful business it has left in the country.

“The FCC decision violates the US Constitution which requires the government to serve its people,” Huawei’s founder and chief executive Ren Zhengfei said in a CNN interview earlier this week, when asked about Huawei’s response to the decision.

Huawei is not entirely “giving up on the US market as it is also fighting for rights conferred by the US Constitution,” said Ren, according to a CNN interview transcript in Chinese shared on Huawei’s official online community on Tuesday.

“The US is a free society. It should embrace the forces of the world with an open spirit. But the US is betraying this spirit. Will it still be able to lead the world in the future?” Ren asks in the transcript.

Huawei’s revenue generated from the US compared with group revenue is minimal, Karl Song, a company vice president and the former Huawei CEO in the US, said on Thursday. He added that the number of Huawei sales people and other staff in the US was declining over time.

Huawei has maintained that Washington has no evidence to support accusations that its equipment can be used by China’s national security agencies for espionage purposes and that it poses a national security threat. It has argued for consistent, open global standards for network gear that all companies must abide by.

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The FCC in April 2018 proposed prohibiting carriers from using subsidies to buy telecoms equipment from companies like Huawei, but many associations and rural carriers filed comments opposing such a ban, citing the large costs involved in replacing existing China-made gear, which would harm both their businesses and the interests of consumers.

Meanwhile the US government is putting real money behind its effort to curtail the footprint of Chinese equipment vendors. A new agency, called the US International Development Finance Corporation, plans to tap some of its US$60 billion budget to help developing countries and businesses purchase equipment from other companies, according to a Bloomberg report on Wednesday.

“The US is very focused on ensuring there’s a viable alternative to Huawei and ZTE. We do not want to be out there saying no. We want to be out there saying yes,” Adam Boehler, the first chief executive officer of the DFC, says in the report.

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