EXCLUSIVE-White House considers new year executive order to bar Huawei, ZTE purchases
by
Reuters
Thursday, 27 December 2018 08:17 GMT
(Adds Chinese foreign ministry comment)
By David Shepardson and Diane Bartz
WASHINGTON,
Dec 27 (Reuters) - President Donald Trump is considering an executive
order in the new year to declare a national emergency that would bar
U.S. companies from using telecommunications equipment made by China's
Huawei and ZTE, three sources familiar with the situation told Reuters.
It
would be the latest step by the Trump administration to cut Huawei
Technologies Cos Ltd and ZTE Corp , two of China's biggest network
equipment companies, out of the U.S. market. The United States alleges
that the two companies work at the behest of the Chinese government and
that their equipment could be used to spy on Americans.
The
executive order, which has been under consideration for more than eight
months, could be issued as early as January and would direct the
Commerce Department to block U.S. companies from buying equipment from
foreign telecommunications makers that pose significant national
security risks, sources from the telecoms industry and the
administration said.
While the order is unlikely to
name Huawei or ZTE, a source said it is expected that Commerce
officials would interpret it as authorization to limit the spread of
equipment made by the two companies. The sources said the text for the
order has not been finalized.
The executive order
would invoke the International Emergency Economic Powers Act, a law that
gives the president the authority to regulate commerce in response to a
national emergency that threatens the United States.
The
issue has new urgency as U.S. wireless carriers look for partners as
they prepare to adopt next generation 5G wireless networks.
The
order follows the passage of a defense policy bill in August that
barred the U.S. government itself from using Huawei and ZTE equipment.
China's
Foreign Ministry Spokeswoman Hua Chunying said that she did not want to
comment on the order as it had not been officially confirmed.
"It's best to let facts speak for themselves when it comes to security problems," Hua said.
"Some
countries have, without any evidence, and making use of national
security, tacitly assumed crimes to politicize, and even obstruct and
restrict, normal technology exchange activities," she added.
"This in reality is undoubtedly shutting oneself off, rather than being the door to openness, progress and fairness."
Huawei
and ZTE did not return requests for comment. Both in the past have
denied allegations their products are used to spy. The White House also
did not return a request for comment.
The Wall Street Journal first reported in early May that the order was under consideration, but it was never issued.
HIT TO RURAL NETWORKS
[I am told that SpeedConnect relies on this equipment, while certain other Wireless companies DO NOT]
Rural
operators in the United States are among the biggest customers of
Huawei and ZTE, and fear the executive order would also require them to
rip out existing Chinese-made equipment without compensation. Industry
officials are divided on whether the administration could legally compel
operators to do that.
While the big U.S. wireless
companies have cut ties with Huawei in particular, small rural carriers
have relied on Huawei and ZTE switches and other equipment because they
tend to be less expensive.
The company is so
central to small carriers that William Levy, vice president for sales of
Huawei Tech USA, is on the board of directors of the Rural Wireless
Association.
The RWA represents carriers with fewer
than 100,000 subscribers. It estimates that 25 percent of its members
had Huawei or ZTE equipment in their networks, it said in a filing to
the Federal Communications Commission earlier this month.
The
RWA is concerned that an executive order could force its members to
remove ZTE and Huawei equipment and also bar future purchases, said
Caressa Bennet, RWA general counsel.
It would cost $800 million to $1 billion for all RWA members to replace their Huawei and ZTE equipment, Bennet said.
Separately,
the FCC in April granted initial approval to a regulation that bars
giving federal funding to help pay for telecommunication infrastructure
to companies that purchase equipment from firms deemed as a threat to
U.S. national security, which analysts have said is aimed at Huawei and
ZTE.
The FCC is also considering whether to require
carriers to remove and replace equipment from firms deemed a national
security risk.
In March, FCC Chairman Ajit Pai said
"hidden 'back doors' to our networks in routers, switches — and
virtually any other type of telecommunications equipment - can provide
an avenue for hostile governments to inject viruses, launch
denial-of-service attacks, steal data, and more."
In
the December filing, Pine Belt Communications in Alabama estimated it
would cost $7 million to $13 million to replace its Chinese-made
equipment, while Sagebrush in Montana said replacement would cost $57
million and take two years.
Sagebrush has noted
that Huawei products are significantly cheaper. When looking for bids in
2010 for its network, it found the cost of Ericsson equipment to be
nearly four times the cost of Huawei. (Reporting by Diane Bartz and
David Shepardson; Additional reporting by Christian Shepherd in BEIJING;
Editing by Chris Sanders, Leslie Adler & Shri Navaratnam)
