Chinese telecom firms brace for accusations of spying in new report

Chinese telecom companies are bracing for a new congressional report that is likely to accuse them of posing a security threat to the United States.

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On Monday, the House Intelligence Committee will release the findings of its yearlong investigation into the Chinese companies Huawei and ZTE. The chairman of the panel, Rep. Mike Rogers (R-Mich.), hinted last week that the report wouldn’t be favorable to the telecom giants. "The report will explain why there may be reasons for concern," Rogers said at an event in Washington.

Some officials worry that the Chinese government could use the companies to spy on Americans or sabotage communications networks.

Dutch Ruppersberger (D-Md.), the Intelligence Committee's top Democrat, said at a hearing last month that he is concerned about the companies because China is "known to aggressively conduct cyber espionage." He wondered whether China is subsidizing Huawei and ZTE so that the companies can offer "bargain basement prices to unsuspecting consumers."

"These consumers may have no idea about the national security implications of their purchase," he said.

Huawei and ZTE insist the concerns raised by lawmakers are baseless.

Bill Plummer, Huawei’s vice president for external affairs, told The Hill he would like to believe that the committee’s report would be a measured examination of the security challenges that all global telecom companies face.

"We have some concern, however, that that won't be the case," Plummer said.

With $32 billion in annual revenue, Huawei is now the world's largest telecom equipment maker, having just recently overtaken Sweden's Ericsson. Plummer said the company wouldn't jeopardize its international revenue to appease the Chinese government.

"The suggestion that there's a conspiracy for Huawei to infect its own equipment at the behest of a government — really? That would require hundreds, thousands of people within the company to be involved in the conspiracy," he said.

He argued that although Huawei was founded in China, it is global in scope, just like many other major companies. He added that most technology companies design and build their products in facilities around the world, including in China.

"There is not a network in this country today that doesn't have gear in it that has been developed, designed and coded on a global basis, including in China," Plummer said.

He warned that banning Huawei from the United States would be "just politics" and would mean "less jobs, less foreign investments, less innovation, less competition, higher-cost broadband, increased trade tensions [and] nasty market-distorting precedents that God-forbid could be used against American companies overseas."

The controversy has caught the attention of “60 Minutes.” The network news program is set to air a segment on Sunday night, ahead of the release of the intelligence panel’s report, reviewing the allegations against Huawei.

“If I were an American company today… and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers’ privacy, and you care about the national security of the United States of America," Rogers told CBS's Steve Kroft.

Huawei has waged an advertising blitz in the United States in recent months to counter the publicity from the House investigation, most visibly with TV ads during the Summer Olympics.

The Wall Street Journal reported on Thursday that Huawei has reached out to investment banks for advice on issuing stock to the public. The move could be part of an effort to become more transparent and win over international skeptics.

But Plummer said Huawei has plenty of capital and that the company would go public when it makes "commercial sense" — not because of government pressure.

For both Huawei and ZTE, it’s unclear what the fallout from Monday’s report might be.

Rogers declined to discuss specific actions that Congress could take against the companies at the hearing last month.

"Congress can do a lot of things, and it will be up to us to determine what best protects our telecommunications infrastructure if we believe there is a threat to both personal business and government information that flows over those networks," he said.

Plummer said he hopes Monday's report will allow the company to move forward and put the investigation behind it.

"Huawei today is a globally-trusted company in over 150 markets, and the integrity and the security of our solutions are world-proven," Plummer said. "And they will be on Tuesday too."