FCC gets tough on China as trade war escalates

FCC gets tough on China as trade war escalates
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The Federal Communications Commission (FCC) is ramping up its battle against Chinese telecom companies as the Trump administration pursues an aggressive trade strategy against China.

Analysts say the FCC’s recent action against China Mobile, and its ongoing investigations into two other Chinese telecom giants, could exacerbate tensions between the two countries amid high-stakes trade negotiations.

“If the FCC effectively wages war on Chinese tech companies in general, then that could make the Chinese government sit up and start to take notice,” Matthew Kendall, chief telecoms analyst at The Economist Intelligence Unit, told The Hill.

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U.S.-China trade negotiations broke down without a deal last week after months of talks. The U.S. increased tariffs on $200 billion in Chinese goods and Beijing on Monday morning retaliated with tariffs on $60 billion of U.S. imports.

Neither side shows any sign of backing down.

President TrumpDonald John TrumpPompeo changes staff for Russia meeting after concerns raised about top negotiator's ties: report House unravels with rise of 'Les Enfants Terrible' Ben Carson: Trump is not a racist and his comments were not racist MORE on Monday warned that “China will be hurt very badly” if the country does not “make a deal” with the U.S. 

“You had a great deal, almost completed, & you backed out!” the president tweeted. 

The U.S. is escalating its pressure campaign against China on multiple other fronts, including the FCC’s increased scrutiny of Chinese telecom companies alleged to be closely tied to the ruling Communist Party of China. 

FCC commissioners last Thursday voted 5-0 across party lines to block China Mobile, one of the largest telecom companies in the world, from U.S. markets over alleged national security concerns.

And at a press conference after the vote, FCC Chairman Ajit Pai revealed that the commission is looking into two other Chinese telecom companies — China Unicom and China Telecom — both of which have the same authorization that China Mobile USA was seeking. 

“We must have a clear-eyed view of the threats that we face and be prepared to do what is necessary to counter those threats,” Pai said before casting his vote on China Mobile.

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Republican Commissioner Brendan Carr called for a full-blown investigation by national security agencies into China Unicom and China Telecom, saying at the Thursday meeting that “much, if not all, of the reasoning behind today’s decision appears to apply with equal or greater force to those legacy authorizations.”

The application from China Mobile’s U.S. subsidiary, China Mobile USA, had languished at the FCC for eight years. The Delaware-based company first asked for authorization to provide services between the U.S. and other countries in 2011.

But the FCC didn’t pick up the matter until last week, as the U.S. and China turned up the heat in their trade talks, a decision that Gordon Smith, the CEO of telecom solutions provider Sagent, said likely was “not coincidental.”

“The telecom industry is strategic to all of our economies, and I think it’s a major trade chip that’s being used,” Smith told The Hill. “And I think U.S. action now is to get action from China on other matters.”

China Mobile in a statement also pointed to the amount of time it took the FCC to address its application.

“After 7 years and 8 months of application, FCC now denies CMI’s bid to operate in the U.S. without apparent reasons and basis,” China Mobile said. The company added that it hopes “the U.S. government will stop putting ‘unreasonable pressure’ on Chinese companies.” 

The FCC’s escalation came days after Trump vowed to increase tariffs on billions in Chinese goods as talks deadlocked.

Paul Triolo, a global technology policy expert with New America’s Eurasia Group, told The Hill that the FCC’s vote against China Mobile USA was a “political message during a more sensitive period in the negotiations.”

The U.S. government over the past year has significantly increased its efforts to push back against Chinese telecom companies as the trade relationship with China deteriorates. Most notably, the Trump administration banned the government from using equipment from Chinese telecom giant Huawei due to concerns about the company’s close ties to the Chinese state.

Experts who spoke to The Hill said the FCC’s decision to block China Mobile USA is only the latest broadside by the commission against Chinese telecom influence, and one of the many ways the Trump administration is putting pressure on China as trade talks deadlock.

It also comes as the U.S. seeks to get a leg up in its race to implement next-generation wireless services known as 5G ahead of China. Next-generation 5G wireless is expected to provide internet connections that are exponentially faster than current speeds and enable a host of new technologies — including the “internet of things,” or an array internet-connected everyday objects — and China is considered the U.S.’s top competitor in the race.

“The FCC’s approach to China is based upon protecting the U.S.’s economic interests and, perhaps more importantly, the FCC’s knowledge that were the U.S. to lose control of the ‘Internet of Things’ due to China’s 5G dominance, it would cede significant geopolitical control and stability too,” Bill Lawrence, a wireless telecommunications lawyer at Burr & Forman, told The Hill.

The Trump administration has focused most of its ire on Huawei and ZTE, seeking to frame the telecom giants as significant threats to national security and raising concerns that the Chinese government could commit espionage using Huawei and ZTE equipment.

The FCC has pursued its own actions to limit those companies, mulling rules that would withhold broadband subsidies for networks that use equipment from companies deemed to be a security threat like Huawei.

While the ties between Huawei and the Chinese state are relatively opaque, it is public knowledge that China Mobile, China Telecom and China Unicom are largely owned and operated by the government.

“There seems to be some inconsistency between saying Huawei is a national security threat but we would allow companies like China Mobile and other Chinese carriers to have access to U.S. networks,” Triolo told The Hill.

It is unlikely the FCC’s China Mobile decision will move the needle in the U.S.-China trade talks, experts said, but as the two economic superpowers wrangle over trade, the U.S. will look for other ways to keep up pressure on Chinese telecom companies.

“I think it’s just going to make the trade talks even more difficult,” Kendall said.