FCC gets pushback on supply chain security proposal

Telecommunications industry trade groups and top vendors are telling the Federal Communications Commission to proceed cautiously in a rulemaking effort that could put certain foreign manufactured telecom equipment off limits for U.S. networks on national security grounds.

In March, the FCC Chairman Ajit Pai proposed rules that would curb billions in federal subsidies from the commission's $8.5 billion Universal Service Fund from going to U.S. telecommunications providers that buy equipment from companies that "pose a national security threat" to U.S. networks.

The proposed rules are largely aimed at Chinese telecommunications equipment suppliers Huawei and ZTE, which Pai and others believe could offer a surreptitious "backdoor" into U.S. telecommunications networks.

Huawei objected both to the suggestion that its gear posed a threat to communications networks and to the FCC's claim of national security authority in a filing posted June 4.

Huawei said the rule "exceeds…statutory authority," called it “arbitrary and capricious,” and said it "will cause costs far in excess of any slight benefits; violates constitutional and statutory procedural requirements; and relies on unverified and unsupportable factual allegations."

Huwaui also noted that the Universal Service Fund doesn't have a national security function, but exists only to guarantee "reasonably priced, high quality telecommunications and broadband services" for disadvantaged customers and in hard-to-reach rural areas. Barring Huawei, the company said, would decrease competition and increase costs for those providers.

In its filing, AT&T said imposing restrictions on U.S. telecommunications providers would put them at a competitive disadvantage in the market for converged services, which includes cable and technology companies as well as traditional telecoms.

"To effectively protect the communications supply chains that serve this converged marketplace against national security threats, restrictions to address such threats should apply to all U.S. telecom and information network operators," said the company in its filing.

The trade group representing wireless carriers, CTIA, told the FCC the Department of Homeland Security is the agency charged with sector-specific protections for telecom and IT infrastructure.

"Thus, the Commission’s efforts in this proceeding should be consistent with the U.S. government's broader efforts on these issues," CTIA said.

The industry association representing wireline telecommunications carriers, USTelecom, had similar concerns, noting that the FCC's supply chain discussions are closely related to those underway at DHS, the Department of Commerce and in Congress.