The US Federal Communications Commission (FCC) on June 30 formally designated Chinese telecom vendors Huawei Technologies and ZTE Corporation, all their parent and subsidiaries, as well as affiliate firms, as ‘national security threats’ to the country.

‘With today’s Orders, and based on the overwhelming weight of evidence, the Bureau has designated Huawei and ZTE as national security risks to America’s communications networks, and to our 5G future,’ FCC Chairman Ajit Pai said in a statement on Tuesday.

‘Both companies have close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services,’ he added.

Telecom companies have been prohibited from using government subsidy through the $8.3 billion Universal Service Fund to purchase equipment from the two companies. The FCC voted unanimously to block telcos from using federal funds to purchase equipment from Huawei last November, but the final order came into effect only on June 30, The Verge reported.

In 2018, US President Donald Trump had said that of the two vendors, ZTE would be able to remain in business in the US after paying a fine of $1.3 billion, and providing ‘high-level security guarantees.’ Trump’s predecessor Barack Obama’s administration had blacklisted ZTE for seven years for violating economic sanction norms imposed on Iran.

Huawei is the world’s largest telecom equipment maker and the second-largest mobile phone parts manufacturer. The company has been at the forefront of innovation that has allowed many companies in developing and as well as developed economies to build large telecom infrastructure at very low costs.

The FCC’s move to block telecoms from using USF funds to purchase equipment from Huawei and ZTE could make it more difficult for smaller companies to provide affordable services.

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