Huawei mounts legal challenge to US subsidy programme ban

Chinese tech giant fights back against FCC ban on carriers in the rural US from using the Universal Service Fund to buy its equipment and designation as threat to US national security

Huawei Technologies has confirmed that it is mounting a legal challenge to the US telecoms regulator’s ban on carriers in rural America from using the Universal Service Fund (USF) to purchase its equipment.

On 22 November, the Federal Communications Commission (FCC) passed a resolution based on a proposal from its chairman, Ajit Pai, that fundamentally prohibits recipients of the regulator’s USF from using such money to buy equipment or services from companies that are perceived to be a risk to the US.

Pai cited Huawei and ZTE in this regard, branding them “untrusted suppliers”. The proposal also requires certain carriers receiving USF funds, known as eligible telecommunications carriers, to remove existing equipment and services from designated companies from their networks.

In response, Huawei has decided to go to the courts and, in a petition filed in the US Court of Appeals for the Fifth Circuit, is asking for the FCC’s order to be held as unlawful on the grounds that it fails to offer Huawei required due process protections in labelling the company as a US national security threat. Huawei believes the FCC has also failed to substantiate its findings, which it describes as arbitrary, with evidence or sound reasoning or analysis, in violation of the US Constitution, the Administrative Procedure Act, and other laws.

Huawei said that in its opinion, both FCC chairman Pai and other FCC commissioners failed to present any evidence to prove their claim that Huawei constitutes a security threat, and ignored the facts and objections raised by Huawei and rural carriers after the FCC first made the proposal in March 2018.

“Banning a company like Huawei, just because we started in China – this does not solve cyber security challenges,” said Song Liuping, Huawei’s chief legal officer. “Huawei also submitted 21 rounds of detailed comments, explaining how the order will harm people and businesses in remote areas. The FCC ignored them all.

“Carriers across rural America, in small towns in Montana, Kentucky, and farms in Wyoming – they choose to work with Huawei because they respect the quality and integrity of our equipment. The FCC should not shut down joint efforts to connect rural communities in the US.”

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In its motion, Huawei also asserted that the FCC’s decision exceeds the agency’s “statutory authority”, arguing that the FCC is not authorised to make national security judgements or restrict the use of USF funds based on such judgements. Also, Huawei’s counsel regarded the FCC’s designation of Huawei as a national security threat as not just lacking legal or factual support, but also “simply shameful prejudgement of the worst kind”.

Aiming to soften the blow to rural US carriers, the FCC announced on 4 December that it would establish a 5G Fund, which would make up to $9bn in USF support available to carriers to deploy advanced 5G mobile wireless services in such regions of the country.

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