House Committee Slams Chinese Telecom Companies

Report finds Huawei and ZTE were not sufficiently open and transparet, charge they dispute

By John Eggerton -- Broadcasting & Cable, 10/8/2012 8:31:04 PM

Following an almost year-long investigation, the The House Permanent Select Committee on Intelligence has recommended that telecom providers steer clear of Chinese-based global tech companies Huawei and ZTE.

In a report released Monday, the committee said the companies did not sufficiently cooperate with the investigation into the national security threat of Chinese telecom companies -- Huawei and ZTE are the top two -- doing business in the U.S.

During the recent congressional debates over cybersecurity, one issue both agreed on was that the country needed to better track the foreign-made telecom-related hardware and software in critical U.S. telecom systems.

The committee report concluded that Huawei and ZTE "failed to provide evidence that would satisfy any fair and full investigation," the report said, leading the committee to conclude that the government should be suspicious of continued Chinese penetration of the U.S. telecom market, that the government block any potential mergers between U.S. companies and the Chinese companies,  that U.S. government systems not use Huawei or ZTE equipment or parts, and that private sector companies consider the long-term security risks of doing business with them, and that "potential legislation to better address the risk posed by telecommunications companies with nation-state ties or otherwise not clearly trusted to build critical infrastructure.  Such legislation could include increasing information sharing among private sector entities..."

That info sharing was a key element in cybersecurity legislation that failed to pass in Congress this session.

"ZTE has presented the Committee with ample facts that demonstrate ZTE is China's most transparent, independent, globally focused, publicly traded telecom company, ZTE said in a statement.

"The United States is a country ruled by law, where all charges and allegations should be based on solid evidence and facts," said Huawei in response to the report. "The report conducted by the House Permanent Select Committee on Intelligence (the Committee), which took 11 months to complete, failed to provide clear information or evidence to substantiate the legitimacy of the Committee's concerns." 

Committee member Rep. Adam Schiff  (D-Calif.) said as far as he was concerned it was too risky to do business with the companies.

"At a time when Chinese collection intelligence efforts against the United States are significant and Chinese theft of American trade secrets is rampant, handing critical telecommunications infrastructure to Huawei and ZTE poses too great a threat to our security and economy," he said.