FCC Denies China Mobile Interconnect

Vote is unanimous, but commissioners suggest more security efforts needed
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The FCC has voted unanimously to deny China Mobile U.S.'s petition to provide telecommunications services between the U.S. and "foreign destinations," but both Republican and Democratic commissioners signaled the FCC needs to do more to address the 5G security threat more broadly and systematically.

The vote followed the recommendation by the Commerce Department and other relevant agencies (the so-called "Team Telecom" review) last year that the petition be denied due to national security concerns.

It was the first time those agencies had asked such a petition to be denied on national security grounds. The FCC agreed, and said there was no way to mitigate that threat. China Mobile is based in Delaware, but controlled (and 100% owned) by the Chinese government.

The FCC found that there were substantial and serious risks that the Chinese government would exert undue control. The commission pointed out that 100% foreign control is not necessarily out of bounds, but found that China could increase intelligence collection from U.S. agencies that depend on U.S. phone networks.

As to mitigating the risk through a voluntary agreement, the FCC said that was a nonstarter in the current national security environment given the lack of trust in such an agreement. Absent that ability to mitigate, granting the petition is not in the public interest, said the International Bureau.

Commissioner Michael O'Rielly said he was voting in favor because it was a drastic but necessary step, even for a free-market fan, as he is. The commissioner said there was "nearly zero daylight" between the Chinese government and its companies. He said China offers below-cost products to help international companies gain market share, but placing their homelands at risk.

The commissioner did have an issue with the process. He pointed out that the petition was filed in 2011, while Team Telecom did not weigh in until last year. He said that delay was not fair to the company and needed to change. It should never take seven years again, he added, and said Telecom reviews--of foreign ownership in companies operating in the U.S.--should themselves be reviewed and improved.

But O'Reilly also suggested that security reviews were more the province of other agencies and not an ideal fit for the FCC, though he said if Congress decided to make the FCC the point agency, he was ready to tackle that challenge.

Commissioner Brendan Carr said that, if you play by the rules, the U.S. welcomes foreign investment. But he said that in this case, it was imperative that the FCC blew the whistle given the scope of the threat from a company owned and controlled by the Chinese government, which can compel access to telecom facilities in China on demand. That means routine and secret surveillance.

He said there is little doubt China would welcome the China Mobile-U.S. connection given its desire to gain U.S. intelligence and intellectual property.

But Carr said the U.S. and FCC should do more, including rethinking China Telecom's and China Unicom's similar, existing, interconnect authorizations. He said Team Telecom should look into rejecting those authorizations, and the FCC should open proceedings on the legacy interconnection rights those Chinese companies were granted in the early 2000's.

Commissioner Jessica Rosenworcel definitely thought the FCC was not doing enough "to address the vast challenges of network security and safety."

So, while she supported the denial, it "did nothing to change the status quo. Nor does it address any of the fundamental challenges to the security of digital age communications," she said.

Rosenworcel argued that the FCC had failed the public when it comes to the privacy and security of wireless devices, citing geolocation tracking by "shady middlemen" using data from carriers. She called that an issue of personal and national security and suggested the FCC had some explaining to do about what it was doing about it. "I think it is time for this agency to act like network security and consumer privacy is a priority," she said.

Commissioner Geoffrey Starks, agreed that strong action to address security vulnerabilities was need. He said that the FCC "needs to do more to protect the security of our telecommunications networks....While private sector action on these issues is laudable, the Commission needs to do more than cheer from the sidelines. We know that more steps to securing our networks are needed.”

He also referenced FCC chair Ajit Pai's proposal to prohibit companies that pose a national security threat to networks or the supply chain from getting Universal Service Fund (USF) broadband subsidy money, saying it was time to resolve how "any uncertainties about how we plan to treat recipients of USF and other FCC-administered support programs that may have otherwise prohibited equipment currently in their network, and ensure that we address the needs of particularly small rural carriers who may lack the resources to replace their equipment.”

He pointed out that while the FCC proposal does not require the removal of existing equipment, Congress has passed legislation that might require that.

Pai has told Congress that the FCC is waiting on input from other agencies on how to identify the banned companies.

Pai said following the unanimous vote that network security is not only a priority, but a necessity. He said he had been at a Senate Select Committee on Intelligence briefing this week and that there was bipartisan agreement that security would definitely not be an afterthought.

He said rejecting the application would not be in the public interest, and was the right call. "When it comes to national security, we can't afford to make risky choices and just hope for the best." 

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