WASHINGTON (BLOOMBERG) – The US Federal Communications Commission moved toward barring China Unicom (Hong Kong) Ltd and ComNet from the US, calling the Chinese telecommunications carriers a security risk controlled by the Beijing government.
The action against two of China’s three major telecommunications operators was decided by a 4-0 vote by agency.
It continues a security crackdown that earlier touched Chinese gear makers Huawei Technologies Co and ZTE Corp. In 2019, the FCC barred China Mobile Ltd from the US market over national security concerns.
ComNet, a subsidiary of Pacific Networks Corp, and the unit formally known as China Unicom (Americas) Operations Ltd were told in April by the FCC to show they are independent from the Chinese government, or face a proceeding that could result in ejection from the US market. With its vote Wednesday the FCC began those proceedings.
“These companies are indirectly owned and controlled by the Chinese government,” Acting Chairwoman Jessica Rosenworcel said at the meeting.
“There is strong reason to believe that they will have to comply with requests from the Chinese government and advance its goals and policies.” The companies may present evidence in proceedings set in motion by the vote, the FCC said in news releases.
Rosenworcel said US agencies had “recommended to us that there are not mitigation measures that would be able to address this problem.” China Unicom said in a statement after the FCC action that it has operated in the US for nearly 20 years through a subsidiary that fully complies with the law.
It said it “expects a thorough, fair and fact-based review of the company’s conduct by the FCC.” In a June filing, it said it had followed rules and there was no basis to oust it from the US.
China’s three major state-owned carriers – China Mobile Ltd, China Telecom Corp and China Unicom – have seen prices drop as much as 33 per cent since the US started targeting them last April. Much of the losses have been recovered since January, buoyed by growth in China, where they operate most of their business.
China Unicom rose as much as 2.4 per cent Thursday morning in Hong Kong. The benchmark Hang Seng Index rose as much as 1.9 per cent. China’s three major state-owned carriers – China Mobile Ltd, China Telecom Corp and China Unicom – have seen prices drop, China Mobile by as much as 33 per cent, since the US started targeting them last April. Much of the losses have been recovered since January, buoyed by growth in China, where they operate most of their business.
Contention Point Pacific Networks and ComNet in a June 1 filing told the FCC their operations aren’t subject to Chinese government control. They said their “successful business records have been matched by their record of compliance with the commission’s regulatory requirements.”
Their parent company is state-owned Citic Group Corp, the companies said.
A message left at a ComNet email wasn’t immediately returned.
The FCC earlier commenced a proceeding asking whether to end China Telecom (Americas) Corp’s permission to operate in the US.
US security agencies in a Nov 16 filing at the FCC said China Unicom is controlled by Beijing “and therefore is vulnerable to exploitation, influence, and control by that government.” Its operations in the US provide opportunities for economic espionage, theft of trade secrets, and the potential for disrupting US communications, officials with the Justice Department and Commerce Department said in the filing.
China Unicom links to US networks at 11 places where it has installed routers, according to the security agencies’ filing. The company leases circuits from US carriers, and has relationships with AT&T, Verizon Communications and CenturyLink, according to the filing.
In a separate Nov 16 filing to the FCC that addressed Pacific Networks and ComNet, the US agencies cited “potential use of Chinese information technology firms as routine and systemic espionage platforms.”
Ownership by government-controlled Citic raises concerns the companies “will be forced to comply with Chinese government requests, including requests for communications intercepts,” the agencies said.
The integrity of US phone networks has emerged as a point of contention as the world’s two largest economies joust over a range of issues, including network security, trade and responsibility for spread of the coronavirus.
The Senate’s Permanent Subcommittee on Investigations in a report issued June 9 branded Chinese government-owned carriers as a threat, and urged the FCC to complete its review of the companies’ status in a “timely” manner.
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