China Telecom is owned by the Chinese government and China’s Communist Party has a “substantial control” over the company, according to the United States Federal Communications Commission.
The FCC made this claim as it voted, 5-0, against two China Telecommunications companies. The FCC, in its latest ruling, ordered the removal of equipment made by a Chinese firm and started a proceeding on whether to continue allowing China Telecom (Americas) Corp. to operate in the United States.
FCC Chairman Ajit Pai said that aside from the ownership issue, security agencies contend that China Telecom has not complied with cybersecurity and privacy laws and provides opportunities for Chinese state-sponsored economic espionage and disruption of U.S. communications traffic.
The FCC last year barred the use of U.S. subsidies in purchasing communications equipment from ZTE Corp. and another China-controlled telco. Both companies denied the FCC’s allegations that they are security risks.
Since then, Congress and other agencies branded Chinese companies a threat, “so today, we establish ‘rip and replace’ rules” covering equipment removal,” Pai said.
The FCC said it would establish a list of prescribed equipment and set up a program to reimburse carriers for replacing the suspected China firm gear that will start once Congress devotes an estimated $1.6 billion for that purpose.
The actions, which affect providers that take federal subsidies, aim to implement a law that Congress passed in March. “The record on this is clear,” said FCC Commissioner Brendan Carr, a Republican.
“The Chinese government intends to surveil persons within our borders, for government security, for spying advantage, as well as for intellectual property and an industrial or business edge.”
The restrictions ordered by the FCC affect mainly small carriers that often serve rural areas. Such companies need help to fulfill the requirements, rural lender CoBank ACB said in a report filed last month with the FCC.
China Telecom, which has a 40-percent stake in Dito Telecommunity, the third major telecom player in the Philippines, is one of the so-called “Big Three” providers in China, offering wireline mobile telecommunications and internet access, according to a U.S. Senate report issued in June.
The company served more than 335 million subscribers worldwide as of December 2019 and claims to be the largest fixed-line and broadband operator in the world, according to the report.
In April, the FCC told China Telecom, China Unicom Americas Ltd., Pacific Networks Corp. and its subsidiary ComNet to explain why the agency shouldn’t move to revoke their authorizations.
China Telecom Americas in a June 8 filing told the FCC that it is an independent business based in the U.S. and isn’t subject to Chinese government control. It called for a hearing if the FCC were to move against it.
The FCC barred China Mobile from the U.S. market last year, and said it would review other companies’ records.
The agency seems set to continue considering national security restrictions, said Commissioner Michael O’Rielly, a Republican who is departing the agency after his term expired.
“We are closing our market in our national security interest,” O’Rielly said. “And it has ramifications and repercussions, but we still have to do it because it’s the right thing.”
The FCC, Congress and President Donald Trump’s administration are confronting China on a range of issues including trade and the novel coronavirus. Thursday’s votes signalled continued vigilance on national security matters at the agency after President-elect Joe Biden’s administration takes over in January.
