FCC denies ZTE request to reverse national security threat designation

The Federal Communications Commission (FCC) on Tuesday formally denied the request by Chinese telecommunications group ZTE to remove the agency’s designation of the company as a national security threat. 

The denial comes months after the FCC formally designated both ZTE and Chinese telecom group Huawei as national security threats, and banned U.S. groups from using funds from the FCC’s $8.3 billion Universal Service Fund to purchase equipment from either group. Huawei is currently in the middle of a legal battle disputing the designation. 

“With today’s order, we are taking another important step in our ongoing efforts to protect U.S. communications networks from security risks,” FCC Chairman Ajit Pai said in a statement. 

Pai noted that the agency will vote next month on rules to implement a reimbursement program created by legislation signed into law by President Trump earlier this year. The program would provide funds for smaller U.S. telecom groups to rip out and replace suspicious equipment, with companies banned from using federal funds to purchase equipment from Huawei and ZTE. 

“Now it is more vital than ever that Congress appropriate funds so that our communications networks are protected from vendors that threaten our national security,” Pai said. 

Linda Fowlkes, the chief of the FCC’s Public Safety and Homeland Security Bureau, wrote in the decision denying ZTE’s request that the action “furthers the Commission’s objective of promoting safe and reliable networks.”

ZTE did not respond to The Hill’s request for comment on the FCC’s ruling. 

In requesting the designation be reconsidered, ZTE had argued that it had taken steps to comply with U.S. authorities, and had pushed back against national security concerns. 

Fowlkes, writing for the FCC, strongly refuted ZTE’s claims, noting that any steps taken by the company to improve its compliance with U.S. law do not “remove ZTE’s obligation to abide by the Chinese government’s national security requirements, which poses an inherent risk to our communications equipment and services.”

The company had also taken steps to increase its cybersecurity and address vulnerabilities, with Fowlkes also arguing that the company’s ties to China meant that any cybersecurity improvements did not matter, citing espionage concerns. 

“Given ZTE’s track record of persistent vulnerabilities in its systems, we must consider the likelihood that its products still contain unknown vulnerabilities, even if it has attempted to resolve known vulnerabilities,” Fowlkes wrote. “This risk is magnified by the ability of the Chinese government to require ZTE to abide by its national intelligence laws.”

Concerns around ZTE and other Chinese tech groups in the U.S., such as social media giant TikTok, have largely stemmed from a 2017 Chinese intelligence law that requires Chinese companies and citizens to participate in state intelligence work if requested.

ZTE has come under scrutiny the past three years alongside Huawei, with the Commerce Department separately adding both groups to its “entity list,” with U.S. companies banned from doing business with groups on the list. 

NBC News reported in March that the Justice Department was investigating ZTE for bribery, accusing the company of paying bribes to foreign officials to gain advantage in the world telecom market. 

The investigation comes three years after ZTE pleaded guilty to illegally shipping equipment from the U.S. to Iran, agreeing to pay a penalty of $1.19 billion in settling with the Commerce and Treasury departments for violating export controls.