Rogue Company

The Huawei threat is already here
BY GEOFFREY STARKS

Last week’s presidential executive order barred U.S. companies from buying foreign-made telecommunications equipment deemed a national security risk. 

Although the order does not name Huawei, Congress and our intelligence agencies have voiced concern that the company’s equipment contains vulnerabilities that the Chinese government and others could exploit to spy on or harm U.S. networks.
But the executive order misses a critical problem: our networks already contain equipment from Huawei — lots of it. 

The Federal Communications Commission must find this equipment and work with other policymakers to fix the security problems and fund a solution for affected carriers.
We must protect ourselves from Chinese espionage. 

Just two weeks ago, I voted to reject an application from China Mobile, China’s largest carrier, to operate in the U.S. because of concerns about Chinese government influence. 

The threat posed by Huawei equipment in our communications networks is real too. 

As one oversight body recently found, Huawei’s equipment contains software vulnerabilities that could seriously compromise our network security.
That’s why the administration, Congress and the FCC have all sought to prohibit or restrict equipment from companies like Huawei. 

But to date, any concrete federal actions have focused on how to deal with Huawei going forward — they don’t address the fact that some carriers already use this equipment.
Carriers bought this equipment because it had similar functionality at half or even one-quarter of the price of equipment from other manufacturers. 

In wireless networks, use of this equipment runs the gamut — antennas and radios, electronics that move data across networks, and routers, servers and switches that make up the network core.
Our interconnected networks are only as secure as their most vulnerable equipment. 

The risks of having insecure equipment in our networks are alarming — beyond the threat of foreign surveillance and hacking, it also means that our critical infrastructure, financial systems, healthcare, and transportation systems are exposed.
Given the stakes, policymakers must address this issue as soon as possible. 

But none of the actions of the administration or FCC so far have dealt with this problem. 

So, I’ve been working with national security experts and rural carrier groups to gather their perspective on the issues and develop a solution.
Here’s where I stand. 

First, we must understand the scope of our network exposure by identifying the equipment that poses a threat. 

The FCC needs to step up here. 

Congress has invested the FCC with the statutory responsibility and authority to gather this information, and the executive order directs agencies to take actions within their authority to implement the order.
This will be no small task, and the size of the problem is far from clear, but the FCC can and must begin its investigation. 

In addition to using its own authority, the FCC should also work with other federal agencies, including the Department of Homeland Security, the Justice Department, the Department of Defense, as well as the relevant intelligence agencies to bring as much expertise as possible to address the problem.

Second, where we find equipment that poses a security threat, we must fix it. 

Unfortunately, there are no easy answers. 

The White House, Congress and the intelligence community have spoken with one voice — equipment from Huawei and similar manufacturers presents an unacceptable security risk. 

The software embedded in the equipment is simply too vulnerable to exploitation. 

Therefore, we must help transition carriers with insecure equipment in their networks as rapidly as possible — “rip and replace” — but in a way that minimizes disruption to these carriers and their customers. 

Fixing the problem will take time, but we must act quickly to restore the security of our networks.

Finally, with the exigency of national security at stake, we must help the affected carriers with funding to offset the cost of purchasing and installing replacement equipment. 

This is a national problem that needs a national solution. 

Many of the affected carriers are small and will not easily withstand these sorts of replacement costs. It could be expensive — estimates of replacement costs range from $150 million to nearly $1 billion. Perhaps more. 

But protecting our national security should be a team effort.
All of these issues need to snap in place as quickly as practicable. 

The executive order is a good first step, but it’s not enough to prospectively ban future equipment from manufacturers like Huawei. 

Policymakers like the FCC need to figure out how to deal with the equipment that’s already in our network. 

Find it. Fix it. Fund it. 

Our security is at stake.

Chinese Espionage

FCC Blocks China Mobile's Bid For International Phone Services In The U.S.

By SASHA INGBER

Federal Communications Commission Chairman Ajit Pai said Thursday that the commission has rejected China Mobile USA's application to provide phone services between the United States and other countries because of national security risks.

The Federal Communications Commission has blocked a Chinese company from providing international phone services in the United States, citing national security concerns as tensions persist between Washington and Beijing.
China Mobile USA, though a Delaware corporation, is ultimately owned and controlled by the Chinese government. 

The company filed an application in 2011 to provide international communications services.
"There is a significant risk that the Chinese government would use China Mobile to conduct activities that would seriously jeopardize the national security, law enforcement, and economic interests of the United States," FCC Chairman Ajit Pai said.

"Among other things, if this application were granted, the Chinese government could use China Mobile to exploit our telephone network to increase intelligence collection against U.S. government agencies and other sensitive targets that depend on this network."
China Mobile USA does not provide domestic services in the United States, an FCC spokesperson says.
If the application had been granted, the company would have been able to connect to the U.S. network, receiving greater access to telephone lines, cellular networks, fiber-optic cables and communication satellites — heightening the risk of communications being monitored, degraded and disrupted.
In 2018, the U.S. Department of Commerce communicated with the company and the U.S. intelligence community before recommending the application be denied. 

Last month, the FCC indicated that it intended to follow through with that recommendation in a draft order.
Thursday's announcement came after a unanimous 5-0 vote from the FCC's Republican and Democratic commissioners.
After the vote, Mr Pai said the agency was also examining authorizations that had been previously granted to two other Chinese firms, China Telecom and China Unicom.
China Mobile USA is a subsidiary of China Mobile Limited, which did not immediately respond to NPR's request for comment.
Lawyers representing China Mobile USA said the drafted order to reject the company's application was guided "more by tensions in the bilateral U.S.-China relationship than an absence of effective mitigation options."
The denied application is the latest indication of a growing rift between the United States and China. Amid a trade war, the Trump administration has insisted that Chinese telecom company Huawei has ties to the government and that its equipment could be used to spy on people or commit economic espionage.

Congress has banned government agencies and contractors from buying Huawei equipment.
Reuters reported that for more than a year, President Trump has also been considering an executive order that would block American companies from using equipment manufactured by Huawei and its competitor, ZTE.
In March, U.S. authorities warned allies in Europe to ban Huawei from their 5G communication networks or face the possibility of receiving less intelligence from U.S. agencies. 

Germany declined to exclude the company.
A FCC spokesperson told NPR that ownership of China Mobile USA traces to the China Mobile Communications Corporation, which is "subject to the supervision of the State-Owned Assets Supervision and Administration Commission," a part of the Chinese government managed under the State Council.

Ajit Pai proposes blocking China-owned telecom from US phone market

China Mobile could be used by Chinese government to attack phone network.
By JON BRODKIN

Federal Communications Commission Chairman Ajit Pai has proposed denying China Mobile USA's application to offer telecom services in the US, saying the Chinese government-owned company poses a security risk.
The FCC is scheduled to vote on an order to deny the application at its open meeting on May 9, and Pai yesterday announced his opposition to China Mobile entering the US market.
"After reviewing the evidence in this proceeding, including the input provided by other federal agencies, it is clear that China Mobile's application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks," Pai said. 

"Therefore, I do not believe that approving it would be in the public interest. I hope that my colleagues will join me in voting to reject China Mobile's application."
We contacted China Mobile and one of its attorneys today about Pai's proposal and will update this story if we get a response.
China Mobile filed its application in 2011, and has repeatedly complained about the government's lengthy review process. 

According to Pai's announcement, China Mobile's application sought authority "to provide international facilities-based and resale telecommunications services between the US and foreign destinations."
In simpler terms, the company was seeking "a license to connect calls between the United States and other nations" and "was not seeking to provide domestic cell service and compete in the country with businesses like AT&T and Verizon," The New York Times wrote yesterday. 

An FCC official told reporters that such calls "could be intercepted for surveillance and make the domestic network vulnerable to hacking and other risks," the Times wrote.

Chinese state-owned firm “subject to exploitation”
The executive branch—which includes the Departments of Justice, Homeland Security, Defense, State, Commerce, and other federal bodies—recommended denial of the application in July 2018.
"[B]ecause China Mobile is subject to exploitation, influence, and control by the Chinese government, granting China Mobile's international Section 214 application, in the current national security environment, would pose substantial and unacceptable national security and law enforcement risks," the National Telecommunications and Information Administration (NTIA), which represents the executive branch in telecom issues, told the FCC.
The filing said that US officials believe that "China Mobile would comply with requests by the Chinese government for information, access to its network, and any other assistance, including activities involving cyber intrusions and attacks."
In another filing, the executive branch noted that granting China Mobile's application "would afford it the ability to interconnect and have greater access to telephone lines, fiber-optic cables, cellular networks, and communication satellites throughout the United States' telecommunications network." Allowing this would not be in the public interest, the executive branch concluded, saying it reached the decision after "a thorough review of the concerns raised by the application, and China Mobile's proposals to mitigate them."
While China Mobile is incorporated in Delaware, "its majority owner is China Mobile Hong Kong (BVI) Limited, which is wholly owned by China Mobile Communications Corporation, which in turn is wholly owned by a foreign state, the People's Republic of China, and is subject to the supervision of the State-Owned Assets Supervision and Administration Commission (SASAC) of the State Council of the People's Republic of China," the executive branch said.
China Mobile acknowledged in filings that "the Chinese government indirectly holds a majority ownership interest in China Mobile USA," but argued that the executive branch "inappropriately conflates" the company with the Chinese government. 

Under FCC rules, the burden of proof is on China Mobile to prove that granting its application is in the public interest, the executive branch noted. 

The executive branch said it is concerned about the Chinese government's ownership of China Mobile because of ample evidence that the Chinese government "has engaged in extensive intelligence collection activity against the United States for national security and economic espionage purposes."
Pai agreed with the executive branch's concerns. 

The FCC said that Pai's draft order to deny the application "would find that, based on the public record, China Mobile had not demonstrated that its application for international Section 214 authority is in the public interest" and that "China Mobile is vulnerable to exploitation, influence, and control by the Chinese government."

Chinese Espionage

Huawei's global ambitions hit by AT&T phone distribution deal's collapse

By Sijia Jiang

HONG KONG -- Huawei Technologies Co Ltd’s planned deal with U.S. carrier AT&T Inc to sell its smartphones in the United States has collapsed at the eleventh hour, people with knowledge of the matter said, in a blow to the Chinese firm’s global ambitions.
A separate person familiar with the discussions said that security concerns had arisen, without elaborating further.
AT&T was pressured to drop the deal after members of the U.S. Senate and House intelligence committees sent a letter on Dec. 20 to the Federal Communications Commission citing concerns about Huawei’s plans to launch consumer products through a major U.S. telecom carrier, online tech news site The Information reported.
Huawei said in a statement to Reuters on Tuesday that its flagship premium smartphone Mate 10 Pro -- Huawei’s challenger to the iPhone -- will not be sold in the United States via a telecoms carrier but only through open channels.
“The U.S. market presents unique challenges for Huawei, and while the HUAWEI Mate 10 Pro will not be sold by U.S. carriers, we remain committed to this market now and in the future,” it said.
Huawei is the world’s third largest smartphone vendor by volume after Samsung Electronics and Apple Inc, but it has a mere 0.5 percent share of the U.S. smartphone market, compared with 39 percent for Apple and 18 percent for Samsung, according to industry tracker Canalys.
In the United States, where telecom carriers dominate the distribution channel by typically providing subsidies and special package deals, Huawei had been unable to make any significant inroads due to national security concerns.
Huawei was poised to announce a partnership with AT&T to distribute its phones in the United States this year, said the people with knowledge of the matter, who declined to be identified as the talks were private. 

AT&T declined to comment.
The flagship Mate 10 Pro that was to be introduced is Huawei’s most high end product to date, equipped with its own AI-powered chips that Huawei says process data much faster than those used by Apple and Samsung. 

It was launched in Europe in October with a price tag of 799 euros ($955).
Huawei’s smartphone chief Richard Yu flagged Huawei’s ambition to become a truly global smartphone brand in 2018 in his New Year address to staff, and also told The Information in an interview in late December that it planned to spend $100 million on marketing to raise brand awareness in the United States.
But the collapse of the deal with AT&T, first reported by the Wall Street Journal, will mean that Huawei will likely struggle to make a hit of its smartphones there.
“This makes it very difficult for Huawei to get significant in the US as the open channels account for only about 10-11 percent of the market,” said Canalys analyst Mo Jia, referring to sales channels outside telecom carriers and vendors’ own stores.
He said Huawei’s proprietary mobile chips may have presented a bigger regulatory hurdle for its U.S. market entry in the current political climate, compared with other Chinese vendors’s entry strategy that relies on U.S. chip suppliers.
“Whatever they have spent on US marketing is a waste now, and the letdown this time may also deter other potential carrier-partners in the future,” Jia said.
In 2012, Huawei and ZTE Corp were the subject of a U.S. investigation that looked into whether the companies’ equipment provided an opportunity for Chinese espionage and threatened critical U.S. infrastructure.