Huawei appeals to FTC to talk sense into Trump administration

Huawei has written to the FTC asking it to have a quiet word with the FCC and Congress in its bid to gain a foothold in the US telecoms industry.

As it stands, Huawei and ZTE are effectively banned from contributing any products or services to any meaningful projects or networks in the US. When the Defense Authorization Act was signed into law, clauses came into effect which effectively prevented Huawei and ZTE from providing any components or services to processes or infrastructure which would be considered ‘essential’ or ‘critical’. The definition of the terms are grey enough to turn it into an outright ban.

While the anti-China sentiment in a sweeping up to tsunami levels, Huawei is fighting back. The 5G prize is too big for it not to. This letter to the FTC appeals to the competition-conscious; effective competition cannot exist without the world’s largest vendor contributing. Presumably ZTE benefits from the doggedness of Huawei, as a reversal of the law would seemingly open the door for it as well.

“Huawei requests that the FTC offer to brief the FCC and appropriate Congressional Committees on these topics,” the filing states. “The agency should also work with the DOJ to help ensure competitive effects are appropriately weighed as part of any inter-agency review of proposed actions by the government.

“As the FTC pivots towards the 21st century, it is imperative that it prioritize achieving its mission through collaboration with other agencies and law enforcement partners to minimize the negative effect on competition, and thereby harm to consumers, caused by government regulation that is not narrowly tailored to achieve its legitimate objectives in the least restrictive way. Failure to do so will result in higher prices, lower-quality goods and services, reduced investment in the U.S., and reduced incentives to innovate. Such negative consequences will isolate the United States and cause it to fall behind other developed countries in important industries like telecommunications.”

The upcoming FTC consultation on communication, media and IT competition in theory should provide suitable ammunition for Huawei to launch another appeal. Some might assume the result of this consultation would be to realise how small the telco industry actually is. There aren’t that many buyers in the ecosystem, in comparison to other verticals, which directly impacts the number of vendors. As you move down the value chain, more niche players appear, but considering the shortage at the top, can the US afford to lose one and still create a competitive environment which benefits the telcos? We suspect not.

Huawei needs a win in the US, as the anti-China rhetoric is starting to spread. Following months of political posturing and finger pointing at China, the US’ prejudices seemed to have rubbed off on Australia, with Japan reportedly the next domino to fall. Huawei is facing an increasingly hostile environment worldwide, and the US is the source of the resentment. Should it be able to win in the US, negative impacts could be controlled, but that win needs to come quickly before too many governments jump on the ‘ban Huawei’ bandwagon.

Appealing to the competition-conscious is a logical move, one which you suspect should work, but this is politics. The political ping-pong extravaganza has grown too large for Huawei to be forgiven. It might be to the detriment of the telco industry, but we cannot see how the US will allow Huawei onto its shores or into its networks.