Huawei escalates its dispute with the US

Chinese telco vendor Huawei seems to be going on the offensive in its battle of wills with US regulators, having filed some fresh objections.

Huawei issued its second response in a month to the US FCC’s “Notice of Proposed Rulemaking” (NPRM) which seeks to ban US companies receiving Universal Service Fund (USF) from purchasing communication equipment and services from the Chinese firm.

To say Huawei and the US authorities do not see eye to eye is to put it very mildly. Here is a timeline of the recent chapters of the feud:

There have been further exchanges since Huawei sent in the first comment, and the second response from Huawei also drew heavily on these other comments from companies and both trade and non-trade associations. In particular, large parts of the document have been devoted to refuting comments by those companies that have expressed support for FCC’s proposal.

Huawei’s updated response makes some interesting reading. The overt anger in its June 1 response is more subdued in the updates. In the preamble of the first response it called the Commission’s proposal “arbitrary and capricious”, the mechanism to implement the measures “improper and imprudent”. It accused the Commission of using “unverified and unsupportable factual allegations” and of “violat(ing) constitutional and statutory procedural requirements”. Some of these emotional expressions are moved further deep into the text, some are taken out entirely.

Huawei stated that the proposal was only supported by those who would benefit from the ban. This is largely correct. Motorola Solutions Inc. is the only one who expressed unequivocal support for it, and is arguing that the proposed ban was not going far enough. It should also extend to public sector purchase, which Motorola is strong. Nokia and the Telecommunications Industry Association (“TIA”) also lent their support to the proposal despite some qualification. The American Library Association (ALA) and its partners also showed a qualified support for the Commission’s proposal, out of principle.

Huawei’s latest response scores some strong points, such as apparently calling out Nokia’s suggestion that listed companies are somehow more trustworthy. When refuting this point, Huawei, which is a privately-owned company, threw its fellow culprit ZTE under the bus. It stated in a rhetorical way, “ZTE is a public company, so it is unclear how Nokia would weigh this factor in a decision whether to blacklist ZTE”. So far, ZTE has not sent in any response.

Other than these, Huawei’s updated response has not added new arguments that the others who do not support the proposal have not made. The main points include: the proposed actions go beyond FCC’s jurisdiction; similar investigations are already being carried out by both the legislature and other agencies of the executive branch; the cost to American industries and consumers outweighs the benefit, which is elusive and speculative; the definition of threat to national security is not clear and lacking substantive evidence; and the accused should be given a full hearing.

If the decision should be made by show of hands, Huawei would have won hands down. At time of writing, 27 entities (companies and associations) have sent in their comments. We went through all the responses, and noticed that those four listed above are the only ones that openly supported the proposal.

The majority of responses opposed it, most of them small and medium sized companies or their representative. The comments from National Federation of Independent Business (NFIB) sums up the sentiment. “The Prohibition [sic] would have a substantial adverse economic impact on small businesses in the telecommunications industry if those businesses (a) depend upon Universal Service Fund support for a substantial portion of their activities and cannot replace that support with other funds, (b) have built their networks to date in substantial part with equipment from what would become a Prohibited Source Company, and (c) have obligated themselves by contract to use the maintenance services of that Prohibited Source Company with respect to those networks in the future…. Even if a Prohibited Source Company’s network equipment could interoperate with another company’s equipment, the small business would incur substantial adverse economic impact”.

The rest asked for further clarification or advised further consideration from FCC. “this objective would be best served by a coordinated, “whole of government” approach in which the Commission’s targeted efforts in the USF context are one part of a broader holistic, cross-sector interagency effort”, said The Internet & Television Association (NCTA).

Here is how the views were distributed.

To the chagrin of Huawei and the others who oppose the proposal, this vote has no direct influence over the process. Indirectly, however, it indicates that the broader US outside of the Trump administration is far from convinced that further restrictions on the activities of Huawei are a good idea. Wouldn’t it be ironic if heavy-handed regulation actually made Huawei the object of sympathy in a country it’s supposed to be such a threat to?