FCC Rejects ZTE Petition to Lift National Security Threat Designation

The Federal Communications Commission has denied ZTE’s request to be removed from its classification as a “national security threat.” Consequently, businesses within the United States will remain prohibited from utilizing the FCC’s $8.3 billion Universal Service Fund to procure equipment or services originating from ZTE.

The Universal Service Fund provides financial support for the development of telecommunications infrastructure throughout the United States, with a particular focus on serving low-income and high-cost regions, expanding rural telehealth capabilities, and supporting schools and libraries. On June 30th, the FCC issued a directive prohibiting U.S. firms from using the fund to purchase technology from both Huawei and ZTE, citing concerns regarding the close relationships these companies maintain with the Chinese Communist Party and its military.

Numerous smaller telecommunications companies depend on Huawei and ZTE, both leading global suppliers of telecom equipment, for affordable technological solutions. Following a survey of carriers, the FCC determined in September that the replacement of existing Huawei and ZTE equipment would require an investment exceeding $1.8 billion.

The Secure and Trusted Communications Networks Act, enacted by Congress this year, stipulates that a significant portion of this cost would qualify for compensation through a program known as “rip and replace.” However, Congress has yet to allocate funding for this program, despite receiving support from both sides of the political spectrum.

In the recent announcement concerning ZTE, Chairman Ajit Pai also stated that the FCC will proceed with a vote on regulations to enact the reimbursement program during its upcoming Open Meeting, scheduled for December 10th.

The FCC initially approved its order preventing companies identified as national security risks from accessing funds from the Universal Service Fund in November 2019. Huawei responded by initiating legal action against the FCC, alleging that the ban surpasses the agency’s legal authority and infringes upon constitutional rights.

TechCrunch has reached out to ZTE for a statement.