FCC Lists Certain Chinese Telecom Equipment as National Security Risk

On March 12, 2021, just days before the Biden Administration’s first face-to-face meeting with Chinese officials, the Federal Communications Commission (“FCC”) took another step to address growing bi-partisan concern about risks posed by Chinese telecom suppliers by publishing a list of communications equipment and services that it determined pose an unacceptable risk to U.S. national security or the security and safety of U.S. persons. The listed equipment and services are produced by (1) Huawei Technologies Company, (2) ZTE Corporation, (3) Hytera Communications Corporation, (4) Hangzhou Hikvision Digital Technology Company, and (5) Dahua Technology Company, as well as their subsidiaries and affiliates. The listing prohibits the use of any federal subsidy to purchase, rent, lease or maintain listed communications equipment and services, and allows certain providers of advanced communications services to be reimbursed for replacing the listed communications equipment and services.

While the listing was accompanied by a forceful statement from acting FCC Chairwoman Jessica Rosenworcel emphasizing a desire to “not repeat the mistakes of the past,” companies should not necessarily view the list as a general policy signal of how the Biden administration will approach Chinese technology issues. Rather, the FCC simply followed its mandate under existing law. The Secure and Trusted Communications Act of 2019 required the FCC to publish by March 12, 2021, a list of communications equipment or service that met certain criteria, including that such equipment or service was listed in Section 889 of the 2019 National Defense Authorization Act. Section 889 expressly included telecommunications equipment produced by Huawei Technologies Company, ZTE Corporation, and the other Chinese companies listed by the FCC.

By limiting the list to those companies identified by Congress in Section 889, the FCC did no more than what was required by law. Indeed, one of the primary functions of the Secure and Trusted Communications Act is to align the FCC’s actions with national security telecommunications designations made by other government entities, including the Federal Acquisition Security Council, the Department of Commerce (pursuant to Executive Order 13873), the Department of Homeland Security, the Department of Defense, the Office of the Director of National Intelligence, the National Security Agency, and the Federal Bureau of Investigation.

Although the FCC listing mirrors the criteria under which the Department of Commerce can block telecommunications transactions pursuant to Executive Order 13873 (see prior alert here), such a determination by the FCC does not mean that the Commerce Department will necessarily take an equivalent approach in its new process. With the effective date for the interim final rule implementing Executive Order 13873 rapidly approaching (March 22, 2021) and senior level officials from China and the United States meeting this week, we may soon have clearer indications of how the Biden Administration will approach the national security risks in the information and communications technology and services supply chain.

In the meantime, companies receiving federal subsidies should ensure that no federal funds are used to purchase, rent, lease or maintain equipment or services from the listed companies. And providers of advanced communications services who serve 2,000,000 or fewer customers may now be able to avail themselves of part of the $1.9 billion that Congress appropriated to “rip and replace” the listed technology. The Biden Administration’s approach is still developing, but there may be further substantive actions in the near future.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta Lichtenbaum, an O'Melveny partner licensed to practice law in the District of Columbia, John Dermody, an O'Melveny counsel licensed to practice law in California and the District of Columbia, David J. Ribner, an O'Melveny counsel licensed to practice law in the District of Columbia and New York, and Kristin R. Marshall, an O'Melveny associate licensed to practice law in the District of Columbia and Missouri, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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