ZTE is still a security threat according to FCC decision

Some might presume that recent political changes in the US government might weaken the campaign against certain US companies but it is far too early to count those eggs. The current government still holds the power and, as far as the Trump administration is concerned, nothing has really changed. Huawei is still on its entity list and TikTok still risks getting banned next month. And according to a recent FCC order, ZTE remains a national security threat because of its potential to be used for state-sanctioned espionage.

ZTE's tussle with the US government began long before Huawei became the latter's target. ZTE was severely punished for breaking trade embargos and was almost completely brought to its knees. Trump relented supposedly on account of keeping the company's workers employed, though there have, of course, been rumors of some negotiations between the US and China over ZTE's fate.

This time, however, ZTE might not get off as easily and not for something it actively committed or does. The company's designation as a national security threat came about because of how the Chinese government works and how it requires companies to cooperate in intelligence gathering activities, a.k.a. spying. FCC chair Ajit Pai notes that ZTE itself didn't dispute that interpretation of Chinese law, but whether that was an admission of guilt is a different question entirely.

In the end, ZTE's request to have its designation removed was rejected by the FCC, despite the company's promise to comply with applicable US laws. The FCC will meet on December 10 to decide on the list of banned equipment. But while Pai hails the decision as a victory in the agency's efforts to protect US communications networks, it won't save small rural carriers from suffering even more than ZTE.

These network operators rely on cheap network hardware from ZTE and Huawei and the FCC's decision means they can no longer use government subsidies to buy those. These will cost such carriers no less than $40 million to replace banned equipment and the FCC is asking Congress for money to help soften the blow. Huawei was curiously not mentioned in the FCC memo but the company has also asked for a review independent of ZTE.