Small Carriers Still Preparing for Push Against National Security Rules

The Competitive Carriers Association, NTCA and the Rural Wireless Association raised questions about an NPRM set for a vote at the April 17 commissioners’ meeting proposing to bar use of money in any USF program to buy equipment or services from companies that “pose a national security threat” to U.S. communications networks or the communications supply chain. But that hasn’t translated into ex parte meetings at the FCC. RWA raised concerns Monday in a filing in new docket 18-89. China experts said concerns are legitimate.

With the item only an NPRM, and one that asks broad questions, smaller carriers appear to be largely waiting to raise their questions with the regulator when a comment window opens. If Chairman Ajit Pai “has the votes and he really wants to do it, he’ll get it done,” said a lawyer who represents small carriers. “But that doesn’t mean industry won’t oppose it pretty vigorously. This came on pretty quickly and a lot of folks have been gathering facts to understand it better.” CCA and NTCA didn’t comment.

“RWA and its members understand that the communications network supply chain is global,” the association said in the filing. “That is why RWA urges the Commission to focus its efforts on the creation of a standards and testing based system, and not on imposing a costly and ultimately ineffective ‘country of origin’ prohibitory regime that would provide nothing more than a false sense of security.” A “serious defensive national cyber security strategy” demands a risk management strategy and program “that address the risk from all suppliers of products and services to government and critical infrastructure, including the communications sector,” RWA said. The rules should apply to all communications networks in the U.S. “rather than targeting those relatively few communications networks funded in part by USF that use equipment from particular countries,” RWA said.

The FCC got support from a member of the U.S.-China Economic and Security Review Commission. "The FCC's potential action to limit the use of taxpayer funds for the purchase of equipment of services that pose a threat to national security is a proper and needed action,” Commissioner Michael Wessel emailed. “The companies are primarily interested in profits, it's the government that has a duty to protect the national security interests of the country. Law enforcement and intelligence officials have identified threats that they deem to be unacceptable and our carriers should heed their warnings or continue to operate, without the benefit of federal subsidies."

The National Federation of Independent Business (NFIB) was the only other group to comment on the draft NPRM in docket 18-89. The ban would be prospective, but NFIB said in a Monday filing the rules could have a negative effect if small businesses can’t find equipment that interoperates with equipment they already installed that's on a now banned list. The group urged the FCC to also seek comment on the extent to which industry has built networks with equipment likely to be banned. NFIB also urged the FCC to seek comment on coordination with other agencies for timely decision making and to ask about the potential for foreign country retaliation. Nokia also plans to file, industry officials said.

Pai’s concerns are “legitimate,” said Mark Jamison, University of Florida telecom professor and member of the Donald Trump FCC landing team. “Back doors that enable cyber hacking were found in 2012, or at least announced then, on computer chips imported from China,” Jamison said. “The overarching challenge is bigger than the FCC, and I am sure that the military, etc., are all over this.” The FCC has two roles to play, he said. The FCC can “decrease the demand for equipment from countries that have the incentive to infiltrate and harm networks in the US. This hurts the importing countries financially,” he said. The other is “to protect networks more broadly by decreasing the [amount] of potentially affected equipment in the U.S.” The FCC needs to do a solid cost-benefit analysis “as it will allow the agency to balance the degree of risk with the amount that might be spent to address it,” he said.

“This issue has been bubbling in the background for a long time, but for these associations it is still early days in figuring out how big a blow it is to the rural guys and what sort of response is merited,” said Information Technology and Innovation Foundation Director Doug Brake. There are “really hard questions” that need to be answered, he said. “We don’t really know how big a risk Chinese equipment poses, or how excluding it from the market will impact rural deployment,” Brake said. “How does this interact with broader U.S.-China policies -- is there any capacity or interest in a more comprehensive approach to long-term supply chain risk analysis?

There are other “serious competitors in the lower end of the range,” said Thomas Duesterberg, senior fellow at the Hudson Institute. LG, perhaps even some of the smaller Chinese firms not of concern to the U.S., could fill in gaps, he said. The market is “dynamic with others such as Google trying to find a way in,” he said. “National security concerns must be real” for DOD, the congressional intelligence committees, the Committee on Foreign Investment in the U.S. and the FCC to be “wary,” he said. “Concerns started way before Trump appeared on the scene.” Duesterberg is former assistant secretary-international economic policy at the Commerce Department.