FCC bars China Mobile from entering US market on security concerns

Ajit Pai Photographer: Stefan Wermuth/Bloomberg

The U.S. Federal Communications Commission barred China Mobile Ltd. from the U.S. market over national security concerns and said it was opening a review of other Chinese companies amid friction between the world’s biggest economies.

The FCC voted 5-0 to deny China Mobile’s request to enter the U.S. market, after being urged to do so by the Trump administration. FCC Chairman Ajit Pai after the vote said the agency is “looking at” authorizations granted earlier to China Telecom and China Unicom. He declined to say what that process entails.

The FCC said it had determined China Mobile is controlled by the Chinese government.

“The Chinese government could use China Mobile to exploit our telephone network to increase intelligence collection against U.S. government agencies and other sensitive targets that depend on this network,” Pai said. “That is a flatly unacceptable risk.”

The vote came as senior Chinese officials were set to visit Washington for negotiations Thursday and Friday. President Donald Trump is locked in a trade dispute with China and has threatened to raise tariffs on $200 billion of Chinese goods as early as Friday.

The Trump administration also is trying to persuade allies to shun Huawei Technologies Co., the Shenzhen-based network-gear maker that U.S. officials call a security risk. Huawei officials dispute the accusation. The FCC is considering whether to allow Huawei to operate in the U.S. and is awaiting a recommendation from the Trump administration, Pai said.

The FCC vote rejected an application filed in 2011 by China Mobile International (USA) Inc. The agency said parent company China Mobile is 100% owned by the Chinese government.

Parent China Mobile is the world’s largest mobile phone operator by customers, with about 899 million subscribers. It wanted approval to be listed as a “common carrier” that would let it to carry international voice traffic between the U.S. and foreign countries, and to connect that traffic with the U.S. telecommunications network. China Mobile told the agency it wouldn’t provide domestic telephone or mobile services in the U.S.

Granting the request would have given China Mobile greater access to telephone lines, fiber-optic cables and cellular networks, raising concerns about its ability to alter, block and re-route traffic, the White House told the FCC.

“They consider the risks to be unacceptable,” the FCC said in a document prepared for Thursday’s vote. “The Chinese government could use China Mobile USA to conduct or to increase economic espionage and intelligence collection against the Unite States.”

U.S. concern focused on Chinese law that requires companies to cooperate with state intelligence agencies, which the U.S. has said could be used for economic espionage or intelligence activities. China Mobile’s size and technical resources make it particularly vulnerable to such demands, the government said.

China Mobile said it wouldn’t be required to comply with such requests and said it “is no more vulnerable to exploitation” than any other U.S. or foreign carrier that uses “best-practices” measures.

“We comply with all applicable laws in the course of operations and have not engaged in any behavior that causes ‘substantial and serious national security and law enforcement risks,”’ China Mobile said in an emailed statement prior to the vote.

Republican Commissioner Brendan Carr said the agency should go further and investigate China-owned carriers that received approval to connect with U.S. networks earlier, citing concerns that at least one of them “has been hijacking U.S. traffic and redirecting it through China.”

FCC Commissioner Jessica Rosenworcel, the agency’s senior Democrat, said the Republican-majority FCC is doing too little to ensure network security.

“This application has been in these halls for more than eight years,” Rosenworcel said in a written statement. “So while I support this vote, it does nothing to change the status quo.”

The U.S. and China have signaled hardening positions as they prepare for high-stakes talks in Washington to try and avoid an escalation in a year-old trade war that has cast a long shadow over financial markets and the global economy.

China’s top trade envoy, Vice Premier Liu He, was due to arrive in the U.S. capital on Thursday afternoon and go immediately into discussions with Trump’s top negotiator, Robert Lighthizer. U.S. tariffs on some $200 billion in Chinese goods are set to increase to 25% just hours later in a move that economists and businesses say risks being the most economically consequential of all of Trump’s tariff moves so far.