US Federal Communications Agency bans use of federal funds to purchase equipment from China's Huawei

(November 23, 2-19) The US Federal Communications Commission (FCC) in a unanimous vote has blocked US telecom companies from using any federal funds to buy Huawei equipment.

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The new regulations

Wireless carriers will be unable to use money from the Universal Service Fund (USF) to make any purchases from many companies that are considered a national security risk. The USF provides billions of dollars in subsidies to offer wireless service throughout the US. The vote has initially named two Chinese telecom companies as national security threats Huawei and ZTE.

FCC chair Ajit Pai said: "Given the threats posed by Huawei and ZTE to America’s security and our 5G future..this FCC will not sit idly by and hope for the best.”

Huawei's problems in the US

US lawmakers and intelligence officials have claimed that Huawei could be used for espionage. An article in the Verge shows the wide variation of views on the degree to which Huawei is a security risk. Huawei has not only denied there are any security threats but has launched a suit against the US government claiming the ban on its products is unconstitutional: "Huawei’s response has been simple: it’s not a security threat. Most importantly, the company’s leaders have said the US has not produced evidence that it works inappropriately with the Chinese government or that it would in the future. Moreover, they say, there are ways to mitigate risk — ones that have worked successfully in other countries. Huawei’s chairman has even gone so far as to call the US government hypocritical, criticizing China while the National Security Agency spies around the globe. The company has also denied any criminal wrongdoing."

A Huawei spokesperson complained that the FCC had designated Huawei a national security threat "based on selective information, innuendo, and mistaken assumptions": “Huawei believes this order is unlawful as the FCC has singled out Huawei based on national security, but it provides no evidence that Huawei poses a security risk.”

Trump blocks US businesses from doing business with Huawei

The Trump administration banned US businesses from doing business with Huawei without a licence back in May but the application of the ban was postponed until August as reported by Reuters: "...the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, a move intended to give telecom operators that rely on Huawei time to make other arrangements."

Wilbur Ross gave another 90-day extension in August. The extension was about to run out when another extension was granted. If another extension is not granted the regulation will go into effect on February 16th 2020.

Rural carriers worry about Huawei ban

Rural US carriers complain that Huawei provides affordable equipment that they rely on. However the FCC is likely to go further and vote on a proposal that would require all wireless carriers that use Huawei equipment to fully remove it from their networks. The argument is that if the equipment poses a threat it should be removed not just the subsidy. However, the Rural Wireless Association said the costs to make any such change would be quite significant across the board.

Previously published in the Digital Journal

Net neutrality may be threatened by Trump administration

While the US Federal Communications Commission (FCC) has approved a number of rules that are pro-consumer during the last few years, they were often passed by a meager three to two margin.

FCC board member Ajit Pai was often one of the two dissenters. Pai is likely to become the chairman when the Trump administration takes power in January. He has made it known that he hopes to do away with the Open Internet Rule, popularly known as net neutrality. Wikipedia describes net neutrality as follows:

Net neutrality is the principle that Internet service providers and governments regulating the Internet should treat all data on the Internet the same, not discriminating or charging differentially by user, content, website, platform, application, type of attached equipment, or mode of communication. The term was coined by Columbia University media law professor Tim Wu in 2003, as an extension of the longstanding concept of a common carrier, which was used to describe the role of telephone systems.

It often includes related ideas such as the open Internet:

The idea of an "open Internet" is the idea that the full resources of the Internet and means to operate on it should be easily accessible to all individuals, companies and organizations. This often includes ideas such as net neutrality, open standards, transparency, lack of Internet censorship, and low barriers to entry.

Net neutrality has been fought tooth and nail by industry giants such as AT&T which filed suit against the net neutrality rule. The U.S. Court of Appeals for the D.C. Circuit heard oral arguments a year ago in December and decided in June to side with the FCC and uphold the rule. Pai considers this ruling an error.

In a speech before the Free State Foundation Pai claimed the FCC needed to scale back regulation and spoke against several FCC rules and also against regulation in general. Pai said: “In the months to come, we need to remove outdated and unnecessary regulations. We need to fire up the weed whacker and remove those rules that are holding back investment, innovation and job creation.” Notice there is no mention of increasing corporate profits — it is all about job creation, investment and innovation!

Pai argues that if harms are not already proved to have happened the FCC should not regulate the market. Of course what is really involved has nothing to do with a free market and everything to do with the interests of giant corporations in remaining unregulated. Pai pontificates: “Proof of market failure should guide the next Commission’s consideration of new regulations. And the FCC should only adopt a regulation if it determines that its benefits outweigh its costs.” Of course cost-benefit analysis often is slanted in the interests of those doing the analysis. If the costs to corporations is more than the benefits to consumers does that mean you should not regulate? This would be special pleading masquerading as objective economics.

Yet Pai continues: “Today, I am more confident than ever that this prediction will come true. And I’m hopeful that beginning next year, our general regulatory approach will be a more sober one that is guided by evidence, sound economic analysis, and a good dose of humility.” Pai never mentions the relationship of regulation to the profit interests of corporations.

Pai's views on the review process contain a number of positive suggestions. He wants the FFC review process to be more transparent and open and also to release more information to the public on its operations. The text of documents being voted on should be released to the public.

The present chair of the FCC Tom Wheeler will step down as chair when Trump becomes president. He said: “When so-called controversy is the result of choosing between the broader common good or those incumbents preferring the status quo, I believe the public interest should prevail. I think it’s an important thing to remember that taking a fast, fair and open Internet away from the public and away from those who use it to offer innovative new services to the public would be a real mistake.” It would not be a mistake, but a government agency operating to advance corporate interests. Pai has the correct line that the regulation was a mistake.

The present net neutrality rules are as follows:Broadband providers may not block access to legal content, applications, services, or non-harmful devices. They may not impair or degrade lawful internet traffic on the basis of content, application, services, or any classes thereof. They may not favor some internet traffic over other internet traffic in exchange for consideration of any kind — no paid prioritization or fast lanes.

Corporate providers are unable to make profits that they could if the net were not neutral. For example they could set up fast access to the Internet material on the basis of paying a premium. The regulation ensures the rights of the Internet user but at the same time commits the mortal sin, not of interfering with the free market, but of backing consumer rights over corporate profits.