China Telecom in the Spotlight

US agencies petition FCC to revoke China Telecom’s licence

The relationship between the world’s two largest economies continues to become more complex.

Last week, the US Department of Justice and other federal agencies called on the Federal Communications Commission (FCC) to revoke authorization for the US subsidiary of China Telecom to provide international telecom services to and from the US. China Telecom Americas was given permission in 2007 by the FCC. But, now, following a review, the Department of Justice, along with five other federal agencies, said that the authorization should be withdrawn.

The move by the agencies comes close on the heels of the Trump administration forming an interdepartmental body to formally review national security concerns related to foreign telecom companies operating in the US.

In a public statement, the Department of Justice wrote that “The Executive Branch agencies identified substantial and unacceptable national security and law enforcement risks associated with China Telecom’s operations, which render the FCC authorizations inconsistent with the public interest”.

The recommendation to revoke the operator’s licence comes from an ad hoc group of agencies, led by the Department of Justice and informally dubbed Team Telecom, which review foreign telecom licences for risks to national security and law enforcement. The agencies include the departments of Homeland Security, Defense, State, Commerce, as well as the Office of the United States Trade Representative. The China Telecom advice marks the first time the group has urged that an existing licence be pulled on national security grounds.

According to an FCC filing, in the US, China Telecom offers its mobile service to more than 4 million Chinese Americans with ties to China, as well as 2 million Chinese tourists visiting the US annually. The operator also caters to Chinese students at US universities and more than 1,500 Chinese businesses in the US. It should be noted that, China Telecom’s parent company is the second-largest mobile provider in China, with about 336 million subscribers.

The US government has been cautious about relationships with Chinese companies involving Internet connectivity. In 2019, it went as far as to sanction companies including ZTE and Huawei. In May, it placed Huawei on its Entity List, preventing it from buying technology from US companies without a government licence (see Instant Insight: Huawei Consumer Devices Uncertainty in Face of US Restrictions). Also that year, FCC chair, Ajit Pai, moved to block China Mobile, another state-owned Chinese telecom provider, from operating in the US amid security concerns.

In a move that appears to mirror the US administration’s attitude toward Chinese companies operating in the US, the FCC approved a request from Google to begin using an undersea cable network, so long as the company agreed not to use the part of the cable network landing in Hong Kong. Google and Facebook helped to pay for construction of the now completed undersea telecom link, but US regulators had until now blocked its use.

The ongoing coronavirus pandemic has become another factor in the already complex business relationship between the US and China, as both countries race for 5G supremacy. Major US tech companies such as Google and Facebook are blocked in China. If the new sanctions are approved by the FCC and enforced by the US government, it’s possible that China will retaliate, fuelling a further war of words between the two countries.