Oversight of Chinese telecoms companies is lacking, US lawmakers find

Jodi Xu Klein

The US government agencies responsible for analysing the threats Chinese telecommunications companies pose to American national security lack consistent oversight, a congressional body said on Tuesday.

Federal agencies “historically exercised minimal oversight” to safeguard US telecommunications networks, according to a report by the Senate’s Permanent Subcommittee on Investigations.

More efforts are needed to guard against cyber and economic espionage efforts against the US, which could be facilitated by Chinese telecoms service providers operating in the US at the behest of Beijing, the report concluded.

China Telecom, China Unicom and ComNet “have been operating in the United States for approximately 20 years, without sufficient oversight from the FCC [Federal Communications Commission] and the Executive Branch”, said the report.

“Especially when dealing with state-owned telecommunications carriers, greater controls are needed, and the administration and Congress must work together to ensure sufficient safeguards and oversight mechanisms are in place,” concluded the subcommittee, which is chaired by Senator Rob Portman, a former US trade representative.

The year-long investigation examined officials from three key US government departments – Homeland Security, Justice and Defence – known as “Team Telecom”, which has historically advised the FCC on national security risks in the telecommunications industry.

The findings could add more pressure on agencies to further crack down on Chinese telecommunications companies that have come under heightened scrutiny in the US.

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Huawei Technologies – the Chinese telecoms company that is a key player in next-generation 5G technology – has been a top target by the Trump administration. The company was placed on an “entity list” last May, barring it from buying critical components from its American suppliers.

US government officials have warned that Chinese state-owned carriers are subject to exploitation, influence, and control by the Chinese government and can be used in the Chinese government’s cyber and economic espionage efforts targeted at the United States.

The subcommittee’s report pointed out that the Chinese government views telecommunications as a “strategic” industry and has expended significant resources to create and promote new business opportunities for its state-owned carriers, while establishing barriers to market entry for foreign carriers seeking to operate in China.

Workers place a China Mobile 5G sign on equipment as they set up a 5G network base station in Fenggang, Guizhou province, China on May 26. Photo: cnsphoto via Reuters

In addition to shoring up a stable domestic market for these carriers, the Chinese government has encouraged its carriers to expand into global markets, including the United States, the subcommittee said.

The report focused on three state-owned carriers that dominate the Chinese telecommunications market: China Mobile, China Telecom, and China Unicom, commonly referred to as the “Big Three”.

The report, triggered by a review of China Mobile’s US operation last year, looked at the US federal government’s guard against risks posed by other Chinese state-owned carriers already authorised to provide international telecommunications services in the country.

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The investigators said while the FCC is responsible for protecting the US market from anticompetitive behaviour in foreign markets, the agency historically relied on “Team Telecom” to assess national security and law enforcement risks associated with a foreign carrier.

The report found these measures were “ineffective” because the team lacked formal statutory authority, leaving its operations “unstructured and ad hoc”.

Since the subcommittee launched its investigation, the agencies have increased their oversight of the Chinese state-owned carriers, the report said.

Last May, the FCC voted unanimously to deny the request of another state-owned Chinese telecommunications company, China Mobile, to provide services in the United States.

FCC Chairman Ajit Pai said after that vote that the commission had determined China Mobile is controlled by the Chinese government.

In April, “Team Telecom” urged the FCC to revoke the 2007 authorisation for China Telecom (Americas) Corp to provide international telecommunications services to and from the United States. Lawmakers last year urged the FCC to review China Unicom’s operations in the US.

On Monday, China Telecom (Americas) asked the US not to revoke its authorisation. The company called the government’s claims “unfounded” and argued the FCC should not revoke its right to operate in the United States “based solely on foreign policy concerns in the absence of any evidence whatsoever of specific misconduct”.

The Senate investigators said the president in April issued an executive order to establish a formal committee to review the national security and law enforcement risks posed by foreign carriers operating in the United States. However, the authority of the new committee, which will replace the informal “Team Telecom”, will remain limited.

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