Is This the Time for the US to Ban More Chinese Telcos?

Last week the Federal Communications Commission (FCC), the US regulator, prohibited two more Chinese-owned telcos from providing services in and to the USA. Pacific Networks and its wholly-owned subsidiary, ComNet, have long been on a list of Chinese telcos considered a danger to national security. The goal has been to ban the Chinese companies as soon as lengthy procedural formalities were completed. When the final order came, it gave the companies just 60 days to close down their operations. Despite the Chinese Commerce Ministry saying it will do what is necessary to protect the country’s telecoms interests, I cannot argue with the underlying reasons for the FCC’s decision. Chinese telcos represent a genuine surveillance threat because they are likely to supply information to the Chinese government and provide assistance to its spy services whenever they are asked to do so. However, with Ukraine under attack from Russia, this is a bad time to antagonize China further. Faced with crippling international sanctions, Russian leader Vladimir Putin will inevitably seek to increase sales of oil, gas and other commodities to China, whilst simultaneously promising to buy more technology from the world’s second-largest economy. If the US really hopes China will restrain Russian military ambitions, might it not have been better to delay the execution of this FCC decision just to signal some faint possibility of a rapprochement between the USA and China regarding the management of international telecoms?

I fear the answer to the rhetorical question is that the USA is incapable of making a diplomatic decision like this because of law and culture. One of the strengths of the West is the extent to which it respects the value of consistently following rules. This makes Western countries predictable, which is good for business, helps ordinary people to plan their affairs, and means other countries know what to expect. Russian billionaire oligarchs moved their wealth to Western havens precisely because they trust it will not be subject to arbitrary confiscation, though their thinking is likely to have changed in the last few weeks. Most people, whether good or bad, rich or poor, are better off when governments behave predictably. However, there are times when Western countries are too predictable, and other occasions when they are not predictable enough. Putin’s invasion of Ukraine was likely encouraged by the haphazard retreat of the USA from Afghanistan, which reportedly left other countries scrambling to implement their own evacuation plans because they received no warning from US diplomats. Contrast this situation with the steady tightening of US pressure on Chinese telecoms businesses over the course of the last 20 years. Huawei’s rise is dangerous for the USA partly because the US government failed to place any strategic priority on home-grown manufacturing of telecoms network equipment. It is much easier to pass a law banning a foreign company than to grow a new business that could successfully compete with it. Whilst US politicians now have a greater appreciation of the reasons why strategically important technological manufacturing should occur within the country’s borders, it will take time to reverse decades of policies that encouraged the purchasing of technology from suppliers based in China and other countries.

Sometimes excuses can be found for rapid changes in national policy, especially when the public mood is sympathetic. A string of Western countries have suddenly discovered reasons to ban Russian propaganda channels that were previously deemed legal, even though there has been no change in how these media outfits have been run. German politicians repeatedly defended the decision to build the Nord Stream 2 gas pipeline, even though it would further cement Germany’s reliance on importing Russian gas to heat homes and generate electricity. The pipeline was completed, but seemingly will never be used, thanks to an abrupt change in the attitudes of the average German voter. Any attempt to seek an accommodation with China in the field of telecommunications may not be entirely sincere, but it would be a useful component in a dialogue designed to isolate Putin and keep the Chinese government ambivalent about who they should seek to trade with. The difficulty is that the cogs in the US government machine are not connected to a brain that can dictate sudden changes in the way a dictator can. On the contrary, there is little evidence of any intelligent design behind US telecommunications policy.

Current US policy objectives include fanciful schemes that seek to govern how all voice traffic is managed globally, whilst simultaneously hammering telcos that provide voice services to more than a billion users on the basis they cannot be trusted. The cognitive dissonance would be extraordinary, except that it can easily be maintained by compartmentalizing which government minions are separately responsible for each individual objective, so that nobody takes responsibility for the coherence, or lack of coherence, exhibited overall. When Jessica Rosenworcel, Chairwoman of the FCC, spoke at Mobile World Congress a few weeks ago, the most telling aspect of her speech was that she said nothing at all about international objectives or international cooperation. She flew 4,000 miles to Europe just to announce an auction that is only relevant to businesses that operate in the USA. There was no mention of the reasons to ban Chinese telcos, or plans to encourage new manufacturing of telecoms equipment, or any discussion of the need to work across borders to protect consumers, even though Rosenworcel is often quoted in FCC press releases about these topics. The difference is that a speech at Mobile World Congress might actually be listened to by people outside of the USA, whilst press releases about international policy are only designed to be reproduced by US journalists for a US audience.

US government functionaries seemingly put more effort into projecting the pretense of international leadership to US voters than they put into talking to foreigners about the grubby business of negotiating real compromises. That is why the timing of bans on Chinese telcos has no connection to wider international affairs, and so little progress is being made with each piecemeal objective of US telecoms policy that needs international cooperation to succeed. When it comes to the global business of communications, it is incredibly difficult to achieve anything on your own, unless you are prepared to isolate your own nation in just the way the Russian and Chinese governments might.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.