Huawei fights FCC USF restrictions with new lawsuit

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The petition claims the FCC exceeded its authority in designating Huawei as a national security risk. (Getty Images)

Huawei has stepped up its fight against U.S. restrictions and petitioned a federal appeals court to throw out a recent FCC ruling that bans service providers from using federal Universal Service Fund (USF) support to purchase the Chinese vendor’s telecom gear and services.

The lawsuit, filed Wednesday evening in the U.S. Court of Appeals for the Fifth Circuit, asks the court to find the Nov. 22 FCC order unlawful, asserting that the FCC doesn’t have the authority to designate Huawei as a national security threat. It argues federal laws were also violated because notice-and-comment rulemaking requirements weren’t observed, and due process protections weren’t afforded.

Last month the FCC voted unanimously to prohibit USF recipients from using government subsidies to buy telecom equipment from companies deemed a national security risk, and specifically named Huawei and fellow Chinese vendor ZTE as entities subject to the rule.

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RELATED: FCC bans use of USF funds for Huawei, ZTE equipment

Michael Carvin, partner at Jones Day and legal spokesperson for Huawei, on Wednesday evening expressed confidence in the strength of the lawsuit, saying Huawei has “excellent arguments” both in terms of the FCC’s involvement in designating entities as a national security risk and the agency’s alleged failure to adhere to “basic principals of procedural fairness.”  

While the FCC’s Notice of Proposed Rulemaking to restrict the use of USF funds was circulated more than a year prior, it wasn’t clear that the order would directly name Huawei until it was adopted in November and the company feels it was not given the basic opportunity to convince the FCC otherwise.

“Banning a company like Huawei, just because we started in China – this does not solve cyber security challenges,” said Huawei’s Chief Legal Officer Song Liuping at a press conference in Shenzhen.

The U.S. has campaigned for allies around the globe to keep Huawei out of next generation 5G networks, citing security concerns that the company could be used by the Chinese government to engage in activities like espionage. Huawei has continuously denied these claims.

The vendor already sued the U.S. government earlier this year, challenging restrictions that banned federal agencies from using Huawei products.

Huawei doesn’t have a major presence in the U.S., but most of its customers are concentrated in rural and underserved parts the country, partly because of the vendor’s lower-cost equipment and willingness to work with smaller operators.

RELATED: Rural carriers get another 90-day extension to work with Huawei

“Carriers across rural America, in small towns in Montana, Kentucky, and farms in Wyoming – they choose to work with Huawei because they respect the quality and integrity of our equipment,” Song added. “The FCC should not shut down joint efforts to connect rural communities in the U.S.”

Huawei’s lead counsel on the legal action, Glen Nager of Jones Day, said in statements that the FCC’s decision to name Huawei as a security threat lacked legal or factual support.

“Indeed, the Commission has no national security expertise or authority,” said Nager. “The designation is based on a fundamental misunderstanding of Chinese law and on unsound, unreliable, and inadmissible accusations and innuendo, not evidence.”

RELATED: House bill asks for $1B to rip and replace Huawei equipment

In making its decision on the USF restrictions, FCC Chairman Ajit Pai at the time said actions were taken “based on evidence in the record, as well as longstanding concerns from the executive and legislative branches about the national security threats posed by certain foreign communications equipment manufacturers, most particularly Huawei and ZTE.”

The FCC also adopted a Further Notice of Proposed Rulemaking to require carriers to “rip and replace” any unsecure telecom network equipment that is already in use and seeks comment on how to fund what could prove to be a costly undertaking.

Just this week the agency proposed allocating $9 billion in USF subsidies over 10 years to support 5G deployments in rural areas. Under the new rules, carriers using those funds would not be able to spend them on Huawei equipment or services.

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