Huawei moving on from U.S. market following FCC vote

Huawei appears to have largely given up on the U.S. market. The company has reportedly laid off a chunk of its top U.S. officials including William Plummer—actions that preceded a vote by the FCC today to withhold federal money from equipment suppliers “that raise national security concerns,” according to the agency.

According to The New York Times, Huawei last week laid off five American employees including Plummer, who had served for years as Huawei’s top representative in the U.S. market in Washington and at various industry and media events.

Further, this this week at a Huawei analyst event in China, the company’s deputy chairman Eric Xu essentially acknowledged that Huawei has been largely blocked from the U.S. market, noting that “with some things, when you let them go, you actually feel more at ease.”

It’s worth noting, though, that Huawei continues to move forward as the world’s largest supplier of network equipment. During its event this week, the company announced its 5G-oriented SingleRAN Pro solution that supports 2G, 3G, 4G and 5G, and the company also said its first 5G smartphone will be released in the third quarter of next year. Interestingly, though, the company’s management also sought to lighten the focus on 5G: “If you look across our entire portfolio, 5G is just one product,” Huawei’s Eric Xu said, according to ComputerWeekly. “It’s just a natural evolution of the technology from 2G to 3G to 4G, and now we’re going to have 5G, but you don’t have a fundamental difference between 5G and 4G.”

Huawei’s apparent final withdrawal from the U.S. market is noteworthy considering the rising momentum against the company. Huawei and ZTE were singled out in a 2012 government report warning that equipment from the two Chinese companies could be used by the Chinese government for espionage. More recently, both AT&T and Verizon reportedly dropped plans to sell smartphones from Huawei, and the FCC embarked on a proposal to tacitly block any network operator—big and small—from using Universal Service Funds to purchase equipment from companies that pose a security threat.

Indeed, that last issue was brought to a vote today during the FCC’s monthly open meeting, and the five-member commission voted unanimously to move forward with the action. The agency said it will also consider how best to implement the proposal, what types of equipment and services should be covered by the proposed rule, and “how the FCC should identify, and how USF recipients can learn, which suppliers are covered by the proposed rule.”

Indeed, the FCC’s notice goes slightly beyond its initial scope to include potential additional threats: “The Notice now explores a broader set of options for remedying any threats that we identify,” explained Commissioner Brandan Carr in a statement. “For instance, we now ask about more than just USF-funded equipment. And the Notice now tees up additional remedies from testing regimes (which have been employed by some of our closest allies) to actions related to the removal or prospective deployment of equipment.”

For example, Commissioner Jessica Rosenworcel pointed to recent reports that foreign powers are using “Stingrays” to eavesdrop on cell phone communications in Washington, D.C. “These surveillance tools can transform cell phones into real-time tracking devices by mimicking legitimate cell towers and some may even have the technical capability to record the content of calls,” Rosenworcel said in her own statement. “If these reports are true, someone needs to explain how foreign actors are transmitting over our airwaves without approval from this agency. Someone also needs to explain whether the devices being used have been certified by the FCC. The security of our communications is at stake right here, right now in Washington and this agency owes the public more than silence.”

The FCC's vote on the issue generated both cheers and criticism.

“Many small carriers serve the most costly, remote and hard-to-reach areas, and provide low-income Americans with affordable device options," said CCA President and CEO Steven Berry in a statement. "Any proposed solution should be cognizant of significant economic hardships on many operators, but also, and perhaps most concerningly, must consider rural and low-income consumers’ choice of viable, affordable devices, in an already very limited market.  The government’s actions have injected uncertainty at a time when carriers need stability, and CCA fears this will impact the United States’ efforts to bring wireless broadband services to rural areas and win the global race to 5G."

“NTCA continues to evaluate the extent to which proposals and questions in the notice might affect member operations," noted NTCA CEO Shirley Bloomfield in a statement. "NTCA is hopeful that this process will identify with precision any concerns about security of the nation’s networks and seek to address them thoughtfully and appropriately.”

"Any effective solution will require close partnership with all parts of the broader technology sector, as well as government agencies that have the necessary deep expertise and experience to evaluate national security risks associated with particular vendors, equipment and services," said USTelecom President and CEO Jonathan Spalter in a statement. "If the Commission prevents the use of universal service support for purchases of communications equipment from vendors deemed to pose a national security threat, rural carriers will continue to benefit from a competitive marketplace for equipment that includes a number of trusted suppliers.

And Cinnamon Rogers, TIA’s Senior Vice President of Government Affairs, said in a statement: "TIA takes supply chain security very seriously and supports the Commission’s efforts to address concerns regarding specific vendors. However, we also appreciate the Commission’s recognition that addressing security concerns requires cooperation across the federal government in partnership with industry. We look forward to working with the Commission on these issues.”

This week’s actions sit in the wider context of a brewing trade war between China and the United States—one that could get much more heated. “If the U.S. continues to work against this trend, we will be prepared, we will be ready and we will launch our countermeasures,” a Chinese Foreign Ministry spokesperson told The Wall Street Journal, in discussing the Commerce Department’s recent action against ZTE.

Article updated April 17 with additional commentary.