Huawei Initiates Legal Fight With the FCC Over its Equipment Ban

Dec 5, 2019
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Huawei, China’s largest company in terms of sales, announced today that it has filed a lawsuit against the U.S. Federal Communications Commission (FCC) in order to challenge the agency’s November 22 order that prohibited rural U.S. carriers from tapping the Universal Service Fund (USF) to purchase Huawei telecommunication equipment (read the press release here).

The Chinese tech behemoth has petitioned the United States Court of Appeals for the Fifth Circuit to overturn FCC’s pertinent order as it labeled the company a national security threat without offering due process protections.

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Glen Nager, Huawei’s lead counsel in the lawsuit, claimed during a press conference today in Shenzhen that, by imposing a blanket prohibition without due course protections, FCC has exceeded its authority and violated the U.S. constitution: “The order fails to give Huawei constitutionally required due process before stigmatizing it as a national security threat, such as an opportunity to confront supposed evidence and witnesses, and a fair and neutral hearing process.”

Additionally, Huawei has asserted in the lawsuit that the FCC did not provide a sound and factual evidentiary support for its decision, thereby, violating a host of U.S. laws including the Administrative Procedure Act: “The designation is based on a fundamental misunderstanding of Chinese law and on unsound, unreliable, and inadmissible accusations and innuendo, not evidence. The designation is simply shameful prejudgment of the worst kind.”

As a refresher, the Universal Service Fund subsidizes the rollout of broadband and 4G/5G services in rural and remote areas of the U.S. to ensure that they have a modern baseline level of cellular and internet connectivity. Rural U.S. carriers have, over the recent past, preferred 5G components sourced from Huawei as compared to those offered by the Chinese company’s European rivals such as Nokia (HEL:NOKIA) or Ericsson (STO:ERIC-B). This is due to the cheaper cost of such components as well as Huawei’s technological lead in the global rollout of the 5G wireless network.

Nonetheless, almost a dozen U.S. telecom service providers that depended upon Huawei equipment have been negotiating with Nokia and Ericsson since June to obtain substitutes to their Chinese-sourced network gear as it became evident that the FCC would eventually ban Huawei components. Moreover, a bipartisan legislation (read our coverage here) in September that was spearheaded by the Energy and Commerce Committee of the U.S. House of Representatives made available up to $1 billion in order to assist rural wireless service providers in replacing their network equipment sourced from blacklisted entities such as Huawei and ZTE (SHE:000063).

Of course, this is not the first such challenge faced in the U.S. by the Asian tech giant. Huawei and ZTE were first identified as potential national security threats in 2012 by a U.S Congressional panel. However, the Chinese duo have faced increasingly stringent conditions in America ever since the intensification of the Sino – U.S. trade war. Earlier in May, Huawei was placed on the U.S. Entity List which forces American companies to seek a prior approval from the U.S. administration before transacting with the blacklisted entity. Nevertheless, Huawei was granted a temporary license in June and then again in August to facilitate the smooth progression of business transactions while China and the U.S. continued their negotiation of a trade agreement. Last month, the Commerce Department extended Huawei’s temporary license for another 90 days.

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