Huawei seeks to overturn FCC ban on the use of US subsidies to purchase its equipment

FAN Editor

View of the Huawei Germany headquarters. Despite political concerns, the Chinese telecommunications group Huawei will in future be able to play a major role in the expansion of the German 5G mobile communications network.

Rolf Vennenbernd | picture alliance | Getty Images

Huawei is looking to overturn a ruling by the U.S. Federal Communications Commission (FCC) that bars a government fund from being used to buy equipment from the Chinese telecommunications giant.

Last month, the FCC banned the use of the $8.5 billion a year Universal Service Fund (USF) to purchase equipment and services from companies that pose a national security threat. The regulator designated Huawei and ZTE as companies covered by this rule.

On Wednesday evening, the company filed a so-called “petition for review” in the U.S. Court of Appeals for the Fifth Circuit in Louisiana. In the legal document seeking to reverse the FCC’s decision, Huawei claims the USF ruling “exceeds the agency’s statutory authority and violates federal law, the Constitution, and other laws.”

It also believes that the FCC’s ruling strips it of “due process protections” by labeling Huawei a national security threat.

Huawei has asked the court to deem the FCC’s order unlawful.

“This is our opportunity to use one of the legally permissible mechanisms to try to block the United States government from the carpet bombing of Huawei in the United States and trying to destroy us around the world,” Andy Purdy, Huawei USA’s chief security officer, told CNBC’s Deirdre Bosa.

“They’ve really gone too far and so this is our way of saying enough,” he added.

Huawei’s clash with the FCC is the company’s latest in a series of battles with the U.S. government. Washington maintains that Huawei is a national security threat claiming its networking gear is a risk because it could be used by Beijing for espionage. Top executives, including the company’s founder, have repeatedly denied the allegations that Huawei is a security risk.

But earlier this year, Huawei was placed on a U.S. blacklist, known as the “Entity List” which restricts American firms from doing business with it. It has been given a number of reprieves. That’s because some rural carriers in the U.S. still rely on Huawei equipment.

The FCC’s Universal Service Fund provides subsidies to boost telecommunications services in rural or remote areas as well as schools and libraries.

Glen Nager, Huawei’s lead counsel, said in a statement that the FCC’s decision to bar companies from using this fund to purchase Huawei gear exceeds the agency’s “statutory authority” because it’s not allowed to make national security judgements or restrict the use of the USF based on such judgements.

When the FCC made the ruling in November, it claimed both Huawei and ZTE have “close ties to the Chinese government and military apparatus and are subject to Chinese laws requiring them to assist with espionage.” It was referencing laws that apparently compel Chinese firms to hand over data to Beijing when asked.

“The designation is based on a fundamental misunderstanding of Chinese law and on unsound, unreliable, and inadmissible accusations and innuendo, not evidence,” Nager said. “The designation is simply shameful prejudgment of the worst kind.”

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