Lawmakers Eye Anti-Huawei/ZTE Alternatives Before NDAA Conference Talks

The Commerce Department Bureau of Industry and Security's addition of Huawei to its entity export blacklist (see 1905160081) was a major topic at a Monday afternoon meeting between officials in President Donald Trump's administration and seven telecom and tech CEOs on the effect of the U.S. trade dispute with China, lobbyists and others said. Some in the tech and telecom sectors backed further loosening of Commerce restrictions on Huawei after Trump's June decision to let U.S. companies resume some shipments to the company (see 1907010070). National Economic Council Director Larry Kudlow led the meeting. The participating CEOs were: Micron's Sanjay Mehrotra, Western Digital Corporation's Stephen Milligan, Qualcomm's Steven Mollenkopf, Google's Sundar Pichai, Cisco's Chuck Robbins, Intel's Robert Swan and Broadcom's Hock Tan, the White House said in a statement. The executives "expressed strong support" for Trump's "national security restrictions" on U.S. "telecom equipment purchases and sales to Huawei. They requested timely licensing decisions from the Department of Commerce, and [Trump] agreed."

Trump told reporters Monday “we'll have to find out” about the truth of a report in The Washington Post that Huawei was secretly involved over the course of eight years in work to build North Korea's wireless infrastructure in violation of U.S. export sanctions against that country. Commerce last year implemented and then later lifted a seven-year ban on U.S. companies selling telecom software and equipment to ZTE for violating U.S. sanctions against Iran and North Korea (see 1807110067). “I know all about Huawei” and “we're going to have the best 5G in the world,” Trump said.

FCC Commissioner Jessica Rosenworcel responded to Trump's 5G comments. “Appreciate the sentiment,” she tweeted: “But if we want to be first to 5G we need to bring mid-band spectrum to market. The rest of the world is leaving us behind.”

Equipment Removal

Much of Capitol Hill's Huawei focus has been on preventing the Trump administration from lifting the BIS restrictions, but the coming Pallone bill and others aim to address related concerns. Pallone's draft measure is expected to specifically target rural carriers that already have equipment from Chinese equipment makers integrated into their networks, said several communications sector lobbyists. Rural carriers repeatedly said they incorporated equipment from Huawei and ZTE into their networks because it's cheaper than from other vendors and it has proven to work well (see 1902200047).

Pallone's bill would be aimed at encouraging rural carriers to remove Chinese equipment from their networks, though it's unclear what incentives would be included, lobbyists said. It may be tied into the FCC's proposal to bar use of USF money to make purchases from companies that “pose a national security threat” to U.S. communications networks or the communications supply chain, some lobbyists said. Pallone's bill is “close to being finalized” and his office aims to introduce it with bipartisan co-sponsors, one telecom lobbyist said. The draft bill has already been circulated to Republican lawmakers' offices and industry stakeholders, lobbyists said.

House Commerce ranking member Greg Walden, R-Ore., acknowledged in an interview that “we've talked about” such a measure. Pallone and House Commerce didn't comment. “When the government comes in and basically says 'you've got a problem with your equipment,' maybe the government needs to help in some way with those folks,” Walden said. The Senate Commerce Committee is expected Wednesday to mark up the U.S. 5G Leadership Act (S-1625), which would create a grant program to make up to $700 million available annually to help U.S. communications providers remove from their networks' Chinese equipment determined to threaten national security (see 1907180054).

“We've had some pretty good discussions” with Eastern Oregon Telecom about the Huawei issue, Walden said. The telco, which is based in Walden's district, “has some [Huawei] equipment in its system” and executives “said 'it's affordable, it works and we didn't know'” about the national security problems posed by the manufacturer. Eastern Oregon Telecom “is not alone” in being concerned about the cost of removing and replacing that equipment “and I'm not unsympathetic,” he said. Smaller operators “run pretty tight budgets” and “they shouldn't be penalized” because of a government directive.

Contingency Plans

Some lawmakers are focusing on ensuring anti-Huawei/ZTE language ends up in the final FY 2020 NDAA via the conference process. “We're going to continue work through things with NDAA and we'll see where this goes,” said Sen. Marsha Blackburn, R-Tenn. “I'm watching it very closely and am in close contact” with Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. The House-passed version (HR-2500) includes three such amendments, including language to impose conditions for the Commerce Department to lift BIS' addition of Huawei to its entity list (see 1907120040). The Senate passed its NDAA measure in June without language from proposed anti-Huawei amendments (see 1906270051).

Several lawmakers who sought anti-Huawei NDAA amendments said alternative approaches are crucial given the possibility a conference NDAA bill won't include their proposal. “We supported the original [BIS] restriction on Huawei and we're worried about the backtracking, especially since this is a national security issue,” said Sen. Chris Van Hollen, D-Md., who's co-sponsoring the Defending America's 5G Future Act (HR-3759/S-2118). The bill mirrors the House-passed amendment to impose conditions on lifting BIS' Huawei blacklisting.

Sen. Marco Rubio, R-Fla., told us he's an active co-sponsor on several anti-Huawei bills, including S-2118, that originated as unsuccessful amendments to the Senate NDAA. “There are a bunch of different approaches, but they're all aimed” at curbing Huawei, he said. Rubio and Sen. Jon Cornyn, R-Texas, last week filed the Prevent Abuse of the Legal System Act, which would bar Huawei and other companies that federal agencies deem pose a risk to U.S. telecom firms under Trump's May executive order (see 1905150066) from filing patent infringement lawsuits in the U.S. or otherwise seek patent relief under federal law. Rubio unsuccessfully attempted to attach the language as an NDAA amendment.

Rep. Ruben Gallego, D-Ariz., told us he believes the best non-NDAA alternative will be to “try to attach it into appropriations and intelligence bills as much as possible.” There's “a very bipartisan agreement that Huawei is not a good actor when it comes to the international community, especially in terms of 5G competition,” he said. “We don't trust that Huawei is going to be able to bifurcate its business from the Chinese government's” influence.

There has been bipartisan support for restricting Huawei but it's unclear now if enough lawmakers will be willing to support staying Trump's desire to use the BIS entity list as a bargaining chip in trade talks with China, said American Enterprise Institute visiting fellow Shane Tews and others. “The challenge is there's a big group of us who believe that there's a problem, but we don't have a lot of proof” yet, Tews said. Lawmakers and communications sector stakeholders would need to “take the security people at their word that this is a real problem, and if I was a small ISP and it's going to cost me twice as much” to get non-Chinese equipment “when no one can actually prove there's a problem, that's a tough sell. I would go to my member of Congress too and tell them to stop” trying to restrict sales.

“Putting Huawei on the [BIS] entity list and trying to stop any flow of U.S. technology to the company was a very risky strategy that wasn't likely to pay off without significant cooperation by allies around the world,” said Information Technology and Innovation Foundation Broadband and Spectrum Policy Director Doug Brake. “Trying to cut them off like that only accelerates any Chinese attempts to achieve technological independence.” It's “not clear what major upside there is to a flat ban” on U.S. exports to Huawei, he said. “We need to be a little bit more thoughtful about how we're going to approach the competitive dynamics with Chinese entities, especially as we look down the road … at how we achieve some technological advantage” for technologies beyond 5G.