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Federal Communications Commission Chairman Ajit Pai has proposed denying China Mobile USA’s application to offer telecom services in the US, saying the Chinese government-owned company poses a security risk.

The FCC is scheduled to vote on an order to deny the application at its open meeting on May 9, and Pai yesterday announced his opposition to China Mobile entering the US market.

“After reviewing the evidence in this proceeding, including the input provided by other federal agencies, it is clear that China Mobile’s application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks,” Pai said. “Therefore, I do not believe that approving it would be in the public interest. I hope that my colleagues will join me in voting to reject China Mobile’s application.”

We contacted China Mobile and one of its attorneys today about Pai’s proposal and will update this story if we get a response.

China Mobile filed its application in 2011, and has repeatedly complained about the government’s lengthy review process. According to Pai’s announcement, China Mobile’s application sought authority “to provide international facilities-based and resale telecommunications services between the US and foreign destinations.”

In simpler terms, the company was seeking “a license to connect calls between the United States and other nations” and “was not seeking to provide domestic cell service and compete in the country with businesses like AT&T and Verizon,” The New York Times wrote yesterday. An FCC official told reporters that such calls “could be intercepted for surveillance and make the domestic network vulnerable to hacking and other risks,” the Times wrote.

State-owned firm “subject to exploitation”

The executive branch—which includes the Departments of Justice, Homeland Security, Defense, State, Commerce, and other federal bodies—recommended denial of the application in July 2018.

“[B]ecause China Mobile is subject to exploitation, influence, and control by the Chinese government, granting China Mobile’s international Section 214 application, in the current national security environment, would pose substantial and unacceptable national security and law enforcement risks,” the National Telecommunications and Information Administration (NTIA), which represents the executive branch in telecom issues, told the FCC.

The filing said that US officials believe that “China Mobile would likely comply with requests by the Chinese government for information, access to its network, and any other assistance, including activities involving cyber intrusions and attacks.”

In another filing, the executive branch noted that granting China Mobile’s application “would afford it the ability to interconnect and have greater access to telephone lines, fiber-optic cables, cellular networks, and communication satellites throughout the United States’ telecommunications network.” Allowing this would not be in the public interest, the executive branch concluded, saying it reached the decision after “a thorough review of the concerns raised by the application, and China Mobile’s proposals to mitigate them.”

While China Mobile is incorporated in Delaware, “its majority owner is China Mobile Hong Kong (BVI) Limited, which is wholly owned by China Mobile Communications Corporation, which in turn is wholly owned by a foreign state, the People’s Republic of China, and is subject to the supervision of the State-Owned Assets Supervision and Administration Commission (SASAC) of the State Council of the People’s Republic of China,” the executive branch said.

China Mobile says US offered no real evidence

China Mobile acknowledged in filings that “the Chinese government indirectly holds a majority ownership interest in China Mobile USA,” but argued that the executive branch “inappropriately conflates” the company with the Chinese government. The executive branch “failed to offer concrete information or analysis that links the actions of the Chinese government and those of [China Mobile], or that persuasively argues that any national security or law enforcement concerns identified in connection with other Chinese entities can be attributed to [China Mobile],” the company said.

Under FCC rules, the burden of proof is on China Mobile to prove that granting its application is in the public interest, the executive branch noted. The executive Branch said it is concerned about the Chinese government’s ownership of China Mobile because of ample evidence that the Chinese government “has engaged in extensive intelligence collection activity against the United States for national security and economic espionage purposes.”

Pai agreed with the executive branch’s concerns. The FCC said that Pai’s draft order to deny the application “would find that, based on the public record, China Mobile had not demonstrated that its application for international Section 214 authority is in the public interest” and that “China Mobile is vulnerable to exploitation, influence, and control by the Chinese government.”



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