May 22

May 22 The Death Of Huawei

5G, Broadband, Broadband Deployment, Cybersecurity, National Security, Wireless, Wireline

May 22, 2019 – It appears that the days of doing business in the U.S. is over for Huawei Technologies Co. Ltd. Well, at least Huawei might want to start advertising a 90-day going out of business sale.

In a span of six days, the U.S. federal government took action against Huawei that will ultimately ban the company from the U.S. market and force U.S. companies and consumers that own Huawei equipment to stop using it. That’s a scary thought for the wireline and wireless broadband providers that spent tens to hundreds of million dollars purchasing Huawei network switches and other equipment, as there’s currently no plan for reimbursing companies that must replace Huawei gear.

First, on May 15, 2019, President Trump issued an Executive Order (EO) that declares a national emergency with respect to threats against U.S. “information and communications technology and services” by foreign adversaries.[1] The move was not surprising, as the Trump administration has been targeting Huawei for some time because of the threat to U.S. communications networks posed by Huawei. There is an underlying assumption that communications equipment produced by Huawei and other Chinese companies contain secret backdoors that can give Chinese spies and other state actors easy access to U.S. communications networks. Another thought is that Huawei equipment may be subject to a secret kill switch, enabling China to shut down, at any time, all or parts of U.S. communications networks from abroad. Yikes. Scary stuff.

Trump’s EO bans the acquisition, importation, transfer, installation, dealing in, or use of any “information and communications technology or service” that is designed, manufactured, or supplied by a company that is controlled by a foreign adversary that poses a threat to the U.S. The term “information and communications technology or services” means any hardware, software, or other product or service primarily intended to fulfill or enable the function of information or data processing, storage, retrieval, or communication by electronic means, including transmission, storage, and display.

No foreign equipment makers or countries are named in the order. Rather, the EO directs the Secretary of Commerce to consult with the leaders of various federal agencies, including the Secretaries of the Treasury, State, Defense, and Homeland Security, and the Attorney General, Director of National Intelligence, and the Chairman of the Federal Communications Commission, to determine which equipment and services pose a threat and should be banned. The EO directs the Commerce Secretary, within 150 days, to publish rules or regulations implementing the EO’s prohibitions.

Second, on May 16, 2019, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added Huawei and 68 non-U.S. affiliates of Huawei to the list of entities reasonably believed to be involved, or to pose a significant risk of being involved, in activities contrary to the national security or foreign policy interests of the U.S.[2]

The BIS decision prohibits exports, reexports, or transfers (in-country) of equipment, software, and technology to Huawei without a license. Applications for such licenses are subject to a review policy which will have a presumption of denial. Further information on the Huawei companies added to the Entity List is available online from the Department of Commerce.

Huawei was added to the Entity List based on, among other things, its indictment in the U.S. District Court for the Eastern District of New York for violating U.S. law by exporting goods, technology, and services from the U.S. to Iran and the government of Iran. In other words, Huawei sold equipment and technology to Iran when U.S. sanctions against Iran prohibited such sales.

Because it was placed on the Entity List, Huawei cannot purchase goods and technology from U.S. companies and Huawei cannot sell its equipment and technology to U.S. companies. After the announcement that Huawei had been placed on the Entity List, Google stopped providing updates to Huawei mobile phones running Android OS, and chipmakers Intel and Broadcom said they would stop supplying Huawei. However, a few days later, Huawei and U.S. companies that depend on Huawei, were given some temporary relief.

On May 20, 2019, the Department of Commerce’s BIS issued a Temporary General License (TGL) amending the Export Administration Regulations to authorize specific, limited engagement in transactions involving the export, reexport, and transfer of items to Huawei Technologies Co. Ltd. and its sixty-eight non-U.S. affiliates.[3] The TGL is effective May 20, 2019 and lasts 90 days.

In the Commerce Department’s official announcement of the 90-day TGL, Secretary Wilbur Ross provided the following statement:

“The Temporary General License grants operators time to make other arrangements and the Department space to determine the appropriate long term measures for Americans and foreign telecommunications providers that currently rely on Huawei equipment for critical services. In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks.”

In other words, if you are a communications service provider and you have Huawei equipment in your network, you have 90 days to figure out what to do. That’s right, 90 days. For the next three months, Huawei can provide support for its products – network switches, smartphones, laptops, and other communications network equipment.

So, service providers that have Huawei equipment can will have to either replace it, or figure out how to keep it in use without any future manufacturer support. Maybe stockpile some spare parts?

Yeah, that may work for some time, until President Trump’s EO gets worked out and implemented. The Information and Communications Technology and Services Supply Chain EO prohibits, among other things, the use of any “information and communications technology or service” that is designed, manufactured, or supplied by a company that is controlled by a foreign adversary that poses a threat to the U.S. Huawei will be on the blacklist when it is finally announced.

So as it stands, all Huawei network equipment currently in use needs to eventually be scuttled. Unfortunately for wireline and wireless broadband providers that spent tens to hundreds of million dollars purchasing Huawei network switches and other equipment, no plan for reimbursing companies that must replace Huawei gear has been formally adopted.

However, on May 23, 2019, a bipartisan group of Senators introduced the “United States 5G Leadership Act of 2019,” which among other things, would create a $700 million Supply Chain Security Trust Fund to provide grants to service providers that replace communications equipment and services made by Huawei, ZTE, and any other blacklisted companies prior to August 14, 2018. Communications providers with not more than 6,000,000 customers would be eligible to receive a grant. The bill is sponsored by Senator Roger Wicker (R-MS), and cosponsored by Senators Tom Cotton (R-AR), Mark Warner (D-VA), and Edward Markey (D-MA), and has been referred to the Senate Committee on Commerce, Science, and Transportation.

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[1] Exec. Order No. 13,873, 84 Fed. Reg. 22689 (May 17, 2019); Executive Order on Securing the Information and Communications Technology and Services Supply Chain, President Donald J. Trump (May 15, 2019), https://www.whitehouse.gov/presidential-actions/executive-order-securing-information-communications-technology-services-supply-chain/.

[2] Addition of Entities to the Entity List, 84 Fed. Reg. 22961 (May 21, 2019).

[3] Temporary General License, 84 Fed. Reg. 23468 (May 22, 2019).