China Mobile barred from the US market over espionage concerns

The FCC vote rejected an application filed in 2011 by China Mobile International (USA) Inc.
The FCC vote rejected an application filed in 2011 by China Mobile International (USA) Inc.PHOTO: AFP

WASHINGTON (BLOOMBERG) - China Mobile Ltd's bid to provide phone service in the US was rejected by regulators, who cited national security concerns about the company controlled by Beijing, adding more friction to fraught trade relations between the world's biggest economies.

The 5-0 vote by the US Federal Communications Commission came at the urging of the Trump administration. FCC Chairman Ajit Pai recommended the rejection.

"The Chinese government could use China Mobile to exploit our telephone network to increase intelligence collection against US government agencies and other sensitive targets that depend on this network," Mr Pai said in a written statement.

"That is a flatly unacceptable risk."

The vote came as senior Chinese officials were set to visit Washington for negotiations on Thursday (May 9) and Friday.

President Donald Trump is locked in a trade dispute with China and has threatened to raise tariffs on US$200 billion (S$273.02 billion) of Chinese goods as early as Friday.

The Trump administration is also trying to persuade allies to shun Huawei Technologies Co, the Shenzhen-based network-gear maker that US officials call a security risk.

 
 
 

Huawei officials dispute the accusation.

The FCC is considering whether to allow Huawei to operate in the US and is awaiting a recommendation from the White House.

The FCC vote rejected an application filed in 2011 by China Mobile International (USA) Inc.

The agency said parent company China Mobile is 100 per cent owned by the Chinese government.

Parent China Mobile is the world's largest mobile phone operator by customers, with about 899 million subscribers.

It wanted approval to be listed as a "common carrier" that would let it to carry international voice traffic between the US and foreign countries, and to connect that traffic with the US telecommunications network.

China Mobile told the agency it wouldn't provide domestic telephone or mobile services in the US.

Granting the request would have given China Mobile greater access to telephone lines, fibre-optic cables and cellular networks, raising concerns about its ability to alter, block and re-route traffic, the White House told the FCC.

"They consider the risks to be unacceptable," the FCC said in a document prepared for Thursday's vote.

"The Chinese government could use China Mobile USA to conduct or to increase economic espionage and intelligence collection against the Unite States."

US concern focused on Chinese law that requires companies to cooperate with state intelligence agencies, which the US has said could be used for economic espionage or intelligence activities.

China Mobile's size and technical resources make it particularly vulnerable to such demands, the government said.

China Mobile said it wouldn't be required to comply with such requests and said it "is no more vulnerable to exploitation" than any other US or foreign carrier that uses "best-practices" measures.

"We comply with all applicable laws in the course of operations and have not engaged in any behaviour that causes 'substantial and serious national security and law enforcement risks'," China Mobile said in an e-mailed statement prior to the vote.

Republican Commissioner Brendan Carr said the agency should go further and investigate China-owned carriers that received approval to connect with US networks earlier, citing concerns that at least one of them "has been hijacking US traffic and redirecting it through China".

FCC Commissioner Jessica Rosenworcel, the agency's senior Democrat, said the Republican-majority FCC is doing too little to ensure network security.

"This application has been in these halls for more than eight years," Ms Rosenworcel said in a written statement.

"So while I support this vote, it does nothing to change the status quo."

The US and China have signalled hardening positions as they prepare for high-stakes talks in Washington to try and avoid an escalation in a year-old trade war that has cast a long shadow over financial markets and the global economy.

China's top trade envoy, Vice-Premier Liu He, is due to land in the US capital on Thursday afternoon and go immediately into discussions with President Donald Trump's top negotiator, Mr Robert Lighthizer.

US tariffs on some US$200 billion in Chinese goods are set to increase to 25 per cent just hours later in a move that economists and businesses say risks being the most economically consequential of all of Mr Trump's tariff moves so far.