FCC gives Pacific Networks 60 days to leave the US

Agency signals more actions targeting Chinese companies to come in the name of national security


Chinese telco Pacific Networks and its subsidiary ComNet must cease all services within the United States within 60 days from Wednesday March 16 following an order issued by the Federal Communications Commission (FCC).

In a canned statement, the FCC cited "potential security threats" as the justification for its action, which passed on a 4-0 vote.

The agency concluded that the companies, which it deemed US subsidiaries of Chinese state-owned entities, are "subject to exploitation, influence and control by the Chinese government" and "highly likely" to be forced into complying with requests from Beijing without independent judicial oversight.

The FCC also expressed concerns about Beijing gaining access to communications and associated data and using it for nefarious ends – including espionage.

A statement from FCC Commissioner Brendan Carr echoed these sentiments when he said the review concluded that the companies' "conduct towards the Commission and Congress lacked trustworthiness and reliability."

In a letter [PDF] to the FCC dated January 2022, legal representatives for the two companies claimed it had complied with the Commission's requests for information through "hundreds of pages of responses" which demonstrated the revocation and termination of its authorizations to operate in the US were unwarranted.

The letter also argued the companies are not Beijing-owned, but rather answer to CITIC Group Corporation – a publicly listed company on the Hong Kong Stock Exchange, with a globally diverse group of shareholders.

Furthermore, explains the letter, operations in the United States are managed locally and involve only six people. The company doesn't possess any significant infrastructure as its primary business is "providing retail calling cards."

"The record of this proceeding shows that the Companies have worked cooperatively and well with Executive Branch oversight," argued Jeffrey Carlisle, counsel for Pacific Network and ComNet.

The FCC began proceedings that would ban the duo, along with China Unicom, in March of last year. China Unicom was barred from operating in the States in late January this year.

The Commission booted China Telecom in October 2021 and blocked the entry of China Mobile in April 2019 – all for similar concerns.

Statements from within the FCC have signaled more action is to come against Chinese firms – and in ways other than revoking authorization under Section 214 of the Communications Act, which governs how foreign companies operate within the US. Carr issued a laundry list of recommendations to address threats from China.

Carr's list included reviews of entities, like Pacific Networks and ComNet, that had their Section 214 authorizations revoked, implementing the Secure Equipment Act, and preventing workarounds for banished telcos by prohibiting regulated carriers from directly interconnecting with entities deemed a national security threat – Section 214 or not.

FCC chairwoman Jessica Rosenworcel said the Commission would be moving forward with rules to update equipment authorization practices in the interest of national security.

Rosenworcel also stated that the list of communication equipment and services deemed to be a national security risk – known as the Covered List – would receive an update later this month.

Furthermore, the chairwoman said data breach reporting would get an update to support the fight against cyber threats.

In January 2022, Chinese foreign minister Zhao Lijian – who is not shy about commenting on perceived US failures – said the US was using security as a pretext to revoke the license of a Chinese company, and referred to the action as "an abuse of state power." ®

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