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United States: Executive Branch Recommends Revocation of China Telecom’s License to Operate as an International Common Carrier in the United States

(Apr. 23, 2020) On April 9, 2020, the executive branch filed a recommendation to the Federal Communications Commission (FCC) to revoke and terminate China Telecom (Americas) Corporation’s authorization to operate as a common carrier in the United States. The recommendation was the product of collaboration between the Departments of Justice, Homeland Security, Defense, State, and Commerce, and the Office of the United States Trade Representative.

China Telecom is a U.S. subsidiary of a Chinese government-owned telecommunications company. The FCC most recently authorized China Telecom to operate as an international common carrier in the U.S. in 2007. The recommendation sets forth the executive branch’s determination that, in light of evolving national security considerations since 2007, China Telecom’s continued access to the U.S. telecommunications infrastructure presents substantial and unacceptable national security and law enforcement risks. The determination is based on increased concern about the Chinese government’s malicious cyber activities, as well as China Telecom’s status as a Chinese state-owned and controlled enterprise; its inaccurate statements to U.S. government authorities and customers regarding its cybersecurity practices and its failure to comply with U.S. federal and state cybersecurity and privacy laws; and its operations in the U.S., which provide increased opportunities for Chinese state-sponsored cyber activities, including economic espionage and disruption of U.S. communications traffic.

Section 214 of the Communications Act (47 U.S.C. § 214) prohibits a common carrier from operating in the U.S. without a certificate of authorization from the FCC. China Telecom currently has three active certificates of authorization to operate as an international common carrier in the U.S. The executive branch filed the recommendation against all three certificates. Shortly after the executive branch’s filing, the FCC released a statement that the recommendation can help provide the legal basis for the FCC to take action against China Telecom’s licenses. On April 13, China Telecom filed requests with the FCC for notice of and opportunity for an evidentiary hearing before the FCC to respond to the allegations against it.

In May 2019, the FCC denied an application by Chinese government-owned telecommunications company China Mobile International (USA) Inc. for an authorization to operate as an international carrier. The denial was based on the FCC’s findings that granting China Mobile’s application would raise “substantial and serious national security and law enforcement risks that cannot be addressed through a mitigation agreement.” In the China Mobile matter, the executive branch had filed a recommendation similar to the present recommendation against China Telecom.

The examination of China Telecom’s and China Mobile’s operations was undertaken by “Team Telecom,” an informal interagency committee comprised of the Departments of Justice, Homeland Security, and Defense. Team Telecom reviews international common carrier authorizations for national security and law enforcement concerns. Five days prior to the filing of the recommendation, President Donald Trump signed an executive order formalizing Team Telecom and its review process by establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector.