Huawei says ‘unfounded’ lockout by US costing its own consumers US$20 billion

Huawei Technologies Co. is fighting to hang on to one of its last footholds in the U.S. market, hitting back against a measure that would restrict rural carriers from buying the Chinese company’s telecommunications equipment.

In filings made public Thursday, Huawei said the proposed measure by the Federal Communications Commission would hurt rural and low-income Americans and lead to heavy costs for small carriers, who would be forced to either rip out existing equipment or scale back network coverage.

“These high costs, which would particularly harm Americans in remote and low-income areas, cannot be justified by the supposed national security benefits of the proposed rule, because these are speculative,” Huawei said.

Large U.S. carriers such as AT&T Inc. have long stayed away from gear made by Huawei, the world’s biggest maker of cellular equipment like base stations and routers. As a result, Huawei mainly supplies gear in the U.S. to a small niche of rural carriers.

The FCC proposal would limit those carriers from accessing gear made by Chinese suppliers like Huawei. It would do so by restricting the carriers from using $9 billion in federal subsidies to buy equipment made by the Chinese companies, saying these firms pose a national security threat.

Though it dominates telecom equipment markets in Asia, Europe and elsewhere, Huawei has been largely locked out of the U.S. since a 2012 congressional report said its gear, and that made by its Chinese peer ZTE Corp., could be used by the Chinese government to spy on Americans. Both companies have long denied their equipment poses a threat, and Huawei says it is privately owned by its employees.

In recent months, the U.S. government has stepped up its campaign against the Chinese telecom firms. In addition to the FCC proposal, members of Congress have scrutinized Huawei’s ties to U.S. tech companies such as Google parent Alphabet Inc. Earlier this year, the Pentagon halted sales on U.S. military bases of smartphones made by the two companies.

And this week, the Commerce Department recommended that the giant Chinese network operator China Mobile Ltd. be denied a license to provide telecommunications services in the U.S., citing national security concerns.

Separately, the Justice Department is investigating whether Huawei violated U.S. sanctions on Iran. Meanwhile, ZTE remains subject to a U.S. order barring American companies from selling to the Chinese firm, according to a person familiar with the matter, though it is racing to comply with a deal that would reverse that ban.

Since Huawei is effectively shut out of the $30-billion-a-year U.S. wireless equipment market, that market is largely dominated by two European firms: Sweden’s Ericsson AB and Finland’s Nokia Corp.

In its comments to the FCC, Huawei said its absence from the U.S. telecom equipment market means “average prices for network equipment are higher here than in most other countries.” It also said, “U.S. customers generally pay higher prices for a lower level of mobile service than consumers elsewhere.” Huawei also argued that the proposed rule is beyond the FCC’s legal authority.