Telecom & Wireless

FCC Chairman Against China Mobile Application for Communications Services in United States

If there is a reason you had hoped for a Chinese telecom carrier to compete for your personal or business communications in the United States, it’s not going to happen. There have been very low odds of any foreign carriers getting their foot in the door of the U.S. communications infrastructure in the past, but T-Mobile is now a large player and Sprint is dominated by Japan’s Softbank.

The Federal Communications Commission (FCC) issued a communication on Wednesday that FCC Chairman Ajit Pai is opposed to and will vote against an application by China Mobile Ltd. (NYSE: CHL) to offer telecommunications services inside the United States. Pai cited substantial national security and law enforcement risks.

With a formal vote taking place in May of 2019, this application has been years in the making. China Mobile first filed an application all the way back on September 1, 2011, requesting authority to provide international facilities-based and resale telecommunications services between the U.S. and what was referred to as “foreign destinations.”

China Mobile USA is a Delaware corporation that is indirectly and ultimately owned and controlled by the Chinese government. China Mobile USA is an indirect but wholly owned subsidiary of China Mobile Limited.

FCC Chairman Pai’s statement said:

Safeguarding our communications networks is critical to our national security. After reviewing the evidence in this proceeding, including the input provided by other federal agencies, it is clear that China Mobile’s application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks. Therefore, I do not believe that approving it would be in the public interest. I hope that my colleagues will join me in voting to reject China Mobile’s application.

The FCC release noted that on July 2, 2018, after discussions with the intelligence community, the Executive Branch agencies recommended to deny China Mobile’s application. The national security and law enforcement risks were pointed as unable to be resolved through a voluntary mitigation agreement. The FCC communication further said:

The draft Order circulated by Chairman Pai to his colleagues would find that, based on the public record, China Mobile had not demonstrated that its application for international Section 214 authority is in the public interest. The draft Order would also find that China Mobile is vulnerable to exploitation, influence, and control by the Chinese government.

It is highly unlikely that any investors (and hopefully consumers) expected that China Mobile was going to get a license to operate in any form or fashion with communications services within and/or originating in the United States. That said, international carrier exchanges have to integrate somehow for the world to communicate.

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