The Federal Communications Commission (FCC) finally made good on its pledge to safeguard the country’s networks by unanimously voting to ban Huawei and ZTE from receiving federal subsidies.

The ban specifically forbids any company from using the FCC’s Universal Service Fund (USF) to purchase equipment or services from companies that pose a national security threat. Both Chinese companies have been repeatedly accused of close ties to the Chinese government and criminality, but Huawei, the market leader, has born the brunt of those attacks of late.

During the last six months Huawei has been targeted by a presidential executive order that prohibits it from purchasing U.S.-made products, but the U.S. Commerce Department has since issued three subsequent 90-day extensions to allow the purchase of American-made products that are deemed necessary to maintain existing networks.

The FCC has expanded those efforts to include federally funded projects. The new FCC order only singles out Huawei and ZTE, but the agency has also established a process to designate additional companies.

The USF is a taxpayer-funded $8.5 billion annual fund that was first established in 1997 to promote universal access to telecommunications services. Most of the money is allocated to carriers that provide coverage in rural or otherwise underserved areas of the country.

The FCC and some members of Congress are also working on separate tracks to draft guidelines for the removal and replacement of Huawei and ZTE gear from U.S. networks, including funding that could help alleviate the burden placed on the smaller and regional carriers that use their equipment.

Funding Might Offset Costs of Replacement

A bipartisan U.S. House panel has unveiled legislation that would authorize $1 billion in funding for small and rural operators to replace equipment from Huawei and ZTE. Meanwhile, FCC Commissioner Geoffrey Starks initiated a study into the matter and concluded that ripping out and replacing the gear could cost $70,000 to $130,000 per cell site. Total estimated costs range from “hundreds of millions of dollars to over a billion,” according to the report.

FCC Chairman Ajit Pai addressed the ongoing security concerns during an on-stage interview at MWC Los Angeles last month. “There are larger issues involved here but from our perspective at least, we want to make sure that we do everything we can to preserve the security of those networks from the domestic perspective,” he said.

Pai reiterated allegations that Huawei and ZTE have engaged in intellectual property theft, bribery, and corruption. He also cited a recent report published by the European Commission that concluded 5G networks could pose a greater cybersecurity risk than past technologies due to the greater use of software to control functions and edge networking components to serve more use cases.

Huawei, in a prepared statement, maintains that these allegations are “based on selection information, innuendo, and mistaken assumptions.” The vendor warns that the FCC’s order will have “profound negative effects on connectivity for Americans in rural and underserved areas across the United States.”

The company argues that the order is unlawful and says it remains committed to an open dialogue with the U.S. government to verify the safety of its equipment and software. “The FCC’s process for labeling Huawei a security threat violates bedrock principles of due process and is based on nothing more than irrational speculation and innuendo,” the company said in response to the FCC’s action.

Ren Zhengfei, founder and CEO of Huawei, has floated the idea of licensing its 5G technology, including patents, to a company based in the West in a bid to change negative perceptions of its business, but little has come of that idea in the last couple months.