The U.S.-China technology battle saw another development with the Federal Communications Commission (FCC) banning an American IT firm due to alleged links with Chinese telecom players.

Per Reuters, Los Angeles-headquartered Digitalsystem Technology was added to the FCC's Covered List for its partnerships with Hong Kong operators China Mobile and China Unicom, alongside Beijing-based China Unicom. The three firms, which are on the same list over national security concerns, saw renewed interest recently when the FCC recently proposed banning U.S. telecom carriers from connecting with outlawed Chinese carriers.

According to Reuters, Digitalsystem updated its website to name the companies as clients in place of their original designation as partners. The firm is owned by a Chinese national, which worked against its favor in the eyes of the FCC, who also banned it from providing international telecommunications services.

The FCC's decision added the firm's Hong Kong-based sister company was a deciding factor, claiming Hong Kong to be "no longer sufficiently autonomous" since its handover to mainland China in 1997.

"If Digitalsystem [and its affiliates/partners] wished to do so and could gain control over Digitalsystem's management network, these parties could direct traffic intended for the United States or other locations through Hong Kong or mainland China," the FCC argued in its decision. "This would potentially expose U.S. communications and traffic to the security and intelligence services of these jurisdictions."

Describing itself as a "trusted IT solutions provider," Digitalsystem offers data center solutions and network points of presence (PoPs) across the U.S., Mexico, Brazil, Hong Kong, and mainland China, and specializes in cloud migration, managed IT, and international telecommunications.

Digitalsystem and the Chinese Embassy in Washington, D.C., did not immediately respond to a request from Reuters for comment.

China crisis

The Digitalsystem debacle follows the FCC widening its ban on imports of Chinese-made network equipment to include equipment that received FCC authorization before 2022.

The update followed its ban on foreign-made routers and consumer tech such as Wi-Fi hot spots and LTE/5G customer premises equipment (CPE) for posing a national security concern in the wake of the notorious Salt Typhoon attacks which saw U.S. telecom giants hacked by China-linked forces.

The FCC's jurisdiction has also seen it revise subsea cable rules to make it harder for Chinese companies to supply equipment for U.S.-based cable projects, as well as outlawing a Chinese “bad lab” for reportedly providing false equipment test results.

Away from communications, U.S. AI giant Anthropic saw its Claude Mythos AI model banned alongside Fable 5 from export by the U.S. government out of national security concerns.

On a related note, Anthropic recently accused Chinese tech giant Alibaba of illicitly extracting capabilities from its flagship Claude models, which in turn saw Alibaba ban its workforce from using Anthropic AI over an alleged China-snooping backdoor in its code.