China Mobile
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The US is formalizing Team Telecom rules to restrict foreign ownership of internet and telecom assets
It has the simplest name, but the sort of shadowy overtones that national security writers lust after.
Team Telecom, a mostly informal working committee of the Departments of Defense, Homeland Security and Justice (along with affiliated agencies) has for years been quietly tasked with evaluating and maintaining the security of America telecom infrastructure in concert with the FCC. Its primary objective as far as we have been able to ascertain is to monitor the ownership of key telecom assets to ensure they don’t fall into the hands of suspect nations (think China, Russia, etc).
Last year, Mark Harris over on Extra Crunch took an in-depth look at the extreme delays companies can experience going through a Team Telecom review (membership required), which in the case of China Mobile’s expansion into the U.S., extended up to seven years before the Team rejected the Chinese bid for market entry.
That informal arrangement is disappearing, as the administration over the weekend published a new executive order formally instantiating Team Telecom as a legal process for reviewing applications for telecom licenses, deals and other requests made to the FCC.
Under a newly christened “Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector” (CAFPUSTSS?), the Committee will be charged with assisting “the FCC in its public interest review of national security and law enforcement concerns that may be raised by foreign participation in the United States telecommunications services sector.”
Like its Team Telecom forerunner, the Committee will be made up of the heads of Justice, Defense and Homeland Security, with the attorney general playing the role of chair. Applications to the Committee will be referred to the U.S. government’s highest-ranking intelligence officer, the Director of National Intelligence, for analysis.
Unlike in the past, where the timeline for reviews was anything but standardized, the executive order provides for a 120-day adjudication process, with a 90-day extension if the Committee has additional concerns and goes through a secondary review.
In a brief press statement, FCC Chairman Ajit Pai said, “I applaud the President for formalizing Team Telecom review and establishing a process that will allow the Executive Branch to provide its expert input to the FCC in a timely manner.” The FCC intends to finish its own rulemaking around Team Telecom, a process which was first proposed at the tail end of the Obama administration and has been on-going ever since.
These reforms to Team Telecom are in line with similar reforms made to CFIUS, the Committee for Foreign Investment in the United States, which were finalized at the beginning of this year after Congress passed a reform bill in 2018.
While the new rules will provide some certainty to areas of telecom like fiber optic cable expansion and wireless services, expect the new rules to be used to put even more restrictions on countries like China hoping to get a slice of the U.S. infrastructure market. Indeed, in the FCC’s statement today, the agency said, “As we demonstrated last year in rejecting the China Mobile application, this FCC will not hesitate to act to protect our networks from foreign threats.”
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Huawei says US ban will cost it $30B in lost revenue
Following a string of trade restrictions from the U.S., China’s telecoms equipment and smartphone maker Huawei expects its revenues to drop $30 billion below forecast over the next two years, founder and chief executive Ren Zhengfei said Monday during a panel discussion at the company’s Shenzhen headquarters.
Huawei’s production will slow down in the next two years while revenues will hover around $100 billion this and next year, according to the executive. The firm’s overseas smartphone shipment is tipped to drop 40%, he said, confirming an earlier report from Bloomberg.
That said, Ren assured that Huawei’s output will be “rejuvenated” by the year 2021 after a period of adjustment.
Huawei’s challenges are multifaceted as the U.S. “entity list” bars it from procuring from American chip makers and using certain Android services, among a list of other restrictions. In response, the Chinese behemoth recently announced it has been preparing for years its own backup chips and an alternative smartphone operating system.
“We didn’t expect the U.S. to attack Huawei with such intense and determined effort. We are not only banned from providing targeted components but also from joining a lot of international organizations, collaborating with many universities, using anything with American components or even connecting to networks that use American parts,” said Ren at the panel.
The founder said these adverse circumstances, though greater than what he expected, would not prevent the company from making strides. “We are like a damaged plane that protected only its heart and fuel tank but not its appendages. Huawei will get tested by the adjustment period and through time. We will grow stronger as we make this step.”
“Heroes in any times go through great challenges,” reads a placard left on a table at a Huawei campus cafe, featuring the image of a damaged World War II aircraft (Photo: TechCrunch)
That image of the beaten aircraft holding out during hard times is sticking to employees’ minds through little motivational placards distributed across the Huawei campus. TechCrunch was among a small group of journalists who spoke to Huawei staff about the current U.S.-China situation, and many of them shared Ren’s upbeat, resilient attitude.
“I’m very confident about the current situation,” said an employee who has been working at Huawei for five years and who couldn’t reveal his name as he wasn’t authorized to speak to the press. “And my confidence stems from the way our boss understands and anticipates the future.”
More collaboration
Although 74-year-old Ren had kept a quiet profile ever since founding Huawei, he has recently appeared more in front of media as his company is thrown under growing scrutiny from the west. That includes efforts like the Monday panel, which was dubbed “A Coffee With Ren” and known to be Ren’s first such fireside chat.
Speaking alongside George Gilder, an American writer and speaker on technology, and Nicholas Negroponte, co-founder of the MIT Media Lab, Ren said he believed in a more collaborative and open economy, which can result in greater mutual gains between countries.
“The west was the first to bring up the concept of economic globalization. It’s the right move. But there will be big waves rising from the process, and we must handle them with correct rather than radical measures,” said Ren.
“It’s the U.S. that will suffer from any effort to decouple,” argued Gilder. “I believe that we have a wonderful entrepreneurial energy, wonderful creativity and wonderful technology, but it’s always thrived with collaboration with other countries.”
“The U.S. is making a terrible mistake, first of all, picking on a company,” snapped Negroponte. “I come from a world where the interest isn’t so much about the trade, commerce or stock. We value knowledge and we want to build on the people before us. The only way this works is that people are open at the beginning… It’s not a competitive world in the early stages of science. [The world] benefits from collaboration.”
“This is an age for win-win games,” said one of the anonymous employees TechCrunch spoke to. He drew the example of network operator China Mobile, which recently announced to buy not just from Huawei but also from non-Chinese suppliers Nokia and Ericsson after it secured one of the first commercial licenses to deploy 5G networks in the country.
“I think the most important thing is that we focus on our work,” said Ocean Sun, who is tasked with integrating network services for Huawei clients. He argued that as employees, their job is to “be professional and provide the best solutions” to customers.
“I think the commercial war between China and the U.S. damages both,” suggested Zheng Xining, an engineer working on Huawei’s network services for Switzerland. “Donald Trump should think twice [about his decisions].”
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With Kata Containers and Zuul, OpenStack graduates its first infrastructure projects
Over the course of the last year and a half, the OpenStack Foundation made the switch from purely focusing on the core OpenStack project to opening itself up to other infrastructure-related projects as well. The first two of these projects, Kata Containers and the Zuul project gating system, have now exited their pilot phase and have become the first top-level Open Infrastructure Projects at the OpenStack Foundation.
The Foundation made the announcement at its Open Infrastructure Summit (previously known as the OpenStack Summit) in Denver today after the organization’s board voted to graduate them ahead of this week’s conference. “It’s an awesome milestone for the projects themselves,” OpenStack Foundation executive direction Jonathan Bryce told me. “It’s a validation of the fact that in the last 18 months, they have created sustainable and productive communities.”
It’s also a milestone for the OpenStack Foundation itself, though, which is still in the process of reinventing itself in many ways. It can now point at two successful projects that are under its stewardship, which will surely help it as it goes out and tries to attract others who are looking to bring their open-source projects under the aegis of a foundation.
In addition to graduating these first two projects, Airship — a collection of open-source tools for provisioning private clouds that is currently a pilot project — hit version 1.0 today. “Airship originated within AT&T,” Bryce said. “They built it from their need to bring a bunch of open-source tools together to deliver on their use case. And that’s why, from the beginning, it’s been really well-aligned with what we would love to see more of in the open-source world and why we’ve been super excited to be able to support their efforts there.”
With Airship, developers use YAML documents to describe what the final environment should look like and the result of that is a production-ready Kubernetes cluster that was deployed by OpenStack’s Helm tool — though without any other dependencies on OpenStack.
AT&T’s assistant vice president, Network Cloud Software Engineering, Ryan van Wyk, told me that a lot of enterprises want to use certain open-source components, but that the interplay between them is often difficult and that while it’s relatively easy to manage the life cycle of a single tool, it’s hard to do so when you bring in multiple open-source tools, all with their own life cycles. “What we found over the last five years working in this space is that you can go and get all the different open-source solutions that you need,” he said. “But then the operator has to invest a lot of engineering time and build extensions and wrappers and perhaps some orchestration to manage the life cycle of the various pieces of software required to deliver the infrastructure.”
It’s worth noting that nothing about Airship is specific to the telco world, though it’s no secret that OpenStack is quite popular in the telco world and unsurprisingly, the Foundation is using this week’s event to highlight the OpenStack project’s role in the upcoming 5G rollouts of various carriers.
In addition, the event will showcase OpenStack’s bare-metal capabilities, an area the project has also focused on in recent releases. Indeed, the Foundation today announced that its bare-metal tools now manage more than a million cores of compute. To codify these efforts, the Foundation also today launched the OpenStack Ironic Bare Metal program, which brings together some of the project’s biggest users, like Verizon Media (home of TechCrunch, though we don’t run on the Verizon cloud), 99Cloud, China Mobile, China Telecom, China Unicom, Mirantis, OVH, Red Hat, SUSE, Vexxhost and ZTE.
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FCC looks to slap down China Mobile’s attempt to join US telecom system
The FCC has proposed to deny an application from China Mobile, a state-owned telecom, to provide interconnect and mobile services here in the U.S., citing security concerns. It’s another setback to the country’s attempts to take part in key portions of American telecommunications.
China Mobile was essentially asking to put call and data interconnection infrastructure here in the U.S.; It would have come into play when U.S. providers needed to connect to Chinese ones. Right now the infrastructure is generally in China, an FCC spokesperson explained on a press call.
In a draft order that will be made public tomorrow and voted on in May, FCC Chairman Ajit Pai moves to deny the application, which has been pending since 2011. Such applications by foreign-owned entities to build and maintain critical infrastructure like this in the U.S. have to pass through the Executive, which only last year issued word that it advised against the deal.
In the last few months, the teams at the FCC have reviewed the record and came to the conclusion that, as Chairman Ajit Pai put it:
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.
National security issues are of course inevitable whenever a foreign-owned company wants to be involved with major infrastructure work in the U.S., and often this can be taken care of with a mitigation agreement. This would be something like an official understanding between the relevant parties that, for instance, law enforcement in the U.S. would have access to data handled by the, say, German-owned equipment, and German authorities would alert U.S. about stuff it finds, that sort of thing.
But that presupposes a level of basic trust that’s absent in the case of a company owned (indirectly but fully) by the Chinese government, the FCC representative explained. It’s a similar objection to that leveled at Huawei, which given its close ties to the Chinese government, the feds have indicated they won’t be contracting with the company for infrastructure work going forward.
The denial of China Mobile’s application on these grounds is apparently without precedent, Pai wrote in a separate note: “Notably, this is the first time the Executive Branch has ever recommended that the FCC deny an application due to national security concerns.”
It’s likely to further strain relations between our two countries, though the news likely comes as no surprise to China Mobile, which probably gave up hope some time around the third or fourth year its application was stuck in a bureaucratic black hole.
The draft order will be published tomorrow, and will contain the evidence and reasoning behind the proposal. It will be voted on at the FCC open meeting on May 9.
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