Inside the Ring

Chinese telecom threat

The U.S. Department of Agriculture (USDA) has listed two Chinese government-related telecommunications companies as approved suppliers for companies taking part in the Obama administration’s multibillion-dollar program to expand broadband Internet service around the country.

Huawei Technologies and ZTE, both state-owned Chinese firms, were included in a USDA list of safe and approved telecommunications equipment providers for the broadband expansion program.

Both companies were the target of a letter from six members of Congress that was sent to President Obama on Monday warning that there are significant risks to U.S. computer network security from security gaps in the broadband initiative.

China is viewed as one of the most aggressive nation-states engaged in international hacking. Last year, Google pulled its operations out of mainland China after a sophisticated cyber-attack against it and other U.S. companies.

Agriculture Secretary Tom Vilsack announced last month that USDA is providing loans to develop broadband networks in rural parts of the country.

The 2009 American Recovery and Reinvestment Act provided $7.2 billion for investment in broadband development for both USDA and the Commerce Department. USDA currently is in charge of several billion dollars of those funds to be used to develop broadband networks.

“Broadband investments are an essential part of the Obama administration’s effort to ‘win the future’ by out-innovating, out-educating, and out-building our global competitors,” Mr. Vilsack said in a statement.

Five senators and one senior House Republican stated in the letter to Mr. Obama that companies like Huawei and ZTE pose threats to U.S. communications security in the broadband initiative.

“We are concerned that these initiatives provide an opportunity for the introduction of potentially harmful technology to U.S. broadband infrastructure,” the lawmakers stated. “We are particularly concerned that these companies, such as Huawei and ZTE, could benefit from this federal investment in broadband technology and receive taxpayer funds in exchange for equipment or services that could undermine U.S. networks. These companies received extensive support from the Chinese government, which increases the risk that the companies will feel obligated to follow its instructions.”

Huawei was blocked from merging with 3Com in 2008 by the Treasury Department-led Committee on Foreign Investment in the United States and the National Security Agency advised some U.S. companies not to buy Huawei equipment, the letter said.

The letter stated that efforts to limit Huawei’s access to U.S. telecommunications networks were insufficient and in particular noted that USDA did not examine its use of broadband funds from a national security standpoint, citing the two companies’ inclusion on the approved vendor list.

“American companies providing broadband access may not be aware of the potential threats that accompany bids from Huawei and ZTE,” the letter said. “If the government agencies funding their work are so unfamiliar with the threat posed by those companies and are not evaluating applications [for loans] from a national security perspective, U.S. networks may be exposed to significant risk.”

USDA spokeswoman Dane Henshall did not answer directly when asked about the department’s listing of the Chinese companies.

“Companies and products listed in the USDA’s ‘List of Material Acceptable for Use on Systems of USDA Rural Development Telecommunications Borrowers’ meet requirements of the USDA RUS Technical Standards Committee and do not include companies or products restricted by law,” she said.

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