Nervous about Huawei, US senators propose over $1B in 5G subsidies

The US must address "the complex security and competitiveness challenges that Chinese-directed telecommunication companies pose," says one lawmaker.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read

Sen. Mark Warner, left, and Sen. Richard Burr talk before the start of a Senate Select Intelligence Committee hearing. 

Bill Clark/Getty Images

A bipartisan group of US senators concerned about China's dominance in 5G technology introduced legislation Tuesday to help subsidize companies developing more-secure 5G gear. The bill would use US wireless auctions to fund a subsidy program that would be used to enhance research and development of 5G equipment and encourage the deployment of secure 5G technology throughout the world. 

Six senators, including the leaders of the Senate Select Committee on Intelligence -- Richard Burr, a Republican from North Carolina, and Mark Warner, a Democrat from Virginia -- introduced the Utilizing Strategic Allied Telecommunications Act. The legislation would allocate at least $750 million to companies developing 5G wireless technology. It would also create a $500 million fund to be doled out to companies deploying "trusted and secure" equipment around the world. 

The proposed bill doesn't call out specific companies, but the sponsors of the legislation made it clear the legislation is designed to provide alternatives to gear made by Huawei and ZTE, China-based telecom-equipment makers that have ties to the Chinese government.

"Every month that the US does nothing, Huawei stands poised to become the cheapest, fastest, most ubiquitous global provider of 5G, while US and Western companies and workers lose out on market share and jobs." Warner, who co-founded the wireless company Nextel before entering public service and currently serves as vice chairman of the Senate Intelligence Committee, said in a statement. "It is imperative that Congress address the complex security and competitiveness challenges that Chinese-directed telecommunication companies pose." 

National security officials fear that equipment from these manufacturers could be used to spy on other countries and companies. In May, President Donald Trump issued an executive order effectively banning new Huawei gear from US communications networks. The Federal Communications Commission also voted last year to cut off funding to wireless carriers that use equipment from these firms, because of the national security risk associated with the gear. 

Huawei and ZTE have denied their equipment can be used to spy or to compromise US security.

Huawei is one of the biggest makers of 5G gear, and its technology is considered the most advanced. It's also the second largest smartphone maker, behind Samsung, having surpassed Apple in 2018. 

Founded in 1987 by a former officer of the Chinese People's Liberation Army, Huawei still has close ties to the Chinese government, according to six US intelligence chiefs, including the directors of the CIA, the FBI and the National Security Agency, who testified before Congress in 2018 that Huawei could conduct "undetected espionage" if its equipment was used in US networks. 

US officials say the Chinese government has been subsidizing the company's growth abroad by enabling it to offer low-cost loans and other support in order to give it a competitive edge against Western equipment competitors. 

The problem is especially worrisome given the massive upgrades underway throughout the world toward next generation 5G wireless technology. The fifth generation of cellular technology promises download speeds 10 to 100 times faster than those of current 4G networks. It's being rolled out across the US and throughout the world. 

Burr, chairman of the Senate Intelligence Committee, said in a statement Tuesday that it was important for Congress to act now to protect networks of the future. 

"[The] risks could prove disastrous if Huawei, a company that operates at the behest of the Chinese government, military, and intelligence services, is allowed to take over the 5G market unchecked," Burr said. "This legislation will help maintain America's competitive advantage and protect our national security by encouraging Western competitors to develop innovative, affordable, and secure 5G alternatives." 

The details

The proposed legislation calls for using proceeds from the FCC's sale of wireless spectrum licenses over the next five years to establish a fund of at least $750 million that can be used to subsidize research and development by any company using open-standards for 5G technology. This could help smaller US companies get a foothold in the 5G equipment market, which is dominated by Asian and European companies. Huawei largely competes with Scandinavian suppliers Ericsson and Nokia. 

The FCC already has two major wireless spectrum auctions planned for this year. The legislation would allow the government to collect $750 million or 5% of all auction proceeds, whichever figure is higher, for the fund.

The National Telecommunications and Information Administration, a division of the Commerce Department, would administer the funds and oversee the grant program. 

The bill would also raise an additional $500 million for a Multilateral Telecommunications Security Fund, which would be controlled by the Department of State. US officials could use these funds to help carriers in other countries purchase non-Chinese equipment. The US has struggled to persuade other countries to abandon Huawei and others as suppliers. The fund would also help the US play a bigger role in crafting international technical standards for 5G.