Will China Mobile Get Its U.S. License Approved?

0 Comment

From a foreign investment/international trade perspective, this is an awesome story chock full of unresolved bilateral issues:

Concerned about possible cyber spying, U.S. national security officials are debating whether to take the unprecedented step of recommending that a Chinese government-owned mobile phone giant be denied a license to offer international service to American customers.

China Mobile, the world’s largest mobile provider, applied in October for a license from the Federal Communications Commission to provide service between China and the United States and to build facilities on American soil. (LA Times)

My first thought here is of Huawei, the Chinese IT firm that has had numerous problems with U.S. deals because of security concerns. Also, as with Huawei, it doesn’t seem unreasonable for the U.S. government to thoroughly investigate foreign telecom firms that wish to operate in the U.S. and have access to American telephony and other data. Fair enough, as long as that process is done fairly and is not used as an excuse for local protectionism.

So what’s the story here? China Mobile wants to expand into the U.S. to support US-China telephony traffic. Nothing dramatic there, they are doing what their competitors have already done. On its face, there is certainly nothing nefarious here.

But the U.S. government, specifically a group in the Federal Communications Commission known as “Team Telecom” (sounds like something Matt Stone and Trey Parker came up with) reviews these types of applications and has been tough on foreign applicants in recent years, forcing firms to sign very detailed national security agreements prior to application approval. This policy has developed over time as U.S. attention on cybersecurity, in particular espionage and intellectual property theft, has crystallized.

If you’ve been following bilateral IT issues over the past few years, you know that this is a huge area of concern that encompasses hacking of public and private servers, industrial espionage, hijacking various forms of data, and several different kinds of intellectual property theft. To make things even more complicated, China’s government has been accused of direct participation in all of this, an accusation that of course has never been resolved one way or the other.

Given this thicket of hot button issues, it’s actually still possible that China Mobile could still come through this process with an approval, after satisfying “Team Telecom” security concerns. On the other hand, their application could also be rejected. What happens then?

At that point, things could get interesting, since China Mobile would have a shot at challenging the administrative decision. You gotta love due process. Would they actually run this whole thing through a federal court? I have no idea (well, probably not). But damn, I would love to see it happen.

Think about it. Assuming that national security concerns allowed for transparency (a big “if” these days), the disclosures on both sides would be extremely interesting and informative. As I’ve said before with respect to the Huawei cases, it would be nice to know exactly what sort of evidence the U.S. government had to justify their rejections of cross-border deals. If China Mobile ultimately gets dinged, wouldn’t you like to know why? You know that the National Security Agency has terabytes of data on this subject that would resolve this issue, if only it could be disclosed.

The reason this is important is that some of us wonder whether these rejections have been made on the basis of solid evidence and whether they are done because of suspicions, fears and hearsay. Fifteen years ago, I wouldn’t have cared about this distinction so much, giving the U.S. government the benefit of the doubt, but since 9/11, I don’t trust the security apparatus of America all that much anymore. I want more transparency; I want the government to justify its actions when it comes to cross-border deals. Unfortunately, the NSA isn’t in the transparency business.

To add to the excitement, this hypothetical court case would have to deal with this factoid:

Team Telecom’s review of China Mobile’s application is complicated by the fact that two other Chinese government-owned firms, China Telecom and China Unicom, were granted similar licenses in 2002 and 2003, respectively, well before Chinese cyber espionage was viewed as a pressing concern. Both carry phone and Internet traffic between the U.S. and China.

Bazinga. If you’re scratching your head at this, the explanation is quite simple. Remember that U.S. policy in this area has evolved over the past few years, and certainly since 2003. The U.S. didn’t see these companies as a threat back then and therefore not only approved their applications, but also let them in without a national security agreement. China Mobile is simply asking for the same deal, right? (One wonders if Team Telecom has the statutory authority to force these companies to sign agreements now. Better late than never.)

Okay, reality check time. I doubt that China Mobile would want the type of scrutiny that a court case would mandate, so I don’t expect a formal challenge to a rejection from “Team Telecom.” Certainly Beijing doesn’t want China Mobile to disclose to anyone what it is required by Chinese law to do with data on its networks (hint: government monitoring). Moreover, the U.S. national security apparatus certainly wouldn’t want to disclose what it knows to the “other side” (i.e. China). And at the end of the day, neither side wishes to disclose any of this to the general public.

At least I can dream about it.

5 responses on “Will China Mobile Get Its U.S. License Approved?

  1. Andrew

    I also hope you’ll post developments on this story. Curiously, you didn’t mention the incident where China Telecom routed something like 15-18% of the world’s Internet traffic through Chinese filtering/routing systems (or something along these lines). I think this would give “Team Telecom” (great pun on Team America btw) pause for concern I would imagine, especially because China Telecom didn’t adequately explain how or why this happened.

    And even though I agree that the US national security apparatus has lost the benefit of the doubt in the years following 9/11, having an even less transparent government and central level Chinese telecommunications SOE build physical infrastructure that taps into US telecommunications and fiber optics channels would scare the crap out of me too, especially considering the rash of cyber security breaches since 2006/2007 (which, not coincidently, also happened to increase after Microsoft “handed” over its source code to its Windows program to the Chinese government. Just saying…).

    1. Stan Post author

      The China Telecom “re-routing” incident is certainly on the minds of regulators. I figured my reference to the requirements of the government covered all sorts of shenanigans, including that one. BTW, as disappointed as I am at the actions of the U.S. government and American telecom companies in the past decade with respect to data privacy, I was not, and wouldn’t, make an equivalence argument with respect to China. Two different things.

      1. Andrew

        Certainly didn’t mean to imply that you were making an equivalence argument. Obviously the transparency between the American and Chinese governments, telecommunications companies, and FDI environment aren’t in the same class. I should have elaborated on this point by noting that the NSA does, if memory serves me correctly, have a spokesperson, identified locations, and has been the subject of many articles on, including its perceived capabilities, with former employees being quoted, etc (where the Ministry of State Security’s doesn’t even have an address on file, let alone a spokesperson or featured articles). Also was trying to draw attention to the fact that since Microsoft “handed” over its source code for Windows to Chinese authorities, there has been a noticeable uptick in cyber security and espionage attacks (due in large part to most computers in America, and the world, running on the Microsoft Word platform). Very “convenient” if you ask me…

  2. H.Z.

    Well unless you want to cut off communication with China altogether you pretty much have to grant Chinese companies rights to carry international traffic between the two nations just based on reciprocity. Otherwise why should China grant US companies the rights for the same? Then who gets to carry the signals? You have to assume that the lines are not secure. If you want security you pretty much have to use end-to-end encryption.

    It is analogous to the airline industry, I guess. They will have to follow ITU rules. Also China Mobile most likely intends to serve Chinese business or government clients. And US companies will likely choose US carriers. Though with end-to-end encryption it probably wouldn’t matter, encrypting voice calls can be burdensome.