Huawei sues FCC over “unconstitutional” ban on the use of federal subsidies to buy its equipment

Huawei said today it is suing the Federal Communications Commission, asking to overturn a ban on carriers from using money from the Universal Service Fund (USF) to buy equipment from Huawei and ZTE.

The $8.5 billion USF supports the purchase of equipment to build communications infrastructure, especially in rural communities. Huawei is asking the United States Court of Appeals for the Fifth Circuit to overrule the FCC’s order, passed on Nov. 22.

Small carriers buy equipment from Huawei and ZTE because it is dependable and cheap. According to a Reuters report, some carriers are considering Nokia and Ericsson for replacements, but their equipment is priced less competitively.

During a press conference in Shenzhen today, Glen Nager, Huawei’s lead counsel for the lawsuit, claimed the ban goes beyond the FCC’s authority and violates the constitution. “The order fails to give Huawei constitutionally required due process before stigmatizing it as a national security threat, such as an opportunity to confront supposed evidence and witnesses, and a fair and neutral hearing process,” he said.

Huawei chief legal officer Song Liuping claims that FCC chairman and Ajit Pai and other commissioners did not present evidence to back its claim that Huawei is a security threat.

“This is a common trend in Washington these days. ‘Huawei is a Chinese company.’ That’s his only excuse,” Song said. He also claimed that the FCC ignored 21 rounds of “detailed comments” submitted by Huawei to explain how the order would harm businesses in rural areas, adding “This decision, just like the Entity List decision in May, is based on politics, not security.”

In March, Huawei also cited the Constitution in another lawsuit filed against the U.S. government arguing that a ban on the use of its products by federal agencies and contractors violate due process.

Huawei and ZTE were first identified as potential national security threats in 2012 by a U.S Congressional panel, but federal actions against Huawei and ZTE have intensified over the past year as the trade war between the U.S. and China escalates.

Earlier this year, it was placed on the U.S. Entity List and the Department of Justice announced it was pursuing several criminal charges against Huawei, including conspiracy to steal trade secrets. Huawei’s chief financial officer, Meng Wanzhou also faces fraud charges in New York. In response, Huawei has dramatically increased the amount it spends on lobbying in the U.S.

In China, Huawei’s announcement today about its FCC lawsuit was overshadowed by controversy about a former employee, Li Hongyuan who was arrested and detained for eight months after demanding severance pay. Li was arrested on extortion charges and released because of insufficient evidence and his treatment has triggered controversy and anger over the treatment of workers by Huawei and other tech companies.