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Federal Register / Vol. 86, No. 158 / Thursday, August 19, 2021 / Proposed Rules station licenses, and thus presumably would include the requirement that the Commission serve the grantee/
responsible party with an order to show cause why revocation should not be issued and must provide that party with an opportunity for a hearing. See 47
U.S.C. 312c. The Commission seeks comment on this requirement. What precisely are the procedures that the Commission should employ if seeking to revoke particular covered equipment? As the Commission discussed above, 2.939c authorizes the Commission to withdraw any equipment authorization in the event of changes in its technical standards.
Pursuant to this provision, should the Commission provide a suitable amortization period for equipment already in the hands of users or in the manufacturing process? If so, what would that be? What other factors should the Commission consider that might warrant revocation under the new rules, such as those applicable to Title III licenses under section 312 of the Communications Act? 47 U.S.C. 312.
Should the Commission revise or clarify the existing requirements to enable the Commission to revoke authorizations of this covered equipment given that it already has been determined that the equipment poses an unacceptable risk?
In considering whether any existing equipment authorizations of covered equipment should be revoked, is there some process in which the Commission should engage to help identify particular equipment authorizations that should be considered for revocation?
What process should the Commission use to identify equipment authorizations for revocation? For example, to what extent might the Commission rely on others reports of a violation, and to what extent might such reports need to be supported in the record or independently verified? If the Commission were to conclude that revocation may be appropriate regarding particular covered equipment, this action would apply only to equipment that has been determined by other agencies to pose an unacceptable risk to national security. The Commission nonetheless recognizes the need to avoid taking actions that are overbroad in terms of affecting users of the equipment or would require removal of this equipment faster than it reasonably can be replaced. If the Commission concludes that revocation may be appropriate regarding particular covered equipment, the Commission seeks comment on the appropriate and reasonable transition period for removing that particular equipment.

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This could include a transition period for non-conforming equipment to make any necessary modifications to communications equipment or services, including removing the covered equipment in whole or as a component from that equipment or service. To what extent should the Commission apply different transition periods to different equipment authorizations that the Commission revokes? Are there any situations that might merit immediate compliance with the new equipment restrictions?
Pursuant to section 503b5 of the Act, the Commission must issue citations against non-regulatees for violations of FCC rules before proposing any monetary penalties. 47 U.S.C. 503b5.
Such citations provide notice to parties that one or more actions violate the Act and/or the FCCs rulesand that they could face a monetary forfeiture if the conduct continues. See Federal Communications Commission, Enforcement Bureau, Enforcement Overview at 10 April 2020, https
www.fcc.gov/sites/default/files/public_
enforcement_overview.pdf. Given this requirement, what enforcement policy would be appropriate for the continued marketing, sale, or operation of equipment by such parties during this transition period? What, if any, educational and outreach efforts should the Commission undertake to inform the public regarding any such revocations and their legal effect?
Finally, the Commission seeks comment on whether the Commission should make any revisions to 2.939.
Should this section be revised and/or clarified to specifically include covered equipment or whether the rule should be clarified to better encompass the intent in this rulemaking? What other specific revisions might be appropriate for consideration?
B. Competitive Bidding Certification Background. The Commissions competitive bidding process requires each applicant to make various certifications as a prerequisite for participation in an auction. Requiring certifications as a condition of participation guards against potential harms to the public interest before the harms could occur.
As described above, the Commission has designated Huawei and ZTE, and their subsidiaries, parents, or affiliates, as companies that pose a national security threat to the integrity of communications networks and the communications supply chain. See generally Huawei Designation Order, 35
FCC Rcd 6604, ZTE Designation Order,
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35 FCC Rcd 6633. As a result of this determination, funds from the Commissions Universal Service Fund may no longer be used to purchase, obtain, maintain, improve, modify, or otherwise support any equipment or services produced or provided by these covered companies.
In reaching this determination, the Commission noted Huaweis and ZTEs ties to the Chinese government and military apparatus, along with Chinese laws obligating it to cooperate with requests by the Chinese government to use or access its systems. Huawei Designation Order, 35 FCC Rcd at 6609, paras. 1314. However, it also is wellestablished that the Chinese government helps fuel Huaweis growth by deploying powerful industrial policies to make Huawei equipment cheaper to deploy than the alternatives. Chuin-Wei Yap, State Support Helped Fuel Huaweis Global Rise, Wall Street Journal Dec. 25, 2019, https
www.wsj.com/articles/state-supporthelped-fuel-huaweis-global-rise11577280736. These policies include both direct subsidies to Huawei and state-funded export financing.
To illustrate, a recent report by the Center for American Progress found that Chinas state-owned banks have provided billions of dollars to Huaweis customers. Melanie Hart and Jordan Link, Center for American Progress, There Is a Solution to the Huawei Challenge Oct. 14, 2020, https
www.americanprogress.org/issues/
security/reports/2020/10/14/491476/
solution-huawei-challenge/. According to the report, these loans can make Huawei impossible to beateven if competitors can match the companys state-subsidized pricesbecause Chinas state banks offer packages that commercial banks generally cannot match. Id. at para. 25. These loans may be run through Huawei or provided directly to Huaweis customers.
The Commission notes that the nature of state support for Huawei and ZTE has shifted over time. Recently, the Commission has observed how statefunded export financing may provide substantial funding to mobile operators already using equipment from Huawei or ZTE prior to national spectrum auctions in other countries. In one recent case, a Huawei customer was able to substantially outbid a rival new entrant in a spectrum auctionthereby denying entry to a new competitor that was planning on using trustworthy equipment in its 5G build-out.
Distortionary financing intended to support participation in spectrum auctions of network operators who then deploy covered equipment and services
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