# Threats to U.S. Networks/Section 5A

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​A. China Mobile Limited and China Mobile USA
China Mobile Limited ("China Mobile") is "the leading provider of telecommunications and related services in Mainland China." The company provides a full suite of communications services, including "mobile voice and data business [and] wireline broadband." Together with its subsidiaries, it is also the ​largest provider of telecommunications services in the world, as measured by the total number of subscribers, with approximately 946 million mobile customers worldwide as of March 2020. China Mobile reported a 2019 operating revenue of $107 billion, of which approximately 90 percent came from telecommunications services.
Outside of China, China Mobile operates through its subsidiary, China Mobile International. China Mobile USA, a subsidiary of China Mobile International, was registered in Delaware in May 2011; it maintains offices in New York and California.
On September 1, 2011, China Mobile USA applied for Section 214 authorization to provide international facilities-based and resale services between the United States and all international points, including China. China Mobile USA planned to provide a variety of international services, including international interexchange services, international private line circuits, and mobile virtual network operator services, as well as data center and cloud services, for which no ​Section 214 authorization is needed. Team Telecom undertook a seven year review before ultimately recommending that the FCC deny the application on national security grounds. The FCC denied the application, but it did so nearly a year after receiving Team Telecom's recommendation.
1. Team Telecom's Review of China Mobile USA's Application Lasted Seven Years
As noted above, China Mobile USA applied for Section 214 authorization on September 1, 2011. The FCC referred the application to Team Telecom for its input on the national security and law enforcement risks posed by the proposed operations. Team Telecom requested the application be removed from streamlining to give it additional time to evaluate concerns. Team Telecom spent the next seven years evaluating the application, during which Team Telecom engaged China Mobile USA to "learn more about its management, business, and proposed activities." China Mobile USA responded to Team Telecom's questions between 2011 and 2012 and again to another set of inquiries in 2014. Not until July 2018, however, did Team Telecom—through the National Telecommunications and Information Administration ("NTIA")—recommend that the FCC deny China Mobile USA's application. Team Telecom concluded that China Mobile USA's proposed services raised serious national security concerns that could not be sufficiently mitigated through a security agreement. Team Telecom's concerns generally fell into the following categories.
China Mobile USA is ultimately owned by the Chinese government. Team Telecom noted that China Mobile USA, through intermediary companies, is majority owned and controlled by the Chinese government. China Mobile USA is ​a wholly-owned subsidiary of China Mobile. Although listed on both the New York and Hong Kong stock exchanges, China Mobile is majority owned by China Mobile Communications Corporation, "a Chinese state-owned enterprise subject to supervision of . . . [the State-owned Assets Supervision and Administration Commission ('SASAC')]." "The Chinese government holds a direct 100 percent ownership interest in China Mobile Communications Corporation." At the time China Mobile USA applied for Section 214 authorization, China Mobile Communications Corporation owned more than 70 percent of China Mobile.
​China Mobile USA is vulnerable to exploitation, influence, and control by the Chinese government. Team Telecom concluded that China Mobile USA is vulnerable to exploitation, influence, and control by the Chinese government, in part because of its government ownership. Team Telecom also noted that China Mobile USA would be required to comply with intercept requests from the Chinese government.
China Mobile USA's authorization would allow it to interconnect with U.S. telecommunications networks and carriers. Team Telecom warned that, with Section 214 authorization, China Mobile USA would have been able "to interconnect [its international voice traffic] with the U.S. telecommunications network." "A carrier connected to [the U.S. telecommunications networks] has greater access to telephone lines, fiber-optic cables, cellular networks, and communication satellites. . . ." Further, China Mobile USA would have been able to build "direct and indirect interconnection relationships with other telecommunications carriers, from basic connections between networks in order to exchange traffic . . . to much more integrated relationships." Access to these networks and relationships with U.S. carriers would provide China Mobile USA—and by extension the Chinese government—with access to critical infrastructure, which the Chinese government could use to further its espionage and intelligence activities.
China Mobile USA's authorization would allow it to increase its operations in the United States without further FCC approval. The concern about China Mobile USA's access to the U.S. telecommunications networks was "amplified" given that,
   after obtaining an international Section 214 authorization, China Mobile [USA] could further expand its U.S. operations by increasing the number of its points of presence in the United States, developing its own domestic network without relying on underlying carriers for connectivity, increasing its number of peering partners, providing mobile service, or operating as a mobile virtual network operator.
​Team Telecom warned that this contributed to a "substantial and unacceptable risk of increased economic espionage" against the United States.
The Chinese government could use the grant of authority to China Mobile USA to further its cyber and economic espionage efforts against the United States. Team Telecom repeatedly warned that the Chinese government could use the grant of authority to China Mobile USA to further its espionage efforts against the United States. Further, China Mobile USA could, at the request of the Chinese government, violate any security agreement with Team Telecom, as it may be required to do under Chinese law. Even if breaches were reported and resolved, "the potential harms could very likely not be remediated." Finally, Team Telecom concluded that it would be unable to work effectively with China Mobile USA or its parent companies to identify and disrupt unlawful activities, or to assist in the investigation of past and current unlawful conduct.
2. Ten Months after Team Telecom's Recommendation, the FCC Denied China Mobile USA's Application on National Security Grounds
In May 2019—nearly a year after Team Telecom's July 2018 recommendation—the FCC voted unanimously to deny China Mobile USA's application. The FCC accepted Team Telecom's national security rationale, explaining:
   [D]ue to a number of factors related to China Mobile USA's ownership and control by the Chinese government, grant of the application would raise substantial and serious national security and law enforcement risks that cannot be addressed through a [security] agreement. ​Therefore, grant of [the] application would not be in the public interest.
The FCC agreed that China Mobile USA was vulnerable to "exploitation, influence, and control by the Chinese government" and that there was a significant risk that the Chinese government would use the Section 214 authorization to further its economic and cyber espionage efforts against the United States.
* ↑ China Mobile FY2019 Form 20-F, supra note 123, at 21.
* ↑ About China Mobile—Overview, China Mobile Limited, https://www.chinamobileltd.com/en/about/overview.php.
* ↑ Id.; In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, n.12 (May 10, 2019); China Mobile Closing Down 3G System, Complete Switch-Off Expected by 2020, Telegeography (Mar. 11, 2019), https://www.telegeography.com/products/commsupdate/articles/2019/03/11/china-mobileclosing-down-3g-system-complete-switch-off-expected-by-2020/; The World's Top 10 Telecommunications Companies, Investopedia (May 16, 2019), https://www.investopedia.com/articles/markets/030216/worlds-top-10-telecommunications-companies.asp.
* ↑ See China Mobile FY2019 Form 20-F, supra note 123, at 21; Investor Relations—Monthly Customer Data, China Mobile Limited, https://www.chinamobileltd.com/en/ir/operation_m.php.
* ↑ Investor Relations—Key Operation Data, China Mobile Limited, https://www.chinamobileltd.com/en/ir/operation_y.php?scroll2title=1. See China Mobile FY2019 Form 20-F, supra note 123, at 3.
* ↑ Application of China Mobile International (USA) Inc. for International Section 214 Authority, File No. ITC-214-20110901-00289, Attach. 2 (filed Sept. 1, 2011), https://licensing.fcc.gov/cgi-bin/ws.exe/prod/ib/forms/attachment_menu.hts?id_app_num=95289&acct=235487&id_form_num=2&filing_key=-233159; Amendment to Application of China Mobile International (USA) Inc. for International Section 214 Authority, File No. ITC-214-20110901-00289 (Jan. 30, 2015), http://licensing.fcc.gov/cgi-bin/ws.exe/prod/ib/forms/reports/related_filing.hts?f_key=-233159&f_number=ITC2142011090100289.
* ↑ See History—About Us, China Mobile International, https://www.cmi.chinamobile.com/en/about/cmi; Global Resources—Global Footprint, China Mobile International, https://www.cmi.chinamobile.com/en/global-resources.
* ↑ See Int'l Bureau Selected Applications Listing, File No. ITC-214-20110901-00289, FED. COMMC'NS COMM'N, http://licensing.fcc.gov/cgi-bin/ws.exe/prod/ib/forms/reports/swr031b.hts?q_set=V_SITE_ANTENNA_FREQ.file_numberC/File+Number/%3D/ITC2142011090100289&prepare=&column=V_SITE_ANTENNA_FREQ.file_numberC/File+Number (listing "date filed" as September 1, 2011); Fed. Commc'ns Comm'n, Public Notice—International Applications Accepted for Filing, Report No. TEL-01519S (Sept. 16, 2011); In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3367, ¶ 4 (May 10, 2019).
* ↑ See Fed. Commc'ns Comm'n, Public Notice—International Applications Accepted for Filing, Report No. TEL-01519S (Sept. 16, 2011); In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3367, ¶ 4 (May 10, 2019). See also Letter from J. Kostyu, Counsel to China Mobile International (USA) Inc., to Marlene Dortch, Sec'y, Fed. Commc'ns Comm'n (Mar. 12, 2013).
* ↑ See In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3367, 4 (May 10, 2019).
* ↑ Id. at 5. Other Executive Branch agencies were also asked to opine on foreign policy and trade risks. Id.
* ↑ Cf. id.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 4.
* ↑ Id. at 4-5.
* ↑ Team Telecom works closely with other Executive Branch agencies to prepare a single recommendation on behalf of the Executive Branch. NTIA is responsible for filing that recommendation with the FCC. Briefing with the Dep't of Justice (Aug. 1, 2019). NTIA is a part of the Department of Commerce. See About NTIA, Nat'l Telecommc'ns & Info. Admin., https://www.ntia.doc.gov/about.
* ↑ Id.; Li Tao, Why the US Government Sees China Mobile as a National Security Threat, South China Morning Post (July 4, 2018).
* ↑ See In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3367 ¶ 19 (May 10, 2019).
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 3. See also Application of China Mobile International (USA) Inc. for Authority to Provide International Facilities-Based and Resold Services to All International Points, at Attach. 2—Answer to Question 14. In January 2015, China Mobile (USA) alerted the FCC that its immediate parent company had been transferred to China Mobile International (UK) Limited, which was also majority controlled by China Mobile Communications Corporation. Thus, the change was in name only and had no effect on China Mobile USA's ultimate ownership or its status as a Chinese state-owned entity. See Letter from K. Bressie et al., Counsel to China Mobile USA, to Marlene Dortch, Sec'y, Fed. Commc'ns Comm'n (Jan. 30, 2015).
* ↑ See Application of China Mobile International (USA) Inc. for Authority to Provide International Facilities-Based and Resold Services to All International Points, at Attach. 2—Answer to Question 14.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 3.
* ↑ The diagram is derived from information contained in Executive Branch Recommendation re China Mobile USA, supra note 56; In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361 (May 10, 2019); China Mobile FY2019 Form 20-F, supra note 123.
* ↑ See Executive Branch Recommendation re China Mobile USA, supra note 56, at 7-17. See also In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, ¶¶8, 19 (May 10, 2019).
* ↑ See Executive Branch Recommendation re China Mobile USA, supra note 56, at 8. The Executive Branch also expressed concern that "there is a substantial risk that the Chinese government would exert even greater control over China Mobile and China Mobile USA than other state-owned enterprises given the Chinese government's 100% ownership of China Mobile, the size and reach of China Mobile and its subsidiaries, and the importance of any opportunities afforded by the telecommunications services offered both within China and globally." See Executive Branch Recommendation re China Mobile USA, supra note 56, at 8. See also In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361 ¶¶8, 19 (May 10, 2019).
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 3.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 10.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 3.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 3, 10.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 10-11.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 11.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 9-17.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 7.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56, at 16-17.
* ↑ Executive Branch Recommendation re China Mobile USA, supra note 56.
* ↑ In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3361, ¶1 (May 10, 2019); Press Release, Fed. Commc'ns Comm'n, FCC Denies China Mobile USA Application to Provide Telecommunications Services (May 9, 2019), https://docs.fcc.gov/public/attachments/DOC-357372A1.pdf. As noted above, during this time, China Mobile USA filed a reply to Team Telecom's recommendation and NTIA, on behalf of Team Telecom and the other Executive Branch agencies, filed a reply. In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3361, 1 (May 10, 2019). The FCC noted that staff "actively worked on the recommendation to deny from July 2018, when it was received" until the May 2019 order. It also suggested that it took longer to reach a decision because the "denial of an international Section 214 application on national security grounds was a case of first impression." See Email from the Fed. Commc'ns Comm'n to the Subcommittee (June 2, 2020) (on file with the Subcommittee).
* ↑ In the Matter of China Mobile Int'l (USA) Inc., FCC No. 19-38, 34 FCC Red 3361, 3361, ¶ 1 (May 10, 2019).
* ↑ Id. at 8, 14-19, 30-33.