New Congressional Investigation Alleges Banned Chinese Firms Never Left Domestic Networks

In confronting Chinese cyber threats, the call is coming from inside the house.

On August 4, the House Select Committee on China revealed that three Chinese telecommunications firms — China Mobile, China Telecom, and China Unicom — had retained a presence in the United States despite being banned by the Federal Communications Commission (FCC) due to their placement on the agency’s Covered List between 2019 and 2021. The investigation alleges that these firms not only maintained equipment and other operations in the United States but also may have provided an opening for Chinese cyberattacks against domestic critical infrastructure.

The investigation flags key regulatory and enforcement gaps in Washington’s ongoing efforts to block China’s access to domestic networks. These gaps may contribute to future espionage threats against the United States, as well as its allies and partners.

Banned Chinese Telecoms Retained Equipment and Networking Arrangements

The report alleges that the Chinese firms retained a market presence via installed equipment in U.S. core networks. This equipment, which the FCC did not require to be removed, included installed routers, server racks, power adapters, and cross-connecting equipment within U.S. facilities. The report also alleges that the banned Chinese firms continued to rent physical space within secure data center facilities, giving them direct access to core network infrastructure, despite the FCC revoking their license to provide telecommunications services within the United States at the turn of the present decade.

The Select Committee also noted that the banned Chinese firms attempted to pivot toward less-regulated private networks after losing their FCC licenses. This process allowed these firms to route internet traffic between the United States, China, and Hong Kong and to bid for vendor support contracts for U.S.-based telecoms infrastructure. The report also claims that several banned Chinese firms sought to bid on trans-Pacific submarine cable contracts that connected to the United States, though these bids either failed outright or were unwound due to concerns over espionage.  

Beijing Exploits Key Regulatory Loopholes To Maintain Access

The report highlights a potential vector that Salt Typhoon, a Chinese state-linked cyber threat actor, may have used to target U.S. and allied telecommunications networks. Publicized in September 2024, Salt Typhoon penetrated military communication networks, collected information on nearly every American, and may have allowed Beijing to track senior government officials. While investigators initially focused on compromised domestic devices, the committee’s report noted that China Mobile International’s network routed to servers linked to the hacking group 192 times over the three days prior to the attack’s publicization.

The investigation also follows the FCC’s efforts to prevent Chinese firms from providing domestic telecommunications services after being placed on the Covered List by stripping them of blanket Section 214 authority. This authority, which was initially intended to allow domestic carriers to seamlessly pivot across national markets, has allowed some Chinese providers currently in the domestic market to continue providing services and interconnect with American providers without a license. This effort also follows the commission’s June measure blocking the importation and sale of some previously approved Chinese telecommunications equipment within the American market due to national security risks.

The FCC and Congress Must Work Together To Target Chinese Access to Domestic Networks

While the FCC has moved to sharply reduce China’s presence within domestic telecommunications networks, its efforts have been hindered by contested statutory authorities and a lack of funding for replacing Chinese components with secure alternatives.

In response, Congress should consider expanding funding for rip-and-replace programs targeting components produced by Covered List firms, including allowing the FCC to borrow against the proceeds of its upcoming broadband spectrum auctions to fund replacement efforts. Moreover, Congress should codify the commission’s authority to revoke its authorizations for previously sold equipment. It can also direct the Commerce Department and the FCC to target unlicensed commercial arrangements involving Covered List entities either directly, or via third-party intermediaries.

Jack Burnham is a senior research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow FDD on X @FDD. Follow Jack on X @JackBurnham802. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.