Threats to U.S. Networks

by by the Permanent Subcommittee on Investigations

United States Senate
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
Committee on Homeland Security and Governmental Affairs

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Rob Portman, Chairman
Tom Carper, Ranking Member

THREATS TO U.S. NETWORKS:
OVERSIGHT OF CHINESE
GOVERNMENT-OWNED CARRIERS

STAFF REPORT

PERMANENT SUBCOMMITTEE ON
INVESTIGATIONS

UNITED STATES SENATE

THREATS TO U.S. NETWORKS: OVERSIGHT OF CHINESE GOVERNMENT-OWNED CARRIERS

TABLE OF CONTENTS

I.IIEXECUTIVE SUMMARY

1

II.IFINDINGS OF FACT AND RECOMMENDATIONS

8

III.BACKGROUND

16

III.A.China Views the Telecommunications Industry as Critical to National Priorities

16

III.B.China Heavily Regulates its Telecommunications Industry and Carriers

17

III.B.1.China Heavily Restricts Foreign Telecommunications Investments

17

III.B.2.China Exerts Control over Domestic Carriers

20

III.B.3.China Encourages State-Owned Telecommunications Carriers to Expand Internationally

21

III.C.The United States Government Has Highlighted National Security Concerns Associated with Chinese State-Owned Carriers Operating within the United States

22

III.B.1.The Chinese Government Engages in Extensive Cyber and Economic Espionage Efforts against the United States

23

III.B.2.Chinese State-Owned Companies are Subject to Control by the Chinese Government

27

III.B.3.Chinese State-Owned Carriers Can Facilitate the Chinese Government's Espionage Efforts by Hijacking Data through Their Relationships with U.S. Carriers

29

IV.EFFORTS TO MITIGATE NATIONAL SECURITY RISKS OF FOREIGN CARRIERS OPERATING IN THE UNITED STATES

32

III.A.The FCC Regulates the Operations of Foreign Telecommunications Carriers in the United States

32

III.B.1.The FCC Authorizes Carriers to Provide Telecommunications Services in the United States Pursuant to Section 214 of the Communications Act of 1934

33

III.B.2.The FCC Must Determine that International Section 214 Authorization Serves the Public Interest, but It Relies on the Executive Branch to Evaluate National Security, Law Enforcement, Foreign Policy, and Trade Concerns

34

III.B.3.The FCC Does Not Periodically Review Section 214 Authorizations Once Granted

36

III.B.Team Telecom Assessed National Security and Law Enforcement Risks, but It Historically Operated in an Ad Hoc Manner

38

III.B.1.Team Telecom's Section 214 Review Process

39

III.B.2.Team Telecom's Lack of Statutory Authority, Established Procedures, and Limited Resources Hampered its Review Process

42

III.B.3.Team Telecom's Post-Authorization Monitoring and Oversight Was Also Limited and Sporadic

44

III.C.Nearly a Year after the Subcommittee's Investigation Began, the Administration Took Steps to Formalize Team Telecom

46

V.ICHINESE STATE-OWNED TELECOM COMPANIES OPERATED IN THE UNITED STATES WITH MINIMAL OVERSIGHT FROM THE FCC AND TEAM TELECOM

48

III.A.China Mobile Limited and China Mobile USA

49

III.B.1.Team Telecom's Review of China Mobile USA’s Application Lasted Seven Years

51

III.B.2.Ten Months after Team Telecom's Recommendation, the FCC Denied China Mobile USA's Application on National Security Grounds

54

III.B.China Telecom Corporation and China Telecom Americas

55

III.B.1.The FCC Streamlined and Approved China Telecom's and CTA's Initial Section 214 Authorizations within Two Weeks

56

III.B.2.After a Change in Ownership in 2007, Team Telecom Sought a Security Agreement with CTA

57

III.B.3.Team Telecom's Oversight of CTA Since 2007 Has Consisted of Two Site Visits and Intermittent Email Communication

62

III.B.4.Team Telecom Did Not Engage CTA regarding Public Allegations that China Telecom and Its Affiliates Hijacked and Rerouted Data through China

65

III.B.5.Nearly Two Decades after Obtaining Section 214 Authorization, Team Telecom Recommended CTA's Authorizations Be Revoked and Terminated

69

III.C.China Unicom and China Unicom (Americas) Operations Limited

73

III.B.1.The FCC Approved CUA's Section 214 Application in Two Weeks after Team Telecom Raised No Concerns

74

III.B.2.Team Telecom Has Never Engaged in Post-Authorization Oversight of CUA

75

III.B.3.CUA Shares Characteristics Highlighted by Team Telecom about China Mobile USA and CTA

77

III.D.ComNet (USA) LLC and Pacific Networks Corp.

84

III.B.1.ComNet's Initial Section 214 Authorization Did Not Require Team Telecom's Review

85

III.B.2.Pacific Networks' Initial Section 214 Authorization Prompted Team Telecom Review and Resulted in a Security Agreement

86

III.B.3.ComNet's Integration with Pacific Networks Prompted Further Team Telecom Scrutiny and Resulted in a Security Agreement

87

III.B.4.Despite a Security Agreement, Team Telecom Conducted Limited Post-Authorization Monitoring

90

III.B.5.ComNet Shares Characteristics Team Telecom Highlighted regarding China Mobile USA and CTA

94

VI.CONCLUSION

100