Chinese and US flags flutter outside the building of an American company in Beijing, China, on Jan 21, 2021.
The Chinese companies and their US-based lawyers did not respond to requests for comment. The Justice Department declined to comment and the White House referred questions to Commerce, which declined to comment. The Chinese Embassy in Washington said it hopes the United States will"stop suppressing Chinese companies under false pretexts," adding that China will continue to defend the rights and interests of Chinese companies.
Regulators have not yet made decisions about how to address the potential threat, two of the people said. But, equipped with the authority to probe internet services sold into the US by companies from"foreign adversary" nations, regulators could block transactions allowing them to operate in data centers and route data for internet providers, the sources said.
One factor in the FCC's decision was a 2020 report from other US government agencies that recommended revoking China Telecom's license to provide US telephone service. It cited at least nine instances where China Telecom misrouted internet traffic through China, putting it at risk of being intercepted, manipulated or blocked from reaching its intended destination.
The telecoms company sought to reverse the FCC decision, but a US appeals court rejected its arguments, noting that the agencies presented"compelling evidence that the Chinese government may use Chinese information technology firms as vectors of espionage and sabotage."The Chinese telecoms companies' reach extends deep inside the US internet infrastructure.
Commerce investigators are also probing the companies' US cloud offerings, the focus of the 2020 referral from the Justice Department on China Mobile, China Telecom and Alibaba that prompted the investigations, the people said. The probe was later expanded to include PoPs and China Unicom, whose cloud business was small at the time of the referral, two of people added. Alibaba did not respond to a request for comment.