House Panel Hammers ZTE, Huawei on Small Business Impact

(Image: Shutterstock)

Small businesses are a particularly weak spot in the American armor when it comes to a potential blow that could be struck by Chinese telecommunications equipment manufacturers ZTE and Huawei.

That strongly voiced sentiment came out of hearing held today by the House Small Business committee, titled, “ZTE: A Threat to America’s Small Businesses.” While the title of the hearing referenced just one of the companies, the threats posed by both were debated, based on recent legislation seeking to ban both ZTE and Huawei from operation in U.S. Federal agencies.

“Small businesses have become top targets for nefarious state-backed actors because they tend to be the softest targets,” said committee chairman Rep. Steve Chabot, R-Ohio. “They have fewer resources to manage their information technology systems and respond to cybersecurity incidents and they often lack the technical knowledge needed to assess the ever-evolving threats.”

The cybersecurity threats the companies present to U.S. infrastructure–via cellular phone towers–and through individual consumer electronics–via cell phones and other components–were both addressed at the hearing.

Infrastructure Fears

Chabot–who said the committee has been paying very close attention to ZTE for several years–said that small businesses in the U.S. often choose suppliers like ZTE because they lack funds and the Chinese companies come in with the most competitive bids.

A real-life example was crystallized by Andy Keiser, visiting fellow at the National Security Institute at George Mason University and a former professional staffer on the House Intelligence Committee.

Keiser said that his previous boss, former Rep. Mike Rogers, R-Mich., was approached by a Michigan small business owner bidding to install cell towers in remote areas of Michigan.

“These companies, Huawei and ZTE, would come in not just below his bid, but below the cost of what the materials were to build the towers,” Keiser said. He asserted that the Chinese companies are operating infrastructure in many areas in the United States.

“It proved that Huawei and ZTE are not in this for profit,” he said. “They are not like any Western company. They are not beholden to shareholders. This is a strategic plan by the Communist Chinese government to at least have the capability to collect information around the world, and perhaps more concerningly, to turn off a switch in the event of potential conflict and create havoc we don’t even want to think about on this committee.”

Keiser further said that Huawei has admitted to stealing router technology from Cisco “all the way down to the typos in the manual,” and the design for the iPhone “down to the last screw.”

Interaction with U.S. Consumer Technology

“Foreign-backed entities from countries like China and Russia regularly target small businesses to steal intellectual property,” said Chabot.

“We know that companies like ZTE and Huawei have the capacity to maliciously modify or steal information and conduct undetected espionage,” said ranking committee member Rep. Nydia Velázquez, D-N.Y.

Keiser further linked ZTE’s activities to the Chinese government, saying the two largest Chinese state-owned banks provided the company an $11 billion infusion after the United States prevented ZTE from purchasing U.S. components–which Keiser said should have put ZTE out of business. “Name a Western company that might have that option,” he said.

Cybersecurity Concerns

“Small businesses are at the forefront of our ongoing digital revolution, and this is because small businesses have the agility and flexibility to create new products and to capitalize on advances in technology,” said Matthew Olsen, president of IronNet Cybersecurity. “With these advances in tech, there has been a related and really alarming trend in the scope and impact of cyberattacks.”

“The FBI has already determined that foreign state actors pose a serious cyber threat to the telecommunications supply chain. It’s also clear that many foreign nations are responsible for direct cyberattacks on the United States,” Chabot said.

Olsen added that the intelligence community has expressed strong concerns about government or business having any involvement with the Chinese companies.

“That concern certainly emanates out from those core intelligence systems to encompass small businesses. Because of the nature of our networks and how closely they are linked, a threat even at a small business can pose a national security threat to the country,” Olsen said. “I would take seriously the advice of the intelligence community that people should not use ZTE products.”

Recent