JFK Berlin 230Hu Xijin, editor of government-run Global Times, wrote "We are all ZTE tonight," echoing Jack Kennedy to support the 80,000 workers of ZTE. “Two thousand years ago, the proudest boast was ‘Civis Romanus sum.' Today, in the world of freedom, the proudest boast is ‘Ich bin ein Berliner!’ ” Lily Kou of the Guardian reports a strong backlash in China to the U.S. Government total ban on ZTE.

The ZTE ruling portends that the United States government could shut down at will virtually any phone or telecom supplier in the world. I confirmed with Commerce that the decree covers software and technology. Reuters reported that Google may have to cut off Android apps, destroying ZTE's phone business, which ships 40,000,000 units a year. Qualcomm & Broadcom can't sell chips to ZTE, probably a billion dollars a year. 

Every manufacturer outside the United States has to fear similar U.S. action, not just the Chinese. For example, Samsung could be affected if the U.S. wanted to punish South Korea for making a separate peace with the North. 

Any sensible company will immediately start researching how to design products without any U.S. content. The Chinese are already spending $100B to build memory chips. They've just promised to up the government spending on 5G. 

The cost to the U.S. over a few years would be tens of billions if U.S. components were widely eliminated. 

Qualcomm and Broadcom have committed to license all their patents in standards on "reasonable and non-discriminatory terms." The U.S. government has now ordered them otherwise. Disputes like this could destroy the entire standards process.

China now is responding with warnings, minor tariffs, and speeding up "Made in China." They could require Huawei and ZTE to use their thousands of patents to destroy American companies, although that's not yet on the table. ZTE and Huawei were #1 and #2 in worldwide patents in 2016.

Trump and his people clearly have no idea about the dangers.

Here is the quote from Weibo (thank you, Ms. Kuo,) the key part of the order, and the Commerce Department release. 

The quote from Global Times, from Weibo in Google translation.

I just had a phone call with a friend of ZTE. I was very impressed. ZTE may have made mistakes, but it is very sincere in its attitude with the US side. The U.S. side has started to use ZTE and is trying to knock down China’s leading 5G momentum. The United States is afraid and they are desperate. ZTE and Huawei made great contributions to the development of China's telecommunications industry. When the United States sold program-controlled switches to China, how much money each of us earned! Today is by no means the only time that China can only let the U.S. side annihilate its bare hands. China spends more than 200 billion U.S. dollars a year to buy chips. Let us take up a significant portion of the world’s largest market to support our chip research and development. We will have some difficulties, but these difficulties are even more difficult with those experienced by the Republic. It's embarrassing to compare. Chinese society must support ZTE and Huawei. ZTE itself should also be more brave, more aggressive, and must not fall. Pay tribute to the 80,000 employees of ZTE. Lao Hu and the Global Times staff are all ZTEs tonight!

 ========================

IT IS THEREFORE ORDERED:

First, from the date of this Order until March 13, 2025, ZTE Corporation ... may not, directly or indirectly, participate in any way in any transaction involving any commodity, software or technology (hereinafter collectively referred to as "item") exported or to be exported from the United States. ...

Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.

SECOND, no person may, directly or indirectly, do any of the following: A. Export or reexport to or on behalf of a Denied Person any item subject to the Regulations; B. Take any action that facil itates the acquisition or attempted acquisition by a Denied Person ofthe ownership, possession, or control of any i tern subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby a Denied Person acquires or attempts to acquire such ownership, possession or control: C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from a Denied Person of any item subj ect to the Regulations that has been exported from the United States: (emphasis added.)

==========

Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government

Apr162018

Trade and InvestmentTrade Enforcement

Posted at 9:49 AM

FOR IMMEDIATE RELEASE

Monday, April 16, 2018

Office of Public Affairs

(202) 482-4883

This email address is being protected from spambots. You need JavaScript enabled to view it.

Secretary of Commerce Wilbur L. Ross, Jr. today announced that the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”).

In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. Government.  In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).

The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken.  ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation.” said Secretary of Commerce Ross.

These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.

“ZTE misled the Department of Commerce.  Instead of reprimanding ZTE staff and senior management, ZTE rewarded them.  This egregious behavior cannot be ignored,” Secretary Ross said.

Click HERE to view the denial order.

BACKGROUND:

Denial Orders are issued by the Assistant Secretary for Export Enforcement of the Bureau of Industry and Security, denying the export privileges of a company or individual. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

This is a regulatory action and is unrelated to any ongoing trade-related actions.

BIS is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items. The BIS Office of Export Enforcement detects, prevents, investigates and assists in the sanctioning of illegal exports of such items. For more information, please visit us at www.bis.doc.gov.

 

I just had a phone call with a friend of ZTE. I was very impressed. ZTE may have made mistakes, but it is very sincere in its attitude with the US side. The U.S. side has started to use ZTE and is trying to knock down China’s leading 5G momentum. The United States is afraid and they are desperate. ZTE and Huawei made great contributions to the development of China's telecommunications industry. When the United States sold program-controlled switches to China, how much money each of us earned! Today is by no means the only time that China can only let the U.S. side annihilate its bare hands. China spends more than 200 billion U.S. dollars a year to buy chips. Let us take up a significant portion of the world’s largest market to support our chip research and development. We will have some difficulties, but these difficulties are even more difficult with those experienced by the Republic. It's embarrassing to compare. Chinese society must support ZTE and Huawei. ZTE itself should also be more brave, more aggressive, and must not fall. Pay tribute to the 80,000 employees of ZTE. Lao Hu and the Global Times staff are all ZTEs tonight!

The world needs a good news source on Internet and telecom policy. I hope to create one. Catch a mistake? Email me please.  Dave Burstein

Latest

Professor Noam's "Many Internets" http://bit.ly/ManyNets

Until about 2010, everyone agreed the Net was a "network of networks," not a monolithic entity. There was a central authority, ICANN, keeping track of domain names, but that was a minor administrative function.
Columbia Professor Noam suggests we might be better off accepting that some nations or groups might want to organize their networks differently. It's easy to see demand for an Internet with much more effective filters against material some think harmful to children. (Any 10 year old can easily find porn today. Many do.)
Internet translation is getting better very quickly. You might want an "Internet" that translates everything into your language. Google Chrome translation isn't perfect but I was able to research most of this story on Russian language sites. With a few more years progress, I might welcome an alternate that brings me everything in English, including caching for better performance.
De facto, Internet news is already split, as hundreds of millions only get their news from Facebook. Google AMP pages, including for news, also favor selected parts of the net
Centralizing the DNS doesn't prevent censorship, as the Chinese have demonstrated. There are many Jewish and Muslim fundamentalists who want to block what they consider blasphemy and limit free speech. See http://www.nytimes.com/2012/05/21/nyregion/ultra-orthodox-jews-hold-rally-on-internet-at-citi-field.html . More from Noam http://bit.ly/ManyNets

Russia Orders Alternate Root Internet System http://bit.ly/RussiaDNS
It's actually practical and not necessarily a problem.The Security Council of the Russian Federation, headed by Vladimir Putin, has ordered the "government to develop an independent internet infrastructure for BRICS nations, which would continue to work in the event of global internet malfunctions ... This system would be used by countries of the BRICS bloc – Brazil, Russia, India, China and South Africa." RT
Columbia University Professor Eli Noam and then ICANN CEO Fadi Chehadé have both said such a system is perfectly practical as long as there is robust interconnection.
Actually, the battle over ICANN and domain names is essentially symbolic. Managing the DNS is a relatively insignificant task, more clerical than governing. ICANN Chair Steve Crocker pointed out they had very little to do with policy.
Some will claim this is about blocking free speech but that's rhetoric. Russia doesn't need to fiddle with the DNS for censorship, as the Chinese have demonstrated. The wonders of the Internet will continue so long as the resulting nets" are robustly connected. The ICANN and U.S. policy goal should be to help create that system for interconnection.
I expect contentions that “The Russians are taking over our Internet” and “They are splitting the Internet.” The Internet is a “Network of Networks.” It is not a monolith so what would “splitting” it mean or do?
After the WCIT, China realized that ICANN and the DNS are side issues not worth bothering about. They have been building alternate institutions including the World Internet Summit in Wuzhan and the BRICs conferences.  The Chinese have put their main work where decisions that matter are made. Wireless standards are set by 3GPP, where nothing can be approved without China's consent.
The American battle at ITU is proving to be a historic mistake.
Why does Russia want an independent Internet?
They fear that Western sanctions on Russia could cripple the Russian Net. Communications minister, Nikolay Nikiforov, worries about, "a scenario where our esteemed partners would suddenly decide to disconnect us from the internet." I think that's highly unlikely but Nikiforov points out, “Recently, Russia is being addressed in a language of unilateral sanctions: first, our credit cards are being cut off; then the European Parliament says that they’ll disconnect us from SWIFT."
It makes sense for the Russians to be prepared for such a contingency as the Cold War has been warming up on both sides. "Britain's top military chief Air Chief Marshal Sir Stuart Peach just made headlines warning Russian subs "could CRIPPLE Britain by cutting undefended undersea internet cables." Much more http://bit.ly/RussiaDNS

ICANN Continues Excluding Russia & China From the Board http://bit.ly/CEOPromises
No wonder Russia wants an alternate root. Three years ago, ICANN CEO Fadi Chehadé promised "a seat at the table" to Chinese Premier Li. ICANN welched and this year added two more Americans.
Almost all the ICANN board is from the U.S. and close allies; only about 4 of the 18 board members are from countries on the other side of the North/South divide in Internet policy.  Claiming ICANN represents the Global Internet is inappropriate. China is 1/3rd of the Internet but has no representation on the board.
I know many of the board members. They are all basically honorable but generally share a strong opinion on North-South issues.
Larry Strickling of the U.S. government knew just what he was doing with the IANA transition. He handed over to a board with similar positions as the U.S. government.
"The system is unsustainable while it excludes half the world," I have been saying since 2012. More, including the transcript of Fadi's statements,http://bit.ly/CEOPromises

Sorry, Ajit Pai: Smaller Telcos Did Not Reduce Investment After NN Ruling http://bit.ly/SorryPai
Pai justifies his NN choice with the claim, "The impact has been particularly serious for smaller Internet service providers." #wrong (Actually, NN has minimal effects on investment, up or down, I’m convinced. Competition, new technology, customer demand and similar are far more important.)
The two largest suppliers to “smaller ISPs” saw sales go up. Adtran's sales the most recent nine months were $540M, up from $473M the year before. 2016 was $636M, 2015 $600M. Calix the last nine months sold $372M, up from $327M. The full year 2016 was $459M, up from $407M in 2015. Clearfield, a supplier of fiber optic gear, was up 8% in sales in the smaller ISPs.
There is nothing in the data from others that suggests an alternate trend. Anyone could have found this data in a few minutes from the company quarterly reports.
The results in larger companies are ambiguous. I can "prove" capex went up or went down by selecting the right data. The four largest companies' capex - two/thirds of the total - went up from $52.7B in 2015 to $55.7B in 2016. The result remains positive after making sensible adjustments for mergers and acquisitions. That's as close to "proving" that NN led to increased spending as the facts chosen to prove the opposite.
Actually, whether capex went up or down in 2016 tells us almost nothing about the choice on neutrality. Everyone knows a single datapoint could be random or due to other causes. Much more, including the source of the errors http://bit.ly/SorryPai

Elders Bearing Witness: Vint, Timbl, & Many More http://bit.ly/VintTim
Vint Cerf, Tim Berners-Lee, Steve Wozniak and more than a dozen true Internet pioneers wrote Congress to protect Neutrality. The best Congress money can buy didn't listen but I wanted to reproduce their letter.
I hope they are wrong believing "is an imminent threat to the Internet we worked so hard to create." My take is the impact will be moderate in the short run.
From the letter:
We are the pioneers and technologists who created and now operate the Internet, and some of the innovators and business people who, like many others, depend on it for our livelihood. ... The FCC’s proposed Order is based on a flawed and factually inaccurate understanding of Internet technology. These flaws and inaccuracies were documented in detail in a 43-page-long joint comment signed by over 200 of the most prominent Internet pioneers and engineers and submitted to the FCC on July 17, 2017.
Despite this comment, the FCC did not correct its misunderstandings, but instead premised the proposed Order on the very technical flaws the comment explained. The technically-incorrect proposed Order ... More, including the full list, http://bit.ly/VintTim