News and Commentary

China Set To Profit Off Of Private Sale Of U.S. Taxpayer-Owned Satellite Spectrum

In recent months there have been multiple headlines about the national security threat that Chinese telecom giant Huawei poses to the United States with its rapid expansion and significant control of the 5G market. However, one aspect of the story that many are not paying attention to is the satellite spectrum.

A coalition of foreign satellite companies is trying to convince the Federal Communications Commission (FCC) to free up the 3.7 to 4.2 GHz Band (mid-band, or “C-band”) for 5G internet services. The companies — Intelsat, SES, Eutelsat, and Telesat — are all 100% foreign owned and belong to a group called the C-band Alliance (CBA), which they have complete control of.

The CBA wants the FCC to allow for the private sale of the C-band spectrum, which they claim is a market-based approach.

However, critics note that “such a plan would be a scam against taxpayers since the spectrum was originally given to the satellite companies for free and [the foreign-owned companies] now are trying to monetize that bandwidth for their own profits,” according to investigative reporter Johnny Kampis.

What the CBA wants is so controversial that both Republicans and Democrats have come out against it.

Senator John Kennedy (R-LA) said last month: “Luxembourg shouldn’t reap huge profits at the expense of Louisianans. A multi-billion dollar, closed-door spectrum deal would mostly benefit foreign-owned satellite companies. The C-Band needs to be put up for public auction.”

Rep. Mike Doyle (D-PA), who chairs the House Energy and Commerce Communications and Technology Subcommittee, said last month: “I think we have to ask ourselves: why should the FCC allow a group of foreign satellite providers to walk away with potentially tens of billions of dollars that could be used to solve our own country’s broadband needs?”

One aspect of the story that has not been reported on is how China — which is widely considered to be the greatest national security threat facing the United States — would profit off of the private sale.

Currently, the American Enterprise Institute (AEI) and The Heritage Foundation report that China invests more in the U.S. than they do in any other country. The China Investment Corporation (CIC), which is a sovereign investment fund of the ruling Chinese Communist Party (CCP), is one of the largest owners of Eutelsat — which is part of the CBA and would profit at the expense of American taxpayers.

A previous CRS Report for Congress noted that “the CIC reports directly to China’s State Council, conferring it with the equivalent standing of a ministry, and the State Council’s leader.”

Critics argue that the national security threat that the U.S. faces from China if China gains partial ownership in America’s satellite spectrum is that it could fall victim to China’s strategy of gaining influence over its enemies by buying up massive stakes in ownership in companies that have influence over those enemies.

The tactic, known as “Debt-Trap” diplomacy, has drawn criticism from U.S. Senators, Secretary of State Mike Pompeo, and Treasury Secretary Steven Mnuchin.

Last year, the Council on Foreign Relations (CFR) reported:

Lawmakers and security officials have become increasingly concerned about the growth of Chinese investments in U.S. companies, which have totaled more than $100 billion over the past five years. The Trump administration has decried the Made in China 2025 industrial policy, in which Beijing plans to leverage Chinese investment in foreign technology firms to quickly develop China’s own high-tech manufacturing sector. In 2018, U.S. intelligence agencies said that China’s targeted acquisitions of U.S. firms constitute an “unprecedented threat” to the United States.

In response, CFIUS has expanded its efforts. In 2016, the agency broadened its review process to apply more oversight to so-called non-notified transactions—that is, deals that had not been registered with the agency.

In 2018, Congress passed—and President Donald J. Trump signed—the Foreign Investment Risk Review Modernization Act (FIRRMA), which many experts say is the most significant overhaul of the agency’s powers since 1988. FIRRMA allows CFIUS to review a wider range of transactions, including any “non-passive” investment in U.S. firms involved in critical technology or other sensitive sectors. It also lengthens the review period, gives CFIUS greater leeway to suspend transactions, increases funding and staffing for the agency, and mandates a separate process to review the export of sensitive U.S. technologies.

CFR noted that while the legislation did not specifically name China, one of its authors, Sen. John Cornyn (R-TX), has made it a point to specifically highlight the threat that China poses to the U.S.

“China has weaponized investment in an attempt to vacuum up our advanced technologies and simultaneously undermine our defense industrial base,” Cornyn said. “As it acquires U.S. firms, and technology, and intellectual property, as well as the know-how to put it to use, the risk is that the Chinese government, which has its tentacles not just in state-owned Chinese companies, but also in so-called private Chinese firms, that it will get its hands on these capabilities and use them against us.”

“China exploits loopholes in our existing safeguards to acquire sensitive, cutting-edge technology and then turns this technology against us to undermine our military advantage,” Cornyn added in a statement. “Modernizing and strengthening the CFIUS review process is a matter of national security, and I was glad my legislation was included in this important bill.”

Senator Marco Rubio (R-FL) has also sounded the alarm on the threat that China poses to the U.S.

“The biggest issue of our time, in my view and, I think, in the view of most of the members of this committee and I would venture to guess, most of the members of this panel, is China and the risk they pose,” Rubio said last year. “I’m not sure in the 240-some-odd-year history of this nation we’ve ever faced a competitor and potential adversary of this scale, scope, and capacity.”

Rubio added: “The tools they use are everything from hacking into companies and critical infrastructure and defense contractors to using our immigration system against us, to even our universities.”

FBI Director Christopher Wray also warned last year about the growing national security threat coming from China.

“The reality is that the Chinese have turned more and more to more creative avenues, using nontraditional collectors, which I think we in the intelligence community recognize, but I think the private sector is not used to spotting,” Wray said.