US probing China Telecom, China Mobile over internet, cloud risks

China Mobile

25/06/2024 13:25

(Repeats June 24 story with no change to text)
    By Alexandra Alper
       WASHINGTON, June 24 (Reuters) - The Biden administration
is investigating China Mobile, China Telecom and China Unicom
over concerns the firms could exploit access to American data
through their U.S. cloud and internet businesses by providing it
to Beijing, three sources familiar with the matter said. 
    
  
The companies still have a small presence in the United States,
for example, providing cloud services and routing wholesale U.S.
internet traffic. That gives them access to Americans' data even
after telecom regulators barred them from providing telephone
and retail internet services in the United States.
    The Chinese companies and their U.S.-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. 
    Reuters found no evidence the companies intentionally
provided sensitive U.S. data to the Chinese government or
committed any other type of wrongdoing.
The investigation is the latest effort by Washington to prevent
Beijing from exploiting Chinese firms' access to U.S. data to
harm companies, Americans or national security, as part of a
deepening tech war between the geopolitical rivals. It shows the
administration is trying to shut down all remaining avenues for
Chinese companies already targeted by Washington to obtain U.S.
data.
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 U.S. 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. 
    Blocking key transactions, in turn, could degrade the
Chinese firms' ability to offer competitive American-facing
cloud and internet services to global customers, crippling their
remaining U.S. businesses, experts and sources said. 
    "They are our chief global adversary and they are very
sophisticated," said Doug Madory, an internet routing expert at
internet analysis firm Kentik. "I think (U.S. regulators) would
not feel like they were doing their job if they weren't trying
to shore up every risk."
     
    ROUTING THROUGH CHINA 
    China Telecom, China Mobile and China Unicom have long been
in Washington's crosshairs. The FCC denied China Mobile's
application to provide telephone service in 2019 and revoked
China Telecom and China Unicom's licenses to do the same in 2021
and 2022 respectively. In April, the FCC went further and barred
the companies from providing broadband service. A spokesman for
the FCC said the agency stands by its concerns. 
One factor in the FCC's decision was a 2020 report from other
U.S. government agencies that recommended revoking China
Telecom's license to provide U.S. 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.
    "China Telecom's U.S. operations... provide Chinese
government-sponsored actors with openings to disrupt and
misroute U.S. data and communications traffic," authorities said
at the time.
    
  
     The telecoms company sought to reverse the FCC decision,
but a U.S. 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."
     
  
    ACCESS POINTS, CLOUD UNDER SCRUTINY
    The Chinese telecoms companies' reach extends deep inside
the U.S. internet infrastructure.
    According to its website, China Telecom has 8 American
Points of Presence (PoPs) that sit at internet exchange points,
which allow large-scale networks to connect to each other and
share routing information.
    China Telecom did not respond to requests for comment about
its U.S. based PoPs.
    According to the FCC, there are "serious national security
and law enforcement risks" posed by PoPs when operated by firms
that pose a national security risk. In cases where China
Telecom's PoPs reside in internet exchange points, the company
"can potentially access and/or manipulate data where it is on
the preferred path for U.S. customer traffic," the FCC said in
April.
Bill Woodcock, executive director of Packet Clearing House, the
intergovernmental treaty organization which is responsible for
the security of critical Internet infrastructure, said traffic
flowing through these points would be vulnerable to metadata
analysis, which can capture key information about the data's
origin, destination, size and timing of delivery. They also
might allow for deep packet inspection, where parties can
glimpse the data's contents, and even decryption. 
Commerce investigators are also probing the companies' U.S.
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. 
Regulators fear that the companies could access personal
information and intellectual property stored in their clouds and
provide it to the Chinese government or disrupt Americans'
access to it, two of the sources said. 
Commerce department officials are particularly concerned about
one data center that is part owned by China Mobile in
California's Silicon Valley, according to one of the sources. 
    China Mobile did not respond to requests for comment about
the data center.
     Reuters could not determine the reason for the government's
specific interest in China Mobile's data center, but ownership
of one provides greater opportunity to mishandle client data,
according to Bert Hubert, a Dutch cloud computing expert and
former member of a board that regulates Dutch Intelligence and
security agencies. 
He noted that ownership would make it easier to meddle with
clients' servers at night, for example, by installing backdoors
to enable remote access or bypass encryption. Those actions
would be much tougher in a data center with strict security
policies where the company merely leases space.  
    "If you have your own data center you have your own unique
piece of China within the U.S.," he said.
     

(Reporting by Alexandra Alper; Additional reporting by Casey
Hall  Editing by Chris Sanders and Anna Driver)
((mailto:Chris.Sanders@thomsonreuters.com; +1 202-558-8254;
Reuters Messaging: rm://chris.sanders.reuters.com@reuters.net/))