U.S. communications regulators have cut off government funding for equipment from two Chinese companies, citing security threats.
The Federal Communications Commission also proposed requiring companies that get government subsidies to rip out any equipment from Huawei and ZTE that they already have in place.
It's the latest action by the U.S. government against Chinese tech and telecom companies.
The FCC voted unanimously Friday to bar U.S. telecommunications providers from using government subsidies to buy equipment from Huawei or ZTE. The FCC's order mostly affects small, rural companies, as larger U.S. carriers do not use equipment from those Chinese companies.
As for replacing existing equipment, The FCC is asking for comment on how to help rural telecoms financially. Bills in Congress have proposed setting $700 million to $1 billion aside.
A trade group for small rural wireless carriers has said that it would cost up to $1 billion for its dozen companies to replace their Huawei and ZTE equipment. It says that Huawei has 40 customers in the U.S. (Huawei is also a member of the trade group, the Rural Wireless Association.)
The group said Friday that it was "cautiously optimistic" that the FCC's approach would let its companies keep providing services to customers and give them funding to replace any banned equipment.
Huawei is the world's biggest supplier of telecom gear as well as a major cellphone manufacturer. The U.S. government has said that Huawei poses an espionage threat, but has presented no evidence of its equipment being used for spying by the Chinese government. The U.S. has been pressuring allies to ban Huawei from their networks and has restricted exports of U.S. technology to Huawei, though numerous loopholes have been exploited.
Huawei said in a statement Friday that the FCC order is unlawful and reiterated that there is no evidence it poses a security risk. The company said it has been deemed a security threat "based on selective information, innuendo, and mistaken assumptions." It said that the FCC's actions will hurt connectivity for rural Americans.
ZTE did not respond to requests for comment Friday. ZTE has also denied that China uses its products for spying.
A congressional report in 2012 labeled both Chinese companies as security risks.
Commissioner Jessica Rosenworcel, a Democrat, said the FCC's move Friday was a good one, but took too long and did not go far enough. She said there needs to be a "coordinated national plan" for securing next-generation cellular networks, known as 5G.