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Chinese smartphone maker ZTE Corp.’s US troubles took a turn for the worse, after a telecoms regulator put forward new policies that could potentially harm the company’s business, while a supply ban threatens to cut off the Android operating system (OS) at the center of its devices.  

After being caught illegally shipping US equipments to Iran, the US Commerce Department on Monday decided to subject ZTE to a seven-year ban of the export of the country’s goods for use in its products.

A source familiar with the matter stated that the Commerce Department’s decision might mean the end of Shenzhen-based firm’s license to utilize tech group Google LLC’s Android OS.

Google parent Alphabet Inc. and ZTE have been discussing the ban, but the two companies were still mostly uncertain about what to do with the telecom equipment group’s use of the Android OS as of yet.

It was not specified what Android software exactly Google is prohibited from selling to ZTE. Android OS is an open source, which means that the smartphone maker could still use the operating system as well as Android's source code to build a modified OS.

However, analysts said that would complicate the sale of its smartphones outside China, since the company’s devices would not be able to access applications from the Google Play Store, if the ban also includes Google's Mobile Services suite of apps.

Data from a research firm showed that ZTE shipped 46.4 million smartphones in 2017. Research analyst Neil Shah said barring the firm from using Android would be a bigger blow.

The two companies have not commented on the matter.   

FCC Proposes New Policies for US Telecom Security Threats

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Following the ban, the Federal Communications Commission (FCC) suggested new rules about restricting government programs from buying from companies that may jeopardize national security and integrity of US communications networks, or their supply chains.

The proposal is expected to be finalized this year, and is likely to affect both ZTE and the world’s third-largest smartphone maker Huawei Technologies Co. Ltd.

It also threatens to fuel tensions further between the US and China. The two countries’ tit-for-tat tariffs in recent weeks have raised the possibility of a global trade war that could damage global supply chains and business investment plans.

FCC’s new policies seem to be another part of a US plan to keep the two smartphone makers from acquiring considerably large amount of market share in the country.

FCC believe the restrictions would prevent money from the $8.5 billion FCC Universal Service Fund, which includes subsidies for telephone service to poor and rural areas, from being used on products or services from businesses or countries which may put the security of US telecoms networks at risk.

FCC Chairman Ajit Pai said hidden backdoors to their networks in routers, switches, and other network equipment can allow other countries to inject viruses as well as other malware to steal Americans’ private data, spy on US companies, and more.

US Republican senators have also presented a regulation that would bar the government from purchasing or leasing telecoms equipment from ZTE or Huawei.

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