VERIZON Communications has dropped all plans to sell phones by Chinese manufacturer Huawei Technologies, including the new Mate 10 Pro, under pressure from the U.S. Government, according to sources familiar with the matter.

The move follows AT&T’s decision earlier last month not to introduce the Mate 10 Pro to the U.S. market. Huawei devices still work on both companies’ networks, but direct sales would have allowed them to reach more consumers than they can through third parties.

The U.S. Government’s move is creating a potential roadblock in the race between Verizon and AT&T to offer 5G, the next generation of super-fast mobile service. Huawei is pushing to be among the first to offer 5G-capable phone, but the device may be considered off-limits to U.S. carriers who are beginning to offer the next-generation service this year in a few cities.

5G networks are expected to be used in everything from phones to self-driving cars and artificial intelligence. U.S. security agencies and some lawmakers fear that 5G phones made by companies that may have close ties to the Chinese Government could pose a security risk.

The perceived threat has prompted the Trump administration to consider plans to not just keep Chinese equipment off the network, but also to nationalize the construction of a 5G system like the United States did with interstate highways in the 1950s. The idea was roundly blasted by industry leaders and lawmakers from both parties Monday.

Phones are just the latest lightning rod for a much broader conflict between the United States and China that dates back more than a decade.

Huawei came under U.S. scrutiny in 2003, when Cisco Systems Inc. sued its China-based rival, accusing it of stealing software code for its network routers. Huawei denied the charges and pulled some products. The company went on to dominate networking gear sales in China and is now the world’s top networking equipment supplier, even though it has made nearly zero inroads in the United States.

The incident fed perceptions that companies in China have certain advantages over the United States because of government support, cheap labor and a loose regard for intellectual property rights. Huawei has spent the past decade fighting those perceptions in an effort to gain access to U.S. market.

Huawei makes both handsets and network equipment. No major American carrier uses equipment from Huawei or another Chinese manufacturer, ZTE Corp., in its network. But Verizon, AT&T and smaller carriers T-Mobile US Inc. and Sprint Corp. all have been selling phones from the two suppliers in the United States for several years.

ZTE plans to introduce a 5G-capable device in the United States at year-end or in early 2019, said Cheng Lixin, chief executive officer of the company’s mobile device business. Thus far, ZTE hasn’t met the same level of pushback from the U.S. Government as Huawei has.

AT&T’s decision not to carry the Mate 10 Pro came amid political pressure and just weeks after U.S. regulators received a letter urging an investigation into China-made equipment. The Mate 10 Pro, which is aimed at being a direct rival to Apple Inc. and Samsung Electronics Co., is expected to have 5G versions available by 2019, according to a person familiar with the plans.

Shenzhen-based Huawei, China’s largest maker of telecommunications equipment, was founded in 1988 by former Chinese army officer Ren Zhengfei. Speaking at a CES event earlier this month, Richard Yu, Huawei’s consumer products chief, defended his company’s record. “We serve 170 countries, and for 30 years we’ve proven our quality and we’ve proven our privacy and security protection,” Yu said.

U.S. lawmakers in December asked Federal Communications Commission Chairman Ajit Pai to begin an investigation of Huawei’s plans to sell consumer gear in the United States, according to text of a congressional letter. The text cited concerns from intelligence committees in Congress, and didn’t list which lawmakers signed the letter.

In 2012, Huawei and ZTE landed on a U.S. blacklist. The House Intelligence Committee urged U.S. companies to steer clear of the Chinese manufacturers. Huawei suffered one of its biggest setbacks when it was the subject of two policy-recommendation letters that labeled the company a “spy threat.” The charges cost Huawei a contract to sell equipment to Sprint.

In 2013, as the United States was raising concerns about possible China-sponsored cyber espionage, National Security Agency contractor Edward Snowden leaked information about the U.S. Government’s own campaign. The Snowden leak pointed to spy work the United States was doing on Huawei and surveillance on foreign citizens.

(SD-Agencies)