GigaOM Pro

The U.S. House of Representatives Intelligence Committee issued a report today warning American telecoms to avoid doing business with Huawei and ZTE, claiming the China-based vendors pose a security threat. The report follows an 11-month investigation.

The committee stopped short of urging a boycott of the two companies, and said its warning pertains only to equipment used to process data on a large scale rather than handsets or other devices. Huawei fired back by saying the committee failed to provide clear information or evidence, and essentially claiming that its worldwide presence is evidence of innocence.

Amazingly, though, the report came the same day Cisco said it will no longer do business with ZTE following an internal investigation into allegations that the Chinese company sold Cisco gear to Iran. That investigation was sparked by Reuters stories documenting how ZTE had sold banned equipment from Cisco and other vendors to Iran’s biggest telecom.

And the report is particularly bad news for Huawei, which is among the world’s largest vendors of LTE equipment. Huawei has lobbied heavily to gain a foothold in the U.S., hiring seven firms to snuggle up to U.S. lawmakers. The report not only underscores the futility of those efforts, it is likely to attract the attention of telecom operators overseas.