The Federal Communications Commission (FCC) has reviewed all the applications for the Huawei and ZTE rip and replace program and determined there is a $3.08 billion shortfall. Therefore, the initial reimbursements will only pay eligible service providers about 39.5% of their rip and replace costs.
The details were revealed in a letter sent from FCC Chairwoman Jessica Rosenworcel to Maria Cantwell, Chair of the Senate Committee on Commerce, Science and Transportation. Rosenworcel noted that Congress had allocated $1.9 billion to the program to replace untrusted telecom equipment from networks. But $4.98 billion of applications have come in.
The Secure and Trusted Communications Networks Reimbursement program offers assistance to service providers with 10 million or fewer customers.
The FCC first opened its filing window for the program on October, 2021. It has since provided regular updates to Congress. In February the FCC first notified Congress that initial demand for reimbursement program support was $5.6 billion.
In her letter to Cantwell, Rosenworcel explained that there are three reasons for the shortfall:
- The original Act was amended to expand the range of entities eligible to participate in the program;
- The preliminary cost estimates did not consider the full range of costs that were ultimately reimbursable under the law;
- Providers have reported increased costs since the program was funded due to supply chain constraints, inflation and the need to complete their projects within the Act’s one-year deadline.
On June 15, Rosenworcel provided an update disclosing that 122 of the 181 applications filed with the FCC were materially deficient, including because they lacked adequate cost estimates or sufficient supporting materials. The agency expedited its review of applications and completed its assessment on July 15, 2022.
In Rosenworcel’s letter she wrote, “Absent an additional appropriation, the Commission will apply the prioritization scheme Congress specified in the CAA.” The first prioritization group consists of service providers with 2 million or fewer customers. The FCC will prorate reimbursement funds equally to each eligible applicant in this group. The pro-rata factor for those allocations will be approximately 39.5% of demand.
CCA President & CEO Steven Berry said in a statement, “I thank the FCC for its continued work to advance the Secure and Trusted Networks Act Reimbursement Program. It is clear that the funding currently in the program still falls far short of the support needed by affected carriers. Today’s update is a call to action – impacted carriers must have appropriate resources to remove and replace untrusted network equipment without disrupting service or negatively impacting customers. Adequate funding must be provided for the program, and CCA looks forward to continued work with policymakers to ensure this goal is achieved.”
Berry has previously told Fierce that the shortfall puts smaller carriers in a tricky situation, where they may face large costs, themselves, for replacing the insecure equipment.