- Congress passed a big defense bill that includes full funding for the rip and replace program
- The legislation includes a provision for an FCC auction of AWS-3 licenses
- The spectrum is attractive to carriers because they already own equipment that supports it
The U.S. wireless industry received a well-timed holiday dose of cheer with the passage of additional funds for rip and replace efforts and authority for the FCC to conduct an auction of mid-band spectrum. Smaller wireless operators in particular are relieved to finally get the rip and replace funds while carriers, both big and small, have been clamoring for more mid-band spectrum for 5G.
“It's a good day for wireless,” said Competitive Carriers Association (CCA) President and CEO Tim Donovan.
Full funding of the rip and replace program, formally known as the 2019 Secure and Trusted Communications Networks Reimbursement Program, came Wednesday when the Senate passed the National Defense Authorization Act (NDAA), which President Biden is expected to sign into law. The NDAA includes $3.08 billion for rip and replace.
Congress gave the FCC $1.9 billion for the program in December 2020 so that carriers could take out network equipment from Chinese vendors Huawei and ZTE and replace it with gear from trusted vendors. But Covid-related supply chain problems and inflation drove up the costs of administering the program, resulting in a shortfall.
Details to come
A lot of the details about exactly when and how carriers will receive the new funds need to be worked out, but Donovan expects the FCC will act quickly and that CCA members who qualify will get the funds early next year.
“They won’t get it all at once. The carriers will actually see the money when reimbursement requests are approved and those reimbursements are issued,” he said. “Think of it like an account that you can draw down from.”
It’s been a nerve-wracking few years for some of CCA’s members that started down the path of ripping out Chinese gear only to discover they didn’t have the funds to complete the job. One CEO reportedly pulled money from his personal retirement account to make his company’s payroll.
“There’s literally multi-generational businesses that were going to be closing their doors if the funding was not provided,” Donovan said.
Last week, when it looked like the full funding for rip and replace was actually going to happen, Pine Belt Wireless President John Nettles told Fierce that it was the best news he’s heard in several years. His family-owned business offers wired and wireless services, including 4G LTE voice and data for about 2,000 wireless customers in five counties in Alabama.
Assuming the funds are approved and allocated early in 2025, his company should have all of its ZTE network gear replaced by Nokia by this time next year. Passage of the bill “removes almost all of the critical uncertainties we’ve been having to fight with the past 24 months,” he said.
The auction of AWS-3 licenses
While previous attempts to pass rip and replace funding were unsuccessful, this go-round likely was made easier with the AWS-3 auction tied to it. In this case, AWS stands for Advanced Wireless Services – not Amazon Web Services – and includes a series of spectrum chunks between 1695 MHz and 2180 MHz.
The FCC doesn’t yet have its full auction authority – and plenty of folks are calling on Congress to grant it in the New Year – but the NDAA includes a one-time authorization for the FCC to conduct an AWS-3 auction within 18 months.
Funds from the Department of Treasury will be used to fund the rip and replace program, with the FCC then paying back the department with the proceeds from the auction, so carriers aren’t going to be waiting for the auction to happen before they get their funding.
Donovan said he expects a lot of interest from CCA members in bidding for the AWS-3 spectrum. The AWS-3 licenses are from two Dish Network-affiliated designated entities, Northstar Wireless and SNR Wireless, that had to forfeit their licenses. The licenses cover big markets like New York City and smaller and rural markets spread out across the country, making them attractive to both big and small carriers.
“I think there’ll be significant interest in it,” he said, in part because the spectrum is already supported in network and handset equipment. Some of it was used under Special Temporary Authorization (STA) authority during operators’ response to Covid.
In a note for investors, New Street Research analyst Blair Levin said he believes the licenses will be attractive to all three of the big U.S. carriers, but AT&T is the most likely to bid for the spectrum because it has less mid-band spectrum than the others.
It generally takes at least nine to 12 months from when the FCC begins work to commencing an auction, Levin said, and he expects incoming FCC Chair Brendan Carr will want to have an auction in his first year, putting the likely auction start date in the second half of 2025.