The final cost estimates are on track with earlier warnings the FCC made in February and June.
The head of the U.S. Federal Communications Commission (FCC) reminded Congress again last week that the $1.9 billion Congress appropriated for the “rip and replace” program targeting the removal of some Chinese vendors’ equipment from domestic networks is drastically insufficient. Without more money, the FCC will only pay prioritized carriers who qualify for the program about 40 cents on the dollar, compared to what they’ve actually requested.
FCC Chairwoman Jessica Rosenworcel explained the details in a letter presented Friday to Senator Maria Cantwell (D-WA), who chairs the Senate Committee on Commerce, Science and Transportation. Rosenworcel explained details the FCC had outlined in broad strokes beginning earlier this year.
The Secure and Trusted Communications Networks Act, enacted in 2020, sought to eliminate the use of American communication network infrastructure manufactured by untrusted suppliers – Chinese telecom equipment manufacturers Huawei and ZTE were both singled out. Congress authorized a $1.9 billion reimbursement program aimed at small and rural carriers who applied for assistance. That figure has been far outstripped by $5.6 billion in eligible requests.
The FCC first released a list of 162 eligible applicants in February, with the warning that providers had three times the original budgeted amount. The FCC says several factors caused the rise in reimbursement requests: That started with a decision to expand the program to include providers servicing up to 10 million subscribers, up from 2 million. Inflation and supply chain constraints have also ballooned costs. What’s more, the fund now requires ripping and replacement work to be done within a year, requiring a signifcant premium for an already challenging labor market. What’s more, the preliminary cost estimates ascertained in the original study didn’t actually account for the full range of carrier costs associated with reimbursement, as required by the final legislation.
All told, said Rosenworcel, there’s a $3.08 billion shortfall in the rip and replace program funding. Without it, the FCC plans to apply the prioritization scheme Congress already specified, which puts service providers with 2 million or fewer customers at the front of the line. But it will also prorate reimbursement funds to 39.5% of their demand, far short of requests.
“The agency has now completed its review of the applications and the amended applications submitted in the Reimbursement Program. We are providing the final cost estimates based on the prioritization scheme set forth in the CAA. Under this scheme, the law allocates funding first to approved applicants that have 2,000,000 or fewer customers, then to approved applications from accredited public or private non-commercial educational institutions providing their own facilities-based educational broadband services and from health care providers and libraries providing advanced communications services, and finally to any remaining approved applicants,” Rosenworcel said in the letter.
That puts small carriers in jeopardy – a situation the Competitive Carriers Association (CCA) has repeatedly warned against. Without government funding, some will small carriers face insurmountable capital costs. And unless they replace that gear, they run the risk of losing Universal Service Fund (USF) eligibility. In a statement, CCA President Steven K. Berry thanked the FCC, but said that it’s clear that the funding situation needs to be corrected.
“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,” said Berry.
The FCC’s Rosenworcel earlier this week proposed looking into a boost to broadband minimum speeds from 25 Mbps download to 100, and from 3 Mbps upload to 20, the first change to the FCC’s broadband standard since 2015. That update would at least bring the FCC in line with Congress. The $65 billion in broadband funding passed by Congress, now mostly under the aegis of the FCC, already requires download speeds of at least 100 Mbps and 20 Mbps upload.
Her proposal would also “set a separate national goal of 1 Gbps/500 Mbps for the future” and also seeks to have the FCC take into consideration “affordability, adoption, availability, and equitable access as part of its determination as to whether broadband is being deployed in a reasonable and timely fashion.”