FCC warns of 'significant consequences' without more rip-and-replace funds

FCC Chairwoman Jessica Rosenworcel again stressed the "urgent need" for full funding of the "rip-and-replace" program, through which operators are reimbursed for removing and replacing wireless network equipment from Huawei and ZTE. In a letter to Congress, dated May 2, Rosenworcel updated lawmakers on the state of the funding shortfall and the potential for "significant consequences" as a result.

As a refresher, the 2019 Secure and Trusted Communications Networks Act appropriated $1.9 billion for operators to remove network equipment from Chinese vendors Huawei and ZTE, deemed insecure by the federal government. However, the FCC has since approved program applications citing "reasonable and supported" costs of $4.98 billion, representing a $3.08 billion funding shortfall.

Operators have been warning the FCC for the better part of two years that the available funding isn't enough, but both the FCC's and White House's efforts to get more money from Congress have thus far failed.

As Rosenworcel's letter explains, since the allocated funds exceed the amount of funds requested, the FCC in accordance with the law is first required to dole out funds to operators with 2 million or fewer customers. But the available funding still only covers 39.5% of those costs, and it leaves nothing for the "single applicant" with over 2 million customers, according to the FCC.

Related:US carriers to get 39% of what they want for FCC's 'rip and replace'

While current deadlines require approved program participants to remove insecure network equipment as early as May 29, 2024 (with deadlines ongoing through February 4, 2025), the FCC has been steadily reviewing and approving requests for extensions. "To date, the Bureau has granted 64 extensions of time—including 52 based in whole or in part on the funding shortfall," said Rosenworcel.

Consequences ahead

More funding-related extensions seem likely, based on the latest status updates.

"Most recently, 64 percent of the status updates filed in April 2024 indicated that the lack of full funding continues to be an obstacle to completing the permanent removal, replacement, and disposal of the covered communications equipment and services in recipients' networks. In fact, nearly 40 percent of the participants reported that they cannot complete the work required under the Reimbursement Program without additional government funding," added Rosenworcel in her letter to Congress.

What's more, those companies also warn of "significant consequences" if full funding isn't granted, including shutting down their mobile networks.

"Because Reimbursement Program recipients serve many rural and remote areas of the country where they may be the only mobile broadband service provider, a shutdown of all or part of their networks could eliminate the only provider in some regions," said Rosenworcel.

Related:The Huawei 'rip and replace' program is a mess, argues SI Wireless

In addition to the threat of networks shutting down, the FCC chairwoman also cited ongoing "national security concerns" as well as "network compatibility issues associated with piecemeal replacement of covered equipment" as other possible problems.

As of the FCC's latest report to Congress on the program, released in January 2024, only five funding recipients had successfully removed and disposed of their Huawei/ZTE equipment. The next progress report to Congress is due this summer.

Possible solution

While the White House made a push last year for Congress to include $3 billion for rip-and-replace in its spending packages for 2024, that call – along with calls to fund the Affordable Connectivity Program (ACP) – have been unsuccessful.

Lawmakers have introduced bills to fund both programs, but neither bill has been moved to a vote.

One possible path forward under consideration in the Senate is to include funding for the rip-and-replace program in a bill to reauthorize the FCC's lapsed spectrum auction authority. As per an amendment, the legislation would increase the available expenditure for the rip-and-replace program to $4.98 billion from $1.9 billion.

Related:Biden requests $6B for ACP, $3B for 'rip and replace'

The Senate Commerce Committee was supposed to vote on that bill during a markup session on May 1, but that action was postponed.

However, a new effort has emerged this week: On Tuesday evening, May 7, a bipartisan group of senators introduced an amendment to the 2024 Federal Aviation Administration (FAA) Reauthorization Act that would provide $3 billion for rip-and-replace (as well as $6 billion for ACP). That amendment will still need Senate approval to attach it to the must-pass FAA legislation.