Lawmakers Eye Calls for More FCC Rip and Replace Reimbursement Money

Telecom-focused lawmakers told us they want more information before committing to pursue more money for additional funding for the FCC’s Secure and Trusted Communications Networks Reimbursement Program to repay U.S. carriers for removing from their networks equipment made by Huawei, ZTE and other companies deemed a national security risk. Eight major communications groups wrote the leaders of the House and Senate Appropriations committees earlier this month to press for additional “rip and replace” funding (see 2203030074).

Telecom groups seeking the additional rip and replace money were believed to be aiming for lawmakers to address the shortfall via the FY 2023 appropriations cycle or work on another measure rather than the FY 2022 talks that Congress just resolved last week, lobbyists said. The groups cited the FCC’s February report that participating companies’ reimbursement requests already totaled almost $5.6 billion, almost three times the $1.9 billion Congress allocated to the program via the FY 2021 appropriations and COVID-19 aid omnibus law (see 2202040066).

President Joe Biden signed off Friday on a continuing resolution (House Joint Resolution 75) to extend federal funding through Tuesday, the White House said. He’s expected to sign the FY22 omnibus appropriations package (HR-2471) that includes funding increases for the FCC, FTC, NTIA and other tech-related federal agencies (see 2203090068) this week, after Congress sends him the measure’s final language.

Both the FCC report on the reimbursement program and groups’ appeal to lawmakers came far too late in the FY22 cycle to have a conceivable chance of success, lobbyists said. Providers must report the extent to which their networks contain or use gear or services on the FCC’s “covered” list in an online FCC portal by May 5. The FCC is to act on the applications by June 15 (see 2202090031).

Lawmakers' Questions

“I’ve not heard” the issue of additional rip and replace funding “raised recently, but it’s a legitimate issue, and I’m happy to talk to people about that” as part of FY23 funding deliberations, said Senate Appropriations Financial Services Subcommittee Chairman Chris Van Hollen, D-Md.: “These are folks that we asked to rip out” suspect manufacturers’ equipment, so they need to be compensated. House Appropriations Financial Services Subcommittee Chairman Mike Quigley, D-Ill., and ranking member Steve Womack, R-Ark., didn’t comment.

“In my view there is” a need for Congress to give the FCC more money for the program, “but of course I’m not” a Senate Appropriations member, said Senate Commerce Committee ranking member Roger Wicker, R-Miss. “We need to get finished with rip and replace as quickly as possible. It is a serious issue and an imperative need” to ensure the security of U.S. communications infrastructure. Wicker was part of a group of senators who pushed in 2020 for “full funding” of the rip and replace program via the FY21 omnibus at a time when lawmakers were seeking to give the FCC smaller pots of money to start reimbursements (see 2012070066).

“We’re looking at” how to move forward on additional rip and replace funding because “we want to make sure this program succeeds” to its fullest, said House Communications Subcommittee Vice Chair Doris Matsui, D-Calif. “If they need more money, we’ll try to get something in” to either FY23 appropriations or another measure, but “we’ve wanted to see” how much higher the total value of reimbursement requests would be above the initial $1.9 billion tranche.

Other lawmakers told us they want to hear more about the telecom industry’s demonstration of need for more money before pushing for additional appropriations. The $5.6 billion figure the FCC reported in February “sounds a little high, but I’ll need to check into it further,” said Senate Commerce Chair Maria Cantwell, D-Wash. “I know there’s generally some interest” in providing more money to the program, but it’s not clear what an acceptable figure would be. “I’d have to look at that closer,” but “I’m a big supporter of rip and replace,” said Senate Communications Subcommittee ranking member John Thune, R-S.D. If the original $1.9 billion allocation “is not enough, I’m open to taking a look at what” the companies need.

“We haven’t been contacted by” the telecom companies about what their additional funding needs are going to be, so “I’m going to need them to come on in and tell us what they’re looking at,” said House Communications ranking member Bob Latta, R-Ohio. “We also haven’t heard from the FCC” on the additional funding need even though appropriators have. The issue may come up during the subcommittee’s planned March 31 FCC oversight hearing (see 2203080076), lobbyists told us.

'Drilling Down'

The FCC has received 180 reimbursement applications, but the number of applicants appears to be closer to 100, Rural Wireless Association Counsel Carri Bennet told us. “Because so much data had to be filed by each company, it wasn’t possible to include it all in one application so companies that had larger networks had to file multiple applications to list out all the equipment and services that needed to be itemized for funding,” she said: When providers submitted estimates to the FCC, they didn’t know what was involved in the reimbursement program “and most only priced for the equipment itself not for the amount of labor or for the destruction of the equipment.” The FCC “had not provided guidance on that until after the initial estimates had been supplied,” Bennet said: Inflation, supply-chain issues and rising labor costs are also driving costs up.

“The FCC is in the process of drilling down on the applications and sending out [requests for information] to the companies,” Bennet said: One question “is what caused the gap in the estimate and the final amount requested.” This “process will more than likely result in a lower amount being approved for some of the applicants by the June 15 deadline in which the FCC must determine how much each company is eligible to receive,” she said: Congress could appropriate money to cover the gap “with the understanding that any unused funds would revert back to the U.S. Treasury if unused by a certain date.”

The Competitive Carriers Association “is astutely focused on” the rip and replace program “and we are working closely with Congress to ensure its success,” emailed President Steve Berry. “The appropriated $1.9 billion is significantly lower than the gross cost estimate demand as reported by the FCC, and additional funds must be made available to properly secure the nation’s communications networks,” he said: “Affected carriers must have the assurance and resources to transition their networks with uninterrupted service to their customers, a mission that simply cannot be completed in many rural and high cost areas for a fraction of estimated costs.”

Absent further appropriations, "the FCC will be forced to prorate available funding using the prioritization process directed by Congress,” said Wireless Infrastructure Association President Jonathan Adelstein: “This will severely limit the FCC’s ability to complete its mission and leave some service providers unable to complete the removal and replacement of covered equipment and services, and could even force some smaller providers to shut down entirely.” Congress “must do its part to secure the advanced networks we rely on by ensuring the appropriate resources are available for wireless providers to transition to network equipment from trusted entities,” he said.

Dell’Oro Group reported Monday that Huawei continued to lead the world in supplying network gear in Q4. “Ongoing efforts by the U.S. government to curb the use of Huawei’s equipment is impacting the company’s position outside of China,” Dell’Oro said: “Even so, Huawei continued to lead the global market, underscoring its grip on the Chinese market, depth of its telecom portfolio, and resiliency with existing footprints.”