Appropriations CR Seen Likeliest Vehicle for Fixing Rip and Replace Funding Shortfall

Backers of a bid to fully fund the FCC’s Secure and Trusted Communications Networks Reimbursement Program believe appropriations legislation, including a likely continuing resolution to extend federal payments past Sept. 30, is the most viable vehicle for formally allocating the additional money, due to concerns about delayed action on the House-passed (see 2207280052) Spectrum Innovation Act (HR-7624). Senate Commerce Committee leaders are grappling during the August recess with how to respond to HR-7624, which would allocate some proceeds from a proposed auction of the 3.1-3.45 GHz band for rip and replace reimbursements, given disagreements on spectrum policy priorities (see 2208090001).

Communications sector entities are having “active” and “encouraging discussions” with aides to Senate Commerce Chair Maria Cantwell, D-Wash., and ranking member Roger Wicker, R-Miss., on potential alternative legislation to address rip and replace funding, an industry lobbyist said. Consultations only started substantially after FCC Chairwoman Jessica Rosenworcel told Congress in July the commission needs an additional $3.08 billion to fully satisfy rip and replace participants’ reimbursement requests (see 2207150067), the lobbyist said. Delayed receipt of that figure “increased the urgency” of talks during the August recess, lobbyists said.

Discussions have explored the Senate's FY 2023 National Defense Authorization Act version (S-4543) as one potential vehicle, but either a CR or an omnibus appropriations package would be a far more feasible alternative, a telecom lobbyist said. Several officials noted Congress reached a deal to pass the Chips and Science Act (2207280060), which appropriated $52 billion in subsidies to encourage U.S.-based semiconductor manufacturing, more than 18 months after enacting the Creating Helpful Incentives to Produce Semiconductors (Chips) for America Act via the FY 2021 NDAA to authorize the aid.

Senate Intelligence Committee Vice Chairman Marco Rubio, R-Fla., told us he’s among those who would back using the NDAA to fill the rip and replace funding gap, but “there are multiple options” available. “Any end-of-year funding package” or CR would also work, he said. Rubio unsuccessfully tried to attach an amendment to the Chips and Science Act that would have increased the amount of funding for the reimbursement program to match the FCC’s July $4.98 billion estimate (see 2207220052). “It’s going to take a little longer” than anticipated to achieve the program’s goals, in part because of the funding delay, Rubio said: “The problem is more extensive than most realized and, frankly, there’s a shortage of replacement equipment.”

Cantwell told reporters before the recess it’s still “premature to start talking about” seeking alternative funding avenues, citing the need to “get people on some common ground” on spectrum legislative priorities inherent in the debate on whether to proceed with HR-7624. “It’s easy to get bogged down on the budget stuff,” as happened during Congress’ prolonged debate on providing initial rip and replace funding, she said. Lawmakers originally appropriated $1.9 billion for the rip and replace program in the FY21 appropriations and COVID-19 aid omnibus law (see 2012210055), more than nine months after then-President Donald Trump first signed off on the Secure and Trusted Communications Networks Act.

Senate Communications Subcommittee ranking member John Thune, R-S.D., told us earlier this month he and other lawmakers haven’t settled on what legislation they want to use to appropriate the additional rip and replace money, but hopes there will be a clearer sense of the path forward when the chamber returns Sept. 6. An alternative vehicle likely “gets the dollars out there quickly,” he said: “If you wait based on proceeds from spectrum auctions, it’s going to take a lot longer. These companies are in the process right now of doing this rip and replace, so I think it’s really important to try and get the resources that were committed to that so they can finish” that work.

House Communications Subcommittee Chairman Mike Doyle, D-Pa., told us he wouldn’t oppose appropriating the additional program funding via another vehicle than his HR-7624, despite ongoing disagreements with Senate Commerce leaders over that bill. “We want” the FCC to be able to fully reimburse participating carriers, “so if there’s another vehicle to get it done,” that’s fine, he said: “I don’t think it’s being done with the idea of putting” HR-7624 “in jeopardy. People realize we need to get that equipment out and replaced.” Removing the reimbursement allocation from HR-7624 “wouldn’t affect” the balance of priorities House Commerce Committee leaders were trying to achieve, in part because it would still allocate up to $10 billion in 3.1-3.45 GHz auction proceeds for next-generation 911 tech upgrades, Doyle said.

Progress Soon?

The Competitive Carriers Association, Rural Wireless Association and others who have been actively seeking Hill action on the funding gap see signs of progress. “We recognize the immediate need for additional funds” for the rip and replace program, “so we support all potential funding vehicles to make sure the FCC has the resources they need to move that forward,” said CCA Senior Vice President-Legislative Affairs Tim Donovan. “As a national security emergency, we really need to get the funds to complete it successfully.” RWA is “feeling confident that this will be dealt with as too much is at risk of it isn’t,” said Counsel Carri Bennet.

Some “really tough discussions are taking place right now” among program participants given FCC plans to pro rate reimbursements absent additional money from Congress, Donovan told us. “It would be really unfortunate at a time when the focus is on expanding broadband,” if the funding “shortfall” resulted in some areas going “from having coverage to reduced or no coverage, affecting not only on their retail subscribers but anyone else that relies on their connectivity in rural areas,” including first responders.

“Using the CR seems to make sense, but I am indifferent to the legislative vehicle used as it seems to be a fairly delicate issue at the moment,” former FCC Commissioner Mike O’Rielly told us. “One thing that is certain -- Congress must address the rip and replace funding shortfall or be willing to absolve providers from the mandates.”

“Funding rip and replace has been a bipartisan priority for a few years,” emailed Cooley’s Robert McDowell, also a former FCC commissioner. “In the next few weeks there will be several ‘moving vehicles’ that could provide an opportunity for a rip and replace amendment,” he said: “While some may look for a ‘pay-for,’ the trend lines in Congress thus far have been to not worry so much about fiscal integrity anymore." A "rip and replace bill that could be sold as being good for national security and rural America" could "be a win-win scenario for both parties leading up to the midterms," McDowell said.

New Street’s Blair Levin expects Congress to fully fund the program. “When discussing Congress, inaction is the default bet, but here there is no obvious opposition and lots of reasons for a bipartisan coalition to support the effort,” he said. “Congress needs to be serious about providing the funding” to address “a well-identified national security risk,” said Recon Analytics’ Roger Entner. The NDAA “makes the most sense” as a vehicle since it’s a “must pass” measure, he said.

'Find the Money'

“It’s smart to look at an alternative” due to concerns that the amount of potential 3.1-3.45 GHz auction proceeds won’t be enough to pay for the additional rip and replace money because HR-7624 would prioritize allocating revenue to incumbent relocation costs and $16 billion for deficit reduction (see 2207120079), said New America Open Technology Institute Wireless Future Program Director Michael Calabrese. “Getting the funding from auctions is not going to be a near-term proposition because it will probably be a few years before there’s an auction large enough to provide that money.” He doesn’t “think there’s many wireless ISPs and others who can wait several years” to get reimbursed, “so there’s going to be some rural and small-town areas that lose that service.”

Fully funding reimbursements “is obviously an important objective on its own,” said Public Knowledge Government Affairs Director Greg Guice. “There’s a lot of systems, particularly out in places like Colorado, that have Huawei and ZTE equipment,” so “it’s a policy that needs to be addressed.” Congress “is going to find the money” somehow, he said: “If they can find it somewhere else” besides enacting HR-7624, “that’s great. If not, we’re supportive of having auction proceeds go to facilitate that” along with “other public interest objectives.”

"Many providers, especially smaller, local firms, are really struggling and the costs from rip-and-replace can easily put them in the red,” said American Action Forum Technology and Innovation Policy Director Jeffrey Westling. “If enough of these providers need” rip and replace funds “to stay afloat and put pressure on their local representatives, Congress may want to get this done as soon as possible.” A CR at the end of September or a larger funding package at the end of the year are options, as is the NDAA, he said: “Keep an eye out on a spectrum reauthorization bill that will hopefully get done in the next few weeks.”

Rip and replace has been “a lingering issue for a while, but Congress has had its focus on a number of high-profile bills in recent weeks,” said Information Technology and Innovation Foundation Broadband and Spectrum Policy Director Joe Kane: “There should now be time to focus on the details of … important but less headline-catching issues.”

“I'm inclined to agree that if Congress does provide additional funding it would likely happen as part of a CR," but the NDAA “could be an alternative,” said R Street Institute Technology Fellow Jonathan Cannon. “The funding is critical, and without filling in the shortfall, we're stuck with equipment or small carriers depending on these resources to make up for reinvestment on broadband infrastructure.”