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

The FCC on Monday released close to $2 billion to dozens of small US telecom operators. The agency's goal is to eliminate Huawei and ZTE equipment from US networks.

However, the agency acknowledged the amount being released won't be enough.

"After review of the submitted applications, the [FCC's Wireline Competition] Bureau has determined that Priority 1 applicants have submitted approximately $4,640,284,672 in cost estimates that are reasonable and supported," the agency wrote in a new filing. "Because available funding is substantially less than that amount, the commission rules require that allocations to Priority 1 applicants be prorated on an equal basis. The pro-rata factor applied to those allocations is approximately 39%."

FCC Chairwoman Jessica Rosenworcel outlined the problem in a letter to Congress late last week. She acknowledged that Congress has already allocated $1.9 billion for the agency's "rip and replace" program, a figure based on initial FCC estimates.

Counting the cost

But Rosenworcel said the FCC subsequently found out that much, much more is needed. Specifically, she said that more companies asked for money than the FCC initially expected, and that the agency didn't anticipate the full cost of removing the equipment. Also: "Providers have reported increased costs since the program was funded due to supply chain constraints, inflation, and the need to complete their projects within the ... one-year deadline," Rosenworcel's letter explained.

Rosenworcel has been hinting that the FCC might need more money to fully finance the removal of equipment from Huawei and ZTE from US networks. But she said the agency completed its final review of the situation just last week, and determined that the full program will require exactly $4.98 billion, or roughly $3.08 billion more than Congress has allocated. That funding will be allocated across two basic groups of companies: those with less than 2 million customers (the so-called "Priority 1 applicants") and companies with more than 2 million customers.

There's only one company in the program that counts more than 2 million customers – Lumen Technologies – and it won't get any of the $270 million it requested unless Congress allocates more funding.

Rallying support

Organizations behind those seeking rip and replace funds weighed in on the funding shortfall and how the issue might be addressed.

"It is clear that the funding currently in the program still falls far short of the support needed by affected carriers," CCA CEO Steven Berry said in a statement distributed to the media. CCA represents some of the companies asking for FCC funding. "Adequate funding must be provided for the program, and CCA looks forward to continued work with policymakers to ensure this goal is achieved."

"Now we are still standing here wondering where the remaining monies will come from and when they will be available to complete the mission while continuing to face the pressures of supporting the increasingly important broadband connectivity needs of our customers. The quantity and quality of coverage, including security, is just as important and urgent across my licensed footprint in west central Alabama as everywhere else in rural America and its past time to get on with the work of addressing it all," said John Nettles, president of the Rural Wireless Association (RWA), a trade association that also represents some of the companies seeking FCC money. Nettles is also the CEO of Pine Belt Cellular, a small wireless network operator that is asking for around $75 million from the FCC's rip and replace program.

The FCC's rip and replace program aims to reimburse US network operators for the costs involved in removing "unsecure" equipment – gear from Chinese vendors ZTE and Huawei – from their networks. The goal is to prevent Chinese spies from gaining access to US networks; however, the two Chinese vendors continue to argue their equipment cannot be used for such espionage.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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