U.S. Huawei/ZTE replacement program short more than $3 billion: FCC

Having completed its review of the applications filed for the Secure and Trusted Communications Networks Reimbursement Program, which mandates that communications network operators remove and replace gear from Huawei and ZTE, the Federal Communications Commission (FCC) has determined that it needs $3.08 billion more than the $1.9 billion Congress has allotted to fully fund such actions (see "FCC sets opening of Huawei/ZTE equipment replacement program"). FCC Chairwoman Jessica Rosenworcel informed Congress in a letter to several members that if more funds aren’t forthcoming, only highest-priority applicants will receive funding -- and less than 40% of what they requested.

In the letter, Rosenworcel reminds the letter recipients – Senator Maria Cantwell, chair of the Senate Committee on Commerce, Science, and Transportation; Senator Roger Wicker, ranking member of that committee; Representative Cathy McMorris Rodgers, ranking member of the House Committee on Energy and Commerce; Representative Rosa DeLauro, chairwoman of the House Committee on Appropriations; Representative Kay Granger, ranking member of the House Committee on Appropriations; Senator Patrick J. Leahy, chairman of the Senate Committee on Appropriations; Senator Richard C. Shelby, ranking member of the Senate Committee on Appropriations; and Representative Frank Pallone, chairman of the House Committee on Energy and Commerce – that Congress established three prioritized categories of potential funding recipients:

1. First, approved applicants that have 2,000,000 or fewer customers
2. Second, 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
3. Third, any remaining approved applicants.

Rosenworcel notes that no approved applicants fall into the second category. However, she states that fully reimbursing applicants in the highest-priority category will require $4.70 billion and applicants in the third will require an additional $0.29 billion.

“Absent an additional appropriation, the Commission will apply the prioritization scheme Congress specified in the CAA [the Consolidated Appropriations Act of 2021]. Because demand within the first prioritization group exceeds available funds for the Reimbursement Program, the Commission will prorate reimbursement funds equally to each eligible applicant in the first prioritization group. The pro-rata factor for those allocations will be approximately 39.5% of demand,” Rosenworcel writes.

Rosenworcel adds that three factors contributed to the funding shortfall:

1. Congress, in the CAA, expanded the categories of potential funding recipients
2. the preliminary cost estimates did not consider the full range of costs that were ultimately reimbursable
3. providers reported cost increases since the program was funded due to supply chain constraints, inflation, and the need to complete their replacements projects within the one-year deadline.

Whether Congress will approve additional funding is uncertain. The House Committee on Energy and Commerce on June 15 approved the Spectrum Innovation Act of 2022 that would earmark up to $3.4 billion of the proceeds from the auction of low gigahertz spectrum mandated by the Infrastructure Investment and Jobs Act to the replacement program. That bill has not yet come up for a full vote.

For related articles, visit the Network Design Topic Center.

For more information on high-speed transmission systems and suppliers, visit the Lightwave Buyer’s Guide.

To stay abreast of fiber network deployments, subscribe to Lightwave’s Service Providers and Datacom/Data Center newsletters.