Telcos keep using “insecure” Chinese gear because of congressional inaction

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The US government has pressured telcos to rip out network gear made by Chinese companies Huawei and ZTE but has allocated only about 38 percent of the money needed to replace equipment with non-Chinese hardware, the Federal Communications Commission said.

FCC Chairwoman Jessica Rosenworcel wrote to Congress Thursday, urging lawmakers to fully fund the program. Congress allocated $1.9 billion for replacements of Chinese gear that must be removed as early as this month, but the needed reimbursements add up to nearly $5 billion, Rosenworcel wrote.

“I am writing… to emphasize again the urgent need for full funding of the Reimbursement Program,” she wrote. Rural mobile carriers could have to withdraw from the reimbursement program or even shut down networks if the funding shortfall isn’t closed, the letter said.

In November 2019, the FCC prohibited telcos from using Huawei and ZTE equipment in projects paid for by the Universal Service Fund. A few months later, Congress approved the Secure and Trusted Communications Networks Act, which created a program to rip out and replace Chinese telecom gear.

Telcos were required to submit requests for reimbursement, and the FCC approved or denied those requests in July 2022. The approved reimbursements total $4.98 billion, Rosenworcel wrote.

Telcos with 2 million or fewer customers are given first access to funding. But those smaller companies are being reimbursed for less than 40 percent of reasonable replacement costs, Rosenworcel wrote. Providers with 10 million or more customers are not eligible for reimbursements.

Rural networks face problems

Telcos are given a year to remove equipment after the initial distribution of funds, and those “recipients now have deadlines to remove, replace, and dispose all Huawei and ZTE communications equipment and services ranging from May 29, 2024 to February 4, 2025,” Rosenworcel wrote.

The chairwoman’s letter said that due to the $3.08 billion shortfall, the FCC “is required to first allocate funding to applicants with two million or fewer customers. These applicants, known as Priority 1 applicants under the law, will receive prorated support of only 39.5 percent of reasonable costs.”

There are 126 applicants designated as Priority 1. The funding shortfall is especially difficult for providers in rural areas, Rosenworcel’s letter said:

Several recipients have recently informed the Commission that they foresee significant consequences that could result from the lack of full funding, including having to shut down their networks or withdraw from the program. 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. Moreover, the inability of any Reimbursement Program recipient to fully remove, replace, and dispose of its covered equipment and services would raise national security concerns by leaving insecure equipment and services in our networks.

There are also “network compatibility issues associated with piecemeal replacement of covered equipment,” Rosenworcel told lawmakers. The FCC can grant extensions of up to six months to individual providers and has so far “granted 64 extensions of time—including 52 based in whole or in part on the funding shortfall—to complete the removal and disposal,” the letter said.

“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,” Rosenworcel wrote. In fact, nearly 40 percent of the participants reported that they cannot complete the work required under the Reimbursement Program without additional government funding.

Congress hasn’t acted on funding bills

The White House asked Congress for $3.1 billion in reimbursement funding in October 2023, saying it was needed “for the ongoing removal of insecure equipment and software from US communications infrastructure.”

Several lawmakers have submitted bills to cover the shortfall, but Congress hasn’t acted yet. Reps. Cathy McMorris Rodgers (R-Wash.) and Frank Pallone, Jr. (D-N.J.) submitted one of those bills in July 2023. Sen. Steve Daines (R-Mont.) submitted another bill to cover the full shortfall in March 2024.

Rosenworcel has also recently been pleading with Congress to renew the Affordable Connectivity Program (ACP), which gave $30 monthly discounts for broadband service to people with low incomes. The FCC distributed the last full discounts in April. Recipients are slated to get partial subsidies of up to $14 this month before the low-income program shuts down entirely.

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