FCC’s 'rip and replace' Chinese infrastructure compensation plan finally agreed and published

  • Next month US rural telcos can claim recompense for ripping out Huawei and ZTE equipment
  • Window of opportunity opens at the end of October and closes in mid-January 2022
  • Those judged eligible will be told in Q2, next year. Not known when the cash will actually arrive
  • US$1.9 billion available. “Not enough”, says Rural Wireless Association

Fifteen months after the US Federal Communications Commission (FCC) officially classified both Huawei and ZTE of China as “threats to the national security of the United States of America’, the venerable regulatory body has finalised and published the rules under which telcos may apply for financial compensation for ripping out and replacing equipment supplied by the two manufacturers with close ties to the Politburo and Chinese state security agencies.

The FCC has voted unanimously to administer a US$1.9 billion federal subsidy programme that will provide some or all the money needed to rebuild the networks of small and mainly rural telcos to ensure that, in future, their networks will be much more secure and devoid of suspect Chinese equipment and products. The original plan called for a $1 billion scheme but this was upped to $1.9 billion under the terms of the second Covid-19 Stimulus Bill.

Under the previous administration, then Secretary of State, Mike Pompeo, called Huawei and ZTE “Trojan horses for Chinese intelligence agencies”. In late 2019 the FCC prohibited rural carriers from accessing infrastructure subsidy payments under the aegis of the US Universal Service Fund to pay for equipment supplied by Huawei and ZTE. Then, in February 2020, telcos were instructed to make plans to remove Chinese infrastructure equipment from their networks

To be eligible for compensatory “rip-out and replace” payments the US carriers that may apply must serve 10 million subscribers or less. Furthermore, those telcos must accept that other organisations including schools, libraries, and health centres and clinics that themselves provide local broadband services will also be eligible to claim some funding. The other major proviso is that all equipment to be replaced must provide up- and down-stream access speeds of 200 kbps. – surely not a big ask in this day and age? When the compensation scheme was first mooted the threshold for payments to rural telcos was for those with fewer than 2 million customers, so the bar has been moved greatly upwards.

In a statement, the FCC writes that applications “for reimbursement from eligible providers of advanced communications services for costs reasonably incurred for the removal, replacement, and disposal of Huawei and ZTE equipment and services obtained on or before June 30, 2020” will be accepted. However, rip and replace costs “incurred prior to April 17, 2018 will not be reimbursable."

There are other exclusions and some welcome inclusions. For instance, the FCC says that “in the cases of older networks, replacing like-for-like may not be possible, and instances such as ripping out an older mobile network to be replaced by LTE or 5G-ready equipment would be allowed.” However, “Those receiving the funds will not be able to replace microwave backhaul or fixed wireless links with fibre links.” Also, where it is found that a tower or gantry is neither big nor strong enough to hold new replacement equipment, the cost of a new tower may be met, but recompense will be judged on a case-by-case basis. Cash is also available for vendor travel and subsistence costs and the payment of salaries of internal telco employees who are “dedicated purely to the replacement program”.

The FCC also says has determined that the replacement of non-Huawei or ZTE mobile handsets and other customer premises equipment, including Internet of Things devices, used by end users and utilising advanced communications services are not reasonably necessary to the removal, replacement, and disposal of covered communications equipment or service. In other words, federal largesse only goes so far.

Claims can be made with effect from the 29th of October (i.e. the end of next month) onwards and the cut-off date is January 14, 2022. Those telcos that the FCC deems eligible for recompense will be informed in Q2 next year, with actual payments beginning to be made in the summer of 2022 (probably).

Rural Wireless Association welcomes the money, but wants more

The Washington DC-based Rural Wireless Association (RWA), the trade association that represents the interests of a membership dedicated to the goal of driving wireless comms across rural and poorer areas of the US, says the $1.9 billion, whilst an improvement on the original sum mooted to be available, says it is still not enough and voices concerns that the entire compensation process will be long, complex and bureaucratic in the extreme. 

In a letter to the FCC, the RWA writes, “Timely disbursement of funds to eligible providers is essential to a quick and smooth transition of communications networks as many rural providers are currently struggling to garner sufficient funds and equipment to begin the replacement and removal processes in their networks amid a global pandemic and global supply chain shortage”.

In another “more in sorrow than anger but how could you be so mean to us when we haven’t done anything to you” response to the FCC, Huawei writes, in the hand of Glenn Schloss, the Vice President of Huawei USA (a poisoned chalice if ever there was one), that the company is “disappointed” by the regulator’s actions and says the 'rip and replace' initiative is “an unrealistic attempt to fix what isn’t broken.” The rural carriers themselves certainly don’t think that and are glad of the money.

The Huawei statement adds, “The FCC initiative only creates extraordinary challenges for carriers in the most rural/remote areas of the U.S. to maintain the same high level and quality of service they provide to their customers without disruption”. According to Mr Schloss (or perhaps his Chinese superiors back in the Mother Country,) the FCC’s rules “will deny consumers broadband connectivity, disrupt business, education and emergency response and cost tax payer's money, while ultimately failing to achieve the core objective of actually providing greater security. It is simply using policy in an effort to make a geopolitical statement.” Well he would say that, wouldn’t he? Just as those reading it are entitled to give a snort of derision.

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