Rip-and-Replace Requests Nearly Triple the Program’s Budget

When Congress mandated that telecommunications providers would need to remove equipment supplied by Chinese vendors Huawei and ZTE from their networks over national security concerns, lawmakers seem to have underestimated how much such an undertaking would cost.

Impact: Congress initially allocated less than $1 billion toward the program under the Secure and Trusted Communications Networks Act, which passed in late 2020. But the next year, that number increased  to $1.9 billion in the 2021 Consolidated Appropriations Act based on recommendations and estimates from the FCC using data gathered from providers on how much the effort would cost. With the original guidelines limiting eligible participants to those with two million customers or less, that seemed like enough funding. But once the initial application period closed at the beginning of 2022, it quickly became apparent that The Secure and Trusted Communications Networks Reimbursement Program, colloquially known as “rip-and-replace,” would need substantially more money to address all of the requests.

The FCC received more than 181 applications for rip-and-replace funding – to the tune of $5.6 billion, nearly three times more than had been budgeted for the program. Much of this stems from a change in the guidelines that opened up reimbursement to providers with up to 10 million customers, meaning much larger telecoms wanted in on the funding if the government was going to require them to upgrade their networks. Lumen Technologies, Windstream, Mediacom, Hargray Communications (owned by Cable One), and MetroNet are among the larger providers asking for funding.

As a result, the FCC and Chairwoman Jessica Rosenworcel have asked Congress to allocate more money to the program, with Rosenworcel pledging to work with Congress to ensure there’s enough funding to improve U.S. network security. But if Congress is unwilling to allocate additional funding or doesn’t allocate enough, applications will be prioritized. Companies that meet the original criteria of less than two million customers will be approved first, followed by educational institutions, healthcare providers, and libraries. Larger providers are at the bottom of the priority list, meaning some big name companies may not get the funding they’re looking for to replace banned equipment.

Whether Lumen needs nearly $200 million or Windstream needs $118 million to replace legacy equipment is up for debate, but it’s not only large providers that are asking for huge amounts of money: Viaero Wireless says it needs $1.2 billion to remove all of the banned equipment from its network. At least one U.S. equipment vendor, Mavenir, believes European vendors like Nokia and Ericsson, which are both well-established in the U.S. networking market, could be inflating their prices for replacement equipment in order to capture a larger share of the funding. If Congress is as committed to U.S. network security to prevent potential Chinese spying as it claims to be, it will need to address the litany of problems the FCC has run into trying to administer rip-and-replace. Delays could leave the providers open to additional networking risks.

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