FCC Faces $3B Shortfall in Huawei Rip-and-Replace ProgramUS Seeking To Shut Out Huawei and ZTT From Domestic Networks
Not even $2 billion is enough to rip out all the unwanted Chinese manufacturer equipment nestled into the networks of small telecoms across the United States, the Federal Communications Commission says.
Washington has ramped up efforts over the past decade to shut out equipment from Shenzen-based Huawei and ZTE from reaching U.S. shores. They culminated in a 2020 law that appropriated $1.9 billion for an FCC-led program refunding small and rural carrier efforts to replace Chinese-made infrastructure. Huawei and ZTE products are considered national security threats by the United States, a concern prioritized during the Trump administration (see: FCC Finalizes Plan to Rip and Replace Chinese Telecom Gear).
"Rip and replace" will actually cost close to $5 billion, based on an agency review of applications, commission Chair Jessica Rosenworcel said in a letter to Congress on Friday.
Absent additional dollars, the agency will prioritize applicants with 2 million or fewer customers. Even then, it will have enough money to reimburse only about 40% of their costs, Rosenworcel added.
What Caused the Shortfall?
Rosenworcel traced the shortfall to three main causes:
- Congress raised the eligibility cap for rip-and-replace telecoms from those with 2 million or fewer customers to those serving 10 million or fewer customers.
- The preliminary cost estimates did not consider the full range of costs reimbursable under the law.
- Supplier costs have increased since the program's initial approval in 2021 due to supply chain constraints, inflation and the need to complete rip and replace within a one-year deadline.
Rip and replace is not a mandatory program, but neither can small and rural carriers access the multibillion-dollar federal subsidy known as the Universal Service Fund to buy Huawei or ZTE gear or services. The FCC in 2019 blacklisted the two companies from the program, one of many incremental steps taken by Washington to squeeze out the companies.
Huawei, in particular, has attempted to maintain its foothold in the U.S. market. The world's largest telecom equipment manufacture maintains it is not a cybersecurity threat and has taken the federal government to court in a bid to halt its blacklisting - unsuccessfully.