TR Daily Unanimous FCC Approves Supply Chain Order
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Thursday, December 10, 2020

Unanimous FCC Approves Supply Chain Order

The FCC today adopted rules to establish the Secure and Trusted Communications Networks Reimbursement Program, which would reimburse smaller carriers for the costs of removing and replacing network equipment deemed to present a national security threat, but for which Congress has not yet provided funding.

An FCC staff estimate puts the cost of reimbursing eligible providers at $1.6 billion, at a minimum.

The communications supply chain second report and order adopted in WC docket 18-89 at today’s monthly FCC meeting also prohibits the use of FCC-administered federal subsidies, including Universal Service Fund support, to purchase, lease, or otherwise obtain prohibited communications services and equipment covered by the order.

It also mandates the publication of a list of equipment and services determined to present a national security threat to communications networks by "(1) executive branch interagency bodies with appropriate national security experience; (2) the Department of Commerce pursuant to its authority under Executive Order 13873; (3) Congress in the John S. McCain National Defense Authorization Act for Fiscal Year 2019, or (4) U.S. national security agencies," the FCC noted in a press release.

The item also provides assurances that carriers that remove and replace equipment ahead of funding for the reimbursement program will still be eligible for reimbursements.

It requires "all providers of advanced communications services to report whether their networks include any covered communications equipment or services acquired after August 14, 2018. Finally, the Order mandates strict reporting requirements to ensure that the Commission is kept informed about the ongoing presence of insecure equipment in U.S. communications networks," the press release said.

The second report and order implements provisions of the Secure and Trusted Communications Networks Act.

The FCC last year barred the use of USF funds on equipment and services provided by "covered companies" deemed to pose a national security threat and made an initial designation that Huawei Technologies Co. Ltd. and ZTE Corp. were covered companies. The FCC’s Public Safety and Homeland Security Bureau confirmed those designations as final last summer (TR Daily, June 30).

In the interim between the Commission’s action last year and the final designation by the bureau in June, Congress passed the Secure and Trusted Communications Networks Act, which directs the FCC to prohibit the use of federal subsidies for companies posing a national security threat to communications networks or the communications supply chain. The Act also establishes the Secure and Trusted Communications Reimbursement Program to assist communications providers with the costs of removing and replacing prohibited equipment and services from their networks, evoking praise from industry players and other stakeholders as well as calls for swift passage of appropriations legislation to fund the new program. However, Congress has yet to appropriate funding for that program.

In September, the FCC’s Wireline Competition Bureau and Office of Economics and Analytics released the public results of the Commission’s supply chain security information inquiry, revealing that ETCs that responded to the information collection reported a total estimated cost of $1.837 billion to remove and replace Huawei or ZTE equipment in their networks. Of that total, WCB and OEA said that "filers that appear to initially qualify for reimbursement under the Secure and Trusted Communications Networks Act of 2019 report it could require approximately $1.618 billion to remove and replace such equipment" (TR Daily, Sept. 8).

Commissioner Mike O’Rielly said at the meeting, "Over the years, I have spoken about the threat from foreign governments which operate according to ideologies that are not consistent with capitalism or freedom.

"At the same time, I recognize the gravity of this undertaking," he added, saying that he has sought to avoid "boisterous commentary." He said that the FCC "is effectively closing our market to certain companies and reimbursing providers … in the interest of preserving our nation’s national security. Our rhetoric should match the seriousness of the moment and its long-term importance."

He added that he hoped "everyone will acknowledge that many providers, especially small businesses did not do anything wrong by incorporating the problematic equipment into their networks."

Commissioner O’Rielly also warned that the FCC should be "careful not to tip the scales toward certain technology or companies, or take advantage of the serious matter to pick winners and losers. I am pleased of order recognizes the need to tread carefully here. while some providers will turn to ORAN [open radio access networks], which I can see has other benefits, many will turn to traditional technologies."

During a conference call with reporters this afternoon, Commissioner O’Rielly said he thought the item "hit the right spot" with regard to encouraging but not mandating use of ORAN technology. "I think there’s incredible promise from ORAN. But there are other technologies that are equally beneficial," he said.

Commissioner Brendan Carr said, "The record on this is clear: The Chinese government intends to surveil persons within our borders, for government security and spying advantage, as well as for intellectual property and an industrial or business edge. The New York Times has reported that hackers working for the Chinese government stole some of our government’s most important cybersecurity tools and repurposed them to attack Western allies and businesses. The Chinese reportedly targeted one of our ally’s telecom networks, and when the tools were later transferred to North Korea and Russia, those governments crippled British hospitals and shipping companies. They even shut down a Ukrainian airport, its postal service, gas stations, and ATMs. There is little doubt that the Chinese government would value additional direct access to our telecom networks for reasons contrary to our security interests."

He added, "America has turned the page on the weak and timid approach to Communist China of the past. Any backsliding or softening of our approach would be a monumental mistake."

Commissioner Carr also said, "The FCC should build on the leadership we have shown and take immediate and appropriate action on the China Unicom and Pacific Networks authorizations."

Commissioner Jessica Rosenworcel said, "This is only the beginning. Because we have so much more work to do to ensure that our communications future is secure. China is playing the long game. By using state-sponsored technological development to extend its economic reach, it could put itself in a position to gather intelligence, steal intellectual property, and bring down regional communications in times of crisis. And despite our efforts here, the Chinese government is still actively consolidating its global 5G authority. It has been funding and building infrastructure across Africa, Latin America, and Central and Southeast Asia. It is a central player in writing international standards and securing patents for emerging 5G technologies. It is developing trade alliances like the Regional Comprehensive Economic Partnership that could sustain its advantages in international supply chains and create more opportunities for Huawei and ZTE to produce and sell within the region."

She called for a coordinated national strategy for 5G security, support for the development of ORAN technology "here on our shores," and action to "to address the security challenges posed by Chinese equipment by building a consistent and united front with our allies and not alienating them."

Commissioner Geoffrey Starks said, "While finalizing the Commission’s designations of Huawei and ZTE as national security threats was an undoubtedly important step, the gap between those designations—which limited the ability of many providers to upgrade and maintain their existing networks—and funding for replacements is causing a strain. Those providers need certainty about replacement funding as soon as possible, and I will continue to urge Congress to prioritize appropriating funding for replacement."

He added, "I am pleased that the Chairman worked with me to make changes to today’s Order that will further reduce the national security impact of the funding lag. The version we now adopt will effectuate the recommendations by Chairman Frank Pallone and Ranking Member Greg Walden who on a bipartisan basis made clear that the Commission intends to develop and release the Catalogue of Eligible Expenses as soon as possible, so that it can be a resource to providers who wish to begin the replacement process before reimbursement funding becomes available. It also encourages companies to proceed with the replacement process before the reimbursement program is funded with confidence that doing so will not jeopardize their eligibility. These steps should encourage providers to make these critical security improvements right now."

Commissioner Starks also thanked Chairman Ajit Pai for working with him "to add language to this item encouraging ETCs and recipients of reimbursement funds to consider O-RAN equipment and services. While achieving its primary goal of improving security, the replacement process outlined in this Order also represents an opportunity to make changes in U.S. networks that will promote innovation, reduce costs, and kickstart a new generation of American technological leadership. I am optimistic that O-RAN can support all three of those goals. I would have preferred, however, that the Commission go a step further and require carriers that receive replacement money to certify that they considered O-RAN solutions. If American tax-payer dollars are going to rebuild these networks, Americans should get the best value and the most benefit. It’s not unfair, then, to ask companies to consider alternatives that could have saved money while promoting American innovation. To be clear, I would not have proposed a requirement that any provider adopt ORAN, but I believe mandating that they consider it would have better promoted both innovation and efficient spending of our reimbursement funds."

Chairman Pai said that today’s action "is critically important work, but there’s still more to be done. We are taking steps within our power to implement the reimbursement program, such as adopting rules for the program and beginning the work of developing a cost catalog to help streamline the process of determining eligible removal and replacement costs. But we can’t actually implement the reimbursement program unless and until Congress appropriates the necessary funding. Based on information collected by Commission staff from providers of advanced communications services, the reported cost of removing and replacing covered equipment for providers eligible under current law is nearly $1.6 billion, and it is possible that the actual number will turn out to be greater. As Senator Wicker, Chairman of the Senate Committee on Commerce, Science, and Transportation recently wrote about the reimbursement program: ‘This is a national security imperative. Fully funding this program is essential to protecting the integrity of communications infrastructure and protecting the future viability of the digital economy at large.’ I entirely agree, and have said so for some time. The FCC stands ready to fully implement the reimbursement program once Congress provides this funding."

Reaction from industry was generally positive, although concerns about the lack of funding were expressed.

Rural Wireless Association, Inc., General Counsel Carri Bennet said, "The FCC’s Second Report & Order does not require the replacement of Huawei and ZTE equipment if the funding doesn’t materialize. We need leadership in Congress, not gamesmanship that puts rural residents at risk during the pandemic. Without this funding, our rural wireless carriers in some instances have had to turn down some parts of their networks due to the inability to use their universal service support on their Huawei and ZTE networks, and are therefore unable to support their communities. Having no assurance from Congress that funding will materialize to replace these networks has put our members on pins and needles and threatens their survival. It is disconcerting that Congress would unanimously pass legislation authorizing a reimbursement program to secure our nations communications supply chain and then not take the necessary action to fund it."

Competitive Carriers Association President and Chief Executive Officer Steve Berry said, "The FCC has been most responsive in seeking information and developing a better understanding of the unique impact of the Order on small and regional carriers that have covered equipment in their networks, and I thank the Commission for its decision today. The Commissioners should be commended for unanimously recognizing the need for rolling reimbursement and providing guidance that carriers now can begin without jeopardizing their eligibility for reimbursement. This challenging issue is of the utmost importance to affected carriers, and CCA continues to encourage Congress to fund the Reimbursement Program so that no American is left behind in the digital world."

Open RAN Policy Coalition Executive Director Diane Rinaldo said, "The Open RAN Policy Coalition applauds the Federal Communications Commission for its unanimous vote in support of making Open RAN solutions eligible for the Secure and Trusted Communications Network Reimbursement Program. Because open and interoperable interfaces provide a foundation and architecture for security in the U.S communications supply chain, carriers should be encouraged to consider such solutions when upgrading or replacing equipment. We urge Congress to appropriate the necessary funding for this program as soon as possible."

Telecommunications Industry Association CEO David Stehlin said, "TIA members support the FCC’s order for this important program that will facilitate the replacement of network equipment that could pose a significant threat to our national security. In the midst of a pandemic, we depend on our networks more than ever to keep us working and learning from home. We urge Congress to now appropriate the necessary funds and make this critical investment to ensure the security of our nation’s digital infrastructure."

Mavenir Systems, Inc., said in a statement, "Mavenir applauds today’s FCC vote to protect mobile networks from equipment that poses serious threats to U.S. national security, and we appreciate the FCC’s determination that OpenRAN solutions will be eligible for the Secure and Trusted Communications Network Reimbursement Program. We urge Congress to fully fund this program as soon as possible so that operators across the country have access to the resources they need to strengthen our nation’s networks and adopt U.S.-based alternatives to Huawei and ZTE." —Lynn Stanton, [email protected]

MainStory: FederalNews FCC PublicSafety Cybersecurity BroadbandDeployment WirelessDeployment

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