Cost Modifications will Stop Rip and Replace Projects, Panel Hears

NEW ORLEANS, May 10, 2023 – Cost estimate modifications have the potential to completely stop the rip and replace process, said internet service providers at a Connect (X) panel on Wednesday.

The Secure and Trusted Communications Network Reimbursement Program provides funds to reimburse carrier expenses for ripping and replacing equipment deemed to be a national security concern due to its association with the PRC by congressional direction.

As part of the initial application process for reimbursement for incurred costs, carriers must submit cost estimations for the project. Submitting cost modifications, however, will effectively halt the entire project, warned Leslie Williams, president of wireless service provider SI Wireless.

The Federal Communications Commission released a cost catalog of estimated eligible expenses in September of 2021. Many, if not most, carriers use the catalog pricing to estimate cost and submit initial reimbursement requests, said Brian Hough, director of plant operations at coop provider PTCI.

However, the catalog is “incomplete,” said the CEO of DTC Communications Chris Townson. Cost estimates were approved before rapid inflation and the current supply chain delays. As such, modifications are inevitable.

“Providers will absolutely incur modifications,” said Hough.

Reimbursement funds are deficient by $3 billion, agree industry leaders. The program was funded with $1.9 billion from Congress, but the FCC has estimated that Congress has allocated money to cover only 39 percent of the total costs.

Applications to the FCC request $5.6 billion, which is to be paid after removal work is done. Furthermore, carriers are up against a deadline to remove obsolete technologies within a year of the initial reimbursement, due this July.

“With July 15, 2023 now less than three months away, the lack of an additional appropriation means that the Commission will need to plan to proceed with the…funding process,” FCC Chairwoman Jessica Rosenworcel said in a letter to Congress.

In April, Sens. Deb Fischer, R-Nebraska, and John Hickenlooper, D-Colorado introduced the Defend Our Networks Act that would add additional funds to the rip and replace program.

Fully funding the program is the only way to fulfill this national security mandate and remove untrusted equipment while maintaining connectivity,” said Competitive Carriers Association CEO Tim Donovan following the announcement.

“If we want to be the best in the world, then why are we racing to the bottom,” said Townson, urging lawmakers to prioritize quality builds rather than cheap builds. “Let’s put our money to things that really matter.”

Rosenworcel announced earlier this month that she has the authority to extend the deadline for carriers to replace the technology considering a lack of funding.