Nearly Half of Rip-and-Replace Firms Struggling with Funding, Supply Chain Delays: FCC Report

WASHINGTON, January 11, 2023 – The Federal Communications Commission said in a report to Congress on Tuesday that nearly half of respondents required to submit status reports on their efforts to remove unsecure equipment from their networks complained about a lack of funding and supply chain concerns required to fulfill their obligations.

The Secure and Trusted Communications Network Act of 2019 allocated $1.9 billion for the FCC to reimburse providers to replace equipment that it deemed insecure or problematic to national security, including Chinese technology from Huawei and ZTE.

The FCC said in the report required by Congress that nearly half of applicants who were required to submit status reports by October 13 last year said that a lack of funding have contributed to problems for replacing the equipment. The commission said two percent of applicants indicated that they will not start work until they get additional funding.

The FCC had previously warned about the lack of funding in the program, saying that the total amount available for reimbursement is just 39 percent of costs outlined by approved applicants. The commission last summer approved 126 applications from 85 entities, with total estimates at $5.26 billion – a roughly $3 billion shortfall.

The omnibus spending bill did not include additional funding for the so-called “rip-and-replace” program, despite complaints from the FCC and industry participating in the program. The CEO of the Telecommunications Industry Association said last month that he was “stunned” to see a lack of money in the omnibus bill for this purpose.

The Rural Wireless Association had noted to the FCC that its members are struggling to even get loans to fund the replacement of equipment.

On supply chain delays, the FCC reported that nearly half of applicants complained about significant delays between the placement and shipment of replacement equipment or delivery of services, price increases, and increased competition for replacement equipment and services. The commission, however, noted that most companies have been able to find replacement alternatives.

In addition, the report notes that about three out of 10 applicants reported labor shortages and one-quarter said weather has hampered efforts to replace equipment.

The commission has estimated that 15 percent of applicants have said they have yet to begin work to remove the equipment, while 83 percent have made some progress.

All announced program recipients must submit a reimbursement claim by July 15, 2023, exactly one year after the FCC announced application approvals.