Last November, the FCC released an Order (FCC 19-121) barring the use of Universal Service Fund (“USF”) subsidies to fund equipment, components, and services from “covered” companies deemed to provide a national security risk including, at the outset, Huawei and ZTE. As discussed in our newsletter of December 2nd, the new rules included a prohibition on E-rate funding of Huawei and ZTE equipment and services as of FY 2020.
Included with the national security Order was a Further Notice of Proposed Rulemaking (“NPRM”) requiring the removal and replacement of existing equipment made by these covered companies and installed by telecommunications carriers. The FCC did not propose to subject other USF recipients such as schools and libraries to the removal requirement but did seek comments on the proposed E-rate (and rural health care) exclusion. Initial comments on this NPRM were due last Monday, February 3rd.
Not surprisingly, most of the comments received dealt with the “rip and replace” aspects of the proposed rules as they applied to the telecommunications carriers. Issues addressed included:
- Exactly which equipment would need to be replaced and over what timeframe.
- Whether the rules would apply only to Eligible Telecommunications Carriers having received USF funding or to a broader range of telecom and Internet network providers.
- Whether, and to what extent, funding to support the replacement of covered equipment should be provided by the USF or by general federal tax revenues under Congressional appropriations.
Only two commenters addressed the narrower E-rate issues. The most detailed E-rate comments were filed by the State E-Rate Coordinators’ Alliance (“SECA”). SECA’s comments support the FCC’s preliminary position that E-rate applicants need not remove and replace previously installed covered equipment. SECA’s analysis of USAC data indicates that over the past four years only 24 schools or districts have installed Huawei equipment with a pre-discount value of $4.4 million — hardly enough to justify a new set of E-rate rules. Should the FCC desire to encourage, but not require, the replacement of this equipment, SECA suggested offering offsetting Category 2 budget credits for removed equipment to the affected applicants. SECA’s comments also reiterate several key points from earlier comments, not reflected in the FCC’s resulting Order, that the presumptive responsibility for assuring no future use of covered equipment be borne by the service providers, not by the applicants.
Moore Public Schools in Oklahoma, the E-rate applicant with the largest installed base of Huawei equipment, also filed comments. Moore’s comments also agreed that rules requiring E-rate applicants to remove Huawei equipment were unnecessary. Should the FCC’s position change, however, Moore asked the FCC to consider funding the full cost of replacement (and a waiver of short-term equipment transferability prohibitions).
To see all comments filed on the NPRM, go to the FCC’s Electronic Comment Filing System and
search under the “Proceedings” for Docket No. “18-89.” Reply comments on this NPRM are due March 3rd.