April 13, 2020 – The FCC’s Wireline Competition Bureau has released a Public Notice which seeks comment on how Section 4 of the Secure and Trusted Communications Networks Act of 2019 applies to proposals under consideration in the FCC’s Protecting Against National Security Threats to the Communications Supply Chain Further Notice of Proposed Rulemaking.[1] Comments are due 15 days after the Public Notice is published in the Federal Register, and reply comments are due 30 days after publication. Comments should be filed in WC Docket 18-89 using the FCC’s Electronic Comment Filing System (ECFS).

In short, the Secure Networks Act and the FCC’s National Security FNPRM, if adopted, create a plan to reimburse communications providers for removing and replacing blacklisted equipment and services. The Bureau is seeking comment on whether it should revise the proposals in the FNPRM to line up with the reimbursement program created in Section 4 of the Secure Networks Act.

November 2019 National Security Report and Order

In the November 2019 National Security Report and Order, the FCC adopted a rule that prospectively prohibits the use of universal service fund support to purchase or obtain any equipment or services produced or provided by a covered company posing a national security threat to the integrity of U.S. communications networks or the U.S. communications supply chain. The FCC initially designated Huawei and ZTE as covered companies and established a process for designating additional covered companies in the future.

November 2019 National Security Further Notice Of Proposed Rulemaking

In the National Security Further Notice of Proposed Rulemaking, the FCC sought comment on a reimbursement program that would require eligible telecommunications carriers (ETCs) to remove and replace blacklisted communications equipment and services from their networks, and would reimburse them for the cost of doing so.[2]

Secure and Trusted Communications Networks Act of 2019

The Trusted Communications Networks Act of 2019 was signed into law on March 12, 2020.[3] It is intended to facilitate the removal of communications equipment and services that pose a threat to U.S. national security from U.S. communications networks by providing reimbursements to communications providers that remove such equipment.[4] The Act first directs the FCC to compile, publish, and periodically update a list of covered communications equipment or services – those that pose a threat. The FCC has already started this process, initially designating Huawei and ZTE as “covered companies” in its November 2019 National Security Supply Chain Order.[5] Next, the Act prohibits communications providers from using universal service fund support to purchase or maintain covered communications equipment or services.[6]

Section 4 of the Secure and Trusted Communications Network  Act requires the FCC to establish a “Secure and Trusted Communications Networks Reimbursement Program” to make reimbursements to communications service providers to rip-out and replace covered communications equipment or services from their networks. Only communications service providers with 2,000,000 or fewer customers are eligible for reimbursements from the program. These providers must comply with the application and certification requirements to receive reimbursements.[7] The FCC is required to make reasonable efforts to ensure that reimbursement funds are distributed equitably among all applicants for reimbursements under the Program according to the needs of the applicants, as identified by the applications of the applicants.[8]

How Does Section 4 Of The Secure And Trusted Communications Networks Act Of 2019 Apply To The FCC’s National Security Proceeding Proposals

Section 4 of the Secure Networks Act is largely consistent with the FCC’s proposed a reimbursement program for eligible telecommunications carriers to replace potentially prohibited equipment and services. Section 4 directs the FCC to establish a reimbursement program for “providers of advanced communications service” replacing covered communications equipment or services. Section 4 limits program eligibility to providers with two million or fewer customers and restricts funding to the permanent replacement of covered equipment and services obtained before August 14, 2018 so long as the equipment and services replaced are identified as “covered” on the initial list issued by the FCC. The Bureau is seeking comment on the following:

• Should the FCC should modify its proposed reimbursement program to implement the new statutory requirements of Section 4?

• How should the FCC should interpret “providers of advanced communications service?”

• How does the Section 4 reimbursement program application filing and review process impact the application process proposed in the FNPRM?

• Should the FCC revise the application process proposed in the FNPRM to implement the Section 4 requirements?

• What challenges, if any, will carriers face in replacing equipment and services within the one-year timeframe required by Section 4 of the Secure Networks Act?

• Is the FCC able to grant both general and individual extensions to the one-year timeframe under the statute or does the grant of a general extension prohibit the FCC from granting additional individual extensions?

• Can the FCC grant multiple extensions to an individual recipient if the circumstances warrant such action? Separately, if the FCC proceeds with having a reimbursement process similar to the one used in the broadcast incentive auction proceeding, how would the deadline for completing the removal and replacement process be structured if the FCC uses initial disbursement allocations based on cost estimates before actually issuing support payments as expenses are incurred?

• Should the FCC revise the FNPRM proposals to implement the parts of the Secure Networks Act related to disposal of blacklisted equipment and reporting requirements?

According to the Bureau, the Secure Networks Act reimbursement program “appears to require an express appropriation from Congress. The Secure Networks Act, however, does not provide funding for the reimbursement program and states that the program must be ‘separate from any Federal universal service program established under section 254 of the Communications Act of 1934, as amended.’” The Bureau seeks comment on its reading of these provisions.

Section 4(d)(1) of the Secure Networks Act directs the FCC to develop a list of physical and virtual communications equipment and services to replace blacklisted equipment and services. In general, comment is sought on how to develop a list of suggested replacement communications equipment and services; possible sources of information; how often the list should be updated; what is the most efficient method of seeking public input on appropriate equipment and services for the list; whether the list can simply include all equipment and services from certain companies, or whether it must include the precise names of the equipment and services from those companies that are eligible for reimbursement; and whether the list can include suppliers of virtual network equipment and services.

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[1] Wireline Competition Bureau Seeks Comment On The Applicability Of Section 4 Of The Secure And Trusted Communications Networks Act Of 2019 To The Commission’s Rulemaking On Protecting Against National Security Threats To The Communications Supply Chain, WC Docket 18-89, Public Notice, DA 20-406 (Apr. 13, 2020), https://docs.fcc.gov/public/attachments/DA-20-406A1.pdf.

[2] Further Notice Of Proposed Rulemaking, FCC 19-121, ¶ 122.

[3] Secure and Trusted Communications Networks Act of 2019, H.R.4998, 116th Cong., 2nd Sess. (passed Senate on Feb. 27, 2020), https://www.congress.gov/116/bills/hr4998/BILLS-116hr4998enr.pdf. The bill was passed by the House of Representatives on Dec. 16, 2019.

[4] Secure and Trusted Communications Networks Act of 2019, Sec. 2(a).

[5] Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs, WC Docket No. 18-89, Huawei Designation, PS Docket No. 19-351, ZTE Designation, PS Docket No. 19-352, Report And Order, Further Notice Of Proposed Rulemaking, And Order, FCC 19-121 (Nov. 26, 2019), https://www.fcc.gov/document/protecting-national-security-through-fcc-programs-0.

[6] A Federal subsidy that is made available through a program administered by the Commission and that provides funds to be used for the capital expenditures necessary for the provision of advanced communications service may not be used to: (A) purchase, rent, lease, or otherwise obtain any covered communications equipment or service; or (B) maintain any covered communications equipment or service previously purchased, rented, leased, or otherwise obtained. Secure and Trusted Communications Networks Act of 2019, Sec. 3(a)(1).

[7] Secure and Trusted Communications Networks Act of 2019, Sec. 4(b).

[8] Secure and Trusted Communications Networks Act of 2019, Sec. 4(d)(5)(A).