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US telcos blame lack of funding for failure to rip out Huawei kit

US telecoms operators have apparently not made a great deal of progress in their efforts to replace Chinese-made equipment in their networks, citing a lack of cash as their number one challenge.

Mary Lennighan

January 12, 2023

3 Min Read
base stations and mobile phone transmitters against the background of the evening sky
base stations and mobile phone transmitters against the background of the evening sky

US telecoms operators have apparently not made a great deal of progress in their efforts to replace Chinese-made equipment in their networks, citing a lack of cash as their number one challenge.

We already knew that the US was struggling with its Rip and Replace scheme, or the Secure and Trusted Communications Networks Reimbursement Program, to give it its full title. It emerged back in July that the funding shortfall for the programme was around the $3 billion mark, the state having received more applications for financial support than budget permitted.

But now the latest report from the FCC, which was presented to Congress earlier this week, provides hard evidence that things are not going plan…despite the regulator’s best efforts to soften the blow.

“The Bureau estimates that around 83% of respondents have made some progress in their overall plan but have not completed the work,” reads the FCC’s report, which it compiled based on the status updates the 80-odd Rip and Replace funding recipients were required to submit in October.

“Some progress.” That’s a lukewarm comment by anyone’s standards.

In fact, just 2 percent of recipients that submitted status updates had completed the permanent removal, replacement, and disposal of all the equipment and services required under the programme, the FCC explained. Given the number of participants in the programme, that’s two companies at most. Meanwhile, a further 15 percent had not yet begun the work.

The companies in question are small players. The Rip and Replace scheme opened for applications late last year, backed by $1.9 billion in public funding, and was designed to enable small telcos and certain other comms service providers – the threshold for eligibility being 10,000 customers or fewer – with the cost of replacing equipment made by either Huawei or ZTE, the pair having been officially designated as threats to national security in mid-2020. The number of applications and the amount of funding requested took the government by surprise, therefore it can come as no shock now that the process of replacing the Chinese kit is moving at a snail’s pace.

The FCC’s report outlines the major challenges the telcos in question feel they are facing, the first, of course, being the lack of funding. “Roughly half of respondents indicated in their status updates that a lack of funding is a challenge they face to complete the permanent removal, replacement, and disposal of the covered communications equipment and services in their networks in their entirety,” the regulator said. It also lists supply chain delays, labour shortages and weather-related challenges.

According to the regulator, approximately 2 percent of respondents said they will not start work on replacing the offending equipment until they receive additional funding. Again, that’s a very small number – probably one or two companies. But coupled with the large number that basically indicated they do not have the funding to complete the work, it’s pretty clear that cash is a major stumbling block here.

The FCC has made no real comment on this. There was no statement accompanying the report. In fact, all we had from the regulator was an announcement reminding programme participants that they must file their latest spending reports by 10 February.

With Congress having sidestepped the budget issue with Rip and Replace for now, the FCC has little choice but to limp on with the programme.

 

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About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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