FCC Bans Wireless Carriers from Using USF Funds to Purchase Equipment Deemed a National Security Threat; Opens Rulemaking to Consider Impact of Ordering Removal and Replacement

Last week, the Federal Communications Commission (“FCC”) announced, via a news release (“the Order”), that it will ban wireless carriers from obtaining benefits from the federal Universal Service Fund (“USF”) if they purchase new telecom equipment originating from companies deemed a national security threat.  The Order specifically includes the much-scrutinized Chinese telecom giants Huawei Technologies Company (“Huawei”) and ZTE Corporations (“ZTE”), but the Order is open to capture other companies also seen as a risk. 

The regulator is also considering a proposal to probe carriers already receiving funding from the $8.5-billion annual USF to find out how much of the banned equipment they are using, require them to remove and replace it, and is asking for Comments on how to pay for [the process of removal/replacement]. 

FCC Chairman Ajit Pai said in a statement that threats from Huawei and ZTE include adding “backdoors” in equipment, such as routers and switches, to allow them to inject viruses and malware, spy, and steal private data.  Chairman Pai added that the Order is critical for the country’s 5G future.

While Commissioner Michael O’Reilly generally supported the measure, he expressed concern that the funding ban on carriers may force them to prematurely replace equipment and have fewer equipment options, thus raising costs and delaying new offerings.  Despite these reservations, the other commissioners supported the Order.   

If your company is impacted by the rule changes and would like guidance in filing Comments, please contact Drew Clark of Marashlian & Donahue, PLLC, at apc@commlawgroup.com or 703-714-1323.

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