FCC Releases National Security Orders

On December 11, 2020, the FCC released two orders, adopted at the December Open Meeting on December 10, 2020, in the Protecting Against National Security Threats to the Communications Supply Chain matter (WC Docket No. 18-89).


Secure Networks Act Implementation: The FCC released a Second Report and Order (“R&O”) implementing the Secure and Trusted Communications Networks Act of 2019 (“Secure Networks Act”) by adopting four new requirements.  First, the FCC adopted a rule requiring Eligible Telecommunications Carriers (“ETC”) to remove and replace equipment deemed to be a risk to national security, as determined by list established under the R&O (the “Covered List”).  ETCs will be required to file a certification indicating that they have complied with the rule one year after the Wireline Competition Bureau releases a Public Notice announcing the acceptance of applications for reimbursement under the reimbursement program (described below) established in the R&O.  After the initial certification, ETCs will be required to annually certify that they are not using equipment on the list prior to receiving USF support.


Second, the FCC established the Secure and Trusted Communications Networks Reimbursement Program to subsidize smaller carriers in removing and replacing covered equipment, once Congress appropriates at least $1.6 billion that Commission staff estimate will be required to implement the program.   Under the program, carriers with two million or fewer customers will be eligible to obtain reimbursement for the cost of permanently removing, replacing, and disposing of equipment on the Covered List and upgrading it with advanced communications equipment.  Providers who begin the transition process prior to the creation of the program will be permitted to seek reimbursement for certain costs and expenses related to the process.  A catalogue of eligible expenses and estimated costs will be published by the Wireline Competition Bureau to guide the process.


Third, the FCC established procedures and criteria for publishing a list of covered communications equipment or services that pose an unacceptable risk to the national security of the United States, the safety and security of individuals within the United States, and prohibit USF support from being used to cover equipment on the list.  The FCC notes that it will consider input from several executive branch agencies, the Department of Commerce, the 2019 NDAA, and national security agencies to determine which items should be included on the Covered List, which will be published and routinely updated without notice or opportunity for comment.  Once the FCC publishes the Covered List, the Public Safety and Homeland Security Bureau will issue a public notice and the prohibition and reporting requirements will go into effect for the listed equipment sixty (60) days after publication of the public notice.  A separate public notice will be issued whenever the list is revised and will be effective sixty (60) days after publication of the public notice announcing the revised list.  Existing equipment contracts will not be grandfathered in and individuals found using prohibited equipment sixty days after publication of the Covered List will not be permitted to receive USF funding.


Finally, the FCC adopted reporting requirements to ensure it is updated about the ongoing presence of covered equipment in communications networks.  For equipment or services on the initial Covered List acquired on or after August 14, 2018, or equipment or services added to the Covered List that were purchased 60 days or more after the Covered List is subsequently updated, providers must report the type of covered communications equipment or service purchased, rented or leased; the location of the equipment or service; the date the equipment or service was procured; the removal or replacement plans for the equipment or service, including the cost to replace; the amount paid for the equipment or service; the supplier for the equipment or service; and a detailed justification for obtaining such covered equipment and service.  The justification should explain in detail the provider’s reason for obtaining the covered equipment or service and should indicate whether it was on the published Covered List at time of purchase.


Huawei Designation: The FCC released a Memorandum Opinion and Order finding that Huawei Technologies Co., along with its parents, affiliates, and subsidiaries, (collectively “Huawei”) constitutes a threat to the security and integrity of the United States’ communications networks and supply chains, affirming Huawei’s designation as a covered company, and prohibiting USF funds from being used to purchase, obtain, maintain, improve, modify, or otherwise support any Huawei equipment or services.  In 2019, the FCC initially designated Huawei as a covered company in its Protecting Against National Security Threats Order.  The FCC ordered the Public Safety and Homeland Security Bureau to determine whether to issue a final designation of Huawei as a covered company.  The Public Safety and Homeland Security Bureau issued a final designation of Huawei as a covered company on June 30, 2020, and Huawei appealed that decision to the full Commission.  The FCC affirmed the Bureau’s final designation for two main reasons.  First, the FCC found that Huawei is highly susceptible to Chinese government coercion, especially considering its ownership structure, which includes close ties to various Chinese government and military officials.  Second, the FCC found that Huawei’s equipment has known security risks and vulnerabilities, a conclusion supported by the numerous other nations that have also banned Huawei’s equipment.  The FCC thus affirmed the Bureau’s decision.


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