Supply Chain Reimbursement Program

On March 12, 2020, the Secure and Trusted Communications Networks Act of 2019 (Secure Networks Act), Pub. L. No. 116-124, was signed into law. Section 4 of the Secure Networks Act, 47 U.S.C. § 1603, directed the Federal Communications Commission (Commission) to establish the Secure and Trusted Communications Networks Reimbursement Program (Reimbursement Program) to reimburse providers of advanced communications services with two million or fewer customers for the removal, replacement, and disposal of covered communications equipment and services from their networks. On December 11, 2020, the Commission released a rulemaking order establishing the Reimbursement Program. The Commission tasked the Wireline Competition Bureau with implementing the Reimbursement Program. See Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs, WC Docket No. 18-89, Second Report and Order, 35 FCC Rcd 14284 (2020) (Second Report and Order). On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA), Pub. L. 116-260, became law, appropriating $1.9 billion for the Commission to “carry out” the Reimbursement Program and amending the Reimbursement Program to, among other things, increase eligibility to those providers of advanced communications services with ten million or fewer customers. The Commission adopted a rulemaking order on July 13, 2021, to implement the amendments contained in the CAA, FCC 21-86. Consistent with the CAA, the Commission expanded Reimbursement Program eligibility to providers with ten million or fewer customers and limited the use of Reimbursement Program funds to the removal, replacement, and disposal of covered communications equipment or services produced or provided by Huawei Technologies Company (Huawei) or ZTE Corporation (ZTE), including their subsidiaries and affiliates, that was obtained on or before June 30, 2020. See Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs, WC Docket No. 18-89, Third Report and Order, FCC 21-86 (rel. July 14, 2021) (Third Report and Order).

Providers of advanced communications service with ten million or fewer customers are eligible to participate in the Reimbursement Program to reimburse such providers for costs reasonably incurred for the replacement, removal, and disposal of Huawei and ZTE communications equipment and service obtained on or before June 30, 2020. The Commission has interpreted the term “provider of advanced communications service” to mean “facilities-based providers, whether fixed or mobile, with a broadband connection to end users with at least 200 kbps in one direction.” Second Report and Order, 35 FCC Rcd at 14332, para. 111. The Commission has interpreted the statutory language “customers of such provider” and “customers of any affiliate” to mean those customers taking advanced communications service from the provider and its affiliates. Id. at 14333, paras. 113-115. A provider seeking to participate in the Reimbursement Program must have ten million or fewer customers, as of the date its application is filed.

To be eligible, the Secure Networks Act and the Commission’s rules require participating providers to certify: (i) as of the date of the submission of the application, that the provider has developed: a plan for the permanent removal and replacement of any covered communications equipment or service that is in the communications network of the provider as of such date; and the disposal of the equipment or services removed; and a specific timeline for the permanent removal, replacement, and disposal of the covered communications equipment or service, which timeline shall be submitted to the Commission as part of the application; and beginning on the date of the approval of the application, the provider: will not purchase, rent, lease, or otherwise obtain covered communications equipment or service, using reimbursement funds or any other funds (including funds derived from private sources); and in developing and tailoring the risk management practices of the applicant, will consult and consider the standards, guidelines, and best practices set forth in the cybersecurity framework developed by the National Institute of Standards and Technology.
Separately, for purposes of the Reimbursement Program, a school, library, or health care provider, or consortium thereof, may also qualify as a provider of advanced communications service, and therefore be eligible to participate in the Reimbursement Program, if it provides facilities-based broadband connections of at least 200 kbps in one direction to end users, which could include students, patrons, patients, or member institutions in the context of cooperative infrastructure sharing arrangements.

During a filing window, eligible providers may request a funding allocation from the Reimbursement Program for the reimbursement of costs reasonably incurred for the permanent removal, replacement, and disposal of covered communications equipment or service. Application Requests for Funding Allocations must include the following:
i. An estimate of costs reasonably incurred for the permanent removal, replacement, and disposal of covered communications equipment or service from the eligible provider’s network. Eligible providers may rely upon the predetermined estimated costs identified in the Catalog of Expenses Eligible for Reimbursement made available by the Wireline Competition Bureau. Eligible providers that submit their own cost estimates must submit supporting documentation and certify that the estimate is made in good faith.
ii. Detailed information on the covered communications equipment or service being removed, replaced and disposed of.
iii. Various certifications identified in the Program rules.
iv. A specific timeline for the permanent removal, replacement, and disposal of the covered communications equipment or services.
v. A good faith certification that the provider will reasonably incur the estimated costs claimed as eligible for reimbursement; it will use all money received from the Reimbursement Program only for expenses eligible for reimbursement; it will comply with all policies and procedures relating to allocations, draw downs, payments, obligations, and expenditures of money from the Reimbursement Program; it will maintain detailed records, including receipts, of all costs eligible for reimbursement actually incurred for a period of 10 years; and it will file all required documentation for its expenses.

The Wireline Competition Bureau has contracted with Ernst & Young, LLP to act as the Fund Administrator for the Reimbursement Program. The Fund Administer will review applications to determine whether the application is complete, whether the applicant is eligible for the Reimbursement Program, and to assess the reasonableness of the cost estimates provided by the applicant and make recommendations to the Wireline Competition Bureau on whether to grant or deny the application. The Wireline Competition Bureau shall approve or deny applications to receive a funding allocation from the Reimbursement Program within 90 days after the close of the applicable filing window. The Wireline Competition Bureau may extend the deadline for granting or denying applications for up to an additional 45 days if it determines that an excessive number of applications have been filed during the window and additional time is needed to review the applications.

The Reimbursement Program is a limited duration program with limited funds. The Wireline Competition Bureau shall issue funding allocations after the close of a filing window. After a filing window closes, the Fund Administrator shall calculate the total demand for Reimbursement Program support submitted by all eligible providers during the filing window period. If the total demand received during the filing window exceeds the total funds available, then the Wireline Competition Bureau shall allocate the available funds consistent with the prioritization schedule established by the Secure Networks Act, as amended, and the Commission’s rules. Specifically, the Commission will prioritize advanced communication service providers with two million or fewer customers first, then advanced communications service providers that are accredited public or private non-commercial educational institutions providing their own facilities-based educational institutions providing their own facilities-based educational broadband service, as defined in 47 CFR § 27.4, or any successor regulation and health care providers and libraries providing advanced communications services second, and any remaining approved applicants determined to be eligible for reimbursement under the Program third. If there is insufficient funding to fully fund all requests in a particular prioritization category, then the Wireline Competition Bureau will pro-rate the available funding among all eligible providers in that prioritization category. Requests for funds in subsequent prioritization categories will be denied for lack of available funding.