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Bill for US telcos to bin Chinese kit blows out by $3 billion

The US Federal Communications Commission (FCC) notified Congress on Friday that the cost to rip and replace equipment kit from Huawei and ZTE installed at US telcos is more than $3 billion higher than funding allocated for the program.

FCC chair Jessica Rosenworcel wrote to explain the situation, which arose from the USA’s desire to remove Chinese comms kit at local carriers in the name of national security. Carriers were offered cash to replace Chinese kit with American products.

The scheme first allocates funding to remove the kit for applicants with under two million customers. Then, if any money is left, it goes to public or private non-commercial education institutions, healthcare providers and libraries. All other applicants get whatever pennies are left.

In the letter, the FCC estimated that the cost of the Reimbursement Program amounts to $4.98 billion – of which Congress has appropriated $1.9 billion.

But as it turns out, after the first tranche of payments there is no money left. In fact, the current funding of $1.9 billion only covers 39.5 percent of the first tranche’s $4.7 billion dollar cost. If left unfunded, no entity will be fully reimbursed for ripping out Chinese kit.

“Because demand within the first prioritization group exceeds available funds for the Reimbursement Program, the Commission will prorate reimbursement funds equally to each eligible applicant in the first prioritization group,” explained Rosenworcel.

Zero applicants fell into the second category – education institutions, health care providers and libraries. The remaining $280 million reflects the third category of “all other applicants.”

The decision to help small to medium US carriers comply with the Secure and Trusted Communications Networks Act – which requires removing and replacing Huawei and ZTE network equipment from US systems – was made in July 2021.

The FCC disclosed last month it received 181 applications for access to the funds, totaling $5.6 billion – of which 122 applications showed deficiencies like insufficient cost estimates or support materials to justify cost claims. ®