What ACS vendors need to know about the FCC Extract, Replace, and Refund Program

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On August 3, 2021, the Federal Communications Commission (FCC) Wireline Competition Bureau (WCB) adopted the final procedures (refund procedures) for the refund program created under the Secure Communications Networks Act, 2019 and reliable (law on secure networks), as amended by the 2021 consolidated finance law (CAA).

These procedures address the reimbursement function of the Secure Networks Act’s rip-and-replace mandate, which requires communications providers who receive FCC grant funds to remove identified equipment and services from Huawei Technologies Company ( Huawei) and ZTE Corporation (ZTE) for their communications. networks. Refund procedures are closely related to the FCC’s Third Report and Order (Third R&O), published in the Federal Register on August 23, 2021, effective October 22, 2021, which, among other things, expands the pool of eligible network providers refunds. and revise the reimbursement prioritization system.

With these publications, a key step remains to be finalized within the framework of the law on secure networks: the setting of the opening date of the window for submitting requests for the Reimbursement Program. When that date, currently scheduled for October 29, 2021, is officially announced, the countdown will begin for the completion of nominations and the completion of all mining and replacement work.

Background

The Secure Networks Act was enacted on March 12, 2020, with the goal of purging equipment and services that pose national security risks emerging from subsidized communications networks in the United States. To achieve this goal, the law included a prohibition on using FCC grant funds to purchase, rent, lease, procure or maintain communications equipment or services listed in a covered list. 1 developed by the FCC. The law also created a reimbursement program to help eligible providers of “advanced communication services” (ACS providers) recover the costs of removing, replacing and destroying (“rip-and-replace”) elements of the system. list covered.

In two designation orders effective June 30, 2020 (which we discussed here), the FCC’s Office of Public Safety and Homeland Security confirmed that Huawei and ZTE equipment and services, including all parents, affiliates, and subsidiaries, posed unacceptable risks to the national security of the United States. and, therefore, included these entities on the covered list. The Second FCC Supply Chain Report and Order 2020 (Second R&O) (which we discussed here) set out rules for the creation and maintenance of the Covered List, the Replacement Mandate, and replacement and reimbursement program, including a plan to prioritize funding in funds allocated to the event are insufficient to cover program costs.

CAA 2021 revised certain aspects of the Secure Networks Act and allocated US $ 1.9 billion to fund the reimbursement program. As a result, the FCC had to reconcile its second R&O with the CAA, which led to the adoption of the third R&O.

The CAA has refined and expanded the number of eligible ACS suppliers and provided that the covered equipment and services eligible for appropriate funding under the reimbursement program are limited to all Huawei and ZTE equipment and services acquired before the date of the orders. designation date of June 30, 2020 (instead of the previously specified deadline of August 14, 2018).2 CAA has also created a new reimbursement prioritization schedule.

Eligible suppliers

Under CAA and Third R&O, ACS providers eligible for the Reimbursement Program include anyone who:

(a) provides “high-speed switched broadband telecommunications capability which enables users to transmit and receive high quality voice, data, graphics and video telecommunications using any technology with high speeds connection of at least 200 kbit / s in both directions ”(also referred to as“ advanced communications service ”or“ advanced telecommunications capability ”);

(b) to customers in the United States; and

(c) has 10 million customers or less.

Prior to CAA and Third R&O, eligibility was limited to two million customers or less.

CAA and Third R&O further clarify that ACS providers under the Secure Networks Act include accredited non-commercial public or private educational institutions or consortia thereof that are already licensed in the FCC Broadband Educational Service (EBS) and provide their own educational broadband based facilities. services of at least 200 kbps one way to end users. The changes also clarify that ACS providers include healthcare providers and libraries or their consortia that provide advanced communication services of at least 200 kbps in one direction to end users.

CAA and Third R&O have not changed the underlying parameters of the communications service or the way customer quantities are counted among ACS Affiliate Suppliers to determine eligibility. Additionally, the expansion of Reimbursement Program eligibility has not resulted in a change to the term “advanced communications service provider” for any other section of the FCC Rules.

In the third R&R, the FCC predicted that the increase in the number of eligible participants by the CAA “will encompass the vast majority of participants. [broadband] providers ”, but broadband service providers interested in the reimbursement program should perform their own eligibility analyzes. This includes first checking whether they meet the above definition of an “advanced communications service provider”; second, to confirm that their customers are US customers; and third, confirm that these customers are within the customer limit.

ACS providers under the Secure Networks Act are assessed against the same standard as ACS providers subject to the filing requirements of FCC Form 477 “Local Telephone and Broadband Reporting”,3 so many potential applicants can respond to the first part quickly by confirming that they have completed the most recent Form 477. Additional reimbursement program eligibility review tools include confirmation of current Qualifying Telecommunications Operator (ETC) status under the Universal Service Support (USF) program or EBS license holder status. . Intermediate providers and fixed or mobile broadband service providers that directly serve end users but are not part of these named programs are still likely to be eligible if they respect connection speed, customer location and the limits of the client.4

If eligible, participation in the reimbursement program is not compulsory. But once an ACS provider applies for the reimbursement program and CAT approves the funding, they must track and remove all Huawei and ZTE equipment. ACS vendors who are currently participating in the USF program but do not wish to remove Huawei or ZTE equipment will not be eligible for additional USF funding.

Prioritization schedule

The second R&O had considered prioritizing some CTE requests for core network expenses over non-ETC and non-network expenses in case the reimbursement funding did not meet the needs. In the context of CAA and Third R&O, the central networks and the ETC status have no particular weight. Instead, ACS providers with two million clients or less will be given priority, followed by eligible providers which are eligible educational institutions, healthcare providers, and libraries, followed by all eligible ACS providers. remaining.

Qualifying providers in the second category (education, healthcare, libraries) will be given priority in the first category if they have two million customers or less. The revised schedule also eliminates the FCC’s earlier proposal to prioritize certain subgroups within larger priority groups.

Refund requests

Refund procedures include changes and finalize:

Among these are clarifications regarding the extent to which technology upgrades are reimbursable: whether a specific replacement or upgrade is reimbursable will be considered against a standard of “costs reasonably incurred”, taking into account take into account that the equipment or service is “reasonably necessary” for the completion of the extraction and replacement work. The FCC has generally determined, for example, that the replacement of the microwave link with a fiber link is non-refundable because such substitution is not “necessary” for the removal and replacement of the equipment and products. covered services.5

Several elements of the FCC 5600 form are noteworthy, such as the level of detail it asks for for removed equipment and replacement equipment, as well as the form’s sharp reminder that not everything that is removed can be replaced with new Huawei or ZTE equipment or services.

Filing and examination of the reimbursement request

A supplier’s eligibility, its priority category, and the maximum reimbursement funds it can receive will be determined for all ACS suppliers through the same process and within the same timeframe. Suppliers who believe they are eligible should prepare and submit the FCC 5600 form through an online portal in the filing window, which will likely be a 60-day period (increased from previous projections of a 30-day window). opening from October. 29, 2021.

After the filing window closes, WCB will review all applications jointly to ensure that allocated funds are distributed according to the priority categories and to determine the allocation amounts for each ACS provider. WCB will have at least 90 days and up to 135 days to complete its review and decisions.

After the filing window closes, ACS providers will each have only one opportunity to remedy a materially deficient request and only a limited ability to modify or supplement a request, with no ability to request funding levels. increased. In light of these restrictions, ACS providers should review each form and all associated instructions carefully and as soon as possible. Suppliers should start compiling the necessary information now so that they are ready to submit full claims through the online portal before the filing window closes.

Once each ACS provider has received their allocation determination, incurred their first replacement program costs, and received their first funding disbursement against a reimbursement request, they will have one calendar year to complete the withdrawal, the replacement and disposal of all covered equipment. and the services of its network.

In our next replacement notice, we’ll discuss the reimbursement program filing requirements, specifically Form 5600, and the timeframes that accompany it. We will also review the catalog of costs and costs eligible for reimbursement with additional details, as well as the procedure notes covered in the third R&R and reimbursement procedures.


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