2904 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 1 and 54 

[WC Docket No. 18–89; FCC 20–176; FRS 

17361] 

Protecting Against National Security 

Threats to the Communications Supply 

Chain Through FCC Programs 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) establishes rules to 

publish a list of covered 

communications equipment and 

services determined to be a risk to 

national security. Eligible 

telecommunications carriers (ETCs) that 

receive universal service funding to 

provide service in remote areas of the 

country must remove such equipment or 

services from their networks and 

properly dispose of it. This document 

also establishes the Secure and Trusted 

Communications Networks 

Reimbursement Program, which will 

provide funds to smaller providers of 

advanced communications services for 

the removal and replacement of covered 

communications equipment and 

services, conditioned on the 

appropriation of funds by Congress. 

Lastly, all providers of advanced 

communications services must report 

whether their networks include any 

covered communications equipment or 

services acquired after August 14, 2018. 

DATES: Effective March 15, 2021, except 

for amendatory instruction 3 adding 

§§ 1.50004(c), (d)(1), (g), (h)(2), (j) 

through (n); amendatory instruction 5 

adding § 1.50007; and amendatory 

instruction 7 adding § 54.11. The 

Commission will publish a document in 

the Federal Register announcing the 

effective date of those amendments. 

FOR FURTHER INFORMATION CONTACT: For 

further information, please contact 

Brian Cruikshank, Competition Policy 

Division, Wireline Competition Bureau, 

at brian.cruikshank@fcc.gov. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Second 

Report and Order in WC Docket No. 18– 

89; FCC 20–176, adopted on December 

10, 2020, and released on December 11, 

2020. The full text of this document is 

available for public inspection on the 

Commission’s website at https://

www.fcc.gov/document/fcc-adoptsrules-secure-communications-networksand-supply-chain-0. 

I. Introduction 

1. The Commission plays an 

important role in protecting America’s 

communications networks and the 

Commission takes further steps toward 

securing its communications networks 

by implementing the Secure and 

Trusted Communications Networks Act 

of 2019 (Secure Networks Act). The 

Commission first adopts a rule that 

requires ETCs to remove and replace 

covered equipment from their networks. 

Second, the Commission establishes the 

Secure and Trusted Communications 

Networks Reimbursement Program to 

subsidize smaller carriers to remove and 

replace covered equipment, once 

Congress appropriates at least $1.6 

billion that Commission staff estimate 

will be needed to reimburse providers 

eligible under current law. Third, the 

Commission establishes the 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 or the security and safety of 

United States persons and prohibit 

Universal Service Fund (USF) support 

from being used for such covered 

equipment or services. Last, the 

Commission adopts a reporting 

requirement to ensure it is informed 

about the ongoing presence of covered 

equipment in communications 

networks. 

II. Report and Order 

2. In the 2019 Supply Chain Further 

Notice, 85 FR 277, January 3, 2020, the 

Commission sought comment on the 

establishment of a reimbursement 

program to ‘‘offset reasonable costs’’ for 

ETCs to remove and replace covered 

communications equipment and 

services from their networks. The 

Wireline Competition Bureau (WCB) 

separately sought comment on section 4 

of the Secure Networks Act, which 

created the Secure and Trusted 

Communications Networks 

Reimbursement Program. In the 2020 

Supply Chain Second Further Notice, 85 

FR 48134, August 10, 2020, the 

Commission sought comment on how to 

implement the various provisions of the 

Secure Networks Act into the 

Commission’s ongoing Supply Chain 

proceeding. Based on the Commission’s 

review of the record created in response, 

it adopts several rules to protect the 

security of its communications networks 

and implement the Secure Networks 

Act. 

3. In the 2019 Supply Chain Further 

Notice, the Commission proposed to 

require ETCs receiving USF support to 

remove and replace covered equipment 

and services from their network 

operations, contingent on the 

availability of a funded reimbursement 

program. The Commission based the 

scope of the proposed requirement on 

its view that sections 201(b) and 254 of 

the Communications Act provides the 

Commission the legal authority to 

condition receipt of USF support to 

advance universal service principles 

grounded in the provision of ‘‘[q]uality 

services . . . at just, reasonable, and 

affordable rates,’’ while furthering the 

public interest and the promotion of 

nationwide access to advanced 

telecommunications and information 

services, and sought comment on that 

rationale. Following the passage of the 

Secure Networks Act, which, among 

other provisions, established a 

reimbursement program for the removal, 

replacement, and disposal of covered 

equipment and services, the 

Commission modified its proposal and 

sought further comment on 

implementation of the Secure Networks 

Act and, specifically, whether it 

provided the Commission independent 

authority to require ETCs or other 

providers to remove and replace 

equipment on the Covered List. 

4. Consistent with the Commission’s 

proposal in the 2019 Supply Chain 

Further Notice and the directives of the 

Secure Networks Act, it requires 

recipients of reimbursement funds 

under the Reimbursement Program and 

ETCs receiving USF support to remove 

and replace from their network and 

operations environments equipment and 

services included on the covered list 

required by section 2 of the Secure 

Networks Act (Covered List). The 

Commission conditions this obligation 

to remove and replace covered 

equipment and services upon a 

congressional appropriation to fund the 

Reimbursement Program. The 

Commission also adopts deadlines 

consistent with those for reimbursement 

funding recipients. This requirement, 

and the steps the Commission takes 

towards its implementation, will further 

its goal of protecting its 

communications networks and supply 

chains from communications equipment 

and services that pose a national 

security threat while facilitating the 

transition to safer and more secure 

alternatives. 

5. The obligation to remove and 

replace covered equipment and services 

on the Covered List applies to recipients 

of reimbursement funds from the 

Reimbursement Program and ETCs 

receiving universal service support. The 

Commission’s authority to require these 

entities to remove and replace covered 

equipment and services arises from both 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2905 

the Secure Networks Act and sections 

201(b) and 254(b) of the 

Communications Act. By limiting the 

requirement to these recipients, the 

Commission protects the nation’s 

networks from a substantial amount of 

equipment and services that pose a 

threat to the security of its 

communications networks while 

minimizing the financial and logistical 

challenges of removal and replacement 

on providers. 

6. The Secure Networks Act requires 

any recipient of Reimbursement 

Program funding to remove all existing 

covered equipment or services in their 

networks as a condition of receiving 

reimbursement funds. The Secure 

Networks Act prohibits recipients of 

reimbursement funds from purchasing, 

renting, leasing, or otherwise obtaining 

covered equipment or services with 

reimbursement funds or any other 

funding, including private funds. 

Recipients must also certify that they 

will permanently remove, replace, and 

dispose of all covered equipment or 

services that are in the recipient’s 

network as of the date of submission of 

the application for reimbursement. Also, 

recipients must certify that they have 

fully complied, or are in the process of 

complying, with all terms and 

conditions of the Reimbursement 

Program, all commitments made in the 

application, and the timeline submitted 

with the application. These provisions 

indicate congressional intent that 

recipients of Reimbursement Program 

funds are to be included within the 

scope of the Commission’s remove-andreplace rule and must remove covered 

equipment. Additionally, commenters 

support a broad application of the 

Commission’s remove-and-replace 

requirement to entities that meet the 

definitions contained in the Secure 

Networks Act. Because section 4 of the 

Secure Networks Act requires the 

removal and replacement of covered 

equipment and services from recipients’ 

networks, the Commission finds 

sufficient support both in the language 

of the statute and the record to include 

recipients of reimbursement funding 

from the Reimbursement Program in the 

Commission’s remove-and-replace 

requirement. No commenters in the 

record oppose this conclusion. While 

Huawei Technologies Company 

(Huawei) argues that the Secure 

Networks Act does not grant the 

Commission authority to mandate 

removal and replacement as proposed in 

the 2019 Supply Chain Further Notice, 

it does not dispute that recipients of 

funding through the Reimbursement 

Program, who volunteer to participate in 

the Program, are required to remove 

covered equipment and services as a 

condition of receiving funding. 

7. To ensure that USF funds are not 

supporting covered equipment and 

services, and that the Commission’s rule 

effectively and broadly removes covered 

equipment and services from recipients’ 

networks to the extent permissible 

under its legal authority, the 

Commission obligates ETCs receiving 

USF support to remove covered 

equipment and services throughout 

their entire network, not just in 

jurisdictions where they operate as an 

ETC, and irrespective of whether they 

receive reimbursement under the 

Reimbursement Program. This broad 

approach to removal greatly mitigates 

the identified risks to national security 

underlying both the Commission’s rules 

and recognized by Congress. However, 

the scope of the rule does not extend to 

affiliates and subsidiaries of ETCs. The 

Commission’s decision to require ETCs 

that receive USF support to remove 

covered equipment and services is also 

consistent with the scope of removal 

under the Reimbursement Program 

recipient obligations in the Secure 

Networks Act, which similarly requires 

recipients to permanently remove 

covered communications equipment or 

services contained on the Covered List 

from their networks. By aligning the 

scope of the Commission’s removal 

requirement with the obligations under 

section 4 of the Secure Networks Act, its 

rules will best effectuate the 

congressional intent to ‘‘mitigat[e] 

threats posed by vulnerable 

communications equipment and 

services’’ throughout U.S. networks. 

8. The Commission conditions the 

implementation of its remove-andreplace rule on the appropriation of 

funding by Congress for the 

Reimbursement Program, to ensure 

sufficient funding is available to pay for 

the removal and replacement of covered 

equipment. Several commenters support 

this proposal and encourage the 

Commission to wait until Congress has 

appropriated funding, and others 

express concern that any obligation to 

remove and replace covered equipment 

and services without reimbursement 

amounts to an unfunded mandate. 

9. Pursuant to the Secure Networks 

Act, only providers with two million or 

fewer broadband customers are eligible 

for the Reimbursement Program, but the 

Commission finds no reason to 

accordingly limit the applicability of its 

remove-and-replace rule to only those 

ETCs which are eligible for the 

Reimbursement Program. Although the 

data shows the vast majority of ETCs 

will be eligible to receive funding under 

the Reimbursement Program, in line 

with the intended scope of eligible 

entities as set forth by Congress under 

the Secure Networks Act, some large 

ETCs receiving USF support may not be 

eligible for reimbursement under the 

Reimbursement Program due to the size 

of their broadband customer base. ETCs 

are providers of ‘‘advanced 

communications services’’ and, as such, 

are subject to the provisions of the 

Secure Networks Act, including 

prohibitions on Federal subsidy 

spending in section 3 and 

reimbursement in section 4 of the 

Secure Networks Act, where eligible. 

Regardless, the House Report suggests 

that Congress intended to focus on 

providing reimbursement for small 

providers, noting that larger 

communications companies ‘‘generally 

have avoided installing and using 

Huawei and other suspect foreign 

equipment in their networks,’’ while 

smaller providers with limited resources 

may have purchased such equipment 

because it was less expensive or they 

were unaware of the security risks, or 

both. Based on the data submitted 

pursuant to the Information Collection 

and subscription data from FCC Form 

477, only two ETCs using suspect 

foreign equipment appear to fall outside 

the scope of reimbursement eligibility 

due to the number of broadband 

customers. Larger ETCs are also more 

likely to have resources to pay for 

removal, replacement, and disposal of 

covered communications equipment 

and services themselves, and not need 

taxpayer money to accomplish the 

objectives of the Commission’s removeand-replace requirement. The 

Commission clarifies that ETCs 

receiving USF support that do not 

receive funding through the 

Reimbursement Program are required to 

remove covered communications 

equipment and services from their 

networks, but whether they replace such 

equipment and services with 

alternatives from the Replacement List 

is within their discretion. Furthermore, 

nothing in the Secure Networks Act 

prevents the Commission from requiring 

removal from entities beyond those who 

receive reimbursement funding. Because 

of the serious risks that untrusted 

participants in the Commission’s supply 

chain pose to the Commission’s 

communications networks, the benefits 

to our national security of removing 

covered equipment and services from 

the Commission’s communications 

networks far outweigh the burdens that 

compliance with the requirement may 

impose on a small number of large 

ETCs. 

2906 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

10. The Commission further clarifies 

that, consistent with the requirements 

for participation in the Reimbursement 

Program under the Secure Networks 

Act, it requires all ETCs receiving USF 

support to dispose of the removed 

covered equipment and services rather 

than resell, donate, or trade them. 

Similar to other applications of the rule, 

such as the certification requirement, 

this requirement synchronizes the 

disposal requirements for ETC 

recipients of USF support with those 

applicable to other reimbursement 

recipients and minimizes any burdens 

that may result from the administration 

of disparate regimes. Furthermore, 

allowing ETCs that receive USF support 

to resell covered equipment and 

services removed from their networks 

undermines the effectiveness of the rule 

and fails to effectively eliminate those 

products that pose national security 

risks from the Commission’s 

communications networks and supply 

chain. 

11. The application of the 

Commission’s remove-and-replace 

requirement to both ETCs receiving USF 

support and recipients of 

reimbursement under the 

Reimbursement Program appropriately 

considers the benefits to our national 

security of a broader approach against 

the burdens to remove and replace 

covered communications equipment 

and services from networks. The 

Commission recognizes that the 

presence of products in 

communications networks that pose 

risks to our national security is not 

limited to ETCs and believe that the 

application of its remove-and-replace 

requirement to recipients of 

reimbursement funding in addition to 

ETCs receiving USF support 

encompasses a wide range of entities 

whose networks may contain covered 

equipment or services. Furthermore, 

while some commenters support an 

expansive application of the removeand-replace rule to require all entities to 

replace covered equipment or services, 

rather than just the recipients described 

in this document, the Commission finds 

that the slightly more limited scope of 

its rule not only covers entities with 

flawed equipment and services, it also 

best captures the broadest application 

while staying within the bounds of the 

Commission’s legal authority. Some 

commenters representing non-ETC USF 

recipients such as schools, libraries, and 

rural healthcare providers favor 

expanding the remove-and-replace 

requirement to non-ETC USF recipients 

because of the cyberthreats such 

recipients face when compromised 

equipment and services remain in their 

networks. While the Commission 

recognizes that the continued existence 

of such untrusted products in its 

communications networks and supply 

chains does introduce risks, it must, as 

USTelecom posits, consider the ‘‘large 

administrative burdens’’ that inclusion 

of non-ETC USF recipients would 

impose against the proportionate impact 

on national security. The Commission 

finds that limiting the requirement to 

recipients of the Reimbursement 

Program and ETC recipients of USF 

support, rather than all USF recipients, 

reduces the administrative burdens of 

removing and replacing covered 

equipment and services on non-ETC 

USF recipients while reducing national 

security threats to its communications 

supply chain. Eligible non-ETC USF 

recipients may voluntarily participate in 

the Reimbursement Program, which 

would subject them to the remove-andreplace requirement but also allow them 

to receive reimbursement for removal, 

replacement, and disposal of covered 

equipment and services; otherwise, nonETC USF recipients are under no 

obligation to remove or replace covered 

equipment or services from their 

networks. The Commission draws this 

important distinction to avoid imposing 

an unfunded mandate on non-ETC USF 

recipients were the Commission to 

require the removal and replacement of 

covered equipment when such 

recipients are not eligible to participate 

in the Reimbursement Program. 

Nevertheless, because the record 

indicates very little covered equipment 

outside the USF programs requiring an 

ETC designation, the Commission will 

closely monitor future developments, 

including through the information 

collection adopted pursuant to section 5 

of the Secure Networks Act, to 

determine whether addressing non-ETC 

USF recipients is necessary and 

appropriate. This information collection 

applies to all providers of advanced 

communications service, unlike the 

Commission’s previous information 

collection adopted in the 2019 Supply 

Chain Information Collection Order, 85 

FR 230, January 3, 2020, which applied 

only to ETCs, thus providing a more 

expanded and comprehensive 

awareness of covered communications 

equipment and services in networks. 

12. Legal Authority. A variety of 

separate and independent statutory 

provisions provide the Commission 

with the appropriate authority and 

ability to impose a remove-and-replace 

requirement. Section 4 of the Secure 

Networks Act expressly requires 

recipients of Reimbursement Program 

funding to ‘‘permanently remove[ ]’’ and 

replace ‘‘all covered communications 

equipment or services’’ in their 

networks as a condition of receiving 

reimbursement funds. The Secure 

Networks Act requires applicants to 

certify that they will permanently 

remove, replace, and dispose of covered 

equipment or services in the recipient’s 

network as of the date of submission of 

the application for reimbursement and 

further requires recipients to submit a 

final certification to the Commission 

that they have permanently removed, 

replaced, and disposed of, or are in the 

process of doing so, all covered 

communications equipment or services 

from their networks. Relatedly, the 

Secure Networks Act prohibits 

recipients of reimbursement funds from 

purchasing, renting, leasing, or 

otherwise obtaining covered equipment 

or services with reimbursement funds or 

any other funding, including private 

funds, indicating congressional intent to 

have covered equipment and services 

eliminated from recipients’ networks as 

a condition of receiving funding. 

13. The requirement adopted is 

similarly consistent with the John S. 

McCain National Defense Authorization 

Act for Fiscal Year 2019 (2019 NDAA), 

which directs the Commission to 

‘‘prioritize funding and technical 

support to assist affected . . . entities to 

transition from covered 

communications equipment [as defined 

by the statute], and to ensure that 

communications service to users and 

customers is sustained.’’ While one 

commenter indicated that the 

Commission could rely on the 2019 

NDAA to obligate removal and 

replacement of covered equipment and 

services, it finds that the provisions of 

the Secure Networks Act, discussed in 

this document, builds upon the goals of 

the 2019 NDAA and provides the 

Commission with express authority to 

require removal and replacement. As 

the Commission finds they have 

sufficient authority under sections 

201(b) and 254 of the Communications 

Act and various provisions of the Secure 

Networks Act, it needs not consider 

whether the Communications 

Assistance and Law Enforcement Act or 

sections 316 or 214 of the 

Communications Act provide a legal 

basis for regulation. 

14. In addition, the Communications 

Act provides legal authority for the 

application of the Commission’s rule to 

ETCs that receive USF support. As the 

U.S. Court of Appeals for the Tenth 

Circuit has held, section 254(e) is 

reasonably interpreted as allowing the 

Commission ‘‘to specify what a USF 

recipient may or must do with the 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2907 

funds,’’ consistent with the policy 

principles outlined in section 254(b). 

Section 254(b) requires the Commission 

to base its universal service policies on 

the principles of providing ‘‘[q]uality 

services . . . at just, reasonable, and 

affordable rates,’’ as well as promoting 

‘‘[a]ccess to advanced 

telecommunications and information 

services . . . in all regions of the 

Nation.’’ Section 201(b) authorizes the 

Commission to ‘‘prescribe such rules as 

may be necessary in the public interest 

to carry out the provisions of the 

[Communications] Act.’’ By requiring 

ETCs that receive USF support to 

remove covered equipment and 

services, the Commission further 

advances the provision of quality 

services nationwide, and ensure the 

safety, reliability, and security of the 

nation’s communications networks, 

which is necessary in the public interest 

in fulfillment of the purpose of the 

Communications Act. 

15. The record also supports the 

Commission’s determination that the 

Communications Act provides the 

Commission broad legal authority to 

require removal of covered equipment 

and services by ETCs that receive USF 

support. Telecommunications Industry 

Association states that the Commission 

is ‘‘properly acting within its assigned 

responsibilities by promulgating rules 

that place conditions and restrictions on 

use of USF support.’’ WTA and NCTA 

both note that the Commission has clear 

and well-established authority to 

impose public interest conditions on the 

use of USF. Furthermore, the provisions 

of the Communications Act tied to the 

Commission’s administration of 

universal service programs provide 

well-established authority for imposing 

remove-and-replace requirements on 

ETCs receiving universal service funds. 

16. The Commission rejects 

arguments that it lacks the authority to 

mandate removal and replacement of 

covered equipment and services. 

Huawei asserts that neither the Secure 

Networks Act nor any other statute 

provides the requisite authority to 

impose a remove-and-replace 

requirement. According to Huawei, 

nothing in the Secure Networks Act 

requires removal and replacement, nor 

does the Reimbursement Program, 

which is voluntary, mandate removal. 

The Commission disagrees. The Secure 

Networks Act conditions receipt of 

reimbursement funds on removal and 

disposal of all covered equipment from 

the recipient’s network; put differently, 

section 4 obligates recipients of 

reimbursement funds to certify to the 

removal of all covered equipment and 

services from their network, then 

provides a means by which to replace 

such equipment and services through 

reimbursement. While providers’ 

participation in the Reimbursement 

Program is not mandatory, the Secure 

Networks Act requires the Commission 

to mandate removal of covered 

equipment and services by any provider 

who does choose to participate. 

17. The Commission also rejects 

International Technology and Trade 

Associates, Inc. (ITTA) and Huawei’s 

arguments that the Communications Act 

does not provide the Commission legal 

authority to adopt its remove-andreplace rule. ITTA argues that the 

proposed requirement is beyond the 

Commission’s authority under section 

254 of the Communications Act. Huawei 

argues that the section 254(b) principles 

upon which the Commission must ‘‘base 

policies for the preservation and 

advancement of universal service’’ do 

not include the promotion of national 

security or equipment regulation 

applied to a subset of USF recipients. 

Conditioning the receipt of USF support 

on removal of covered equipment and 

services, however, ensures against the 

substantial security risks associated 

with such equipment and services and 

thereby promotes access to ‘‘quality’’ 

advanced telecommunications and 

information services. Moreover, while 

Huawei contends that section 201(b) 

alone does not empower the 

Commission to enact rules in the 

absence of other authority under the 

Communications Act, it finds that the 

combination of these Communications 

Act provisions grants the Commission 

the authority to adopt a remove-andreplace requirement for ETCs receiving 

USF support. 

18. The Commission limits the scope 

of the remove-and-replace requirement 

to equipment and services on the 

Covered List. This approach aligns with 

the scope of equipment and services 

that Congress intended to restrict under 

the statute, as both the section 3 

prohibition and the section 4 

reimbursement eligibility apply to 

equipment and services added to the 

Covered List. The Commission’s rules 

on publication of the Covered List also 

incorporate notice for updates to the 

covered equipment or services listed, 

and entities will therefore have notice 

with regard to the scope of equipment 

or services they are subsequently 

required to remove and replace. The 

Commission finds that using the 

Covered List better aligns compliance 

with removal and replacement 

obligations to the administration of the 

Reimbursement Program and creates a 

bright-line determination for ETCs 

receiving USF support and 

reimbursement recipients to easily 

identify equipment and services to 

remove and replace from their networks. 

Furthermore, the Commission ties 

administration of the remove-andreplace requirement to the 

administration of the Reimbursement 

Program; therefore, it finds it will not be 

overly burdensome for entities, 

including smaller carriers, to identify, 

remove, replace, and discard covered 

equipment and services from their 

networks. 

19. Consistent with the provisions of 

the 2019 NDAA and Secure Networks 

Act, this rule represents a reasoned 

modification of the Commission’s 

proposal in the 2019 Supply Chain 

Further Notice. There, the Commission 

proposed to require the removal of all 

equipment and services from covered 

companies. To synchronize the 

requirement the Commission adopts 

with the scope of covered equipment 

and services under the Secure Networks 

Act, however, the Commission slightly 

modifies its rule from its original 

proposal. The Commission concludes 

upon review of the record in this 

proceeding and after considering the 

Secure Networks Act that its proposal 

risks being too broad and excessively 

burdensome. The Commission’s slightly 

modified and more narrowly tailored 

rule instead supports a risk-based 

assessment of problematic equipment 

and services within a network, 

consistent with the approach taken in 

section 889 of the 2019 NDAA and 

ultimately incorporated into section 2 of 

the Secure Networks Act, rather than 

the proposed blanket prohibition to all 

equipment and services produced by a 

manufacturer. The Covered List is 

limited to such equipment and services 

that the federal government, including 

the U.S. intelligence community, has 

identified as national security threats 

and that are placed at the most 

vulnerable spots in the Commission’s 

communications infrastructure. 

Equipment and services on the Covered 

List are also limited to certain 

operational functions such as routing or 

redirecting user data traffic, causing an 

advanced communications service 

provider’s network to be remotely 

disrupted, or otherwise posing an 

unacceptable risk to United States 

national security. Secure Networks Act 

sections 2(b)(2)(A)–(C). As such, 

concerns raised in the record regarding 

inclusion of Lifeline end-user 

equipment are moot because they are 

outside the scope of the Secure 

Networks Act. Therefore, the 

Commission believes limiting the 

remove-and-replace requirement to 

2908 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

equipment and services on the Covered 

List advances its goals of protecting its 

communications networks and supply 

chains from those products that pose a 

risk to our national security while 

minimizing the financial, 

administrative, and logistical efforts 

entities may face in compliance. The 

Commission clarifies that, while there is 

nothing in § 54.9 of the Commission’s 

rules that restricts the use of private 

funds to purchase, obtain, maintain, 

improve, modify, or otherwise support 

any equipment or services produced or 

provided by any company posing a 

national security threat to the integrity 

of communications networks or the 

communications supply chain, nor is 

there anything in § 54.10 of the 

Commission’s rules that restricts the use 

of private funds to purchase, rent, lease, 

or otherwise obtain any covered 

communications equipment or service, 

or maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained, as identified and 

published on the Covered List, 

compliance with the remove-andreplace mandate requires ETCs 

receiving USF support and recipients of 

Reimbursement Program funding to 

remove all covered equipment and 

services from their network operations 

and to certify compliance. To the extent 

there are equipment or services not on 

the Covered List but fall within the 

scope of § 54.9, entities may continue to 

use private funds to purchase, obtain, 

maintain, improve, modify, or otherwise 

support such equipment or services. 

20. USTelecom posits that the 

Commission’s proposal to implement 

section 3 of the Secure Networks Act 

‘‘stands to create a significant gap in the 

scope of equipment that could be 

subject to replacement funding’’ vis-a`- 

vis the scope of covered equipment 

under the two prohibitions. According 

to USTelecom, the Commission should 

either reconsider the scope of § 54.9 of 

the Commission’s rules to match the 

definition of ‘‘covered communications 

equipment or service’’ required by the 

Secure Networks Act, or it should 

clarify that equipment subject to § 54.9 

is also eligible for funded removal and 

reimbursement under the 

Reimbursement Program; otherwise, 

USTelecom argues, failure to do either 

creates a de facto unfunded mandate. 

21. The Commission disagrees with 

USTelecom that the interplay of § 54.9 

and Reimbursement Program eligibility 

amounts to an unfunded mandate. First, 

section 3 of the Secure Networks Act 

does not, in itself, require the removal 

and replacement of covered equipment 

or services; it merely prohibits 

prospective use of certain Federal 

subsidies to purchase, rent, lease, or 

otherwise obtain any covered 

communications equipment or service, 

or maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained on the Covered List. 

Second, the requirement to remove and 

replace, like the prohibition under 

§ 54.10 and the equipment and services 

eligible for reimbursement under the 

Reimbursement Program, only applies 

to the products and services contained 

on the Covered List. To the extent there 

is equipment or service that is 

prohibited under § 54.9 but is not on the 

Covered List, it is not subject to the 

remove-and-replace requirement, and 

thus that rule does not constitute an 

unfunded mandate. The Commission 

does, however, acknowledge that the 

creation of two prohibitions will 

establish different parameters for 

designation of covered equipment or 

services. 

22. The Commission disagrees with 

arguments raised by commenters that 

mandating removal and replacement is 

impermissibly retroactive or amounts to 

a regulatory taking. The Commission 

addresses these two concerns raised in 

the record in turn. 

23. Pursuant to the Administrative 

Procedure Act (APA), in the absence of 

express statutory authority to 

promulgate retroactive rules, the 

Commission may only adopt legislative 

rules that apply prospectively. The 

Commission notes that the Secure 

Networks Act requires it to publish a list 

of any covered communications 

equipment or service produced by an 

entity that poses an unacceptable risk to 

national security or the security and 

safety of United States persons and to 

establish a reimbursement program for 

removal of such equipment purchased, 

rented, leased, or otherwise obtained 

before August 14, 2018. The Secure 

Networks Act requires the Commission 

to publish the list of covered 

communications equipment or services 

to its website and to complete a 

rulemaking to implement the 

reimbursement program by March 12, 

2021. To the extent the rules adopted in 

this document serve to implement the 

rulemaking requirement of the Secure 

Networks Act, this APA limitation is 

inapplicable. A rule may be found to be 

impermissible as primarily retroactive 

‘‘if it impairs rights a party possessed 

when he acted, increases a party’s 

liability for past conduct, or imposes 

new duties with respect to transactions 

already completed.’’ Additionally, a rule 

may be impermissible for secondary 

retroactivity, in which rules affect the 

future legal consequence of past or 

ongoing actions. Where a rule has 

secondary retroactive effect, it is 

permissible unless such effect is 

unreasonable. And the Takings Clause 

of the Fifth Amendment prohibits the 

government from taking ‘‘private 

property . . . for public use, without 

just compensation.’’ Notably, and 

relevant to any takings arguments, 

Commission and judicial precedent 

have established that carriers have no 

vested property interest in USF support. 

24. Retroactivity Claims. Huawei 

argues that the Commission’s proposal 

to mandate replacement of covered 

equipment and services would impose 

primary retroactivity and therefore be 

invalid under the APA and, further, 

would impose secondary retroactivity 

by adversely and unreasonably altering 

future legal consequences of past 

actions. According to Huawei, requiring 

removal of equipment and services 

installed before the adoption of § 54.9 of 

the Commission’s rules would 

‘‘constitute a sanction on Huawei’s past 

conduct’’ and restrict its ability to 

supply equipment and services to 

telecommunications carriers. LATAM 

argues that a remove-and-replace 

requirement raises concerns about the 

retroactive impact of regulatory actions 

on private investment. PRTC states that 

the requirement raises the same 

prospective application concerns that 

the Commission found would not be 

impacted in the 2019 Supply Chain 

Order, 85 FR 230, January 3, 2020, when 

adopting § 54.9 of the Commission’s 

rules, thus contradicting the 

Commission’s arguments in that Order 

that the rule would only be applied 

prospectively and not require carriers to 

remove or stop using existing 

equipment or services. 

25. The Commission disagrees with 

commenters that the remove-andreplace requirement constitutes 

impermissible primary retroactivity. 

Huawei claims that the rule attaches a 

‘‘new disability’’ or ‘‘new burdens’’ to 

past conduct. In support of its argument, 

Huawei cites National Mining 

Association, where the D.C. Circuit 

found that a Department of Interior rule 

was invalid because it imposed a ‘‘new 

disability,’’ namely permit ineligibility, 

based upon ‘‘pre-rule violations by mine 

operators over whom permit operators 

acquired control before the rule’s 

effective date.’’ It also cites Rock of Ages 

Corp., where the Second Circuit found 

a new regulation from the Department of 

Labor to be impermissibly retroactive 

because it required on-going inspections 

at blasting sites beginning a year before 

the effective date of the regulation that 

imposed the inspection requirement, 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2909 

thus impermissibly imposing new 

duties on already completed 

transactions. Huawei also cites AMC 

Entertainment, Inc., where the Ninth 

Circuit invalidated an agency’s 

interpretation of a rule which would 

have required retrofitting movie theaters 

before the agency announced its 

interpretation. The Commission finds 

that Huawei’s interpretation of these 

cases is incorrect as applied to the 

requirement at hand. The standard for 

primary retroactivity assesses whether a 

rule has changed the past legal 

consequences of past actions. Unlike the 

factual circumstances in the cases cited 

by Huawei, the remove-and-replace 

requirement does not attach a ‘‘new 

disability’’ before the rule goes into 

effect. Carriers will not be penalized for 

having covered equipment or services in 

their networks before the removal and 

replacement rule is effective, nor do 

they have to take action prior to the rule 

taking effect; therefore, the rule has no 

primary retroactive effect. Thus, while it 

‘‘changes the legal landscape,’’ it has not 

‘‘rendered past actions illegal or 

otherwise sanctionable,’’ even as to the 

carriers themselves—much less those 

from whom the carriers purchase 

equipment not governed by such rules, 

such as Huawei. As to Huawei, the new 

rules have no application at all. They 

apply only to carriers, requiring them to 

replace Huawei equipment only if and 

after reimbursement to the carriers for 

doing so becomes available. While 

collateral effects on its contracts with 

such carriers would not be cognizable as 

primary retroactivity under NCTA, in 

any event Huawei makes no claim that 

the Commission’s action could result in 

any carrier claims against Huawei, 

much less any damages in support of 

any such claims notwithstanding the 

reimbursement program. 

26. While the effect of the removal 

and replacement rule may alter the 

future legal consequence to certain 

carriers of having certain equipment or 

services in a network by making what 

was once permissible equipment and 

services to operate now impermissible 

to retain going forward, ‘‘[i]t is often the 

case that a business will undertake a 

certain course of conduct based on the 

current law, and will then find its 

expectations frustrated when the law 

changes.’’ Such action ‘‘has never been 

thought to constitute retroactive 

lawmaking, and indeed most economic 

regulation would be unworkable if all 

laws disrupting prior expectations were 

deemed suspect.’’ 

27. The Commission similarly finds 

Huawei’s arguments regarding 

secondary retroactivity unpersuasive. 

Huawei argues that to compel 

equipment replacement would impose 

unreasonable secondary retroactivity on 

carriers and suppliers ‘‘because such a 

requirement would adversely and 

unreasonably alter the future legal 

consequences of past actions’’ and 

render covered equipment ‘‘essentially 

useless.’’ However, ‘‘secondary 

activity—which occurs if an agency’s 

rule affects a regulated entity’s 

investment made in reliance on the 

regulatory status quo before the rule’s 

promulgation—will be upheld if it is 

reasonable.’’ First, the Commission 

disagrees with Huawei that this rule 

constitutes secondary retroactivity. The 

remove-and-replace requirement 

imposes a future obligation, albeit on 

existing property, by mandating 

removal, as well as replacement, of 

covered equipment and services; 

replacement can only occur once 

removal—a future action—occurs. As 

such, this requirement imposes a legal 

consequence on an action to occur at a 

future date, i.e., should a reimbursement 

recipient or an ETC receiving USF 

support retain covered equipment or 

services in its networks past the 

certification requirement deadline for 

the rule. And the Commission, in 

creating the Reimbursement Program, 

has sought to mitigate any harm that the 

future effect of the rule may incur. 

28. Second, even assuming arguendo 

that the removal-and-replacement 

requirement amounts to secondary 

retroactivity, it is reasonable and 

therefore permissible. The threat that 

the presence of covered equipment and 

services in the Commission’s 

communications networks poses to our 

national security necessitates the 

prompt removal and replacement of 

such equipment, thereby supporting 

that this requirement is not arbitrary 

and capricious. Courts have held that 

the Commission ‘‘is entitled to 

reconsider and revise its views as to the 

public interest and the means needed to 

protect that interest, though it must give 

a sufficient explanation of that change.’’ 

The rule the Commission adopts 

facilitates the transition away from such 

identified equipment and services that 

threaten our nation’s security to ensure 

entities are able to offer secure, reliable, 

and quality service over their networks. 

To that end, the Commission’s rule is no 

different than other regulatory 

requirements which require regulated 

entities to upgrade their networks for 

the improved provision of services. For 

example, the Commission may require a 

common carrier subject to section 214 of 

the Communications Act to ‘‘provide 

itself with adequate facilities for the 

expeditious and efficient performance of 

its service’’ which, for some carriers, 

could require an upgrade of their 

equipment. Similarly, the remove-andreplace rule requires recipients of 

reimbursement funding and ETCs 

receiving USF support—which are, in 

fact, common carriers—to effectively 

upgrade their networks by removing 

compromised products and services and 

thus improve the provision of quality 

services at just, reasonable, and 

affordable rates, in accordance with 

section 254 of the Communications Act. 

29. Third, providers may choose 

alternatives to removal and replacement 

of covered equipment and services to 

avoid compliance or avoid any 

perceived impact on private investment. 

Participation in the Reimbursement 

Program is voluntary; providers are 

under no obligation to accept 

reimbursement funding and the 

conditions associated with such 

support. Designation as an ETC, and the 

opportunity therefore to participate in 

USF programs, or acceptance of USF 

funds through those programs, is 

likewise voluntary, and providers that 

are currently designated as ETCs or that 

accept universal service funding may 

decline to participate in USF programs. 

To allow providers so inclined a 

reasonable opportunity to relinquish 

their ETC status or secure alternative 

funding to USF support, ETCs choosing 

this option must do so within one year 

after WCB issues a Public Notice 

announcing the acceptance of 

applications filed during the initial 

filing window to participate in the 

Reimbursement Program. A state 

commission, or the Commission in the 

case of a common carrier providing 

telephone exchange service and 

exchange access that is not subject to 

the jurisdiction of a state commission, 

shall permit an ETC to relinquish its 

designation as such in any area served 

by more than one ETC. This time period 

is consistent with the amount of time 

that carriers participating in the 

Reimbursement Program and for ETCs 

receiving USF support that retain their 

designation or continue to accept 

universal service funding have to 

comply with the remove-and-replace 

requirement. Finally, the Commission 

reiterates that the applicability of this 

rule is within the bounds of its legal 

authority and, as such, only extends to 

recipients of reimbursement funds and 

ETCs receiving USF support; beyond 

this, the rule imposes no restriction on 

Huawei’s ability to supply equipment 

and services to telecommunications 

carriers and other providers who are not 

subject to this requirement. ETCs that 

choose to forego their ETC designation 

2910 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

or disclaim USF support may avoid any 

impact that this rule may have on future 

legal consequences of past actions. 

While the rule no doubt may frustrate a 

business that undertook a course of 

conduct based on current law, only to 

have its expectations frustrated, when 

the law changes, ‘‘this has never been 

thought to constitute retroactive 

lawmaking.’’ 

30. Furthermore, the Commission 

disagrees with PRTC’s assertion that the 

rule it adopts raises the same concerns 

regarding prospective application that 

the Commission addressed when 

adopting § 54.9 in the 2019 Supply 

Chain Order. In that Order, the 

Commissions found that because the 

rule restricting use of USF support was 

prospective in effect, it therefore did 

‘‘not prohibit the use of existing services 

or equipment already deployed or in 

use.’’ That finding is not contradicted 

here. The prohibition contained in 

§ 54.9 of the Commission’s rules 

prospectively limits the use of future 

USF support, whereas the requirement 

to remove and replace obligates 

recipients of reimbursement funding 

and ETCs receiving USF support to take 

action to remove covered equipment 

and services from their networks. Not 

only do the regulations impose different 

obligations, but, as stated in this 

document, the future receipt of USF 

support is not mandatory. Therefore, 

under both rules, affected entities may 

decline to accept USF support and 

avoid compliance with either rule. 

31. Unconstitutional Taking. LATAM 

argues that the Commission’s removeand-replace requirement raises 

regulatory takings concerns. PRTC 

contends that this requirement raises 

the same regulatory takings arguments 

that the Commission addressed in the 

2019 Supply Chain Order. Huawei also 

argues that mandating removal and 

replacement would violate the Takings 

Clause and due process ‘‘because 

carriers have vested property interests 

in already-purchased equipment, and 

mandating its removal would deny all 

economically beneficial or productive 

use or all economically viable use of the 

equipment.’’ 

32. The Commission finds the 

arguments from LATAM, PRTC, and 

Huawei unpersuasive. As explained in 

the 2019 Supply Chain Order, universal 

service support recipients do not have a 

property interest in maintaining 

particular levels of support 

notwithstanding changes in the program 

rules. Nor is the Commission persuaded 

that the effects on carriers’ existing 

equipment represents a regulatory 

taking under the Penn Central 

framework. In assessing whether such a 

taking has occurred, courts consider: (1) 

The economic impact of the regulation 

on the regulated party; (2) the extent to 

which the regulation interferes with the 

regulated party’s reasonable investmentbacked expectations; and (3) the 

‘‘character’’ of the government action. 

First, the economic impact on carriers is 

minimal, especially for reimbursement 

recipients who are eligible to receive 

reimbursement for reasonable costs 

incurred to remove, replace, and 

dispose of covered equipment through 

the Reimbursement Program. For those 

ETCs receiving USF support that do not 

receive reimbursement funding, the 

impact to replace covered equipment 

and services should not be severe 

because larger entities, who would 

otherwise be ineligible for 

reimbursement, are less likely to have 

covered equipment or services in their 

networks and otherwise have more 

opportunity to bear the cost of any such 

replacement due to their size. Second, 

the rule should not upend reasonable 

investment-backed expectations, as 

providers have been aware of the 

designation of certain products and 

manufacturers as covered equipment or 

services since the passage of the 2019 

NDAA in 2018. And over the last 

decade, Congress and the Executive 

Branch have repeatedly stressed the 

importance of identifying and 

eliminating potential security 

vulnerabilities in communications 

networks and their supply chains. Third 

and finally, the requirement does not 

amount to a physical invasion of the 

property, especially when there is 

recourse for entities to relinquish their 

ETC designation or forego receiving 

future USF support in order to avoid 

any consequence of the rule upon 

physical property. 

33. As an alternative basis for the 

Commission’s conclusion, it is not 

persuaded that the regulatory takings 

precedent represents the appropriate 

manner of analyzing its action here. In 

particular, the restriction applies only as 

a condition on a provider’s continued 

participation in the federal universal 

service program, including receipt of 

compensation from the federal universal 

service support mechanisms. However, 

recipients of Reimbursement Program 

funding are prohibited from using 

funding, including private funds to 

purchase, rent, lease, or otherwise 

obtain any covered communications 

equipment or service. Even assuming 

arguendo that the restriction resulted in 

some effect on providers’ property 

interest in their existing equipment, 

there is a sufficient nexus and 

proportionality between the restriction 

and the providers’ participation in the 

USF programs. The restriction on use of 

universal service support for equipment 

and services that pose an ongoing 

security risk has a clear nexus to the 

Commission’s legitimate concerns, as 

explained in the 2019 Supply Chain 

Order. By targeting the providers’ 

actions only insofar as they would be 

using federal universal service support 

in a manner that perpetuates a security 

risk, the restriction is appropriately 

proportional to address that harm. 

34. Separately, the Commission 

observes that these arguments only 

focus on the removal of the equipment 

and disregard the support provided for 

the replacement of the equipment and 

the availability of ‘‘just compensation’’ 

through reimbursement appropriations. 

Eligibility for providers of advanced 

communications service to participate 

in the Reimbursement Program is 

expansive, and the vast majority of 

affected entities required to remove and 

replace covered equipment and services 

under the Commission’s rule by virtue 

of their continued receipt of universal 

service support will be eligible to 

receive reimbursement. Where 

recipients of reimbursement funding do 

have a property interest in the covered 

equipment the Commission requires 

them to remove, the Reimbursement 

Program offers just compensation. 

35. In the 2019 Supply Chain Further 

Notice, the Commission proposed 

making the remove-and-replace 

requirement contingent on the creation 

of a reimbursement program that would 

help ‘‘mitigate the impact on affected 

entities, and in particular small, rural 

entities.’’ Commenters supported this 

approach. Accordingly, the Commission 

will proceed as proposed and make 

compliance with the removal obligation 

that will coincide with the 

implementation of the Reimbursement 

Program, which the Commission 

separately establishes in the following. 

Specifically, the Commission will 

require ETC recipients of USF support 

to certify that they have complied with 

its new rule requiring the removal of 

equipment and services on the Covered 

List. The first certification will be 

required one year after WCB issues a 

Public Notice announcing the 

acceptance of applications filed during 

the initial filing window to participate 

in the Reimbursement Program. Once 

the one-year period has expired, ETCs 

receiving USF support will then need to 

certify going forward that they are not 

using equipment or services identified 

on the Covered List before receiving 

USF support each funding year. 

Participants in the Reimbursement 

Program will not need to certify 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2911 

compliance with the remove-andreplace rule until after the expiration of 

their removal, replacement, and 

disposal term. 

36. The Commission finds that 

adopting a uniform certification 

requirement and transition period will 

promote equitable compliance deadlines 

for all entities subject to the removeand-replace requirement, regardless of 

their participation in the 

Reimbursement Program. Additionally, 

as the threat to our national security is 

immediate, it better advances the 

Commission’s goals to require entities to 

remove and replace covered equipment 

and services consistent with the 

transition periods for reimbursement in 

the Reimbursement Program, rather than 

permitting them to wait until such 

products are at end-of-life or replaced in 

the ordinary course of business. 

37. The Secure Networks Act’s 

requirements apply to ‘‘communications 

equipment or service’’ and to providers 

of ‘‘advanced communications service.’’ 

Although the Secure Networks Act 

defines ‘‘communications equipment or 

service’’ as ‘‘any equipment or service 

that is essential to the provision of 

advanced communications service,’’ it 

does not define which factors make 

equipment or service ‘‘essential.’’ 

Similarly, the Secure Networks Act 

defines ‘‘advanced communications 

service’’ as the ‘‘advanced 

telecommunications capability’’ 

described in section 706 of the 

Telecommunications Act of 1996, which 

encompasses ‘‘high-speed, switched, 

broadband telecommunications 

capability that enables users to originate 

and receive high-quality voice, data, 

graphics, and video telecommunications 

using any technology,’’ but does not 

define how the Commission should 

determine what constitutes ‘‘high-speed, 

switched, broadband 

telecommunications capability.’’ In the 

2020 Supply Chain Second Further 

Notice, the Commission sought 

comment on how to interpret these two 

terms employed throughout the Secure 

Networks Act. 

38. Interpretations of 

‘‘communications equipment or 

service’’. Consistent with the 

Commission’s proposal in the 2020 

Supply Chain Second Further Notice, it 

interprets ‘‘communications equipment 

and service’’ as defined in section 9(4) 

to include all equipment or services 

used in fixed and mobile broadband 

networks, provided they include or use 

electronic components. Included in the 

definition of ‘‘communications 

services’’ is software and firmware used 

in broadband networks. This 

interpretation is consistent with 

Commission precedent regarding 

software’s potential security risk. Also 

included in this definition is any optical 

switching equipment or services that 

include or use electronic components. 

The Commission believes that all 

equipment or services that include or 

use electronic components can be 

reasonably considered essential to 

broadband networks, and it further 

believes that the Commission’s 

definition will provide a bright-line rule 

that will ease regulatory compliance and 

administrability. The Commission’s 

proposed definition received support 

from several commenters in the record, 

who agreed that it provides regulatory 

certainty and as one commenter 

explained, ‘‘would make it universally 

clear for compliance purposes.’’ RWA 

also supports the definition because it 

‘‘provides the FCC with the flexibility it 

needs as technology evolves so that 

regulations do not lag behind 

technological developments.’’ 

39. The Commission rejects 

arguments that it should interpret 

‘‘communications equipment or 

service’’ more broadly or narrowly. 

Although the Commission agrees with 

CCA that it ‘‘needs not adopt a cramped 

interpretation in order to implement the 

[Reimbursement] Program,’’ the 

definition is appropriately tailored 

because it provides clear and simple 

guidance to regulated parties while still 

covering any equipment and service that 

could potentially pose a threat to 

national security. The Commission’s 

decision to include in the definition of 

communications equipment or services 

any equipment or service that includes 

or uses electronic components does not 

alter or modify the statutory language, 

but instead interprets it in a way so as 

to ‘‘most accurately reflect[ ] the broad 

participant pool Congress intended for 

the program.’’ 

40. Alternatively, CTIA’s argument 

that the Commission’s definition is 

‘‘unduly broad’’ conflates its 

interpretation of ‘‘communications 

equipment or service’’ with the separate 

inquiry in section 2(b)(2) of the Secure 

Networks Act. Section 2(b)(2) provides 

that, relying solely on determinations 

made by a list of enumerated sources, 

the Commission shall publish on the 

Covered List communications 

equipment or service that meet specific 

criteria. CTIA would read out the 

difference between ‘‘communications 

equipment or service’’ in section 9(4) of 

the Secure Networks Act and section 

2(b)(2), which limits the Covered List, to 

communications equipment and 

services that possess certain 

capabilities. CTIA proposes to ‘‘narrow 

the scope of the ‘communications 

equipment or service’ ’’ because ‘‘not all 

equipment subcomponents are 

essential,’’ and asks the Commission to 

‘‘develop a risk-based analysis relevant 

to the core layer, distribution layer, and 

access layer.’’ The Commission 

disagrees because the Secure Networks 

Act already provides a definition for the 

subset of communications equipment 

and services that have been subjected to 

the section 2(b)(2) review. Section 9(5) 

defines ‘‘covered communications 

equipment or service’’ as ‘‘any 

communications equipment or service 

that is on the [Covered List] . . . ,’’ and, 

thus, subject to the section 2(b)(2) 

criteria. These factors, which determine 

which pieces of equipment or service 

should be considered ‘‘covered 

communications equipment and 

services,’’ and thus must be published 

on the Covered List, do not apply to the 

definition of ‘‘communications 

equipment and services.’’ 

41. Definition of ‘‘advanced 

communications service.’’ Consistent 

with the Commission’s proposal in the 

2020 Supply Chain Second Further 

Notice, it interprets ‘‘advanced 

communications service’’ for the 

purposes of the Secure Networks Act to 

include services with any connection of 

at least 200 kbps in either direction. No 

commenter opposed this definition. 

This interpretation had unanimous 

support in the record and is consistent 

with the Commission’s historic 

interpretation of section 706 of the 

Telecommunications Act. The 

Commission acknowledges that it has 

encouraged providers of advanced 

communications service to offer 

broadband service at greater speeds and 

adjusted over time its definition of 

advanced telecommunications 

capability in its annual Broadband 

Deployment Reports. However, the 

Commission’s interpretation in this 

proceeding covers a broader array of 

equipment and services, consistent with 

congressional intent to identify and 

remove insecure equipment and, 

therefore, it believes establishing a 

standard that captures this broader 

number of providers is appropriate. 

Using the standard will maximize 

program participation to include 

providers with older, legacy technology. 

42. The Commission agrees with Dell 

that its interpretation ‘‘would ensure 

that insecure equipment is not left in 

our nation’s interconnected broadband 

networks.’’ The 200 kbps threshold is a 

familiar benchmark to current providers 

of advanced communications services, 

as it matches the definition of 

‘‘broadband services’’ the Commission 

uses to determine which facilities-based 

broadband providers must file the 

2912 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

Commission’s FCC Form 477 and which 

helps determine the availability of 

advanced communications services 

throughout the country. The 

Commission does not modify the 

definition of ‘‘advanced 

communications service’’ for any other 

purposes other than interpreting the 

Secure Networks Act. Using this 

standard will also allow the 

Commission to leverage available 

information on FCC Form 477 filers to 

verify applicant eligibility. 

43. Section 2(a) of the Secure 

Networks Act directs the Commission to 

publish, no later than March 12, 2021, 

a list of covered communications 

equipment and services (Covered List). 

The Covered List, which will be 

publicly available, will serve as a 

reference for interested parties to 

indicate the communications equipment 

and services that certain providers must 

remove from their networks, as well as 

the equipment and services to which the 

section 3(a) prohibition applies, the 

communications equipment and 

services eligible for reimbursement 

pursuant to section 4, and the 

equipment and services that form the 

basis for the reporting requirements in 

section 5. 

44. Consistent with the clear direction 

in the Secure Networks Act and the 

Commission’s proposal in the 2020 

Supply Chain Second Further Notice, 

the Commission will publish on its 

website the Covered List of 

communications equipment or services 

determined to pose an unacceptable risk 

to the national security of the United 

States or the security and safety of 

United States persons. Section 2(c) of 

the Secure Networks Act states that the 

‘‘Commission shall place’’ on the 

Covered List ‘‘any communications 

equipment or service that poses an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons based solely on one or more of 

the following determinations,’’ and then 

lists four sources for such 

determinations: 

• ‘‘A specific determination made by 

any executive branch interagency body 

with appropriate national security 

expertise, including the Federal 

Acquisition Security Council’’; 

• ‘‘A specific determination made by 

the Department of Commerce pursuant 

to Executive Order No. 13873 . . . 

relating to securing the information and 

communications technology and 

services supply chain’’; 

• ‘‘The communications equipment 

or service being covered 

telecommunications equipment or 

services, as defined in section 889(f)(3)’’ 

of the 2019 NDAA; or 

• ‘‘A specific determination made by 

an appropriate national security 

agency.’’ The Act defines ‘‘appropriate 

national security agency’’ to include the 

Department of Homeland Security, the 

Department of Defense, the Office of the 

Director of National Intelligence, the 

National Security Agency, and the 

Federal Bureau of Investigation. 

45. Requirement to accept 

determinations. Consistent with the 

2020 Supply Chain Second Further 

Notice, the Commission interprets 

Congress’s use of the words ‘‘shall 

place’’ to mean it has no discretion to 

disregard determinations from these 

enumerated sources. Huawei agrees, and 

stated in its comments that ‘‘the Secure 

Networks Act’s use of the term ‘shall’ 

provides the Commission no discretion’’ 

when evaluating determinations for 

inclusion on the Covered List. The 

record supports the Commission’s 

interpretation. For example, USTelecom 

contends that ‘‘once one of the federal 

agencies, either enumerated or implied, 

make a granular determination about 

‘covered equipment’, the Commission is 

bound to accept it.’’ Similarly, NCTA 

explains that ‘‘[the] Secure Networks 

Act did not grant the Commission 

plenary authority to regulate the 

communications network supply chain 

based upon its own assessment of 

national security risks posed by covered 

equipment and services.’’ Thus, where 

there is a determination from one of 

these sources, the Commission must 

take action to publish or update the 

Covered List to incorporate 

communications equipment or services 

covered by that determination. While it 

is difficult for the Commission to 

calculate the national security benefits 

derived from removing covered 

communications equipment and 

services, the Secure Networks Act 

requires the Commission to rely on the 

judgment and expertise of those 

enumerated sources tasked with making 

this assessment. 

46. No deviation from enumerated 

sources. Consistent with the 

Commission’s proposal in the 2020 

Supply Chain Second Further Notice 

and the record, it interprets Congress’ 

use of the word ‘‘solely’’ in section 2(c) 

to mean the Commission can accept 

determinations only from these four 

categories of sources. ‘‘In taking action 

under subsection (b)(1), the Commission 

shall place on the list any 

communications equipment or service 

that poses an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons based solely on one or more of 

the following determinations . . . .’’ 

This interpretation is shared by multiple 

commenters, including USTelecom, 

NCTA, NTCA, CTIA, and Huawei. 

47. Determinations from any 

executive branch interagency body with 

appropriate national security expertise. 

The Secure Networks Act directs the 

Commission to rely on ‘‘a specific 

determination made by any executive 

branch interagency body with 

appropriate national security expertise, 

including the Federal Acquisition 

Security Council’’ to accept 

determinations. The Commission 

includes in this definition two crossgovernment groups: Team Telecom and 

the Committee on Foreign Investment in 

the United States (CFIUS), as these 

executive branch interagency bodies 

routinely provide expert advice to the 

Commission on national security-related 

questions. The members of Team 

Telecom are the Secretary of Defense, 

the Attorney General, the Secretary of 

Homeland Security, and the head of any 

other executive department or agency, 

or any Assistant to the President, as the 

President determines appropriate. The 

Executive Order establishing Team 

Telecom explained that Team Telecom 

was created to ‘‘assist the FCC in its 

public interest review of national 

security and law enforcement concerns 

that may be raised by foreign 

participation in the United States 

telecommunications services sector.’’ 

The Executive Order creating CFIUS 

authorized it to conduct inquiries ‘‘with 

respect to the potential national security 

risk posed by a transaction.’’ 

48. The Commission has no discretion 

to ignore determinations from CFIUS 

and Team Telecom because they are 

plainly ‘‘executive branch interagency 

bodies with appropriate national 

security expertise.’’ For example, Team 

Telecom and the economic agencies 

(Department of Commerce, U.S. Trade 

Representative, and Department of 

State), recently recommended in 2018 

that the Commission deny China Mobile 

USA’s section 214 application, finding 

that allowing China Mobile USA to 

‘‘offer telecommunications services as a 

common carrier between the United 

States and international countries . . . 

would pose substantial and 

unacceptable national security and law 

enforcement risks’’ because China 

Mobile USA is ‘‘subject to exploitation, 

influence, and control by the Chinese 

Government.’’ The Commission 

assessed this recommendation as part of 

its public interest analysis of the 

pending application and concluded that 

‘‘significant national security and law 

enforcement harms would arise from 

granting China Mobile USA an 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2913 

international section 214 authorization’’ 

and decided determined that a ‘‘grant of 

the application would result in 

substantial and serious national security 

and law enforcement risks.’’ And the 

Commission recently adopted rules 

streamlining the process by which it 

‘‘coordinates with [Team Telecom] for 

assessment of any national security, law 

enforcement, foreign policy, or trade 

policy issues regarding certain 

applications filed with the 

Commission.’’ 

49. The Commission therefore 

disagrees with CTIA and NTCA that 

findings from Team Telecom or CFIUS 

‘‘are not structured to make 

determinations of general supply chain 

risk,’’ because regardless of their 

structure, the Commission must 

incorporate any determinations they 

make into the Covered List. Huawei 

argues that relying on Team Telecom 

and CFIUS is unnecessary ‘‘given the 

involvement of the agencies that 

comprise CFIUS and Team Telecom in 

other relevant bodies identified in the 

Secure Networks Act.’’ But that 

argument fails to recognize that section 

2(c)(1) of the Secure Networks Act 

specifically includes executive branch 

interagency bodies with appropriate 

national security expertise. The 

Commission also disagrees with CTIA’s 

claim that determinations made by the 

[Federal Acquisition Security Council] 

should not ‘‘result in automatic listing 

of items on the Covered List’’ because 

the ‘‘FASC does not operate in a public 

fashion.’’ The Secure Networks Act 

specifically lists the Council as an 

executive branch interagency body with 

national security expertise, and the 

Commission has no authority to 

disregard Congress’s clear direction. 

Moreover, any additions the 

Commission makes to the Covered List 

will be made public. 

50. Determinations from the 

Department of Commerce. The Secure 

Networks Act directs the Commission to 

rely on determinations made by the 

Department of Commerce. Executive 

Order No. 13873 grants the Secretary of 

Commerce the authority to prohibit any 

transaction of any information and 

communications technology or service 

where the Secretary, in consultation 

with other relevant agency heads, 

determines that the transaction: (i) 

Involves property in which foreign 

country or national has an interest; (ii) 

includes information and 

communications technology or services 

designed, developed, manufactured, or 

supplied by persons owned by, 

controlled by, or subject to the 

jurisdiction or direction of a foreign 

adversary; and (iii) poses certain undue 

risks to the critical infrastructure or the 

digital economy in the United States or 

certain unacceptable risks to U.S. 

national security or U.S. persons. In 

November 2019, the Department of 

Commerce commenced a rulemaking to 

implement Executive Order No. 13873. 

The proposed rule would authorize the 

Secretary to make a preliminary 

determination to prohibit or mitigate 

certain transactions, subject to a notice 

period before the Secretary issues a final 

determination. 

51. Pursuant to this statutory 

requirement, the Commission will 

incorporate any final determinations 

from the Department of Commerce and 

add them to the Covered List once they 

are published in the Federal Register. 

Although CTIA contends that 

‘‘Commerce’s implementation of the 

2019 Supply Chain E.O. is replete with 

concerns about breadth and 

unpredictability,’’ the Secure Networks 

Act does not permit the Commission the 

discretion to alter or ignore Department 

of Commerce determinations. 

Furthermore, administrative and 

judicial remedies are available should 

there be any disagreement with the 

Department of Commerce’s 

implementation of its authority under 

the Secure Networks Act to make 

determinations, and those have no 

bearing here. The Commission will, 

therefore, comply with its statutory 

obligation to incorporate determinations 

from the Department of Commerce’s 

proceeding into the Covered List. 

52. Determinations from the 2019 

NDAA. The third enumerated source for 

determinations is found in section 

889(f)(3) of the 2019 NDAA. Each 

subpart of section 889(f)(3) contains 

determinations. Section 889(f)(3) of the 

2019 NDAA defines ‘‘covered 

telecommunications equipment or 

services’’ to include ‘‘(A) 

telecommunications equipment 

produced or provided by Huawei or 

ZTE Corporation (ZTE); (B) for the 

purpose of public safety, security of 

government facilities, physical security 

surveillance of critical infrastructure, 

and other national security purposes, 

video surveillance and 

telecommunications equipment 

produced by Hytera Communications 

Corporation (Hytera), Hangzhou 

Hikvision Digital Technology Company 

(Hikvision), or Dahua Technology 

Company (Dahua); [and] (C) 

telecommunications or video 

surveillance services provided by such 

entities or using such equipment.’’ 

Additionally, section 889(f)(3)(D) 

provides that covered 

telecommunications equipment or 

services includes 

‘‘[t]elecommunications or video 

surveillance equipment or services 

produced or provided by an entity that 

the Department of Defense, in 

consultation with the Director of 

National Intelligence or the Director of 

the Federal Bureau of Investigation, 

reasonably believes to be an entity 

owned or controlled by, or otherwise 

connected to, the governments of [the 

People’s Republic of China].’’ 

53. As the Commission explained in 

the 2020 Supply Chain Second Further 

Notice, the 2019 NDAA establishes four 

sources of determinations. The first is 

telecommunications equipment 

produced or provided by Huawei or 

ZTE capable of the functions outlined in 

sections 2(b)(2)(A)–(C) of the Secure 

Networks Act. The Commission ‘‘shall 

place’’ on the Covered List ‘‘any 

communications equipment or service’’ 

‘‘if, based exclusively on the 

determinations’’ under section 2(c), 

such equipment or service poses an 

unacceptable risk to the national 

security of the United States and the 

security and safety of United States 

persons’’ and is ‘‘capable’’ of ‘‘(A) 

routing or redirecting user data traffic or 

permitting visibility into any user data 

or packets that such equipment or 

service transmits or otherwise handles; 

(B) causing the network of a provider of 

advanced communications service to be 

disrupted remotely; or (C) otherwise 

posing an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons.’’ The Commission disagrees 

with NCTA and Huawei, which argue 

that the Commission must limit the 

scope of its designation because section 

889(a)(2)(b) of the 2019 NDAA limits the 

restriction on the procurement of 

‘‘covered telecommunications 

equipment or services’’ to equipment 

and services that can ‘‘route or redirect 

user data traffic or permit visibility into 

any user data or packets that such 

equipment transmits or otherwise 

handles.’’ This restriction to only 

certain types of equipment and services, 

however, applies only to section 

889(a)(1) and does not extend to the 

definition section in section 889(f)(3). 

Nor does the restriction in section 

889(b)(3)(B), which limits the scope of 

the prohibition on federal agency 

spending to equipment capable of 

routing or permitting network visibility, 

support NCTA or Huawei’s argument. 

That restriction specifically applies only 

to subsection (b), not section 889(f). 

Congress explicitly limited the scope of 

its procurement restrictions to Huawei 

and ZTE equipment in subsections (a) 

and (b) of the 2019 NDAA to equipment 

2914 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

capable of routing or permitting network 

visibility, but did not include such a 

limitation in paragraph 889(f)(3), which 

governs the determination the 

Commission must incorporate onto the 

Covered List. To limit the NDAA 

determination to equipment capable of 

routing or permitting network visibility 

would both ignore the plain text of the 

NDAA and read section 2(b)(2)(C) out of 

the Secure Networks Act, which lists 

the capabilities of communications 

equipment or service that warrant 

inclusion on the Covered List. The 

Commission will thus place on the 

Covered List the determination found in 

section 889(f)(3)(A), that is, 

‘‘telecommunications equipment 

produced or provided by Huawei or 

ZTE’’ capable of the functions outlined 

in sections 2(b)(2)(A), (B), or (C) of the 

Secure Networks Act. 

54. The second determination the 

Commission will incorporate from the 

2019 NDAA is video surveillance and 

telecommunications equipment 

produced by Hytera, Hikvision, and 

Dahua capable of the functions outlined 

in section 2(b)(2)(A)–(C) of the Secure 

Networks Act. Consistent with the 

Commission’s proposal from the 2020 

Supply Chain Second Further Notice, it 

will incorporate onto the Covered List 

such equipment from Hytera, Hikvision, 

and Dahua, ‘‘to the extent it is used for 

public safety or security,’’ capable of the 

functions outlined in sections 

2(b)(2)(A), (B), or (C) of the Secure 

Networks Act. 

55. The third determination the 

Commission incorporates from the 2019 

NDAA is ‘‘[o]ther telecommunications 

or video surveillance services produced 

or provided by Huawei, ZTE, Hytera, 

Hikvision, and Dahua or using such 

equipment’’ that are capable of the 

functions outlined in section 2(b)(2)(A)– 

(C) of the Secure Networks Act. Finally, 

the Commission will also include on the 

Covered List ‘‘telecommunications or 

video surveillance equipment’’ that the 

Department of Defense ‘‘reasonably 

believes to be an entity owned or 

controlled by, or otherwise connected 

to, the government of’’ China, but it is 

unaware of any such determination by 

the Department of Defense at this time. 

56. Determinations from appropriate 

national security agencies. Consistent 

with the Commission’s proposal in the 

2020 Supply Chain Second Further 

Notice, because it is required to 

incorporate a specific determination 

made by an appropriate national 

security agency, the Commission will 

include in the definition of ‘‘an 

appropriate national security agency’’ 

any sub-agencies of the enumerated 

agencies provided in section 9(2) of the 

Secure Networks Act. The only party 

that commented on this subject, 

USTelecom, agrees that ‘‘sub-agencies of 

enumerated ‘appropriate national 

security agenc[ies]’ should qualify [to 

make determinations under section 

2(c)].’’ 

57. Form of determinations. The 

Secure Networks Act grants the 

Commission no discretion to disregard 

determinations from any of these four 

enumerated sources. Although the 

Commission recognizes that each source 

may follow a different procedure to 

arrive at the conclusion that equipment 

or services, or classes of equipment or 

services, pose an unacceptable security 

risk, it nevertheless must incorporate 

their decisions into the Covered List. 

Accordingly, the Commission rejects 

CTIA’s argument that the transparency 

of the originating source should control 

what kind of deference it gives to a 

national security determination, and 

Huawei’s argument that an 

determination should only be 

incorporated if it identifies ‘‘particular 

pieces or categories of equipment.’’ 

Congress granted the Commission no 

authority to dictate to other agencies 

how to arrive at their determinations, 

and granted it no discretion to disregard 

or modify these determinations. 

58. Consistent with the Commission’s 

proposal from the 2020 Supply Chain 

Second Further Notice and the text of 

the Secure Networks Act, it will 

publish, update, or modify the Covered 

List without providing notice or 

opportunity to comment. Section 2(a) of 

the Secure Networks Act states the 

Commission ‘‘shall publish on its 

website [the Covered List]’’ and section 

2(d) states the Commission ‘‘shall 

periodically update the [Covered List.]’’. 

As the Commission stated in the 2020 

Supply Chain Second Further Notice, it 

reads this language ‘‘to be mandatory— 

precluding us from altering the list 

beyond the specific updates (all tied to 

changes in section 2(c) determinations) 

required by its terms.’’ Because the 

Commission is statutorily obligated to 

update the Covered List in light of new 

or modified determinations, it needs not 

provide notice before updating the 

Covered List to reflect new or modified 

determinations. Accordingly, when one 

of the enumerated sources makes a new 

or modified determination, the 

Commission will update the Covered 

List without first providing notice or 

seeking comment on these changes. To 

provide clear guidance for affected 

providers, however, the Public Safety 

and Homeland Security Bureau (PSHSB) 

will issue a Public Notice each time the 

Covered List is updated. The Secure 

Networks Act’s section 3(a)(1) 

prohibition and section 5 reporting 

requirement will then apply to the 

communications equipment and 

services added to the Covered List 60 

days after publication of the updated 

Covered List. 

59. Because this notice process is 

based on the clear language of the 

Secure Networks Act, the Commission 

disagrees with commenters who argue 

this process to update the Covered List 

fails to provide proper notice for 

affected parties. Section 2(a) of the 

Secure Networks Act tasks the agency 

with publishing the Covered List no 

later than March 13, 2021. In taking 

action to publish this list, Congress 

clearly directs the agency to rely 

‘‘solely’’ on the determinations from 

external sources. The Act then requires 

the Commission to enforce the 

provisions of the Act, including section 

3(a)’s prohibition that applies to items 

on the Covered List 60 days after their 

inclusion. The text of the Secure 

Networks Act indicates Congress 

intended for an expedited regulatory 

process by establishing procedures ‘‘so 

clearly different from those required by 

the APA that is must have intended to 

displace them.’’ 

60. The Commission also disagrees 

with commenters who advocate for a 

notice period in addition to the one 

already provided by the Secure 

Networks Act to ‘‘ensure that the 

Commission has an accurate factual 

basis upon which to make the technical 

determination required by the Act.’’ For 

example, Huawei argues the notice 

period is crucial to ‘‘ensure that 

appropriate due process protections are 

provided and that companies have the 

opportunity to respond to allegations 

and provide information relevant to the 

analyses required by the Secure 

Networks Act before the Commission 

places any equipment or services on the 

Covered List.’’ Huawei contends that 

notice and comment ‘‘from relevant 

stakeholders regarding the technical 

capabilities of equipment is a critical 

step for the Commission to conduct the 

analyses section 2(b)(2)(A) and (B) 

require.’’ But under the Secure 

Networks Act, the Commission merely 

accepts the determination from the 

enumerated source and then add to the 

Covered List all communications 

equipment or service from that 

determination that is capable of the 

functions outlined in section 2(b)(2)(A)– 

(C). The Commission does not conduct 

its own analysis of the national security 

threat the equipment or services 

identified by these enumerated sources 

pose to the communications supply 

chain; the Secure Network Act requires 

the Commission to be deferential to the 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2915 

source agency providing the 

determination. In addition, there is no 

need to solicit public comment when 

the Commission performs no technical 

analysis prior to including equipment or 

services on the Covered List. 

61. To the extent necessary, the 

Commission also finds good cause to 

deviate from the standard rulemaking or 

formal adjudication process when 

publishing or updating the Covered List 

in response to determinations. As the 

Commission tentatively found in the 

2020 Supply Chain Second Further 

Notice, ‘‘the Commission’s placement of 

the equipment or service on the Covered 

List . . . is a non-discretionary, 

ministerial act.’’ Because the Secure 

Networks Act provides the Commission 

no discretion when incorporating 

determinations onto the Covered List, 

its action is not subject to the notice and 

comment provisions of the APA. While 

the Commission expects that the source 

of the determination will either provide 

some opportunity for notice and 

comment prior to making the 

determination or have a justifiable 

reason, such as valid national security 

concerns, for deviating from this 

process, regardless of the process 

provided by the source of the 

determination, the Commission has no 

discretion to deviate from its role to 

publish and update the Covered List. 

When an enumerated source makes a 

determination that communications 

equipment or services pose an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons, the Commission will include it 

on the Covered List without seeking 

comment. 

62. When the Commission publishes 

or updates the Covered List, it will do 

so in response to a new or modified 

determination from an agency 

specifically enumerated by the Secure 

Networks Act. The Commission itself 

changes or creates no new rule when 

doing so. Whether the determination 

originated from a process where the 

opportunity for notice and comment 

was present is irrelevant to the 

ministerial function the Commission 

performs by updating the Covered List. 

The Commission accordingly rejects 

NTCA’s suggestion that it should use its 

designation process under § 54.9 of the 

Commission’s rules in the Secure 

Networks Act designation process, as 

that view is untethered from the 

statutory requirements. The 

Commission therefore rejects arguments 

to the contrary, as inconsistent with and 

undermining the statutory process. 

63. Moreover, inclusion on the 

Covered List does not mean providers 

are immediately prohibited from using 

the communications equipment—the 

Act’s prohibition applies 60 days after 

the equipment or services are included 

on the Covered List. Similarly, such 

communications equipment or service 

must be reported pursuant to the 

reporting requirement in section 5 of the 

Secure Networks Act 60 days after the 

communications equipment or service 

has been placed on the Covered List. 

When updated, the PSHSB will issue a 

public notice indicating that the 

Covered List has been updated. 

Providers, manufacturers, and other 

interested parties will then have 60 

days’ notice before the prohibition and 

reporting requirement take effect and 

may in that time period seek whatever 

relief they believe is appropriate. 

64. The Commission also disagrees 

with commenters who believe it should 

implement a notice period to allow time 

for industry to provide feedback to the 

Commission regarding potential effects 

of adding communications equipment 

and services to the Covered List. For 

example, NCTA believes the 

Commission should implement a 

‘‘notice and interim transition period 

prior to placement of new equipment or 

services on the list.’’ Under this 

program, the Commission would allow 

industry to ‘‘apprise the Commission of 

any potential impacts of its proposed 

updates or seek clarification regarding 

models of equipment or components 

that would be covered by the update.’’ 

Dell argues that the Commission should 

seek ‘‘confidential industry advice from 

trusted domestic technology companies 

. . .’’ in order to ‘‘establish the level of 

specificity that is required to determine 

the threat posed by equipment or 

service[s].’’ Because the prohibition on 

the use of federal subsidies will not take 

effect until 60 days after the equipment 

or service’s inclusion on the Covered 

List, the Act already provides a time 

period for industry to review and take 

appropriate action. Moreover, any 

interim period proposal ignores the 

plain language of the Secure Networks 

Act. If a designated government agency 

determines that communications 

equipment or services pose a threat to 

national security of the safety and 

security of United States persons, the 

Commission has no discretion and must 

add this equipment or service to the 

Covered List. The Commission rejects 

Huawei’s arguments to the contrary, as 

they assume a degree of discretion it 

simply lacks under the statute. 

65. Section 2(b) of the Secure 

Networks Act states that the 

Commission ‘‘shall place’’ on the 

Covered List ‘‘any communications 

equipment or service’’ that (1) ‘‘is 

produced or provided by any entity’’ ‘‘if, 

based exclusively on the 

determinations’’ from section 2(c), 

‘‘such equipment or service poses an 

unacceptable risk to the national 

security of the United States and the 

security and safety of United States 

persons’’ and (2) is ‘‘capable’’ of ‘‘(A) 

routing or redirecting user data traffic or 

permitting visibility into any user data 

or packets that such equipment or 

service transmits or otherwise handles; 

(B) causing the network or a provider of 

advanced communications service to be 

disrupted remotely; or (C) otherwise 

posing an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons.’’ The Commission anticipates 

that some determinations will list 

specific communications equipment or 

services that ‘‘pose[ ] an unacceptable 

risk to the national security of the 

United States and the security and 

safety of United States persons’’ and 

others will list general categories or 

classes of equipment that pose such a 

risk. In the case of the former, the 

Commission will incorporate these 

national security determinations onto 

the Covered List automatically. With the 

latter, the Commission will incorporate 

these determinations onto the Covered 

List to the extent the class or category 

of equipment or service identified is 

‘‘capable’’ of the 2(b)(2)(A)–(C) criteria. 

66. Specific determinations based on 

the section 2(b)(2)(C) criteria. If a 

determination indicates that a specific 

piece of equipment or service poses an 

unacceptable risk to the national 

security of the United States and the 

security and safety of United States 

persons, the Commission will 

automatically include this 

determination on the Covered List. The 

Commission takes this approach 

because of the plain language in section 

2(b)(2)(C) which lists, among other 

equipment or service capabilities 

mandating inclusion on the Covered 

List, whether the equipment or service 

poses an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons. If an enumerated source has 

already performed this analysis as part 

of its determination, the only action the 

Commission needs to take is to 

incorporate this determination onto the 

Covered List. The Commission notes 

that USTelecom agrees with this simple 

process because, when a national 

security determination makes a 

‘‘granular determination about ‘covered 

equipment’ the Commission is bound to 

accept it.’’ The Commission’s role is 

2916 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

limited to serving as ‘‘the custodian of 

such determinations.’’ 

67. The Commission rejects Huawei’s 

arguments that section 2(b)(2)(C) should 

be interpreted more narrowly. Huawei 

argues the canon of surplusage dictates 

that, should the Commission 

automatically include equipment or 

services that have been explicitly 

deemed a national security threat by an 

enumerated source, it would read out of 

the statute the technical analysis found 

in sections 2(c)(2)(A) and (B). But it is 

Huawei’s reading that gives no meaning 

to section 2(b)(2)(C), which requires 

inclusion on the list of any 

communications equipment or services 

subject to a national security 

determination if it ‘‘otherwise posing an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons.’’ Huawei then claims a 

different canon, ejusdem generis, 

requires the Commission to use section 

2(b)(2)(C) only to modify equipment 

subject to sections 2(b)(2)(A) and (B), 

but that would again would essentially 

read section 2(b)(2)(C) out of the statute. 

These arguments center around 

Huawei’s contention that, by 

incorporating onto the Covered List 

specific determinations of particular 

pieces of equipment or services, the 

Commission is disregarding sections 

2(b)(2)(A) and (B) because it would 

neglect to conduct a required analysis of 

the capabilities of equipment and 

service it includes on the Covered List. 

Those sections play an important role in 

determining which specific pieces of 

equipment or services belong on the 

Covered List when the Commission 

receives a more general determination. 

But when a determination covers a 

specific piece of equipment or service 

and the agency has indicated that such 

equipment or service poses a national 

security risk, the Commission is 

obligated to include it on the Covered 

List, particularly because one of the 

three capabilities that warrant inclusion 

on the list is whether the equipment or 

service is capable of ‘‘otherwise posing 

an unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons.’’ The Commission therefore 

rejects Huawei’s argument that it claims 

the Secure Networks Act gives the 

Commission a ‘‘broad, roving license’’ to 

make national security decisions. 

Section 2(b)(2)(C) provides that ability 

to other agencies or Congress. The 

Commission’s actions in this scenario 

are non-discretionary and ministerial. If 

the determination is specified to a 

particular piece of communications 

equipment or service, the Commission 

has no discretion to exclude that 

determination from the Covered List. 

68. Determinations identifying 

broader classes or categories of 

equipment or services. In the 2020 

Supply Chain Second Further Notice, 

the Commission sought comment on 

how best to incorporate determinations 

that are made at ‘‘different levels of 

granularity.’’ Because the Commission 

will rely on determinations from other 

government agencies and sources, not 

every determination will be conveyed 

with the same level of specificity. When 

the Commission identifies a broader 

determination from a section 2(c) source 

that a class or category of 

communications equipment or service 

poses an unacceptable national security 

risk, the Commission will publish it on 

the Covered List to the extent the 

equipment or service identified is 

capable of the section 2(b)(2)(A)–(C) 

criteria. The Commission believes this 

procedure is best viewed through the 

lens of the determination the 

Commission received from section 

889(f)(3)(A) of the 2019 NDAA. 

Congress provided the Commission with 

the determination that all 

‘‘telecommunications equipment 

produced or provided by Huawei or 

ZTE C (or any subsidiary or affiliate of 

such entities)’’ poses a threat. This 

broader determination refers a class of 

equipment or service— 

telecommunications equipment 

produced or provided by Huawei or 

ZTE—but did not specify which specific 

pieces of communications equipment or 

services to add to the Covered List. In 

this case, and likewise when the 

Commission receives similarly broad 

determinations in the future, it will 

include on the Covered List 

‘‘telecommunications equipment 

produced by Huawei or ZTE that is 

capable of (A) routing or redirecting 

user data traffic or permitting visibility 

into any user data or packets that such 

equipment or service transmits or 

otherwise handles, (B) causing the 

networks of a provider of advanced 

communications service to be disrupted 

remotely, or (C) otherwise posing an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons.’’ 

69. This method for incorporating 

broader classes of equipment and 

services into the Covered List relies on 

the expertise and determinations of 

enumerated sources, and is supported 

by CTIA and USTelecom, which argue 

for a ‘‘whole-of-government approach, 

led by DHS and supported by 

Commerce.’’ By adopting this approach 

and continuing to be deferential to the 

enumerated sources making the 

determination, the Commission will 

‘‘continue to work closely with 

Executive Branch entities with expertise 

and responsibilities concerning 

telecommunications security, including 

supply chain security.’’ 

70. The Commission disagrees with 

commenters who argue that more 

general determinations should not 

trigger inclusion on the Covered List. 

Huawei commented that ‘‘the specified 

agencies must identify particular pieces 

or categories of equipment that, in their 

view, ‘pose[ ] an unacceptable risk.’’ 

Huawei believes that because the Secure 

Networks Act does not define 

‘‘specific,’’ the Commission must use 

the ordinary meaning of the word, 

which is understood as ‘‘constituting or 

falling into a specifiable category, 

restricted to a particular individual, 

situation, relation, or effect; free from 

ambiguity.’’ Thus, Huawei asserts that 

the references to ‘‘specific 

determinations’’ in section 2(c) mean 

that only determinations as to 

individual types of equipment or 

services trigger the Commission’s 

obligations to include such equipment 

or services on the Covered List. Huawei 

argues that ‘‘[g]eneral guidance or mere 

expressions of concern regarding 

particular manufacturers or types of 

equipment does not constitute a 

‘specific determination’ upon which the 

Commission can rely.’’ The Commission 

disagrees. The Commission interprets 

the Secure Networks Act to require 

‘‘specific determinations’’ to have a 

level of specificity sufficient to allow 

the Commission to incorporate the 

determination onto the Covered List. 

Should the Commission identify a 

determination, for example, that failed 

to indicate the source or type of 

communications equipment or service 

that the originating source found 

potentially insecure, it would be unable 

to incorporate this generic 

determination onto the Covered List. If, 

however, the originating source 

identifies a class or category of 

communications equipment or service, 

even at a broad level, such a 

determination provides the Commission 

enough information to include it on the 

Covered List. Furthermore, with more 

general determinations, the Commission 

does not place on the Covered List, for 

example, ‘‘all Huawei equipment or 

services.’’ Instead, the Commission 

limits inclusion on the Covered List to 

a specifiable category of Huawei 

equipment or services capable of the 

functions outlined in 2(b)(2)(A)–(B) or 

that otherwise poses an unacceptable 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2917 

risk to the national security of the 

United States or the security and safety 

of United States persons. When the 

Commission identifies a determination, 

the Covered List will include the 

determination, subject to the 2(b)(2)(A)– 

(C) criteria. 

71. The Secure Networks Act does not 

require the Commission to conduct a 

technical analysis of the 

communications equipment or service 

prior to including it on the Covered List. 

Section 2(b) merely states that, upon 

receipt of a determination from an 

enumerated source, the Commission 

‘‘shall place’’ on the Covered List only 

the communications equipment and 

service from that determination that is 

capable of the functions outlined in 

section 2(b)(2)(A)–(C). That is precisely 

what the Commission will do. 

Accordingly, the Commission rejects the 

arguments of commenters that contend 

it should conduct various technical 

analyses. The Covered List, as NTCA 

requests, will serve as a ‘‘single source 

for covered [ ] equipment and service.’’ 

To the extent NTCA argues for 

additional specificity, it is not required 

by the text of the Secure Networks Act. 

72. Definition of ‘‘capable’’ for 

incorporation on the Covered List. 

Section 2(b) requires the Commission to 

place on the Covered List 

communications equipment or service 

if, among other requirements, it is 

‘‘capable’’ of the functions or impacts 

set forth in section 2(b)(2)(A)–(C). 

Consistent with the Commission’s 

proposal in the 2020 Supply Chain 

Second Further Notice, it interprets 

‘‘capable’’ for the purposes of fulfilling 

section 2(b)(2)(A)–(C), to include 

equipment or service that can possibly 

perform these functions, even if the 

subject equipment or service is not 

ordinarily used to perform the functions 

in section 2(b)(2)(A)–(C). The 

Commission takes this approach 

because it is unwilling to risk the 

deployment of unsecure equipment or 

services that would occur if it defined 

‘‘capable’’ too narrowly. The term 

‘‘capable’’ as presented in the Secure 

Networks Act is ambiguous and the 

Commission interprets it in light of the 

goals of the statute. 

73. Although the Commission 

disagrees with Huawei that its decision 

to define ‘‘capable’’ broadly is 

‘‘misguided,’’ it agrees that a piece of 

equipment or service’s capabilities 

‘‘refers to the present functionality of 

equipment or a service’’ as that is the 

ordinary interpretation of that word. 

The Commission’s interpretation of 

‘‘capable’’ tracks the word’s definition 

in the Merriam-Webster Dictionary— 

‘‘having traits conducive to or features 

permitting something.’’ In patent law, 

where ‘‘a claim [ ] recites capability and 

not actual operation, an accused device 

‘need only be capable of operating’ in 

the described mode.’’ ‘‘The meaning of 

‘capable of’ is explained as . . . ‘the 

ability to perform.’’ For the purposes of 

including communications equipment 

and services on the Covered List, the 

Commission defines ‘‘capable’’ to 

include the current possible uses of 

equipment or service. The 

Commission’s approach does not extend 

this definition to the functionalities of 

communications equipment or services 

should they be modified in the future. 

The Commission’s broad definition of 

‘‘capable’’ in this context alone does 

not, as Huawei suggests, unreasonably 

extend the definition to equipment or 

services ‘‘potentially having such 

attributes after modification.’’ The 

Commission merely declines to narrow 

the scope of communications equipment 

or service’s capability to the equipment 

or service’s marketed use. To do 

otherwise would allow potentially 

insecure equipment or service to remain 

in communications networks. 

74. Clarifying inclusion on the 

Covered List. The Commission also 

sought comment in the 2020 Supply 

Chain Second Further Notice on a 

process to allow interested parties to 

clarify whether a specific piece of 

communications equipment or a 

specific service is included on the 

Covered List. Some commenters argue 

that the Commission should consider 

mechanisms to provide transparency on 

which specific pieces of 

communications equipment and service 

are included on the Covered List. As 

with any Commission proceeding, 

providers of advanced communications 

service and other interested parties may 

seek a declaratory ruling to ‘‘terminat[e] 

a controversy’’ or ‘‘remov[e] 

uncertainty.’’ To the extent a party is 

uncertain whether a specific piece of 

equipment is subject to a determination 

under section 2(c) of the Secure 

Networks Act, the party may seek a 

declaratory ruling. That said, the 

Commission lacks discretion to modify 

a determination under section 2(c), and 

it is skeptical that any equipment that 

an enumerated source has determined 

‘‘poses an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons’’ would not also, at a minimum, 

‘‘pos[e] an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons.’’ 

75. Once the Commission publishes 

the Covered List, PSHSB will issue a 

public notice indicating that the 

Covered List has been revised and that 

the section 3(a) prohibition and section 

5(a) reporting requirement will take 

effect for communications equipment 

and service on the Covered List 60 days 

later. Pursuant to the Secure Networks 

Act, the Commission ‘‘shall periodically 

update the [Covered List] to reflect 

changes in the determinations described 

[in section 2(c)].’’ If one of the sources 

for determinations changes or modifies 

a determination, the Commission will 

update the Covered List accordingly. 

The Commission notes, however, that it 

has no discretion to reverse or modify 

determinations from other sources as 

the statute requires the Commission to 

accept and incorporate the 

determinations as provided. Should 

interested parties seek to reverse or 

modify the scope of one of these 

determinations, the party should 

petition the source of the determination. 

76. Section 2(d) of the Secure 

Networks Act concerns how the 

Covered List should be updated to 

reflect new or revised determinations of 

covered communications equipment or 

services. Congress directed the 

Commission to ‘‘periodically update the 

[Covered List] to reflect changes in the 

determinations described [in section 

2(c)].’’ In addition, the Commission 

‘‘shall monitor the making or reversing 

of the determinations’’ from the 

enumerated sources in order to ‘‘place 

additional communications equipment 

or services on the [Covered List] or to 

remove communications equipment and 

services from such list.’’ If any of these 

determinations are reversed, the 

Commission ‘‘shall remove such equipment or service from the list . . .’’ 

unless the equipment or service’s 

inclusion on the Covered List is based 

on a determination received from 

another enumerated source. Section 4(f) 

of the Secure Networks Act, discussed 

infra, provides options for when 

communications equipment or services 

are removed from the Covered List 

following an update or revocation of any 

determination. Secure Networks Act 

§ 4(f). Finally, the Commission must 

notify the public for every twelve-month 

period during which the Commission 

does not update the Covered List. The 

Commission must indicate that ‘‘no 

updates were necessary during such 

period to protect national security or to 

address changes in the determinations 

. . . .’’ 

77. No updates to Covered List unless 

Commission receives new or modified 

determination. In the 2020 Supply 

Chain Second Further Notice, the 

Commission sought comment on ‘‘the 

process to update and publish the 

Covered List and solicit ideas and best 

2918 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

practices for ways to maintain the 

Covered List and keep it current and 

readily available.’’ The Commission 

interpreted the Secure Networks Act to 

not give its discretion to make any 

updates to the Covered List outside of 

determinations made by the sources 

enumerated in section 2(c). The 

Commission noted that the text of 

section 2(d) ‘‘does not appear to give it 

discretion not to update the Covered 

List based on changes in 

determinations, and hence it would be 

unclear what purpose a notice period 

would serve.’’ 

78. The Commission believes the best 

interpretation of the Secure Networks 

Act is that it does not grant its authority 

to update the Covered List outside of 

these national security determinations, 

and thus, the Commission will make no 

changes or modifications to the Covered 

List unless it identifies a new or 

modified determination of covered 

communications equipment or services 

from any of the sources identified in 

section 2(c) of the Act. If one of the 

sources issues a new or modified 

determination, the Commission will 

update the Covered List to reflect this 

change. Once the Commission updates 

the Covered List, the PSHSB, in 

conjunction with WCB, will issue a 

Public Notice declaring that the Covered 

List has been updated to reflect a new 

or modified determination. This 

approach is consistent with NCTA’s 

desire for the Commission to ‘‘provide 

clear and prominent notice of decisions 

to remove vendors of equipment items 

from the Covered List.’’ If the 

Commission identifies no updates or 

modifications in any twelve-month 

period, PSHSB shall issue a Public 

Notice indicating that ‘‘no updates were 

necessary during such period to protect 

national security or to address changes 

in the determinations . . . .’’ 

79. Section 3 of the Secure Networks 

Act prohibits funding from Federal 

programs made available to subsidize 

capital expenditures necessary for the 

provision of advanced communications 

service from being used to purchase, 

rent, lease, or otherwise obtain any 

covered communications equipment or 

service, or maintain any covered 

equipment or service previously 

purchased, rented, leased, or otherwise 

obtained. Currently, § 54.9 of the 

Commission’s rules imposes a similar 

prohibition on the spending of USF 

support, yet broadly applies to 

equipment and services produced or 

provided by entities designated as 

posing a national security threat to the 

integrity of communications networks 

or the communications supply chain. In 

the 2020 Supply Chain Declaratory 

Ruling and Second Further Notice, 85 

FR 47211, August 4, 2020 and 85 FR 

48134, August 10, 2020, the 

Commission found that § 54.9 

substantially implements the 

prohibition under section 3 of the 

Secure Networks Act, but it nonetheless 

proposed a new rule, independent of 

§ 54.9, to align the Commission’s rules 

with the scope of the prohibition found 

in the Secure Networks Act. The 

Commission sought comment on that 

proposal and an effective period of 60 

days after communications equipment 

or services are placed on the Covered 

List. The Commission also sought 

comment on the impact of the proposed 

rule on multiyear contracts or contracts 

with voluntary extensions between USF 

recipients and companies producing or 

providing communications equipment 

or services posing a supply chain 

security risk, if any such contracts exist. 

80. Consistent with the Commission’s 

proposal in the 2020 Supply Chain 

Second Further Notice, it adopts a rule 

to enact section 3 of the Secure 

Networks Act by prohibiting the use of 

Federal subsidies made available 

through a program administered by the 

Commission and that provides funds to 

be used for the capital expenditures 

necessary for the provision of advanced 

communications service to purchase, 

rent, lease, or otherwise obtain any 

communications equipment or service, 

or maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained, and identified and 

published on the Covered List. 

81. The new rule the Commission 

adopts, codified at § 54.10, prohibits the 

use of a Federal subsidy made available 

through a program administered by the 

Commission that provides funds for the 

capital expenditures necessary for the 

provision of advanced communications 

service to purchase, rent, lease, or 

otherwise obtain any covered 

communications equipment or service 

identified and published on the Covered 

List, or maintain any such covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained. The Commission 

has interpreted section 3 of the Secure 

Networks Act as intending to apply to 

all universal service programs but not 

other Federal subsidy programs to the 

extent those programs may tangentially 

or indirectly involve expenditures 

related to the provision of advanced 

communications service. The 

Commission acknowledges that there 

will be two processes to designate 

equipment or services as prohibited 

from federal funding—one for the 

designation of an entity as posing a 

national security threat to the integrity 

of communications networks or the 

communications supply chain, and one 

for the designation of specific 

equipment and services through the 

Covered List process outlined in section 

2 of the Secure Networks Act. Certain 

equipment or services may be subject to 

either or both the prohibition under 

§ 54.9 of the Commission’s rules and the 

new § 54.10 prohibition enacting section 

3 of the Secure Networks Act. Parties 

subject to these requirements are 

responsible for complying with both 

prohibitions, as applicable, and in 

accordance with any applicable 

effective dates. The Commission finds 

that the prohibitions in §§ 54.9 and 

54.10 of the Commission’s rules are 

consistent with, and fully implement, 

section 3(a) of the Secure Networks Act. 

In the 2020 Supply Chain Declaratory 

Ruling, the Commission found that it 

satisfied the requirement to implement 

the section 3(a) prohibition within 180 

days of enactment of the Secure 

Networks Act through its action in the 

2019 Supply Chain Order; therefore, the 

Commission’s action has no bearing on 

section 3(b)’s implementation deadline. 

The new prohibition encompasses 

covered equipment and services found 

on or added to the Covered List, while 

the existing prohibition in § 54.9 applies 

to a somewhat overlapping group of 

products or services from companies 

designated as posing a threat to national 

security. As the Commission stated in 

the 2020 Supply Chain Second Further 

Notice, the addition of § 54.10 will grant 

the Commission two different 

designation processes, ‘‘one for the 

designation of an entity, as currently 

provided by [§ 54.9 of] the 

Commission’s rules, and another, more 

targeted process, for the designation of 

specific communications equipment 

and services per section 2 of the Secure 

Networks Act.’’ The new prohibition 

further applies to any funding programs 

administered by the Commission made 

available to subsidize capital 

expenditures for the provision of 

advanced communications service, 

including any future USF programs, 

whereas § 54.9 is limited to USF 

support. RWA recommends that the 

Commission apply the prohibition to 

both ‘‘USF programs that fund capital 

expenditures and to USF programs that 

fund operational expenditures’’ to 

encompass the broadest range of risky or 

compromised equipment. The 

Commission clarifies that, through both 

prohibitions under §§ 54.9 and 54.10 of 

the Commission’s rules, the rules apply, 

respectively, to both USF funds and to 

Federal subsidies administered by the 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2919 

Commission that provide funds for 

capital expenditures used for the 

provision of advanced communications 

services, which it has interpreted to 

mean universal service programs. Both 

prohibitions apply to all universal 

service funding from all current USF 

programs. The Commission believes that 

this approach will comprehensively 

encapsulate the universe of products 

and services that pose a risk to our 

nation’s communications systems and 

prohibit spending of public funds 

consistent with congressional intent. 

82. The two rules are intended to 

complement each other, and compliance 

should not impose additional burdens 

on providers of advanced 

communications service. CTIA raises 

concerns about the overlap of the two 

prohibitions, specifically that parties 

subject to both requirements are 

responsible for compliance with both 

prohibitions, and urges the Commission 

to ‘‘promote consistency, pursue 

transparency, and work with agencies 

that have expertise on supply chain and 

national security.’’ Although there is 

some overlap between the two 

prohibitions, the Commission believes 

that the rules are straightforward and 

transparent in their applicability to 

entities, funding, and equipment or 

services such that providers are able to 

comply. For example, the equipment 

and services designated under each rule 

will be published in accordance with 

the respective requirements (i.e., the 

Commission’s website for § 54.9, or the 

Covered List for § 54.10) such that 

entities can identify which equipment 

or services are subject to each 

prohibition. 

83. CTIA urges the Commission to 

limit the new prohibition to subsidies 

under the USF programs, rather than 

expanding to include ‘‘other programs 

administered by the Commission that 

primarily support the provision of 

advanced communications services’’ 

and requests that the rule explicitly 

state the limitation to USF. The 

Commission finds additional limitation 

would be misplaced given its previously 

stated interpretation of the statute and 

its applicability. Furthermore, the 

Commission is compelled by the clear 

and direct language of the statute to 

make the language of § 54.10 potentially 

broader than USF programs. Section 3 of 

the Secure Networks Act applies only to 

Federal subsidies administered by the 

Commission used for capital 

expenditures necessary for the provision 

of advanced communications services 

which, as stated in the 2020 Supply 

Chain Declaratory Ruling, the 

Commission interprets to encompass 

universal service programs. Consistent 

with the 2020 Supply Chain Declaratory 

Ruling, the Commission reiterates that 

the prohibition does not apply to the 

Interstate Telecommunications Relay 

Service (TRS) Fund, as the TRS Fund 

does not subsidize capital expenditures 

necessary for the provision of advanced 

communications services. However, to 

the extent Congress creates additional 

programs in the future that provide a 

Federal subsidy administered by the 

Commission that provides funds to be 

used for capital expenditures necessary 

for the provision of advanced 

communications services, they would 

appear to fall under the prohibition in 

section 3 of the Secure Networks Act, 

and it would expect that § 54.10 would 

apply to those programs as well. 

84. Consistent with the Commission’s 

decision not to grandfather existing 

contracts under § 54.9 in the 2019 

Supply Chain Order, the Commission 

also declines to grandfather existing 

contracts for equipment or services on 

the Covered List under § 54.10 of the 

Commission’s rules. Exempting or 

excluding covered equipment or 

services purchased under existing 

multiyear contracts would negate the 

purpose behind the Commission’s rule 

in contravention of the clear and direct 

language in section 3 of the Secure 

Networks Act. Dell ‘‘urge[s] the 

Commission to prioritize risk factors 

before contractual obligations,’’ and the 

Commission believes its decision 

advances that directive. Furthermore, 

although NCTA supports grandfathering 

existing equipment acquired pursuant to 

multiyear contracts except in instances 

where the authorized Federal body 

making the risk determination cites 

compelling evidence of an ongoing 

threat to national security, the 

Commission finds that, given the 

process by which the referring agencies 

or entities make such determinations 

that trigger inclusion of equipment and 

services on the Covered List, it finds 

that there is compelling evidence that 

equipment and services on the Covered 

List do pose such a threat, and 

grandfathering is not warranted. 

85. NCTA urges the Commission to 

avoid an ‘‘unfair retroactive effect’’ by 

grandfathering existing equipment 

acquired pursuant to multiyear 

contracts in certain circumstances. The 

Commission disagrees with NCTA’s 

assessment of the rule’s effect. Section 

3 of the Secure Networks Act does not, 

in itself, require a future action that 

generates a retroactive effect; it merely 

prohibits prospective use of certain 

Federal subsidies to purchase, rent, 

lease, or otherwise obtain any covered 

communications equipment or service, 

or maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained on the Covered List. 

As such, there can be no primary 

retroactivity in restricting the use of 

future Federal subsidies for covered 

equipment or services provided 

pursuant to existing contracts. 

Furthermore, the Commission relies on 

the presumption that, in passing the 

Secure Networks Act, Congress 

intended to apply section 3 to existing 

contracts absent manifest injustice. The 

Commission determines that the record 

does not support a finding of manifest 

injustice. Therefore, absent such a 

showing, the Commission declines to 

adopt a grandfathering exception to 

§ 54.10. 

86. Some commenters favor 

grandfathering existing equipment 

contracts in order to promote 

predictability and minimize network 

disruptions, and propose alternatives to 

allow for grandfathering in certain 

situations. For instance, CTIA suggests 

that rather than attempting to define ex 

ante what kinds of arrangements qualify 

for grandfathering, the Commission 

should ‘‘exercise its discretion and work 

with the regulated community to build 

in permissible grandfathering that is 

consistent with fair process and sensible 

regulatory practice.’’ NCTA further asks 

that the Commission clarify that ‘‘where 

a provider has already been selected to 

provide services that receive USF 

support, the support will not end 60 

days after equipment or services are 

added to the Covered List.’’ 

87. The Commission declines to adopt 

these alternative proposals. The 

Commission finds that the urgency of 

the threat that allowing covered 

equipment and services to remain in its 

communications networks poses to our 

national security outweighs the 

potential burdens associated with 

failure to grandfather or exempt certain 

contracts. Because such exemptions 

would create security loopholes to the 

effectiveness of the prohibition, the 

Commission rejects commenters’ 

proposals to grandfather existing 

equipment contracts for covered 

equipment or services. 

88. Effective date. The prohibition on 

the use of Federal subsidies under 

§ 54.10 of the Commission’s rules that 

the Commission adopts takes effect 60 

days after any particular 

communications equipment or services 

are placed on the Covered List, 

consistent with the Secure Networks 

Act. Furthermore, adopting a 60-day 

period between placement on the 

Covered List and the effectiveness of the 

prohibition on funds appropriately 

balances the consideration of the 

2920 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

compelling national security interests to 

promptly remove insecure equipment 

and services from the Commission’s 

networks against the burdens on 

advanced communications service 

providers to identify covered equipment 

and services and make any adjustments 

to alternative funding to effectuate the 

prohibition. The Commission will 

require recipients of universal service 

support from each of the four USF 

programs to certify that they have 

complied with its new rule prohibiting 

the use of Federal subsidies for 

equipment and services on the Covered 

List. 

89. Some commenters raise concerns 

about the 60-day period between when 

items are placed on the Covered List 

and when the prohibition under § 54.10 

takes effect, and many propose 

alternatives. NTCA suggests that 

providers continue receiving USF 

support until federal funding is 

available to reimburse for the cost of 

replacement or the provider replaces the 

equipment in the normal course of 

business. CCA urges the Commission to 

be mindful of the strains the current 

public health crisis has placed on small 

and rural wireless carriers and 

advocates for a transition timeline that 

allows carriers to demonstrate progress 

through milestones. NCTA proposes the 

creation of a safe harbor ‘‘for providers 

that are making a reasonable, good-faith 

effort to transition away from newlybanned equipment but cannot meet the 

60-day removal timetable without 

significant disruptions to network 

operations or service delivery.’’ 

90. The Commission disagrees with 

these commenters’ assessments of the 

impact of the 60-day effective date of 

the § 54.10 prohibition and therefore 

declines to adopt their alternative 

proposals. First, setting the effective 

date of the prohibition at 60 days after 

covered equipment is placed on the 

Covered List is statutory, and the rule 

the Commission adopts codifies an 

effective date consistent with the 

statute. Second, the rule prohibits the 

use of Federal subsidies to purchase, 

rent, lease, or otherwise obtain covered 

communications equipment or service, 

or maintain covered communications 

equipment or service previously 

purchased, rented, leased, or otherwise 

obtained on the Covered List; it does not 

directly speak to a deadline to remove 

or replace that equipment. The 

Commission addresses issues regarding 

the transition periods for removal and 

replacement of covered equipment and 

services under the Reimbursement 

Program in this document. To the extent 

providers request a transition period to 

secure alternative funding, similar to the 

Commission’s decision in the 2019 

Supply Chain Order, it finds that there 

is a compelling interest in protecting 

our national security, which 

necessitates prompt implementation of 

the prohibition. § 54.9 of the 

Commission’s rules took effect 

immediately upon publication in the 

Federal Register because of the national 

security interests in moving 

expeditiously. The Commission is not 

granted the discretion to waive a 

statutory mandate; however, it believes 

60 days is sufficient based on its 

experience with the effective date of 

§ 54.9. Therefore, the Commission finds 

that 60 days is sufficient notice to 

prohibit spending of Federal subsidy 

funding on equipment and services 

added to the Covered List. 

91. The Commission in the 2019 

Supply Chain Further Notice proposed 

a program to reimburse ETCs for 

reasonable transition costs associated 

with the removal and replacement of 

equipment and services produced or 

provided by entities posing a national 

security threat as designated by the 

process outlined in § 54.9 of the 

Commission’s rules. Subsequently, the 

President signed into law the Secure 

Networks Act requiring the Commission 

to establish the Reimbursement 

Program. WCB then released a public 

notice seeking comment on the 

applicability of the Secure Networks Act 

on the Commission’s proposed 

reimbursement mechanism. 

92. The reimbursement program 

required by the Secure Networks Act 

largely mirrors the Commission’s 

original proposal in purpose and 

process. Both are focused on 

reimbursing entities for the removal and 

replacement of equipment and services 

posing a national security risk. Both 

envision a reimbursement process 

focused on initial cost estimates and 

including procedures to protect against 

waste, fraud, and abuse. But there are 

also noticeable differences. For 

example, the Commission initially 

proposed limiting eligibility to ETCs, 

while the Secure Networks Act expands 

eligibility beyond ETCs to include all 

providers of advanced communications 

service with two million or fewer 

customers. The process for designating 

covered equipment and services also 

differs, which could change the scope of 

reimbursable expenses for the removal, 

replacement, and disposal of such 

equipment and services under the 

Commission’s proposal versus the 

program required by Congress. The 

Commission concludes the 

Reimbursement Program effectively 

supersedes the Commission’s original 

proposal, and it conforms it to the 

requirements set forth in the Secure 

Networks Act. 

93. The Commission now establishes, 

as directed by the Secure Networks Act, 

the Reimbursement Program to 

reimburse the costs reasonably incurred 

by providers of advanced 

communication services with two 

million or fewer customers to 

permanently remove, replace, and 

dispose of covered communications 

equipment and services from their 

networks. The Commission will allow 

eligible providers to obtain 

reimbursement to remove and replace 

older covered communications 

equipment with upgraded technology 

and will reimburse providers for certain 

transition expenses incurred prior to the 

creation of this program. The 

Commission requires program 

participants to submit estimated costs to 

receive funding allocations. Recipients 

can then obtain funding disbursements 

on a rolling basis upon a showing of 

actual expenses incurred. 

94. If aggregate demand exceeds 

available funding, the Commission will 

prioritize funding for ETCs and 

expenses for transitioning core networks 

over non-ETCs and non-core network 

transition expenses. Program recipients 

will have one year from the initial 

funding disbursement to complete the 

permanent removal, replacement, and 

disposal of covered communications 

equipment. The Commission may grant 

a single, general six-month extension for 

all recipients and/or individual 

extensions of time if circumstances 

warrant. The Commission also adopts a 

number of measures as directed by the 

Secure Networks Act to combat waste, 

fraud, and abuse, including the filing of 

status updates, spending reports, and a 

final certification, requiring 

documentation retention, audits, 

reviews and field inspections, and 

seeking the repayment of disbursed 

funds for violations of the Secure 

Networks Act and the Reimbursement 

Program rules in addition to taking 

other possible enforcement actions. 

95. Eligible Providers. As directed by 

section 4 of the Secure Networks Act, 

the Commission limits eligibility for the 

Reimbursement Program to providers of 

advanced communication service with 

two million or fewer customers. The 

Secure Networks Act identifies 

advanced communication service 

providers as providers of advanced 

telecommunications capability as 

defined in section 706 of the 

Telecommunications Act of 1996 

(Telecommunications Act). Advanced 

telecommunications capability is 

defined in section 706 of the 

Telecommunications Act ‘‘without 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2921 

regard to any transmission media or 

technology, as high-speed, switched, 

broadband telecommunications 

capability that enables users to originate 

and receive high-quality voice, data, 

graphics, and video telecommunications 

using any technology.’’ As Blue Danube 

correctly notes, the advanced 

communications service term in the 

statute is ‘‘straight forward.’’ If Congress 

were to pass additional legislation 

defining eligibility for the 

reimbursement program, the 

Commission would modify its eligibility 

requirements. 

96. The Commission has historically 

interpreted providers of advanced 

telecommunications capability, and 

thus providers of advanced 

communications services, to mean 

facilities-based providers, whether fixed 

or mobile, with a broadband connection 

to end users with at least 200 kbps in 

one direction. This standard is used by 

the Commission to identify providers 

required to report broadband 

deployment using the FCC Form 477. 

The few commenters addressing this 

issue generally support the use of this 

same speed threshold to determine 

providers of advanced communications 

service. Using this standard will 

maximize the pool of eligible applicants 

and help assist with the removal of 

insecure equipment that is older and 

slower than newer, more 

technologically up-to-date equipment 

from our Nation’s interconnected 

networks. 

97. 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 provisions 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. This clarification 

addresses the concerns raised by 

Northern Michigan University as it 

seeks to remove and replace covered 

equipment from its LTE network that 

serves ‘‘over 15,000 NMU students, K– 

12 families, and community members.’’ 

However, a school, library, or health 

care provider that merely purchases 

advanced telecommunications or 

information services and is not a 

facilities-based network provider of 

services is not considered a provider of 

advanced communications services for 

purposes of the Reimbursement 

Program. Accordingly, the Commission 

disagrees with RWA’s suggestion to 

interpret the statute to allow 

reimbursement eligibility for entities 

that only purchase but do not provide 

advanced communications services. 

98. The Commission also takes this 

opportunity to clarify the demarcation 

point between eligible and non-eligible 

advanced communications service 

providers, i.e., those with fewer than 

two million customers. The Secure 

Networks Act defines ‘‘customers’’ to 

mean ‘‘with respect to a provider of 

advanced communications service—(A) 

the customers of such provider’’ as well 

as the ‘‘customers of any affiliate . . . of 

such provider.’’ The statute references 

the definition of ‘‘affiliate’’ contained in 

section 3 of the Communications Act, 

which reads ‘‘a person that (directly or 

indirectly) owns or controls, is owned 

or controlled by, or is under common 

ownership or control with, another 

person.’’ The definition of affiliate 

further states ‘‘[f]or purposes of this 

paragraph, the term ‘own’ means to own 

an equity interest (or the equivalent 

thereof) of more than 10 percent.’’ 

99. The Commission reads the phrase 

‘‘customers of such provider’’ and 

‘‘customers of any affiliate’’ as having 

more than one possible interpretation. 

The language could refer only to those 

customers purchasing advanced 

communications service or could refer 

to any customer of the provider or 

affiliate regardless of the service or 

product purchased. The accompanying 

House Report states ‘‘[s]ection 4 requires 

the FCC . . . to reimburse providers of 

advanced communications service with 

2 million or fewer subscribers.’’ This 

language suggests an intention to focus 

on the subscribers of the provider that 

purchase advanced communications 

service in determining eligibility. The 

House Report also states the 

Reimbursement Program is established 

‘‘to assist small communications 

providers with the costs of removing 

prohibited equipment and services from 

their networks.’’ By limiting the 

meaning of ‘‘customer’’ to those 

purchasing advanced communications 

service, potentially a large company 

with a small number of advanced 

communications service customers 

could qualify for the Reimbursement 

Program. Given the overall intent of the 

program to assist with the removal of 

equipment and services posing a 

national security risk and the language 

in the House Report, the Commission 

chooses to interpret customer narrowly, 

which in turn will increase the pool of 

eligibility for the program. Accordingly, 

the Commission interprets ‘‘customers 

of such provider’’ and ‘‘customers of 

any affiliate’’ to mean those customers 

taking advanced communications 

service from the provider and its 

affiliates. A provider seeking to 

participate in the Reimbursement 

Program must have two million or fewer 

customers, as of the date its application 

is filed. If the provider’s number of 

customers increases above two million 

after its application is filed, they will 

not lose their eligibility to participate in 

the Reimbursement Program by virtue of 

the customer increase. 

100. To identify customers of 

advanced communications service, 

providers must count those customers 

purchasing a service that includes a 

broadband connection with a speed of at 

least 200 kbps in one direction. The 

Secure Networks Act states an advanced 

communications service has the 

meaning given the term advanced 

telecommunications capability. The 

Commission has historically interpreted 

‘‘advanced telecommunications service’’ 

to mean a service with a broadband 

connection of at least 200 kbps in one 

direction. Accordingly, the Commission 

directs providers to count customers of 

broadband service meeting or exceeding 

this speed threshold for purposes of 

program eligibility. A subscriber merely 

purchasing traditional plain old 

telephone service would therefore not 

count as a subscriber of advanced 

communications service. 

101. Lastly, to be eligible, the Secure 

Networks Act requires providers filing 

applications to make specific 

certifications per section 4(d)(4). 

Applicants must certify that ‘‘as of the 

date of the submission of the 

application, the applicant—(i) has 

developed a plan for—(I) the permanent 

removal and replacement of any covered 

communications equipment or service 

that are in the communications network 

of the applicant as of such date; and (II) 

the disposal of the equipment or 

services removed . . . and has 

developed a specific timeline . . . for 

the permanent removal, replacement, 

and disposal of the covered 

communications equipment or services 

identified . . . , which timeline shall be 

submitted to the Commission as part of 

the application.’’ The applicant must 

also certify on the date of its 

application’s approval that it ‘‘will not 

purchase, rent, lease, or otherwise 

obtain covered communications 

equipment or services, using 

reimbursement funds or any other funds 

(including funds derived from private 

sources); and . . . 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 . . . in developing and 

tailoring the risk management practices 

2922 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

of the applicant.’’ The Commission 

directs WCB to incorporate these 

certifications as part of the application 

submission process to ensure applicants 

are eligible for the Reimbursement 

Program. 

102. Covered Communications 

Equipment or Services. The Secure 

Networks Act allows eligible providers 

to seek reimbursement for expenses 

associated solely with the permanent 

removal, replacement, and disposal of 

‘‘covered communications equipment or 

services’’ as designated per section 2(a) 

of the Secure Networks Act. 

Specifically, eligible providers may seek 

reimbursement funds to remove, 

replace, and dispose of ‘‘covered 

communications equipment or services 

purchased, rented, leased or otherwise 

obtained’’ before August 14, 2018 if on 

the initial list published by the 

Commission, or no later than 60 days 

after the Commission adds further 

equipment and services to the initial 

list. Recipients are prohibited from 

using reimbursement funds to remove, 

replace, or dispose of covered 

communications equipment or service 

purchased, rented, or leased or 

otherwise obtained after these statutory 

cutoff dates. The Commission has no 

discretion to deviate from the scope of 

covered communications equipment or 

services provided under the Secure 

Networks Act. Accordingly, to the 

extent the Commission’s original 

proposal in the 2019 Supply Chain 

Further Notice suggested limiting 

eligibility to a broader or narrower 

category of equipment and services, it 

now instead follows the requirements 

contained in the Secure Networks Act. 

103. As proposed in the 2019 Supply 

Chain Further Notice, the 

Reimbursement Program will reimburse 

costs reasonably incurred for the 

removal, replacement, and disposal of 

covered equipment and services in 

accordance with the Secure Networks 

Act. The Commission notes that the 

Reimbursement Program does not 

modify rules that govern how universal 

service funds may be used in the 

various universal service programs. 

ETCs will still be required to certify, for 

example, that federal high-cost support 

was used only for the provision, 

maintenance, and upgrading of facilities 

and services for which the support is 

intended. The reasonableness standard 

the Commission adopts is consistent 

with the standard applicable to the 

broadcast incentive auction 

reimbursement mechanism. This 

standard is also consistent with 

approach taken in the Emerging 

Technologies framework when assisting 

existing operators with relocation costs 

in transitioning to new facilities. A 

standard of reasonableness will provide 

the Commission with a sensible 

approach for evaluating reimbursement 

costs to help combat waste, fraud and 

abuse through the exclusion of 

excessive and otherwise unreasonable 

costs from the Reimbursement Program. 

104. The Secure Networks Act does 

not expressly establish a standard for 

evaluating costs for reimbursement. The 

statute simply requires the Commission 

to reimburse providers for the 

permanent removal, replacement, and 

disposal of covered communications 

equipment and services. The 

Commission therefore proposed to 

apply a standard of reasonableness 

when evaluating requests for 

reimbursement. One commenter, the 

Rural Wireless Broadband Coalition, 

urged the Commission to ‘‘follow the 

principle’’ of reimbursing any 

reasonable cost. Other commenters, 

while not engaging directly with the 

proposed reasonableness standard, 

implicitly supported this approach by 

commenting on the need for certainty in 

knowing upfront what expenses are 

reimbursable, advocating for the 

inclusion of various expenses as 

reasonable, and supporting use of the 

same standard as used in the broadcast 

incentive auction reimbursement 

mechanism. 

105. The Commission sees no reason 

to deviate from using a standard of 

reasonableness, as proposed, for 

purposes of the Reimbursement 

Program. First, using a standard of 

reasonableness will help guide objective 

determinations of whether to include or 

deny costs for reimbursement and 

ensure that excessive, unreasonable 

costs do not jeopardize the available 

funding needed by all participating 

providers to transition away from 

networks posing a national security risk. 

Second, by using an existing standard, 

the Commission can leverage its prior 

experience with the broadcast incentive 

auction reimbursement mechanism 

standard and the Emerging Technologies 

framework to benefit the 

Reimbursement Program. There already 

exists in the incentive auction context a 

Catalog of Expenses, identifying 

categories of expenses considered 

reasonable for purposes of 

reimbursement. The Commission can 

look to these efforts to assist its 

determinations and help identify the 

types of expenses considered reasonable 

during a transition process in 

implementing the Reimbursement 

Program. While the equipment and 

services replaced may differ, the same 

basic steps apply here, as in planning 

and implementing a network transition 

while attempting to minimize 

disruptions for customers/users. Lastly, 

using the existing standard provides 

regulatory consistency between 

similarly situated program participants 

of both the broadcast incentive auction, 

other wireless proceedings involving the 

relocation of existing operators, and the 

instant Reimbursement Program. A 

fundamental precept of administrative 

law is to treat similarly situated entities 

in a similar manner. 

106. The Commission will thus 

consider eligible for reimbursement 

costs reasonably incurred for the timely 

removal, replacement, and disposal of 

covered equipment and services 

obtained prior to the statutory cutoff 

dates. The Commission interpreted 

‘‘costs reasonably incurred’’ in the 

broadcast incentive auction 

reimbursement mechanism context as 

requiring the reimbursement of ‘‘costs 

that are reasonable to provide facilities 

comparable to those . . . reasonably 

replaced.’’ The Commission has further 

interpreted ‘‘[t]hese costs [to] include 

both ‘hard’ expenses, such as new 

equipment and tower rigging, and ‘soft’ 

expenses, including legal and 

engineering services.’’ The Commission 

sees no reason to deviate from this 

model and will apply it to the instant 

Reimbursement Program. Although the 

Commission cannot forecast all types of 

reasonable expenses, it does provide 

guidance to help participants with their 

transition planning. The appropriate 

scope of ‘‘costs reasonably incurred’’ 

will necessarily be decided on a caseby-case basis, and the Commission 

delegates authority to WCB to make 

reimbursement determinations and to 

finalize a catalog to help participants 

estimate their reimbursable costs. 

107. The Commission considers as 

reasonable replacement facilities 

comparable to the facilities in use by the 

provider prior to the removal, 

replacement, and disposal of covered 

communications equipment or service. 

The Commission recognizes, however, 

when replacing older technology that a 

certain level of technological upgrade is 

inevitable. Accordingly, the 

Commission will permit Reimbursement 

Program participants to obtain 

reimbursement for reasonable costs 

incurred for replacing older mobile 

wireless networks with fourth 

generation Long Term Evolution (4G 

LTE) equipment or service that are 5G 

ready. 

108. The reimbursement program is 

intended ‘‘to assist small 

communications providers with the 

costs of removing prohibited equipment 

and services from their networks and 

replacing prohibited equipment with 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2923 

more secure communications 

equipment and services.’’ Language 

from the House Report demonstrates 

that Congress ‘‘expects the Commission, 

when implementing regulations . . . to 

preclude network upgrades that go 

beyond the replacement of covered 

communications equipment or services 

from eligibility; however, [Congress] 

expects there to be a transition from 3G 

to 4G or even 5G-ready equipment in 

instances where equipment being 

replaced was initially deployed several 

years ago.’’ 

109. The Commission sought 

comment in the 2019 Supply Chain 

Further Notice on whether it should use 

the same ‘‘comparability standard’’ used 

in the broadcast incentive auction 

reimbursement mechanism. In the 

broadcast proceeding, the Commission 

said that reasonable reimbursement 

costs include ‘‘costs that are reasonable 

to provide facilities comparable those 

that [an existing operator] had prior to 

the auction.’’ The Commission further 

stated that it did ‘‘not anticipate 

providing reimbursement for optional 

features beyond those already present’’ 

but recognized when replacing older 

equipment that the new ‘‘equipment 

necessarily may include improved 

functionality.’’ The Commission uses a 

similar comparable facilities standard 

when relocating incumbent operators 

under the Emerging Technologies 

framework. One commenter, the Rural 

Wireless Association, urged the 

Commission to ‘‘closely mirror the 

structure used for the Broadcast 

Incentive Auction.’’ Another 

commenter, Rise Broadband, said a 

comparability standard for replacement 

costs is essential. Otherwise, 

commenters generally favored allowing 

some level of technological upgrade, 

especially when replacing older 

technology that is unlikely to have a 

comparable replacement. 

110. Consistent with approach taken 

on equipment upgrades for the 

broadcast incentive auction, the 

Commission expects, as a general 

matter, eligible providers to ‘‘obtain the 

lowest-cost equipment that most closely 

replaces their existing equipment.’’ That 

said, the Commission recognizes the 

replacement of older legacy technology 

will inevitably require the use of newer 

equipment and services that have 

additional capabilities. Accordingly, 

consistent with the intent of Congress, 

the Commission will allow, and indeed 

encourage, eligible providers replacing 

third generation and older equipment to 

obtain reimbursement for the cost of 4G 

LTE replacement equipment that is 5Gready. 

111. The record indicates new 

equipment supporting older, secondand third generation wireless 

technology services is unavailable, and 

even acquiring such equipment and 

services on the secondary market is 

proving increasingly difficult and in 

some instances impossible. The 

reimbursement program is not limited to 

replacing covered equipment and 

services in wireless networks, but the 

Commission recognizes the initial focus 

is on the equipment and services 

provided by Huawei and ZTE, which is 

most often found with the provision of 

wireless services. Accordingly, while 

much of this discussion is focused on 

replacing wireless technology, the 

underlying rationale applies equally in 

the non-wireless context. And from a 

policy perspective, investing money on 

outdated and soon-to-be 

decommissioned equipment and service 

is of little benefit and an inefficient and 

wasteful use of Federal support. The 

Commission will therefore allow 

providers replacing older technology to 

obtain reimbursement for the cost of 

new replacement equipment that is 4G 

LTE compatible and is capable of 

subsequently being upgraded to provide 

5G service. However, operators that 

elect ‘‘to purchase optional equipment 

capability or make other upgrades’’ 

beyond those reasonably needed to 

replace existing equipment must do so 

using their own funds, consistent with 

the approach the Commission took in 

the broadcast incentive auction 

proceeding and the recent C-Band 

auction proceeding. 

112. By taking this approach on 

comparable facilities and technology 

upgrades, the Commission rejects 

alternative proposals for determining 

reimbursement amounts based on the 

value of the equipment being replaced. 

If, however, eligible providers are 

simply removing and disposing of 

covered equipment and service without 

replacement, e.g., simply shutting down 

an older network, then the Commission 

would consider reimbursing the 

provider for the cost of the depreciated 

value of the decommissioned 

equipment. For example, NTCH and 

NTCA suggested that to avoid the 

‘‘impossibility’’ of evaluating what 

constitute appropriate replacements, the 

Commission should simply reimburse 

the original cost of the covered 

equipment and services plus an 

additional 25%. This approach, 

however, may not result in providing 

sufficient reimbursement funding for 

providers if the cost of the replacement 

equipment exceeds the reimbursement 

support allocated to the recipient. In 

addition, the Commission finds PRTC’s 

proposal to reimburse both the presentday value of the replaced equipment 

and the cost of the replacement 

equipment unreasonable, giving the 

provider a windfall and an unfair 

competitive advantage over other 

providers. 

113. The Commission next delegates 

to WCB the responsibility to develop 

and finalize a Catalog of Eligible 

Expenses and Estimated Costs (Catalog 

of Eligible Expenses) to inform the 

Reimbursement Program. The Secure 

Networks Act requires the Commission 

to ‘‘develop a list of suggested 

replacements’’ for covered equipment 

and services and for applicants to 

submit ‘‘initial reimbursement cost 

estimate[s] at the time of application.’’ 

The Commission is also required to 

‘‘take reasonable steps to mitigate the 

administrative burdens and costs 

associated with the application process, 

while taking into account the need to 

avoid waste, fraud, and abuse.’’ In the 

broadcast incentive auction 

reimbursement mechanism, the use of a 

catalog to estimate relocation costs 

played a critical role in the successful 

processing of reimbursement 

applications. The Commission seeks to 

duplicate that success here by using a 

Catalog of Eligible Expenses as 

suggested in the record. The catalog will 

identify reimbursable costs with as 

much specificity as possible, provide 

guidance to entities seeking 

reimbursement, streamline the 

reimbursement process, and increase 

accountability. Listing in the catalog, 

however, is not a guarantee of 

reimbursement for any individual 

expense, and all claimed expenses are 

subject to review by the Commission 

staff to ensure each expense and request 

for reimbursement is reasonable. 

114. The Catalog of Eligible Expenses 

will also help the Commission and 

applicants satisfy the Secure Networks 

Act’s requirements not only by helping 

applicants with transition planning and 

estimating costs for application 

submissions, but also with identifying 

potential replacement equipment and 

services and expediting the 

Commission’s reimbursement request 

review process. As CCA points out, the 

removal, replacement and disposal of 

covered equipment and services in a 

mobile wireless network is a complex, 

multi-step process that is likely to 

encompass a range of expenses, 

including: Drive testing to determine 

baseline coverage; evaluating spectrum 

and backhaul capabilities; ordering new 

equipment; installing new network core 

and RAN equipment; potentially leasing 

space on or building new towers and 

2924 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

obtaining any associated permits and 

approvals; testing and optimizing the 

network; and migrating traffic and 

decommissioning covered equipment 

and services. Because there will likely 

be a range of expenses that could vary 

among providers, the Catalog of Eligible 

Expenses will be used to provide 

helpful guidance regarding the kinds 

and amounts of expenses that will be 

reimbursed. Accordingly, the Catalog of 

Eligible Expenses will not be a 

definitive list of all reimbursable 

expenses but a means to facilitate the 

reimbursement process. Given the 

importance of the Catalog of Eligible 

Expenses to the Reimbursement 

Program, Commission staff have already 

begun work to develop it, and the 

Commission expects to release it as soon 

as possible. 

115. The Commission next turns to 

the acceptable timing of costs incurred 

by providers to comply with the 

Commission’s requirement. Some 

providers have already started the 

process to remove and replace 

problematic equipment from Huawei 

and ZTE from their networks. The 

Commission applauds these providers 

for proactively taking steps to increase 

the security of their networks 

notwithstanding the uncertainty of 

Federal government assistance. As such, 

the Commission will allow providers to 

obtain reimbursement for costs 

reasonably incurred prior to the creation 

and funding of the Reimbursement 

Program, for the removal, replacement, 

and disposal of covered equipment and 

services. 

116. The Secure Networks Act 

expressly limits reimbursement support 

to the removal, replacement, and 

disposal of covered equipment and 

services obtained before certain dates. 

For covered equipment and services 

placed by the Commission on the initial 

Covered List required by section 2(a) of 

the Secure Networks Act, the cutoff date 

is August 14, 2018, which is the day 

after the 2019 NDAA was signed into 

law. For equipment and services 

subsequently added to the Covered List 

required by section 2(a), the provider 

must have obtained the equipment or 

service no later than 60 days after being 

placed on the Covered List to obtain 

reimbursement for costs associated with 

its removal, replacement, and disposal. 

The cutoff deadlines are explicit in the 

statute, and the Commission lacks 

discretion to use different cutoff dates 

for the purchase of covered 

communications equipment or service 

that is eligible for the reimbursement of 

removal, replacement, and disposal 

costs. Because of the statutory cutoff 

date, the Commission lacks discretion to 

consider an alternative cutoff date. 

117. The 2019 NDAA prohibits the 

head of an executive agency from 

obligating or expending ‘‘loan or grant 

funds to procure or obtain, extend or 

renew a contract to procure or obtain, or 

enter into a contract (or extend or renew 

a contract) to procure or obtain’’ 

telecommunications and video 

surveillance equipment produced by 

entities reasonably believed to be owned 

or controlled by a foreign country. The 

2019 NDAA specifically identified 

Huawei and ZTE as producers of 

covered equipment, putting the general 

public on official notice that the Federal 

government considered the equipment 

and services produced by these entities 

to pose a potential national security 

risk. 

118. Following the 2019 NDAA’s 

enactment and as the instant rulemaking 

proceeding progressed, providers 

increasingly began planning and taking 

steps to proactively remove, replace, 

and dispose of covered equipment and 

services from their networks. Providers 

urged the Commission to reimburse 

costs associated with these efforts even 

if incurred prior to the creation of any 

reimbursement program. The 

Commission will not penalize these 

providers for taking decisive, proactive 

steps to secure their networks before the 

reimbursement program is created and 

funded. Indeed, in order to protect the 

nation’s communications networks, the 

Commission encourages providers to 

remove and replace covered equipment 

and services before the Reimbursement 

Program begins. For any expenses 

incurred before the commencement of 

the Reimbursement Program providers 

may not be reimbursed for unreasonable 

expenses. The Commission will apply 

the same standard, i.e., costs reasonably 

incurred, to determine whether an 

expense is eligible for reimbursement. 

Accordingly, for covered equipment and 

services placed on the initial list 

required by section 2(a) of the Secure 

Networks Act, the Commission will 

reimburse reasonable costs associated 

with the removal, replacement, and 

disposal of covered equipment that were 

incurred on or after April 17, 2018, the 

date the Commission adopted the 2018 

Supply Chain Notice, 83 FR 19196, May 

2, 2018, commencing this proceeding. 

The adoption date of the 2018 Supply 

Chain Notice was the first clear 

indication that the Commission was 

considering taking action to remove 

covered equipment from U.S. networks. 

Costs incurred before that date are 

ineligible for reimbursement. For 

equipment and services subsequently 

added to the initial list, the provider 

must incur the costs of removal, 

replacement, and disposal on or after 

the date the equipment or services are 

placed on the list for the reasonably 

incurred cost to qualify for 

reimbursement. 

119. The Commission recognizes the 

removal, replacement, and disposal of 

covered equipment may, in the case of 

mobile wireless networks, entail setting 

up parallel network core and RAN 

components and then migrating existing 

customers to the new network. The 

Commission expects providers will 

endeavor to mitigate service disruptions 

to effectuate a seamless transition for 

customers. Consistent with the 

Commission’s proposal in the 2019 

Supply Chain Further Notice, to the 

extent providers experience a reduction 

in revenues as a result of a temporary 

loss in service, reduced coverage, or 

otherwise as a result of the transition, it 

will not reimburse providers for the lost 

revenues in the Reimbursement 

Program. 

120. Allowing reimbursement for lost 

revenues would increase the costs of the 

Reimbursement Program substantially, 

and risk exhausting funding 

prematurely without reimbursing many 

eligible providers. The Commission is 

also concerned that evaluating the 

reasonableness of requests for 

reimbursement for lost revenues is 

challenging and speculative and may 

result in over-reimbursement. The 

Commission believes scarce program 

funding is better spent by assisting as 

many eligible providers as possible with 

the replacement costs directly related to 

the transition instead of trying to ensure 

providers are also reimbursed for lost 

revenues. Moreover, the Commission 

expects program participants will strive 

to minimize service disruptions for 

customers during the transition process 

to mitigate revenue loss. Accordingly, 

the Commission disagrees with Mark 

Twain Communications Company and 

deem lost revenues an unreasonable and 

ineligible expense for purposes of the 

reimbursement program. 

121. The Secure Networks Act limits 

funding use to the removal, 

replacement, and disposal of covered 

communications equipment and 

services. Even with covered 

communications equipment and 

services, to use funds for the removal, 

replacement, and disposal, the Secure 

Networks Act requires the recipient to 

have obtained the equipment or service 

before a certain statutorily specified 

cutoff date. Specifically, for covered 

communications equipment or services 

published on the Commission’s initial 

Covered List, the recipient must have 

obtained the equipment or service 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2925 

before August 14, 2018. For 

communications equipment or service 

subsequently added to the Covered List, 

the recipient must have obtained the 

equipment or service no later than 60 

days after being added to the Covered 

List. Separately, the Secure Networks 

Act prohibits recipients from using 

funds to ‘‘purchase, rent, lease, or 

otherwise obtain any covered 

communications equipment or service.’’ 

Recipients are also not allowed to use 

‘‘other funds (including funds derived 

from private sources)’’ to ‘‘purchase, 

rent, lease, or otherwise obtain any 

covered communications equipment or 

service.’’ Requests for the 

reimbursement of expenses falling 

within the scope of these statutory 

prohibitions are considered 

unreasonable per se and thus ineligible. 

122. Rural Wireless Broadband 

Coalition asks whether the statutory 

limit on funding use prohibits recipients 

from operating and maintaining covered 

communications equipment or service 

in their networks during the removal, 

replacement, and disposal process. The 

transition process will likely involve 

standing up a replacement network 

before migrating traffic to the 

replacement network and 

decommissioning the covered 

communications equipment or service 

in the old network. Recipients would 

thus need to continue operating and 

therefore maintain the old network 

containing covered communications 

equipment or service during the 

transition process to mitigate service 

disruptions for existing customers. 

According to the Rural Wireless 

Broadband Coalition, keeping the old 

network operational may involve 

replacing defective equipment that is 

covered, and because such equipment is 

typically proprietary, it would likely 

require, for purposes of interoperability, 

a replacement that is also supplied by 

the same supplier and covered. 

123. The Commission reads the 

statute as clearly prohibiting the use of 

funds by recipients to obtain equipment 

or service that is on the Covered List 

even if such equipment is needed to 

maintain operations during a transition 

process. Notwithstanding this 

limitation, a provider possessing 

covered communications equipment 

spares obtained before becoming a 

Reimbursement Program recipient could 

use funds to install and maintain that 

covered communications equipment 

during the transition process. If, 

however, the recipient receives 

Universal Service support, then there 

may be other applicable rules that 

prohibit the use of funding to install and 

maintain covered communications 

equipment or service. The provider, 

however, must remove and dispose of 

all covered communications equipment 

by the time of the final certification. 

124. The Commission in the 2019 

Supply Chain Further Notice proposed 

a ‘‘detailed reimbursement application 

process’’ like the reimbursement 

mechanism used in the broadcast 

incentive auction proceeding ‘‘to 

confirm that funding is being used only 

to replace covered equipment and 

services, rather than to deploy services 

to new areas or replace aging equipment 

or services that are not covered.’’ 

Applicants would ‘‘provide details of 

the covered equipment and services 

being replaced, the replacement 

equipment and services, and the 

estimated costs of replacement.’’ To 

help guide applicants, the Commission 

sought comments on ‘‘efficient ways’’ to 

develop replacement cost estimates. The 

Commission separately sought comment 

on whether to ‘‘prioritize payments for 

the replacement of certain equipment 

and services that are identified as 

posing the greatest risk to the security 

of networks, and what categories of 

equipment and services should that 

prioritization include.’’ Comments were 

also sought on measures to prevent 

waste, fraud, and abuse, including 

applicant certifications, deadlines for 

completing removal and replacement, 

periodic compliance audits, 

investigations, and enforcement 

penalties. 

125. The Secure Networks Act 

establishes specific requirements 

applicable to the application process for 

the reimbursement program. 

Specifically, ‘‘[t]he Commission shall 

require an applicant to provide an 

initial reimbursement cost estimate at 

the time of application, with supporting 

materials substantiating the costs.’’ The 

Commission is required to act on 

applications within 90 days after the 

date of submission. If there is an 

excessive number of applications, the 

Commission can extend this deadline by 

no more than 45 days. The Commission 

must also give applicants a 15-day 

period to cure a material deficiency in 

the application as determined by the 

Commission ‘‘(including by lacking an 

adequate cost estimate or adequate 

supporting materials) . . . before 

denying the application.’’ The statute 

states that ‘‘[i]f such period would 

extend beyond the deadline . . . for 

approving or denying the application, 

such deadline shall be extended through 

the end of such period.’’ The Secure 

Networks Act also includes provisions 

for the removal, replacement, and 

disposal term and extensions thereof, 

status updates, measures to avoid waste, 

fraud, and abuse, and education efforts. 

The statute also addresses enforcement 

actions and additional penalties 

relevant to the reimbursement program. 

The Commission sought comment on 

the impact of section 7 in the 2020 

Supply Chain Second Further Notice. 

126. The Commission now adopts a 

reimbursement process like the one 

used in the broadcast incentive auction 

reimbursement mechanism that 

provides allocations to eligible 

providers based on their estimated 

costs. Program recipients can then 

obtain funding disbursements upon 

showing of actual expenses incurred. If 

aggregate demand exceeds available 

funding, the Commission will prioritize 

funding requests from ETCs subject to a 

remove and replace requirement before 

funding the requests of non-ETCs. 

Among non-ETCs, the Commission will 

further prioritize funding to those that 

voluntarily provided it with cost 

estimate data in response to the Supply 

Chain Security Information Collection 

over those that did not. Additionally, if 

the Commission is unable to fully fund 

either all ETCs or all non-ETCs, it will 

prioritize funding for transitioning core 

networks over funding non-core 

network expenses. Program recipients 

will have one year from the initial 

disbursement to complete the 

permanent removal, replacement, and 

disposal of covered communications 

equipment or services with the potential 

for a general and individual extensions 

of time. 

127. The Commission’s goals in 

developing a reimbursement process are 

threefold. First, the Commission strives 

to create a simple and straightforward 

process, providing certainty to 

participants while minimizing the costs 

associated with reimbursement and the 

administrative burden on both affected 

parties and the Commission. Second, 

the reimbursement mechanism should 

facilitate the prompt and efficient 

distribution of funds for the expeditious 

removal, replacement, and disposal of 

covered communications equipment 

and services posing a national security 

risk from the networks of participating 

providers. Third, the program should 

fairly cover the eligible costs reasonably 

incurred for reimbursement and include 

measures to prevent waste, fraud, and 

abuse. As the Secure Networks Act 

instructs the Commission, ‘‘[i]n 

developing the application process 

. . . , the Commission shall take 

reasonable steps to mitigate the 

administrative burden and costs 

associated with the application process, 

while taking into account the need to 

avoid waste, fraud, and abuse in the 

Program.’’ 

2926 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

128. The Reimbursement Program 

will allocate funds on the applicant’s 

behalf to the U.S. Treasury for draw 

down by applicants on a rolling basis 

upon the showing of expenses actually 

incurred. This approach is consistent 

with the one used in the broadcast 

incentive auction reimbursement 

mechanism which has proven 

successful in the efficient and 

expeditious disbursement of funds for 

transitioning networks. 

129. The Secure Networks Act states 

‘‘[n]othing in this section shall be 

construed to prohibit the Commission 

from making a reimbursement under the 

Program to a provider of advanced 

communications service before the 

provider incurs the cost of the 

permanent removal, replacement, and 

disposal of the covered communications 

equipment or service for which the 

application of the provider has been 

approved . . . .’’ This language permits 

the Commission to make funding 

disbursements in advance of costs 

actually incurred but does not require 

any such advance payments. The 

Commission has concerns, however, 

about providing advanced funding 

because once disbursed, its ability to 

ensure the applicant spends the money 

as intended to avoid waste, fraud, and 

abuse is greatly diminished. If the 

Commission later finds the applicant 

has not used the money as intended and 

in compliance with the Secure 

Networks Act and the Commission’s 

rules, then reclaiming the money from 

the applicant following advance 

disbursement can prove challenging. 

Accordingly, rather than disbursing 

large amounts upfront to program 

participants, the Commission will use 

an initial funding allocation process 

based on cost estimates, and then allow 

rolling disbursements based on 

showings of actual costs incurred. This 

approach provides recipients with the 

upfront knowledge of available funds 

for purposes of planning and engaging 

lenders and vendors. The Commission 

finds that this methodology best 

achieves Congress’s goal of mitigating 

the administrative burden and costs of 

the program while taking steps to avoid 

waste, fraud, and abuse. By adopting a 

rolling reimbursement process, the 

Commission declines to provide 

funding upfront before costs are actually 

incurred as suggested by the Secure 

Networks Coalition. The Commission 

expects the reimbursement process, as 

shown in the broadcast incentive 

auction context, will sufficiently meet 

the financial needs of providers, 

including smaller providers, in a timely 

manner while ensuring appropriate 

agency oversight over the disbursement 

and use of funds for their intended 

purpose. Some commenters urge the 

Commission to ‘‘establish a payment 

schedule and clear milestones for 

payments so that carriers know when 

they will be able to obtain payments to 

facilitate a transition.’’ They argue that 

given the scope and scale of expenses, 

waiting for reimbursement until the 

transition is complete is unworkable. As 

NetNumber states, ‘‘the Commission 

should provide for milestone payments 

to ensure service providers receive 

sufficient funding at every stage of the 

network transition process.’’ The 

Commission surmises the milestone 

process suggested is akin to draws on a 

construction loan whereby a lender 

releases a certain percentage of the total 

loan amount upon satisfaction of certain 

construction milestones, e.g., obtaining 

the necessary permits, pouring the 

foundation, completing the close-in 

inspection, and so forth. 

130. The Commission finds 

milestones would add an unnecessary 

level of complexity to the 

reimbursement mechanism. For such a 

system to work, the Commission would 

need to determine the appropriate 

deployment milestones, the percentage 

of funding to disburse at each stage, the 

documentation needed to demonstrate 

milestone completion, and some 

inspection verification process to ensure 

the milestones are indeed satisfied prior 

to disbursing funds. By instead having 

a rolling system of disbursements 

throughout the transition project based 

on the submission of documentation of 

eligible expenses incurred, the 

Commission successfully addresses any 

concerns some providers may have of 

delayed payments until the network 

transition is complete. Accordingly, the 

Commission declines to use a transition 

funding disbursement mechanism based 

on milestones. While the Commission 

declines to impose milestone-based 

disbursements, it delegates the task of 

determining the specific timing of 

disbursements to WCB as part of its 

implementation of the Reimbursement 

Program with the goal of efficiently and 

expeditiously disbursing funds to 

recipients. 

131. Lastly, the Commission declines 

to provide ‘‘bonuses’’ for completing the 

removal, replacement, and removal 

process ahead of the applicable deadline 

as suggested by Blue Danube. The 

Secure Networks Act already provides 

an aggressive one-year deadline for 

completing the transition process. This 

provides ample incentives for 

Reimbursement Program recipients to 

act quickly to complete the process. 

Accordingly, the Commission finds 

additional incentive payments 

unnecessary. 

132. The Secure Networks Act directs 

the Commission to ‘‘develop an 

application process’’ that ‘‘require[s] an 

applicant to provide an initial 

reimbursement cost estimate at the time 

of application, with supporting 

materials substantiating the costs.’’ 

Consistent with the statute, to 

participate in the Reimbursement 

Program, eligible providers are required 

to submit initial estimates of the costs 

to be reasonably incurred for the 

removal, replacement, and disposal of 

covered communications equipment or 

services to participate in the 

reimbursement program. The 

Commission directs WCB to establish an 

initial 30-day filing window for the 

submission of cost estimates and to 

establish subsequent filing windows as 

necessary should support remain, or 

additional support become available to 

fund additional requests. Participants 

are also statutorily required to submit, 

in addition to cost estimates, 

‘‘supporting materials substantiating the 

costs,’’ a ‘‘specific timeline . . . for the 

permanent removal, replacement and 

disposal of the covered communications 

equipment or services,’’ and the 

certifications required by section 4(d)(4) 

as to the development of a transition 

plan and the use of funds if approved 

and in developing and tailoring risk 

management practices. 

133. The Commission has separately 

tasked WCB with developing and 

finalizing a Catalog of Eligible Expenses 

to identify reimbursable costs with as 

much specificity as possible to help 

entities in preparing initial cost 

estimates. Applicants can reference the 

final Catalog of Eligible Expenses, 

which will contain a list of many, but 

not necessarily all, of the relevant 

expenses in lieu of providing additional 

supporting documentation to justify the 

specific cost estimate. If an applicant 

believes the predetermined estimate 

does not fully account for its specific 

circumstances or a predetermined cost 

estimate is not provided in the Catalog 

of Eligible Expenses for the cost 

identified by the applicant, the 

applicant can provide its own 

individualized cost estimate. Applicants 

providing such individualized cost 

estimates will be required to submit 

supporting documentation and to certify 

the estimate is made in good faith. 

134. Regardless of whether they are 

claiming predetermined cost estimates 

or their own individualized estimated 

costs, each applicant will be required to 

certify under penalty of perjury, inter 

alia, that: (1) It believes in good faith 

that it will reasonably incur all of the 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2927 

estimated costs that it claims as eligible 

for reimbursement; (2) it will use all 

money received from the 

Reimbursement Program only for 

expenses it believes are eligible for 

reimbursement; (3) it will comply with 

all policies and procedures relating to 

allocations, draw downs, payments, 

obligations, and expenditures of money 

from the Reimbursement Program; (4) it 

will maintain for 10 years detailed 

records, including receipts, of all costs 

eligible for reimbursement actually 

incurred; and (5) it will file all required 

documentation for its expenses. Similar 

certifications were required by the 

Commission with the broadcast 

incentive auction reimbursement 

mechanism. In addition, a 10-year 

record retention requirement is 

consistent with the record keeping 

required for the broadcast incentive 

auction reimbursement program. The 

Commission will also require applicants 

to provide detailed information on the 

covered communications equipment or 

services they are removing, replacing, 

and disposing to assist the Commission 

in evaluating whether the estimated 

costs reported are reasonably incurred. 

135. For entities that choose to 

provide their own cost estimate, i.e., 

either a cost estimate higher than the 

predetermined cost estimate or an 

individualized cost estimate for an 

expense for which the Commission does 

not provide a predetermined cost 

estimate, WCB will review the required 

justification for the estimate and may 

accept it or substitute a different amount 

for purposes of calculating the initial 

allocation. The Commission is 

statutorily authorized to require 

applicants to update initial cost 

estimates and/or submit additional 

supporting cost estimate materials. If the 

applicant has already incurred costs 

eligible for reimbursement, e.g., the 

applicant already started transitioning 

its network prior to the acceptance of 

applications, then it should report its 

actual expenses with supporting 

documentation and indicate which costs 

are actual and not estimated in its 

submission. Doing so will allow WCB to 

factor in the actual costs when 

determining the funding allocation. 

WCB may ultimately determine, based 

on its reasonableness review, that an 

applicant should receive a different 

allocation from that claimed on the 

application. 

136. After an applicant submits 

estimated cost forms, WCB will review 

them to determine completeness, the 

applicant’s eligibility for 

reimbursement, and the reasonableness 

of the cost estimates provided, and will 

allocate funding accordingly for draw 

down by applicants. The funding 

amount allocated represents the 

maximum amount eligible for draw 

down by an eligible provider unless a 

subsequent funding allocation is made. 

This approach is consistent with the 

suggestion of NetNumber to ‘‘cap 

reimbursement for service providers at 

their estimated replacement costs for 

covered equipment and services in their 

networks.’’ The funding amount 

allocated represents the maximum 

amount eligible for draw down by an 

eligible provider unless a subsequent 

funding allocation is made. This 

approach is consistent with the 

suggestion of NetNumber to ‘‘cap 

reimbursement for service providers at 

their estimated replacement costs for 

covered equipment and services in their 

networks.’’ 

137. Per the Secure Networks Act, 

WCB must act on applications within 90 

days of submission. For purposes of 

calculating the 90-day deadline, the 

Commission will consider the date of 

submission as the date on which the 

filing window closes for accepting 

reimbursement requests. This approach 

is consistent with the Commission’s 

historical treatment of applications 

submitted during a filing window as all 

being filed on the last day of the filing 

window. A filing window also allows 

WCB to efficiently review and act on 

applications in batch and not in 

piecemeal fashion, and is necessary to 

manage demand for funding. If there is 

an excessive number of applications, 

WCB can extend this deadline by no 

more than 45 days. After the initial 

filing window closes, the Commission 

expects WCB to release a public notice 

announcing the applications accepted 

for filing and indicate whether an 

extension of time of up to 45 days to 

review applications is justified. 

Applicants are allowed a 15-day period 

to cure a material deficiency in the 

application as determined by WCB 

‘‘(including by lacking an adequate cost 

estimate or adequate supporting 

materials) . . . before denying the 

application.’’ The statute states that ‘‘[i]f 

such period would extend beyond the 

deadline . . . for approving or denying 

the application, such deadline shall be 

extended through the end of such 

period.’’ WCB will notify applicants of 

material deficiencies via Public Notice. 

If the 15-day cure period, ‘‘would 

extend beyond the deadline . . . for 

approving or denying the application, 

such deadline shall be extended through 

the end of such period.’’ If WCB denies 

the application, the filer will be allowed 

to resubmit its application or submit a 

new filing at a later date. Resubmitted 

applications previously denied or new 

applications from filers of previously 

denied applications will be subjected to 

a subsequent filing window if there is 

available funding. If the Commission 

were to process such filings as part of 

the applications submitted in the initial 

filing window, it would delay the award 

of funding allocations as the 

Commission must ensure aggregate 

demand does not exceed the available 

funds before issuing all allocations for 

requests filed in the initial filing 

window. Once WCB completes its 

review, it will issue an allocation from 

the Program to the provider, which will 

be available to the provider to draw 

down as expenses are incurred. 

138. The Commission has requested 

Congress to appropriate $2,000,000,000 

to fund the Reimbursement Program. To 

date, Congress has not yet appropriated 

any funds. Even if the eventual 

appropriation is substantial, the 

potential exists for the costs reasonably 

incurred for the removal, replacement, 

and disposal of covered 

communications equipment or services 

to exceed the funding appropriated. 

ETCs with two million or fewer 

customers reported in the Commission’s 

Supply Chain Security Information 

Collection that it would cost $1.62 

billion to remove and replace Huawei 

and ZTE equipment in their networks. 

And this figure does not account for 

other providers of advanced 

communications service that would be 

eligible to participate in the 

reimbursement program. 

139. In the 2019 Supply Chain Further 

Notice, the Commission sought 

comment on whether ‘‘[t]o best target 

available funds,’’ the Commission 

should ‘‘prioritize[ ] payments for the 

replacement of certain equipment and 

services that are identified as posing the 

greatest risk to the security of networks, 

and what categories of equipment and 

services should that prioritization 

include.’’ The Commission also sought 

comment on whether to ‘‘cap the 

amount eligible for each individual 

funding request.’’ In the subsequently 

enacted Secure Networks Act, Congress 

did not provide for, or expressly 

prohibit, any funding prioritization 

scheme. The statute does instruct the 

Commission to ‘‘make reasonable efforts 

to ensure that reimbursement funds are 

distributed equitably among all 

applicants . . . according to the needs 

of the applicants, as identified by the 

applications of the applicant.’’ The 

Commission is also required to notify 

Congress on the need for additional 

funding should anticipated demand 

exceed $1 billion. WCB sought further 

comment on the impact of the Secure 

2928 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

Networks Act on the proposed 

reimbursement program in April 2020. 

Only three parties commented on this 

issue with WTA generally supporting 

the prioritization of ETCs receiving USF 

support over other providers, 

NetNumber suggesting the Commission 

use funding caps based on the type of 

service provider and the nature of the 

project, and RWA asking the 

Commission to prorate reimbursement 

where each recipient gets a set 

percentage of the appropriated funding. 

140. The Commission decides to 

establish a prioritization paradigm in 

the event the estimated costs for 

replacement submitted by the providers 

during the initial or any subsequent 

filing window in the aggregate exceed 

the total amount of funding available as 

appropriated by Congress for 

reimbursement requests. The 

Commission finds prioritization 

preferable to the alternatives suggested 

by NetNumber and RWA. Capping fund 

amounts depending on the nature of the 

removal, replacement, and disposal 

project and service provider type 

presents added complexity to the 

allocation process and fails to ensure 

demand will not exceed the total 

amount of available funding as the 

number of requests are unlimited. 

NetNumber suggests the Commission 

use funding caps but ensure ‘‘fair 

compensation for the full deployment 

cost for replacement equipment.’’ If 

there is no limit on the number of 

requests filed, then NetNumber’s 

approach could lead to a funding deficit 

as the total demand, even when using a 

capped funding approach, could exceed 

the total amount of available funding. 

The Commission also finds that 

prorating support equally among all 

participants based on a set percentage of 

available funding, as the only means of 

allocating support, fails to account for 

the individual needs of the applicants 

and runs counter to the directive in the 

Secure Networks Act. 

141. Under the prioritization scheme 

the Commission adopts, it will first 

allocate funding to eligible providers 

that are ETCs subject to a remove-andreplace requirement under the 

Commission’s rules. If funding is 

insufficient to meet the total demand 

from this subcategory of eligible 

providers, then the Commission will 

prioritize funding for transitioning the 

core networks of these eligible providers 

before allocating funds to non-core 

network related expenses, including 

reasonable costs incurred for removing, 

replacing, and disposing of a provider’s 

radio access network. The Catalog of 

Eligible Expenses cost catalog will 

include additional detail as to what are 

considered core and non-core network 

related expenses. If after allocating 

support to ETCs for both core and noncore network expenses funding is still 

available, the Commission will then 

allocate funding to non-ETC eligible 

provider applicants, prioritizing those 

non-ETCs that provided cost estimate 

data in response to the Commission 

Supply Chain Security Information 

Collection over other non-ETCs. The 

Commission will further prioritize 

funding for core network transition 

costs over non-core network transition 

costs within each non-ETC category. If 

available funding is insufficient to 

satisfy all requests in a certain 

prioritization category, then the 

Commission will prorate the available 

funding equally across all requests 

falling in that category. 

FUNDING PRIORITIZATION CATEGORIES

Priority 1: Advanced communications service providers with 2 million or fewer customers that 

are Eligible Telecommunications Carriers subject to section [54.11] (new removal and replacement requirement). 

Priority 1a: * Costs reasonably incurred for 

transitioning core network(s). 

Priority 1b: * Costs reasonably incurred for noncore network transition. 

Priority 2: Non-ETC providers of advanced communications service with 2 million or fewer customers that participated in the Supply Chain Security Information Collection, OMB Control 

No. 3060–1270. 

Priority 2a: * Costs reasonably incurred for 

transitioning core network(s). 

Priority 2b: * Costs reasonably incurred for noncore network transition. 

Priority 3: Other non-ETC providers of advanced communications service with 2 million or 

fewer customers. 

Priority 3a: * Costs reasonably incurred for 

transitioning core network(s). 

Priority 3b: * Costs reasonably incurred for noncore network transition. 

* If available funding is insufficient to satisfy all requests in this prioritization subcategory, then prorate the funding available equally among all 

requests in subcategory. 

142. In considering prioritization of 

funding, the Commission interprets the 

Secure Networks Act as requiring it to 

make reasonable efforts to treat all 

applicants on a just and fair basis while 

accounting for the applicants’ 

individual circumstances. Accordingly, 

the Commission may find some 

applicants have a greater and more 

urgent need for funding than other 

applicants. The Commission thus does 

not interpret the statute as requiring 

equal funding or treatment but instead 

requiring it to make reasonable efforts to 

treat similarly situated applicants fairly. 

143. While the presence of covered 

communications equipment or services 

threatens network security for all 

eligible providers equally, the 

Commission finds ETCs who are 

receiving USF support stand in a 

different position vis-a`-vis other 

providers. Congress and the 

Commission have undertaken 

significant efforts over the twenty-plus 

years to subsidize the costs of ETCs to 

provide service in high-cost, hard-toserve areas to facilitate universal access 

to essential telecommunications and 

broadband services to all Americans. 

And these efforts have borne fruit, 

resulting in the affordable availability of 

essential communications services for 

hard-to-reach Americans. ETCs in many 

instances represent the only provider of 

such services in the most rural areas of 

our country. Accordingly, the 

Commission finds the protection of ETC 

networks—networks which are funded 

through USF and serve on the front 

lines of providing universal service— 

from national security threats to be of 

the utmost importance. PTA–FL does 

not expressly advocate an alternative 

prioritization approach but notes, 

without citing any statistics, that some 

non-ETCs are also sole source providers. 

PTA–FL also states non-ETCs have a 

greater need for reimbursement support 

than ETCs because their covered 

equipment was acquired without using 

USF support. Notwithstanding these 

assertions, the Commission has made a 

substantial investment to help ETCs 

provide service in areas where the 

economics often do not support viable 

service offerings. Facing the possibility 

of service disruptions absent continued 

support due to the remove-and-replace 

prohibition the Commission adopts, it 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2929 

finds, notwithstanding PTA–FL’s recent 

filing, that ETCs stand in a different 

position than non-ETCs, justifying a 

prioritization in the allocation of 

reimbursement support. Perhaps most 

significantly, in this document the 

Commission requires ETCs receiving 

universal service support to remove 

covered equipment and services from 

their networks. Failure to comply will 

result in the loss of future universal 

service funding. ETCs, which often 

provide service in areas where providers 

are less likely to be able to recover their 

costs from subscribers, are more 

sensitive to the possibility that they 

could lose universal service funding. 

ETCs thus face greater consequences 

than non-ETC providers if the transition 

does not occur in a timely manner. The 

potential for enforcement liability or 

reduced universal service funding 

further distinguishes ETCs from the 

circumstances of other applicants. 

Based on these factors, the Commission 

finds there is a greater urgency to 

expeditiously accommodate the 

transition of ETC networks over other 

applicants. Accordingly, if initial 

funding is insufficient to satisfy 

reimbursement requests, the 

Commission will first prioritize funding 

to ETCs over non-ETC applicants. By 

adopting a prioritization scheme, the 

Commission declines to follow the 

suggestions of RWA to grant an 

equitable percentage of funding to all 

applicants ‘‘proportionate to need . . . . 

if there is an insufficient amount of 

funds initially appropriated.’’ The 

Commission will, however, pro rate 

funding within a prioritization 

subcategory if insufficient funds remain 

for all requests in the subcategory. 

144. Among non-ETC applicants, the 

Commission will further prioritize 

funding, as recently suggested by RWA, 

to first allocate funding to those nonETCs that voluntarily provided cost 

estimate data in response to the Supply 

Chain Security Information Collection 

over other non-ETC applicants. The 

estimated cost to remove and replace 

covered equipment as reported by the 

Supply Chain Security Information 

Collection participants with two million 

or fewer customers totaled $1.62 billion 

with costs reported by all filers totaling 

$1.84 billion. This number includes 

data reported not only by ETCs required 

to report but also non-ETCs that were 

encouraged to report on a voluntary 

basis. The Commission asked Congress 

to appropriate $2 billion in funding for 

the Reimbursement Program, taking into 

account the cost data collected in the 

Supply Chain Security Information 

Collection. If Reimbursement Program 

demand were to substantially exceed $2 

billion in appropriated funding due to 

the emergence of providers not 

participating in the Supply Chain 

Security Information Collection, then 

those non-ETCs that participated 

voluntarily in the collection could go 

without or with reduced funding simply 

because the costs of non-participating 

non-ETCs were not reported, and thus 

not considered. The Commission finds 

this result inequitable. Accordingly, the 

Commission will prioritize funding for 

participating non-ETCs over other nonETCs. 

145. If funding proves insufficient to 

meet the estimated reimbursement costs 

reasonably incurred for ETCs or nonETCs, the Commission will further 

prioritize funding for expenses to 

transition the core networks of 

providers over non-core network 

expenses. To demarcate core network 

transition and non-core network 

transition expenses, applicant will need 

to report estimated costs for such 

activities separately in their submission. 

146. Commenters indicate replacing 

the core network is the logical first step 

in a network transition and may have 

the greatest impact on eliminating a 

national security risk from the network. 

For example, CCA states ‘‘[t]he core is 

where the routing functions and 

‘intelligence’ resides in today’s 

networks, so starting with the core is a 

natural step both in transitioning 

networks and prioritizing any national 

security risks.’’ WTA also notes that 

‘‘limiting removal and replacement to 

core equipment could save the 

transition time and money as the 

equipment that is least likely to be a 

threat is on the edge of the network.’’ 

While the Commission believes having 

covered communications equipment 

and service in any portion of the 

network poses a national security risk, 

it agrees that prioritizing funding for 

core network transition expenses makes 

sense logically from a network 

migration standpoint and will greatly 

mitigate risks in the network. SNC states 

that replacing the core without also 

replacing the radio access network may 

raise interoperability issues but such 

concerns do not dissuade the 

Commission from finding that funding 

is best prioritized to most efficiently 

address national security risks by first 

assisting with the replacement of the 

core network over a provider’s radio 

access network when demand exceeds 

available funding. Accordingly, the 

Commission instructs WCB to further 

prioritize the allocation of funding 

among applicants. 

147. If available funding is 

insufficient to satisfy all funding 

requests in a prioritization subcategory, 

the Commission will prorate funding 

among all requests in the subcategory to 

ensure that total funding allocated does 

not exceed the funding available. 

Specifically, WCB will reduce each 

applicant’s funding allocation request 

by an equal percentage to bring down 

the total funding allocation within the 

available support limit. This process 

will thus result in the equitable 

distribution of funding among 

applicants within the prioritization 

subcategory, consistent with the statute, 

while still allocating more funding to 

those applicants with higher transition 

costs. WCB will determine a pro-rata 

factor by dividing the total amount of 

available funding by the total amount of 

funding requested. WCB will then 

multiply the pro-rata factor by the total 

amount of support requested by each 

applicant and will allocate funds to 

each eligible applicant in the 

prioritization subcategory consistent 

with this calculation. The net result is 

each eligible applicant in that 

subcategory will receive less support 

than requested by the same pro-rata 

factor to bring the overall support 

amount committed within the 

applicable limit. 

148. Following the acceptance of 

applications submitted during the 

relevant filing window, WCB will assess 

the aggregate demand of the 

applications filed during the applicable 

filing window to determine whether 

demand exceeds available funding, 

thereby triggering the need for funding 

prioritization. In conducting this 

assessment, WCB should make a cursory 

review of the applications to determine 

if any requests are clearly ineligible for 

funding, e.g., equipment to be removed 

is not on the Covered List ineligible or 

there appears to be a duplicate request 

from an applicant, and should not be 

included in the aggregate demand 

assessment. Per the Secure Networks 

Act, the Commission must give 

applicants a 15-day period to cure any 

material defect in the application before 

denying the application. This cursory 

review to eliminate clearly ineligible or 

erroneous applications will help to 

ensure a more accurate assessment of 

aggregate demand to determine whether 

to apply funding prioritization. 

149. WCB will need to account for the 

administrative cost of operating the 

reimbursement program when assessing 

aggregate demand to the extent such 

costs are funded by a congressional 

appropriation and do not count towards 

funding available for reimbursement 

requests. 

150. Following the allocation of funds 

to eligible providers and after eligible 

2930 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

providers incur actual costs, they will 

need to file reimbursement claims along 

with any required supporting invoices 

and other cost documentation, as 

directed by WCB, to obtain 

reimbursement funds from their 

allocation. Entities may, and likely will, 

submit multiple reimbursement requests 

as they incur expenses throughout the 

reimbursement period. WCB will review 

reimbursement claims to ensure that 

disbursements are made only for costs 

reasonably incurred. 

151. If an actual cost exceeds the 

estimated cost for a particular line item, 

the program participant will need to 

note the nature of the variation in the 

reimbursement claim filing, e.g., the 

recipient had to change equipment 

vendors resulting in higher replacement 

costs than estimated. The Commission 

understands the difficulty in accurately 

estimating costs and expect some degree 

of variation between estimated and 

actual costs. Ultimately, while the 

Commission will exercise some degree 

of flexibility with such variations, the 

Reimbursement Program participant 

cannot draw down more than the total 

funding amount allocated to it and can 

only receive reimbursement for 

reasonable costs incurred. If a 

recipient’s costs exceed the funding 

allocation, then the recipient will need 

to seek an additional allocation of 

funding, if funding remains available. 

152. To ensure the timely use of 

allocated funds as intended, the 

Commission will require recipients to 

submit all applicable reimbursement 

claims by a set date following the 

expiration of the term for completing 

the removal, replacement, and disposal 

of covered communications equipment 

and services. Without a deadline, 

outstanding funding would have to 

remain allocated indefinitely to satisfy 

possible future reimbursement claims 

filed for actual expenses incurred even 

if the recipient had no intention of filing 

any future claims. The effect would be 

to essentially strand funding and 

prevent the reallocation of unused funds 

to other Reimbursement Program 

participants. Imposing a deadline for the 

filing of reimbursement claims will 

address these concerns. 

153. The Commission recently 

imposed a deadline on the filing of 

invoices to receive committed funds in 

the Rural Health Care Program to 

address similar concerns. The 

Commission similarly adopted an 

invoicing deadline for the E-Rate 

Program. In that proceeding, the 

Commission found an invoicing 

deadline of 120 days following the 

expiration of the one-year service 

delivery deadline, with the possibility 

of a one-time 120 day extension, 

sufficient to give program participants 

time to submit claims for expenses 

incurred while still providing the 

certainty needed for the efficient deobligation of funding for use by future 

program participants. For the same 

reasons, the Commission will apply the 

approach used in the Rural Health Care 

Program to the Reimbursement Program. 

Recipients are required to file all 

reimburse claims within 120 days 

following the expiration of the removal, 

replacement, and disposal term. Prior to 

the expiration of the 120-day deadline, 

recipients can request and receive a 120- 

day extension of the reimbursement 

claim deadline, if timely requested. 

After the expiration of the 

reimbursement claim deadline, any 

allocated but as-yet unclaimed funds 

will revert automatically to the 

Reimbursement Program for reallocation 

to other participants pursuant to a 

future filing window. If a petition for an 

extension of the removal, replacement, 

and disposal term is pending when the 

term expires, then automatic reversion 

of the unallocated funds is stayed until, 

and if, the extension request is denied. 

Additional details on the removal, 

replacement, and disposal term, and 

extensions thereof, are provided in the 

subsequent section. 

154. The Secure Networks Act 

requires, unless there is an extension 

provided for by the statute, 

Reimbursement Program recipients to 

complete the removal, replacement, and 

disposal of covered communications 

equipment or service ‘‘not later than 1 

year after the date on which the 

Commission distributes reimbursement 

funds to the recipient.’’ The 

Commission concludes the one year 

window for project completion 

commences when the applicant makes 

the initial draw down disbursement of 

funding during the funding distribution 

stage. Thus, the one-year deadline will 

vary among recipients depending on 

when each recipient chooses to accept 

its initial draw down disbursement. The 

Commission finds this approach most 

accurately complies with a straightforward reading of the statute and that 

it provides applicants a substantial 

amount of control over when the oneyear window opens since the applicant 

chooses when to accept the initial drawdown. 

155. The Commission recognizes 

there is concern among providers that 

the network transition process will 

likely take more than a year to complete. 

Congress has made clear its intent, 

however, and the Commission lacks 

discretion to deviate from what the 

statute requires. By tying the completion 

term to the actual initial disbursement 

of funds, the Commission adheres to the 

statutory requirement but also provides 

some flexibility to applicants. Because 

the Commission has declined to use a 

milestone-based phased funding 

approach, the suggestion to commence 

the one-year project deadline to the final 

disbursement is unworkable. At the 

same time, the Commission 

acknowledges applicants may defer 

taking their initial disbursement to 

further delay commencement of the oneyear deadline. Such actions, in turn, 

may delay the network transitions to 

remove, replace, and dispose of 

equipment and service posing a national 

security risk. To ensure the efficient and 

expeditious use of funding to facilitate 

network transitions, the Commission 

will require recipients to file to receive 

their initial disbursement within [one 

year] of receiving the funding allocation 

approval. Failure to file for an initial 

disbursement within one year of receipt 

of funding allocation approval will 

result in the automatic reversion of the 

funding allocation to the program fund 

for reallocation to other or future 

program participants. 

156. Term Extensions. The Secure 

Networks Act authorizes the 

Commission to grant extensions of time 

to complete the removal, replacement 

and disposal of covered 

communications equipment and service. 

The Commission may grant a ‘‘general’’ 

six-month extension ‘‘to all recipients of 

reimbursements . . . if the Commission: 

(i) finds that the supply of replacement 

communications equipment or services 

needed by the recipients to achieve the 

purposes of the Program is inadequate 

to meet the needs of the recipients; and 

(ii) provides notice and a detailed 

justification for granting the extension 

to’’ Congress. The Commission is also 

authorized to grant ‘‘individual’’ 

extensions on a case-by-case basis to 

program recipients pursuant to petition 

for a period of time of up to six months. 

To grant an individual extension, the 

Commission must find that, ‘‘due to no 

fault of such recipient, such recipient is 

unable to complete the permanent 

removal, replacement, and disposal.’’ 

According to the legislative history, 

‘‘[t]he Committee expects the 

Commission to not find it the fault of a 

recipient of the program if such 

recipient has a shortage of qualified 

workers, either employees or contracted 

third-parties, to complete the removal of 

covered equipment and replacement of 

new equipment under the timeframe 

established.’’ 

157. The general extension provision 

authorizes the Commission to issue sua 

sponte a one-time six-month extension 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2931 

to all program recipients. Interpreting 

this provision to allow for more 

multiple general six month extensions 

for all participants without regard to the 

circumstances of each individual 

applicant would seem to run counter to 

the intent of Congress of having a oneyear term deadline and would seem to 

moot, or at least significantly diminish, 

the need for, or relevance of allowing, 

individual extensions. Following the 

funding allocation stage, the 

Commission directs WCB to assess the 

supply of replacement equipment in the 

marketplace. The Commission expects 

WCB, in making this assessment, to 

account for the information reported by 

program recipients in the status updates 

filed as required by the Secure Networks 

Act. WCB shall inform the Commission 

of its assessment in a timely manner so 

as to give the Commission sufficient 

time to provide notice and justification 

to Congress and to issue a general 

extension of time before the initial oneyear deadline expires for program 

recipients. 

158. In reading the statutory provision 

on individual extensions, the 

Commission agrees with commenters 

who assert that the provision allows it 

to grant more than one extension to a 

recipient. The Secure Networks Act 

states that the Commission may grant a 

petition for an extension, but does not 

provide any direct limit as to the 

number of extensions that may be 

granted. Instead, the only limit to 

granting an extension is whether the 

Commission finds that, ‘‘due to no fault 

of such recipient, such recipient is 

unable to complete the permanent 

removal, replacement, and disposal.’’ 

The Commission interprets this 

language to mean that it may grant more 

than one individual extension as factors 

beyond the control of an applicant may 

exist for more than six months, an 

interpretation endorsed by all 

commenters. The Commission also 

agrees with commenters that the statute 

specifically allows it to grant both a 

general and individual extensions if the 

circumstances warrant. The 

Commission also agrees with 

commenters that it may not issue a 

single, across-the-board extension that 

exceeds six months. The Commission 

believes this is an important safety valve 

for recipients to complete their network 

transitions. The Commission directs 

WCB to address petitions for extensions 

in the first instance consistent with the 

following principles. In order to ensure 

prompt replacement in accordance with 

the goals of the Act, petitions for 

extension will only be granted where 

the program recipient demonstrates the 

delay is due to factors beyond its 

control. In making this determination, 

the Commission directs WCB to be 

guided by the Commission’s precedent 

in dealing with similar requests 

involving wireless facilities under 

§ 1.946 of the Commission’s rules. 

§ 1.946(e) allows for extensions of time 

‘‘if the licensee shows that failure to 

meet the construction or coverage 

deadline is due to involuntary loss of 

site or other causes beyond its control.’’ 

The rule further provides that 

‘‘[e]xtension requests will not be granted 

for failure to meet a construction or 

coverage deadline due to delays caused 

by a failure to obtain financing, to 

obtain an antenna site, or to order 

equipment in a timely manner. If the 

licensee orders equipment within 90 

days of its initial license grant, a 

presumption of diligence is 

established.’’ The rule further provides 

that ‘‘[e]xtension requests will not be 

granted for failure to meet a 

construction or coverage deadline 

because the licensee undergoes a 

transfer of control or because the 

licensee intends to assign the 

authorization. The Commission will not 

grant extension requests solely to allow 

a transferee or assignee to complete 

facilities that the transferor or assignor 

failed to construct.’’ The Commission 

encourages WCB to provide guidance as 

necessary to program recipients to help 

them in seeking an extension of time. 

This addresses the request of CCA, 

asking the Commission to provide clear 

guidance on how it will implement the 

provision on individual extensions and 

what will be expected from applicants 

to satisfy an extension request. 

159. Applicability of USF Support 

Certification Requirement. The new 

remove-and-replace rule that the 

Commission adopts requires ETCs to 

certify prior to receiving USF support 

that they do not use equipment or 

services identified on the Covered List. 

The Commission recognizes 

Reimbursement Program recipients will 

likely need to utilize their existing 

covered communications equipment or 

service on a temporary basis during the 

transition process to mitigate service 

disruptions for existing customers. 

Accordingly, Reimbursement Program 

recipients are not subject to the new 

certification requirement until after the 

expiration of their removal, 

replacement, and disposal term. 

However, once the term has expired, the 

provider will be subject to the 

certification requirement going forward 

when seeking to obtain USF support. 

160. Effect of Removal from the 

Covered List. The Secure Networks Act 

provides a process for addressing 

situations when communications 

equipment or service is removed from 

the Covered List following the filing of 

an application for reimbursement. If this 

situation occurs, then according to the 

Secure Networks Act, an applicant may 

either: (1) Return the reimbursement 

funds received and be released from any 

further removal, replacement, and 

disposal requirements; or (2) retain the 

reimbursement funds received and 

remain subject to the applicable 

removal, replacement, and disposal 

requirements. For purposes of the 

Reimbursement Program established in 

this document, the Commission 

interprets this statutory provision to 

mean that if the Covered List removal 

occurs after an application is filed and 

approved, then it will give the applicant 

the option to either proceed with or 

withdraw from the Reimbursement 

Program altogether. If withdrawing, then 

the applicant would need to notify the 

Commission as such and return any 

reimbursement funds previously 

disbursed to the Commission where 

applicable. If withdrawing, any funding 

allocated but not yet disbursed to the 

applicant would automatically revert to 

the Commission for potential 

reallocation to other applicants 

pursuant to a subsequently established 

filing window. If continuing with the 

Reimbursement Program, then the 

applicant must continue to comply with 

all applicable program requirements and 

obligations. Per the Secure Networks 

Act, if a program recipient needs an 

‘‘assurance’’ as to whether the 

reimbursement funds have been 

returned, then ‘‘the assurance may be 

satisfied [by the recipient] making an 

assurance that such funds have been 

returned.’’ That said, the Commission 

will provide recipients with 

confirmation of reimbursement funds 

returned. 

161. The Commission declines to 

implement a preapproval process for 

transition plans. Both CCA and 

NetNumber urge the Commission to 

provide a mechanism by which 

providers can obtain an upfront 

approval or at least additional guidance 

for their network transition plans. These 

commenters note the complexity of 

transitioning a network and explain 

how upfront approval and guidance 

would mitigate wasted time and 

resources on a plan the Commission 

ultimately does not support. The 

upfront approval mechanism would 

apparently need to precede the filing 

window for submitting reimbursement 

cost estimates. 

162. Although the Commission sees 

the benefits of having a preapproval 

process, it is concerned the addition of 

2932 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

another procedural layer will 

unnecessarily delay the allocation of 

funding for the removal, replacement, 

and disposal of covered 

communications equipment and service 

from the networks of eligible providers. 

Because of the national security 

implications of continuing to have 

insecure equipment in the 

Commission’s communications 

networks, it is striving to receive 

applications within twelve months of 

the adoption of this document. Adding 

a processing layer to pre-approve 

transition plans would require building 

in further time for implementation and 

the redirection of resources to reviewing 

and approving transition plans, instead 

of immediately implementing a system 

to receive applications. Moreover, the 

Commission will separately be 

providing participants with guidance on 

replacement equipment and cost 

estimates. The Commission finds the 

additional guidance will sufficiently 

help applicants in formulating their 

network transition plans and should 

alleviate the concerns the commenters 

express. Accordingly, the Commission 

declines at this time to establish a 

preapproval process for transition plans 

as suggested by CCA and NetNumber. 

For the same reasons, the Commission 

declines a similar suggestion by SNC, to 

the extent SNC’s proposals differs from 

the process the Commission adopts, to 

have two separate application rounds 

upfront to obtain a funding allocation, 

i.e., one to requests funds for planning 

and another for replacement and 

implementation. 

163. The Secure Networks Act directs 

the Commission to adopt regulations 

requiring the ‘‘disposal’’ of covered 

communications equipment and 

services by Reimbursement Program 

recipients to prevent the use of such 

equipment or services in the networks 

of advanced communications service 

providers. Disposal is defined as the act 

of disposing. To dispose of something 

means ‘‘to get rid of,’’ ‘‘to deal with 

conclusively,’’ ‘‘to transfer to the control 

of another.’’ While the act of disposing 

typically means to get rid of or to 

transfer control of something to another, 

the Commission reads ‘‘disposal’’ in 

connection with the statutory language 

‘‘to prevent such equipment or services 

from being used in the networks of 

providers’’ as requiring the destruction 

of the equipment or service by the 

recipient so as to make the equipment 

or service inoperable and incapable of 

use. The Commission adopts a 

regulation consistent with its 

interpretation and will require 

recipients to dispose of covered 

communications equipment and service 

in a manner to prevent the use of the 

equipment or service in the networks of 

other providers. 

164. The Commission disagrees with 

PRTC that the statute would allow the 

Commission to permit the transfer of 

covered communications equipment or 

service to non-U.S. providers in an 

operable state that would allow for use 

of the equipment or service in another 

provider’s network, whether foreign or 

domestic. At the same time, the 

Commission agrees with CCA and will 

allow providers to satisfy its disposal 

requirements ‘‘by documenting their 

transfer of removed equipment to third 

parties tasked with destruction or other 

disposal of the equipment.’’ Regardless 

of the method of disposal or destruction, 

the Commission requires participants to 

retain detailed documentation to verify 

compliance with this requirement. The 

Commission expects WCB to provide 

participants with additional guidance to 

help participants with the disposal and 

verification process. 

165. The Commission directs WCB to 

create one or more forms to be used by 

entities to claim reimbursement from 

the Reimbursement Program, to report 

on their use of money disbursed and the 

status of their construction efforts, and 

for any other Reimbursement Programrelated purposes. The Commission also 

directs WCB to establish the timing and 

calculate the amount of the allocations 

to eligible entities from the 

Reimbursement Program, develop a 

final Catalog of Eligible Expenses with 

the assistance of a contractor, and make 

other determinations regarding eligible 

costs and the reimbursement process. 

The Commission further directs WCB to 

adopt the necessary policies and 

procedures relating to allocations, draw 

downs, payments, obligations, and 

expenditures of money from the 

Reimbursement Program to protect 

against waste, fraud, and abuse and to 

protect Reimbursement Program funds 

in the event of bankruptcy of a support 

recipient. The Commission expects 

WCB through the implementation 

process will address many of the 

procedural details highlighted by the 

Secure Networks Coalition with input as 

needed from the public. 

166. WCB will consult with the Office 

of General Counsel and the Office of the 

Managing Director (OMD) in carrying 

out these tasks. The Commission also 

encourages the WCB to work, as 

necessary, with other appropriate 

Bureaus and Offices in implementing 

and maintaining the Reimbursement 

Program. The Commission authorizes 

WCB to engage contractors to assist in 

the reimbursement process and the 

administration of the Reimbursement 

Program. Lastly, as required by the 

Secure Networks Act, the Commission 

directs WCB with the assistance of the 

Consumer and Governmental Affairs 

Bureau to ‘‘engage in education efforts 

with providers of advanced 

communications service’’ to encourage 

participation in the Reimbursement 

Program and to assist such providers in 

submitting applications. 

167. The Secure Networks Act 

requires the Commission to take ‘‘all 

necessary steps’’ to combat waste, fraud, 

and abuse in the Reimbursement 

Program. The Secure Networks Act and 

the associated House Report specified 

that these steps shall include, but are 

not limited to, requiring recipients to 

submit status updates, detailed 

spending reports and documentation of 

invoices, and conducting routine audits 

and random field investigations of 

recipients to ensure compliance with 

Program requirements and this Act. The 

Commission sought comment in the 

Section 4 Public Notice, 85 FR 26653, 

May 5, 2020, and the 2019 Supply 

Chain Second Further Notice on these 

statutory obligations. The Commission 

now adopts rules to protect against the 

waste, fraud, and abuse of taxpayer 

money consistent with the Secure 

Networks Act. 

168. Status Updates. While the 

Commission did not receive any 

comments on how to implement this 

statutory provision, it will proceed as 

directed by the Secure Networks Act 

and require program recipients to file a 

status update ‘‘once every 90 days 

beginning on the date on which the 

Commission approves an application for 

a reimbursement.’’ Recipients must file 

the first report within 90 days of 

receiving their funding allocation. 

Although the statute allows the 

Commission to require more frequently 

filed updates, it finds an update every 

90 days sufficient to keep the 

Commission informed of ongoing 

developments while not unduly 

burdening program recipients and 

diverting limited administrative 

resources away from the network 

transition process. These updates will 

help the Commission monitor the 

overall pace of the removal, 

replacement, and disposal process and 

whether recipients are acting 

consistently with the timelines provided 

to the Commission or whether 

unexpected challenges are causing 

delay. 

169. In the update, the recipients shall 

report on the efforts undertaken, and 

challenges encountered, in permanently 

removing, replacing, and disposing its 

covered communications equipment or 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2933 

services. Recipients shall also report in 

detail on the availability of replacement 

equipment in the marketplace so the 

Commission can assess whether a 

general, six-month extension permitted 

by the statute is appropriate. The report 

must include a certification that affirms 

the information in the status report is 

accurate. After the program recipient 

has notified the Commission of the 

completion of the permanent removal, 

replacement, and disposal of the 

covered communications equipment or 

service pursuant to a final certification, 

updates are no longer required. 

170. The Commission directs WCB to 

provide additional details on the filing 

requirements and contents for such 

status updates. Per the statute, the 

Commission directs WCB to publicly 

post on the Commission’s website the 

status update filings within 30 days of 

submission. The Commission further 

directs WCB to prepare a report for 

Congress within every 180 days 

following the funding allocation stage. 

The report shall provide an update on 

the Commission’s implementation 

efforts and ‘‘the work by recipients of 

reimbursements . . . to permanently 

remove, replace, and dispose of covered 

communications equipment or 

services.’’ 

171. Spending Reports. The Secure 

Networks Act directs the Commission to 

require Reimbursement Program 

recipients to submit ‘‘reports regarding 

how reimbursement funds have been 

spent, including detailed accounting of 

the covered communications equipment 

or services permanently removed and 

disposed of, and the replacement 

equipment or services purchased, 

rented, leased or otherwise obtained, 

using reimbursement funds.’’ Like status 

updates, spending reports help mitigate 

waste, fraud, and abuse by allowing the 

Commission to monitor the recipient’s 

funding use to help make sure funds are 

spent as intended. The statute requires 

the filing of spending reports on a 

regular basis but does not otherwise 

indicate the filing frequency. 

172. The Commission sought and 

received limited comment on the 

implementation of this statutory 

provision. The lone commenter, the 

Rural Wireless Broadband Coalition, 

understands the benefits of having 

recipients file such reports but 

encourages the Commission to limit the 

filing frequency to a semi-annual basis. 

According to Rural Wireless Broadband 

Coalition, [p]roducing these detailed 

accountings will be a burdensome, timeconsuming exercise for small wireless 

carriers, requiring them to dedicate 

scarce resources to track, record, 

assemble, review, and report extensive 

data related to the removal, 

replacement, and disposal of covered 

equipment.’’ 

173. The Commission is sensitive to 

the reporting burden highlighted by 

Rural Wireless Broadband Coalition. 

While the removal, replacement, and 

disposal term is for a one-year period 

with possible extensions of time for up 

to six-months, the Commission finds 

that requiring filings twice a year will 

provide information with sufficient 

frequency to allow the Commission to 

monitor against waste, fraud, and abuse 

while mitigating the reporting burden 

on recipients. Accordingly, the 

Commission will require 

Reimbursement Program recipients to 

file semiannually. Spending reports will 

be due within 10 calendar days after the 

end of January and July, starting with 

the recipient’s initial draw down of 

disbursement funds and terminating 

once the recipient has filed a final 

spending report showing the 

expenditure of all funds received as 

compared to the estimated costs 

submitted. A final spending report will 

be due following the filing of a final 

certification by the recipient. 

174. The Commission directs WCB to 

provide Reimbursement Program 

recipients with additional details on the 

filing of and information contained in 

the spending reports. The Commission 

also directs WCB to make filed spending 

reports available to the public via a 

portal on the Commission’s website. 

The Commission will consider detailed 

accounting information on the covered 

communications equipment or services 

permanently removed and disposed of, 

and the replacement equipment or 

services purchased, rented, leased, or 

otherwise obtained, using 

reimbursement funds presumptively 

confidential and will withhold such 

disaggregated information from routine 

public inspection. 

175. Final Certification. The Secure 

Networks Act directs the Commission to 

require Reimbursement Program 

recipients to file a final certification ‘‘in 

a form and at an appropriate time to be 

determined by the Commission.’’ In the 

final certification, the Reimbursement 

Program recipient must indicate 

whether it has fully complied with (or 

is in the process of complying with) all 

terms and conditions of the Program 

and the commitments made in the 

application of the recipient for the 

reimbursement; has permanently 

removed from the communications 

network of the recipient, replaced, and 

disposed of (or is in the process of 

permanently removing, replacing, and 

disposing of) all covered 

communications equipment or services 

that were in the network of the recipient 

as of the date of the submission of the 

application of the recipient for the 

reimbursement; and has fully complied 

with (or is in the process of complying 

with) the timeline submitted by the 

recipient. The statute also requires the 

filing of an updated certification if at the 

time the final certification is filed, the 

recipient has not fully complied with 

and completed its obligations under the 

Reimbursement Program. 

176. No comments were filed 

addressing the final certification 

required by the Secure Networks Act. 

As the Commission lacks discretion to 

deviate from clear statutory 

requirements, it adopts a rule requiring 

recipients to file a final certification and 

updates as necessary per the statute. 

The Commission will require recipients 

to file the final certification within 10 

calendar days of the expiration of the 

removal, replacement and disposal term 

because the final certification relates to 

the completion of the removal, 

replacement, and disposal process. The 

final certification will relate to the state 

of compliance and project completion as 

of the end of the removal, replacement 

and disposal term. Subsequently filed 

final certification updates will relate to 

the state of compliance and project 

completion as of the date the update is 

filed. Notwithstanding the statutory 

allowance for a final certification 

update, the failure to complete the 

removal, replacement, and disposal 

process in accordance with the 

Reimbursement Program’s requirements 

by the end of the removal, replacement 

and disposal term, as evidenced in the 

filing of the final certification as 

initially filed, may result in the 

assessment of fines, forfeitures, and/or 

other enforcement actions against the 

recipient. The Commission directs WCB 

to provide additional details on the 

filing requirements and contents for the 

final certification and associated 

updates. 

177. Documentation Retention 

Requirement. Reimbursement Program 

recipients are required to provide 

documentation, including relevant 

invoices and receipts, to support 

requests for the disbursement of 

reimbursement funds for reasonable 

expenses actually incurred during the 

removal, replacement, and disposal 

process. This documentation helps the 

Commission assess whether funding is 

being used as intended for reasonable 

costs, helps the Commission compare 

actual costs to submitted estimated 

costs, and helps to ensure 

disbursements for actual costs do not 

exceed the recipients funding 

allocation. While commenters did not 

2934 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

address document retention, the 

Commission finds it prudent in its effort 

to combat waste, fraud, and abuse to 

require program recipients to retain all 

documentation related to their requests 

for funding reimbursement for actual 

expenses incurred. Recipients must 

retain the documentation for a period of 

10 years after the date the final 

disbursement payment is received from 

the Reimbursement Program. The 

retained documentation will assist the 

Commission with any subsequent 

investigations should an issue of waste, 

fraud, and abuse arise following the 

completion of the removal, replacement, 

and disposal process. A 10-year period 

of time for retaining documentation is 

consistent with the Commission’s 

retention requirement for both the ERate program and the broadcast 

incentive auction reimbursement 

program and coincides with the 10-year 

statute of limitations under the False 

Claims Act. 

178. Audits, Reviews, and Field 

Investigations. In the 2019 Supply Chain 

Further Notice the Commission 

proposed subjecting program recipients 

to periodic compliance audits and other 

inquiries, including investigations as 

appropriate, to ensure compliance with 

the Commission’s rules and orders. The 

Commission did not receive any 

comments on this issue. The 

Commission now directs OMD, or a 

third-party identified by OMD, to 

prepare a system to audit 

Reimbursement Program recipients to 

ensure compliance with the 

Commission’s rules. Consistent with the 

Commission’s experience regarding the 

USF, the Commission finds that audits 

are the most effective way to determine 

compliance with the Commission’s rule 

requirements. To facilitate audits and 

field investigations, the Commission 

requires Reimbursement Program 

recipients to provide consent to allow 

vendors or contractors used by the 

recipient to release confidential 

information to the auditor, reviewer, or 

other representative. Recipients must 

also allow any representative appointed 

by the Commission to enter the 

premises of the recipient to conduct 

compliance inspections. 

179. Enforcement. In the 2020 Supply 

Chain Second Further Notice, the 

Commission sought comment on 

implementing the enforcement 

measures contained in section 7 of the 

Secure Networks Act. The Commission 

received only one comment, from CCA, 

on the issue. As provided for in the 

statute, a violation of the Secure 

Networks Act or a regulation adopted 

pursuant to this statute shall constitute 

a violation of the Communications Act. 

As such, the Commission’s authority to 

impose fines and forfeitures pursuant to 

section 503 of the Communications Act 

and § 1.80 of the Commission’s rules, 47 

CFR 1.80, will apply equally to 

violations of the Secure Networks Act 

and Commission regulation adopted 

pursuant to the Secure Networks Act. 

Potential violators are not limited to 

Reimbursement Program recipients but 

could also include consultants, vendors 

and contractors that assist entities 

participating in Reimbursement 

Program. In addition, as directed by the 

Secure Networks Act and consistent 

with the Commission’s proposal in the 

2020 Supply Chain Second Further 

Notice and the Secure Networks Act the 

Commission requires Reimbursement 

Program recipients found in violation of 

its rules or the ‘‘commitments made by 

the recipient in the application for the 

reimbursement’’ to repay funds 

disbursed via the Reimbursement 

Program. Prior to requiring repayment, 

WCB will send notice of the violation to 

the alleged violator and give the alleged 

violator 180 days to cure the violation 

as required by the Secure Networks Act. 

In addition to taking steps necessary to 

address a non-compliant situation, 

curing a violation may simply involve a 

response showing that a violation has 

been cured. The cure period will 

provide alleged violators with ample 

time to resolve issues of noncompliance before the Commission 

proceeds with taking further 

enforcement action. 

180. Section 7(c) of the Secure 

Networks Act requires the Commission 

to take immediate action to recover all 

reimbursement funds awarded to a 

recipient if the recipient is required to 

repay funding due to a violation. CCA 

urged the Commission ‘‘to include in its 

enforcement procedures a reasonable 

opportunity for carriers to cure before 

repayment or other penalty action is 

triggered. The statute already provides 

program participants a 180-day period 

to cure violations prior to initiating 

repayment actions, and so the 

Commission finds going beyond what is 

already required unnecessary. 

Accordingly, consistent with the 

Commission’s proposals in the 2020 

Supply Chain Second Further Notice, it 

will initiate a repayment action by 

sending a request for repayment to the 

recipient immediately following the 

expiration of the opportunity to cure if 

the recipient fails to respond to the 

notice of violation, indicating the 

violation is cured. If the alleged violator 

does respond to the notice but is 

ultimately determined by the 

Commission not to have cured the 

violation, the Commission will then 

request repayment following that 

determination. 

181. The Commission directs the 

Enforcement Bureau (EB) to take all 

steps necessary to initiate enforcement 

actions against Reimbursement Program 

violators and to recover any outstanding 

repayment amounts once a violation of 

the Reimbursement Program is referred 

by WCB to EB. Participants found to 

violate the Commission’s rules will also 

be referred to ‘‘all appropriate law 

enforcement agencies or officials for 

further action under applicable criminal 

and civil laws.’’ Any person or entity 

that violates the Reimbursement 

Program rules will also be banned from 

further participation in the section 4 

reimbursement program, and the person 

or entity may also be barred from 

participating in other Commission 

programs, including Universal Service 

support programs. 

182. Section 4(d)(1) of the Secure 

Networks Act requires the Commission 

to develop a list of suggested 

replacements (Replacement List) for the 

equipment and services being removed, 

replaced, and destroyed. Specifically, 

Congress directed the Replacement List 

to include ‘‘both physical and virtual 

communications equipment, application 

and management software, and services 

or categories of replacements of both 

physical and virtual communications 

equipment, application and 

management software.’’ The list of 

suggested replacements must also be 

technology neutral and may not 

advantage the use of reimbursement 

funds for capital expenditures over 

operational expenditures. The 

Commission sought comment on how to 

develop the Replacement List in April 

2020. 

183. Consistent with the 

Commission’s statutory obligation, it 

establishes, and will publish on its 

website, a Replacement List that will 

identify the categories of suggested 

replacements of real and virtual 

hardware and software equipment and 

services to guide of providers removing 

covered communications equipment 

from their networks. The Commission 

agrees with commenters that the Secure 

Networks Act provides the Commission 

with the flexibility to choose either to 

create a list of suggested replacements 

or categories of replacements. The 

Commission also agrees that the 

Replacement List should include 

categories of replacements rather than 

try to identify suggested replacements, 

because, as commenters assert, creating 

a list of suggested replacements would 

have negative consequences, such as the 

Commission being seen as picking 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2935 

favored equipment and manufacturers 

and imposing de facto mandates of 

specific equipment. The Commission 

agrees with commenters that it should 

provide carriers with the flexibility to 

select the equipment or services that fit 

their needs from categories of 

equipment and services. The 

Commission is wary of actions that 

could harm its communications 

networks, or result in mandatory 

purchases of specific equipment 

included on the Replacement List. The 

Commission therefore will list 

categories of suggested replacements on 

the Reimbursement List. 

184. Further, were the Commission to 

try to identify specific equipment and 

services, it would risk inadvertently 

overlooking some equipment or 

manufacturers because ‘‘the number and 

diversity of telecommunications 

equipment is enormous, with varying 

model numbers, releases, and 

configurations.’’ There is no available 

resource with such information in the 

record. The Commission believes the 

better approach in developing the 

Replacement List is to identify 

categories of replacement equipment 

and services that providers of advanced 

communications service could then look 

to as they determine the proper 

equipment and services for their 

networks. 

185. Others suggest that rather than 

creating a list of permissible hardware 

and software equipment and services, 

the Commission should make a list of 

manufacturers from whom the products 

and services might be purchased. The 

Secure Networks Act specifically 

requires the Commission to produce a 

list of ‘‘Suggested Replacements.’’ 

Identifying manufacturers would give 

the imprimatur of government approval 

and create a government approved list 

of manufacturers. An approved 

government listing could influence 

purchases and appear to convey that the 

Commission believes certain equipment 

meets quality and security metrics, 

which would require intensive review 

of products to ensure that the 

Replacement List was accurate and upto-date. It could also lead to security 

threats as companies rely on the 

Commission’s ‘‘seal of approval’’ in lieu 

of conducting their own research into 

the security of certain equipment. 

Further, entities seeking to enter the 

market may be dissuaded if their 

customers are only able to purchase 

equipment from manufacturers 

approved by the Commission, harming 

competition and innovation right as the 

move to Open Radio Access Networks 

(O–RAN) and virtualized networks 

opens up markets to new competitors. 

For these reasons, the Commission 

declines to name specific manufacturers 

and instead find that a Replacement List 

with categories of suggested equipment 

and services to guide providers of 

advanced communications service is the 

better interpretation of its obligation. 

186. In compiling this Replacement 

List, the Commission will use the 

categories of equipment and services in 

its recently completed information 

collection as guidance for specific 

categories on the Replacement List. 

Specifically, in the 2019 Supply Chain 

Order, the Commission directed the 

Office of Economics and Analytics 

(OEA) and WCB to conduct an 

information collection to determine 

whether ETCs own equipment or 

services from Huawei and ZTE; what 

that equipment is and services are; the 

costs associated with purchasing and/or 

installing such equipment and services; 

and the costs associated with removing 

and replacing such equipment and 

services. Additionally, the Catalog of 

Expenses adopted as part of the 

Reimbursement Program will inform the 

Replacement List by helping to target 

the type of equipment that will be 

removed and replaced. The Commission 

may also review efforts from other 

Federal partners, such as the Federal 

Acquisition Security Council, or the 

Department of Homeland Security’s 

Information and Communications 

Technology Supply Chain Risk 

Management Task Force, if those efforts 

are relevant to the Replacement List. 

The Federal Acquisition Security 

Council was established pursuant to the 

SECURE Technology Act and the 

Information and Communications 

Technology Supply Chain Risk 

Management Task Force is a publicprivate supply chain risk management 

partnership established in to identify 

and develop consensus strategies that 

enhance supply chain security. 

187. The Commission agrees with 

commenters that the Replacement List 

should include equipment and services 

equipped, or upgradable to, be used in 

O–RAN, or in virtualized networks. 

Including O–RAN equipment and 

services, which ‘‘could transform 5G 

network architecture, costs, and 

security,’’ is consistent with the Secure 

Networks Act’s requirement that the 

Replacement List be technologically 

neutral. The Secure Networks Act 

allows for the inclusion of services such 

as O–RAN and virtualized network 

equipment ‘‘to the extent that the 

Commission determines that 

communications services can serve as 

an adequate substitute for the 

installation of communications 

equipment.’’ The record shows that 

these communications services can 

serve as an adequate substitute for 

communications equipment. The 

Commission makes such a finding here. 

The Commission encourages providers 

participating in the Reimbursement 

Program to consider this promising 

technology, along with all other 

available technologies as they make 

their procurement decisions. 

188. One commenter asserts that the 

Commission should use a software 

overlay to allow companies with 

covered communications equipment 

and services to keep the equipment in 

their networks until obsolescence, 

potentially enabling reimbursement 

funding to cover more networks. They 

argue the software overlay will make the 

replacement of the risky of covered 

equipment more efficient ‘‘with proven 

and fully tested technology (tested by 

[the U.S. government]), that installs as 

software on 3rd party communications 

equipment and mitigates the covered 

equipment manufacturers’’ ability to 

remotely access, manipulate traffic, 

access private and proprietary data and 

make configuration changes.’’ They 

further suggest that these software 

technologies provide the ability to 

defend the United States 

communications and data 

infrastructure, regardless of the location 

and source of manufacturing allowing 

time for ‘‘rip and replace’’ actions to be 

accelerated at lower cost. 

189. Were the Commission to adopt 

this proposal, covered, potentially 

harmful equipment could remain in its 

networks for years, increasing the risks 

to the Commission’s networks. The 

Commission believes the better 

approach given the language in the 

Secure Networks Act is take every 

measure possible to immediately reduce 

and eliminate the risk by removing the 

equipment promptly. Additionally, the 

Reimbursement Program requires that 

reimbursement funds be used solely for 

the purposes of ‘‘permanent removal of 

covered communications equipment 

and services . . . .’’ The public interest 

and its statutory goals would be best 

served by the approach the Commission 

has adopted. 

190. The Commission also declines at 

this time to rely solely on a third party 

to create a list of suggested categories or 

the list of replacement equipment and 

services, as advocated by one 

commenter. First, the Secure Networks 

Act requires the Replacement List to be 

technologically neutral. Trade 

associations or membership 

organizations may be inherently biased 

toward the interests of their 

membership. Rather than risk the 

impression of self-dealing, the 

2936 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

Commission believes it is more prudent 

to maintain control of the Replacement 

List. Second, although the Commission 

recognizes the challenges inherent in 

creating the Replacement List, the 

Secure Networks Act is clear that the 

Commission ‘‘shall’’ develop the 

Replacement List. Outsourcing the task 

to a third-party trade association or 

similar organization could be an 

unlawful subdelegation and risk the 

appearance of abdicating the 

Commission’s responsibility. 

191. Maintenance of the List. The 

Commission agrees with commenters 

that the list of suggested equipment and 

service should be transparent and 

current. The Commission will update 

the list of suggested equipment and 

services, and program recipients and 

interested third parties may also provide 

information about suggested equipment 

and services to assist the Commission in 

keeping the list current and reflective of 

changes in the market. The Commission 

finds that the list should be updated at 

least annually to ensure that it stays 

current with new technologies and 

innovations while also providing access 

to evolving next-generation 

communications capabilities to all 

consumers. Updating the Replacement 

List annually is consistent with the 

minimum schedule that Congress set for 

the Commission to update the list of 

covered communications equipment 

and services. The Commission believes 

updating its list of equipment and 

services that pose a threat to national 

security risks and its Replacement Lists 

together will provide consistency and 

clarity for providers seeking to comply 

with the Commission’s rules. 

192. The Commission declines to 

update the list quarterly, as some 

commenters argue. By adopting a 

Replacement List featuring categories of 

equipment and services, the 

Commission is expressly declining to 

attempt to evaluate every piece of 

equipment or software released. The 

Commission finds that the relevant 

categories of equipment and services are 

unlikely to change quarterly, and that an 

annual review is sufficient to keep the 

list current and foster a competitive 

marketplace. An annual update will be 

much more comprehensive and avoid 

the need for providers to constantly 

check the Commission’s website prior to 

investing in their networks. For these 

same reasons, the Commission declines 

to update the list at even shorter 

intervals, such as monthly. The 

Commission does, however, note that 

the list may be updated at a shorter 

interval if the Commission deems it 

necessary. 

193. The Commission directs WCB to 

issue a Public Notice at least annually 

announcing the updates to the 

Replacement List. 

194. In the 2019 Supply Chain Order, 

the Commission sought to understand 

the scope of potentially prohibited 

equipment or services in the 

communications supply chain to help 

inform its rulemaking. As a result, it 

adopted the 2019 Supply Chain 

Information Collection Order, which 

required ETCs, and their non-ETC 

affiliates and subsidiaries, to report on 

the existence, or lack thereof, of any of 

their equipment and services obtained 

from Huawei and ZTE. ETCs had to 

submit information on the type of 

equipment or service obtained from 

these covered companies; the cost to 

purchase and/or install such equipment 

and services; and the cost to remove and 

replace such equipment and services. 

All submissions were required to be 

certified. OEA and WCB collected and 

compiled this data, and the results were 

published in September 2020. 

195. Section 5 of the Secure Networks 

Act requires that ‘‘providers of 

advanced communications service’’ 

report annually if they have ‘‘purchased, 

rented, leased, or otherwise obtained 

any covered communications 

equipment or service, ‘‘on or after’’ 

August 14, 2018 or 60 days after an 

equipment or service has been placed 

on the Covered List. In other words, any 

equipment or service on the Covered 

List based on one of these two 

specifications must be reported. Section 

5 also requires that providers of 

advanced communications service who 

have indicated in the information 

collection that their network contains 

covered equipment or services, based on 

the specifications in this document, 

submit a ‘‘detailed justification’’ for 

obtaining such equipment or services, as 

well as information indicating whether 

the covered equipment or services has 

subsequently been removed and 

replaced and information about plans to 

continue the purchase, rent, lease, 

installation, or use of such covered 

equipment or services. Any providers 

that certify to the Commission that they 

do not have any equipment or services 

are not required to submit annual 

reports unless they acquire covered 

equipment or services after their last 

certification. 

196. In the 2020 Supply Chain Second 

Further Notice, the Commission 

proposed to require that advanced 

communications service providers 

report the type, location, date obtained, 

and any removal and replacement plans 

of covered equipment and services in 

their networks. The Commission also 

sought comment on the appropriate 

information needed to satisfy the 

‘‘detailed justification’’ requirement of 

the Secure Networks Act. 

197. Consistent with the Secure 

Networks Act and the Commission’s 

proposal in the 2020 Supply Chain 

Second Further Notice, the Commission 

implements a new data collection 

requirement applying to all providers of 

advanced communications service. The 

Commission requires that providers of 

advanced communications service 

annually report on covered 

communications equipment or services 

in their networks. Specifically, with 

respect to 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; 

location of the equipment or service; 

date the equipment or service was 

procured; removal or replacement plans 

for the equipment or service, including 

cost to replace; 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. 

198. The detailed justification must 

thoroughly explain the provider’s 

reasons for obtaining the covered 

equipment and/or services, including 

why the provider chose to obtain 

covered equipment and services rather 

than equipment and services not on the 

Covered List. These reasons can include 

technical or compatibility issues or the 

source of the vendor was not known by 

the provider. Providers must also 

indicate whether the equipment and 

services were published on the Covered 

List at the time of purchase, and 

whether the covered equipment and 

services supports any other covered 

equipment and services that do not need 

to be reported, because, for example, the 

equipment or services were obtained 

before August 14, 2018. This 

information is not only required 

pursuant to the Secure Networks Act 

but will inform future Commission 

action to address security issues in 

communications networks. 

199. The Commission will release to 

the public a list of providers that have 

reported covered equipment or services 

in their networks, consistent with the 

2019 Supply Chain Information 

Collection Order. The Commission 

believes that the public interest in 

knowing whether providers have 

covered equipment and services in their 

networks outweighs any interest the 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2937 

carrier may have in keeping such 

information confidential. The 

Commission rejects NCTA’s argument to 

the contrary. NCTA argues that because 

the Secure Networks Act directed that 

status updates under the reimbursement 

program would be made public under 

section 4(d)(8) while remaining silent 

on whether the section 5 results should 

be made public, Congress intended that 

section 5 results remain confidential. 

The Commission disagrees. Instead, 

Congress provided the Commission with 

significant discretion as to the ‘‘form’’ 

and manner of these reports, and it 

believes the public interest in knowing 

whether covered communications 

equipment and services acquired after 

August 14, 2018 are in providers of 

advanced communications service 

networks outweigh any countervailing 

interest of the provider in keeping such 

information confidential. Moreover, at 

the time it passed the Secure Networks 

Act, Congress was aware of the 

Commission’s intention to publish a list 

of ETCs with Huawei and ZTE 

equipment in their networks based on 

the 2019 Supply Chain Information 

Collection Order, and the Commission 

believes Congress’s silence as to 

whether the section 5 results should be 

made public is better interpreted as 

endorsing a similar approach to the 

2019 Supply Chain Information 

Collection Order rather than NCTA’s 

reading. Other information, such as 

location of the equipment and services; 

removal or replacement plans that 

include sensitive information; the 

specific type of equipment or service; 

and any other provider specific 

information will be presumptively 

confidential. The Commission believes 

that this information would likely 

qualify as trade secrets under the 

Freedom of Information Act. 

200. The Commission directs OEA to 

administer the collection, which 

includes creating a form for submission 

through an online portal. The form will 

require that all providers certify that the 

information provided is true and 

accurate subject to federal regulations. 

The form will have the option for 

providers to certify that they do not 

have any covered equipment and 

services. Those providers that certify 

that they do not have any covered 

equipment and services will not need to 

refile annually unless circumstances 

change, and they acquire any of these 

covered equipment and services or if 

equipment they currently use is 

subsequently added to the Covered List. 

However, a provider of advanced 

communications service that certifies 

that its network does have covered 

equipment or services will need to 

continue to file an annual report, 

including the justification, until the 

provider can certify that its network no 

longer contains covered equipment or 

services. The Secure Networks Act only 

allows entities that respond to the 

information collection with a negative 

response to cease filing unless their 

subsequently purchase, rent, lease, or 

obtain covered communications 

equipment and services. 

201. The Commission reiterates that 

this information collection requirement 

does not have any effect on the 2019 

Supply Chain Information Collection 

Order and its subsequent results. The 

2019 Supply Chain Information 

Collection Order has closed, and the 

Commission has publicly reported its 

results. The results of the 2019 Supply 

Chain Information Collection Order 

helped inform the Commission of the 

extent of Huawei and ZTE equipment in 

its communications networks and 

provided information about the cost of 

replacing such equipment. USTelecom 

argues that the Secure Networks Act’s 

information collection should supersede 

the 2019 Supply Chain Information 

Collection Order, but that argument has 

been mooted by the release of results 

from the 2019 Supply Chain 

Information Collection Order. Moreover, 

the 2019 Supply Chain Information 

Collection Order and the new 

information collection are distinct. The 

new information collection, as required 

by Congress in the Secure Networks Act, 

will inform the Commission and public 

about advanced communications service 

provider action regarding covered 

communications equipment or services 

on or after August 14, 2018. As the 

Commission explained in the 2020 

Supply Chain Second Further Notice, 

the 2019 Supply Chain Information 

Collection Order only covered ETCs. 

ETCs were required to report any 

Huawei and ZTE equipment and 

services in their networks, or their 

subsidiaries or affiliates, regardless of 

when they were obtained. 

202. Effective Date. For the first 

annual filing, certified responses to this 

information collection from providers of 

advanced communication service will 

be due through the portal no later than 

90 days after OEA issues a public notice 

announcing the availability of the new 

reporting portal. Although the 

Commission proposed a six-month 

window in the proposed rules appendix 

of the 2020 Supply Chain Second 

Further Notice, a 90-day period would 

provide the Commission and the public 

with quicker notification of potential 

security risks to U.S. communications 

networks. The Commission finds that a 

90-day period is sufficient time for 

providers to complete the first annual 

report for two reasons. First, it will 

likely take OEA time to prepare the 

portal for the annual submissions. The 

Commission expects providers of 

advanced communications service to 

begin work for the certification and 

reporting requirement before OEA 

issues the Public Notice, providing 

sufficient time for providers to gather 

the information when added to the 90 

days after the Public Notice is 

published. Second, 90 days is roughly 

consistent with the amount of time the 

Commission gave ETCs, their 

subsidiaries, and affiliates, to comply 

with the first information collection, 

including an extension of time to 

respond. Thereafter, all providers of 

advanced communications service 

required to comply with this 

information collection must submit 

their certified response through the 

portal no later than March 31 for the 

previous year. 

203. Based on presently available 

information obtained through the 

Commission’s Information Collection, 

the Commission estimates the cost of 

requiring the removal and replacement 

of covered equipment and services 

within the next two years to be $1.8 

billion for all ETCs. In the 2019 Supply 

Chain Order, the Commission 

preliminarily estimated the total cost to 

be between $600 million and $2 billion 

dollars. Not all of that amount, however, 

is subject to reimbursement. The ETCs 

that appear to initially qualify for 

reimbursement under the Secure 

Networks Act report it would require 

approximately $1.6 billion to replace 

their equipment. Yet, as the 

Commission concluded in the 2019 

Supply Chain Order, it finds that the 

affected equipment has a 10-year life 

and that this Order will impact 

investment decisions starting in 2021. 

The Commission therefore expects to 

see some replacements, like those 

normally occurring under attrition at the 

end of both 2020 and 2021, covering 

two years and including up to 20% of 

the original equipment. Hence, the 

Commission expects the required 

replacement costs for the Huawei or 

ZTE asset base occurring at the end of 

the period for all ETCs may be as low 

as $1.5 billion (i.e., about 80% of $1.8 

billion) and the reimbursement amount 

for qualifying ETCs may be as low as 

$1.3 billion (i.e., 80% of $1.6 billion). 

204. The Commission nonetheless 

concludes that, even if total replacement 

cost is as high as $1.8 billion reported 

by all ETCs, that cost will be far 

exceeded by the benefits obtained by 

addressing the important national 

2938 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

security concerns raised by the 

enumerated sources who make national 

security determinations. As the 

Commission explained in the 2019 

Supply Chain Order, the benefits of 

removing covered equipment and 

services ‘‘extend to [hard] to quantify 

matters, such as preventing 

untrustworthy elements in the 

communications network from 

impacting our nation’s defense, public 

safety, and homeland security 

operations, our military readiness, and 

our critical infrastructure, let alone the 

collateral damage such as loss of life 

that may occur with any mass 

disruption to our nation’s 

communications networks.’’ 

205. The other rules enacted in the 

Order are mandated by the Secure 

Networks Act and the Commission has 

no discretion to diverge from statutory 

direction. The Commission estimates 

the reporting costs of complying with 

the new reporting requirement, 

mandated by section 5 of the Secure 

Networks Act, to be approximately 

$600,000, being the product the per 

provider cost of $167 and the 

Commission’s estimate of reporting 

providers of advanced communications 

services of approximately 3,500 ($167 * 

3,500 = $584,500, which the 

Commission rounds to $600,000 

recognizing its calculations are only 

approximations). The Commission 

estimates that complying would take 3 

hours for each ETC subject to that 

collection, at a cost of about $167 per 

carrier, as the reporting requirements for 

the new collection are similar to those 

in the 2019 Supply Chain Information 

Collection. The Commission estimates 

there are approximately 3,500 providers 

of advanced communications service, 

i.e., providers that would have to report 

under the present collection, as follows. 

There are 3,822 current 477 filings. 

Some of these are from filers that 

affiliated with each other. The 

Commission associated affiliated 477 

filers with a unique ‘‘parent’’ filer, 

dropping the affiliates from its count. Of 

the remaining 477 filers, the 

Commission dropped filers who only 

engage in fixed line resale and do not 

supply mobile service. This left 3,579 

filers, which, recognizing the 

Commission’s process involves 

approximation, it rounds to 3,500. This 

reporting cost estimate is higher than 

the cost of the data collection of the 

2019 Supply Chain Information 

Collection because the universe of 

respondents includes all providers of 

advanced communications service, not 

just ETCs. The Commission anticipates 

that the new prohibition on Federal 

subsidy programs administered by the 

Commission will not have incremental 

net costs beyond those already imposed 

by § 54.9 of the Commission’s rules. The 

Commission accordingly finds that its 

requirements will achieve the stated 

objectives of Congress’s mandated rules 

in the most cost-effective manner. 

Huawei argues that the ‘‘significant 

upfront costs as well as ongoing 

expenditures . . . will make it 

extremely difficult to comply with a 

removal and replacement mandate.’’ 

Huawei believes a cost benefit analysis 

‘‘likely would result in inequitable 

disbursement or reimbursement funds 

because some carriers may have spent 

more on covered company equipment 

that other carriers’’ and, for non-ETCs, 

‘‘the magnitude of equipment 

replacements costs is not something 

they can afford.’’ The Commission 

disagrees. For non-ETCs, the 

requirement to remove and replace 

equipment applies only to those 

providers which voluntarily choose to 

participate in the Reimbursement 

Program. And the Commission received 

no comments from ETCs who would be 

ineligible to participate in the 

Reimbursement Program stating the 

requirement to remove and replace 

covered equipment or services is not 

feasible. Finally, the design of the 

Reimbursement Program, including 

section 4 of the Secure Networks Act 

and the rules the Commission adopts, 

will ensure an equitable allocation of 

funds to replace covered equipment and 

services. 

III. Procedural Matters 

A. Paperwork Reduction Act of 1995 

Analysis 

206. This document contains 

modified information collection 

requirements subject to the Paperwork 

Reduction Act of 1995 (PRA), Public 

Law 104–13. It will be submitted to the 

Office of Management and Budget 

(OMB) for review under Section 3507(d) 

of the PRA. OMB, the general public, 

and other Federal agencies will be 

invited to comment on the modified 

information collection requirements 

contained in this proceeding. In 

addition, the Commission notes that 

pursuant to the Small Business 

Paperwork Relief Act of 2002, Public 

Law 107–198, see 44 U.S.C. 3506(c)(4), 

the Commission previously sought 

specific comment on how the 

Commission might further reduce the 

information collection burden for small 

business concerns with fewer than 25 

employees. 

B. Congressional Review Act 

207. The Commission has determined, 

and the Administrator of the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

concurs that this rule is major under the 

Congressional Review Act, 5 U.S.C. 

804(2). The Commission will send a 

copy of this Second Report and Order to 

Congress and the Government 

Accountability Office pursuant to 5 

U.S.C. 801(a)(1)(A). 

208. Final Regulatory Flexibility 

Analysis. The Regulatory Flexibility Act 

of 1980 (RFA) requires that an agency 

prepare a regulatory flexibility analysis 

for notice and comment rulemakings, 

unless the agency certifies that ‘‘the rule 

will not, if promulgated, have a 

significant economic impact on a 

substantial number of small entities.’’ 

Accordingly, the Commission has 

prepared a FRFA concerning the 

possible impact of the rule changes 

contained in the Report and Order on 

small entities. 

209. The Commission sought written 

comment on the proposals in the 2019 

Supply Chain Further Notice and 2020 

Supply Chain Second Further Notice, 

including comment on the Initial 

Regulatory Flexibility Analysis (IRFA). 

The present Final Regulatory Flexibility 

Analysis (FRFA) addresses comments 

received on the IRFAs and conforms to 

the RFA. 

210. Consistent with the 

Commission’s obligation to be 

responsible stewards of the public funds 

used in USF programs and increasing 

concern about ensuring 

communications supply chain integrity, 

and as directed by the Secure Networks 

Act, the Second Report and Order 

(Order) adopts rules to implement 

sections 2, 3, 4, 5, and 7 of the Secure 

Networks Act and to require recipients 

of reimbursement funds under the 

Reimbursement Program and ETCs 

receiving USF support to remove and 

replace from their network operations 

communications equipment and 

services included on the covered list 

required by section 2 of the Covered 

List. 

211. Specifically, in addition to the 

requirement to remove-and-replace, the 

Commission adopts several rules to 

implement provisions of the Secure 

Networks Act. The Commission 

implements section 2 of the Secure 

Networks Act by publishing on its 

website the Covered List of 

communications equipment or services 

determined to pose a risk to national 

security, pursuant to the sources of 

determinations identified in section 2(c) 

of the Secure Networks Act. The 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2939 

Commission adopts a rule to prohibit 

the use of Federal subsidies made 

available through a program 

administered by the Commission to 

purchase, rent, lease, or otherwise 

obtain any covered communications 

equipment or service, or maintain any 

covered communications equipment or 

service previously purchased, rented, 

leased, or otherwise obtained, and 

identified and published on the Covered 

List. The Commission establishes, as 

directed by section 4 of the Secure 

Networks Act, the Reimbursement 

Program to reimburse costs reasonably 

incurred by providers of advanced 

communications service with two 

million or fewer customers to 

permanently remove, replace, and 

dispose of covered communications 

equipment and services from their 

networks. To further administer the 

Reimbursement Program, the 

Commission establishes, and will 

publish on its website, a list of 

suggested replacements (Replacement 

List) for the equipment and services 

being removed, replaced, and destroyed, 

and establishes a reporting requirement 

and new information collection to 

require providers of advanced 

communications service to report 

covered communications equipment 

and service in their networks. 

212. Small entities potentially 

affected by the rules herein include 

eligible schools and libraries, eligible 

rural non-profit and public health care 

providers, and the eligible service 

providers offering them services, 

including telecommunications service 

providers, internet Service Providers, 

and vendors of the services and 

equipment used for telecommunications 

and broadband networks. 

213. Requirement to Remove and 

Replace Covered Equipment and 

Services. The Order requires recipients 

of reimbursement funds under the 

Reimbursement Program and ETCs 

receiving USF support to remove and 

replace from their network operations 

covered equipment and services 

included on the Covered List. The Order 

conditions this obligation to remove and 

replace covered equipment and services 

upon a congressional appropriation to 

fund the Reimbursement Program. The 

Order limits the scope of the removeand-replace requirement to equipment 

and services on the Covered List. 

Applicants for funds through the 

Reimbursement Program shall satisfy 

compliance with the remove-andreplace obligation in accordance with 

the deadlines and transition periods 

associated with the Reimbursement 

Program. Entities required to comply 

that are not recipients of funding 

through the Reimbursement Program 

must remove covered equipment and 

services within one year after WCB 

issues a Public Notice announcing the 

acceptance of applications filed during 

the initial filing window to participate 

in the Reimbursement Program. ETC 

recipients of USF support must certify 

that they have complied with our new 

rule requiring the removal of equipment 

and services on the Covered List. 

214. Covered List. Consistent with the 

Secure Networks Act, no later than 

March 12, 2021, the Commission will 

publish on its website the Covered List 

of communications equipment or 

services determined to pose an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons. The Order establishes that the 

Commission will publish, update, or 

modify the Covered List without 

providing notice or opportunity to 

comment; however, PSHSB will issue a 

Public Notice every time the Covered 

List is updated. As directed by the 

Secure Networks Act, the Order states 

that the Commission may only accept 

determinations from the four sources 

enumerated in the Secure Networks Act, 

and will incorporate national security 

determinations into the Covered List 

automatically, when identifying specific 

communications equipment or services 

that ‘‘pose[ ] an unacceptable risk to the 

national security of the United States 

and the security and safety of United 

States persons,’’ or to the extent the 

class or category of equipment or service 

identified is ‘‘capable’’ of the 2(b)(2)(A)– 

(C) criteria, when listed in general 

categories or classes of equipment that 

pose such a risk. The Commission will 

periodically update or modify the 

Covered List to reflect changes in 

determinations and will notify the 

public for every twelve-month period 

during which the Commission does not 

update the Covered List. 

215. Restriction on Use of Federal 

Subsidies. Pursuant to section 3 of the 

Secure Networks Act, the Order adopts 

a rule that no Federal subsidy made 

available through a program 

administered by the Commission for 

capital expenditures necessary for the 

provision of advanced communications 

service shall be used to purchase, rent, 

lease, or otherwise obtain any covered 

communications equipment or service, 

or maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained, as identified and 

published on the Covered List. The 

Commission has interpreted section 3 of 

the Secure Networks Act as intending to 

apply to all universal service programs 

but not other Federal subsidy programs 

to the extent those programs may 

tangentially or indirectly involve 

expenditures related to the provision of 

advanced communications service. In 

the Order, the Commission declines to 

grandfather existing contracts for 

equipment or services on the Covered 

List under § 54.10 of the Commission’s 

rules. The prohibition on the use of 

Federal subsidies takes effect 60 days 

after any particular communications 

equipment or services are placed on the 

Covered List, consistent with the Secure 

Networks Act. The Order requires 

recipients of universal service support 

from each of the four USF programs to 

certify that they have complied with the 

new rule prohibiting the use of Federal 

subsidies for equipment and services on 

the Covered List. 

216. Reimbursement Program. The 

Order establishes, as directed by the 

Secure Networks Act, the Secure and 

Trusted Communications 

Reimbursement Program 

(Reimbursement Program) to reimburse 

the costs reasonably incurred by 

providers of advanced communication 

services with two million or fewer 

customers to permanently remove, 

replace, and dispose of covered 

communications equipment and 

services from their networks. In the 

Order, the Commission allows eligible 

providers to obtain reimbursement to 

remove and replace older covered 

communications equipment with 

upgraded technology and will reimburse 

providers for certain transition expenses 

incurred prior to the creation of this 

program. Program participants are 

required to submit estimated costs to 

receive funding allocations, and 

recipients can then obtain funding 

disbursements on a rolling basis upon a 

showing of actual expenses incurred. If 

aggregate demand exceeds available 

funding, the Order prioritizes funding 

for ETCs and expenses for transitioning 

core networks over non-ETCs and noncore network transition expenses. 

Program recipients will have one year 

from the initial funding disbursement to 

complete the permanent removal, 

replacement, and disposal of covered 

communications equipment, and the 

Commission may grant a single, general 

six-month extension for all recipients 

and/or individual extensions of time if 

circumstances warrant. 

217. Status Updates. As directed by 

the Secure Networks Act, the Order 

requires program recipients to file a 

status update ‘‘once every 90 days 

beginning on the date on which the 

Commission approves an application for 

a reimbursement.’’ Recipients should 

file the first report within 90 days of 

2940 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

receiving their allocation. In the update, 

the recipients shall report on the efforts 

undertaken, and challenges 

encountered, in permanently removing, 

replacing, and disposing its covered 

communications equipment or services. 

Recipients shall also report in detail on 

the availability of replacement 

equipment in the marketplace so the 

Commission can assess whether a 

general, six-month extension permitted 

by the statute is appropriate. The report 

must also include information that the 

entity has fully complied with (or is in 

the process of complying with) all terms 

and conditions of the Program; has fully 

complied with (or is in the process of 

complying with) the commitments made 

in the application of the recipient for 

the reimbursement; has permanently 

removed from the communications 

network of the recipient, replaced, and 

disposed of (or is in the process of 

permanently removing, replacing, and 

disposing of) all covered 

communications equipment or services 

that were in the network of the recipient 

as of the date of the submission of the 

application of the recipient for the 

reimbursement; and has fully complied 

with (or is in the process of complying 

with) the timeline submitted by the 

recipient. The report must include a 

certification that affirms the information 

in the status report is accurate. After the 

program recipient has notified the 

Commission of the completion of the 

permanent removal, replacement, and 

disposal of the covered communications 

equipment or service pursuant to a final 

certification, updates are no longer 

required. 

218. Steps to Mitigate Waste, Fraud, 

and Abuse. The Order directs OMD, or 

a third-party identified by OMD, to 

prepare a system to audit 

Reimbursement Program recipients to 

ensure compliance with the 

Commission’s rules. The Order requires 

recipients found in violation of the 

Commission’s rules or the 

‘‘commitments made by the recipient in 

the application for the reimbursement’’ 

to repay funds disbursed via the 

Reimbursement Program. Prior to 

requiring repayment, the Commission 

will provide notice of the violation, and 

will give the violator 180 days to cure 

the violation. The Commission initiates 

such action by sending a request for 

repayment to the recipient immediately 

following the expiration of the 

opportunity to cure if the recipient does 

not respond to the notice of violation. If 

the alleged violator does not respond to 

the notice or does not repay the 

amounts due, the Commission will 

demand repayment. Participants that are 

found to violate the Commission’s rules 

will also be referred to ‘‘all appropriate 

law enforcement agencies or officials for 

further action under applicable criminal 

and civil laws.’’ Any person or entity 

that violates the Reimbursement 

Program rules will also be banned from 

further participation in the section 4 

Reimbursement Program, and the 

person or entity may also be barred from 

participating in other Commission 

programs, including Universal Service 

support programs. 

219. Replacement List. The Order 

establishes, and the Commission will 

publish on its website, a Replacement 

List that will identify the categories of 

suggested replacements of real and 

virtual hardware and software 

equipment and services to guide of 

providers removing covered 

communications equipment from their 

networks. The Replacement List of 

suggested equipment and services will 

be updated at least annually, and 

program recipients and interested thirdparties may also provide information 

about suggested equipment and services 

to assist in keeping the list current and 

informed based upon changes in the 

market. 

220. Reporting Requirement. The 

Order requires that providers of 

advanced communications service 

annually report the type of covered 

communications equipment or service 

purchased, rented or leased; location of 

the equipment or service; date the 

equipment or service was procured; 

removal or replacement plans for the 

equipment or service, including cost to 

replace; 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. All covered 

communications equipment or services 

on the initial Covered List published 

under section 2(a) of the Secure 

Networks Act that was purchased, 

leased, or otherwise obtained by a 

provider on or after August 14, 2018 

must be reported. Additional covered 

equipment or services added to the list 

must be reported in the next annual 

report that is at least 60 days after the 

list is updated. Those providers needing 

to submit a detailed justification must 

thoroughly explain their reasons for 

obtaining the covered equipment and/or 

services. The Commission will release 

to the public a list of providers that have 

reported covered equipment or services 

in their networks, consistent with the 

2019 Supply Chain Information 

Collection Order. For the first annual 

filing, certified responses to this 

information collection from providers of 

advanced communication service will 

be due through the portal no later than 

90 days after OEA issues a public notice 

announcing the availability of the new 

reporting portal. 

221. The RFA requires an agency to 

describe the steps the agency has taken 

to minimize the significant economic 

impact on small entities of the final 

rule, consistent with the stated 

objectives of the applicable statutes, 

including a statement of the factual, 

policy, and legal reasons in support of 

the final rule, and why any significant 

alternatives to the rule considered by 

the agency and which affect the impact 

on small entities were rejected. 

222. Several of the rules in the Order 

are adopted pursuant to statutory 

obligation under the Secure Networks 

Act. However, where the Commission 

has discretion in its interpretation or 

implementation of the Secure Networks 

Act provisions, or adopts rules pursuant 

to alternative statutory authority, the 

scope of the rules is narrowly tailored 

so as to lessen the impact on small 

entities. The rules adopted in the Order 

appropriately consider the burdens on 

smaller providers against the 

Commission’s goal of protecting its 

communications networks and 

communications supply chain from 

communications equipment and 

services that pose a national security 

threat, while facilitating the transition to 

safer and more secure alternatives. 

223. Consistent with the 

Commission’s proposal in the 2019 

Supply Chain Further Notice, the 

requirement to remove and replace 

covered equipment and services is 

contingent upon appropriation from 

Congress, rather than making the 

requirement effective before funding is 

secured or based upon funding obtained 

through alternative measures, such as 

USF. Waiting until appropriated 

funding is available will reduce the 

burdens imposed upon smaller 

providers by ensuring that funds are 

available to cover reimbursable 

expenses through the Reimbursement 

Program. Additionally, the Order ties 

the administration of the remove-andreplace requirement to the 

administration of the Reimbursement 

Program, including limiting the scope of 

the requirement to equipment and 

services on the Covered List, which will 

allow providers to easily identify 

equipment and services to remove and 

replace from their networks. Using the 

Covered List to determine the scope of 

equipment and services applicable to 

the remove-and-replace requirement, as 

well as the prohibition on the use of 

Federal subsidies in § 54.10 of the 

Commission’s rules and the 

Reimbursement Program, will enable 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2941 

small providers to easily identify 

equipment and services for compliance 

with these rules. 

224. Consistent with the statutory 

mandates in the Secure Networks Act, 

the Order establishes a program to 

reimburse eligible providers of 

advanced communications service for 

costs reasonably incurred to remove, 

replace, and dispose of covered 

equipment and services on the Covered 

List. As a general matter, when 

obtaining replacement products for 

reimbursement, the Commission expects 

eligible providers to ‘‘obtain the lowestcost equipment that most closely 

replaces their existing equipment’’ yet 

will allow, and indeed encourage, 

eligible providers replacing third 

generation and older equipment to 

obtain reimbursement for the cost of 4G 

LTE replacement equipment that is 5Gready. This will put recipients, 

including smaller providers, on equal 

footing to their prior position before 

incurring the costs of removing and 

replacing the covered equipment and 

services and, ultimately, end up placing 

recipients in a slightly better position 

than they were before having to replace 

the covered equipment and services. 

225. Although one commenter 

advocated that the Commission release 

reimbursement funding upfront to 

provide financial security for smaller 

providers, the Order determines that the 

Reimbursement Program will allocate 

funds on a rolling basis, similar to the 

administration of the broadcast 

incentive auction. This methodology, 

which sufficiently met the financial 

needs of providers, including smaller 

providers, in the broadcast incentive 

auction context, best achieves 

Congress’s goal of mitigating the 

administrative burden and costs of the 

program while taking steps to avoid 

waste, fraud, and abuse. Consistent with 

the Secure Networks Act, the Order 

further sets a term of one year from the 

date upon which funding is received for 

recipients to remove, replace, and 

dispose of covered equipment or 

services, though the Secure Networks 

Act authorizes the Commission to grant 

six-month extensions of time, either on 

a general or case-by-case basis, for 

compliance. 

226. Lastly, the Commission will 

update the list of suggested equipment 

and services contained on the 

Replacement List at least annually to 

ensure that the list stays current and 

transparent, which will help small and 

rural providers required to remove and 

replace covered equipment and services 

access advanced products and services 

when transitioning away from covered 

equipment and services in their 

networks. 

227. Pursuant to § 1.3 of the 

Commission’s rules, any provision of 

the Commission’s rules may be waived 

by the Commission on its own motion 

or on petition ‘‘if good cause therefor is 

shown.’’ The Order permits entities to 

seek a waiver of the requirements if 

permitted by statute. In these ways, the 

Order seeks to minimize the economic 

burden of these rules on small entities. 

IV. Ordering Clauses 

228. Accordingly, it is ordered that, 

pursuant to the authority contained in 

sections 1–4, 201(b), 214, 229, 254, 

303(r), 403, and 503 of the 

Communications Act of 1934, as 

amended, 47 U.S.C. 151–154, 201(b), 

214, 229, 254, 303(r), 403, 503, sections 

2, 3, 4, 5, and 7 of the Secure Networks 

Act, 47 U.S.C. 1601, 1602, 1603, 1604, 

and 1606, section 889 of the 2019 

NDAA, Public Law 115–232, and §§ 1.1 

and 1.412 of the Commission’s rules and 

47 CFR 1.1, the Report and Order is 

adopted. 

229. It is further ordered that Parts 1 

and 54 of the Commission’s rules are 

amended as set forth in the following. 

230. It is further ordered that, 

pursuant to §§ 1.4(b)(1) and 1.103(a) of 

the Commission’s rules, 47 CFR 

1.4(b)(1), 1.103(a), the Report and Order 

shall be effective 60 days after 

publication of the Report and Order in 

the Federal Register, with the exception 

§§ 1.50004(c), (d)(1), (g), (h)(2), (j)–(n), 

1.50007, and 54.11, which contain new 

or modified information collection 

requirements that require review and 

approval by the OMB under the 

Paperwork Reduction Act. The 

Commission will announce the effective 

date of those sections in the Federal 

Register after receiving OMB approval. 

List of Subjects 

47 CFR Part 1 

Administrative practice and 

procedure, Civil rights, Claims, 

Communications, Communications 

common carriers, Communications 

equipment, Cuba, Drug abuse, 

Environmental impact statements, Equal 

access to justice, Equal employment 

opportunity, Federal buildings and 

facilities, Government employees, 

Historic preservation, Income taxes, 

Indemnity payments, Individuals with 

disabilities, internet, Investigations, 

Lawyers, Metric system, Penalties, 

Radio, Reporting and recordkeeping 

requirements, Security measures, 

Satellites, Telecommunications, 

Telephone, Television, Wages. 

47 CFR Part 54 

Communications common carriers, 

Health facilities, Infants and children, 

internet, Libraries, Puerto Rico, 

Reporting and recordkeeping 

requirements, Schools, 

Telecommunications, Telephone, Virgin 

Islands. 

Federal Communications Commission 

Marlene Dortch, 

Secretary. 

Final Rules 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR parts 1 and 

54 as follows: 

PART 1—PRACTICE AND 

PROCEDURE 

■ 1. The authority citation for part 1 

continues to read as follows: 

Authority: 47 U.S.C. chs. 2, 5, 9, 13; 28 

U.S.C. 2461 note, unless otherwise noted. 

■ 2. Effective March 15, 2021, add 

Subpart DD consisting of §§ 1.50000 

through 1.50007 to read as follows: 

Subpart DD—Secure and Trusted 

Communications Networks 

Authority: 47 U.S.C. chs. 5, 15. 

Sec. 

1.50000 Purpose. 

1.50001 Definitions. 

1.50002 Covered List. 

1.50003 Updates to the Covered List. 

1.50004 Secure and Trusted 

Communications Networks 

Reimbursement Program. 

1.50005 Enforcement. 

1.50006 Replacement List. 

1.50007 [Reserved] 

Subpart DD—Secure and Trusted 

Communications Networks 

§ 1.50000 Purpose. 

The purpose of this subpart is to 

implement the Secure and Trusted 

Communications Networks Act of 2019, 

Public Law 116–124, 133 Stat. 158. 

§ 1.50001 Definitions. 

For purposes of this subpart: 

(a) Advanced communications 

service. The term ‘‘advanced 

communications service’’ means highspeed, switched, broadband 

telecommunications capability that 

enables users to originate and receive 

high-quality voice, data, graphics, and 

video telecommunications using any 

technology with connection speeds of at 

least 200 kbps in either direction. 

(b) Appropriate national security 

agency. The term ‘‘appropriate national 

security agency’’ means: 

2942 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

(1) The Department of Homeland 

Security; 

(2) The Department of Defense; 

(3) The Office of the Director of 

National Intelligence; 

(4) The National Security Agency; and 

(5) The Federal Bureau of 

Investigation. 

(c) Communications equipment or 

service. The term ‘‘communications 

equipment or service’’ means any 

equipment or service used in fixed and 

mobile networks that provides advanced 

communication service, provided the 

equipment or service includes or uses 

electronic components. 

(d) Covered communications 

equipment or service. The term 

‘‘covered communications equipment or 

service’’ means any communications 

equipment or service that is included on 

the Covered List developed pursuant to 

§ 1.50002. 

(e) Determinations. The term 

‘‘determination’’ means any 

determination from sources identified in 

§ 1.50002(b)(1)(i)–(iv) that 

communications equipment or service 

pose an unacceptable risk to the 

national security of the United States or 

the security and safety of United States 

persons. 

(f) Covered List. The Covered List is 

a regularly updated list of covered 

communications equipment and 

services. 

(g) Reimbursement Program. The 

Reimbursement Program means the 

program established by section 4 of the 

Secure and Trusted Communications 

Networks Act of 2019, Public Law 116– 

124, 133 Stat. 158, codified at 47 U.S.C. 

1603, as implemented by the 

Commission in § 1.50004. 

(h) Reimbursement Program recipient 

(or recipient). The term 

‘‘Reimbursement Program recipient’’ or 

‘‘recipient’’ means an eligible advanced 

communications service provider that 

has requested via application and been 

approved for funding in the 

Reimbursement Program, regardless of 

whether the provider has received 

reimbursement funds. 

(i) Replacement List. The 

Replacement List is a list of categories 

of suggested replacements for covered 

communications equipment or service. 

§ 1.50002 Covered List. 

(a) Publication of the Covered List. 

The Public Safety and Homeland 

Security Bureau shall publish the 

Covered List on the Commission’s 

website and shall maintain and update 

the Covered List in accordance with 

§ 1.50003. 

(b) Inclusion on the Covered List. The 

Public Safety and Homeland Security 

Bureau shall place on the Covered List 

any communications equipment or 

service that: 

(1) Is produced or provided by any 

entity if, based exclusively on the 

following determinations, such 

equipment or service poses an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons: 

(i) A specific determination made by 

any executive branch interagency body 

with appropriate national security 

expertise, including the Federal 

Acquisition Security Council 

established under section 1222(a) of title 

41, United States Code; 

(ii) A specific determination made by 

the Department of Commerce pursuant 

to Executive Order No. 13873 (3 CFR, 

2019 Comp., p 317); relating to securing 

the information and communications 

technology and services supply chain); 

(iii) Equipment or service being 

covered telecommunications equipment 

or services, as defined in section 

889(f)(3) of the John S. McCain National 

Defense Authorization Act for Fiscal 

Year 2019 (Pub. L. 115–232; 132 Stat. 

1918); or 

(iv) A specific determination made by 

an appropriate national security agency; 

(2) And is capable of: 

(i) Routing or redirecting user data 

traffic or permitting visibility into any 

user data or packets that such 

equipment or service transmits or 

otherwise handles; 

(ii) Causing the networks of a provider 

of advanced communications services to 

be disrupted remotely; or 

(iii) Otherwise posing an 

unacceptable risk to the national 

security of the United States or the 

security and safety of United States 

persons. 

§ 1.50003 Updates to the Covered List. 

(a) The Public Safety and Homeland 

Security Bureau shall monitor the status 

of determinations in order to update the 

Covered List. 

(b) If a determination regarding 

covered communications equipment or 

service on the Covered List is reversed 

or modified, the Public Safety and 

Homeland Security Bureau shall remove 

from or modify the entry of such 

equipment or service on the Covered 

List, except the Public Safety and 

Homeland Security Bureau may not 

remove such equipment or service from 

the Covered List if any other of the 

sources identified in § 1.50002(b)(1)(i) 

through (iv) maintains a determination 

supporting inclusion on the Covered 

List of such equipment or service. 

(c) After each 12-month period during 

which the Covered List is not updated, 

the Public Safety and Homeland 

Security Bureau will issue a Public 

Notice indicating that no updates were 

necessary during such period. 

§ 1.50004 Secure and Trusted 

Communications Networks Reimbursement 

Program. 

(a) Eligibility. Providers of advanced 

communications service with two 

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 

covered communications equipment or 

services if: 

(1) The covered communications 

equipment or service to be removed, 

replaced, or disposed of was purchased, 

rented, leased or otherwise obtained 

before August 14, 2018 and on the 

initial Covered List published per 

§ 1.50002; or 

(2) The covered communications 

equipment or service was added to the 

Covered List per § 1.50003, then no later 

than 60 days after the date of addition 

to the Covered List; 

(3) The provider certifies: 

(i) As of the date of the submission of 

the application, the provider has 

developed: 

(A) 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 

(B) 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 per paragraph 

(c)(1)(iv) of this section; and 

(ii) beginning on the date of the 

approval of the application, the 

provider: 

(A) 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 

(B) 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. 

(b) Filing window. The Wireline 

Competition Bureau shall announce the 

opening of an initial application filing 

window for eligible providers seeking to 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2943 

participate in the Reimbursement 

Program for the reimbursement of costs 

reasonably incurred for the removal, 

replacement, and disposal of covered 

communications equipment and 

services. The Wireline Competition 

Bureau may implement additional filing 

windows as necessary and shall provide 

notice before opening any additional 

filing window, and include in that 

notice the amount of funding available. 

The Wireline Competition Bureau shall 

treat all eligible providers filing an 

application within any filing window as 

if their applications were 

simultaneously received. Funding 

requests submitted outside of a filing 

window will not be accepted. 

(c) [Reserved] 

(d) Application review process. The 

Wireline Competition Bureau 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. 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. 

(1) [Reserved] 

(2) Denial of an application shall not 

preclude the applicant from submitting 

a new application for reimbursement in 

a subsequent filing window. 

(e) Funding allocation. Once an 

application is approved, the Wireline 

Competition Bureau will allocate 

funding on the applicant’s behalf to the 

United States Treasury for draw down 

by the Reimbursement Program 

recipient as expenses are incurred 

pursuant to the funding disbursement 

process provided for in paragraph (g) of 

this section. 

(f) Prioritization of support. The 

Wireline Competition Bureau shall issue 

funding allocations in accordance with 

this section after the close of a filing 

window. After a filing window closes, 

the Wireline Competition Bureau 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 

following priority schedule: 

TABLE 1 TO PARAGRAPH (f)—PRIORITIZATION SCHEDULE

Priority 1: Advanced communication service providers with 2 million or fewer customers that 

are Eligible Telecommunication Carriers subject to section [54.11] (new removal and replacement requirement). 

Priority 1a: Costs reasonably incurred for 

transitioning core network(s). 

Priority 1b: Costs reasonably incurred for noncore network transition. 

Priority 2: Non-ETC providers of advanced communications service with 2 million or fewer customers that participated in the Supply Chain Security Information Collection, OMB Control 

No. 3060–1270. 

Priority 2a:* Costs reasonably incurred for 

transitioning core network(s). 

Priority 2b:* Costs reasonably incurred for noncore network transition. 

Priority 3: Other non-Eligible Telecommunication Carriers that are providers of advanced communication service with 2 million or fewer customers. Priority 3a: Costs reasonably incurred for 

transitioning core network(s). 

Priority 3b: Costs reasonably incurred for noncore network transition. 

(1) Application of prioritization 

schedule. The Wireline Competition 

Bureau shall issue full funding 

allocations for all eligible providers in 

the Priority 1 prioritization category 

before issuing funding allocations in 

any subsequent prioritization categories. 

The Wireline Competition Bureau shall 

continue to review all funding requests 

and issue funding allocations by 

prioritization category until there are no 

available funds remaining. 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. 

(2) Pro-rata reductions. When pro-rata 

reductions are required per paragraph 

(f)(1) of this section, the Wireline 

Competition Bureau shall: 

(i) Divide the total remaining funds 

available by the demand within the 

specific prioritization category to 

produce a pro-rata factor; 

(ii) Multiply the pro-rata factor by the 

total dollar amount requested by each 

recipient in the prioritization category; 

and 

(iii) Allocate funds to each recipient 

consistent with this calculation. 

(g) [Reserved] 

(h) Removal, replacement, and 

disposal term. Reimbursement Program 

recipients must complete the permanent 

removal, replacement, and disposal of 

covered communications equipment or 

service within one year of receiving the 

initial draw down disbursement from 

their funding allocation. 

(1) General extension. The 

Commission may extend by a period of 

six months the removal, replacement, 

and disposal term to all Reimbursement 

Program recipients if the Commission: 

(i) Finds that the supply of 

replacement communications 

equipment or services needed by the 

recipients to achieve the purposes of the 

Reimbursement Program is inadequate 

to meet the needs of the recipients; and 

(ii) Provides notice and detailed 

justification for granting the extension 

to: 

(A) The Committee on Energy and 

Commerce of the House of 

Representatives; and 

(B) The Committee on Commerce, 

Science, and Transportation of the 

Senate. 

(2) Individual extensions. Prior to the 

expiration of the removal, replacement 

and disposal term, a Reimbursement 

Program recipient may petition the 

Wireline Competition Bureau for an 

extension of the term. The Wireline 

Competition Bureau may grant an 

extension for up to six months after 

finding, that due to no fault of such 

recipient, such recipient is unable to 

complete the permanent removal, 

replacement, and disposal by the end of 

the term. The Wireline Competition 

Bureau may grant more than one 

extension request to a recipient if 

circumstances warrant. 

(i) Limitations on funding use. A 

Reimbursement Program recipient may 

not: 

2944 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

(1) Use reimbursement funds to 

remove, replace or dispose of any 

covered communications equipment or 

service purchased, rented, leased, or 

otherwise obtained: 

(i) On or after August 14, 2018, if on 

the initial Covered List published per 

§ 1.50002; or 

(ii) On or after 60 days after the date 

of addition to the Covered List if the 

communications equipment or services 

were subsequently added to the Covered 

List per § 1.50003; or 

(2) Purchase, rent, lease, or otherwise 

obtain any covered communications 

equipment or service, using 

reimbursement funds or any other funds 

(including funds derived from private 

sources). 

(j)–(n) [Reserved] 

(o) Audits, reviews, and field 

investigations. Recipients shall be 

subject to audits and other 

investigations to evaluate their 

compliance with the statutory and 

regulatory requirements for the 

Reimbursement Program. Recipients 

must provide consent to allow vendors 

or contractors used by the recipient in 

connection with the Reimbursement 

Program to release confidential 

information to the auditor, reviewer, or 

other representative. Recipients shall 

permit any representative (including 

any auditor) appointed by the 

Commission to enter their premises to 

conduct compliance inspections. 

(p) Delegation of authority. The 

Commission delegates authority to the 

Wireline Competition Bureau, to adopt 

the necessary policies and procedures 

relating to allocations, draw downs, 

payments, obligations, and expenditures 

of money from the Reimbursement 

Program to protect against waste, fraud, 

and abuse and in the event of 

bankruptcy, to establish a Catalog of 

Expenses Eligible for Reimbursement 

and predetermined cost estimates, 

review the estimated cost forms, issue 

funding allocations for costs reasonably 

incurred, set filing deadlines and review 

information and documentation 

regarding progress reports, allocations, 

and final accountings. 

§ 1.50005 Enforcement. 

(a) Violations. In addition to the 

penalties provided under the 

Communications Act of 1934, as 

amended, and section 1.80 of this 

chapter, if a Reimbursement Program 

recipient violates the Secure and 

Trusted Communications Networks Act 

of 2019, Public Law 116–124, 133 Stat. 

158, the Commission’s rules 

implementing the statute, or the 

commitments made by the recipient in 

the application for reimbursement, the 

recipient: 

(1) Shall repay to the Commission all 

reimbursement funds provided to the 

recipient under the Reimbursement 

Program; 

(2) Shall be barred from further 

participation in the Reimbursement 

Program; 

(3) Shall be referred to all appropriate 

law enforcement agencies or officials for 

further action under applicable criminal 

and civil law; and 

(4) May be barred by the Commission 

from participation in other programs of 

the Commission, including the Federal 

universal service support programs 

established under section 254 of the 

Communications Act of 1934, as 

amended. 

(b) Notice and opportunity to cure. 

The penalties described in paragraph (a) 

of this section shall not apply to a 

recipient unless: 

(1) The Commission, the Wireline 

Competition Bureau, or the Enforcement 

Bureau provides the recipient with 

notice of the violation; and 

(2) The recipient fails to cure the 

violation within 180 days after such 

notice. 

(c) Recovery of funds. The 

Commission will immediately take 

action to recover all reimbursement 

funds awarded to a recipient under the 

Program in any case in which such 

recipient is required to repay 

reimbursement funds under paragraph 

(a) of this section. 

§ 1.50006 Replacement List. 

(a) Development of List. The 

Commission shall develop a list of 

categories of suggested replacements of 

physical and virtual communications 

equipment, application and 

management software, and services for 

the covered communications equipment 

or services listed on the Covered List 

pursuant to §§ 1.50002 and 1.50003 of 

this subpart. 

(1) In compiling the Replacement List, 

the Commission may review efforts 

from, or overseen by, other Federal 

partners to inform the Replacement List. 

(2) The Replacement List shall 

include categories of physical and 

virtual communications equipment, 

application and management software, 

and services that allows carriers the 

flexibility to select the equipment or 

services that fit their needs from 

categories of equipment and services. 

(3) The Wireline Competition Bureau 

shall publish the Replacement List on 

the Commission’s website. 

(b) Maintenance of the List. The 

Wireline Competition Bureau shall issue 

a Public Notice announcing any updates 

to the Replacement List. If there are no 

updates to the Replacement List in a 

calendar year, the Wireline Competition 

Bureau shall issue a Public Notice 

announcing that no updates that have 

been made to the Replacement List. 

(c) Neutrality. The Replacement List 

must be technology neutral and may not 

advantage the use of reimbursement 

funds for capital expenditures over 

operational expenditures. 

§ 1.50007 [Reserved] 

■ 3. Delayed indefinitely, in § 1.50004, 

add paragraphs (c), (d)(1), (g), (h)(2), and 

(j) through (n) to read as follows: 

§ 1.50004 Secure and Trusted 

Communications Networks Reimbursement 

Program. 

* * * * * 

(c) Application requests for funding. 

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. 

(1) Requests for funding allocations 

must include: 

(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) The certifications set forth in 

paragraph (a)(3) of this section; 

(iv) A specific timeline for the 

permanent removal, replacement, and 

disposal of the covered communications 

equipment or services; and 

(v) The eligible provider certifies in 

good faith: 

(A) It will reasonably incur the 

estimated costs claimed as eligible for 

reimbursement; 

(B) It will use all money received from 

the Reimbursement Program only for 

expenses eligible for reimbursement; 

(C) It will comply with all policies 

and procedures relating to allocations, 

draw downs, payments, obligations, and 

expenditures of money from the 

Reimbursement Program; 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 2945 

(D) It will maintain detailed records, 

including receipts, of all costs eligible 

for reimbursement actually incurred for 

a period of 10 years; and 

(E) It will file all required 

documentation for its expenses. 

(d) * * * 

(1) If the Wireline Competition 

Bureau determines that an application is 

materially deficient (including by 

lacking an adequate cost estimate or 

adequate supporting materials), the 

Wireline Competition Bureau shall 

provide the applicant a 15-day period to 

cure the defect before denying the 

application. If the cure period would 

extend beyond the deadline under this 

paragraph (d) for approving or denying 

the application, such deadline shall be 

extended through the end of the cure 

period. 

* * * * * 

(g) Funding disbursements. Following 

the approval and issuance by the 

Wireline Competition Bureau of a 

funding allocation, a Reimbursement 

Program recipient may file a 

reimbursement claim request for the 

draw down disbursement of funds from 

the recipient’s funding allocation. The 

recipient must show in the 

reimbursement claim actual expenses 

reasonably incurred for the removal, 

replacement, and disposal of covered 

communications equipment or service. 

The Wireline Competition Bureau will 

review and grant or deny 

reimbursement claims for actual costs 

reasonably incurred. 

(1) Initial reimbursement claim. 

Within one year of the approval of its 

Reimbursement Program application, a 

recipient must file at least one 

reimbursement claim. Failure to file a 

reimbursement claim within the oneyear period will result in the 

reclamation of all allocated funding 

from the Reimbursement Program 

recipient and revert to the 

Reimbursement Program fund for 

potential allocation to other 

Reimbursement Program participants. 

(2) Reimbursement claim deadline. 

All reimbursement claims must be filed 

by the Reimbursement Program 

recipient within 120 days of expiration 

of the removal, replacement and 

disposal term. Following the expiration 

of the reimbursement claim deadline, 

any remaining and unclaimed funding 

allocated to the Reimbursement Program 

recipient will automatically be 

reclaimed and revert to the 

Reimbursement Program fund for 

potential allocation to other 

Reimbursement Program participants. 

(3) Extension of reimbursement claim 

deadline. A Reimbursement Program 

recipient may request a single extension 

of the reimbursement claim deadline by 

no later than the deadline discussed in 

paragraph (g)(2). The Wireline 

Competition Bureau shall grant any 

timely filed extension request of the 

reimbursement claim filing deadline for 

no more than 120 days. 

(h) * * * 

(2) Individual extensions. Prior to the 

expiration of the removal, replacement 

and disposal term, a Reimbursement 

Program recipient may petition the 

Wireline Competition Bureau for an 

extension of the term. The Wireline 

Competition Bureau may grant an 

extension for up to six months after 

finding, that due to no fault of such 

recipient, such recipient is unable to 

complete the permanent removal, 

replacement, and disposal by the end of 

the term. The Wireline Competition 

Bureau may grant more than one 

extension request to a recipient if 

circumstances warrant. 

* * * * * 

(j) Disposal requirements. 

Reimbursement Program recipients 

must dispose of the covered 

communications equipment or service 

in a manner to prevent the equipment 

or service from being used in the 

networks of other providers of advanced 

communications service. The disposal 

must result in the destruction of the 

covered communications equipment or 

service, making the covered 

communications equipment or service 

inoperable permanently. 

Reimbursement Program recipients 

must retain documentation 

demonstrating compliance with this 

requirement. 

(k) Status updates. Reimbursement 

Program recipients must file a status 

update with the Commission once every 

90 days beginning on the date on which 

the Wireline Competition Bureau 

approves the recipient’s application for 

reimbursement and until the recipient 

has filed the final certification. 

(1) Status updates must include: 

(i) Efforts undertaken, and challenges 

encountered, in permanently removing, 

replacing, and disposing of the covered 

communications equipment or service; 

(ii) The availability of replacement 

equipment in the marketplace; 

(iii) Whether the recipient has fully 

complied with (or is in the process of 

complying with) all requirements of the 

Reimbursement Program; 

(iv) Whether the recipient has fully 

complied with (or is in the process of 

complying with) the commitments made 

in the recipient’s application; 

(v) Whether the recipient has 

permanently removed from its 

communications network, replaced, and 

disposed of (or is in the process of 

permanently removing, replacing, and 

disposing of) all covered 

communications equipment or services 

that were in the recipient’s network as 

of the date of the submission of the 

recipient’s application; and 

(vi) Whether the recipient has fully 

complied with (or is in the process of 

complying with) the timeline submitted 

by the recipient as required by 

paragraph (c)(1)(iv) of this section. 

(2) The Wireline Competition Bureau 

will publicly post on the Commission’s 

website the status update filings within 

30 days of submission. 

(3) Within 180 days of completing the 

funding allocation stage provided for in 

paragraph (e), the Wireline Competition 

Bureau shall prepare a report for 

Congress providing an update on the 

Commission’s implementation efforts 

and the work by recipients to 

permanently remove, replace, and 

dispose of covered communications 

equipment and service from their 

networks. 

(l) Spending reports. Within 10 days 

after the end of January and July, 

Reimbursement Program recipients 

must file reports with the Commission 

regarding how reimbursement funds 

have been spent, including detailed 

accounting of the covered 

communications equipment or service 

permanently removed and disposed of, 

and the replacement equipment or 

service purchased, rented, leased, or 

otherwise obtained, using 

reimbursement funds. 

(1) This requirement applies starting 

with the recipient’s initial receipt of 

disbursement funds per paragraph (g) of 

this section and terminates once the 

recipient has filed a final spending 

report. certification. 

(2) Following the filing of its final 

certification per paragraph (m) of this 

section, certifying that the recipient has 

completed the removal, replacement, 

and disposal process, the recipient must 

file a final spending report showing the 

expenditure of all funds received as 

compared to estimated costs identified 

in its application for funding. 

(3) The Wireline Competition Bureau 

will make versions of the spending 

reports available on the Commission’s 

website subject to confidentiality 

concerns consistent with the 

Commission’s rules. 

(m) Final certification. Within 10 days 

following the expiration of the removal, 

replacement, and disposal term, 

Reimbursement Program recipient shall 

file a final certification with the 

Commission. 

2946 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Rules and Regulations 

(1) The final certification shall 

indicate whether the recipient has fully 

complied with (or is in the process of 

complying with) all terms and 

conditions of the Reimbursement 

Program, the commitments made in the 

application of the recipient for the 

reimbursement, and the timeline 

submitted by the recipient as required 

by paragraph (c) of this section. In 

addition, the final certification shall 

indicate whether the recipient has 

permanently removed from its 

communications network, replaced, and 

disposed of (or is in the process of 

permanently removing, replacing, and 

disposing of) all covered 

communications equipment or services 

that were in the network of the recipient 

as of the date of the submission of the 

application by the recipient for the 

reimbursement. 

(2) If a recipient submits a 

certification under this paragraph 

stating the recipient has not fully 

complied with the obligations detailed 

in paragraph (m)(1) of this section, then 

the recipient must file an updated 

certification when the recipient has 

fully complied. 

(n) Documentation retention 

requirement. Each Reimbursement 

Program recipient is required to retain 

all relevant documents, including 

invoices and receipts, pertaining to all 

costs eligible for reimbursement actually 

incurred for the removal, replacement, 

and disposal of covered 

communications equipment or services 

for a period ending not less than 10 

years after the date on which it receives 

final disbursement from the 

Reimbursement Program. 

* * * * * 

■ 5. Delayed indefinitely, add § 1.50007 

to subpart DD to read as follows: 

§ 1.50007 Reports on covered 

communications equipment or services. 

(a) Contents of Report. Each provider 

of advanced communications service 

must submit an annual report to the 

Commission that: 

(1) Identifies any covered 

communications equipment or service 

that was purchased, rented, leased or 

otherwise obtained on or after: 

(i) August 14, 2018, in the case of any 

covered communications equipment or 

service on the initial list published 

pursuant to § 1.50002; or 

(ii) Within 60 days after the date on 

which the Commission places such 

equipment or service on the list 

required by § 1.50003; 

(2) Provides details on the covered 

communications equipment or services 

in its network subject to reporting 

pursuant to paragraph (a)(1) of this 

section, including the type, location, 

date purchased, rented, leased or 

otherwise obtained, and any removal 

and replacement plans; 

(3) Provides a detailed justification as 

to why the facilities-based provider of 

broadband service purchased, rented, 

leased or otherwise obtained the 

covered communications equipment or 

service; 

(4) Provides information about 

whether any such covered 

communications equipment or service 

has subsequently been removed and 

replaced pursuant to Commission’s 

reimbursement program contained in 

§ 1.50004 of this subpart; 

(5) Provides information about 

whether such provider plans to 

continue to purchase, rent, lease, or 

otherwise obtain, or install or use, such 

covered communications equipment or 

service and, if so, why; and 

(6) Includes a certification as to the 

accuracy of the information reported by 

an appropriate official of the filer, along 

with the title of the certifying official. 

(b) Reporting deadline. Providers of 

advanced communications service shall 

file initial reports within 90 days after 

the Office of Economics and Analytics 

issues a public notice announcing the 

availability of the new reporting 

platform. Thereafter, filers must submit 

reports once per year on or before March 

31st, reporting information as of 

December 31st of the previous year. 

(c) Reporting exception. If a provider 

of advanced communications service 

certifies to the Commission that such 

provider does not have any covered 

communications equipment or service 

in the network of such provider, such 

provider is not required to submit a 

report under this section after making 

such certification, unless such provider 

later purchases, rents, leases or 

otherwise obtains any covered 

communications equipment or service. 

(d) Authority to update. The Office of 

Economics and Analytics may, 

consistent with these rules, implement 

any technical improvements, changes to 

the format and type of data submitted, 

or other clarifications to the report and 

its instructions. 

PART 54—UNIVERSAL SERVICE 

■ 5. The authority citation for part 54 is 

revised to read as follows: 

Authority: 47 U.S.C. 151, 154(i), 155, 201, 

205, 214, 219, 220, 229, 254, 303(r), 403, 

1004, 1302, and 1601–1609, unless otherwise 

noted. 

■ 6. Effective March 15, 2021, add 

§ 54.10 to read as follows: 

§ 54.10 Prohibition on use of certain 

Federal subsidies. 

(a) A Federal subsidy made available 

through a program administered by the 

Commission that provides funds to be 

used for the capital expenditures 

necessary for the provision of advanced 

communications service may not be 

used to: 

(1) Purchase, rent, lease, or otherwise 

obtain any covered communications 

equipment or service; or 

(2) Maintain any covered 

communications equipment or service 

previously purchased, rented, leased, or 

otherwise obtained. 

(b) The term ‘‘covered 

communications equipment or service’’ 

is defined in § 1.50001 of this chapter. 

(c) The prohibition in paragraph (a) of 

this section applies to any covered 

communications equipment or service 

beginning on the date that is 60 days 

after the date on which such equipment 

or service is placed on a published list 

pursuant to § 1.50003 of this chapter. In 

the case of any covered communications 

equipment or service that is on the 

initial list published pursuant to 

§ 1.50002 of this chapter, such 

equipment or service shall be treated as 

being placed on the list on the date 

which such list is published. 

■ 7. Delayed indefinitely, add § 54.11 to 

read as follows: 

§ 54.11 Requirement to remove and 

replace. 

(a) Each Eligible Telecommunications 

Carrier receiving Universal Service 

Fund support must certify prior to 

receiving a funding commitment or 

support that it does not use covered 

communications equipment or services. 

(b) For purposes of paragraph (a) of 

this section, covered communications 

equipment or services means any 

communications equipment or service 

that is on the Covered list found in 

§ 1.50002 of this chapter. 

(c) The certification required in 

paragraph (a) of this section is not 

applicable until one year after the date 

the Commission releases a Public Notice 

announcing the acceptance of 

applications for filing during the initial 

filing window of the Reimbursement 

Program per § 1.50004(b) of this chapter. 

(d) Reimbursement Program 

recipients, as defined in § 1.50001(h) of 

this chapter, are not subject to 

paragraph (a) of this section until after 

the expiration of their applicable 

removal, replacement, and disposal 

term per § 1.50004(h). 

[FR Doc. 2021–00052 Filed 1–12–21; 8:45 am] 

BILLING CODE 6712–01–P