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[Federal Register Volume 86, Number 160 (Monday, August 23, 2021)]
[Rules and Regulations]
[Pages 46995-47022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17279]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 54

[WC Docket No. 18-89; FCC 21-86; FR ID 41783]

Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) adopts rules to modify the Secure and Trusted 
Communications Networks Reimbursement Program (Reimbursement Program) 
consistent with the Secure and Trusted Communications Networks Act of 
2019, as modified by the Congressional Appropriations Act, 2021.

DATES: Effective October 22, 2021.

FOR FURTHER INFORMATION CONTACT: Brian Cruikshank, Wireline Competition 
Bureau, [email protected], 202-418-3623 or TTY: 202-418-0484.

[[Page 46996]]

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Third 
Report and Order in WC Docket No. 18-89; FCC 21-86, adopted July 13, 
2021 and released July 14, 2021. Due to the COVID-19 pandemic, the 
Commission's headquarters will be closed to the general public until 
further notice. The full text of this document is available at the 
following internet address: https://www.fcc.gov/document/fcc-acts-protect-national-security-communications-supply-chain-0.

I. Introduction

    1. The Federal Communications Commission (Commission) continues to 
play a leading role protecting the security of its communications 
networks and communications supply chain. Securing its nation's 
networks from those who would harm the United States and its people is 
more important than ever due to the outsized impact that the internet 
has on its work, education, health care, and personal connections. 
Recognizing this reality, and the damage that attacks on these networks 
can and do cause, today the Commission modifies its rules to 
incorporate the Consolidated Appropriations Act, 2021 (CAA) amendments 
to the Secure and Trusted Communications Networks Act of 2019 (Secure 
Networks Act).
    2. Specifically, in response to several sections of the CAA that 
provide additional guidance for and direct changes to the Commission's 
Secure and Trusted Communications Networks Reimbursement Program 
(Reimbursement Program), the Commission adopts several changes to the 
program rules. The Commission first increases the customer eligibility 
cap for participation in the Reimbursement Program. The Commission also 
modifies the type of equipment and services eligible for reimbursement 
and adjust the date by which equipment or services must have been 
obtained to be eligible for Reimbursement Program funds. The Commission 
further adopts the prioritization scheme created in the CAA and clarify 
the definition of ``provider of advanced communications service'' for 
purposes of the Reimbursement Program. Finally, the Commission 
clarifies portions of the Reimbursement Program to assist eligible 
providers as they prepare to seek reimbursement.

II. Report and Order

    3. After reviewing the record, the Commission implements several of 
the Commission's proposals to incorporate the CAA's amendments to the 
Secure Networks Act into its rules. Specifically, the Commission 
revises the eligibility to participate in the Reimbursement Program to 
providers of advanced communications service with 10 million or fewer 
customers; amend the scope of equipment and services that Reimbursement 
Program participants may use funding to remove, replace, or dispose; 
adjust the cutoff date for equipment and services eligible for 
reimbursement; adopt the CAA's prioritization scheme for distributing 
reimbursement funding; clarify the definition of ``provider of advanced 
communications service''; and clarify various aspects of the 
Reimbursement Program.

A. Eligibility for Participation in the Reimbursement Program

    4. The Commission first amends its rules to allow providers of 
advanced communications service with 10 million or fewer customers to 
participate in the Reimbursement Program, consistent with the Secure 
Networks Act, as amended by the CAA. Prior to enactment of the CAA, its 
rules limited Reimbursement Program eligibility to providers of 
advanced communications service with two million or fewer customers, in 
line with the participation restriction in section 4(b)(1) of the 
Secure Networks Act. In the CAA, however, Congress amended the Secure 
Networks Act to expand eligibility to providers of advanced 
communications service with 10 million or fewer customers. The rule 
revisions the Commission adopts today align eligibility for 
participation in the Reimbursement Program with the congressional 
directives in the CAA. This approach is also supported by comments in 
the record.
    5. In the 2020 Supply Chain Order, 86 FR 2904 (January 13, 2021), 
the Commission defined ``customer'' of a provider of advanced 
communications service as the customer of such provider as well as the 
customer of any affiliate of such provider. The Commission further 
defined ``affiliate'' as ``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 Commission maintains the definition 
of ``customer'' as interpreted in the 2020 Supply Chain Order as those 
taking advanced communications service from the provider and/or its 
affiliate. As such, eligibility in the Reimbursement Program shall 
continue to be determined based on the number of customers to the 
specific advanced communications service offered by the provider and/or 
its affiliate, as set forth in the 2020 Supply Chain Order.
    6. Increasing the number of providers of advanced communications 
service eligible for the Reimbursement Program has important benefits. 
First, it will advance the Commission's goals of removing vulnerable 
equipment and services from its nation's communications networks by 
eliminating covered equipment and services from the networks of more 
providers. LATAM Telecommunications, LLC (LATAM) agrees, arguing that 
by expanding eligibility, in conjunction with the CAA's reimbursement 
prioritization scheme, ``Congress has given the Commission 
flexibility'' to secure a greater number of networks throughout the 
communications ecosystem. While the vast majority of providers of 
advanced communications service participating in the Reimbursement 
Program are expected to have fewer than two million customers, 
increasing the number of providers eligible for reimbursement will 
ensure the removal of covered equipment and services from a broader 
swath of its nation's communications networks. Furthermore, eligibility 
expansion will also reduce the likelihood that insecure equipment and 
services will remain in domestic communications networks.
    7. The Commission rejects the argument that raising the cap would 
extend reimbursement eligibility to larger companies that ``do not need 
government assistance,'' and the Commission declines to use a different 
metric, such as revenue or net income, to determine eligibility for 
participation in the Reimbursement Program. From an administrative 
standpoint, utilizing customer count as the sole eligibility metric 
allows prospective participants and the Commission to easily determine 
participants' eligibility in the Reimbursement Program. The Commission 
also notes that a variety of entities have identified Huawei and ZTE 
equipment and services in their networks, indicating that until such 
equipment and services are removed, those networks are at risk, 
regardless of size. Furthermore, the Commission finds that its decision 
to expand eligibility for the Reimbursement Program is consistent not 
only with the statutory directive but also with the Commission's stated 
goals of the Reimbursement Program. Although the Commission anticipates 
that expanding participant eligibility will increase Reimbursement 
Program applications and demand, doing so does not frustrate its 
ability to administer a program that effectively and efficiently 
distributes funds in accordance with congressional

[[Page 46997]]

directives. By allowing more providers to participate in the 
Reimbursement Program, the Commission will further its goal of ensuring 
that insecure equipment and services are promptly removed from provider 
networks, thus improving the security and reliability of its nation's 
communications systems.

B. Equipment and Services Eligible for Reimbursement

    8. Consistent with the CAA, the Commission modifies its rules to 
limit the equipment and services for which recipients may use 
Reimbursement Program funding to the removal, replacement, or disposal 
of communications equipment and services produced or provided by Huawei 
or ZTE that are on the Covered List. Because the Covered List includes 
all communications equipment and services produced or provided by 
Huawei or ZTE, all such equipment and services are eligible for 
reimbursement.
    9. The CAA's amendments to the Secure Networks Act changed the 
scope of equipment and services eligible for reimbursement from the 
Reimbursement Program. Specifically, the CAA's amendments to the Secure 
Networks Act make ``covered communications equipment and services,'' as 
further specified by the 2019 Supply Chain Order, 85 FR 48134 (August 
10, 2020) or Designation Orders, eligible for reimbursement. The 
Commission is bound by the statutory language, and find that the Secure 
Networks Act, as amended, requires the Commission to limit the 
acceptable use of Reimbursement Program funds to the removal, 
replacement, and disposal of eligible equipment and services that are 
both: (1) On the Covered List published pursuant to section 2(a) of the 
Secure Networks Act; and (2) as captured by the definition of equipment 
or services established in the 2019 Supply Chain Order, or as 
determined by the process set forth in section 54.9 of the Commission's 
rules and in the Designation Orders. In practice, as the Commission 
explains below, that means that all communications equipment or 
services produced or provided by Huawei and ZTE, the companies that are 
both included on the Covered List and subject to the Designation 
Orders, are eligible for reimbursement. The Commission also revises the 
scope of its section 54.11 remove-and-replace rule to require ETCs 
receiving USF support and recipients of Reimbursement Program funding 
to remove all Huawei and ZTE communications equipment and services from 
their networks, consistent with the scope of equipment and services 
eligible for reimbursement.
    10. Covered List. The rules adopted in the 2020 Supply Chain Order 
limit the use of Reimbursement Program funding to the removal, 
replacement, and disposal of covered communications equipment or 
services as published on the Covered List, consistent with section 4(c) 
of the Secure Networks Act before it was amended by the CAA. To be 
included on the Covered List, equipment and services must meet three 
requirements. First, they must be communications equipment, which the 
Commission defined in the 2020 Supply Chain Order to include ``all 
equipment or services used in fixed and mobile broadband networks, 
provided they include or use electronic components.'' Second, the 
equipment and services must be identified as posing ``an unacceptable 
risk to the national security of the United States or the security and 
safety of United States persons'' by sources enumerated in section 2(c) 
of the Secure Networks Act. Third, the equipment and services must be 
capable of satisfying the criteria in section 2(b)(2)(A)-(C) of the 
Secure Networks Act. As discussed in more detail below, all 
communications equipment and services produced or provided by Huawei 
and ZTE are included on the Covered List.
    11. Designation Orders. The Designation Orders prohibit the use of 
USF support for all equipment and services produced or provided by 
Huawei and ZTE because of their designations as covered companies under 
section 54.9 of the Commission's rules. As a result, some equipment and 
services identified pursuant to those section 54.9 designations may not 
be eligible for reimbursement under the rules of the Reimbursement 
Program if they do not meet the three requirements and therefore are 
not ``covered communications equipment and services,'' even though they 
are subject to the USF prohibition in section 54.9.
    12. Effect of CAA Amendments. The Commission finds that further 
analysis of the effect of the CAA's amendments on section 4 of the 
Secure Networks Act compels it to slightly diverge from its original 
proposal in the 2021 Supply Chain Further Notice, 86 FR 15165 (March 
22, 2021). In that Notice, the Commission proposed to modify the scope 
of communications equipment and services eligible for reimbursement to 
those equipment and services produced or provided by covered companies 
subject to the Designation Orders. While there is record support for 
its original proposal, it overlooked the requirement in section 4(c) of 
the Secure Networks Act, as amended, to limit equipment and services 
eligible for reimbursement to those that are ``covered communications 
equipment and services,'' defined as communications equipment and 
services found on the Covered List. The Commission accordingly finds, 
based on a further review of the Secure Networks Act, as amended by the 
CAA, that Congress intended to limit the scope of equipment and 
services eligible for Reimbursement Program funding to a subset of 
equipment and services identified on the Covered List and that are 
either defined in the 2019 Supply Chain Order or designated in the 
Designation Orders. As such, the Commission amends its rules consistent 
with the CAA.
    13. Congress, in amending section 4(c) of the Secure Networks Act, 
modified the scope of equipment and services eligible for reimbursement 
but did not revise the definition of ``covered communications equipment 
or service'' found in section 9 of the Secure Networks Act, which 
defines ``covered communications equipment and services'' as equipment 
and services found on the Covered List. As a result, the Secure 
Networks Act, as amended, allows reimbursement for equipment and 
services from the companies designated as national security threats 
pursuant to section 54.9 of the Commission's rules that are also 
included on the Covered List. The Commission interprets the CAA's 
amendment as maintaining the Covered List as the baseline source for 
eligibility for the Reimbursement Program, but altering the scope of 
covered communications equipment and services to those equipment and 
services on the Covered List that are either defined in the 2019 Supply 
Chain Order or designated in the Designation Orders and through the 
designation process in section 54.9 of the Commission's rules. To align 
its Reimbursement Program rules with the modified scope of eligible 
covered communications equipment and services, the Commission therefore 
revises its eligibility rules to specify that the equipment and 
services eligible for reimbursement are limited to communications 
equipment and services produced or provided by Huawei and ZTE, as they 
are covered companies designated in the Designation Orders under 
section 54.9 of the Commission's rules whose communications equipment 
is also on the Covered List.
    14. The record generally supports its interpretation of the CAA 
amendments to section 4(c) of the Secure Networks Act. As the Rural 
Wireless Association, Inc. (RWA) states, the CAA's

[[Page 46998]]

amendment to section 4(c) of the Secure Networks Act makes clear 
Congress's intent ``that it did not mean to cover all equipment and 
services later placed on the Covered List,'' instead choosing to limit 
reimbursement funding to Huawei and ZTE communications equipment and 
services. Both RWA and Mediacom argue that the Commission's proposals 
are supported by provisions in the CAA that further align the scope of 
reimbursement with the equipment and services identified by the 2019 
Information Collection Order, 85 FR 230 (January 3, 2020), which sought 
data on Huawei and ZTE equipment and services contained in ETCs', and 
their subsidiaries and affiliates, networks. The Commission concurs 
that this alignment supports its interpretation that Congress intended 
to narrow the scope of eligible equipment and services to Huawei and 
ZTE communications equipment and services, as covered companies 
established in the Designation Orders. Furthermore, the CAA's revision 
to set the cutoff date for equipment and services eligible for 
reimbursement as the effective date of the Designation Orders, June 30, 
2020, likewise indicates Congress's intent to synchronize the 
Reimbursement Program eligibility with the scope of equipment and 
services designated pursuant to section 54.9 of the Commission's rules.
    15. The Competitive Carriers Association (CCA), NTCA--The Rural 
Broadband Association (NTCA), and the Secure Networks Coalition offer 
slightly varied interpretations of the CAA's amendment to section 4(c) 
of the Secure Networks Act. CCA argues that the CAA's amendment 
demonstrates Congress's ``intent to allow the use of Reimbursement 
Program funds to remove, replace, and dispose of equipment and services 
subject either to the Covered List or the Designation Orders, rather 
than including only equipment and services subject both to the Covered 
List and the Designation Orders.'' NTCA mischaracterizes the 
Commission's proposal, instead supporting revising the equipment and 
services subject to removal and reimbursement ``to encompass all 
equipment and services produced or provided by entities identified on 
the Commission's Covered List.'' The Secure Networks Coalition's 
similarly misconstrues the section 4(c) amendments. The Secure Networks 
Coalition argues that the CAA requires the Reimbursement Program to 
fund the replacement of all equipment, software, and services included 
on the Covered List. The Secure Networks Coalition claims that because 
Congress allocated funding to remove network equipment posing a 
national security risk to the nation's communications networks, the 
Commission must allow for the removal and replacement of any hardware 
or software from companies on the Covered List in order to meet 
Congress's mandate to mitigate risks to national security.
    16. While the Commission agrees with commenters' conclusions that 
Congress intended to include Huawei and ZTE communications equipment 
and services in the scope of products eligible for reimbursement, the 
Commission rejects CCA, NTCA, and the Secure Network Coalition's 
interpretations of the CAA. Section 901 of the CAA amends section 4(c) 
of the Secure Networks Act by replacing the entire text of sections 
4(c)(1)(A)(i) & (ii) to revise the scope of equipment and services 
eligible for reimbursement from those that are either published on the 
initial Covered List or subsequently placed on the Covered List, to 
those that are defined by the 2019 Supply Chain Order or as determined 
by the designation process in section 54.9 of the Commission's rules 
and the Designation Orders designating Huawei and ZTE as covered 
companies. Section 901 does not, however, amend section 4(c)(1)(A), 
which limits reimbursement funding to the permanent removal of covered 
communications equipment or services, nor does it amend the definition 
of ``covered communications equipment or service'' in section 9(5) of 
the Secure Networks Act, which means any communications equipment or 
service on the Covered List.
    17. The Commission concludes that had Congress intended to continue 
using the Covered List as the sole means to identify equipment and 
services eligible for reimbursement, it would have left the original 
provisions in the Secure Networks Act intact, rather than replacing 
them with different parameters. At the same time, Congress preserved 
the definition of ``covered communications equipment or service'' to 
include such items on the Covered List. This indicates Congress's 
intent to maintain the Covered List as a baseline source for eligible 
equipment and services. The amendments in section 901 of the CAA 
suggest that Congress meant to further limit reimbursement eligibility 
from the Covered List to the subset of those equipment and services 
defined in the 2019 Supply Chain Order or subject to the designation 
process in section 54.9 of the Commission's rules. Specifically, 
Congress replaced language that formerly listed the Covered List as the 
sole source of equipment and service eligible for reimbursement with 
language identifying Huawei and ZTE equipment and services subject to 
the Designation Orders when setting the bounds of equipment and 
services eligible for reimbursement through the Reimbursement Program.
    18. Therefore, CCA's interpretation, that Congress intended to 
allow reimbursement funds to be used for eligible equipment and 
services on either the Covered List or produced or provided by 
designated companies in the Designation Orders, does not comport with 
the structure of the amended section 4 of the Secure Networks Act. The 
amended section 4 still preserves the Covered List as the baseline 
source for eligible equipment and services but then limits eligibility 
to those such equipment and services as defined by the 2019 Supply 
Chain Order or as determined by the designation process in section 54.9 
of the Commission's rules and the Designation Orders designating Huawei 
and ZTE as covered companies. Nor do NTCA and the Secure Networks 
Coalition's interpretations supporting eligibility for all equipment 
and services on the Covered List reconcile with the CAA's amendments to 
section 4(c)(1) of the Secure Networks Act. Congress intended to limit 
eligibility to a subset of equipment and services on the Covered List 
by amending sections 4(c)(1)(A)(i) & (ii) to replace the original text, 
which referenced the Covered List, with a reference the 2019 Supply 
Chain Order, the Designation Orders, and the Commission's process for 
designations under section 54.9 of its rules.
    19. Analysis of Covered List. Consistent with the Commission's 
previous interpretation of the scope of Huawei and ZTE equipment and 
services included in the Covered List, the Commission interprets the 
CAA's revised scope of equipment and services eligible for 
reimbursement to include all communications equipment and services 
produced or provided by Huawei or ZTE. Section 2(b) of the Secure 
Networks Act requires the Commission to add to the Covered List 
communications equipment and services that satisfy certain functional 
capabilities, as determined by specific sources enumerated in section 
2(c). In the 2020 Supply Chain Order, the Commission acknowledged that 
section 889(f)(3) of the 2019 NDAA is one of the enumerated sources in 
section 2(c) for including equipment and services on the Covered List. 
Section 889(f)(3) defines ``covered telecommunications equipment and 
services'' to include ``(A) telecommunications equipment produced or 
provided by Huawei or

[[Page 46999]]

ZTE; [and] (C) telecommunications or video surveillance services 
provided by such entities or using such equipment.'' Notably, the 
Commission rejected arguments that it should have added a narrower list 
of equipment and services to the Covered List based upon a separate 
section of the 2019 NDAA, section 889(a)(2)(B), that limited the 
``covered telecommunications equipment or services'' in the statute 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.'' The Commission found that 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 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 add on the Covered List. Therefore, 
consistent with the Secure Networks Act statutory obligation, the 
Commission placed 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.
    20. The Commission finds that the Commission's prior interpretation 
of the 2019 NDAA provisions means that Huawei and ZTE communications 
equipment and services need not be capable of the functions listed in 
sections 2(b)(2)(A) or (B) of the Secure Networks Act to be on the 
Covered List. The Commission determined in the 2020 Supply Chain Order 
that Congress chose to specifically include the broader definition of 
eligible equipment and services in section 889(f)(3), and the 
Commission concluded that section 889(f)(3) incorporated all such 
Huawei and ZTE communications equipment and services into the Covered 
List. Furthermore, in dismissing arguments to limit inclusion to only 
Huawei or ZTE equipment and services capable of the functionality 
enumerated in section 889(a)(2)(B) of the 2019 NDAA, the Commission 
interpreted the inclusion of section 2(b)(2)(C) of the Secure Networks 
Act, that is, including equipment and services capable of ``otherwise 
posing an unacceptable risk to the national security of the United 
States or the security and safety of United States persons,'' as 
indicative of Congress's intent to encompass on the Covered List 
equipment and services beyond the narrower list of enumerated 
functions. As the Commission stated in the 2020 Supply Chain Order, 
``[t]o 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 and services that 
warrant inclusion on the Covered List.'' Section 901 of the CAA is 
consistent with this interpretation. It carves out the equipment and 
services eligible for reimbursement into a limited subset of the 
Covered List, that is, only communications equipment and services as 
defined in the 2019 Supply Chain Order or as determined by the process 
in section 54.9 of the Commission's rules and the Designation Orders. 
The Designation Orders prohibited the use of USF support for all Huawei 
and ZTE equipment and services. The Commission thus finds Congress in 
the CAA intended reimbursement eligibility for all Huawei and ZTE 
equipment and services found on the Covered List, that is, all Huawei 
and ZTE communications equipment and services.
    21. Its decision today also advances the Commission's goals of 
developing a simple and straightforward reimbursement process that 
facilitates the expeditious removal, replacement, and disposal of 
equipment and services that threaten the security of its nation's 
communications systems. The Commission agrees with RWA that clarifying 
the scope of equipment and services eligible for reimbursement as 
Huawei and ZTE communications equipment and services, rather than all 
equipment and services on the Covered List, which currently includes 
three other companies and potentially others should the Commission add 
more, creates a bright line for Reimbursement Program participants to 
clearly identify what equipment and services are eligible, thus easing 
administrative costs for eligible providers and the Commission. By 
revising the scope of equipment and services eligible for 
reimbursement, the Commission provides clarity to providers of advanced 
communications service as to the expectations for participation in the 
Reimbursement Program and assurance as to what costs associated with 
the removal, replacement, and disposal of covered equipment and 
services they can expect to be reimbursed, if accepted.
    22. The Commission further interprets the CAA amendments to 
determine that other equipment and services on the Covered List are not 
automatically eligible for reimbursement. Only equipment and services 
on the Covered List that are also defined in the 2019 Supply Chain 
Order or that are produced or provided by covered companies designated 
under section 54.9 of the Commission's rules as posing a national 
security threat to the integrity of communications networks or the 
communications supply chain are eligible for reimbursement under the 
Reimbursement Program based on the CAA. The Commission agrees with CCA 
and Mediacom that the CAA amends section 4(c) of the Secure Networks 
Act to permit eligibility of such equipment and services from other 
designated companies, should the Public Safety and Homeland Security 
Bureau make such a determination pursuant to the process set forth in 
section 54.9 of the Commission's rules. Section 901 of the CAA amends 
section 4(c) of the Secure Networks Act to allow reimbursement funding 
to be used for the removal, replacement, and disposal of equipment and 
services as defined by the 2019 Supply Chain Order, which adopted the 
process for designating covered companies that pose a national security 
threat to the integrity of communications networks or the 
communications supply chain found in section 54.9 of the Commission's 
rules. By listing the 2019 Supply Chain Order in the CAA amendment, the 
Commission finds that Congress intended that the Commission's 
designation process serve as a source for identifying future equipment 
and services eligible for reimbursement from the broader Covered List; 
otherwise, Congress could have merely stated that the Designation 
Orders alone set the eligibility parameters. Therefore, should future 
companies be designated as posing a national security threat pursuant 
to section 54.9 of the Commission's rules, the Commission may consider 
costs associated with the removal, reimbursement, or disposal of 
equipment and services produced or provided by those covered companies 
eligible for reimbursement under the Reimbursement Program, provided 
that such equipment and services are also on the Covered List and the 
Reimbursement Program has an open filing window and adequate funding.
    23. The Commission next finds that, to the extent there are future 
designations, equipment and services from such companies would be 
eligible for reimbursement from the Reimbursement Program without 
needing an additional appropriation from Congress. Congress has 
currently appropriated $1.9 billion for the

[[Page 47000]]

Reimbursement Program, which is very close to the number the Commission 
publicly identified in the 2019 information collection, as well as 
presented to Congress, as the cost to replace Huawei and ZTE equipment. 
The CAA also amends the eligibility cutoff date for covered equipment 
and services for reimbursement to align with the date that the 
Designation Orders were released, June 30, 2020. Both actions indicate 
Congress's intent to limit the eligibility of the current Reimbursement 
Program to the scope of such Huawei and ZTE equipment and services on 
the Covered List. Yet despite the signals that Congress intended this 
current appropriation to fund the removal, replacement, and disposal of 
such Huawei and ZTE equipment and services on the Covered List through 
the Reimbursement Program, Congress did not restrict funding to only 
those equipment and services, nor did it limit any future eligibility 
to specific appropriations. Therefore, as discussed herein, the 
Commission will continue to administer the Reimbursement Program in 
accordance with the prioritization scheme set forth in the CAA and 
adopted in this Third Report and Order.
    24. To maintain consistency within the Reimbursement Program, the 
Commission also extends the revised scope of equipment and services 
eligible for reimbursement throughout its rules related to the 
administration of the Reimbursement Program. Specifically, the 
Commission extends this revised scope to all references to ``covered 
communications equipment or service'' contained in section 4 of the 
Secure Networks Act, and the Commission's rules implementing that 
section. As noted herein, while the CAA amends the scope of equipment 
and services eligible for reimbursement from those solely on the 
Covered List to those also either defined in the 2019 Supply Chain 
Order or subject to the Huawei and ZTE Designation Orders and any 
future designated entities identified under its designation process 
established in the 2019 Supply Chain Order, it does not revise the 
definition of ``covered communications equipment or service'' found in 
section 9 of the Secure Networks Act, which defines ``covered 
communications equipment and services'' as equipment and services found 
on the Covered List. As such, other references to ``covered 
communications equipment or service'' in section 4 of the Secure 
Networks Act do not reflect the revised scope of eligible equipment and 
services as amended by the CAA. This incongruity could lead to 
discrepancies between the equipment and services participants are 
required to remove and dispose of and the equipment and services for 
which they are permitted to spend reimbursement funding for removal, 
replacement, and disposal. The Commission believes that Congress 
intended to make reimbursement funds available for all such equipment 
and services participants are required to remove. To reconcile any 
potential conflicts wherein Reimbursement Program participants are 
required to permanently remove and dispose of equipment and services 
from the Covered List as set forth in their plans as obligated by their 
participation, the Commission interprets the scope of covered 
communications equipment and services referenced throughout section 4 
of the Secure Networks Act as aligning with the scope of equipment and 
services eligible for reimbursement, that is, such equipment and 
services on the Covered List that are as defined by the 2019 Supply 
Chain Order or as determined by the process established in the 2019 
Supply Chain Order and in the Designation Orders.
    25. The Commission emphasizes that the CAA's amendment and its 
subsequent modification to the Commission's rules apply only to the 
Reimbursement Program and do not implicate other sections of the Secure 
Networks Act. Congress narrowly limited its amendment to section 4 of 
the Secure Networks Act and as such, the Commission limits its 
applicability to the corresponding sections of the Commission's rules. 
The Covered List, published and maintained pursuant to section 2 of the 
Secure Networks Act, is still in full effect as applicable to the 
section 3 prohibition on the use of Federal subsidies and the section 5 
information reporting requirement, and to the Commission's rules 
implementing those provisions of the Secure Networks Act. Furthermore, 
the modification does not impact or revise the prohibition on the use 
of USF support for equipment or services produced or provided by 
covered companies, pursuant to section 54.9(a) of the Commission's 
rules. The Public Safety and Homeland Security Bureau may still 
designate companies which pose a national security threat via the 
process set forth in section 54.9(b) of the Commission's rules, to 
which the prohibition in section 54.9(a) would apply.
    26. The Commission next determines that the modification to the 
scope of equipment and services eligible for reimbursement is effective 
60 days after publication in the Federal Register, as applied to 
prospective applicants to the Reimbursement Program. All providers of 
advanced communications service that participate in the Reimbursement 
Program must remove, replace, and dispose of all such communications 
equipment and services from Huawei and ZTE, in accordance with the 
deadlines set forth in the Reimbursement Program rules. To the extent 
future designations may identify additional companies from the Covered 
List that pose a national security threat to the integrity of 
communications networks and the communications supply chain after the 
initial application period for the Reimbursement Program, the 
Commission directs the Wireline Competition Bureau, in consultation 
with the Office of the Managing Director, to issue further guidance 
clarifying the procedure for seeking reimbursement for removal, 
replacement, and disposal costs associated with eligible equipment and 
services, should the Reimbursement Program be accepting applications 
and sufficient reimbursement funding be available.
    27. Remove-and-Replace Rule. The Commission further revises the 
remove-and-replace rule adopted by the Commission in the 2020 Supply 
Chain Order to align the scope of equipment and services required for 
removal and replacement with the scope of equipment and services now 
eligible for reimbursement through the Reimbursement Program. 
Therefore, recipients of funding through the Reimbursement Program and 
ETCs receiving USF support must remove and replace equipment and 
services from the Covered List that are defined in the 2019 Supply 
Chain Order or subject to the Designation Orders and the process for 
designating companies that pose a national security threat to the 
integrity of communications networks or the communications supply 
chain, as set forth in the 2019 Supply Chain Order. Because the 
Commission currently has only designated Huawei and ZTE as covered 
companies from the list of five companies found on the Covered List, 
Reimbursement Program funding recipients and ETCs receiving USF support 
must remove and replace Huawei and ZTE communications equipment and 
services from their networks.
    28. In the 2020 Supply Chain Order, the Commission adopted section 
54.11, requiring that ETCs receiving USF support and recipients of 
Reimbursement Program funding remove and replace all covered 
communications equipment and services on the Covered List from their 
networks. The Commission made compliance with the remove-and-

[[Page 47001]]

replace requirement contingent upon an appropriation from Congress to 
the Reimbursement Program. Reimbursement Program recipients must 
certify compliance as a condition to their participation, as required 
by various provisions of the Secure Networks Act. ETC recipients of USF 
support must certify that they have complied with section 54.11 after 
the Reimbursement Program opens, and subsequently certify compliance 
before receiving USF support each funding year.
    29. Its decision is consistent with the Commission's prior approach 
to requiring removal of vulnerable equipment and services from the 
nation's communications networks. Upon adoption of the remove-and-
replace rule, the Commission stated its intent to align the scope of 
equipment and services subject to section 54.11 of the Commission's 
rules with the scope of equipment and services eligible for 
reimbursement under the Reimbursement Program. Doing so, the Commission 
found, ``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.'' Because the Commission finds 
the CAA amends the Secure Networks Act to modify the equipment and 
services eligible for reimbursement from solely those on the Covered 
List to those on the Covered List and also defined in the 2019 Supply 
Chain Order or subject to the designation process in section 54.9 of 
the Commission's rules and the Designation Orders, the Commission 
modifies the remove-and-replace rule to preserve the alignment of the 
equipment and services subject to removal under section 54.11 and 
through the Reimbursement Program. The Commission finds that using the 
equipment and services on the Covered List that are defined in the 2019 
Supply Chain Order or subject to the designation process in section 
54.9 of the Commission's rules and the Designation Orders to determine 
both the equipment and services subject to the remove-and-replace 
requirement and the equipment and services eligible for reimbursement 
through the Reimbursement Program creates a bright-line determination 
for entities complying with section 54.11 and those participating in 
the Reimbursement Program. Therefore, the Commission finds that it 
should not be overly burdensome for entities to identify the equipment 
and services in their networks required for removal and replacement.
    30. The record supports its decision to align the scope of 
equipment and services required for removal under section 54.11 with 
the scope of equipment and services eligible for reimbursement through 
the Reimbursement Program. As NTCA claims, this revision ``eliminates 
the incongruity created by the Commission's prior rules and the Secure 
Networks Act wherein the scope of equipment and services that [ETCs] 
were required to remove and replace exceeded the equipment and services 
eligible for reimbursement.'' The Commission further concurs with NTCA 
and Mediacom that modifying the scope of the remove-and-replace 
requirement to match the scope of eligible equipment and services in 
the Reimbursement Program provides clarity to providers, thus 
ultimately easing administrative burdens as providers work to remove 
Huawei and ZTE equipment and services from their networks.
    31. The Commission rejects Huawei's argument that because the 
Commission lacks authority to mandate removal and replacement, it 
likewise has no authority to modify the scope of the equipment and 
services subject to the requirement. As discussed at length in response 
to similar arguments Huawei raised in the 2020 Supply Chain Order, the 
Commission found that several statutory provisions provided appropriate 
authority for adoption of the remove-and-replace rule. Section 4 of the 
Secure Networks Act requires recipients of Reimbursement Program 
funding to permanently remove and replace all covered communications 
equipment and services from their networks as a condition of receiving 
the funding, and to certify to that effect throughout the reimbursement 
process. The Commission also found that provisions of the 
Communications Act, including those related to its authority governing 
universal service, provided legal authority for the application of the 
remove-and-replace rule to ETCs that receive USF support. Nothing in 
the CAA or the record changes the Commission's previous finding that 
the Commission has authority to require recipients of Reimbursement 
Program funding and ETCs receiving USF support to remove and replace 
covered equipment and services. While the Commission acknowledges that 
section 901 of the CAA amends some provisions of the Secure Networks 
Act, including the scope of the equipment and services eligible for 
reimbursement, the CAA does not disturb the provisions that authorize 
the Commission's mandate, as discussed in the 2020 Supply Chain Order. 
On the contrary, the CAA's amendments to the Secure Networks Act 
bolster its position that the Commission has authority to require the 
removal of equipment and services from covered companies designated 
pursuant to section 54.9 of the Commission's rules. First, Congress 
incorporated the Commission's designation process and current 
designations of Huawei and ZTE as covered companies into its limitation 
on the use of Reimbursement Program funds. Second, Congress revised the 
cutoff date for equipment and services eligible for reimbursement to 
June 30, 2020, the date the Designation Orders were released. Both 
actions indicate Congress's support for the Commission's authority to 
designate Huawei and ZTE as covered companies and are evidence of 
congressional intent to ensure removal of Huawei and ZTE equipment and 
services from its nation's communications networks and supply chain. By 
incorporating the Commission's previous actions as the basis for 
reimbursement eligibility, the CAA provides even more support for the 
Commission's position that it was authorized to take that action.
    32. The Commission similarly rejects Huawei's argument that the CAA 
does not provide the authority to expand the scope of equipment and 
services subject to the remove-and-replace requirement. As discussed 
above, when adopting the remove-and-replace rule, the Commission 
intended to align the scope of equipment and services subject to the 
requirement with the scope of equipment and services Congress intended 
for reimbursement--prior to the CAA's amendments, the Covered List. By 
amending the scope of equipment and services eligible for reimbursement 
to a subset of products on the Covered List that are defined in the 
2019 Supply Chain Order or subject to the designation process and 
Designation Orders, the CAA necessitates a corresponding modification 
to the scope of equipment and services subject to removal and 
replacement under section 54.11 of the Commission's rules. The 
Commission finds the CAA supports its action to align the scope of 
equipment and services required for removal with those eligible for 
reimbursement as set forth by Congress.
    33. The modifications to the remove-and-replace requirement adopted 
herein are limited to the scope of equipment and services subject to 
removal and do not revise the scope of entities required

[[Page 47002]]

to comply nor the procedures for certifying compliance. In the 2020 
Supply Chain Order, the Commission stated that both ETCs receiving USF 
support and recipients of Reimbursement Program funding are required to 
remove and replace from their networks covered communications equipment 
and services. While the expansion of eligible participants in the 
Reimbursement Program now includes providers of advanced communications 
service with 10 million or fewer customers, which, as stated herein, 
will encompass the vast majority of providers, participation in the 
Reimbursement Program remains voluntary. If a provider of advanced 
communications service decides to apply to the Reimbursement Program, 
it expressly agrees to permanently remove and dispose of covered 
communications equipment or services. Similarly, the Tenth Circuit has 
held that the Commission may ``specify what a USF recipient may or must 
do with the funds,'' consistent with the policy principles outlined in 
section 254(b) of the Communications Act, and designation as an ETC and 
participation in universal service programs is voluntary. Providers 
currently designated as ETCs and that participate in USF programs may 
relinquish their ETC status or decline to participate in USF programs 
should they wish to avoid compliance with its rules.
    34. Compliance with its mandate to remove and replace covered 
communications equipment and services as described herein continues to 
apply to ETCs receiving USF support, in addition to participants in the 
Reimbursement Program, as a condition of receiving universal service or 
reimbursement funding, respectively. The CAA amendments did not modify 
those obligations. As such, the Commission will continue to require ETC 
recipients of universal service funding to certify that they have 
complied with the remove and replace requirement for the new scope of 
covered equipment and services from the Covered List and as defined in 
the 2019 Supply Chain Order or subject to the designation process in 
section 54.9 of the Commission's rules and the Designation Orders, as 
established in the 2020 Supply Chain Order.
    35. The Commission clarifies that the remove-and-replace rule 
extends only to equipment or services on the Covered List that have 
also been produced or provided by companies that have been designated 
by the Public Safety and Homeland Security Bureau as posing a national 
security threat to the integrity of communications networks or the 
communications supply chain. Consistent with its original remove-and-
replace rule, any future remove-and-replace obligation for additional 
designations that are included on the Covered List will be contingent 
on the existence of funding to remove and replace the equipment or 
services produced or provided by such designated covered company. If 
the Public Safety and Homeland Security Bureau makes any such future 
final designations, following any appropriations to fund the removal 
and replacement of equipment or services produced or provided by those 
covered companies, the Commission will require ETCs receiving USF 
support to remove equipment and services produced or provided by 
designated companies that are on the Covered List before they are next 
obligated to certify that they have removed all covered equipment and 
services from their networks on their applications for any USF support. 
The process for announcing an initial designation provides adequate 
notice that ETCs receiving USF support may be required to remove 
equipment and services from that company, should a final designation be 
issued.

C. Timing Requirement for the Reimbursement Program

    36. The Commission next amends the Reimbursement Program rules to 
allow recipients to use reimbursement funds to remove, replace, or 
dispose of any equipment or services that were purchased, rented, 
leased, or otherwise obtained on or before June 30, 2020, consistent 
with the CAA's amendments to the Secure Networks Act. Currently, 
pursuant to section 4(c)(2)(A) of the original Secure Networks Act, its 
rules prohibit Reimbursement Program recipients from using such funds 
to remove, replace, or dispose of equipment and services obtained, in 
the case of any covered communications equipment or service that is on 
the initial Covered List published pursuant to section 2(a) of the 
Secure Networks Act, on or after August 14, 2018, or, in the case of 
any covered communications equipment or service that is not on the 
initial Covered List published pursuant to section 2(a), the date that 
is 60 days after the date on which the Commission places such equipment 
or service on the Covered List. The CAA however, amends the Secure 
Networks Act to allow recipients of Reimbursement Program funding to 
use such funding on equipment and services purchased before June 30, 
2020, the date that the Public Safety and Homeland Security Bureau 
issued the Designation Orders. The Commission amends its rules to 
satisfy the new timing for eligible equipment and services set forth in 
the CAA amendments.
    37. The clear language of the CAA's amendment to section 4(c)(2)(A) 
of the Secure Networks Act establishing June 30, 2020 as the 
eligibility cutoff date compels the Commission to modify its rules. The 
amended cutoff date for eligible equipment and services is also 
consistent with the Public Safety and Homeland Security Bureau's orders 
designating Huawei and ZTE as companies that pose a national security 
threat to the integrity of communications networks or the 
communications supply chain. Following initial designations adopted in 
the 2019 Supply Chain Order, the Public Safety and Homeland Security 
Bureau issued final designations of Huawei and ZTE on June 30, 2020, 
pursuant to section 54.9 of the Commission's rules. When setting the 
effective date of Huawei's final designation as immediately upon 
release of the Huawei Designation Order, the Public Safety and Homeland 
Security Bureau concluded that ``the risks to its national 
communications networks and communications supply chain posed by 
Huawei's equipment necessitate immediate implementation of its 
designation.'' The Public Safety and Homeland Security Bureau relied on 
a similar justification for the immediate effective date of ZTE's final 
designation. Therefore, as of June 30, 2020, USF support could no 
longer be used to purchase, obtain, maintain, improve, modify, or 
otherwise support any equipment or services produced or provided by 
Huawei or ZTE.
    38. In addition to being statutorily mandated, the June 30, 2020 
cutoff date for equipment and services initially eligible for removal, 
replacement, and disposal under the Reimbursement Program advances the 
Commission's goals of removing vulnerable equipment from its nation's 
communications networks. Additional equipment and services from 
designated companies that may have been legally purchased or deployed 
into networks between 2018 and June 30, 2020 are now eligible for 
reimbursement, thus ensuring their effective removal from the networks 
of participants in the Reimbursement Program. Furthermore, by amending 
the eligibility cutoff to June 30, 2020, Congress intended to establish 
the Designation Orders as a clear delineation for what equipment and 
services would be eligible for reimbursement. Consistent with the 
Commission's rules, Congress did not intend to allow providers to seek 
reimbursement for equipment

[[Page 47003]]

purchased after the Public Safety and Homeland Security Bureau issued 
the final Designation Orders. Therefore, the Commission revises its 
rules for the Reimbursement Program to limit reimbursement to equipment 
and services purchased on or before the Designation Orders were 
released, consistent with the CAA.
    39. Commenters support its proposal to modify the cutoff date for 
reimbursement eligibility for equipment and services. RWA argues that 
retaining the previous cutoff date, August 14, 2018, would be 
``inequitable to eligible carriers who at that time were not even aware 
of the availability of a reimbursement program,'' which was first 
introduced in the Secure Networks Act in 2019 and later incorporated 
into the Commission's rules in the 2020 Supply Chain Order. Northern 
Michigan University posits that adjusting the date to align with the 
effective date of the Designation Orders will ``facilitate a more 
timely replacement program'' and ensure that systems will be replaced 
with modern, secure facilities. The Commission agrees with commenters 
that amending its Reimbursement Program rules to set a June 30, 2020 
cutoff date will help program participants to recover costs associated 
with the removal, replacement, and disposal of such Huawei and ZTE 
equipment and services at the time the Designation Orders were 
released, thus fairly ensuring the timely and effective removal and 
replacement of such vulnerable equipment from its communications 
systems.
    40. As discussed above, the Commission finds that the current scope 
of the Reimbursement Program is limited to such communications 
equipment and services produced or provided by the current covered 
companies, i.e., Huawei and ZTE. As a result, costs associated with the 
removal, replacement, and disposal of all such Huawei and ZTE 
telecommunications equipment or services purchased prior to June 30, 
2020, will be eligible for reimbursement. This result is further 
supported by Congress's establishment of June 30, 2020, the release 
date of the Designation Orders designating Huawei and ZTE as covered 
companies, as the cutoff date. Furthermore, Mediacom supports using a 
``single, certain date'' to ease administrative burdens in determining 
whether purchased equipment or services falls within the deadlines for 
reimbursement, rather than continually monitoring whether such products 
that may be added to the Covered List are eligible under the previous 
rules. The Commission agrees that establishing June 30, 2020 as a 
bright-line date for equipment and services eligible for reimbursement 
will help to ease administrative burdens by allowing participating 
providers to more easily identify such Huawei and ZTE equipment and 
services as eligible for removal, replacement, and disposal. Aligning 
the cutoff date with the release date for the Huawei and ZTE 
Designation Orders also signals to Reimbursement Program participants 
that such Huawei and ZTE equipment and services purchased prior to June 
30, 2020 are eligible for reimbursement at this time.
    41. CCA supports modifying the timing cutoff for eligible equipment 
and services yet asks that the Commission ensure that its rule be 
``flexible enough to encompass dates related to a subsequent 
designation of equipment or services manufactured by companies that 
pose a security threat.'' The Commission finds that, since Congress 
intended for equipment and services on the Covered List produced or 
provided by companies designated pursuant to section 54.9 of the 
Commission's rules to be eligible for reimbursement funding, further 
clarification as to the eligible cutoff date for such equipment and 
services designated in the future is warranted.
    42. Prior to its amendment, section 4(c) of the Secure Networks Act 
established an alternative effective date of 60 days after any covered 
communications equipment or services are added to the Covered List; 
however, the CAA removes this provision and is ultimately silent as to 
the eligible date for equipment and services should the Public Safety 
and Homeland Security Bureau designate additional companies on the 
Covered List as national security threats under section 54.9 of the 
Commission's rules. Similar to the original provision in the Secure 
Networks Act, the Commission adopts a comparable period of 60 days 
before the effect of any subsequent designation. Therefore, 
communications equipment or services produced or provided by such 
covered companies designated under section 54.9 that are subsequently 
added to the Covered List will become eligible 60 days after the date 
on which the Commission places such equipment or service on the Covered 
List. Reimbursement Program participants will similarly be prohibited 
from using reimbursement funding to remove, replace, or dispose of such 
equipment or services purchased, rented, leased, or otherwise obtained 
more than 60 days after such designation is final. The process by which 
the Public Safety and Homeland Security Bureau designates companies as 
posing a national security threat to the integrity of communications 
networks or the communications supply chain involves several 
opportunities for notice prior to the final designation going into 
effect. Given the precedent for a 60-day effective period in the Secure 
Networks Act and the notice provided through the designation process, 
establishing this time frame for the effective date of any equipment or 
services from the Covered List that are produced or provided by 
companies covered under subsequent designations is reasonable for 
providers to identify newly eligible equipment and services. This 
effective period is also consistent with the 60-day time period in 
sections 3 and 5 that remains in the Secure Networks Act following the 
CAA amendments.

D. Prioritization if Reimbursement Program Demand Exceeds Supply

    43. The Commission next amends its Reimbursement Program rules to 
replace the prioritization scheme adopted in the 2020 Supply Chain 
Order with the prioritization paradigm Congress expressly adopted in 
the CAA. These prioritizations will govern the allocation of funds in 
the event requests for reimbursement funding exceed the appropriated 
money available for such reimbursement.
    44. The Commission, in the 2019 Information Collection Order, 
directed ETCs to report whether they use or own Huawei or ZTE equipment 
or services in their networks, or the networks of their affiliates and 
subsidiaries, and to report the cost of removing and replacing such 
equipment and services. The Wireline Competition Bureau and the Office 
of Economics and Analytics released the results of this information 
collection in September 2020, finding that it would cost an estimated 
$1.837 billion to remove and replace Huawei and ZTE equipment in 
respondents' networks. In releasing the estimate, the Wireline 
Competition Bureau and the Office of Economics and Analytics noted that 
not all providers of advanced communications service that may be 
eligible for reimbursement under the Secure Networks Act participated 
in the information collection. Following the information collection, 
Congress appropriated $1.9 billion to the Commission to ``carry[ ] 
out'' the Secure Networks Act, including $1.895 billion for the 
Reimbursement Program.
    45. In the 2020 Supply Chain Order, issued before the congressional 
appropriation, the Commission adopted a prioritization paradigm that 
would take effect should ``the estimated costs for replacement 
submitted by the

[[Page 47004]]

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 decided to 
first allocate funding to ETCs subject to a remove-and-replace 
requirement under the Commission's rules. If funding is insufficient to 
meet total demand from this category, the Commission would prioritize 
``funding for transitioning the core networks of these eligible 
providers before allocating funds to non-core network related 
expenses.'' If funding was available after fully funding the prior 
category, the Commission would then prioritize non-ETCs that provided 
cost estimates as part of the 2019 Information Collection, with the 
same priority for replacing core network equipment over non-core 
equipment. Finally, if money remained after funding reimbursement 
requests for the first two groups, the Commission would disburse 
funding to other qualified non-ETC providers of advanced communications 
services, with the same priority for replacing core network equipment. 
The Commission decided to prorate the available funding equally across 
all requests in an individual category if ``available funding is 
insufficient to satisfy all requests in a certain prioritization 
category.''
    46. When Congress enacted the CAA, however, it provided its own 
prioritization paradigm for the Reimbursement Program. The Commission 
sought comment on how the CAA's prioritization differed from the one 
the Commission adopted in the 2020 Supply Chain Order and whether, in 
light of these changes, the Commission should modify the existing 
Reimbursement Program rules. After reviewing the record, the Commission 
adopts the prioritization paradigm Congress expressly provided in the 
CAA and discard the one previously adopted in the 2020 Supply Chain 
Order.

1. CAA Prioritization

    47. The CAA directs that ``the Commission shall allocate sufficient 
reimbursement funds . . ., first, to approved applications that have 
2,000,000 or fewer customers . . ., [then] to approved applicants that 
are accredited public or private non-commercial educational 
institutions providing their own facilities-based educational broadband 
services . . . [and] health care providers and libraries providing 
advanced communications service, [then] to any remaining approved 
applicants determined to be eligible for reimbursement under the 
[Reimbursement] Program.''
    48. Congress's intent was clear that the CAA should replace the 
Commission's prioritization paradigm with its own. In the 2020 Supply 
Chain Order, the Commission created its own prioritization paradigm 
because, in the Secure Networks Act, ``Congress did not provide for, or 
expressly prohibit, any funding prioritization scheme.'' That is no 
longer the case. The Commission finds that the Commission has no 
discretion to deviate from the CAA's provided prioritization paradigm. 
The record supports its conclusion. For example, USTelecom notes that 
``Congress left the Commission no discretion in this regard.'' CCA also 
agrees that the ``Commission should implement Congress' prioritization 
scheme to ensure funding is distributed first to smaller carriers with 
2 million or fewer customers'' and argues that the ``success of the 
Reimbursement Program hinges on rigorous adherence to this 
prioritization scheme.'' Mediacom also supports this change because 
``not only is the revised schedule consistent with the CAA, but it also 
. . . recognizes that those providers [with two million or fewer 
customers] need the greatest assistance because they have more limited 
resources.'' Mediacom adds that ``the funds appropriated by the CAA . . 
. are finite and rely on data that was collected primarily from 
providers with two million or fewer subscribers. The Commission must 
therefore ensure that the limited funds are allocated to those who need 
it most and on whose costs the funds are based.'' NTCA expresses 
support for the new prioritization process as ``consistent with the CAA 
as well as the [Secure Networks Act]'' and because ``[s]maller 
providers already operate on razor thin margins [and] adding the 
financial cost of replacing existing equipment outside of its normal 
upgrade cycle or losing universal service funding would be a crushing 
burden.'' The Commission agrees with these commenters and adopt, as 
expressly provided, the prioritization paradigm in the CAA to replace 
the one the Commission created in the 2020 Supply Chain Order.
    49. Under this paradigm, the Commission will first allocate funding 
to providers of advanced communications service with two million or 
fewer customers. The Commission will then allocate funding to approved 
applicants that are accredited public or private non-commercial 
educational institutions providing their own facilities-based 
educational broadband services and health care providers and libraries 
providing advanced communications service. The Commission will then 
allocate funding to any remaining applicants determined to be eligible 
for reimbursement under the Reimbursement Program.

2. Other Considered Prioritization Categories

    50. The CAA's amendments did not set forth how the Commission 
should allocate funding within a particular category if funding was 
insufficient to meet demand. If, for example, demand for reimbursement 
funding among qualified applicants with two million or fewer customers 
exceeds $1.895 billion, the Commission will not be able to fully fund 
all applicants. After reviewing the record, the Commission finds that 
the most equitable solution, and the one that is consistent with the 
Secure Networks Act direction that the ``Commission make reasonable 
efforts to treat all applicants on a just and fair basis,'' requires 
the Commission to adopt a pro-rata distribution system in the event 
demand exceeds supply at any given prioritization level. Thus, if 
available funding is insufficient to satisfy all requests in a 
prioritization category, the Commission will prorate the available 
funding equally across all requests in this category. Applicants with 
accepted applications to participate in the Reimbursement Program will 
be funded at a percentage proportional to the estimated amount included 
in the application. The Commission therefore discards any sub-
prioritization levels adopted in the 2020 Supply Chain Order. As 
USTelecom explains in support of this position, ``the Commission should 
decline to sub-prioritize within the prioritization categories 
established by Congress.'' USTelecom warns that ``if any sub-
prioritization had any effect, it would be to reduce funding to one or 
more applications in favor of others notwithstanding Congress's 
expectation that they would be treated equally.'' The Commission agrees 
and notes, as USTelecom argues, ``Congress had knowledge of the 
prioritization scheme that the Commission was going to use for its 
reimbursement program . . . [but] intentionally set new, and different, 
priorities.''
a. Decline To Prioritize Core Network Equipment
    51. When the Commission adopted its previous prioritization 
paradigm, the Commission reasoned that ``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.'' Thus, in the 2020 Supply

[[Page 47005]]

Chain Order, the Commission held that if funding is insufficient to 
meet total demand from a particular category, the Commission would 
prioritize ``funding for transitioning the core networks of these 
eligible providers before allocating funds to non-core network related 
expenses.'' Though the Commission has seen nothing in the record to 
convince it otherwise, and some commenters, such as Mediacom ``support[ 
] prioritizing core equipment over non-core equipment,'' the 
prioritization scheme in the CAA does not indicate a preference for 
core network equipment over non-core equipment. The CAA paradigm only 
asks the Commission to first consider applications from providers with 
two million or fewer customers. It does not address any preference to 
replace certain types of covered equipment in telecommunications 
networks. Neither the CAA nor the Secure Networks Act provides the 
Commission with guidance to determine which specific communications 
equipment and services would comprise any ``core network.'' Thus, to 
ensure that ``reimbursement funds are distributed equitably across all 
applicants . . .,'' and to ease administrative burdens, the Commission 
will not prioritize core equipment over any other type of equipment. 
The Commission finds that discarding this sub-prioritization category 
will provide more clear guidance to the Reimbursement Program Fund 
Administrator (Fund Administrator) and applicants during the 
Reimbursement Program funding allocation process.
    52. The Commission reaches the same conclusion in considering 
Mavenir's suggestion that the Commission prioritizes Open Radio Access 
Network (O-RAN) reimbursement requests over those from carriers that 
choose to use traditional or proprietary RAN. Mavenir comments that the 
Commission should allow for a priority for O-RAN technology because 
such technology may be more secure than traditional network technology, 
may allow United States-based vendors to compete on a more level 
playing field with foreign counterparts, and will allow for easier and 
cheaper network upgrades in the future. The Commission is mindful of 
the potential benefits associated with a transition to more virtual 
networks but nevertheless decline to establish a preference for such 
equipment and services. The CAA's prioritization paradigm expressly 
provides for no such preference for O-RAN or any other type of 
equipment or service, so the Commission similarly declines to do so. 
The Commission emphasizes that Reimbursement Program recipients may 
choose to replace their existing covered equipment and services with O-
RAN equipment and services, and the Commission recommends that 
providers participating in the Reimbursement Program consider all 
potential vendors, including O-RAN providers, before selecting their 
replacement equipment and services.
b. Decline To Prioritize Eligible Telecommunications Carriers
    53. In the 2020 Supply Chain Order, the Commission reasoned that 
ETCs, who are required to remove covered equipment and services from 
their networks, ``face greater consequences than non-ETC providers'' so 
``there is a greater urgency to expeditiously accommodate the 
transition of ETC networks over other applicants.'' The Commission thus 
explicitly prioritized ETC applicants over non-ETC applicants, who are 
not required to remove covered equipment and services unless they 
participate in the Reimbursement Program. However, the CAA does not 
indicate a preference for ETC applicants over non-ETC applicants. 
Instead, it directs the Commission to prioritize smaller carriers 
first, then schools, health care providers, and libraries, and then 
larger carriers. The Commission therefore reconsiders and revises its 
prior prioritization scheme to remove any preference for ETC applicants 
for the same reasons the Commission declines to prioritize the 
replacement of core network equipment and services. To ensure 
Reimbursement Program funding is distributed equitably, and to provide 
clear guidance to Reimbursement Program applicants, the Commission will 
implement the prioritization scheme as provided by Congress in the CAA.
    54. The record supports this decision. Mediacom argues that the old 
preference for ETCs ``was inconsistent with the Secure Networks Act and 
contrary to the public interest.'' Mediacom contends that many non-ETCs 
made ``significant investments in removing and replacing their 
equipment and services based on the belief, supported by the Secure 
Networks Act, that they would be reimbursed for those costs. The 
Commission should not punish those providers that acted early and have 
been proactively attempting to comply with the statute.'' PTA-FLA also 
writes that ``Congress plainly did not envision ETCs receiving all or 
virtually all of the funds available since it stressed that funds 
should be made available equitably to all applicants, a command that 
would not be heeded if non-ETCs are effectively precluded from 
receiving any funds.'' PTA-FLA argues ETCs should receive funding, 
``but not to the exclusion of other worthy recipients who have not had 
the advantage of receiving USF money to fund their build-outs and 
operations.''
    55. RWA contends that the CAA ``does not prohibit such 
prioritization, and such prioritization is consistent with the CAA.'' 
RWA argues that, ``[c]onsidering the USF constitutes the source of much 
of ETCs' funding as opposed to non-ETCs, limiting those funds has 
significantly hampered the ability of many rural ETCs to maintain their 
networks.'' RWA asserts that ``the FCC already acknowledged the 
importance of ETC networks in its Second Report and Order as it agreed 
that ETCs should be allocated reimbursement funds first.'' Further, 
``[i]f there is not enough funding to go around initially, the 
Commission must prioritize, and there are substantial public interest 
reasons for prioritizing ETCs over non-ETCs. Non-ETCs should still be 
reimbursed; it may just take longer.'' RWA also argues that ``[r]ural 
ETCs . . . are entirely dependent on [USF] program funding, in addition 
to business revenue from a sparse number of subscribers in high cost 
areas,'' and, unlike other carriers with access to additional sources 
of capital, ``a 20%-30% funding reduction would drive small and rural 
companies out of business.''
    56. The Commission acknowledges that, in the 2020 Supply Chain 
Order, the Commission used a similar justification to fund ETCs over 
non-ETCs. However, the Commission adopted that priority before Congress 
expressly provided its own prioritization scheme, in which it 
explicitly adopted a scheme that does not prioritize ETCs over all 
providers of advanced communications services with 2 million customers 
or fewer. While the CAA does not explicitly prohibit the Commission 
from including additional sub-prioritization categories, without 
express direction to further sub-prioritize the Commission concludes 
that doing so would frustrate its charge, from the Secure Networks Act, 
to ensure that Reimbursement Program funds are equitably distributed 
amongst all applications. As a result, the Commission adopts the 
paradigm advanced by Congress and will not prioritize funding to ETCs 
over non-ETCs. If available funding is insufficient to satisfy all 
requests in any individual category, the Commission will prorate the 
available funding equally across all requests in this category. The

[[Page 47006]]

Commission finds this scheme is most consistent with congressional 
intent and that it will allow, as Congress intended, all providers of 
advanced communications services to begin the necessary work of 
removing insecure communications equipment and services from their 
networks.
c. Decline To Prioritize Information Collection Participants
    57. In choosing to adopt a pro-rata distribution method for the 
limited funds available in the Reimbursement Program, the Commission 
acknowledges a departure from earlier rules that prioritized non-ETCs 
who responded to the 2019 Information Collection Order. The results of 
the information collection showed that ETCs with two million or fewer 
customers required $1.62 billion to remove and replace Huawei and ZTE 
equipment from their networks. This figure did not account for other 
providers of advanced communications service that may be eligible to 
participate in the Reimbursement Program. Non-ETCs who voluntarily 
submitted cost estimates to remove and replace Huawei and ZTE equipment 
in their networks estimated they would require approximately $200 
million to do so. The total estimated amount needed to remove and 
replace Huawei and ZTE equipment from the networks of ETCs and non-ETCs 
who voluntarily submitted cost estimates is $1.837 billion, a figure 
closely aligned with the actual amount appropriated by Congress in the 
CAA.
    58. In the 2020 Supply Chain Order, the Commission prioritized non-
ETCs who voluntarily submitted cost estimates over other non-ETC 
providers of advanced communications services. The Commission found 
that it would be ``inequitable'' to allow these providers to go without 
funding simply because ``the costs of non-participating non-ETCs were 
not reported and thus not considered.'' However, the CAA was enacted 
after the Commission adopted the 2020 Supply Chain Order, and the 
Commission sought comment on whether the language in the CAA permitted 
it to adopt a preference to fund non-ETCs who responded to the 2019 
Information Collection Order. After reviewing the record, the 
Commission finds that the CAA does not require such a preference, and 
the Commission declines to implement one for the same reason that the 
Commission declines to prioritize ETCs or the replacement of core 
network equipment and services. Congress created a clear prioritization 
program that does not express a preference to fund non-ETCs who 
voluntarily submitted cost estimates over those that, for whatever 
reason, did not.
    59. Mediacom ``strongly supports the Commission's proposed 
prioritization schedule'' in part because ``prioritizing non-ETCs that 
responded to the data collection over those that did not was arbitrary 
and unfair.'' Mediacom argues that many smaller providers, especially 
while dealing with the COVID-19 pandemic, ``simply did not have the 
resources necessary to evaluate their entire network and respond to 
what they understood was a voluntary data collection while still 
meeting customer demands.''
    60. PTA-FLA and RWA assert that the Commission should maintain this 
preference for non-ETCs who submitted cost estimates as part of the 
information collection. PTA-FLA argues that ``Congress based its 
calculation of how much money to appropriate for the Reimbursement 
Program on the estimated expenses submitted by both ETCs and non-ETCs 
during the cost estimate process.'' PTA-FLA thus claims ETCs and non-
ETCs should be prioritized for funding ``to the extent of the estimates 
they submitted last year.'' PTA-FLA argues that this prioritization 
would ``recognize[ ] the fundamental fairness of prioritizing funding 
to parties who went to the expense and effort of creating a solid 
record to support Congressional funding.'' If the appropriated funds 
were insufficient to meet the demand for these groups, ``all parties 
would have to seek additional funding from Congress to make up the 
difference.'' RWA claims that, ``once ETCs receive their funding 
allocations, non-ETCs who participated in the Commission's information 
collection process should be next in line to be allocated funds . . . 
.'' RWA asserts that the non-ETCs who voluntarily submitted cost 
estimates did so ``in reliance on the Commission's indication that non-
ETC estimates would assist in soliciting Congressional funding.'' RWA 
argues the Commission should continue to prioritize these carriers who 
``demonstrated candor before the Commission in presenting their costs, 
and most importantly, prioritized network security despite regulatory 
uncertainty.'' RWA proposes a new prioritization paradigm that 
allocates funds first to ETCs up to the original cost estimates, then 
to non-ETCs who submitted cost estimates up to those estimates, then to 
those providers who did not submit cost estimates. RWA's proposal would 
allow non-ETCs who participated in the information collection to 
receive funding allocations immediately after the Commission allocates 
funding to ETCs with two million or fewer customers.
    61. The Commission rejects these arguments as inconsistent with its 
mandate to distribute Reimbursement Program funds equitably amongst all 
applications. Although the Commission appreciates the time and expense 
that non-ETCs undertook to prepare their voluntarily replies to the 
2019 information collection, Congress created a scheme that declined to 
prioritize these carriers. The Commission must comply with the statute 
as written and decline to prioritize non-ETCs who voluntarily submitted 
cost estimates.
d. Decline To Prioritize Equipment Posing Elevated National Security 
Risks
    62. In the 2021 Supply Chain Further Notice, the Commission sought 
comment on whether to ``prioritiz[e], within each category, the removal 
and reimbursement of certain equipment or services at particular 
locations identified as posing an elevated national security risk by 
the Commission or other federal agencies or interagency bodies . . . 
.'' The Commission asked whether certain national security threats 
warranted swift action to remove and replace equipment and services at 
various locations around the country. The Commission also sought 
comment on whether national security concerns would justify the 
Commission prioritizing the removal and replacement of equipment and 
services at certain locations ahead of its prioritization in the CAA.
    63. After reviewing the record, the Commission declines to adopt a 
prioritization for certain equipment and services at particular 
locations that may pose an elevated national security risk. The 
Commission does not find express support for such a prioritization in 
the CAA and, as PTA-FLA commented, ``if Congress had intended to 
prioritize the removal and reimbursement of certain equipment or 
services at particular locations . . . it would have said so rather 
than setting explicit priority categories . . . .'' USTelecom and Niki 
N. agree. USTelecom argues the Commission would ``clearly violate the 
CAA and frustrate the intent of Congress if, for any reason, it 
prioritizes any equipment or services in a lower priority category 
ahead of . . . a higher prioritization category.'' Niki N. contends 
that they do not ``believe the Commission should prioritize equipment 
and services at locations that pose a heightened national security risk 
in a lower priority category ahead of any equipment and services in a 
higher prioritization category.''

[[Page 47007]]

    64. Just as the Commission declines to sub-prioritize other 
categories of carriers or equipment and services, the fact that the CAA 
itself does not expressly prohibit the Commission from including 
additional sub-prioritization categories for national security does not 
convince it that doing so is the correct policy decision. Instead, it 
could expressly frustrate the Secure Network Act's requirement that 
Reimbursement Program funds be equitably distributed amongst all 
applications. The Commission thus declines to prioritize equipment or 
services at particular locations or ahead of the prioritization levels 
defined by Congress.

E. Definition of ``Provider of Advanced Communications Service''

    65. The Secure Networks Act directed the Commission to ``establish 
[the Reimbursement Program] . . . to make reimbursements to providers 
of advanced communications service to replace covered communications 
equipment or services.'' The Commission now adds a definition of 
``provider of advanced communications service'' in its program rules to 
match the definition Congress enacted in the Secure Networks Act, as 
amended by the CAA. This definition will clarify which entities are 
eligible to participate in the Reimbursement Program.
    66. In the Secure Networks Act, Congress defined ``provider of 
advanced communications service'' as ``a person who provides advanced 
communications service to United States customers.'' Congress defined 
``advanced communications service'' as ``the meaning given the term 
`advanced telecommunications capability' in section 706 of the 
Telecommunications Act of 1996 (Telecommunications Act).'' In the 
Telecommunications Act, ``advanced telecommunications capability'' 
means ``without regard to any transmission media or technology, . . . 
high-speed, switched, broadband telecommunications capability that 
enables users to originate and receive high-quality voice, data, 
graphics, and video telecommunications using any technology.''
    67. The Commission has historically interpreted ``high-speed, 
switched, broadband telecommunications capability'' to include 
facilities-based providers, whether fixed or mobile, with a broadband 
connection to end users with at least 200 kbps in one direction. In the 
2020 Supply Chain Order, the Commission used this guidance to adopt a 
definition of ``advanced communications service'' for the Reimbursement 
Program. As a result, participation in the Reimbursement Program is 
limited to providers of ``high-speed, 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.'' The Commission also clarified 
that, ``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 . . . .''
    68. In the CAA, Congress amended its definition of ``provider of 
advanced communications service'' to specifically include ``accredited 
public or private non-commercial educational institutions providing 
their own facilities-based educational broadband service as defined in 
section 27.4 of the Commission's rules,'' and ``health care providers 
and libraries providing advanced communications services.'' 
Accordingly, the Commission explicitly includes, in its definition of 
``provider of advanced telecommunications service,'' ``accredited 
public or private non-commercial educational institutions providing 
their own facilities-based educational broadband service as defined in 
Part 27, Subpart M of the Commission's rules,'' and ``health care 
providers and libraries providing advanced communications services.'' 
Such entities are thus eligible for participation in the Reimbursement 
Program, provided they comply with all other relevant requirements, and 
are included in the first prioritization category if they have fewer 
than two million customers. No commenters disagreed with this proposal, 
and Northern Michigan University comments that ``[it] support[s] the 
amendment to the CAA by Congress to include accredited public or 
private noncommercial educational institutions providing their own 
facilities-based educational broadband service.'' QCommunications, LLC 
also ``agrees, concurs and supports the Commission's proposal to . . . 
[r]edefine the term `provider of advanced communications service,' 
adding: libraries, healthcare, [and] accredited noncommercial education 
. . . .''
    69. The Commission also clarifies that it limits the term 
``educational broadband service as defined in Part 27, Subpart M of the 
Commission's rules'' to solely reference licensees in the Commission's 
Educational Broadband Service (EBS). Commenters support this 
interpretation. For instance, Northern Michigan University argues that 
``Congress's intent in the CAA is to allow EBS licensees who actively 
provide advanced communications services with the means to receive 
equipment replacement funds through the Supply Chain Reimbursement 
Program.'' USTelecom agrees that ``the definition of educational 
broadband service is limited, as indicated by the CAA unambiguously, to 
EBS licensees. The CAA derives its definition from 47 CFR 27.4 which 
includes the licensing requirement as part of the definition.'' The 
Commission agrees with these commenters that this limitation accurately 
reflects Congress's intent to limit participation in the Reimbursement 
Program to entities already licensed for certain frequency bands.
    70. The Commission rejects USTelecom's position that ``[a]lthough 
it might be argued that an EBS licensee with fewer than 2 million 
`customers' could be in category 1, it is apparent that such a result 
could not have been Congress's intent.'' USTelecom argues that all EBS 
licensees, even those with two million or fewer customers, should be 
prioritized after funding is distributed to all other advanced 
communications service providers with two million or fewer customers. 
This interpretation of the CAA is contrary to the plain language of the 
statute, which tasks the Commission with first funding all advanced 
communications service providers with two million or fewer customers, 
and defines ``providers of advanced communications service'' to include 
such EBS licensees. The Commission interprets the word ``all'' to 
include these EBS licensees who are otherwise eligible for 
participation in the Reimbursement Program, even if there currently 
exist no such providers who can claim more than two million customers.
    71. The Commission does not expect the addition to the existing 
Reimbursement Program rules of a definition of ``provider of advanced 
communications service'' to have any practical effect on the number or 
type of carriers eligible to participate in the Reimbursement Program. 
The 2020 Supply Chain Order already provided that ``accredited public 
or private non-commercial educational institutions providing their own 
facilities-based educational broadband service as defined in section 
27.4 of the Commission's rules,'' and ``health care providers and 
libraries providing advanced communications services'' would be 
eligible for participation.

[[Page 47008]]

Nevertheless, the Commission will amend its definition to explicitly 
include these providers.
    72. The Secure Networks Act further limited eligibility in the 
Reimbursement Program to ``providers of advanced communications service 
. . . [with] . . . customers.'' The word ``customers'' is defined as 
either customers of the provider of advanced communications services or 
the customers of any affiliate of a providers of advanced 
communications service. LATAM claims that Congress, by expanding the 
definition of ``provider of advanced communications service'' in the 
CAA, intended to ``better capture all the networks that may be used for 
the provision of advanced communications services to consumers,'' 
including intermediate providers, who carry traffic for other carriers 
only, and neither originate nor terminate that traffic. It also argues 
that, from a policy perspective, ``it does not make sense to exclude 
intermediate providers from participation in the Reimbursement Program 
since the security concerns would be similar to providers of advanced 
communications services.''
    73. The Commission agrees, but do not think its existing rules 
prohibit such intermediate providers from participation in the 
Reimbursement Program. Its existing definition did not limit 
eligibility to providers who offer service to end users. Rather, it 
extended eligibility to providers of ``high-speed, 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.'' Intermediate providers, such as 
LATAM, likely provide such a service to their customers, 
notwithstanding whether those customers are carrier customers or end-
user customers. The Commission intends to include intermediate 
providers in the Reimbursement Program because, by doing so, the 
Commission can secure against ``potential vulnerabilities to the 
broader network.'' Its goal is to ensure the safety and security of the 
entire network, not only to those portions that provide service to end 
users. Thus, the Commission clarifies that intermediate providers are 
eligible for participation in the Reimbursement Program.
    74. Finally, the Commission reiterates that the adopted changes to 
the definition of ``provider of advanced communication services'' apply 
only to the Reimbursement Program. The Commission does not amend the 
term as it is defined in any other section of its rules.

F. Reimbursement Program Clarifications

    75. The Commission next clarifies various other aspects of the 
Reimbursement Program adopted in the 2020 Supply Chain Order. 
Specifically, the Commission clarifies: (1) The ``costs reasonably 
incurred'' standard adopted for determining eligible reimbursement 
expenses with technology upgrades; (2) the initial application filing 
window; (3) the consideration of requests for individual extensions of 
the removal, replacement, and disposal term; (4) additional 
expectations for and obligations of Reimbursement Program participants 
regarding reimbursement claim requests and the filing of final spending 
reports and final certification updates; (5) the process by which to 
account for removal, replacement, and disposal of covered equipment and 
services; (6) parameters when accounting for reimbursement funds; and 
(7) delegation of financial oversight to the Office of the Managing 
Director (OMD).
    76. Costs Reasonably Incurred Standard--Technology Upgrades. The 
Commission clarifies the ``costs reasonably incurred'' standard adopted 
in the 2020 Supply Chain Order and provide additional guidance as to 
the types of replacement options that would be considered comparable 
facilities and technology upgrades. As adopted in the 2020 Supply Chain 
Order, the Reimbursement Program will reimburse costs reasonably 
incurred for the removal, replacement, and disposal of covered 
communications equipment and services in accordance with the Secure 
Networks Act. In the 2020 Supply Chain Order, the Commission considered 
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 further 
acknowledged, however, that replacing older technology inevitably 
involves a certain amount of technology upgrade and as a result 
expressly allowed for the replacement of older mobile wireless networks 
with 4G LTE equipment or service that is 5G ready. The Commission 
cautioned, however, that providers electing ``'to purchase optional 
equipment capability or make other upgrades' . . . must do so using 
their own funds.''
    77. Providers considering replacement options have expressed 
interest in changing their technology path and have asked for 
clarification regarding what is considered comparable and eligible for 
reimbursement and what is considered a technology upgrade and 
ineligible for reimbursement. For example, providers may want to 
transition from older mobile wireless technologies to 5G or move from 
fixed wireless to fiber. The Commission therefore provides additional 
guidance on what is considered a technology upgrade, how to estimate 
cost for the Reimbursement Program for a technology upgrade, and how 
the Commission will allocate funding for such requests.
    78. As a policy matter, the Commission encourages providers to 
upgrade their networks and to transition to efficient, scalable, and 
secure technology, thereby providing more choices and capabilities to 
end users. The Reimbursement Program is, however, limited in funding 
and focused on assisting ``small communications providers with the 
costs of removing prohibited equipment and services from their networks 
and replacing prohibited equipment with more secure communications 
equipment and services.'' Additionally, Congress specifically stated 
that the Commission is expected ``to preclude network upgrades that go 
beyond the replacement of covered communications equipment or services 
from eligibility.'' The Commission thus interprets the ``costs 
reasonably incurred'' standard to make providers responsible for the 
additional incremental cost of funding upgrades that exceed what is 
reasonably necessary to transition to a comparable replacement. That 
said, and as the Commission previously acknowledged, replacing older 
technology inevitably involves a certain level of upgrade as the 
equipment and services currently available in the marketplace typically 
contain features and capabilities not present in the legacy equipment 
and services no longer offered. Accordingly, a certain degree of 
upgrade may be entirely reasonable, and eligible for reimbursement, 
depending on the comparable replacements available in the marketplace. 
In particular, the Commission reiterates, as previously stated in the 
2020 Supply Chain Order, that 4G Long Term Evolution (LTE) network 
equipment or service, which would include VoLTE technology, would be 
treated as a comparable replacement for an older mobile wireless 
network for purposes of the Reimbursement Program.
    79. Whether an upgrade is treated as a reasonable, comparable 
replacement necessary for the transition, and thus acceptable, or a 
technology upgrade ineligible for reimbursement will likely

[[Page 47009]]

depend on the facts in each case. The Commission expects the Wireline 
Competition Bureau, with the assistance of the Fund Administrator, will 
first consider whether the cost is typically incurred when 
transitioning from covered communications equipment and services to a 
replacement. Other factors the Wireline Competition Bureau and Fund 
Administrator may consider when determining whether a change is 
necessary, reasonable, and comparable are the costs in relation to 
alternative equipment and services and the capabilities and functions 
performed by the replacement equipment and services as compared to the 
equipment and services removed.
    80. As a general matter, the Commission does not consider replacing 
microwave backhaul with fiber backhaul or replacing last-mile fixed 
wireless links with fiber-to-the-premises (FTTP) necessary for the 
removal, replacement, and disposal of such communications equipment or 
service produced or provided by Huawei and ZTE that is listed on the 
Covered List. The Rural Wireless Broadband Coalition states that 
higher-capacity fiber backhaul is needed to support the replacement of 
older technology networks with 5G ready equipment that is subsequently 
made 5G operable by a provider. Santel ``would like'' to replace its 
four transmitters with an FTTP wireline network serving 850 customers 
to provide a far better quality service that ``even exceeds 5G wireless 
solutions.'' In either case, the Commission fails to see how such 
expenses are reasonably necessary to the removal, replacement, and 
disposal of covered communications equipment or services eligible for 
reimbursement. Moreover, the cost of replacing microwave with fiber 
backhaul and fixed wireless links to end users with FTTP would likely 
greatly exceed the cost of other wireless alternatives. As the 
Commission stated in the C-Band proceeding, relocation support is not 
intended ``to provide a means of funding [an] incumbent['s] . . . 
transition to fiber'' and ``while a transition to fiber in some cases 
may be a more efficient or desirable approach for certain . . . 
operators, incumbents would only be reimbursed for the reasonable costs 
of relocating existing services. . . .'' This same rationale applies to 
the Reimbursement Program. Accordingly, the Commission will generally 
view fiber link replacements as a technology upgrade and not a 
reasonable, comparable replacement.
    81. Participants may obtain Reimbursement Program support for an 
amount equivalent to the cost estimate of a comparable replacement. If, 
however, a participant ultimately decides to upgrade to a higher 
quality, more advanced, non-comparable replacement, then the program 
participant will bear the difference in cost between the comparable 
replacement and the technology upgrade solution chosen. When 
Reimbursement Program participants seek to replace eligible covered 
communications equipment or service with a technology upgrade in excess 
of the costs of a comparable replacement, they will need to provide 
price quotes for the comparable replacement with their Application 
Request for Funding Allocation and may not rely on the cost estimates 
contained in the Catalog of Eligible Expenses (Catalog). This approach 
is consistent with the Commission's treatment of situations where the 
estimated cost is not provided in the Catalog, and the applicant must 
provide additional documentation to support the identified cost 
estimate. They will also need to separately certify, as already 
required by the Commission's rules, that the estimated cost is made in 
good faith.
    82. Price quotes will provide a more accurate estimation of costs 
for funding allocations than using the Catalog when participants 
request a technology upgrade and will help address concerns about 
inflated cost estimates and the over allocation of support. The 
Commission anticipates the Catalog largely reflects list prices, and 
not the amount providers will actually pay after any purchasing 
discounts are applied. While the Catalog reduces burdens for the 
applicant during the submission process, reliance on it in some 
circumstances could result in the overestimation of cost, and the over-
allocation of support. Accordingly, to ensure more accurate cost 
estimates and to minimize the over-allocation of funding, the 
Commission clarifies that it will treat requests for reimbursement 
towards a technology upgrade as outside the scope of the Catalog. 
Applicants seeking support when completing a technology upgrade will 
need to provide their own cost estimates for a comparable replacement 
with price quotes.
    83. Costs Reasonably Incurred--Handset Upgrades. The Commission 
rejects RWA's request that the Commission add VoLTE compatible 
replacement subscriber handsets to its Catalog and permit recipients of 
the Reimbursement Program to replace consumer handsets. RWA argues that 
the subscribers of some potential applicants of the Reimbursement 
Program have only CDMA-capable handset devices and those devices would 
need to be replaced because the handsets will not be compatible with a 
newer technology replacement network. RWA thus seeks reimbursement for 
the replacement cost of non-Huawei and ZTE handsets that will no longer 
be compatible with replacement networks. The Commission finds CDMA-
capable handsets not produced or provided by Huawei or ZTE ineligible 
for reimbursement under the Reimbursement Program rules because 
replacing such handsets with VoLTE compatible subscriber handsets is 
not reasonably necessary to the removal, replacement, and disposal of 
covered communications equipment or service.
    84. The Reimbursement Program has limited funding aimed at securing 
its nation's communication networks from national security threats. 
Expanding the scope of reimbursement eligibility to include subscriber 
mobile handheld devices not produced or provided by Huawei or ZTE 
threatens to detract substantial funding away from the core mission of 
securing the nation's networks. Handsets and other customer premises 
equipment, including Internet of Things devices, used by end users to 
access and utilize advanced communications services are distinctly 
different from the cell sites, backhaul, core network, etc. used to 
operate a network and provide advanced communications services. 
Consumers typically choose on their own to upgrade their mobile 
handsets every two years on average absent any network transition, and 
newer comparable replacement networks are often backward compatible 
with older technology handsets with some limited exceptions. 
Accordingly, the Commission finds the replacement of non-Huawei or ZTE 
mobile devices not reasonably necessary to the removal, replacement, 
and disposal of covered communications equipment or service. 
Additionally, without detailed information as to the handset models end 
users own, it is unclear whether a transition to a newer technology 
network will prevent those users from accessing the network. Similar to 
any network upgrade, the Commission anticipates providers will assist 
their customers with incompatible handsets to upgrade as necessary to 
mitigate any disruptions in service if for some reason their handsets 
are not compatible with the new network.
    85. Filing Window. Consistent with the Secure Networks Act, the 
Commission established an application process for Reimbursement Program 
participation in the 2020 Supply Chain Order. To participate in the

[[Page 47010]]

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 Program. In the 2020 Supply Chain 
Order, the Commission directed the Wireline Competition Bureau to 
establish an initial 30-day filing window for the submission of cost 
estimates and to establish additional filing windows as necessary. The 
accompanying rules adopted, however, do not specify a period of time 
for the filing window. Given the complexity of the Reimbursement 
Program, the Commission wants to ensure that applicants have sufficient 
opportunity to familiarize themselves with and utilize the application 
filing portal. Therefore, the Commission clarifies that the Wireline 
Competition Bureau has discretion to establish an initial filing window 
that provides sufficient time for applicants to submit cost estimates, 
which may be for a period longer than 30 days if a longer window is 
needed to help applicants navigate the application filing portal or to 
compile the necessary documentation required for the filing 
requirements.
    86. Individual Extensions. The Commission further clarifies the 
factors the Wireline Competition Bureau, with the assistance of the 
Fund Administrator, will consider when evaluating whether to grant an 
individual extension of the removal, replacement, and disposal term 
available to program participants. Program participants are required to 
complete the removal, replacement and disposal of the equipment within 
one year of the initial disbursement. Its rules permit participants to 
petition the Wireline Competition Bureau for an extension of the 
removal, replacement, and disposal term prior to the expiration of the 
term. The Wireline Competition Bureau will generally review such 
requests on a case-by-case basis, and 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.
    87. The Commission acknowledges that there are circumstances that 
may increase the difficulty of a Reimbursement Program participant's 
ability to complete removal, replacement, and disposal within the one-
year term. For example, the Commission understands that some 
replacement options, such as O-RAN or virtual RAN, may require 
additional time for system integration. For program participants 
choosing an O-RAN or virtual RAN replacement option, the Commission 
directs the Wireline Competition Bureau, when evaluating an extension 
request, to consider the high likelihood of additional time needed as a 
significant factor favoring an extension. Additionally, the Commission 
understands the concern some commenters raise regarding the 
availability of replacement technology and semiconductors. USTelecom 
requests that the Commission acknowledge that the current shortage of 
semiconductors could impact the availability of replacement equipment, 
thereby warranting a waiver. NTCA highlights delays in obtaining 
equipment that are impacting providers of all sizes, but especially 
smaller providers who are forced to further compete with larger 
operators for labor and equipment. The Commission agrees with these 
commenters and direct the Wireline Competition Bureau to consider 
limited availability of the replacement options as a factor for whether 
to grant an individual extension request, including impacts caused by a 
shortage of semiconductors. A commenter raised another potential factor 
that may delay completion within the one-year team. Union Telephone 
Company argues that providers of advanced communications service may 
need to modify or replace their outdated network infrastructure, 
including cellular towers, to comply with current structural standards, 
which will also require federal permitting approval. The Commission 
directs the Wireline Competition Bureau to consider delays in federal 
permitting as one potential factor to consider when reviewing requests 
for extensions of time.
    88. Vantage Point Solutions also identifies possible delays caused 
by equipment availability, weather considerations for construction, and 
cash flow and replacement funding distribution timing that may 
specifically impact providers in Alaska. It asks the Commission to 
consider extensions of time for these providers to complete the 
removal, replacement, and disposal of covered equipment beyond the term 
set by the Reimbursement Program.
    89. The Commission acknowledges that certain locations will have 
challenges meeting the term deadline due to weather or other issues. 
The Commission further recognizes that the claims raised by USTelecom 
and others regarding the availability of semiconductors are valid, and 
that certain situations may impact smaller or rural providers such that 
they are unable to meet the timing requirements for removal, 
replacement, and disposal through the Reimbursement Program. The 
examples included in this item are not an exhaustive list of factors 
that the Wireline Competition Bureau will consider in the event a 
provider files an individual extension request. The Commission directs 
the Wireline Competition Bureau to consider all factors included in an 
individual extension request when evaluating the request. Additionally, 
the Commission directs the Wireline Competition Bureau to review 
individual extension requests on a case-by-case basis. As the 
Commission found in the 2020 Supply Chain Order, however, the Secure 
Networks Act authorizes the Commission to grant extensions of time to 
allow providers of advanced communications services to complete the 
removal, replacement, and disposal of covered communications equipment 
and services, either as a ``general'' six-month extension to all 
recipients of reimbursement funding, or as individual extensions on a 
case-by-case basis. In the event circumstances regarding the 
availability of equipment do not improve, or if there is sufficient 
justification to warrant an extension, such information may influence 
the Wireline Competition Bureau's consideration of a six-month 
extension, whether for all program participants or on an individual, 
case-by-case basis.
    90. General Extension. The Secure Networks Act authorizes the 
Commission to grant a six-month extension of the removal, replacement, 
and disposal term deadline ``to all recipients of reimbursements . . . 
if the Commission finds that the supply of replacement communications 
equipment or services needed by the recipients to achieve the purposes 
of the [Reimbursement] Program are inadequate.'' Several commenters 
have recommended that the Commission proactively grant this six-month 
general extension immediately, citing supply chain and labor shortages 
and the potential non-availability of semiconductors due to the impacts 
of the COVID-19 pandemic and the increased demand for scarce resources 
driven by the requirement to remove, replace, and dispose of covered 
communications equipment and services. However, the Commission finds 
such requests to extend a deadline that is not yet established 
premature, and run counter to the intent of Congress of having a one-
year removal, replacement, and disposal term.

[[Page 47011]]

Accordingly, the Commission rejects these requests.
    91. Removal, Replacement and Disposal Term--Reimbursement Claims. 
The Commission clarifies that only reasonable expenses incurred before 
the expiration of the removal, replacement, and disposal term are 
eligible for reimbursement. Reimbursement Program participants have one 
year from the initial disbursement to complete the permanent removal, 
replacement, and disposal of covered communications equipment or 
services. As a result, program participants may only submit 
reimbursement claims for costs incurred within one year of the initial 
disbursement date. If a program participant requests, and the Wireline 
Competition Bureau grants, a term extension according to its rules, all 
reimbursement claims must cover eligible expenses incurred prior to the 
term end date as adjusted by the granted extension. Any expenses 
incurred after the term ends will be ineligible for reimbursement. 
Additionally, any expenses incurred while an individual extension 
request is pending will not be reimbursable if the request is 
ultimately denied and the expenses were incurred outside of the one-
year term.
    92. Final Certification Update Timing. Within 10 days following the 
expiration of the removal, replacement, and disposal term, 
Reimbursement Program recipients are required to file a final 
certification with the Commission indicating, among other things, 
whether or not the recipient has fully complied with all terms of 
program participation. Program participants stating in their final 
certification that they have not ``fully complied'' are then required 
by both the Secure Networks Act and the 2020 Supply Chain Order to file 
an updated final certification ``when the recipient has fully 
complied.'' Both the Secure Networks Act and the 2020 Supply Chain 
Order are silent as to a deadline for filing the final certification 
update.
    93. Program participants are required to complete the permanent 
removal, replacement, and disposal of the equipment or services, and 
thus the terms of program participation, before the expiration of the 
removal, replacement, and disposal term. The Commission recognizes that 
unforeseen delays may extend the removal, replacement, and disposal 
process beyond the one-year term, and the Commission expects program 
participants who anticipate they will not complete removal, 
replacement, and disposal by the end of their term will request an 
individual extension from the Wireline Competition Bureau before the 
end of that term.
    94. If a program participant fails to timely submit a final 
certification, the program participant may be subject to forfeitures as 
provided for under the Communications Act of 1934, as amended. Further, 
if a program participant files a final certification indicating that it 
has not ``fully complied'' with the terms of the program, but 
subsequently fails to file an updated final certification indicating 
full compliance within 60 days after the final certification deadline, 
the program participant may be subject to forfeitures as provided for 
under the Communications Act of 1934, as amended. Additionally, program 
participants found in violation of the Secure Networks Act, the 
Commission's rules implementing the statute, or the commitments made by 
the recipient in the application for reimbursement may be: (1) Required 
to repay reimbursement funds; (2) barred from further participation in 
the Reimbursement Program; (3) referred to all appropriate law 
enforcement agencies or officials for further action under applicable 
criminal and civil law; and (4) barred 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. The aforementioned penalties are within the 
Commission's jurisdiction. The Commission notes that applicants that 
commit fraud may separately be subject to the False Claims Act or other 
legal action as provided by existing statutes.
    95. Final Spending Report Timing. Under the Reimbursement Program 
rules, program recipients must file their final spending report after 
the final certification. The Commission was silent, however, as to the 
deadline for filing the final spending report. The Commission clarifies 
the timeframe and expect program participants to submit the final 
spending report no later than 60 days following the expiration of the 
program participant's reimbursement claim deadline. If a program 
participant has not submitted a final spending report within 60 days of 
the expiration of the reimbursement claim deadline, the matter may be 
referred to the Enforcement Bureau for further investigation.
    96. Accounting for Removal, Replacement, and Disposal of Covered 
Equipment. Some program participants participating in other funding 
programs or subject to rate regulation could receive duplicate recovery 
for support received from the Reimbursement Program for network 
changes. As a result, the Commission clarifies provider requirements 
with respect to maintaining books of account using the Uniform System 
of Accounts contained in Part 32 of the Commission's rules (USOA 
carriers). To the extent a USOA carrier has purchased and installed 
covered equipment, that equipment should currently be recognized as an 
investment in the USOA carrier's telecommunications plant and subject 
to retirement and depreciation rules which require the carrier to 
establish estimated lives and ratable depreciation of the assets. 
Because the Commission is requiring 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, and as defined in 
the 2019 Supply Chain Order or as designated pursuant to section 54.9 
of the Commission's rules and in the Designation Orders, the Commission 
also must address the accounting treatment of USOA carriers' retirement 
of covered equipment.
    97. To ensure consistent accounting treatment, and to prevent the 
removal, replacement, and disposal of covered equipment by USOA 
carriers from unduly depleting such carriers' depreciation reserve, 
such carriers may treat the removal, replacement and disposal of 
covered equipment as an ``extraordinary retirement,'' subject to the 
amortization schedule that the Commission provides below. For an event 
to be considered an extraordinary retirement, it must satisfy three 
requirements: (1) The impending retirement was not adequately 
considered in setting past depreciation rates; (2) the charging of the 
retirement against the reserve will unduly deplete that reserve; and 
(3) the retirement is unusual such that similar retirements are not 
likely to recur in the future.
    98. The Commission finds that the first and third of these 
requirements are met for retirements made in accordance with the 2019 
Supply Chain Order. Carriers that purchased covered equipment could not 
have anticipated that the Commission and Congress would require 
retirement of covered equipment and that Congress would make 
reimbursement funds available to replace covered equipment. As a 
result, early retirements resulting from Commission and congressional 
action were not and could not have been considered in setting past 
depreciation rates. Furthermore, given the unusual circumstances that 
led to these retirements, it is highly unlikely that

[[Page 47012]]

similar retirements will occur again in the future.
    99. Regarding the second prong, the question of whether charging a 
retirement against a particular carrier's reserve would unduly deplete 
that reserve is normally determined on a case-by-case basis. The 
retirements at issue here, however, are compulsory, and the Commission 
finds that conducting case-by-case reviews for each carrier would be 
unduly burdensome for the Commission and for the carriers, particularly 
given the critical importance of these retirements for ensuring the 
security of the nation's infrastructure. Accordingly, on its own 
motion, the Commission finds there is good cause to waive the second 
prong to allow a USOA carrier to treat the retirements required by this 
docket as extraordinary retirements. The Commission therefore 
establishes a uniform process for addressing significant reserve 
deficiencies.
    100. As part of this process, the Commission directs USOA carriers 
that take advantage of the waiver to credit Account 3100, Accumulated 
Depreciation, and charge Account 1438, Deferred Maintenance, 
retirements and other deferred charges, with the unprovided-for loss in 
service value resulting from the actions the Commission has taken in 
this docket. The amount of the unprovided-for loss in service value is 
recorded in Account 1438 and shall be amortized to Account 6561, 
Depreciation expense--Telecommunications plant in service, or Account 
6562, Depreciation expense--property held for future telecommunications 
use. This treatment will reflect the amortization of the amounts in 
Account 1438 as depreciation expenses, thereby allowing carriers to 
include those amounts in their revenue requirement.
    101. The asset category for the type of equipment subject to 
removal, replacement, and disposal is largely circuit equipment, and 
has an expected life in the 10-year range. To mitigate the effects of 
any excess depletion in the depreciation expense, the Commission waives 
its rules to allow carriers to use the following amortization schedules 
for covered equipment they are required to retire. First, if the 
expected remaining service life of the covered equipment being retired 
is two years or less, a USOA carrier may amortize one-half of the 
balance from Account 1438 each of the next two years. Second, if the 
covered equipment being retired has an expected remaining service life 
of between three and five years, the USOA carrier may amortize one-
third of the balance from Account 1438 each of the next three years. If 
the covered equipment being retired has an expected remaining service 
life of more than six years, the USOA carrier will may amortize one-
fourth of the balance from Account 1438 each of the next four years.
    102. Accounting for Reimbursement. The Reimbursement Program will 
reimburse providers for some or all of the costs of removal, 
replacement, and disposal of covered communications equipment or 
services. The Commission clarifies that, consistent with the limitation 
on reimbursements, USOA carriers should account for reimbursed amounts 
as contributions by crediting the asset account charged with the 
reimbursed amount of the plant or equipment. This accounting treatment 
is appropriate because the contributions are not investor-supplied 
funds and should not be accorded a return on investment. This approach 
also conforms with the treatment of contribution to capital addressed 
in section 32.2000(a)(2) of the Commission's rules, and is consistent 
with how the accounting was handled for support payments awarded in the 
2012 BTOP/BIP stimulus funding.
    103. Delegation to the Office of the Managing Director. In the 2020 
Supply Chain Order, the Commission directed OMD to develop a system to 
audit the Reimbursement Program. In this Third Report and Order, the 
Commission delegates financial oversight of the Reimbursement Program 
to the Commission's Office of the Managing Director and direct OMD to 
work in coordination with the Wireline Competition Bureau to ensure 
that all financial aspects of the program have adequate internal 
controls. These duties fall within OMD's current delegated authority to 
ensure that the Commission operates in accordance with federal 
financial statutes and guidance. Such financial oversight must be 
consistent with this Third Report and Order and the rules adopted in 
the 2020 Supply Chain Order. OMD performs this role with respect to the 
Universal Service Administrative Company's administration of the 
Commission's Universal Service programs, the COVID-19 Telehealth 
program, and the Emergency Broadband Benefit Program, and the 
Commission anticipates that OMD will leverage existing policies and 
procedures, to the extent practicable and consistent with section 904, 
to ensure the efficient and effective management of the program. 
Finally, the Commission notes that OMD is required to consult with the 
Wireline Competition Bureau on any policy matters affecting the 
program, consistent with section 0.91(a) of the Commission's rules. 
OMD, in coordination with the Wireline Competition Bureau, may issue 
additional directions to Program Administrator Ernst and Young LLC 
(Ernst & Young) and program participants in furtherance of its 
responsibilities.

G. Cost-Benefit Analysis

    104. Based on presently available information obtained from the 
2019 information collection, the Commission estimated the cost of the 
removal, replacement, and disposal of Covered List equipment and 
services subject to the Designation Orders and the process set forth in 
the 2019 Supply Chain Order to be $1.62 billion for ETCs with two 
million or fewer customers, and at least $1.837 billion for providers 
with 10 million or fewer customers. As the Commission recognized in the 
Information Collection Results Public Notice, there may be ``other 
providers of advanced communications [who] may not have participated in 
the information collection and yet still [are] eligible for 
reimbursement under the terms of [the Secure Networks] Act.'' Though 
Congress appropriated $1.895 billion to the Reimbursement Program in 
the CAA, it also expanded the eligibility criteria for participation in 
the Reimbursement Program. The Commission does not have cost estimates 
for the cost of the removal, replacement, and disposal of eligible 
equipment for the entire potential pool of eligible providers.
    105. Nevertheless, this Third Report and Order implements 
requirements from the CAA, and the Commission has no discretion to 
ignore such congressional direction. The Commission also concludes that 
even if the total replacement cost exceeds the $1.837 billion reported 
by providers with 10 million or fewer customers, that cost will be far 
exceeded by the benefits obtained in addressing the important national 
security concerns posed by the equipment and services eligible for 
reimbursement. The $1.895 billion reimbursement appropriation suggests 
that Congress anticipated great costs and even greater benefits would 
be generated by the Secure Networks Act. 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 its 
nation's defense, public safety, and homeland security operations, its 
military readiness, and its critical infrastructure, let alone the

[[Page 47013]]

collateral damage such as loss of life that may occur with any mass 
disruption to its nation's communications networks.'' Any increasing 
costs due to the CAA's expansion of the eligibility criteria for 
participation in the Reimbursement Program will be exceeded by the 
benefits of removing, replacing, and disposing of even more insecure 
equipment and services from U.S. networks.

III. Procedural Matters

    106. Paperwork Reduction Act of 1995 Analysis. This document does 
not contain modified information collection requirements subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, 
therefore, it does not contain any new or modified information 
collection burden for small business concerns with fewer than 25 
employees, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4).
    107. 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 Final Regulatory 
Flexibility Analysis (FRFA) concerning the possible impact of the rule 
changes contained in this Third Report and Order on small entities.
    108. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Third Further Notice of Proposed Rulemaking (2021 
Supply Chain Further Notice) in this proceeding. The Commission sought 
written comment on the proposals in the 2021 Supply Chain Further 
Notice, including comment on the accompanying IRFA. The present Final 
Regulatory Flexibility Analysis (FRFA) addresses comments received on 
the IRFA and conforms to the RFA.

A. Need for, and Objectives of, the Rules

    109. As directed by the Secure and Trusted Communications Networks 
Act of 2019 (Secure Networks Act) and the Consolidated Appropriations 
Act, 2021 (CAA), and in light of increasing concern about ensuring 
communications supply chain integrity, and consistent with its 
obligation to be responsible stewards of the public funds used in 
Universal Service Fund (USF) programs, this Third Report and Order 
adopts rules to modify the Secure and Trusted Communications Networks 
Reimbursement Program (Reimbursement Program) according to sections 901 
and 906 of the CAA.
    110. Specifically, the Commission increases the eligibility cap to 
allow providers of advanced communications services with 10 million or 
fewer customers to participate in the Reimbursement Program. 
Additionally, the Commission modifies the equipment and services 
eligible for reimbursement through the Reimbursement Program and amends 
its rules to allow Reimbursement Fund participants to use such funds to 
remove, replace, or dispose of equipment or services from the Covered 
List that are defined in the 2019 Supply Chain Order or subject to the 
Designation Orders and the process for designating companies that pose 
a national security threat to the integrity of communications networks 
or the communications supply chain, as set forth in the 2019 Supply 
Chain Order, and were purchased, rented, leased, or otherwise obtained 
on or before June 30, 2020. The Commission also alters its 
prioritization scheme that will guide fund allocation if demand for 
reimbursement funds exceeds the $1.895 billion appropriated by 
Congress. The new prioritization scheme will first fund reimbursement 
claims from eligible providers with two million or fewer customers. 
Next, it will fund claims from approved applicants that are accredited 
public or private non-commercial educational institutions providing 
their own facilities-based educational broadband services. Last, it 
will fund eligible providers with 10 million or fewer customers. The 
Commission also alters the definition of ``provider of advanced 
communications services'' to mirror the definition provided in the CAA. 
Finally, the Commission clarifies (1) the ``costs reasonably incurred'' 
standard adopted for determining eligible reimbursement expenses with 
technology upgrades; (2) the initial application filing window; (3) the 
consideration of requests for individual extensions of the removal, 
replacement, and disposal term; (4) additional expectations for and 
obligations of Reimbursement Program participants regarding 
reimbursement claim requests and the filing of final spending reports 
and final certification updates; (5) the process by which to account 
for removal, replacement, and disposal of covered equipment and 
services; (6) parameters when accounting for reimbursement funds; and 
(7) delegation of financial oversight to the Office of the Managing 
Director (OMD).

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    111. No comments were filed in response to the IRFAs. However, 
parties did file comments addressing the impact of some proposals on 
small entities.
    112. The Competitive Carriers Association supports the Commission's 
adoption of the prioritization scheme expressly provided for in the 
CAA. CCA argued that ``[t]hose provider with 2 million or fewer 
customers include the small and rural carriers that serve some of the 
most remote and expensive areas of the country and are bridging the 
digital divide by bringing service to places where there would not be a 
business case to offer service absent support . . . . Loss of funding 
would have an immediate and detrimental effect on the carriers' ability 
to provide services and, thus, access to rural America.'' Mediacom 
supports the Commission's new prioritization schedule because ``those 
providers need the greatest assistance because they have more limited 
resources.'' NTCA agrees, writing that ``[s]maller providers already 
operate on razor thin margins; adding the financial cost of replacing 
existing equipment outside of its normal upgrade cycle or losing 
universal service funding would be a crushing burden.'' While some 
commenters quibble about additional prioritization categories, there is 
broad support in the record for offering first priority to 
Reimbursement Program funding to those providers with two million or 
fewer customers. The Commission agrees and finds that its new 
prioritization paradigm will target those smaller providers who are 
most affected by any remove-and-replace requirement.
    113. Northern Michigan University (NMU) supports the Commission's 
decision to ``modify the acceptable use of reimbursement funds for the 
removal, replacement, and disposal of covered equipment obtained prior 
to July 1, 2020 . . . .'' NMU writes that ``[m]oving the eligible 
replacement equipment date to June 30, 2020 accounts for the additional 
expenses providers have incurred in maintaining robust internet 
services to customers and ensures that these systems will be replaced 
with more modern, secure facilities.'' NMU also believes that this 
action will help smaller providers who ``often lack the cash reserves 
typically required for large construction projects. In the case of 
Supply Chain wholesale equipment replacement, portions of systems

[[Page 47014]]

deemed ineligible for replacement funds may delay their replacement 
until the required finances are available.'' Mark Twain Communications 
Company also supports this action because ``the costs associated with 
the replacement of existing networks equipment which in the future is 
determined to violate the proposed rule imposes a significant and 
unreasonable financial burden on rural telecommunications companies.''

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    114. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA), and to provide a detailed statement of any change made to the 
proposed rules as a result of those comments.
    115. The Chief Counsel did not file any comments in response to 
this proceeding.

D. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply

    116. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of, the number of small entities that may 
be affected by the rules adopted pursuant to the Third Report and 
Order. The RFA generally defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act. A ``small business 
concern'' is one which (1) is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA.
    117. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Its actions, over time, may affect small entities that 
are not easily categorized at present. The Commission therefore 
describes here, at the outset, three broad groups of small entities 
that could be directly affected herein. First, while there are industry 
specific size standards for small businesses that are used in the 
regulatory flexibility analysis, according to data from the Small 
Business Administration's (SBA) Office of Advocacy, in general a small 
business is an independent business having fewer than 500 employees. 
These types of small businesses represent 99.9% of all businesses in 
the United States, which translates to 30.7 million businesses.
    118. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 
or less to delineate its annual electronic filing requirements for 
small exempt organizations. Nationwide, for tax year 2018, there were 
approximately 571,709 small exempt organizations in the U.S. reporting 
revenues of $50,000 or less according to the registration and tax data 
for exempt organizations available from the IRS.
    119. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2017 Census of Governments indicate that there 
were 90,075 local governmental jurisdictions consisting of general 
purpose governments and special purpose governments in the United 
States. Of this number there were 36,931 general purpose governments 
(county, municipal and town or township) with populations of less than 
50,000 and 12,040 special purpose governments--independent school 
districts with enrollment populations of less than 50,000. Accordingly, 
based on the 2017 U.S. Census of Governments data, the Commission 
estimates that at least 48,971 entities fall into the category of 
``small governmental jurisdictions.''
    120. 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 (ISPs), and vendors of the services and 
equipment used for telecommunications and broadband networks.
1. Schools and Libraries
    121. As noted, ``small entity'' includes non-profit and small 
government entities. Under the schools and libraries universal service 
support mechanism, which provides support for elementary and secondary 
schools and libraries, an elementary school is generally ``a non-profit 
institutional day or residential school, that provides elementary 
education, as determined under state law.'' A secondary school is 
generally defined as ``a non-profit institutional day or residential 
school . . . , that provides secondary education, as determined under 
state law,'' and not offering education beyond grade 12. A library 
includes ``(1) [a] public library; (2) [a] public elementary school or 
secondary school library; (3) [a]n academic library; (4) [a] research 
library . . . ; and (5) [a] private library, but only if the state in 
which such private library is located determines that the library 
should be considered a library for the purposes of this definition.'' 
For-profit schools and libraries, and schools and libraries with 
endowments in excess of $50,000,000, are not eligible to receive 
discounts under the program, nor are libraries whose budgets are not 
completely separate from any schools. Certain other statutory 
definitions apply as well. The SBA has defined for-profit, elementary 
and secondary schools having $12 million or less in annual receipts, 
and libraries having $16.5 million or less in annual receipts, as small 
entities. In funding year 2007, approximately 105,500 schools and 
10,950 libraries received funding under the schools and libraries 
universal service mechanism. Although the Commission is unable to 
estimate with precision the number of these entities that would qualify 
as small entities under SBA's size standard, the Commission estimates 
that fewer than 105,500 schools and 10,950 libraries might be affected 
annually by its action, under current operation of the program.
2. Healthcare Providers
    122. Offices of Physicians (except Mental Health Specialists). This 
U.S. industry comprises establishments of health practitioners having 
the degree of M.D. (Doctor of Medicine) or D.O. (Doctor of Osteopathy) 
primarily engaged in the independent practice of general or specialized 
medicine (except psychiatry or psychoanalysis) or surgery. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. The SBA has created a size standard 
for this industry, which is annual receipts of $12 million or less. 
According to 2012 U.S. Economic Census, 152,468 firms operated 
throughout the entire year in this industry. Of that number, 147,718 
had annual receipts of less than $10 million, while 3,108 firms had 
annual receipts between $10 million and $24,999,999. Based on this 
data, the Commission concludes that a majority of firms operating in 
this industry are small under the applicable size standard.
    123. Offices of Physicians, Mental Health Specialists. This U.S. 
industry

[[Page 47015]]

comprises establishments of health practitioners having the degree of 
M.D. (Doctor of Medicine) or D.O. (Doctor of Osteopathy) primarily 
engaged in the independent practice of psychiatry or psychoanalysis. 
These practitioners operate private or group practices in their own 
offices (e.g., centers, clinics) or in the facilities of others, such 
as hospitals or HMO medical centers. The SBA has established a size 
standard for businesses in this industry, which is annual receipts of 
$12 million dollars or less. The 2012 U.S. Economic Census indicates 
that 8,809 firms operated throughout the entire year in this industry. 
Of that number 8,791 had annual receipts of less than $10 million, 
while 13 firms had annual receipts between $10 million and $24,999,999. 
Based on this data, the Commission concludes that a majority of firms 
in this industry are small under the applicable standard.
    124. Offices of Dentists. This U.S. industry comprises 
establishments of health practitioners having the degree of D.M.D. 
(Doctor of Dental Medicine), D.D.S. (Doctor of Dental Surgery), or 
D.D.Sc. (Doctor of Dental Science) primarily engaged in the independent 
practice of general or specialized dentistry or dental surgery. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. They can provide either comprehensive 
preventive, cosmetic, or emergency care, or specialize in a single 
field of dentistry. The SBA has established a size standard for that 
industry of annual receipts of $8 million or less. The 2012 U.S. 
Economic Census indicates that 115,268 firms operated in the dental 
industry throughout the entire year. Of that number 114,417 had annual 
receipts of less than $5 million, while 651 firms had annual receipts 
between $5 million and $9,999,999. Based on this data, the Commission 
concludes that a majority of business in the dental industry are small 
under the applicable standard.
    125. Offices of Chiropractors. This U.S. industry comprises 
establishments of health practitioners having the degree of D.C. 
(Doctor of Chiropractic) primarily engaged in the independent practice 
of chiropractic. These practitioners provide diagnostic and therapeutic 
treatment of neuromusculoskeletal and related disorders through the 
manipulation and adjustment of the spinal column and extremities, and 
operate private or group practices in their own offices (e.g., centers, 
clinics) or in the facilities of others, such as hospitals or HMO 
medical centers. The SBA has established a size standard for this 
industry, which is annual receipts of $8 million or less. The 2012 U.S. 
Economic Census statistics show that in 2012, 33,940 firms operated 
throughout the entire year. Of that number 33,910 operated with annual 
receipts of less than $5 million per year, while 26 firms had annual 
receipts between $5 million and $9,999,999. Based on this data, the 
Commission concludes that a majority of chiropractors are small.
    126. Offices of Optometrists. This U.S. industry comprises 
establishments of health practitioners having the degree of O.D. 
(Doctor of Optometry) primarily engaged in the independent practice of 
optometry. These practitioners examine, diagnose, treat, and manage 
diseases and disorders of the visual system, the eye and associated 
structures as well as diagnose related systemic conditions. Offices of 
optometrists prescribe and/or provide eyeglasses, contact lenses, low 
vision aids, and vision therapy. They operate private or group 
practices in their own offices (e.g., centers, clinics) or in the 
facilities of others, such as hospitals or HMO medical centers, and may 
also provide the same services as opticians, such as selling and 
fitting prescription eyeglasses and contact lenses. The SBA has 
established a size standard for businesses operating in this industry, 
which is annual receipts of $8 million or less. The 2012 Economic 
Census indicates that 18,050 firms operated the entire year. Of that 
number, 17,951 had annual receipts of less than $5 million, while 70 
firms had annual receipts between $5 million and $9,999,999. Based on 
this data, the Commission concludes that a majority of optometrists in 
this industry are small.
    127. Offices of Mental Health Practitioners (except Physicians). 
This U.S. industry comprises establishments of independent mental 
health practitioners (except physicians) primarily engaged in (1) the 
diagnosis and treatment of mental, emotional, and behavioral disorders 
and/or (2) the diagnosis and treatment of individual or group social 
dysfunction brought about by such causes as mental illness, alcohol and 
substance abuse, physical and emotional trauma, or stress. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. The SBA has created a size standard 
for this industry, which is annual receipts of $8 million or less. The 
2012 U.S. Economic Census indicates that 16,058 firms operated 
throughout the entire year. Of that number, 15,894 firms received 
annual receipts of less than $5 million, while 111 firms had annual 
receipts between $5 million and $9,999,999. Based on this data, the 
Commission concludes that a majority of mental health practitioners who 
do not employ physicians are small.
    128. Offices of Physical, Occupational and Speech Therapists and 
Audiologists. This U.S. industry comprises establishments of 
independent health practitioners primarily engaged in one of the 
following: (1) Providing physical therapy services to patients who have 
impairments, functional limitations, disabilities, or changes in 
physical functions and health status resulting from injury, disease or 
other causes, or who require prevention, wellness or fitness services; 
(2) planning and administering educational, recreational, and social 
activities designed to help patients or individuals with disabilities, 
regain physical or mental functioning or to adapt to their 
disabilities; and (3) diagnosing and treating speech, language, or 
hearing problems. These practitioners operate private or group 
practices in their own offices (e.g., centers, clinics) or in the 
facilities of others, such as hospitals or HMO medical centers. The SBA 
has established a size standard for this industry, which is annual 
receipts of $8 million or less. The 2012 U.S. Economic Census indicates 
that 20,567 firms in this industry operated throughout the entire year. 
Of this number, 20,047 had annual receipts of less than $5 million, 
while 270 firms had annual receipts between $5 million and $9,999,999. 
Based on this data, the Commission concludes that a majority of 
businesses in this industry are small.
    129. Offices of Podiatrists. This U.S. industry comprises 
establishments of health practitioners having the degree of D.P.M. 
(Doctor of Podiatric Medicine) primarily engaged in the independent 
practice of podiatry. These practitioners diagnose and treat diseases 
and deformities of the foot and operate private or group practices in 
their own offices (e.g., centers, clinics) or in the facilities of 
others, such as hospitals or HMO medical centers. The SBA has 
established a size standard for businesses in this industry, which is 
annual receipts of $8 million or less. The 2012 U.S. Economic Census 
indicates that 7,569 podiatry firms operated throughout the entire 
year. Of that number, 7,545 firms had annual receipts of less than $5 
million, while 22 firms had annual receipts between $5 million and 
$9,999,999. Based on this data, the Commission concludes that a

[[Page 47016]]

majority of firms in this industry are small.
    130. Offices of All Other Miscellaneous Health Practitioners. This 
U.S. industry comprises establishments of independent health 
practitioners (except physicians; dentists; chiropractors; 
optometrists; mental health specialists; physical, occupational, and 
speech therapists; audiologists; and podiatrists). These practitioners 
operate private or group practices in their own offices (e.g., centers, 
clinics) or in the facilities of others, such as hospitals or HMO 
medical centers. The SBA has established a size standard for this 
industry, which is annual receipts of $8 million or less. The 2012 U.S. 
Economic Census indicates that 11,460 firms operated throughout the 
entire year. Of that number, 11,374 firms had annual receipts of less 
than $5 million, while 48 firms had annual receipts between $5 million 
and $9,999,999. Based on this data, the Commission concludes the 
majority of firms in this industry are small.
    131. Family Planning Centers. This U.S. industry comprises 
establishments with medical staff primarily engaged in providing a 
range of family planning services on an outpatient basis, such as 
contraceptive services, genetic and prenatal counseling, voluntary 
sterilization, and therapeutic and medically induced termination of 
pregnancy. The SBA has established a size standard for this industry, 
which is annual receipts of $12 million or less. The 2012 Economic 
Census indicates that 1,286 firms in this industry operated throughout 
the entire year. Of that number 1,237 had annual receipts of less than 
$10 million, while 36 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, the Commission concludes that the 
majority of firms in this industry is small.
    132. Outpatient Mental Health and Substance Abuse Centers. This 
U.S. industry comprises establishments with medical staff primarily 
engaged in providing outpatient services related to the diagnosis and 
treatment of mental health disorders and alcohol and other substance 
abuse. These establishments generally treat patients who do not require 
inpatient treatment. They may provide a counseling staff and 
information regarding a wide range of mental health and substance abuse 
issues and/or refer patients to more extensive treatment programs, if 
necessary. The SBA has established a size standard for this industry, 
which is $16.5 million or less in annual receipts. The 2012 U.S. 
Economic Census indicates that 4,446 firms operated throughout the 
entire year. Of that number, 4,069 had annual receipts of less than $10 
million while 286 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, the Commission concludes that a 
majority of firms in this industry are small.
    133. HMO Medical Centers. This U.S. industry comprises 
establishments with physicians and other medical staff primarily 
engaged in providing a range of outpatient medical services to the 
health maintenance organization (HMO) subscribers with a focus 
generally on primary health care. These establishments are owned by the 
HMO. Included in this industry are HMO establishments that both provide 
health care services and underwrite health and medical insurance 
policies. The SBA has established a size standard for this industry, 
which is $35 million or less in annual receipts. The 2012 U.S. Economic 
Census indicates that 14 firms in this industry operated throughout the 
entire year. Of that number, 5 firms had annual receipts of less than 
$25 million, while 1 firm had annual receipts between $25 million and 
$99,999,999. Based on this data, the Commission concludes that 
approximately one-third of the firms in this industry are small.
    134. Freestanding Ambulatory Surgical and Emergency Centers. This 
U.S. industry comprises establishments with physicians and other 
medical staff primarily engaged in (1) providing surgical services 
(e.g., orthoscopic and cataract surgery) on an outpatient basis or (2) 
providing emergency care services (e.g., setting broken bones, treating 
lacerations, or tending to patients suffering injuries as a result of 
accidents, trauma, or medical conditions necessitating immediate 
medical care) on an outpatient basis. Outpatient surgical 
establishments have specialized facilities, such as operating and 
recovery rooms, and specialized equipment, such as anesthetic or X-ray 
equipment. The SBA has established a size standard for this industry, 
which is annual receipts of $16.5 million or less. The 2012 U.S. 
Economic Census indicates that 3,595 firms in this industry operated 
throughout the entire year. Of that number, 3,222 firms had annual 
receipts of less than $10 million, while 289 firms had annual receipts 
between $10 million and $24,999,999. Based on this data, the Commission 
concludes that a majority of firms in this industry are small.
    135. All Other Outpatient Care Centers. This U.S. industry 
comprises establishments with medical staff primarily engaged in 
providing general or specialized outpatient care (except family 
planning centers, outpatient mental health and substance abuse centers, 
HMO medical centers, kidney dialysis centers, and freestanding 
ambulatory surgical and emergency centers). Centers or clinics of 
health practitioners with different degrees from more than one industry 
practicing within the same establishment (i.e., Doctor of Medicine and 
Doctor of Dental Medicine) are included in this industry. The SBA has 
established a size standard for this industry, which is annual receipts 
of $22 million or less. The 2012 U.S. Economic Census indicates that 
4,903 firms operated in this industry throughout the entire year. Of 
this number, 4,269 firms had annual receipts of less than $10 million, 
while 389 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, the Commission concludes that a 
majority of firms in this industry are small.
    136. Blood and Organ Banks. This U.S. industry comprises 
establishments primarily engaged in collecting, storing, and 
distributing blood and blood products and storing and distributing body 
organs. The SBA has established a size standard for this industry, 
which is annual receipts of $35 million or less. The 2012 U.S. Economic 
Census indicates that 314 firms operated in this industry throughout 
the entire year. Of that number, 235 operated with annual receipts of 
less than $25 million, while 41 firms had annual receipts between $25 
million and $49,999,999. Based on this data, the Commission concludes 
that approximately three-quarters of firms that operate in this 
industry are small.
    137. All Other Miscellaneous Ambulatory Health Care Services. This 
U.S. industry comprises establishments primarily engaged in providing 
ambulatory health care services (except offices of physicians, 
dentists, and other health practitioners; outpatient care centers; 
medical and diagnostic laboratories; home health care providers; 
ambulances; and blood and organ banks). The SBA has established a size 
standard for this industry, which is annual receipts of $16.5 million 
or less. The 2012 U.S. Economic Census indicates that 2,429 firms 
operated in this industry throughout the entire year. Of that number, 
2,318 had annual receipts of less than $10 million, while 56 firms had 
annual receipts between $10 million and $24,999,999. Based on this 
data, the Commission concludes that a majority of the firms in this 
industry is small.
    138. Medical Laboratories. This U.S. industry comprises 
establishments

[[Page 47017]]

known as medical laboratories primarily engaged in providing analytic 
or diagnostic services, including body fluid analysis, generally to the 
medical profession or to the patient on referral from a health 
practitioner. The SBA has established a size standard for this 
industry, which is annual receipts of $35 million or less. The 2012 
U.S. Economic Census indicates that 2,599 firms operated in this 
industry throughout the entire year. Of this number, 2,465 had annual 
receipts of less than $25 million, while 60 firms had annual receipts 
between $25 million and $49,999,999. Based on this data, the Commission 
concludes that a majority of firms that operate in this industry are 
small.
    139. Diagnostic Imaging Centers. This U.S. industry comprises 
establishments known as diagnostic imaging centers primarily engaged in 
producing images of the patient generally on referral from a health 
practitioner. The SBA has established size standard for this industry, 
which is annual receipts of $16.5 million or less. The 2012 U.S. 
Economic Census indicates that 4,209 firms operated in this industry 
throughout the entire year. Of that number, 3,876 firms had annual 
receipts of less than $10 million, while 228 firms had annual receipts 
between $10 million and $24,999,999. Based on this data, the Commission 
concludes that a majority of firms that operate in this industry are 
small.
    140. Home Health Care Services. This U.S. industry comprises 
establishments primarily engaged in providing skilled nursing services 
in the home, along with a range of the following: Personal care 
services; homemaker and companion services; physical therapy; medical 
social services; medications; medical equipment and supplies; 
counseling; 24-hour home care; occupation and vocational therapy; 
dietary and nutritional services; speech therapy; audiology; and high-
tech care, such as intravenous therapy. The SBA has established a size 
standard for this industry, which is annual receipts of $16.5 million 
or less. The 2012 U.S. Economic Census indicates that 17,770 firms 
operated in this industry throughout the entire year. Of that number, 
16,822 had annual receipts of less than $10 million, while 590 firms 
had annual receipts between $10 million and $24,999,999. Based on this 
data, the Commission concludes that a majority of firms that operate in 
this industry are small.
    141. Ambulance Services. This U.S. industry comprises 
establishments primarily engaged in providing transportation of 
patients by ground or air, along with medical care. These services are 
often provided during a medical emergency but are not restricted to 
emergencies. The vehicles are equipped with lifesaving equipment 
operated by medically trained personnel. The SBA has established a size 
standard for this industry, which is annual receipts of $16.5 million 
or less. The 2012 U.S. Economic Census indicates that 2,984 firms 
operated in this industry throughout the entire year. Of that number, 
2,926 had annual receipts of less than $15 million, while 133 firms had 
annual receipts between $10 million and $24,999,999. Based on this 
data, the Commission concludes that a majority of firms in this 
industry is small.
    142. Kidney Dialysis Centers. This U.S. industry comprises 
establishments with medical staff primarily engaged in providing 
outpatient kidney or renal dialysis services. The SBA has established 
assize standard for this industry, which is annual receipts of $41.5 
million or less. The 2012 U.S. Economic Census indicates that 396 firms 
operated in this industry throughout the entire year. Of that number, 
379 had annual receipts of less than $25 million, while 7 firms had 
annual receipts between $25 million and $49,999,999. Based on this 
data, the Commission concludes that a majority of firms in this 
industry are small.
    143. General Medical and Surgical Hospitals. This U.S. industry 
comprises establishments known and licensed as general medical and 
surgical hospitals primarily engaged in providing diagnostic and 
medical treatment (both surgical and nonsurgical) to inpatients with 
any of a wide variety of medical conditions. These establishments 
maintain inpatient beds and provide patients with food services that 
meet their nutritional requirements. These hospitals have an organized 
staff of physicians and other medical staff to provide patient care 
services. These establishments usually provide other services, such as 
outpatient services, anatomical pathology services, diagnostic X-ray 
services, clinical laboratory services, operating room services for a 
variety of procedures, and pharmacy services. The SBA has established a 
size standard for this industry, which is annual receipts of $41.5 
million or less. The 2012 U.S. Economic Census indicates that 2,800 
firms operated in this industry throughout the entire year. Of that 
number, 877 has annual receipts of less than $25 million, while 400 
firms had annual receipts between $25 million and $49,999,999. Based on 
this data, the Commission concludes that approximately one-quarter of 
firms in this industry are small.
    144. Psychiatric and Substance Abuse Hospitals. This U.S. industry 
comprises establishments known and licensed as psychiatric and 
substance abuse hospitals primarily engaged in providing diagnostic, 
medical treatment, and monitoring services for inpatients who suffer 
from mental illness or substance abuse disorders. The treatment often 
requires an extended stay in the hospital. These establishments 
maintain inpatient beds and provide patients with food services that 
meet their nutritional requirements. They have an organized staff of 
physicians and other medical staff to provide patient care services. 
Psychiatric, psychological, and social work services are available at 
the facility. These hospitals usually provide other services, such as 
outpatient services, clinical laboratory services, diagnostic X-ray 
services, and electroencephalograph services. The SBA has established a 
size standard for this industry, which is annual receipts of $41.5 
million or less. The 2012 U.S. Economic Census indicates that 404 firms 
operated in this industry throughout the entire year. Of that number, 
185 had annual receipts of less than $25 million, while 107 firms had 
annual receipts between $25 million and $49,999,999. Based on this 
data, the Commission concludes that more than one-half of the firms in 
this industry are small.
    145. Specialty (Except Psychiatric and Substance Abuse) Hospitals. 
This U.S. industry consists of establishments known and licensed as 
specialty hospitals primarily engaged in providing diagnostic, and 
medical treatment to inpatients with a specific type of disease or 
medical condition (except psychiatric or substance abuse). Hospitals 
providing long-term care for the chronically ill and hospitals 
providing rehabilitation, restorative, and adjustive services to 
physically challenged or disabled people are included in this industry. 
These establishments maintain inpatient beds and provide patients with 
food services that meet their nutritional requirements. They have an 
organized staff of physicians and other medical staff to provide 
patient care services. These hospitals may provide other services, such 
as outpatient services, diagnostic X-ray services, clinical laboratory 
services, operating room services, physical therapy services, 
educational and vocational services, and psychological and social work 
services. The SBA has established a size standard for this industry, 
which is annual

[[Page 47018]]

receipts of $41.5 million or less. The 2012 U.S. Economic Census 
indicates that 346 firms operated in this industry throughout the 
entire year. Of that number, 146 firms had annual receipts of less than 
$25 million, while 79 firms had annual receipts between $25 million and 
$49,999,999. Based on this data, the Commission concludes that more 
than one-half of the firms in this industry are small.
    146. Emergency and Other Relief Services. This industry comprises 
establishments primarily engaged in providing food, shelter, clothing, 
medical relief, resettlement, and counseling to victims of domestic or 
international disasters or conflicts (e.g., wars). The SBA has 
established a size standard for this industry which is annual receipts 
of $35 million or less. The 2012 U.S. Economic Census indicates that 
541 firms operated in this industry throughout the entire year. Of that 
number, 509 had annual receipts of less than $25 million, while 7 firms 
had annual receipts between $25 million and $49,999,999. Based on this 
data, the Commission concludes that a majority of firms in this 
industry are small.
3. Providers of Telecommunications and Other Services
a. Telecommunications Service Providers
    147. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The closest 
applicable NAICS Code category is Wired Telecommunications Carriers. 
Under the applicable SBA size standard, such a business is small if it 
has 1,500 or fewer employees. U.S. Census Bureau data for 2012 indicate 
that 3,117 firms operated the entire year. Of this total, 3,083 
operated with fewer than 1,000 employees. Consequently, the Commission 
estimates that most providers of incumbent local exchange service are 
small businesses that may be affected by its actions. According to 
Commission data, one thousand three hundred and seven (1,307) Incumbent 
Local Exchange Carriers reported that they were incumbent local 
exchange service providers. Of this total, an estimated 1,006 have 
1,500 or fewer employees. Thus, using the SBA's size standard the 
majority of incumbent LECs can be considered small entities.
    148. Competitive Local Exchange Carriers (Competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate NAICS Code category is Wired 
Telecommunications Carriers and under that size standard, such a 
business is small if it has 1,500 or fewer employees. U.S. Census 
Bureau data for 2012 indicate that 3,117 firms operated during that 
year. Of that number, 3,083 operated with fewer than 1,000 employees. 
Based on these data, the Commission concludes that the majority of 
Competitive LECS, CAPs, Shared-Tenant Service Providers, and Other 
Local Service Providers, are small entities. According to Commission 
data, 1,442 carriers reported that they were engaged in the provision 
of either competitive local exchange services or competitive access 
provider services. Of these 1,442 carriers, an estimated 1,256 have 
1,500 or fewer employees. In addition, 17 carriers have reported that 
they are Shared-Tenant Service Providers, and all 17 are estimated to 
have 1,500 or fewer employees. Also, 72 carriers have reported that 
they are Other Local Service Providers. Of this total, 70 have 1,500 or 
fewer employees. Consequently, based on internally researched FCC data, 
the Commission estimates that most providers of competitive local 
exchange service, competitive access providers, Shared-Tenant Service 
Providers, and Other Local Service Providers are small entities.
    149. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
Interexchange Carriers. The closest applicable NAICS Code category is 
Wired Telecommunications Carriers. The applicable size standard under 
SBA rules is that such a business is small if it has 1,500 or fewer 
employees. U.S. Census Bureau data for 2012 indicate that 3,117 firms 
operated for the entire year. Of that number, 3,083 operated with fewer 
than 1,000 employees. According to internally developed Commission 
data, 359 companies reported that their primary telecommunications 
service activity was the provision of interexchange services. Of this 
total, an estimated 317 have 1,500 or fewer employees. Consequently, 
the Commission estimates that the majority of interexchange service 
providers are small entities.
    150. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The closest applicable size standard under 
SBA rules is for the category Wired Telecommunications Carriers. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. U.S. Census Bureau data for 2012 show that there were 3,117 
firms that operated that year. Of this total, 3,083 operated with fewer 
than 1,000 employees. Thus under this size standard, the Commission 
estimates that the majority of firms in this industry are small 
entities. According to Commission data, 33 carriers have reported that 
they are engaged in the provision of operator services. Of these, an 
estimated 31 have 1,500 or fewer employees and 2 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
operator service providers are small entities.
    151. Local Resellers. The SBA has not developed a small business 
size standard specifically for Local Resellers. The SBA category of 
Telecommunications Resellers is the closest NAICs code category for 
local resellers. The Telecommunications Resellers industry comprises 
establishments engaged in purchasing access and network capacity from 
owners and operators of telecommunications networks and reselling wired 
and wireless telecommunications services (except satellite) to 
businesses and households. Establishments in this industry resell 
telecommunications; they do not operate transmission facilities and 
infrastructure. Mobile virtual network operators (MVNOs) are included 
in this industry. Under the SBA's size standard, such a business is 
small if it has 1,500 or fewer employees. U.S. Census Bureau data from 
2012 show that 1,341 firms provided resale services during that year. 
Of that number, all operated with fewer than 1,000 employees. Thus, 
under this category and the associated small business size standard, 
the majority of these resellers can be considered small entities. 
According to Commission data, 213 carriers have reported that they are 
engaged in the provision of local resale services. Of these, an 
estimated 211 have 1,500 or fewer employees and two have more than 
1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities.
    152. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless

[[Page 47019]]

telecommunications services (except satellite) to businesses and 
households. Establishments in this industry resell telecommunications; 
they do not operate transmission facilities and infrastructure. MVNOs 
are included in this industry. The SBA has developed a small business 
size standard for the category of Telecommunications Resellers. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. 2012 U.S. Census Bureau data show that 1,341 firms provided 
resale services during that year. Of that number, 1,341 operated with 
fewer than 1,000 employees. Thus, under this category and the 
associated small business size standard, the majority of these 
resellers can be considered small entities. According to Commission 
data, 881 carriers have reported that they are engaged in the provision 
of toll resale services. Of this total, an estimated 857 have 1,500 or 
fewer employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities.
    153. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``establishments primarily engaged in 
operating and/or providing access to transmission facilities and 
infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including voice over internet protocol (VoIP) services; wired (cable) 
audio and video programming distribution; and wired broadband internet 
services. By exception, establishments providing satellite television 
distribution services using facilities and infrastructure that they 
operate are included in this industry.'' The SBA has developed a small 
business size standard for Wired Telecommunications Carriers, which 
consists of all such companies having 1,500 or fewer employees. U.S. 
Census data for 2012 show that there were 3,117 firms that operated 
that year. Of this total, 3,083 operated with fewer than 1,000 
employees. Thus, under this size standard, the majority of firms in 
this industry can be considered small.
    154. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular services, paging 
services, wireless internet access, and wireless video services. The 
appropriate size standard under SBA rules is that such a business is 
small if it has 1,500 or fewer employees. For this industry, U.S. 
Census Bureau data for 2012 show that there were 967 firms that 
operated for the entire year. Of this total, 955 firms employed fewer 
than 1,000 employees and 12 firms employed of 1,000 employees or more. 
Thus under this category and the associated size standard, the 
Commission estimates that the majority of Wireless Telecommunications 
Carriers (except Satellite) are small entities.
    155. The Commission's own data--available in its Universal 
Licensing System--indicate that, as of August 31, 2018, there are 265 
Cellular licensees that will be affected by its actions. The Commission 
does not know how many of these licensees are small, as the Commission 
does not collect that information for these types of entities. 
Similarly, according to internally developed Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service 
(PCS), and Specialized Mobile Radio (SMR) Telephony services. Of this 
total, an estimated 261 have 1,500 or fewer employees, and 152 have 
more than 1,500 employees. Thus, using available data, the Commission 
estimates that the majority of wireless firms can be considered small.
    156. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. The closest applicable SBA category is Wireless 
Telecommunications Carriers (except Satellite). Under the SBA small 
business size standard, a business is small if it has 1,500 or fewer 
employees. For this industry, U.S. Census Bureau data for 2012 show 
that there were 967 firms that operated for the entire year. Of this 
total, 955 firms had fewer than 1,000 employees and 12 firms had 1,000 
employees or more. Thus under this category and the associated size 
standard, the Commission estimates that a majority of these entities 
can be considered small. According to Commission data, 413 carriers 
reported that they were engaged in wireless telephony. Of these, an 
estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Therefore, more than half of these entities can be 
considered small.
    157. Satellite Telecommunications. This category comprises firms 
``primarily engaged in providing telecommunications services to other 
establishments in the telecommunications and broadcasting industries by 
forwarding and receiving communications signals via a system of 
satellites or reselling satellite telecommunications.'' Satellite 
telecommunications service providers include satellite and earth 
station operators. The category has a small business size standard of 
$35 million or less in average annual receipts, under SBA rules. For 
this category, U.S. Census Bureau data for 2012 show that there were a 
total of 333 firms that operated for the entire year. Of this total, 
299 firms had annual receipts of less than $25 million. Consequently, 
the Commission estimates that the majority of satellite 
telecommunications providers are small entities.
    158. All Other Telecommunications. The ``All Other 
Telecommunications'' category is comprised of establishments primarily 
engaged in providing specialized telecommunications services, such as 
satellite tracking, communications telemetry, and radar station 
operation. This industry also includes establishments primarily engaged 
in providing satellite terminal stations and associated facilities 
connected with one or more terrestrial systems and capable of 
transmitting telecommunications to, and receiving telecommunications 
from, satellite systems. Establishments providing internet services or 
voice over internet protocol (VoIP) services via client-supplied 
telecommunications connections are also included in this industry. The 
SBA has developed a small business size standard for ``All Other 
Telecommunications,'' which consists of all such firms with annual 
receipts of $35 million or less. For this category, U.S. Census Bureau 
data for 2012 show that there were 1,442 firms that operated for the 
entire year. Of those firms, a total of 1,400 had annual receipts less 
than $25 million and 15 firms had annual receipts of $25 million to 
$49, 999,999. Thus, the Commission estimates that the majority of ``All 
Other Telecommunications'' firms potentially affected by its action can 
be considered small.
b. Internet Service Providers
    159. Internet Service Providers (Broadband). Broadband internet 
service providers include wired (e.g., cable, DSL) and VoIP service 
providers using their own operated wired

[[Page 47020]]

telecommunications infrastructure fall in the category of Wired 
Telecommunication Carriers. Wired Telecommunications Carriers are 
comprised of establishments primarily engaged in operating and/or 
providing access to transmission facilities and infrastructure that 
they own and/or lease for the transmission of voice, data, text, sound, 
and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies. The SBA size standard for this category classifies a 
business as small if it has 1,500 or fewer employees. U.S. Census 
Bureau data for 2012 show that there were 3,117 firms that operated 
that year. Of this total, 3,083 operated with fewer than 1,000 
employees. Consequently, under this size standard the majority of firms 
in this industry can be considered small.
    160. Internet Service Providers (Non-Broadband). internet access 
service providers such as Dial-up internet service providers, VoIP 
service providers using client-supplied telecommunications connections 
and internet service providers using client-supplied telecommunications 
connections (e.g., dial-up ISPs) fall in the category of All Other 
Telecommunications. The SBA has developed a small business size 
standard for All Other Telecommunications which consists of all such 
firms with gross annual receipts of $35 million or less. For this 
category, U.S. Census Bureau data for 2012 show that there were 1,442 
firms that operated for the entire year. Of these firms, a total of 
1,400 had gross annual receipts of less than $25 million. Consequently, 
under this size standard a majority of firms in this industry can be 
considered small.
c. Vendors and Equipment Manufacturers
    161. Vendors of Infrastructure Development or ``Network Buildout.'' 
The Commission has not developed a small business size standard 
specifically directed toward manufacturers of network facilities. There 
are two applicable SBA categories in which manufacturers of network 
facilities could fall and each have different size standards under the 
SBA rules. The SBA categories are ``Radio and Television Broadcasting 
and Wireless Communications Equipment'' with a size standard of 1,250 
employees or less and ``Other Communications Equipment Manufacturing'' 
with a size standard of 750 employees or less.'' U.S. Census Bureau 
data for 2012 shows that for Radio and Television Broadcasting and 
Wireless Communications Equipment firms 841 establishments operated for 
the entire year. Of that number, 828 establishments operated with fewer 
than 1,000 employees, and 7 establishments operated with between 1,000 
and 2,499 employees. For Other Communications Equipment Manufacturing, 
U.S. Census Bureau data for 2012, show that 383 establishments operated 
for the year. Of that number 379 operated with fewer than 500 employees 
and 4 had 500 to 999 employees. Based on this data, the Commission 
concludes that the majority of Vendors of Infrastructure Development or 
``Network Buildout'' are small.
    162. Telephone Apparatus Manufacturing. This industry comprises 
establishments primarily engaged in manufacturing wire telephone and 
data communications equipment. These products may be stand-alone or 
board-level components of a larger system. Examples of products made by 
these establishments are central office switching equipment, cordless 
and wire telephones (except cellular), PBX equipment, telephone 
answering machines, LAN modems, multi-user modems, and other data 
communications equipment, such as bridges, routers, and gateways. The 
SBA has developed a small business size standard for Telephone 
Apparatus Manufacturing, which consists of all such companies having 
1,250 or fewer employees. U.S. Census Bureau data for 2012 show that 
there were 266 establishments that operated that year. Of this total, 
262 operated with fewer than 1,000 employees. Thus, under this size 
standard, the majority of firms in this industry can be considered 
small.
    163. Radio and Television Broadcasting and Wireless Communications 
Equipment Manufacturing. This industry comprises establishments 
primarily engaged in manufacturing radio and television broadcast and 
wireless communications equipment. Examples of products made by these 
establishments are: Transmitting and receiving antennas, cable 
television equipment, GPS equipment, pagers, cellular phones, mobile 
communications equipment, and radio and television studio and 
broadcasting equipment. The SBA has established a small business size 
standard for this industry of 1,250 or fewer employees. U.S. Census 
Bureau data for 2012 show that 841 establishments operated in this 
industry in that year. Of that number, 828 establishments operated with 
fewer than 1,000 employees, 7 establishments operated with between 
1,000 and 2,499 employees and 6 establishments operated with 2,500 or 
more employees. Based on this data, the Commission concludes that a 
majority of manufacturers in this industry are small.
    164. Other Communications Equipment Manufacturing. This industry 
comprises establishments primarily engaged in manufacturing 
communications equipment (except telephone apparatus, and radio and 
television broadcast, and wireless communications equipment). Examples 
of such manufacturing include fire detection and alarm systems 
manufacturing, Intercom systems and equipment manufacturing, and 
signals (e.g., highway, pedestrian, railway, traffic) manufacturing. 
The SBA has established a size standard for this industry as all such 
firms having 750 or fewer employees. U.S. Census Bureau data for 2012 
shows that 383 establishments operated in that year. Of that number, 
379 operated with fewer than 500 employees and 4 had 500 to 999 
employees. Based on this data, the Commission concludes that the 
majority of Other Communications Equipment Manufacturers are small.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    165. Requirement to Remove and Replace Covered Equipment and 
Services. The Third Report and Order increases the pool or participants 
in the Reimbursement Program from those providers of advanced 
communications services with two million or fewer customers to those 
with 10 million or fewer customers, but does not change any reporting 
requirements adopted in previous Commission orders.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    166. 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.
    167. All of the rules in the Third Report and Order are adopted 
pursuant to statutory obligation under the CAA. However, where the 
Commission has discretion in its interpretation or implementation of 
the CAA provisions, or adopts rules pursuant to alternative

[[Page 47021]]

statutory authority, the scope of the rules is narrowly tailored so as 
to lessen the impact on small entities. The rules adopted in the Third 
Report and 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.

G. Report to Congress

    168. The Commission will send a copy of the Third Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Third Report and Order, including this FRFA, to the Chief 
Counsel for Advocacy of the SBA. A copy of the Third Report and Order 
and FRFA (or summaries thereof) will also be published in the Federal 
Register.
    169. Congressional Review Act. 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 Third Report and Order to Congress and the Government 
Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

IV. Ordering Clauses

    170. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 4(i), 201(b), 214, 254, 303(r), 403, and 503 of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 201(b), 
214, 254, 303(r), 403, 503, sections 2, 3, 4, 5, 7 and 9 of the Secure 
Networks Act, 47 U.S.C. 1601, 1602, 1603, 1604, 1606, and 1608, 
Division N, Title IX, sections 901 and 906 of the Consolidated 
Appropriations Act, 2021, and sections 1.1 and 1.412 of the 
Commission's rules, 47 CFR 1.1 and 1.412, this Third Report and Order 
is adopted.
    171. It is further ordered that Parts 1 and 54 of the Commission's 
rules are amended as set forth below.
    172. It is further ordered that, pursuant to sections 1.4(b)(1) and 
1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1), 1.103(a), this 
Third Report and Order shall be effective October 22, 2021.
    173. It is further ordered that the Commission shall send a copy of 
this Third Report and Order to Congress and to the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).
    174. It is further ordered that the Commission's Consumer and 
Governmental Affairs, Bureau, Reference Information Center, shall send 
a copy of this Third Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Communications, 
Communications equipment, Internet, Telecommunications.

47 CFR Part 54

    Communications common carriers, Internet, Libraries, Reporting and 
recordkeeping requirements, Schools, Telecommunications.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

    For the reasons set forth above, part 1 of title 47 of the Code of 
Federal Regulations is amended as follows:

PART 1--PRACTICE AND PROCEDURE

0
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.

0
2. Section 1.50004 is amended by:
0
a. Revising paragraphs (a) introductory text, (a)(1), (a)(2) (f) 
introductory text, (i)(1)(i), and (ii), and adding paragraph (q) to 
read as follows:

Sec.  1.50004   Secure and Trusted Communications Networks 
Reimbursement Program.

    (a) Eligibility. Providers of advanced communications service with 
ten million or fewer customers are eligible to participate in the 
Reimbursement Program to reimburse such providers solely for costs 
reasonably incurred for the permanent replacement, removal, and 
disposal of covered communications equipment or services:
    (1) As defined in the Report and Order of the Commission in the 
matter of Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs (FCC 19-121; WC Docket 
No. 18-89; adopted November 22, 2019 (in this section referred to as 
the `Report and Order'); or
    (2) As determined to be covered by both the process of the Report 
and Order and the Designation Orders of the Commission on June 30, 2020 
(DA 20-690; PS Docket No. 19-351; adopted June 30, 2020) (DA 20-691; PS 
Docket No. 19-352; adopted June 30, 2020) (in this section collectively 
referred to as the `Designation Orders');
* * * * *
    (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.
------------------------------------------------------------------------
Priority 2
 
Advanced communications service providers that are accredited public or
 private non-commercial educational institutions providing their own
 facilities-based educational broadband service, as defined in part 27,
 subpart M of title 47, Code of Federal Regulations, or any successor
 regulation and health care providers and libraries providing advanced
 communications service.
------------------------------------------------------------------------

[[Page 47022]]

 
Priority 3
 
Any remaining approved applicants determined to be eligible for
 reimbursement under the Program.
------------------------------------------------------------------------

* * * * *
    (i) * * * (1) * * *
    (i) on or after publication of the Report and Order; or
    (ii) in the case of any covered communications equipment that only 
became covered pursuant to the Designation Orders, June 30, 2020; or
* * * * *
    (q) Provider of Advanced Communications Services. For purposes of 
the Secure and Trusted Communications Networks Reimbursement Program, 
the term ``provider of advanced communications services'' is defined 
as:
    (1) A person who provides advanced communications service to United 
States customers; and includes:
    (A) Accredited public or private non-commercial educational 
institutions, providing their own facilities-based educational 
broadband service, as defined in 47 CFR part 27, subpart M, or any 
successor regulation; and
    (B) Health care providers and libraries providing advanced 
communications service.
    (2) [Reserved].

PART 54--UNIVERSAL SERVICE

0
3. The authority citation for part 54 continues 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.

0
4. Section 54.11 is amended by revising paragraphs (b), (c), and (d) to 
read as follows:
* * * * *
    (b) For the purposes of this section, covered communications 
equipment or services means any communications equipment or service 
that is on the Covered List maintained pursuant to Sec.  1.50002 of 
this chapter, and:
    (1) As defined in the Report and Order of the Commission in the 
matter of Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs (FCC 19-121; WC Docket 
No. 18-89; adopted November 22, 2019 (in this section referred to as 
the `Report and Order'); or
    (2) as determined to be covered by both the process of the Report 
and Order and the Designation Orders of the Commission on June 30, 2020 
(DA 20-690; PS Docket No. 19-351; adopted June 30, 2020) (DA 20-691; PS 
Docket No. 19-352; adopted June 30, 2020) (in this section collectively 
referred to as the `Designation Orders').
    (c) The certification referenced in paragraph (a) of this section 
is required starting one year after the date the Commission releases a 
Public Notice announcing that applications are accepted for filing in 
the corresponding filing window of the Reimbursement Program per Sec.  
1.50004(b) for the removal, replacement, and disposal of associated 
covered communications equipment and services.
    (d) Reimbursement Program recipients, as defined in Sec.  
1.50001(h) of this chapter, are not subject to paragraph (a) of this 
section until after the expiration of their corresponding removal, 
replacement, and disposal term per Sec.  1.50004(h) of this chapter for 
associated covered communications equipment and services.
* * * * *
[FR Doc. 2021-17279 Filed 8-20-21; 8:45 am]
BILLING CODE 6712-01-P
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