[Federal Register Volume 86, Number 8 (Wednesday, January 13, 2021)]
[Rules and Regulations]
[Pages 2904-2946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00052]



[[Page 2903]]

Vol. 86

Wednesday,

No. 8

January 13, 2021

Part IV





Federal Communications Commission





-----------------------------------------------------------------------





47 CFR Parts 1 and 54





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

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

[[Page 2904]]


-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 54

[WC Docket No. 18-89; FCC 20-176; FRS 17361]


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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Federal Communications Commission 
(Commission) establishes rules to publish a list of covered 
communications equipment and services determined to be a risk to 
national security. Eligible telecommunications carriers (ETCs) that 
receive universal service funding to provide service in remote areas of 
the country must remove such equipment or services from their networks 
and properly dispose of it. This document also establishes the Secure 
and Trusted Communications Networks Reimbursement Program, which will 
provide funds to smaller providers of advanced communications services 
for the removal and replacement of covered communications equipment and 
services, conditioned on the appropriation of funds by Congress. 
Lastly, all providers of advanced communications services must report 
whether their networks include any covered communications equipment or 
services acquired after August 14, 2018.

DATES: Effective March 15, 2021, except for amendatory instruction 3 
adding Sec. Sec.  1.50004(c), (d)(1), (g), (h)(2), (j) through (n); 
amendatory instruction 5 adding Sec.  1.50007; and amendatory 
instruction 7 adding Sec.  54.11. The Commission will publish a 
document in the Federal Register announcing the effective date of those 
amendments.

FOR FURTHER INFORMATION CONTACT: For further information, please 
contact Brian Cruikshank, Competition Policy Division, Wireline 
Competition Bureau, at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Report and Order in WC Docket No. 18-89; FCC 20-176, adopted on 
December 10, 2020, and released on December 11, 2020. The full text of 
this document is available for public inspection on the Commission's 
website at https://www.fcc.gov/document/fcc-adopts-rules-secure-communications-networks-and-supply-chain-0.

I. Introduction

    1. The Commission plays an important role in protecting America's 
communications networks and the Commission takes further steps toward 
securing its communications networks by implementing the Secure and 
Trusted Communications Networks Act of 2019 (Secure Networks Act). The 
Commission first adopts a rule that requires ETCs to remove and replace 
covered equipment from their networks. Second, the Commission 
establishes the Secure and Trusted Communications Networks 
Reimbursement Program to subsidize smaller carriers to remove and 
replace covered equipment, once Congress appropriates at least $1.6 
billion that Commission staff estimate will be needed to reimburse 
providers eligible under current law. Third, the Commission establishes 
the procedures and criteria for publishing a list of covered 
communications equipment or services that pose an unacceptable risk to 
the national security of the United States or the security and safety 
of United States persons and prohibit Universal Service Fund (USF) 
support from being used for such covered equipment or services. Last, 
the Commission adopts a reporting requirement to ensure it is informed 
about the ongoing presence of covered equipment in communications 
networks.

II. Report and Order

    2. In the 2019 Supply Chain Further Notice, 85 FR 277, January 3, 
2020, the Commission sought comment on the establishment of a 
reimbursement program to ``offset reasonable costs'' for ETCs to remove 
and replace covered communications equipment and services from their 
networks. The Wireline Competition Bureau (WCB) separately sought 
comment on section 4 of the Secure Networks Act, which created the 
Secure and Trusted Communications Networks Reimbursement Program. In 
the 2020 Supply Chain Second Further Notice, 85 FR 48134, August 10, 
2020, the Commission sought comment on how to implement the various 
provisions of the Secure Networks Act into the Commission's ongoing 
Supply Chain proceeding. Based on the Commission's review of the record 
created in response, it adopts several rules to protect the security of 
its communications networks and implement the Secure Networks Act.
    3. In the 2019 Supply Chain Further Notice, the Commission proposed 
to require ETCs receiving USF support to remove and replace covered 
equipment and services from their network operations, contingent on the 
availability of a funded reimbursement program. The Commission based 
the scope of the proposed requirement on its view that sections 201(b) 
and 254 of the Communications Act provides the Commission the legal 
authority to condition receipt of USF support to advance universal 
service principles grounded in the provision of ``[q]uality services . 
. . at just, reasonable, and affordable rates,'' while furthering the 
public interest and the promotion of nationwide access to advanced 
telecommunications and information services, and sought comment on that 
rationale. Following the passage of the Secure Networks Act, which, 
among other provisions, established a reimbursement program for the 
removal, replacement, and disposal of covered equipment and services, 
the Commission modified its proposal and sought further comment on 
implementation of the Secure Networks Act and, specifically, whether it 
provided the Commission independent authority to require ETCs or other 
providers to remove and replace equipment on the Covered List.
    4. Consistent with the Commission's proposal in the 2019 Supply 
Chain Further Notice and the directives of the Secure Networks Act, it 
requires recipients of reimbursement funds under the Reimbursement 
Program and ETCs receiving USF support to remove and replace from their 
network and operations environments equipment and services included on 
the covered list required by section 2 of the Secure Networks Act 
(Covered List). The Commission conditions this obligation to remove and 
replace covered equipment and services upon a congressional 
appropriation to fund the Reimbursement Program. The Commission also 
adopts deadlines consistent with those for reimbursement funding 
recipients. This requirement, and the steps the Commission takes 
towards its implementation, will further its goal of protecting its 
communications networks and supply chains from communications equipment 
and services that pose a national security threat while facilitating 
the transition to safer and more secure alternatives.
    5. The obligation to remove and replace covered equipment and 
services on the Covered List applies to recipients of reimbursement 
funds from the Reimbursement Program and ETCs receiving universal 
service support. The Commission's authority to require these entities 
to remove and replace covered equipment and services arises from both

[[Page 2905]]

the Secure Networks Act and sections 201(b) and 254(b) of the 
Communications Act. By limiting the requirement to these recipients, 
the Commission protects the nation's networks from a substantial amount 
of equipment and services that pose a threat to the security of its 
communications networks while minimizing the financial and logistical 
challenges of removal and replacement on providers.
    6. The Secure Networks Act requires any recipient of Reimbursement 
Program funding to remove all existing covered equipment or services in 
their networks as a condition of receiving reimbursement funds. The 
Secure Networks Act prohibits recipients of reimbursement funds from 
purchasing, renting, leasing, or otherwise obtaining covered equipment 
or services with reimbursement funds or any other funding, including 
private funds. Recipients must also certify that they will permanently 
remove, replace, and dispose of all covered equipment or services that 
are in the recipient's network as of the date of submission of the 
application for reimbursement. Also, recipients must certify that they 
have fully complied, or are in the process of complying, with all terms 
and conditions of the Reimbursement Program, all commitments made in 
the application, and the timeline submitted with the application. These 
provisions indicate congressional intent that recipients of 
Reimbursement Program funds are to be included within the scope of the 
Commission's remove-and-replace rule and must remove covered equipment. 
Additionally, commenters support a broad application of the 
Commission's remove-and-replace requirement to entities that meet the 
definitions contained in the Secure Networks Act. Because section 4 of 
the Secure Networks Act requires the removal and replacement of covered 
equipment and services from recipients' networks, the Commission finds 
sufficient support both in the language of the statute and the record 
to include recipients of reimbursement funding from the Reimbursement 
Program in the Commission's remove-and-replace requirement. No 
commenters in the record oppose this conclusion. While Huawei 
Technologies Company (Huawei) argues that the Secure Networks Act does 
not grant the Commission authority to mandate removal and replacement 
as proposed in the 2019 Supply Chain Further Notice, it does not 
dispute that recipients of funding through the Reimbursement Program, 
who volunteer to participate in the Program, are required to remove 
covered equipment and services as a condition of receiving funding.
    7. To ensure that USF funds are not supporting covered equipment 
and services, and that the Commission's rule effectively and broadly 
removes covered equipment and services from recipients' networks to the 
extent permissible under its legal authority, the Commission obligates 
ETCs receiving USF support to remove covered equipment and services 
throughout their entire network, not just in jurisdictions where they 
operate as an ETC, and irrespective of whether they receive 
reimbursement under the Reimbursement Program. This broad approach to 
removal greatly mitigates the identified risks to national security 
underlying both the Commission's rules and recognized by Congress. 
However, the scope of the rule does not extend to affiliates and 
subsidiaries of ETCs. The Commission's decision to require ETCs that 
receive USF support to remove covered equipment and services is also 
consistent with the scope of removal under the Reimbursement Program 
recipient obligations in the Secure Networks Act, which similarly 
requires recipients to permanently remove covered communications 
equipment or services contained on the Covered List from their 
networks. By aligning the scope of the Commission's removal requirement 
with the obligations under section 4 of the Secure Networks Act, its 
rules will best effectuate the congressional intent to ``mitigat[e] 
threats posed by vulnerable communications equipment and services'' 
throughout U.S. networks.
    8. The Commission conditions the implementation of its remove-and-
replace rule on the appropriation of funding by Congress for the 
Reimbursement Program, to ensure sufficient funding is available to pay 
for the removal and replacement of covered equipment. Several 
commenters support this proposal and encourage the Commission to wait 
until Congress has appropriated funding, and others express concern 
that any obligation to remove and replace covered equipment and 
services without reimbursement amounts to an unfunded mandate.
    9. Pursuant to the Secure Networks Act, only providers with two 
million or fewer broadband customers are eligible for the Reimbursement 
Program, but the Commission finds no reason to accordingly limit the 
applicability of its remove-and-replace rule to only those ETCs which 
are eligible for the Reimbursement Program. Although the data shows the 
vast majority of ETCs will be eligible to receive funding under the 
Reimbursement Program, in line with the intended scope of eligible 
entities as set forth by Congress under the Secure Networks Act, some 
large ETCs receiving USF support may not be eligible for reimbursement 
under the Reimbursement Program due to the size of their broadband 
customer base. ETCs are providers of ``advanced communications 
services'' and, as such, are subject to the provisions of the Secure 
Networks Act, including prohibitions on Federal subsidy spending in 
section 3 and reimbursement in section 4 of the Secure Networks Act, 
where eligible. Regardless, the House Report suggests that Congress 
intended to focus on providing reimbursement for small providers, 
noting that larger communications companies ``generally have avoided 
installing and using Huawei and other suspect foreign equipment in 
their networks,'' while smaller providers with limited resources may 
have purchased such equipment because it was less expensive or they 
were unaware of the security risks, or both. Based on the data 
submitted pursuant to the Information Collection and subscription data 
from FCC Form 477, only two ETCs using suspect foreign equipment appear 
to fall outside the scope of reimbursement eligibility due to the 
number of broadband customers. Larger ETCs are also more likely to have 
resources to pay for removal, replacement, and disposal of covered 
communications equipment and services themselves, and not need taxpayer 
money to accomplish the objectives of the Commission's remove-and-
replace requirement. The Commission clarifies that ETCs receiving USF 
support that do not receive funding through the Reimbursement Program 
are required to remove covered communications equipment and services 
from their networks, but whether they replace such equipment and 
services with alternatives from the Replacement List is within their 
discretion. Furthermore, nothing in the Secure Networks Act prevents 
the Commission from requiring removal from entities beyond those who 
receive reimbursement funding. Because of the serious risks that 
untrusted participants in the Commission's supply chain pose to the 
Commission's communications networks, the benefits to our national 
security of removing covered equipment and services from the 
Commission's communications networks far outweigh the burdens that 
compliance with the requirement may impose on a small number of large 
ETCs.

[[Page 2906]]

    10. The Commission further clarifies that, consistent with the 
requirements for participation in the Reimbursement Program under the 
Secure Networks Act, it requires all ETCs receiving USF support to 
dispose of the removed covered equipment and services rather than 
resell, donate, or trade them. Similar to other applications of the 
rule, such as the certification requirement, this requirement 
synchronizes the disposal requirements for ETC recipients of USF 
support with those applicable to other reimbursement recipients and 
minimizes any burdens that may result from the administration of 
disparate regimes. Furthermore, allowing ETCs that receive USF support 
to resell covered equipment and services removed from their networks 
undermines the effectiveness of the rule and fails to effectively 
eliminate those products that pose national security risks from the 
Commission's communications networks and supply chain.
    11. The application of the Commission's remove-and-replace 
requirement to both ETCs receiving USF support and recipients of 
reimbursement under the Reimbursement Program appropriately considers 
the benefits to our national security of a broader approach against the 
burdens to remove and replace covered communications equipment and 
services from networks. The Commission recognizes that the presence of 
products in communications networks that pose risks to our national 
security is not limited to ETCs and believe that the application of its 
remove-and-replace requirement to recipients of reimbursement funding 
in addition to ETCs receiving USF support encompasses a wide range of 
entities whose networks may contain covered equipment or services. 
Furthermore, while some commenters support an expansive application of 
the remove-and-replace rule to require all entities to replace covered 
equipment or services, rather than just the recipients described in 
this document, the Commission finds that the slightly more limited 
scope of its rule not only covers entities with flawed equipment and 
services, it also best captures the broadest application while staying 
within the bounds of the Commission's legal authority. Some commenters 
representing non-ETC USF recipients such as schools, libraries, and 
rural healthcare providers favor expanding the remove-and-replace 
requirement to non-ETC USF recipients because of the cyberthreats such 
recipients face when compromised equipment and services remain in their 
networks. While the Commission recognizes that the continued existence 
of such untrusted products in its communications networks and supply 
chains does introduce risks, it must, as USTelecom posits, consider the 
``large administrative burdens'' that inclusion of non-ETC USF 
recipients would impose against the proportionate impact on national 
security. The Commission finds that limiting the requirement to 
recipients of the Reimbursement Program and ETC recipients of USF 
support, rather than all USF recipients, reduces the administrative 
burdens of removing and replacing covered equipment and services on 
non-ETC USF recipients while reducing national security threats to its 
communications supply chain. Eligible non-ETC USF recipients may 
voluntarily participate in the Reimbursement Program, which would 
subject them to the remove-and-replace requirement but also allow them 
to receive reimbursement for removal, replacement, and disposal of 
covered equipment and services; otherwise, non-ETC USF recipients are 
under no obligation to remove or replace covered equipment or services 
from their networks. The Commission draws this important distinction to 
avoid imposing an unfunded mandate on non-ETC USF recipients were the 
Commission to require the removal and replacement of covered equipment 
when such recipients are not eligible to participate in the 
Reimbursement Program. Nevertheless, because the record indicates very 
little covered equipment outside the USF programs requiring an ETC 
designation, the Commission will closely monitor future developments, 
including through the information collection adopted pursuant to 
section 5 of the Secure Networks Act, to determine whether addressing 
non-ETC USF recipients is necessary and appropriate. This information 
collection applies to all providers of advanced communications service, 
unlike the Commission's previous information collection adopted in the 
2019 Supply Chain Information Collection Order, 85 FR 230, January 3, 
2020, which applied only to ETCs, thus providing a more expanded and 
comprehensive awareness of covered communications equipment and 
services in networks.
    12. Legal Authority. A variety of separate and independent 
statutory provisions provide the Commission with the appropriate 
authority and ability to impose a remove-and-replace requirement. 
Section 4 of the Secure Networks Act expressly requires recipients of 
Reimbursement Program funding to ``permanently remove[ ]'' and replace 
``all covered communications equipment or services'' in their networks 
as a condition of receiving reimbursement funds. The Secure Networks 
Act requires applicants to certify that they will permanently remove, 
replace, and dispose of covered equipment or services in the 
recipient's network as of the date of submission of the application for 
reimbursement and further requires recipients to submit a final 
certification to the Commission that they have permanently removed, 
replaced, and disposed of, or are in the process of doing so, all 
covered communications equipment or services from their networks. 
Relatedly, the Secure Networks Act prohibits recipients of 
reimbursement funds from purchasing, renting, leasing, or otherwise 
obtaining covered equipment or services with reimbursement funds or any 
other funding, including private funds, indicating congressional intent 
to have covered equipment and services eliminated from recipients' 
networks as a condition of receiving funding.
    13. The requirement adopted is similarly consistent with the John 
S. McCain National Defense Authorization Act for Fiscal Year 2019 (2019 
NDAA), which directs the Commission to ``prioritize funding and 
technical support to assist affected . . . entities to transition from 
covered communications equipment [as defined by the statute], and to 
ensure that communications service to users and customers is 
sustained.'' While one commenter indicated that the Commission could 
rely on the 2019 NDAA to obligate removal and replacement of covered 
equipment and services, it finds that the provisions of the Secure 
Networks Act, discussed in this document, builds upon the goals of the 
2019 NDAA and provides the Commission with express authority to require 
removal and replacement. As the Commission finds they have sufficient 
authority under sections 201(b) and 254 of the Communications Act and 
various provisions of the Secure Networks Act, it needs not consider 
whether the Communications Assistance and Law Enforcement Act or 
sections 316 or 214 of the Communications Act provide a legal basis for 
regulation.
    14. In addition, the Communications Act provides legal authority 
for the application of the Commission's rule to ETCs that receive USF 
support. As the U.S. Court of Appeals for the Tenth Circuit has held, 
section 254(e) is reasonably interpreted as allowing the Commission 
``to specify what a USF recipient may or must do with the

[[Page 2907]]

funds,'' consistent with the policy principles outlined in section 
254(b). Section 254(b) requires the Commission to base its universal 
service policies on the principles of providing ``[q]uality services . 
. . at just, reasonable, and affordable rates,'' as well as promoting 
``[a]ccess to advanced telecommunications and information services . . 
. in all regions of the Nation.'' Section 201(b) authorizes the 
Commission to ``prescribe such rules as may be necessary in the public 
interest to carry out the provisions of the [Communications] Act.'' By 
requiring ETCs that receive USF support to remove covered equipment and 
services, the Commission further advances the provision of quality 
services nationwide, and ensure the safety, reliability, and security 
of the nation's communications networks, which is necessary in the 
public interest in fulfillment of the purpose of the Communications 
Act.
    15. The record also supports the Commission's determination that 
the Communications Act provides the Commission broad legal authority to 
require removal of covered equipment and services by ETCs that receive 
USF support. Telecommunications Industry Association states that the 
Commission is ``properly acting within its assigned responsibilities by 
promulgating rules that place conditions and restrictions on use of USF 
support.'' WTA and NCTA both note that the Commission has clear and 
well-established authority to impose public interest conditions on the 
use of USF. Furthermore, the provisions of the Communications Act tied 
to the Commission's administration of universal service programs 
provide well-established authority for imposing remove-and-replace 
requirements on ETCs receiving universal service funds.
    16. The Commission rejects arguments that it lacks the authority to 
mandate removal and replacement of covered equipment and services. 
Huawei asserts that neither the Secure Networks Act nor any other 
statute provides the requisite authority to impose a remove-and-replace 
requirement. According to Huawei, nothing in the Secure Networks Act 
requires removal and replacement, nor does the Reimbursement Program, 
which is voluntary, mandate removal. The Commission disagrees. The 
Secure Networks Act conditions receipt of reimbursement funds on 
removal and disposal of all covered equipment from the recipient's 
network; put differently, section 4 obligates recipients of 
reimbursement funds to certify to the removal of all covered equipment 
and services from their network, then provides a means by which to 
replace such equipment and services through reimbursement. While 
providers' participation in the Reimbursement Program is not mandatory, 
the Secure Networks Act requires the Commission to mandate removal of 
covered equipment and services by any provider who does choose to 
participate.
    17. The Commission also rejects International Technology and Trade 
Associates, Inc. (ITTA) and Huawei's arguments that the Communications 
Act does not provide the Commission legal authority to adopt its 
remove-and-replace rule. ITTA argues that the proposed requirement is 
beyond the Commission's authority under section 254 of the 
Communications Act. Huawei argues that the section 254(b) principles 
upon which the Commission must ``base policies for the preservation and 
advancement of universal service'' do not include the promotion of 
national security or equipment regulation applied to a subset of USF 
recipients. Conditioning the receipt of USF support on removal of 
covered equipment and services, however, ensures against the 
substantial security risks associated with such equipment and services 
and thereby promotes access to ``quality'' advanced telecommunications 
and information services. Moreover, while Huawei contends that section 
201(b) alone does not empower the Commission to enact rules in the 
absence of other authority under the Communications Act, it finds that 
the combination of these Communications Act provisions grants the 
Commission the authority to adopt a remove-and-replace requirement for 
ETCs receiving USF support.
    18. The Commission limits the scope of the remove-and-replace 
requirement to equipment and services on the Covered List. This 
approach aligns with the scope of equipment and services that Congress 
intended to restrict under the statute, as both the section 3 
prohibition and the section 4 reimbursement eligibility apply to 
equipment and services added to the Covered List. The Commission's 
rules on publication of the Covered List also incorporate notice for 
updates to the covered equipment or services listed, and entities will 
therefore have notice with regard to the scope of equipment or services 
they are subsequently required to remove and replace. The Commission 
finds that using the Covered List better aligns compliance with removal 
and replacement obligations to the administration of the Reimbursement 
Program and creates a bright-line determination for ETCs receiving USF 
support and reimbursement recipients to easily identify equipment and 
services to remove and replace from their networks. Furthermore, the 
Commission ties administration of the remove-and-replace requirement to 
the administration of the Reimbursement Program; therefore, it finds it 
will not be overly burdensome for entities, including smaller carriers, 
to identify, remove, replace, and discard covered equipment and 
services from their networks.
    19. Consistent with the provisions of the 2019 NDAA and Secure 
Networks Act, this rule represents a reasoned modification of the 
Commission's proposal in the 2019 Supply Chain Further Notice. There, 
the Commission proposed to require the removal of all equipment and 
services from covered companies. To synchronize the requirement the 
Commission adopts with the scope of covered equipment and services 
under the Secure Networks Act, however, the Commission slightly 
modifies its rule from its original proposal. The Commission concludes 
upon review of the record in this proceeding and after considering the 
Secure Networks Act that its proposal risks being too broad and 
excessively burdensome. The Commission's slightly modified and more 
narrowly tailored rule instead supports a risk-based assessment of 
problematic equipment and services within a network, consistent with 
the approach taken in section 889 of the 2019 NDAA and ultimately 
incorporated into section 2 of the Secure Networks Act, rather than the 
proposed blanket prohibition to all equipment and services produced by 
a manufacturer. The Covered List is limited to such equipment and 
services that the federal government, including the U.S. intelligence 
community, has identified as national security threats and that are 
placed at the most vulnerable spots in the Commission's communications 
infrastructure. Equipment and services on the Covered List are also 
limited to certain operational functions such as routing or redirecting 
user data traffic, causing an advanced communications service 
provider's network to be remotely disrupted, or otherwise posing an 
unacceptable risk to United States national security. Secure Networks 
Act sections 2(b)(2)(A)-(C). As such, concerns raised in the record 
regarding inclusion of Lifeline end-user equipment are moot because 
they are outside the scope of the Secure Networks Act. Therefore, the 
Commission believes limiting the remove-and-replace requirement to

[[Page 2908]]

equipment and services on the Covered List advances its goals of 
protecting its communications networks and supply chains from those 
products that pose a risk to our national security while minimizing the 
financial, administrative, and logistical efforts entities may face in 
compliance. The Commission clarifies that, while there is nothing in 
Sec.  54.9 of the Commission's rules that restricts the use of private 
funds to purchase, obtain, maintain, improve, modify, or otherwise 
support any equipment or services produced or provided by any company 
posing a national security threat to the integrity of communications 
networks or the communications supply chain, nor is there anything in 
Sec.  54.10 of the Commission's rules that restricts the use of private 
funds to purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service, or maintain any covered 
communications equipment or service previously purchased, rented, 
leased, or otherwise obtained, as identified and published on the 
Covered List, compliance with the remove-and-replace mandate requires 
ETCs receiving USF support and recipients of Reimbursement Program 
funding to remove all covered equipment and services from their network 
operations and to certify compliance. To the extent there are equipment 
or services not on the Covered List but fall within the scope of Sec.  
54.9, entities may continue to use private funds to purchase, obtain, 
maintain, improve, modify, or otherwise support such equipment or 
services.
    20. USTelecom posits that the Commission's proposal to implement 
section 3 of the Secure Networks Act ``stands to create a significant 
gap in the scope of equipment that could be subject to replacement 
funding'' vis-[agrave]-vis the scope of covered equipment under the two 
prohibitions. According to USTelecom, the Commission should either 
reconsider the scope of Sec.  54.9 of the Commission's rules to match 
the definition of ``covered communications equipment or service'' 
required by the Secure Networks Act, or it should clarify that 
equipment subject to Sec.  54.9 is also eligible for funded removal and 
reimbursement under the Reimbursement Program; otherwise, USTelecom 
argues, failure to do either creates a de facto unfunded mandate.
    21. The Commission disagrees with USTelecom that the interplay of 
Sec.  54.9 and Reimbursement Program eligibility amounts to an unfunded 
mandate. First, section 3 of the Secure Networks Act does not, in 
itself, require the removal and replacement of covered equipment or 
services; it merely prohibits prospective use of certain Federal 
subsidies to purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service, or maintain any covered 
communications equipment or service previously purchased, rented, 
leased, or otherwise obtained on the Covered List. Second, the 
requirement to remove and replace, like the prohibition under Sec.  
54.10 and the equipment and services eligible for reimbursement under 
the Reimbursement Program, only applies to the products and services 
contained on the Covered List. To the extent there is equipment or 
service that is prohibited under Sec.  54.9 but is not on the Covered 
List, it is not subject to the remove-and-replace requirement, and thus 
that rule does not constitute an unfunded mandate. The Commission does, 
however, acknowledge that the creation of two prohibitions will 
establish different parameters for designation of covered equipment or 
services.
    22. The Commission disagrees with arguments raised by commenters 
that mandating removal and replacement is impermissibly retroactive or 
amounts to a regulatory taking. The Commission addresses these two 
concerns raised in the record in turn.
    23. Pursuant to the Administrative Procedure Act (APA), in the 
absence of express statutory authority to promulgate retroactive rules, 
the Commission may only adopt legislative rules that apply 
prospectively. The Commission notes that the Secure Networks Act 
requires it to publish a list of any covered communications equipment 
or service produced by an entity that poses an unacceptable risk to 
national security or the security and safety of United States persons 
and to establish a reimbursement program for removal of such equipment 
purchased, rented, leased, or otherwise obtained before August 14, 
2018. The Secure Networks Act requires the Commission to publish the 
list of covered communications equipment or services to its website and 
to complete a rulemaking to implement the reimbursement program by 
March 12, 2021. To the extent the rules adopted in this document serve 
to implement the rulemaking requirement of the Secure Networks Act, 
this APA limitation is inapplicable. A rule may be found to be 
impermissible as primarily retroactive ``if it impairs rights a party 
possessed when he acted, increases a party's liability for past 
conduct, or imposes new duties with respect to transactions already 
completed.'' Additionally, a rule may be impermissible for secondary 
retroactivity, in which rules affect the future legal consequence of 
past or ongoing actions. Where a rule has secondary retroactive effect, 
it is permissible unless such effect is unreasonable. And the Takings 
Clause of the Fifth Amendment prohibits the government from taking 
``private property . . . for public use, without just compensation.'' 
Notably, and relevant to any takings arguments, Commission and judicial 
precedent have established that carriers have no vested property 
interest in USF support.
    24. Retroactivity Claims. Huawei argues that the Commission's 
proposal to mandate replacement of covered equipment and services would 
impose primary retroactivity and therefore be invalid under the APA 
and, further, would impose secondary retroactivity by adversely and 
unreasonably altering future legal consequences of past actions. 
According to Huawei, requiring removal of equipment and services 
installed before the adoption of Sec.  54.9 of the Commission's rules 
would ``constitute a sanction on Huawei's past conduct'' and restrict 
its ability to supply equipment and services to telecommunications 
carriers. LATAM argues that a remove-and-replace requirement raises 
concerns about the retroactive impact of regulatory actions on private 
investment. PRTC states that the requirement raises the same 
prospective application concerns that the Commission found would not be 
impacted in the 2019 Supply Chain Order, 85 FR 230, January 3, 2020, 
when adopting Sec.  54.9 of the Commission's rules, thus contradicting 
the Commission's arguments in that Order that the rule would only be 
applied prospectively and not require carriers to remove or stop using 
existing equipment or services.
    25. The Commission disagrees with commenters that the remove-and-
replace requirement constitutes impermissible primary retroactivity. 
Huawei claims that the rule attaches a ``new disability'' or ``new 
burdens'' to past conduct. In support of its argument, Huawei cites 
National Mining Association, where the D.C. Circuit found that a 
Department of Interior rule was invalid because it imposed a ``new 
disability,'' namely permit ineligibility, based upon ``pre-rule 
violations by mine operators over whom permit operators acquired 
control before the rule's effective date.'' It also cites Rock of Ages 
Corp., where the Second Circuit found a new regulation from the 
Department of Labor to be impermissibly retroactive because it required 
on-going inspections at blasting sites beginning a year before the 
effective date of the regulation that imposed the inspection 
requirement,

[[Page 2909]]

thus impermissibly imposing new duties on already completed 
transactions. Huawei also cites AMC Entertainment, Inc., where the 
Ninth Circuit invalidated an agency's interpretation of a rule which 
would have required retrofitting movie theaters before the agency 
announced its interpretation. The Commission finds that Huawei's 
interpretation of these cases is incorrect as applied to the 
requirement at hand. The standard for primary retroactivity assesses 
whether a rule has changed the past legal consequences of past actions. 
Unlike the factual circumstances in the cases cited by Huawei, the 
remove-and-replace requirement does not attach a ``new disability'' 
before the rule goes into effect. Carriers will not be penalized for 
having covered equipment or services in their networks before the 
removal and replacement rule is effective, nor do they have to take 
action prior to the rule taking effect; therefore, the rule has no 
primary retroactive effect. Thus, while it ``changes the legal 
landscape,'' it has not ``rendered past actions illegal or otherwise 
sanctionable,'' even as to the carriers themselves--much less those 
from whom the carriers purchase equipment not governed by such rules, 
such as Huawei. As to Huawei, the new rules have no application at all. 
They apply only to carriers, requiring them to replace Huawei equipment 
only if and after reimbursement to the carriers for doing so becomes 
available. While collateral effects on its contracts with such carriers 
would not be cognizable as primary retroactivity under NCTA, in any 
event Huawei makes no claim that the Commission's action could result 
in any carrier claims against Huawei, much less any damages in support 
of any such claims notwithstanding the reimbursement program.
    26. While the effect of the removal and replacement rule may alter 
the future legal consequence to certain carriers of having certain 
equipment or services in a network by making what was once permissible 
equipment and services to operate now impermissible to retain going 
forward, ``[i]t is often the case that a business will undertake a 
certain course of conduct based on the current law, and will then find 
its expectations frustrated when the law changes.'' Such action ``has 
never been thought to constitute retroactive lawmaking, and indeed most 
economic regulation would be unworkable if all laws disrupting prior 
expectations were deemed suspect.''
    27. The Commission similarly finds Huawei's arguments regarding 
secondary retroactivity unpersuasive. Huawei argues that to compel 
equipment replacement would impose unreasonable secondary retroactivity 
on carriers and suppliers ``because such a requirement would adversely 
and unreasonably alter the future legal consequences of past actions'' 
and render covered equipment ``essentially useless.'' However, 
``secondary activity--which occurs if an agency's rule affects a 
regulated entity's investment made in reliance on the regulatory status 
quo before the rule's promulgation--will be upheld if it is 
reasonable.'' First, the Commission disagrees with Huawei that this 
rule constitutes secondary retroactivity. The remove-and-replace 
requirement imposes a future obligation, albeit on existing property, 
by mandating removal, as well as replacement, of covered equipment and 
services; replacement can only occur once removal--a future action--
occurs. As such, this requirement imposes a legal consequence on an 
action to occur at a future date, i.e., should a reimbursement 
recipient or an ETC receiving USF support retain covered equipment or 
services in its networks past the certification requirement deadline 
for the rule. And the Commission, in creating the Reimbursement 
Program, has sought to mitigate any harm that the future effect of the 
rule may incur.
    28. Second, even assuming arguendo that the removal-and-replacement 
requirement amounts to secondary retroactivity, it is reasonable and 
therefore permissible. The threat that the presence of covered 
equipment and services in the Commission's communications networks 
poses to our national security necessitates the prompt removal and 
replacement of such equipment, thereby supporting that this requirement 
is not arbitrary and capricious. Courts have held that the Commission 
``is entitled to reconsider and revise its views as to the public 
interest and the means needed to protect that interest, though it must 
give a sufficient explanation of that change.'' The rule the Commission 
adopts facilitates the transition away from such identified equipment 
and services that threaten our nation's security to ensure entities are 
able to offer secure, reliable, and quality service over their 
networks. To that end, the Commission's rule is no different than other 
regulatory requirements which require regulated entities to upgrade 
their networks for the improved provision of services. For example, the 
Commission may require a common carrier subject to section 214 of the 
Communications Act to ``provide itself with adequate facilities for the 
expeditious and efficient performance of its service'' which, for some 
carriers, could require an upgrade of their equipment. Similarly, the 
remove-and-replace rule requires recipients of reimbursement funding 
and ETCs receiving USF support--which are, in fact, common carriers--to 
effectively upgrade their networks by removing compromised products and 
services and thus improve the provision of quality services at just, 
reasonable, and affordable rates, in accordance with section 254 of the 
Communications Act.
    29. Third, providers may choose alternatives to removal and 
replacement of covered equipment and services to avoid compliance or 
avoid any perceived impact on private investment. Participation in the 
Reimbursement Program is voluntary; providers are under no obligation 
to accept reimbursement funding and the conditions associated with such 
support. Designation as an ETC, and the opportunity therefore to 
participate in USF programs, or acceptance of USF funds through those 
programs, is likewise voluntary, and providers that are currently 
designated as ETCs or that accept universal service funding may decline 
to participate in USF programs. To allow providers so inclined a 
reasonable opportunity to relinquish their ETC status or secure 
alternative funding to USF support, ETCs choosing this option must do 
so within one year after WCB issues a Public Notice announcing the 
acceptance of applications filed during the initial filing window to 
participate in the Reimbursement Program. A state commission, or the 
Commission in the case of a common carrier providing telephone exchange 
service and exchange access that is not subject to the jurisdiction of 
a state commission, shall permit an ETC to relinquish its designation 
as such in any area served by more than one ETC. This time period is 
consistent with the amount of time that carriers participating in the 
Reimbursement Program and for ETCs receiving USF support that retain 
their designation or continue to accept universal service funding have 
to comply with the remove-and-replace requirement. Finally, the 
Commission reiterates that the applicability of this rule is within the 
bounds of its legal authority and, as such, only extends to recipients 
of reimbursement funds and ETCs receiving USF support; beyond this, the 
rule imposes no restriction on Huawei's ability to supply equipment and 
services to telecommunications carriers and other providers who are not 
subject to this requirement. ETCs that choose to forego their ETC 
designation

[[Page 2910]]

or disclaim USF support may avoid any impact that this rule may have on 
future legal consequences of past actions. While the rule no doubt may 
frustrate a business that undertook a course of conduct based on 
current law, only to have its expectations frustrated, when the law 
changes, ``this has never been thought to constitute retroactive 
lawmaking.''
    30. Furthermore, the Commission disagrees with PRTC's assertion 
that the rule it adopts raises the same concerns regarding prospective 
application that the Commission addressed when adopting Sec.  54.9 in 
the 2019 Supply Chain Order. In that Order, the Commissions found that 
because the rule restricting use of USF support was prospective in 
effect, it therefore did ``not prohibit the use of existing services or 
equipment already deployed or in use.'' That finding is not 
contradicted here. The prohibition contained in Sec.  54.9 of the 
Commission's rules prospectively limits the use of future USF support, 
whereas the requirement to remove and replace obligates recipients of 
reimbursement funding and ETCs receiving USF support to take action to 
remove covered equipment and services from their networks. Not only do 
the regulations impose different obligations, but, as stated in this 
document, the future receipt of USF support is not mandatory. 
Therefore, under both rules, affected entities may decline to accept 
USF support and avoid compliance with either rule.
    31. Unconstitutional Taking. LATAM argues that the Commission's 
remove-and-replace requirement raises regulatory takings concerns. PRTC 
contends that this requirement raises the same regulatory takings 
arguments that the Commission addressed in the 2019 Supply Chain Order. 
Huawei also argues that mandating removal and replacement would violate 
the Takings Clause and due process ``because carriers have vested 
property interests in already-purchased equipment, and mandating its 
removal would deny all economically beneficial or productive use or all 
economically viable use of the equipment.''
    32. The Commission finds the arguments from LATAM, PRTC, and Huawei 
unpersuasive. As explained in the 2019 Supply Chain Order, universal 
service support recipients do not have a property interest in 
maintaining particular levels of support notwithstanding changes in the 
program rules. Nor is the Commission persuaded that the effects on 
carriers' existing equipment represents a regulatory taking under the 
Penn Central framework. In assessing whether such a taking has 
occurred, courts consider: (1) The economic impact of the regulation on 
the regulated party; (2) the extent to which the regulation interferes 
with the regulated party's reasonable investment-backed expectations; 
and (3) the ``character'' of the government action. First, the economic 
impact on carriers is minimal, especially for reimbursement recipients 
who are eligible to receive reimbursement for reasonable costs incurred 
to remove, replace, and dispose of covered equipment through the 
Reimbursement Program. For those ETCs receiving USF support that do not 
receive reimbursement funding, the impact to replace covered equipment 
and services should not be severe because larger entities, who would 
otherwise be ineligible for reimbursement, are less likely to have 
covered equipment or services in their networks and otherwise have more 
opportunity to bear the cost of any such replacement due to their size. 
Second, the rule should not upend reasonable investment-backed 
expectations, as providers have been aware of the designation of 
certain products and manufacturers as covered equipment or services 
since the passage of the 2019 NDAA in 2018. And over the last decade, 
Congress and the Executive Branch have repeatedly stressed the 
importance of identifying and eliminating potential security 
vulnerabilities in communications networks and their supply chains. 
Third and finally, the requirement does not amount to a physical 
invasion of the property, especially when there is recourse for 
entities to relinquish their ETC designation or forego receiving future 
USF support in order to avoid any consequence of the rule upon physical 
property.
    33. As an alternative basis for the Commission's conclusion, it is 
not persuaded that the regulatory takings precedent represents the 
appropriate manner of analyzing its action here. In particular, the 
restriction applies only as a condition on a provider's continued 
participation in the federal universal service program, including 
receipt of compensation from the federal universal service support 
mechanisms. However, recipients of Reimbursement Program funding are 
prohibited from using funding, including private funds to purchase, 
rent, lease, or otherwise obtain any covered communications equipment 
or service. Even assuming arguendo that the restriction resulted in 
some effect on providers' property interest in their existing 
equipment, there is a sufficient nexus and proportionality between the 
restriction and the providers' participation in the USF programs. The 
restriction on use of universal service support for equipment and 
services that pose an ongoing security risk has a clear nexus to the 
Commission's legitimate concerns, as explained in the 2019 Supply Chain 
Order. By targeting the providers' actions only insofar as they would 
be using federal universal service support in a manner that perpetuates 
a security risk, the restriction is appropriately proportional to 
address that harm.
    34. Separately, the Commission observes that these arguments only 
focus on the removal of the equipment and disregard the support 
provided for the replacement of the equipment and the availability of 
``just compensation'' through reimbursement appropriations. Eligibility 
for providers of advanced communications service to participate in the 
Reimbursement Program is expansive, and the vast majority of affected 
entities required to remove and replace covered equipment and services 
under the Commission's rule by virtue of their continued receipt of 
universal service support will be eligible to receive reimbursement. 
Where recipients of reimbursement funding do have a property interest 
in the covered equipment the Commission requires them to remove, the 
Reimbursement Program offers just compensation.
    35. In the 2019 Supply Chain Further Notice, the Commission 
proposed making the remove-and-replace requirement contingent on the 
creation of a reimbursement program that would help ``mitigate the 
impact on affected entities, and in particular small, rural entities.'' 
Commenters supported this approach. Accordingly, the Commission will 
proceed as proposed and make compliance with the removal obligation 
that will coincide with the implementation of the Reimbursement 
Program, which the Commission separately establishes in the following. 
Specifically, the Commission will require ETC recipients of USF support 
to certify that they have complied with its new rule requiring the 
removal of equipment and services on the Covered List. The first 
certification will be required one year after WCB issues a Public 
Notice announcing the acceptance of applications filed during the 
initial filing window to participate in the Reimbursement Program. Once 
the one-year period has expired, ETCs receiving USF support will then 
need to certify going forward that they are not using equipment or 
services identified on the Covered List before receiving USF support 
each funding year. Participants in the Reimbursement Program will not 
need to certify

[[Page 2911]]

compliance with the remove-and-replace rule until after the expiration 
of their removal, replacement, and disposal term.
    36. The Commission finds that adopting a uniform certification 
requirement and transition period will promote equitable compliance 
deadlines for all entities subject to the remove-and-replace 
requirement, regardless of their participation in the Reimbursement 
Program. Additionally, as the threat to our national security is 
immediate, it better advances the Commission's goals to require 
entities to remove and replace covered equipment and services 
consistent with the transition periods for reimbursement in the 
Reimbursement Program, rather than permitting them to wait until such 
products are at end-of-life or replaced in the ordinary course of 
business.
    37. The Secure Networks Act's requirements apply to 
``communications equipment or service'' and to providers of ``advanced 
communications service.'' Although the Secure Networks Act defines 
``communications equipment or service'' as ``any equipment or service 
that is essential to the provision of advanced communications 
service,'' it does not define which factors make equipment or service 
``essential.'' Similarly, the Secure Networks Act defines ``advanced 
communications service'' as the ``advanced telecommunications 
capability'' described in section 706 of the Telecommunications Act of 
1996, which encompasses ``high-speed, switched, broadband 
telecommunications capability that enables users to originate and 
receive high-quality voice, data, graphics, and video 
telecommunications using any technology,'' but does not define how the 
Commission should determine what constitutes ``high-speed, switched, 
broadband telecommunications capability.'' In the 2020 Supply Chain 
Second Further Notice, the Commission sought comment on how to 
interpret these two terms employed throughout the Secure Networks Act.
    38. Interpretations of ``communications equipment or service''. 
Consistent with the Commission's proposal in the 2020 Supply Chain 
Second Further Notice, it interprets ``communications equipment and 
service'' as defined in section 9(4) to include all equipment or 
services used in fixed and mobile broadband networks, provided they 
include or use electronic components. Included in the definition of 
``communications services'' is software and firmware used in broadband 
networks. This interpretation is consistent with Commission precedent 
regarding software's potential security risk. Also included in this 
definition is any optical switching equipment or services that include 
or use electronic components. The Commission believes that all 
equipment or services that include or use electronic components can be 
reasonably considered essential to broadband networks, and it further 
believes that the Commission's definition will provide a bright-line 
rule that will ease regulatory compliance and administrability. The 
Commission's proposed definition received support from several 
commenters in the record, who agreed that it provides regulatory 
certainty and as one commenter explained, ``would make it universally 
clear for compliance purposes.'' RWA also supports the definition 
because it ``provides the FCC with the flexibility it needs as 
technology evolves so that regulations do not lag behind technological 
developments.''
    39. The Commission rejects arguments that it should interpret 
``communications equipment or service'' more broadly or narrowly. 
Although the Commission agrees with CCA that it ``needs not adopt a 
cramped interpretation in order to implement the [Reimbursement] 
Program,'' the definition is appropriately tailored because it provides 
clear and simple guidance to regulated parties while still covering any 
equipment and service that could potentially pose a threat to national 
security. The Commission's decision to include in the definition of 
communications equipment or services any equipment or service that 
includes or uses electronic components does not alter or modify the 
statutory language, but instead interprets it in a way so as to ``most 
accurately reflect[ ] the broad participant pool Congress intended for 
the program.''
    40. Alternatively, CTIA's argument that the Commission's definition 
is ``unduly broad'' conflates its interpretation of ``communications 
equipment or service'' with the separate inquiry in section 2(b)(2) of 
the Secure Networks Act. Section 2(b)(2) provides that, relying solely 
on determinations made by a list of enumerated sources, the Commission 
shall publish on the Covered List communications equipment or service 
that meet specific criteria. CTIA would read out the difference between 
``communications equipment or service'' in section 9(4) of the Secure 
Networks Act and section 2(b)(2), which limits the Covered List, to 
communications equipment and services that possess certain 
capabilities. CTIA proposes to ``narrow the scope of the 
`communications equipment or service' '' because ``not all equipment 
subcomponents are essential,'' and asks the Commission to ``develop a 
risk-based analysis relevant to the core layer, distribution layer, and 
access layer.'' The Commission disagrees because the Secure Networks 
Act already provides a definition for the subset of communications 
equipment and services that have been subjected to the section 2(b)(2) 
review. Section 9(5) defines ``covered communications equipment or 
service'' as ``any communications equipment or service that is on the 
[Covered List] . . . ,'' and, thus, subject to the section 2(b)(2) 
criteria. These factors, which determine which pieces of equipment or 
service should be considered ``covered communications equipment and 
services,'' and thus must be published on the Covered List, do not 
apply to the definition of ``communications equipment and services.''
    41. Definition of ``advanced communications service.'' Consistent 
with the Commission's proposal in the 2020 Supply Chain Second Further 
Notice, it interprets ``advanced communications service'' for the 
purposes of the Secure Networks Act to include services with any 
connection of at least 200 kbps in either direction. No commenter 
opposed this definition. This interpretation had unanimous support in 
the record and is consistent with the Commission's historic 
interpretation of section 706 of the Telecommunications Act. The 
Commission acknowledges that it has encouraged providers of advanced 
communications service to offer broadband service at greater speeds and 
adjusted over time its definition of advanced telecommunications 
capability in its annual Broadband Deployment Reports. However, the 
Commission's interpretation in this proceeding covers a broader array 
of equipment and services, consistent with congressional intent to 
identify and remove insecure equipment and, therefore, it believes 
establishing a standard that captures this broader number of providers 
is appropriate. Using the standard will maximize program participation 
to include providers with older, legacy technology.
    42. The Commission agrees with Dell that its interpretation ``would 
ensure that insecure equipment is not left in our nation's 
interconnected broadband networks.'' The 200 kbps threshold is a 
familiar benchmark to current providers of advanced communications 
services, as it matches the definition of ``broadband services'' the 
Commission uses to determine which facilities-based broadband providers 
must file the

[[Page 2912]]

Commission's FCC Form 477 and which helps determine the availability of 
advanced communications services throughout the country. The Commission 
does not modify the definition of ``advanced communications service'' 
for any other purposes other than interpreting the Secure Networks Act. 
Using this standard will also allow the Commission to leverage 
available information on FCC Form 477 filers to verify applicant 
eligibility.
    43. Section 2(a) of the Secure Networks Act directs the Commission 
to publish, no later than March 12, 2021, a list of covered 
communications equipment and services (Covered List). The Covered List, 
which will be publicly available, will serve as a reference for 
interested parties to indicate the communications equipment and 
services that certain providers must remove from their networks, as 
well as the equipment and services to which the section 3(a) 
prohibition applies, the communications equipment and services eligible 
for reimbursement pursuant to section 4, and the equipment and services 
that form the basis for the reporting requirements in section 5.
    44. Consistent with the clear direction in the Secure Networks Act 
and the Commission's proposal in the 2020 Supply Chain Second Further 
Notice, the Commission will publish on its website the Covered List of 
communications equipment or services determined to pose an unacceptable 
risk to the national security of the United States or the security and 
safety of United States persons. Section 2(c) of the Secure Networks 
Act states that the ``Commission shall place'' on the Covered List 
``any communications equipment or service that poses an unacceptable 
risk to the national security of the United States or the security and 
safety of United States persons based solely on one or more of the 
following determinations,'' and then lists four sources for such 
determinations:
     ``A specific determination made by any executive branch 
interagency body with appropriate national security expertise, 
including the Federal Acquisition Security Council'';
     ``A specific determination made by the Department of 
Commerce pursuant to Executive Order No. 13873 . . . relating to 
securing the information and communications technology and services 
supply chain'';
     ``The communications equipment or service being covered 
telecommunications equipment or services, as defined in section 
889(f)(3)'' of the 2019 NDAA; or
     ``A specific determination made by an appropriate national 
security agency.'' The Act defines ``appropriate national security 
agency'' to include the Department of Homeland Security, the Department 
of Defense, the Office of the Director of National Intelligence, the 
National Security Agency, and the Federal Bureau of Investigation.
    45. Requirement to accept determinations. Consistent with the 2020 
Supply Chain Second Further Notice, the Commission interprets 
Congress's use of the words ``shall place'' to mean it has no 
discretion to disregard determinations from these enumerated sources. 
Huawei agrees, and stated in its comments that ``the Secure Networks 
Act's use of the term `shall' provides the Commission no discretion'' 
when evaluating determinations for inclusion on the Covered List. The 
record supports the Commission's interpretation. For example, USTelecom 
contends that ``once one of the federal agencies, either enumerated or 
implied, make a granular determination about `covered equipment', the 
Commission is bound to accept it.'' Similarly, NCTA explains that 
``[the] Secure Networks Act did not grant the Commission plenary 
authority to regulate the communications network supply chain based 
upon its own assessment of national security risks posed by covered 
equipment and services.'' Thus, where there is a determination from one 
of these sources, the Commission must take action to publish or update 
the Covered List to incorporate communications equipment or services 
covered by that determination. While it is difficult for the Commission 
to calculate the national security benefits derived from removing 
covered communications equipment and services, the Secure Networks Act 
requires the Commission to rely on the judgment and expertise of those 
enumerated sources tasked with making this assessment.
    46. No deviation from enumerated sources. Consistent with the 
Commission's proposal in the 2020 Supply Chain Second Further Notice 
and the record, it interprets Congress' use of the word ``solely'' in 
section 2(c) to mean the Commission can accept determinations only from 
these four categories of sources. ``In taking action under subsection 
(b)(1), the Commission shall place on the list any communications 
equipment or service that poses an unacceptable risk to the national 
security of the United States or the security and safety of United 
States persons based solely on one or more of the following 
determinations . . . .'' This interpretation is shared by multiple 
commenters, including USTelecom, NCTA, NTCA, CTIA, and Huawei.
    47. Determinations from any executive branch interagency body with 
appropriate national security expertise. The Secure Networks Act 
directs the Commission to rely on ``a specific determination made by 
any executive branch interagency body with appropriate national 
security expertise, including the Federal Acquisition Security 
Council'' to accept determinations. The Commission includes in this 
definition two cross-government groups: Team Telecom and the Committee 
on Foreign Investment in the United States (CFIUS), as these executive 
branch interagency bodies routinely provide expert advice to the 
Commission on national security-related questions. The members of Team 
Telecom are the Secretary of Defense, the Attorney General, the 
Secretary of Homeland Security, and the head of any other executive 
department or agency, or any Assistant to the President, as the 
President determines appropriate. The Executive Order establishing Team 
Telecom explained that Team Telecom was created to ``assist the FCC in 
its public interest review of national security and law enforcement 
concerns that may be raised by foreign participation in the United 
States telecommunications services sector.'' The Executive Order 
creating CFIUS authorized it to conduct inquiries ``with respect to the 
potential national security risk posed by a transaction.''
    48. The Commission has no discretion to ignore determinations from 
CFIUS and Team Telecom because they are plainly ``executive branch 
interagency bodies with appropriate national security expertise.'' For 
example, Team Telecom and the economic agencies (Department of 
Commerce, U.S. Trade Representative, and Department of State), recently 
recommended in 2018 that the Commission deny China Mobile USA's section 
214 application, finding that allowing China Mobile USA to ``offer 
telecommunications services as a common carrier between the United 
States and international countries . . . would pose substantial and 
unacceptable national security and law enforcement risks'' because 
China Mobile USA is ``subject to exploitation, influence, and control 
by the Chinese Government.'' The Commission assessed this 
recommendation as part of its public interest analysis of the pending 
application and concluded that ``significant national security and law 
enforcement harms would arise from granting China Mobile USA an

[[Page 2913]]

international section 214 authorization'' and decided determined that a 
``grant of the application would result in substantial and serious 
national security and law enforcement risks.'' And the Commission 
recently adopted rules streamlining the process by which it 
``coordinates with [Team Telecom] for assessment of any national 
security, law enforcement, foreign policy, or trade policy issues 
regarding certain applications filed with the Commission.''
    49. The Commission therefore disagrees with CTIA and NTCA that 
findings from Team Telecom or CFIUS ``are not structured to make 
determinations of general supply chain risk,'' because regardless of 
their structure, the Commission must incorporate any determinations 
they make into the Covered List. Huawei argues that relying on Team 
Telecom and CFIUS is unnecessary ``given the involvement of the 
agencies that comprise CFIUS and Team Telecom in other relevant bodies 
identified in the Secure Networks Act.'' But that argument fails to 
recognize that section 2(c)(1) of the Secure Networks Act specifically 
includes executive branch interagency bodies with appropriate national 
security expertise. The Commission also disagrees with CTIA's claim 
that determinations made by the [Federal Acquisition Security Council] 
should not ``result in automatic listing of items on the Covered List'' 
because the ``FASC does not operate in a public fashion.'' The Secure 
Networks Act specifically lists the Council as an executive branch 
interagency body with national security expertise, and the Commission 
has no authority to disregard Congress's clear direction. Moreover, any 
additions the Commission makes to the Covered List will be made public.
    50. Determinations from the Department of Commerce. The Secure 
Networks Act directs the Commission to rely on determinations made by 
the Department of Commerce. Executive Order No. 13873 grants the 
Secretary of Commerce the authority to prohibit any transaction of any 
information and communications technology or service where the 
Secretary, in consultation with other relevant agency heads, determines 
that the transaction: (i) Involves property in which foreign country or 
national has an interest; (ii) includes information and communications 
technology or services designed, developed, manufactured, or supplied 
by persons owned by, controlled by, or subject to the jurisdiction or 
direction of a foreign adversary; and (iii) poses certain undue risks 
to the critical infrastructure or the digital economy in the United 
States or certain unacceptable risks to U.S. national security or U.S. 
persons. In November 2019, the Department of Commerce commenced a 
rulemaking to implement Executive Order No. 13873. The proposed rule 
would authorize the Secretary to make a preliminary determination to 
prohibit or mitigate certain transactions, subject to a notice period 
before the Secretary issues a final determination.
    51. Pursuant to this statutory requirement, the Commission will 
incorporate any final determinations from the Department of Commerce 
and add them to the Covered List once they are published in the Federal 
Register. Although CTIA contends that ``Commerce's implementation of 
the 2019 Supply Chain E.O. is replete with concerns about breadth and 
unpredictability,'' the Secure Networks Act does not permit the 
Commission the discretion to alter or ignore Department of Commerce 
determinations. Furthermore, administrative and judicial remedies are 
available should there be any disagreement with the Department of 
Commerce's implementation of its authority under the Secure Networks 
Act to make determinations, and those have no bearing here. The 
Commission will, therefore, comply with its statutory obligation to 
incorporate determinations from the Department of Commerce's proceeding 
into the Covered List.
    52. Determinations from the 2019 NDAA. The third enumerated source 
for determinations is found in section 889(f)(3) of the 2019 NDAA. Each 
subpart of section 889(f)(3) contains determinations. Section 889(f)(3) 
of the 2019 NDAA defines ``covered telecommunications equipment or 
services'' to include ``(A) telecommunications equipment produced or 
provided by Huawei or ZTE Corporation (ZTE); (B) for the purpose of 
public safety, security of government facilities, physical security 
surveillance of critical infrastructure, and other national security 
purposes, video surveillance and telecommunications equipment produced 
by Hytera Communications Corporation (Hytera), Hangzhou Hikvision 
Digital Technology Company (Hikvision), or Dahua Technology Company 
(Dahua); [and] (C) telecommunications or video surveillance services 
provided by such entities or using such equipment.'' Additionally, 
section 889(f)(3)(D) provides that covered telecommunications equipment 
or services includes ``[t]elecommunications or video surveillance 
equipment or services produced or provided by an entity that the 
Department of Defense, in consultation with the Director of National 
Intelligence or the Director of the Federal Bureau of Investigation, 
reasonably believes to be an entity owned or controlled by, or 
otherwise connected to, the governments of [the People's Republic of 
China].''
    53. As the Commission explained in the 2020 Supply Chain Second 
Further Notice, the 2019 NDAA establishes four sources of 
determinations. The first is telecommunications equipment produced or 
provided by Huawei or ZTE capable of the functions outlined in sections 
2(b)(2)(A)-(C) of the Secure Networks Act. The Commission ``shall 
place'' on the Covered List ``any communications equipment or service'' 
``if, based exclusively on the determinations'' under section 2(c), 
such equipment or service poses an unacceptable risk to the national 
security of the United States and the security and safety of United 
States persons'' and is ``capable'' of ``(A) routing or redirecting 
user data traffic or permitting visibility into any user data or 
packets that such equipment or service transmits or otherwise handles; 
(B) causing the network of a provider of advanced communications 
service to be disrupted remotely; or (C) otherwise posing an 
unacceptable risk to the national security of the United States or the 
security and safety of United States persons.'' The Commission 
disagrees with NCTA and Huawei, which argue that the Commission must 
limit the scope of its designation because section 889(a)(2)(b) of the 
2019 NDAA limits the restriction on the procurement of ``covered 
telecommunications equipment or services'' to equipment and services 
that can ``route or redirect user data traffic or permit visibility 
into any user data or packets that such equipment transmits or 
otherwise handles.'' This restriction to only certain types of 
equipment and services, however, applies only to section 889(a)(1) and 
does not extend to the definition section in section 889(f)(3). Nor 
does the restriction in section 889(b)(3)(B), which limits the scope of 
the prohibition on federal agency spending to equipment capable of 
routing or permitting network visibility, support NCTA or Huawei's 
argument. That restriction specifically applies only to subsection (b), 
not section 889(f). Congress explicitly limited the scope of its 
procurement restrictions to Huawei and ZTE equipment in subsections (a) 
and (b) of the 2019 NDAA to equipment

[[Page 2914]]

capable of routing or permitting network visibility, but did not 
include such a limitation in paragraph 889(f)(3), which governs the 
determination the Commission must incorporate onto the Covered List. To 
limit the NDAA determination to equipment capable of routing or 
permitting network visibility would both ignore the plain text of the 
NDAA and read section 2(b)(2)(C) out of the Secure Networks Act, which 
lists the capabilities of communications equipment or service that 
warrant inclusion on the Covered List. The Commission will thus place 
on the Covered List the determination found in section 889(f)(3)(A), 
that is, ``telecommunications equipment produced or provided by Huawei 
or ZTE'' capable of the functions outlined in sections 2(b)(2)(A), (B), 
or (C) of the Secure Networks Act.
    54. The second determination the Commission will incorporate from 
the 2019 NDAA is video surveillance and telecommunications equipment 
produced by Hytera, Hikvision, and Dahua capable of the functions 
outlined in section 2(b)(2)(A)-(C) of the Secure Networks Act. 
Consistent with the Commission's proposal from the 2020 Supply Chain 
Second Further Notice, it will incorporate onto the Covered List such 
equipment from Hytera, Hikvision, and Dahua, ``to the extent it is used 
for public safety or security,'' capable of the functions outlined in 
sections 2(b)(2)(A), (B), or (C) of the Secure Networks Act.
    55. The third determination the Commission incorporates from the 
2019 NDAA is ``[o]ther telecommunications or video surveillance 
services produced or provided by Huawei, ZTE, Hytera, Hikvision, and 
Dahua or using such equipment'' that are capable of the functions 
outlined in section 2(b)(2)(A)-(C) of the Secure Networks Act. Finally, 
the Commission will also include on the Covered List 
``telecommunications or video surveillance equipment'' that the 
Department of Defense ``reasonably believes to be an entity owned or 
controlled by, or otherwise connected to, the government of'' China, 
but it is unaware of any such determination by the Department of 
Defense at this time.
    56. Determinations from appropriate national security agencies. 
Consistent with the Commission's proposal in the 2020 Supply Chain 
Second Further Notice, because it is required to incorporate a specific 
determination made by an appropriate national security agency, the 
Commission will include in the definition of ``an appropriate national 
security agency'' any sub-agencies of the enumerated agencies provided 
in section 9(2) of the Secure Networks Act. The only party that 
commented on this subject, USTelecom, agrees that ``sub-agencies of 
enumerated `appropriate national security agenc[ies]' should qualify 
[to make determinations under section 2(c)].''
    57. Form of determinations. The Secure Networks Act grants the 
Commission no discretion to disregard determinations from any of these 
four enumerated sources. Although the Commission recognizes that each 
source may follow a different procedure to arrive at the conclusion 
that equipment or services, or classes of equipment or services, pose 
an unacceptable security risk, it nevertheless must incorporate their 
decisions into the Covered List. Accordingly, the Commission rejects 
CTIA's argument that the transparency of the originating source should 
control what kind of deference it gives to a national security 
determination, and Huawei's argument that an determination should only 
be incorporated if it identifies ``particular pieces or categories of 
equipment.'' Congress granted the Commission no authority to dictate to 
other agencies how to arrive at their determinations, and granted it no 
discretion to disregard or modify these determinations.
    58. Consistent with the Commission's proposal from the 2020 Supply 
Chain Second Further Notice and the text of the Secure Networks Act, it 
will publish, update, or modify the Covered List without providing 
notice or opportunity to comment. Section 2(a) of the Secure Networks 
Act states the Commission ``shall publish on its website [the Covered 
List]'' and section 2(d) states the Commission ``shall periodically 
update the [Covered List.]''. As the Commission stated in the 2020 
Supply Chain Second Further Notice, it reads this language ``to be 
mandatory--precluding us from altering the list beyond the specific 
updates (all tied to changes in section 2(c) determinations) required 
by its terms.'' Because the Commission is statutorily obligated to 
update the Covered List in light of new or modified determinations, it 
needs not provide notice before updating the Covered List to reflect 
new or modified determinations. Accordingly, when one of the enumerated 
sources makes a new or modified determination, the Commission will 
update the Covered List without first providing notice or seeking 
comment on these changes. To provide clear guidance for affected 
providers, however, the Public Safety and Homeland Security Bureau 
(PSHSB) will issue a Public Notice each time the Covered List is 
updated. The Secure Networks Act's section 3(a)(1) prohibition and 
section 5 reporting requirement will then apply to the communications 
equipment and services added to the Covered List 60 days after 
publication of the updated Covered List.
    59. Because this notice process is based on the clear language of 
the Secure Networks Act, the Commission disagrees with commenters who 
argue this process to update the Covered List fails to provide proper 
notice for affected parties. Section 2(a) of the Secure Networks Act 
tasks the agency with publishing the Covered List no later than March 
13, 2021. In taking action to publish this list, Congress clearly 
directs the agency to rely ``solely'' on the determinations from 
external sources. The Act then requires the Commission to enforce the 
provisions of the Act, including section 3(a)'s prohibition that 
applies to items on the Covered List 60 days after their inclusion. The 
text of the Secure Networks Act indicates Congress intended for an 
expedited regulatory process by establishing procedures ``so clearly 
different from those required by the APA that is must have intended to 
displace them.''
    60. The Commission also disagrees with commenters who advocate for 
a notice period in addition to the one already provided by the Secure 
Networks Act to ``ensure that the Commission has an accurate factual 
basis upon which to make the technical determination required by the 
Act.'' For example, Huawei argues the notice period is crucial to 
``ensure that appropriate due process protections are provided and that 
companies have the opportunity to respond to allegations and provide 
information relevant to the analyses required by the Secure Networks 
Act before the Commission places any equipment or services on the 
Covered List.'' Huawei contends that notice and comment ``from relevant 
stakeholders regarding the technical capabilities of equipment is a 
critical step for the Commission to conduct the analyses section 
2(b)(2)(A) and (B) require.'' But under the Secure Networks Act, the 
Commission merely accepts the determination from the enumerated source 
and then add to the Covered List all communications equipment or 
service from that determination that is capable of the functions 
outlined in section 2(b)(2)(A)-(C). The Commission does not conduct its 
own analysis of the national security threat the equipment or services 
identified by these enumerated sources pose to the communications 
supply chain; the Secure Network Act requires the Commission to be 
deferential to the

[[Page 2915]]

source agency providing the determination. In addition, there is no 
need to solicit public comment when the Commission performs no 
technical analysis prior to including equipment or services on the 
Covered List.
    61. To the extent necessary, the Commission also finds good cause 
to deviate from the standard rulemaking or formal adjudication process 
when publishing or updating the Covered List in response to 
determinations. As the Commission tentatively found in the 2020 Supply 
Chain Second Further Notice, ``the Commission's placement of the 
equipment or service on the Covered List . . . is a non-discretionary, 
ministerial act.'' Because the Secure Networks Act provides the 
Commission no discretion when incorporating determinations onto the 
Covered List, its action is not subject to the notice and comment 
provisions of the APA. While the Commission expects that the source of 
the determination will either provide some opportunity for notice and 
comment prior to making the determination or have a justifiable reason, 
such as valid national security concerns, for deviating from this 
process, regardless of the process provided by the source of the 
determination, the Commission has no discretion to deviate from its 
role to publish and update the Covered List. When an enumerated source 
makes a determination that communications equipment or services pose an 
unacceptable risk to the national security of the United States or the 
security and safety of United States persons, the Commission will 
include it on the Covered List without seeking comment.
    62. When the Commission publishes or updates the Covered List, it 
will do so in response to a new or modified determination from an 
agency specifically enumerated by the Secure Networks Act. The 
Commission itself changes or creates no new rule when doing so. Whether 
the determination originated from a process where the opportunity for 
notice and comment was present is irrelevant to the ministerial 
function the Commission performs by updating the Covered List. The 
Commission accordingly rejects NTCA's suggestion that it should use its 
designation process under Sec.  54.9 of the Commission's rules in the 
Secure Networks Act designation process, as that view is untethered 
from the statutory requirements. The Commission therefore rejects 
arguments to the contrary, as inconsistent with and undermining the 
statutory process.
    63. Moreover, inclusion on the Covered List does not mean providers 
are immediately prohibited from using the communications equipment--the 
Act's prohibition applies 60 days after the equipment or services are 
included on the Covered List. Similarly, such communications equipment 
or service must be reported pursuant to the reporting requirement in 
section 5 of the Secure Networks Act 60 days after the communications 
equipment or service has been placed on the Covered List. When updated, 
the PSHSB will issue a public notice indicating that the Covered List 
has been updated. Providers, manufacturers, and other interested 
parties will then have 60 days' notice before the prohibition and 
reporting requirement take effect and may in that time period seek 
whatever relief they believe is appropriate.
    64. The Commission also disagrees with commenters who believe it 
should implement a notice period to allow time for industry to provide 
feedback to the Commission regarding potential effects of adding 
communications equipment and services to the Covered List. For example, 
NCTA believes the Commission should implement a ``notice and interim 
transition period prior to placement of new equipment or services on 
the list.'' Under this program, the Commission would allow industry to 
``apprise the Commission of any potential impacts of its proposed 
updates or seek clarification regarding models of equipment or 
components that would be covered by the update.'' Dell argues that the 
Commission should seek ``confidential industry advice from trusted 
domestic technology companies . . .'' in order to ``establish the level 
of specificity that is required to determine the threat posed by 
equipment or service[s].'' Because the prohibition on the use of 
federal subsidies will not take effect until 60 days after the 
equipment or service's inclusion on the Covered List, the Act already 
provides a time period for industry to review and take appropriate 
action. Moreover, any interim period proposal ignores the plain 
language of the Secure Networks Act. If a designated government agency 
determines that communications equipment or services pose a threat to 
national security of the safety and security of United States persons, 
the Commission has no discretion and must add this equipment or service 
to the Covered List. The Commission rejects Huawei's arguments to the 
contrary, as they assume a degree of discretion it simply lacks under 
the statute.
    65. Section 2(b) of the Secure Networks Act states that the 
Commission ``shall place'' on the Covered List ``any communications 
equipment or service'' that (1) ``is produced or provided by any 
entity'' ``if, based exclusively on the determinations'' from section 
2(c), ``such equipment or service poses an unacceptable risk to the 
national security of the United States and the security and safety of 
United States persons'' and (2) is ``capable'' of ``(A) routing or 
redirecting user data traffic or permitting visibility into any user 
data or packets that such equipment or service transmits or otherwise 
handles; (B) causing the network or a provider of advanced 
communications service to be disrupted remotely; or (C) otherwise 
posing an unacceptable risk to the national security of the United 
States or the security and safety of United States persons.'' The 
Commission anticipates that some determinations will list specific 
communications equipment or services that ``pose[ ] an unacceptable 
risk to the national security of the United States and the security and 
safety of United States persons'' and others will list general 
categories or classes of equipment that pose such a risk. In the case 
of the former, the Commission will incorporate these national security 
determinations onto the Covered List automatically. With the latter, 
the Commission will incorporate these determinations onto the Covered 
List to the extent the class or category of equipment or service 
identified is ``capable'' of the 2(b)(2)(A)-(C) criteria.
    66. Specific determinations based on the section 2(b)(2)(C) 
criteria. If a determination indicates that a specific piece of 
equipment or service poses an unacceptable risk to the national 
security of the United States and the security and safety of United 
States persons, the Commission will automatically include this 
determination on the Covered List. The Commission takes this approach 
because of the plain language in section 2(b)(2)(C) which lists, among 
other equipment or service capabilities mandating inclusion on the 
Covered List, whether the equipment or service poses an unacceptable 
risk to the national security of the United States or the security and 
safety of United States persons. If an enumerated source has already 
performed this analysis as part of its determination, the only action 
the Commission needs to take is to incorporate this determination onto 
the Covered List. The Commission notes that USTelecom agrees with this 
simple process because, when a national security determination makes a 
``granular determination about `covered equipment' the Commission is 
bound to accept it.'' The Commission's role is

[[Page 2916]]

limited to serving as ``the custodian of such determinations.''
    67. The Commission rejects Huawei's arguments that section 
2(b)(2)(C) should be interpreted more narrowly. Huawei argues the canon 
of surplusage dictates that, should the Commission automatically 
include equipment or services that have been explicitly deemed a 
national security threat by an enumerated source, it would read out of 
the statute the technical analysis found in sections 2(c)(2)(A) and 
(B). But it is Huawei's reading that gives no meaning to section 
2(b)(2)(C), which requires inclusion on the list of any communications 
equipment or services subject to a national security determination if 
it ``otherwise posing an unacceptable risk to the national security of 
the United States or the security and safety of United States 
persons.'' Huawei then claims a different canon, ejusdem generis, 
requires the Commission to use section 2(b)(2)(C) only to modify 
equipment subject to sections 2(b)(2)(A) and (B), but that would again 
would essentially read section 2(b)(2)(C) out of the statute. These 
arguments center around Huawei's contention that, by incorporating onto 
the Covered List specific determinations of particular pieces of 
equipment or services, the Commission is disregarding sections 
2(b)(2)(A) and (B) because it would neglect to conduct a required 
analysis of the capabilities of equipment and service it includes on 
the Covered List. Those sections play an important role in determining 
which specific pieces of equipment or services belong on the Covered 
List when the Commission receives a more general determination. But 
when a determination covers a specific piece of equipment or service 
and the agency has indicated that such equipment or service poses a 
national security risk, the Commission is obligated to include it on 
the Covered List, particularly because one of the three capabilities 
that warrant inclusion on the list is whether the equipment or service 
is capable of ``otherwise posing an unacceptable risk to the national 
security of the United States or the security and safety of United 
States persons.'' The Commission therefore rejects Huawei's argument 
that it claims the Secure Networks Act gives the Commission a ``broad, 
roving license'' to make national security decisions. Section 
2(b)(2)(C) provides that ability to other agencies or Congress. The 
Commission's actions in this scenario are non-discretionary and 
ministerial. If the determination is specified to a particular piece of 
communications equipment or service, the Commission has no discretion 
to exclude that determination from the Covered List.
    68. Determinations identifying broader classes or categories of 
equipment or services. In the 2020 Supply Chain Second Further Notice, 
the Commission sought comment on how best to incorporate determinations 
that are made at ``different levels of granularity.'' Because the 
Commission will rely on determinations from other government agencies 
and sources, not every determination will be conveyed with the same 
level of specificity. When the Commission identifies a broader 
determination from a section 2(c) source that a class or category of 
communications equipment or service poses an unacceptable national 
security risk, the Commission will publish it on the Covered List to 
the extent the equipment or service identified is capable of the 
section 2(b)(2)(A)-(C) criteria. The Commission believes this procedure 
is best viewed through the lens of the determination the Commission 
received from section 889(f)(3)(A) of the 2019 NDAA. Congress provided 
the Commission with the determination that all ``telecommunications 
equipment produced or provided by Huawei or ZTE C (or any subsidiary or 
affiliate of such entities)'' poses a threat. This broader 
determination refers a class of equipment or service--
telecommunications equipment produced or provided by Huawei or ZTE--but 
did not specify which specific pieces of communications equipment or 
services to add to the Covered List. In this case, and likewise when 
the Commission receives similarly broad determinations in the future, 
it will include on the Covered List ``telecommunications equipment 
produced by Huawei or ZTE that is capable of (A) routing or redirecting 
user data traffic or permitting visibility into any user data or 
packets that such equipment or service transmits or otherwise handles, 
(B) causing the networks of a provider of advanced communications 
service to be disrupted remotely, or (C) otherwise posing an 
unacceptable risk to the national security of the United States or the 
security and safety of United States persons.''
    69. This method for incorporating broader classes of equipment and 
services into the Covered List relies on the expertise and 
determinations of enumerated sources, and is supported by CTIA and 
USTelecom, which argue for a ``whole-of-government approach, led by DHS 
and supported by Commerce.'' By adopting this approach and continuing 
to be deferential to the enumerated sources making the determination, 
the Commission will ``continue to work closely with Executive Branch 
entities with expertise and responsibilities concerning 
telecommunications security, including supply chain security.''
    70. The Commission disagrees with commenters who argue that more 
general determinations should not trigger inclusion on the Covered 
List. Huawei commented that ``the specified agencies must identify 
particular pieces or categories of equipment that, in their view, 
`pose[ ] an unacceptable risk.'' Huawei believes that because the 
Secure Networks Act does not define ``specific,'' the Commission must 
use the ordinary meaning of the word, which is understood as 
``constituting or falling into a specifiable category, restricted to a 
particular individual, situation, relation, or effect; free from 
ambiguity.'' Thus, Huawei asserts that the references to ``specific 
determinations'' in section 2(c) mean that only determinations as to 
individual types of equipment or services trigger the Commission's 
obligations to include such equipment or services on the Covered List. 
Huawei argues that ``[g]eneral guidance or mere expressions of concern 
regarding particular manufacturers or types of equipment does not 
constitute a `specific determination' upon which the Commission can 
rely.'' The Commission disagrees. The Commission interprets the Secure 
Networks Act to require ``specific determinations'' to have a level of 
specificity sufficient to allow the Commission to incorporate the 
determination onto the Covered List. Should the Commission identify a 
determination, for example, that failed to indicate the source or type 
of communications equipment or service that the originating source 
found potentially insecure, it would be unable to incorporate this 
generic determination onto the Covered List. If, however, the 
originating source identifies a class or category of communications 
equipment or service, even at a broad level, such a determination 
provides the Commission enough information to include it on the Covered 
List. Furthermore, with more general determinations, the Commission 
does not place on the Covered List, for example, ``all Huawei equipment 
or services.'' Instead, the Commission limits inclusion on the Covered 
List to a specifiable category of Huawei equipment or services capable 
of the functions outlined in 2(b)(2)(A)-(B) or that otherwise poses an 
unacceptable

[[Page 2917]]

risk to the national security of the United States or the security and 
safety of United States persons. When the Commission identifies a 
determination, the Covered List will include the determination, subject 
to the 2(b)(2)(A)-(C) criteria.
    71. The Secure Networks Act does not require the Commission to 
conduct a technical analysis of the communications equipment or service 
prior to including it on the Covered List. Section 2(b) merely states 
that, upon receipt of a determination from an enumerated source, the 
Commission ``shall place'' on the Covered List only the communications 
equipment and service from that determination that is capable of the 
functions outlined in section 2(b)(2)(A)-(C). That is precisely what 
the Commission will do. Accordingly, the Commission rejects the 
arguments of commenters that contend it should conduct various 
technical analyses. The Covered List, as NTCA requests, will serve as a 
``single source for covered [ ] equipment and service.'' To the extent 
NTCA argues for additional specificity, it is not required by the text 
of the Secure Networks Act.
    72. Definition of ``capable'' for incorporation on the Covered 
List. Section 2(b) requires the Commission to place on the Covered List 
communications equipment or service if, among other requirements, it is 
``capable'' of the functions or impacts set forth in section 
2(b)(2)(A)-(C). Consistent with the Commission's proposal in the 2020 
Supply Chain Second Further Notice, it interprets ``capable'' for the 
purposes of fulfilling section 2(b)(2)(A)-(C), to include equipment or 
service that can possibly perform these functions, even if the subject 
equipment or service is not ordinarily used to perform the functions in 
section 2(b)(2)(A)-(C). The Commission takes this approach because it 
is unwilling to risk the deployment of unsecure equipment or services 
that would occur if it defined ``capable'' too narrowly. The term 
``capable'' as presented in the Secure Networks Act is ambiguous and 
the Commission interprets it in light of the goals of the statute.
    73. Although the Commission disagrees with Huawei that its decision 
to define ``capable'' broadly is ``misguided,'' it agrees that a piece 
of equipment or service's capabilities ``refers to the present 
functionality of equipment or a service'' as that is the ordinary 
interpretation of that word. The Commission's interpretation of 
``capable'' tracks the word's definition in the Merriam-Webster 
Dictionary--``having traits conducive to or features permitting 
something.'' In patent law, where ``a claim [ ] recites capability and 
not actual operation, an accused device `need only be capable of 
operating' in the described mode.'' ``The meaning of `capable of' is 
explained as . . . `the ability to perform.'' For the purposes of 
including communications equipment and services on the Covered List, 
the Commission defines ``capable'' to include the current possible uses 
of equipment or service. The Commission's approach does not extend this 
definition to the functionalities of communications equipment or 
services should they be modified in the future. The Commission's broad 
definition of ``capable'' in this context alone does not, as Huawei 
suggests, unreasonably extend the definition to equipment or services 
``potentially having such attributes after modification.'' The 
Commission merely declines to narrow the scope of communications 
equipment or service's capability to the equipment or service's 
marketed use. To do otherwise would allow potentially insecure 
equipment or service to remain in communications networks.
    74. Clarifying inclusion on the Covered List. The Commission also 
sought comment in the 2020 Supply Chain Second Further Notice on a 
process to allow interested parties to clarify whether a specific piece 
of communications equipment or a specific service is included on the 
Covered List. Some commenters argue that the Commission should consider 
mechanisms to provide transparency on which specific pieces of 
communications equipment and service are included on the Covered List. 
As with any Commission proceeding, providers of advanced communications 
service and other interested parties may seek a declaratory ruling to 
``terminat[e] a controversy'' or ``remov[e] uncertainty.'' To the 
extent a party is uncertain whether a specific piece of equipment is 
subject to a determination under section 2(c) of the Secure Networks 
Act, the party may seek a declaratory ruling. That said, the Commission 
lacks discretion to modify a determination under section 2(c), and it 
is skeptical that any equipment that an enumerated source has 
determined ``poses an unacceptable risk to the national security of the 
United States or the security and safety of United States persons'' 
would not also, at a minimum, ``pos[e] an unacceptable risk to the 
national security of the United States or the security and safety of 
United States persons.''
    75. Once the Commission publishes the Covered List, PSHSB will 
issue a public notice indicating that the Covered List has been revised 
and that the section 3(a) prohibition and section 5(a) reporting 
requirement will take effect for communications equipment and service 
on the Covered List 60 days later. Pursuant to the Secure Networks Act, 
the Commission ``shall periodically update the [Covered List] to 
reflect changes in the determinations described [in section 2(c)].'' If 
one of the sources for determinations changes or modifies a 
determination, the Commission will update the Covered List accordingly. 
The Commission notes, however, that it has no discretion to reverse or 
modify determinations from other sources as the statute requires the 
Commission to accept and incorporate the determinations as provided. 
Should interested parties seek to reverse or modify the scope of one of 
these determinations, the party should petition the source of the 
determination.
    76. Section 2(d) of the Secure Networks Act concerns how the 
Covered List should be updated to reflect new or revised determinations 
of covered communications equipment or services. Congress directed the 
Commission to ``periodically update the [Covered List] to reflect 
changes in the determinations described [in section 2(c)].'' In 
addition, the Commission ``shall monitor the making or reversing of the 
determinations'' from the enumerated sources in order to ``place 
additional communications equipment or services on the [Covered List] 
or to remove communications equipment and services from such list.'' If 
any of these determinations are reversed, the Commission ``shall remove 
such equip- ment or service from the list . . .'' unless the equipment 
or service's inclusion on the Covered List is based on a determination 
received from another enumerated source. Section 4(f) of the Secure 
Networks Act, discussed infra, provides options for when communications 
equipment or services are removed from the Covered List following an 
update or revocation of any determination. Secure Networks Act Sec.  
4(f). Finally, the Commission must notify the public for every twelve-
month period during which the Commission does not update the Covered 
List. The Commission must indicate that ``no updates were necessary 
during such period to protect national security or to address changes 
in the determinations . . . .''
    77. No updates to Covered List unless Commission receives new or 
modified determination. In the 2020 Supply Chain Second Further Notice, 
the Commission sought comment on ``the process to update and publish 
the Covered List and solicit ideas and best

[[Page 2918]]

practices for ways to maintain the Covered List and keep it current and 
readily available.'' The Commission interpreted the Secure Networks Act 
to not give its discretion to make any updates to the Covered List 
outside of determinations made by the sources enumerated in section 
2(c). The Commission noted that the text of section 2(d) ``does not 
appear to give it discretion not to update the Covered List based on 
changes in determinations, and hence it would be unclear what purpose a 
notice period would serve.''
    78. The Commission believes the best interpretation of the Secure 
Networks Act is that it does not grant its authority to update the 
Covered List outside of these national security determinations, and 
thus, the Commission will make no changes or modifications to the 
Covered List unless it identifies a new or modified determination of 
covered communications equipment or services from any of the sources 
identified in section 2(c) of the Act. If one of the sources issues a 
new or modified determination, the Commission will update the Covered 
List to reflect this change. Once the Commission updates the Covered 
List, the PSHSB, in conjunction with WCB, will issue a Public Notice 
declaring that the Covered List has been updated to reflect a new or 
modified determination. This approach is consistent with NCTA's desire 
for the Commission to ``provide clear and prominent notice of decisions 
to remove vendors of equipment items from the Covered List.'' If the 
Commission identifies no updates or modifications in any twelve-month 
period, PSHSB shall issue a Public Notice indicating that ``no updates 
were necessary during such period to protect national security or to 
address changes in the determinations . . . .''
    79. Section 3 of the Secure Networks Act prohibits funding from 
Federal programs made available to subsidize capital expenditures 
necessary for the provision of advanced communications service from 
being used to purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service, or maintain any covered equipment 
or service previously purchased, rented, leased, or otherwise obtained. 
Currently, Sec.  54.9 of the Commission's rules imposes a similar 
prohibition on the spending of USF support, yet broadly applies to 
equipment and services produced or provided by entities designated as 
posing a national security threat to the integrity of communications 
networks or the communications supply chain. In the 2020 Supply Chain 
Declaratory Ruling and Second Further Notice, 85 FR 47211, August 4, 
2020 and 85 FR 48134, August 10, 2020, the Commission found that Sec.  
54.9 substantially implements the prohibition under section 3 of the 
Secure Networks Act, but it nonetheless proposed a new rule, 
independent of Sec.  54.9, to align the Commission's rules with the 
scope of the prohibition found in the Secure Networks Act. The 
Commission sought comment on that proposal and an effective period of 
60 days after communications equipment or services are placed on the 
Covered List. The Commission also sought comment on the impact of the 
proposed rule on multiyear contracts or contracts with voluntary 
extensions between USF recipients and companies producing or providing 
communications equipment or services posing a supply chain security 
risk, if any such contracts exist.
    80. Consistent with the Commission's proposal in the 2020 Supply 
Chain Second Further Notice, it adopts a rule to enact section 3 of the 
Secure Networks Act by prohibiting the use of Federal subsidies made 
available through a program administered by the Commission and that 
provides funds to be used for the capital expenditures necessary for 
the provision of advanced communications service to purchase, rent, 
lease, or otherwise obtain any communications equipment or service, or 
maintain any covered communications equipment or service previously 
purchased, rented, leased, or otherwise obtained, and identified and 
published on the Covered List.
    81. The new rule the Commission adopts, codified at Sec.  54.10, 
prohibits the use of a Federal subsidy made available through a program 
administered by the Commission that provides funds for the capital 
expenditures necessary for the provision of advanced communications 
service to purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service identified and published on the 
Covered List, or maintain any such covered communications equipment or 
service previously purchased, rented, leased, or otherwise obtained. 
The Commission has interpreted section 3 of the Secure Networks Act as 
intending to apply to all universal service programs but not other 
Federal subsidy programs to the extent those programs may tangentially 
or indirectly involve expenditures related to the provision of advanced 
communications service. The Commission acknowledges that there will be 
two processes to designate equipment or services as prohibited from 
federal funding--one for the designation of an entity as posing a 
national security threat to the integrity of communications networks or 
the communications supply chain, and one for the designation of 
specific equipment and services through the Covered List process 
outlined in section 2 of the Secure Networks Act. Certain equipment or 
services may be subject to either or both the prohibition under Sec.  
54.9 of the Commission's rules and the new Sec.  54.10 prohibition 
enacting section 3 of the Secure Networks Act. Parties subject to these 
requirements are responsible for complying with both prohibitions, as 
applicable, and in accordance with any applicable effective dates. The 
Commission finds that the prohibitions in Sec. Sec.  54.9 and 54.10 of 
the Commission's rules are consistent with, and fully implement, 
section 3(a) of the Secure Networks Act. In the 2020 Supply Chain 
Declaratory Ruling, the Commission found that it satisfied the 
requirement to implement the section 3(a) prohibition within 180 days 
of enactment of the Secure Networks Act through its action in the 2019 
Supply Chain Order; therefore, the Commission's action has no bearing 
on section 3(b)'s implementation deadline. The new prohibition 
encompasses covered equipment and services found on or added to the 
Covered List, while the existing prohibition in Sec.  54.9 applies to a 
somewhat overlapping group of products or services from companies 
designated as posing a threat to national security. As the Commission 
stated in the 2020 Supply Chain Second Further Notice, the addition of 
Sec.  54.10 will grant the Commission two different designation 
processes, ``one for the designation of an entity, as currently 
provided by [Sec.  54.9 of] the Commission's rules, and another, more 
targeted process, for the designation of specific communications 
equipment and services per section 2 of the Secure Networks Act.'' The 
new prohibition further applies to any funding programs administered by 
the Commission made available to subsidize capital expenditures for the 
provision of advanced communications service, including any future USF 
programs, whereas Sec.  54.9 is limited to USF support. RWA recommends 
that the Commission apply the prohibition to both ``USF programs that 
fund capital expenditures and to USF programs that fund operational 
expenditures'' to encompass the broadest range of risky or compromised 
equipment. The Commission clarifies that, through both prohibitions 
under Sec. Sec.  54.9 and 54.10 of the Commission's rules, the rules 
apply, respectively, to both USF funds and to Federal subsidies 
administered by the

[[Page 2919]]

Commission that provide funds for capital expenditures used for the 
provision of advanced communications services, which it has interpreted 
to mean universal service programs. Both prohibitions apply to all 
universal service funding from all current USF programs. The Commission 
believes that this approach will comprehensively encapsulate the 
universe of products and services that pose a risk to our nation's 
communications systems and prohibit spending of public funds consistent 
with congressional intent.
    82. The two rules are intended to complement each other, and 
compliance should not impose additional burdens on providers of 
advanced communications service. CTIA raises concerns about the overlap 
of the two prohibitions, specifically that parties subject to both 
requirements are responsible for compliance with both prohibitions, and 
urges the Commission to ``promote consistency, pursue transparency, and 
work with agencies that have expertise on supply chain and national 
security.'' Although there is some overlap between the two 
prohibitions, the Commission believes that the rules are 
straightforward and transparent in their applicability to entities, 
funding, and equipment or services such that providers are able to 
comply. For example, the equipment and services designated under each 
rule will be published in accordance with the respective requirements 
(i.e., the Commission's website for Sec.  54.9, or the Covered List for 
Sec.  54.10) such that entities can identify which equipment or 
services are subject to each prohibition.
    83. CTIA urges the Commission to limit the new prohibition to 
subsidies under the USF programs, rather than expanding to include 
``other programs administered by the Commission that primarily support 
the provision of advanced communications services'' and requests that 
the rule explicitly state the limitation to USF. The Commission finds 
additional limitation would be misplaced given its previously stated 
interpretation of the statute and its applicability. Furthermore, the 
Commission is compelled by the clear and direct language of the statute 
to make the language of Sec.  54.10 potentially broader than USF 
programs. Section 3 of the Secure Networks Act applies only to Federal 
subsidies administered by the Commission used for capital expenditures 
necessary for the provision of advanced communications services which, 
as stated in the 2020 Supply Chain Declaratory Ruling, the Commission 
interprets to encompass universal service programs. Consistent with the 
2020 Supply Chain Declaratory Ruling, the Commission reiterates that 
the prohibition does not apply to the Interstate Telecommunications 
Relay Service (TRS) Fund, as the TRS Fund does not subsidize capital 
expenditures necessary for the provision of advanced communications 
services. However, to the extent Congress creates additional programs 
in the future that provide a Federal subsidy administered by the 
Commission that provides funds to be used for capital expenditures 
necessary for the provision of advanced communications services, they 
would appear to fall under the prohibition in section 3 of the Secure 
Networks Act, and it would expect that Sec.  54.10 would apply to those 
programs as well.
    84. Consistent with the Commission's decision not to grandfather 
existing contracts under Sec.  54.9 in the 2019 Supply Chain Order, the 
Commission also declines to grandfather existing contracts for 
equipment or services on the Covered List under Sec.  54.10 of the 
Commission's rules. Exempting or excluding covered equipment or 
services purchased under existing multiyear contracts would negate the 
purpose behind the Commission's rule in contravention of the clear and 
direct language in section 3 of the Secure Networks Act. Dell ``urge[s] 
the Commission to prioritize risk factors before contractual 
obligations,'' and the Commission believes its decision advances that 
directive. Furthermore, although NCTA supports grandfathering existing 
equipment acquired pursuant to multiyear contracts except in instances 
where the authorized Federal body making the risk determination cites 
compelling evidence of an ongoing threat to national security, the 
Commission finds that, given the process by which the referring 
agencies or entities make such determinations that trigger inclusion of 
equipment and services on the Covered List, it finds that there is 
compelling evidence that equipment and services on the Covered List do 
pose such a threat, and grandfathering is not warranted.
    85. NCTA urges the Commission to avoid an ``unfair retroactive 
effect'' by grandfathering existing equipment acquired pursuant to 
multiyear contracts in certain circumstances. The Commission disagrees 
with NCTA's assessment of the rule's effect. Section 3 of the Secure 
Networks Act does not, in itself, require a future action that 
generates a retroactive effect; it merely prohibits prospective use of 
certain Federal subsidies to purchase, rent, lease, or otherwise obtain 
any covered communications equipment or service, or maintain any 
covered communications equipment or service previously purchased, 
rented, leased, or otherwise obtained on the Covered List. As such, 
there can be no primary retroactivity in restricting the use of future 
Federal subsidies for covered equipment or services provided pursuant 
to existing contracts. Furthermore, the Commission relies on the 
presumption that, in passing the Secure Networks Act, Congress intended 
to apply section 3 to existing contracts absent manifest injustice. The 
Commission determines that the record does not support a finding of 
manifest injustice. Therefore, absent such a showing, the Commission 
declines to adopt a grandfathering exception to Sec.  54.10.
    86. Some commenters favor grandfathering existing equipment 
contracts in order to promote predictability and minimize network 
disruptions, and propose alternatives to allow for grandfathering in 
certain situations. For instance, CTIA suggests that rather than 
attempting to define ex ante what kinds of arrangements qualify for 
grandfathering, the Commission should ``exercise its discretion and 
work with the regulated community to build in permissible 
grandfathering that is consistent with fair process and sensible 
regulatory practice.'' NCTA further asks that the Commission clarify 
that ``where a provider has already been selected to provide services 
that receive USF support, the support will not end 60 days after 
equipment or services are added to the Covered List.''
    87. The Commission declines to adopt these alternative proposals. 
The Commission finds that the urgency of the threat that allowing 
covered equipment and services to remain in its communications networks 
poses to our national security outweighs the potential burdens 
associated with failure to grandfather or exempt certain contracts. 
Because such exemptions would create security loopholes to the 
effectiveness of the prohibition, the Commission rejects commenters' 
proposals to grandfather existing equipment contracts for covered 
equipment or services.
    88. Effective date. The prohibition on the use of Federal subsidies 
under Sec.  54.10 of the Commission's rules that the Commission adopts 
takes effect 60 days after any particular communications equipment or 
services are placed on the Covered List, consistent with the Secure 
Networks Act. Furthermore, adopting a 60-day period between placement 
on the Covered List and the effectiveness of the prohibition on funds 
appropriately balances the consideration of the

[[Page 2920]]

compelling national security interests to promptly remove insecure 
equipment and services from the Commission's networks against the 
burdens on advanced communications service providers to identify 
covered equipment and services and make any adjustments to alternative 
funding to effectuate the prohibition. The Commission will require 
recipients of universal service support from each of the four USF 
programs to certify that they have complied with its new rule 
prohibiting the use of Federal subsidies for equipment and services on 
the Covered List.
    89. Some commenters raise concerns about the 60-day period between 
when items are placed on the Covered List and when the prohibition 
under Sec.  54.10 takes effect, and many propose alternatives. NTCA 
suggests that providers continue receiving USF support until federal 
funding is available to reimburse for the cost of replacement or the 
provider replaces the equipment in the normal course of business. CCA 
urges the Commission to be mindful of the strains the current public 
health crisis has placed on small and rural wireless carriers and 
advocates for a transition timeline that allows carriers to demonstrate 
progress through milestones. NCTA proposes the creation of a safe 
harbor ``for providers that are making a reasonable, good-faith effort 
to transition away from newly-banned equipment but cannot meet the 60-
day removal timetable without significant disruptions to network 
operations or service delivery.''
    90. The Commission disagrees with these commenters' assessments of 
the impact of the 60-day effective date of the Sec.  54.10 prohibition 
and therefore declines to adopt their alternative proposals. First, 
setting the effective date of the prohibition at 60 days after covered 
equipment is placed on the Covered List is statutory, and the rule the 
Commission adopts codifies an effective date consistent with the 
statute. Second, the rule prohibits the use of Federal subsidies to 
purchase, rent, lease, or otherwise obtain covered communications 
equipment or service, or maintain covered communications equipment or 
service previously purchased, rented, leased, or otherwise obtained on 
the Covered List; it does not directly speak to a deadline to remove or 
replace that equipment. The Commission addresses issues regarding the 
transition periods for removal and replacement of covered equipment and 
services under the Reimbursement Program in this document. To the 
extent providers request a transition period to secure alternative 
funding, similar to the Commission's decision in the 2019 Supply Chain 
Order, it finds that there is a compelling interest in protecting our 
national security, which necessitates prompt implementation of the 
prohibition. Sec.  54.9 of the Commission's rules took effect 
immediately upon publication in the Federal Register because of the 
national security interests in moving expeditiously. The Commission is 
not granted the discretion to waive a statutory mandate; however, it 
believes 60 days is sufficient based on its experience with the 
effective date of Sec.  54.9. Therefore, the Commission finds that 60 
days is sufficient notice to prohibit spending of Federal subsidy 
funding on equipment and services added to the Covered List.
    91. The Commission in the 2019 Supply Chain Further Notice proposed 
a program to reimburse ETCs for reasonable transition costs associated 
with the removal and replacement of equipment and services produced or 
provided by entities posing a national security threat as designated by 
the process outlined in Sec.  54.9 of the Commission's rules. 
Subsequently, the President signed into law the Secure Networks Act 
requiring the Commission to establish the Reimbursement Program. WCB 
then released a public notice seeking comment on the applicability of 
the Secure Networks Act on the Commission's proposed reimbursement 
mechanism.
    92. The reimbursement program required by the Secure Networks Act 
largely mirrors the Commission's original proposal in purpose and 
process. Both are focused on reimbursing entities for the removal and 
replacement of equipment and services posing a national security risk. 
Both envision a reimbursement process focused on initial cost estimates 
and including procedures to protect against waste, fraud, and abuse. 
But there are also noticeable differences. For example, the Commission 
initially proposed limiting eligibility to ETCs, while the Secure 
Networks Act expands eligibility beyond ETCs to include all providers 
of advanced communications service with two million or fewer customers. 
The process for designating covered equipment and services also 
differs, which could change the scope of reimbursable expenses for the 
removal, replacement, and disposal of such equipment and services under 
the Commission's proposal versus the program required by Congress. The 
Commission concludes the Reimbursement Program effectively supersedes 
the Commission's original proposal, and it conforms it to the 
requirements set forth in the Secure Networks Act.
    93. The Commission now establishes, as directed by the Secure 
Networks Act, the Reimbursement Program to reimburse the costs 
reasonably incurred by providers of advanced communication services 
with two million or fewer customers to permanently remove, replace, and 
dispose of covered communications equipment and services from their 
networks. The Commission will allow eligible providers to obtain 
reimbursement to remove and replace older covered communications 
equipment with upgraded technology and will reimburse providers for 
certain transition expenses incurred prior to the creation of this 
program. The Commission requires program participants to submit 
estimated costs to receive funding allocations. Recipients can then 
obtain funding disbursements on a rolling basis upon a showing of 
actual expenses incurred.
    94. If aggregate demand exceeds available funding, the Commission 
will prioritize funding for ETCs and expenses for transitioning core 
networks over non-ETCs and non-core network transition expenses. 
Program recipients will have one year from the initial funding 
disbursement to complete the permanent removal, replacement, and 
disposal of covered communications equipment. The Commission may grant 
a single, general six-month extension for all recipients and/or 
individual extensions of time if circumstances warrant. The Commission 
also adopts a number of measures as directed by the Secure Networks Act 
to combat waste, fraud, and abuse, including the filing of status 
updates, spending reports, and a final certification, requiring 
documentation retention, audits, reviews and field inspections, and 
seeking the repayment of disbursed funds for violations of the Secure 
Networks Act and the Reimbursement Program rules in addition to taking 
other possible enforcement actions.
    95. Eligible Providers. As directed by section 4 of the Secure 
Networks Act, the Commission limits eligibility for the Reimbursement 
Program to providers of advanced communication service with two million 
or fewer customers. The Secure Networks Act identifies advanced 
communication service providers as providers of advanced 
telecommunications capability as defined in section 706 of the 
Telecommunications Act of 1996 (Telecommunications Act). Advanced 
telecommunications capability is defined in section 706 of the 
Telecommunications Act ``without

[[Page 2921]]

regard to any transmission media or technology, as high-speed, 
switched, broadband telecommunications capability that enables users to 
originate and receive high-quality voice, data, graphics, and video 
telecommunications using any technology.'' As Blue Danube correctly 
notes, the advanced communications service term in the statute is 
``straight forward.'' If Congress were to pass additional legislation 
defining eligibility for the reimbursement program, the Commission 
would modify its eligibility requirements.
    96. The Commission has historically interpreted providers of 
advanced telecommunications capability, and thus providers of advanced 
communications services, to mean facilities-based providers, whether 
fixed or mobile, with a broadband connection to end users with at least 
200 kbps in one direction. This standard is used by the Commission to 
identify providers required to report broadband deployment using the 
FCC Form 477. The few commenters addressing this issue generally 
support the use of this same speed threshold to determine providers of 
advanced communications service. Using this standard will maximize the 
pool of eligible applicants and help assist with the removal of 
insecure equipment that is older and slower than newer, more 
technologically up-to-date equipment from our Nation's interconnected 
networks.
    97. Separately, for purposes of the Reimbursement Program, a 
school, library or health care provider, or consortium thereof, may 
also qualify as a provider of advanced communications service, and 
therefore be eligible to participate in the Reimbursement Program, if 
it provisions facilities-based broadband connections of at least 200 
kbps in one direction to end users, which could include students, 
patrons, patients, or member institutions in the context of cooperative 
infrastructure sharing arrangements. This clarification addresses the 
concerns raised by Northern Michigan University as it seeks to remove 
and replace covered equipment from its LTE network that serves ``over 
15,000 NMU students, K-12 families, and community members.'' However, a 
school, library, or health care provider that merely purchases advanced 
telecommunications or information services and is not a facilities-
based network provider of services is not considered a provider of 
advanced communications services for purposes of the Reimbursement 
Program. Accordingly, the Commission disagrees with RWA's suggestion to 
interpret the statute to allow reimbursement eligibility for entities 
that only purchase but do not provide advanced communications services.
    98. The Commission also takes this opportunity to clarify the 
demarcation point between eligible and non-eligible advanced 
communications service providers, i.e., those with fewer than two 
million customers. The Secure Networks Act defines ``customers'' to 
mean ``with respect to a provider of advanced communications service--
(A) the customers of such provider'' as well as the ``customers of any 
affiliate . . . of such provider.'' The statute references the 
definition of ``affiliate'' contained in section 3 of the 
Communications Act, which reads ``a person that (directly or 
indirectly) owns or controls, is owned or controlled by, or is under 
common ownership or control with, another person.'' The definition of 
affiliate further states ``[f]or purposes of this paragraph, the term 
`own' means to own an equity interest (or the equivalent thereof) of 
more than 10 percent.''
    99. The Commission reads the phrase ``customers of such provider'' 
and ``customers of any affiliate'' as having more than one possible 
interpretation. The language could refer only to those customers 
purchasing advanced communications service or could refer to any 
customer of the provider or affiliate regardless of the service or 
product purchased. The accompanying House Report states ``[s]ection 4 
requires the FCC . . . to reimburse providers of advanced 
communications service with 2 million or fewer subscribers.'' This 
language suggests an intention to focus on the subscribers of the 
provider that purchase advanced communications service in determining 
eligibility. The House Report also states the Reimbursement Program is 
established ``to assist small communications providers with the costs 
of removing prohibited equipment and services from their networks.'' By 
limiting the meaning of ``customer'' to those purchasing advanced 
communications service, potentially a large company with a small number 
of advanced communications service customers could qualify for the 
Reimbursement Program. Given the overall intent of the program to 
assist with the removal of equipment and services posing a national 
security risk and the language in the House Report, the Commission 
chooses to interpret customer narrowly, which in turn will increase the 
pool of eligibility for the program. Accordingly, the Commission 
interprets ``customers of such provider'' and ``customers of any 
affiliate'' to mean those customers taking advanced communications 
service from the provider and its affiliates. A provider seeking to 
participate in the Reimbursement Program must have two million or fewer 
customers, as of the date its application is filed. If the provider's 
number of customers increases above two million after its application 
is filed, they will not lose their eligibility to participate in the 
Reimbursement Program by virtue of the customer increase.
    100. To identify customers of advanced communications service, 
providers must count those customers purchasing a service that includes 
a broadband connection with a speed of at least 200 kbps in one 
direction. The Secure Networks Act states an advanced communications 
service has the meaning given the term advanced telecommunications 
capability. The Commission has historically interpreted ``advanced 
telecommunications service'' to mean a service with a broadband 
connection of at least 200 kbps in one direction. Accordingly, the 
Commission directs providers to count customers of broadband service 
meeting or exceeding this speed threshold for purposes of program 
eligibility. A subscriber merely purchasing traditional plain old 
telephone service would therefore not count as a subscriber of advanced 
communications service.
    101. Lastly, to be eligible, the Secure Networks Act requires 
providers filing applications to make specific certifications per 
section 4(d)(4). Applicants must certify that ``as of the date of the 
submission of the application, the applicant--(i) has developed a plan 
for--(I) the permanent removal and replacement of any covered 
communications equipment or service that are in the communications 
network of the applicant as of such date; and (II) the disposal of the 
equipment or services removed . . . and has developed a specific 
timeline . . . for the permanent removal, replacement, and disposal of 
the covered communications equipment or services identified . . . , 
which timeline shall be submitted to the Commission as part of the 
application.'' The applicant must also certify on the date of its 
application's approval that it ``will not purchase, rent, lease, or 
otherwise obtain covered communications equipment or services, using 
reimbursement funds or any other funds (including funds derived from 
private sources); and . . . will consult and consider the standards, 
guidelines, and best practices set forth in the cybersecurity framework 
developed by the National Institute of Standards and Technology . . . 
in developing and tailoring the risk management practices

[[Page 2922]]

of the applicant.'' The Commission directs WCB to incorporate these 
certifications as part of the application submission process to ensure 
applicants are eligible for the Reimbursement Program.
    102. Covered Communications Equipment or Services. The Secure 
Networks Act allows eligible providers to seek reimbursement for 
expenses associated solely with the permanent removal, replacement, and 
disposal of ``covered communications equipment or services'' as 
designated per section 2(a) of the Secure Networks Act. Specifically, 
eligible providers may seek reimbursement funds to remove, replace, and 
dispose of ``covered communications equipment or services purchased, 
rented, leased or otherwise obtained'' before August 14, 2018 if on the 
initial list published by the Commission, or no later than 60 days 
after the Commission adds further equipment and services to the initial 
list. Recipients are prohibited from using reimbursement funds to 
remove, replace, or dispose of covered communications equipment or 
service purchased, rented, or leased or otherwise obtained after these 
statutory cutoff dates. The Commission has no discretion to deviate 
from the scope of covered communications equipment or services provided 
under the Secure Networks Act. Accordingly, to the extent the 
Commission's original proposal in the 2019 Supply Chain Further Notice 
suggested limiting eligibility to a broader or narrower category of 
equipment and services, it now instead follows the requirements 
contained in the Secure Networks Act.
    103. As proposed in the 2019 Supply Chain Further Notice, the 
Reimbursement Program will reimburse costs reasonably incurred for the 
removal, replacement, and disposal of covered equipment and services in 
accordance with the Secure Networks Act. The Commission notes that the 
Reimbursement Program does not modify rules that govern how universal 
service funds may be used in the various universal service programs. 
ETCs will still be required to certify, for example, that federal high-
cost support was used only for the provision, maintenance, and 
upgrading of facilities and services for which the support is intended. 
The reasonableness standard the Commission adopts is consistent with 
the standard applicable to the broadcast incentive auction 
reimbursement mechanism. This standard is also consistent with approach 
taken in the Emerging Technologies framework when assisting existing 
operators with relocation costs in transitioning to new facilities. A 
standard of reasonableness will provide the Commission with a sensible 
approach for evaluating reimbursement costs to help combat waste, fraud 
and abuse through the exclusion of excessive and otherwise unreasonable 
costs from the Reimbursement Program.
    104. The Secure Networks Act does not expressly establish a 
standard for evaluating costs for reimbursement. The statute simply 
requires the Commission to reimburse providers for the permanent 
removal, replacement, and disposal of covered communications equipment 
and services. The Commission therefore proposed to apply a standard of 
reasonableness when evaluating requests for reimbursement. One 
commenter, the Rural Wireless Broadband Coalition, urged the Commission 
to ``follow the principle'' of reimbursing any reasonable cost. Other 
commenters, while not engaging directly with the proposed 
reasonableness standard, implicitly supported this approach by 
commenting on the need for certainty in knowing upfront what expenses 
are reimbursable, advocating for the inclusion of various expenses as 
reasonable, and supporting use of the same standard as used in the 
broadcast incentive auction reimbursement mechanism.
    105. The Commission sees no reason to deviate from using a standard 
of reasonableness, as proposed, for purposes of the Reimbursement 
Program. First, using a standard of reasonableness will help guide 
objective determinations of whether to include or deny costs for 
reimbursement and ensure that excessive, unreasonable costs do not 
jeopardize the available funding needed by all participating providers 
to transition away from networks posing a national security risk. 
Second, by using an existing standard, the Commission can leverage its 
prior experience with the broadcast incentive auction reimbursement 
mechanism standard and the Emerging Technologies framework to benefit 
the Reimbursement Program. There already exists in the incentive 
auction context a Catalog of Expenses, identifying categories of 
expenses considered reasonable for purposes of reimbursement. The 
Commission can look to these efforts to assist its determinations and 
help identify the types of expenses considered reasonable during a 
transition process in implementing the Reimbursement Program. While the 
equipment and services replaced may differ, the same basic steps apply 
here, as in planning and implementing a network transition while 
attempting to minimize disruptions for customers/users. Lastly, using 
the existing standard provides regulatory consistency between similarly 
situated program participants of both the broadcast incentive auction, 
other wireless proceedings involving the relocation of existing 
operators, and the instant Reimbursement Program. A fundamental precept 
of administrative law is to treat similarly situated entities in a 
similar manner.
    106. The Commission will thus consider eligible for reimbursement 
costs reasonably incurred for the timely removal, replacement, and 
disposal of covered equipment and services obtained prior to the 
statutory cutoff dates. The Commission interpreted ``costs reasonably 
incurred'' in the broadcast incentive auction reimbursement mechanism 
context as requiring the reimbursement of ``costs that are reasonable 
to provide facilities comparable to those . . . reasonably replaced.'' 
The Commission has further interpreted ``[t]hese costs [to] include 
both `hard' expenses, such as new equipment and tower rigging, and 
`soft' expenses, including legal and engineering services.'' The 
Commission sees no reason to deviate from this model and will apply it 
to the instant Reimbursement Program. Although the Commission cannot 
forecast all types of reasonable expenses, it does provide guidance to 
help participants with their transition planning. The appropriate scope 
of ``costs reasonably incurred'' will necessarily be decided on a case-
by-case basis, and the Commission delegates authority to WCB to make 
reimbursement determinations and to finalize a catalog to help 
participants estimate their reimbursable costs.
    107. The Commission considers as reasonable replacement facilities 
comparable to the facilities in use by the provider prior to the 
removal, replacement, and disposal of covered communications equipment 
or service. The Commission recognizes, however, when replacing older 
technology that a certain level of technological upgrade is inevitable. 
Accordingly, the Commission will permit Reimbursement Program 
participants to obtain reimbursement for reasonable costs incurred for 
replacing older mobile wireless networks with fourth generation Long 
Term Evolution (4G LTE) equipment or service that are 5G ready.
    108. The reimbursement program is intended ``to assist small 
communications providers with the costs of removing prohibited 
equipment and services from their networks and replacing prohibited 
equipment with

[[Page 2923]]

more secure communications equipment and services.'' Language from the 
House Report demonstrates that Congress ``expects the Commission, when 
implementing regulations . . . to preclude network upgrades that go 
beyond the replacement of covered communications equipment or services 
from eligibility; however, [Congress] expects there to be a transition 
from 3G to 4G or even 5G-ready equipment in instances where equipment 
being replaced was initially deployed several years ago.''
    109. The Commission sought comment in the 2019 Supply Chain Further 
Notice on whether it should use the same ``comparability standard'' 
used in the broadcast incentive auction reimbursement mechanism. In the 
broadcast proceeding, the Commission said that reasonable reimbursement 
costs include ``costs that are reasonable to provide facilities 
comparable those that [an existing operator] had prior to the 
auction.'' The Commission further stated that it did ``not anticipate 
providing reimbursement for optional features beyond those already 
present'' but recognized when replacing older equipment that the new 
``equipment necessarily may include improved functionality.'' The 
Commission uses a similar comparable facilities standard when 
relocating incumbent operators under the Emerging Technologies 
framework. One commenter, the Rural Wireless Association, urged the 
Commission to ``closely mirror the structure used for the Broadcast 
Incentive Auction.'' Another commenter, Rise Broadband, said a 
comparability standard for replacement costs is essential. Otherwise, 
commenters generally favored allowing some level of technological 
upgrade, especially when replacing older technology that is unlikely to 
have a comparable replacement.
    110. Consistent with approach taken on equipment upgrades for the 
broadcast incentive auction, the Commission expects, as a general 
matter, eligible providers to ``obtain the lowest-cost equipment that 
most closely replaces their existing equipment.'' That said, the 
Commission recognizes the replacement of older legacy technology will 
inevitably require the use of newer equipment and services that have 
additional capabilities. Accordingly, consistent with the intent of 
Congress, the Commission will allow, and indeed encourage, eligible 
providers replacing third generation and older equipment to obtain 
reimbursement for the cost of 4G LTE replacement equipment that is 5G-
ready.
    111. The record indicates new equipment supporting older, second- 
and third generation wireless technology services is unavailable, and 
even acquiring such equipment and services on the secondary market is 
proving increasingly difficult and in some instances impossible. The 
reimbursement program is not limited to replacing covered equipment and 
services in wireless networks, but the Commission recognizes the 
initial focus is on the equipment and services provided by Huawei and 
ZTE, which is most often found with the provision of wireless services. 
Accordingly, while much of this discussion is focused on replacing 
wireless technology, the underlying rationale applies equally in the 
non-wireless context. And from a policy perspective, investing money on 
outdated and soon-to-be decommissioned equipment and service is of 
little benefit and an inefficient and wasteful use of Federal support. 
The Commission will therefore allow providers replacing older 
technology to obtain reimbursement for the cost of new replacement 
equipment that is 4G LTE compatible and is capable of subsequently 
being upgraded to provide 5G service. However, operators that elect 
``to purchase optional equipment capability or make other upgrades'' 
beyond those reasonably needed to replace existing equipment must do so 
using their own funds, consistent with the approach the Commission took 
in the broadcast incentive auction proceeding and the recent C-Band 
auction proceeding.
    112. By taking this approach on comparable facilities and 
technology upgrades, the Commission rejects alternative proposals for 
determining reimbursement amounts based on the value of the equipment 
being replaced. If, however, eligible providers are simply removing and 
disposing of covered equipment and service without replacement, e.g., 
simply shutting down an older network, then the Commission would 
consider reimbursing the provider for the cost of the depreciated value 
of the decommissioned equipment. For example, NTCH and NTCA suggested 
that to avoid the ``impossibility'' of evaluating what constitute 
appropriate replacements, the Commission should simply reimburse the 
original cost of the covered equipment and services plus an additional 
25%. This approach, however, may not result in providing sufficient 
reimbursement funding for providers if the cost of the replacement 
equipment exceeds the reimbursement support allocated to the recipient. 
In addition, the Commission finds PRTC's proposal to reimburse both the 
present-day value of the replaced equipment and the cost of the 
replacement equipment unreasonable, giving the provider a windfall and 
an unfair competitive advantage over other providers.
    113. The Commission next delegates to WCB the responsibility to 
develop and finalize a Catalog of Eligible Expenses and Estimated Costs 
(Catalog of Eligible Expenses) to inform the Reimbursement Program. The 
Secure Networks Act requires the Commission to ``develop a list of 
suggested replacements'' for covered equipment and services and for 
applicants to submit ``initial reimbursement cost estimate[s] at the 
time of application.'' The Commission is also required to ``take 
reasonable steps to mitigate the administrative burdens and costs 
associated with the application process, while taking into account the 
need to avoid waste, fraud, and abuse.'' In the broadcast incentive 
auction reimbursement mechanism, the use of a catalog to estimate 
relocation costs played a critical role in the successful processing of 
reimbursement applications. The Commission seeks to duplicate that 
success here by using a Catalog of Eligible Expenses as suggested in 
the record. The catalog will identify reimbursable costs with as much 
specificity as possible, provide guidance to entities seeking 
reimbursement, streamline the reimbursement process, and increase 
accountability. Listing in the catalog, however, is not a guarantee of 
reimbursement for any individual expense, and all claimed expenses are 
subject to review by the Commission staff to ensure each expense and 
request for reimbursement is reasonable.
    114. The Catalog of Eligible Expenses will also help the Commission 
and applicants satisfy the Secure Networks Act's requirements not only 
by helping applicants with transition planning and estimating costs for 
application submissions, but also with identifying potential 
replacement equipment and services and expediting the Commission's 
reimbursement request review process. As CCA points out, the removal, 
replacement and disposal of covered equipment and services in a mobile 
wireless network is a complex, multi-step process that is likely to 
encompass a range of expenses, including: Drive testing to determine 
baseline coverage; evaluating spectrum and backhaul capabilities; 
ordering new equipment; installing new network core and RAN equipment; 
potentially leasing space on or building new towers and

[[Page 2924]]

obtaining any associated permits and approvals; testing and optimizing 
the network; and migrating traffic and decommissioning covered 
equipment and services. Because there will likely be a range of 
expenses that could vary among providers, the Catalog of Eligible 
Expenses will be used to provide helpful guidance regarding the kinds 
and amounts of expenses that will be reimbursed. Accordingly, the 
Catalog of Eligible Expenses will not be a definitive list of all 
reimbursable expenses but a means to facilitate the reimbursement 
process. Given the importance of the Catalog of Eligible Expenses to 
the Reimbursement Program, Commission staff have already begun work to 
develop it, and the Commission expects to release it as soon as 
possible.
    115. The Commission next turns to the acceptable timing of costs 
incurred by providers to comply with the Commission's requirement. Some 
providers have already started the process to remove and replace 
problematic equipment from Huawei and ZTE from their networks. The 
Commission applauds these providers for proactively taking steps to 
increase the security of their networks notwithstanding the uncertainty 
of Federal government assistance. As such, the Commission will allow 
providers to obtain reimbursement for costs reasonably incurred prior 
to the creation and funding of the Reimbursement Program, for the 
removal, replacement, and disposal of covered equipment and services.
    116. The Secure Networks Act expressly limits reimbursement support 
to the removal, replacement, and disposal of covered equipment and 
services obtained before certain dates. For covered equipment and 
services placed by the Commission on the initial Covered List required 
by section 2(a) of the Secure Networks Act, the cutoff date is August 
14, 2018, which is the day after the 2019 NDAA was signed into law. For 
equipment and services subsequently added to the Covered List required 
by section 2(a), the provider must have obtained the equipment or 
service no later than 60 days after being placed on the Covered List to 
obtain reimbursement for costs associated with its removal, 
replacement, and disposal. The cutoff deadlines are explicit in the 
statute, and the Commission lacks discretion to use different cutoff 
dates for the purchase of covered communications equipment or service 
that is eligible for the reimbursement of removal, replacement, and 
disposal costs. Because of the statutory cutoff date, the Commission 
lacks discretion to consider an alternative cutoff date.
    117. The 2019 NDAA prohibits the head of an executive agency from 
obligating or expending ``loan or grant funds to procure or obtain, 
extend or renew a contract to procure or obtain, or enter into a 
contract (or extend or renew a contract) to procure or obtain'' 
telecommunications and video surveillance equipment produced by 
entities reasonably believed to be owned or controlled by a foreign 
country. The 2019 NDAA specifically identified Huawei and ZTE as 
producers of covered equipment, putting the general public on official 
notice that the Federal government considered the equipment and 
services produced by these entities to pose a potential national 
security risk.
    118. Following the 2019 NDAA's enactment and as the instant 
rulemaking proceeding progressed, providers increasingly began planning 
and taking steps to proactively remove, replace, and dispose of covered 
equipment and services from their networks. Providers urged the 
Commission to reimburse costs associated with these efforts even if 
incurred prior to the creation of any reimbursement program. The 
Commission will not penalize these providers for taking decisive, 
proactive steps to secure their networks before the reimbursement 
program is created and funded. Indeed, in order to protect the nation's 
communications networks, the Commission encourages providers to remove 
and replace covered equipment and services before the Reimbursement 
Program begins. For any expenses incurred before the commencement of 
the Reimbursement Program providers may not be reimbursed for 
unreasonable expenses. The Commission will apply the same standard, 
i.e., costs reasonably incurred, to determine whether an expense is 
eligible for reimbursement. Accordingly, for covered equipment and 
services placed on the initial list required by section 2(a) of the 
Secure Networks Act, the Commission will reimburse reasonable costs 
associated with the removal, replacement, and disposal of covered 
equipment that were incurred on or after April 17, 2018, the date the 
Commission adopted the 2018 Supply Chain Notice, 83 FR 19196, May 2, 
2018, commencing this proceeding. The adoption date of the 2018 Supply 
Chain Notice was the first clear indication that the Commission was 
considering taking action to remove covered equipment from U.S. 
networks. Costs incurred before that date are ineligible for 
reimbursement. For equipment and services subsequently added to the 
initial list, the provider must incur the costs of removal, 
replacement, and disposal on or after the date the equipment or 
services are placed on the list for the reasonably incurred cost to 
qualify for reimbursement.
    119. The Commission recognizes the removal, replacement, and 
disposal of covered equipment may, in the case of mobile wireless 
networks, entail setting up parallel network core and RAN components 
and then migrating existing customers to the new network. The 
Commission expects providers will endeavor to mitigate service 
disruptions to effectuate a seamless transition for customers. 
Consistent with the Commission's proposal in the 2019 Supply Chain 
Further Notice, to the extent providers experience a reduction in 
revenues as a result of a temporary loss in service, reduced coverage, 
or otherwise as a result of the transition, it will not reimburse 
providers for the lost revenues in the Reimbursement Program.
    120. Allowing reimbursement for lost revenues would increase the 
costs of the Reimbursement Program substantially, and risk exhausting 
funding prematurely without reimbursing many eligible providers. The 
Commission is also concerned that evaluating the reasonableness of 
requests for reimbursement for lost revenues is challenging and 
speculative and may result in over-reimbursement. The Commission 
believes scarce program funding is better spent by assisting as many 
eligible providers as possible with the replacement costs directly 
related to the transition instead of trying to ensure providers are 
also reimbursed for lost revenues. Moreover, the Commission expects 
program participants will strive to minimize service disruptions for 
customers during the transition process to mitigate revenue loss. 
Accordingly, the Commission disagrees with Mark Twain Communications 
Company and deem lost revenues an unreasonable and ineligible expense 
for purposes of the reimbursement program.
    121. The Secure Networks Act limits funding use to the removal, 
replacement, and disposal of covered communications equipment and 
services. Even with covered communications equipment and services, to 
use funds for the removal, replacement, and disposal, the Secure 
Networks Act requires the recipient to have obtained the equipment or 
service before a certain statutorily specified cutoff date. 
Specifically, for covered communications equipment or services 
published on the Commission's initial Covered List, the recipient must 
have obtained the equipment or service

[[Page 2925]]

before August 14, 2018. For communications equipment or service 
subsequently added to the Covered List, the recipient must have 
obtained the equipment or service no later than 60 days after being 
added to the Covered List. Separately, the Secure Networks Act 
prohibits recipients from using funds to ``purchase, rent, lease, or 
otherwise obtain any covered communications equipment or service.'' 
Recipients are also not allowed to use ``other funds (including funds 
derived from private sources)'' to ``purchase, rent, lease, or 
otherwise obtain any covered communications equipment or service.'' 
Requests for the reimbursement of expenses falling within the scope of 
these statutory prohibitions are considered unreasonable per se and 
thus ineligible.
    122. Rural Wireless Broadband Coalition asks whether the statutory 
limit on funding use prohibits recipients from operating and 
maintaining covered communications equipment or service in their 
networks during the removal, replacement, and disposal process. The 
transition process will likely involve standing up a replacement 
network before migrating traffic to the replacement network and 
decommissioning the covered communications equipment or service in the 
old network. Recipients would thus need to continue operating and 
therefore maintain the old network containing covered communications 
equipment or service during the transition process to mitigate service 
disruptions for existing customers. According to the Rural Wireless 
Broadband Coalition, keeping the old network operational may involve 
replacing defective equipment that is covered, and because such 
equipment is typically proprietary, it would likely require, for 
purposes of interoperability, a replacement that is also supplied by 
the same supplier and covered.
    123. The Commission reads the statute as clearly prohibiting the 
use of funds by recipients to obtain equipment or service that is on 
the Covered List even if such equipment is needed to maintain 
operations during a transition process. Notwithstanding this 
limitation, a provider possessing covered communications equipment 
spares obtained before becoming a Reimbursement Program recipient could 
use funds to install and maintain that covered communications equipment 
during the transition process. If, however, the recipient receives 
Universal Service support, then there may be other applicable rules 
that prohibit the use of funding to install and maintain covered 
communications equipment or service. The provider, however, must remove 
and dispose of all covered communications equipment by the time of the 
final certification.
    124. The Commission in the 2019 Supply Chain Further Notice 
proposed a ``detailed reimbursement application process'' like the 
reimbursement mechanism used in the broadcast incentive auction 
proceeding ``to confirm that funding is being used only to replace 
covered equipment and services, rather than to deploy services to new 
areas or replace aging equipment or services that are not covered.'' 
Applicants would ``provide details of the covered equipment and 
services being replaced, the replacement equipment and services, and 
the estimated costs of replacement.'' To help guide applicants, the 
Commission sought comments on ``efficient ways'' to develop replacement 
cost estimates. The Commission separately sought comment on whether to 
``prioritize payments for the replacement of certain equipment and 
services that are identified as posing the greatest risk to the 
security of networks, and what categories of equipment and services 
should that prioritization include.'' Comments were also sought on 
measures to prevent waste, fraud, and abuse, including applicant 
certifications, deadlines for completing removal and replacement, 
periodic compliance audits, investigations, and enforcement penalties.
    125. The Secure Networks Act establishes specific requirements 
applicable to the application process for the reimbursement program. 
Specifically, ``[t]he Commission shall require an applicant to provide 
an initial reimbursement cost estimate at the time of application, with 
supporting materials substantiating the costs.'' The Commission is 
required to act on applications within 90 days after the date of 
submission. If there is an excessive number of applications, the 
Commission can extend this deadline by no more than 45 days. The 
Commission must also give applicants a 15-day period to cure a material 
deficiency in the application as determined by the Commission 
``(including by lacking an adequate cost estimate or adequate 
supporting materials) . . . before denying the application.'' The 
statute states that ``[i]f such period would extend beyond the deadline 
. . . for approving or denying the application, such deadline shall be 
extended through the end of such period.'' The Secure Networks Act also 
includes provisions for the removal, replacement, and disposal term and 
extensions thereof, status updates, measures to avoid waste, fraud, and 
abuse, and education efforts. The statute also addresses enforcement 
actions and additional penalties relevant to the reimbursement program. 
The Commission sought comment on the impact of section 7 in the 2020 
Supply Chain Second Further Notice.
    126. The Commission now adopts a reimbursement process like the one 
used in the broadcast incentive auction reimbursement mechanism that 
provides allocations to eligible providers based on their estimated 
costs. Program recipients can then obtain funding disbursements upon 
showing of actual expenses incurred. If aggregate demand exceeds 
available funding, the Commission will prioritize funding requests from 
ETCs subject to a remove and replace requirement before funding the 
requests of non-ETCs. Among non-ETCs, the Commission will further 
prioritize funding to those that voluntarily provided it with cost 
estimate data in response to the Supply Chain Security Information 
Collection over those that did not. Additionally, if the Commission is 
unable to fully fund either all ETCs or all non-ETCs, it will 
prioritize funding for transitioning core networks over funding non-
core network expenses. Program recipients will have one year from the 
initial disbursement to complete the permanent removal, replacement, 
and disposal of covered communications equipment or services with the 
potential for a general and individual extensions of time.
    127. The Commission's goals in developing a reimbursement process 
are threefold. First, the Commission strives to create a simple and 
straightforward process, providing certainty to participants while 
minimizing the costs associated with reimbursement and the 
administrative burden on both affected parties and the Commission. 
Second, the reimbursement mechanism should facilitate the prompt and 
efficient distribution of funds for the expeditious removal, 
replacement, and disposal of covered communications equipment and 
services posing a national security risk from the networks of 
participating providers. Third, the program should fairly cover the 
eligible costs reasonably incurred for reimbursement and include 
measures to prevent waste, fraud, and abuse. As the Secure Networks Act 
instructs the Commission, ``[i]n developing the application process . . 
. , the Commission shall take reasonable steps to mitigate the 
administrative burden and costs associated with the application 
process, while taking into account the need to avoid waste, fraud, and 
abuse in the Program.''

[[Page 2926]]

    128. The Reimbursement Program will allocate funds on the 
applicant's behalf to the U.S. Treasury for draw down by applicants on 
a rolling basis upon the showing of expenses actually incurred. This 
approach is consistent with the one used in the broadcast incentive 
auction reimbursement mechanism which has proven successful in the 
efficient and expeditious disbursement of funds for transitioning 
networks.
    129. The Secure Networks Act states ``[n]othing in this section 
shall be construed to prohibit the Commission from making a 
reimbursement under the Program to a provider of advanced 
communications service before the provider incurs the cost of the 
permanent removal, replacement, and disposal of the covered 
communications equipment or service for which the application of the 
provider has been approved . . . .'' This language permits the 
Commission to make funding disbursements in advance of costs actually 
incurred but does not require any such advance payments. The Commission 
has concerns, however, about providing advanced funding because once 
disbursed, its ability to ensure the applicant spends the money as 
intended to avoid waste, fraud, and abuse is greatly diminished. If the 
Commission later finds the applicant has not used the money as intended 
and in compliance with the Secure Networks Act and the Commission's 
rules, then reclaiming the money from the applicant following advance 
disbursement can prove challenging. Accordingly, rather than disbursing 
large amounts upfront to program participants, the Commission will use 
an initial funding allocation process based on cost estimates, and then 
allow rolling disbursements based on showings of actual costs incurred. 
This approach provides recipients with the upfront knowledge of 
available funds for purposes of planning and engaging lenders and 
vendors. The Commission finds that this methodology best achieves 
Congress's goal of mitigating the administrative burden and costs of 
the program while taking steps to avoid waste, fraud, and abuse. By 
adopting a rolling reimbursement process, the Commission declines to 
provide funding upfront before costs are actually incurred as suggested 
by the Secure Networks Coalition. The Commission expects the 
reimbursement process, as shown in the broadcast incentive auction 
context, will sufficiently meet the financial needs of providers, 
including smaller providers, in a timely manner while ensuring 
appropriate agency oversight over the disbursement and use of funds for 
their intended purpose. Some commenters urge the Commission to 
``establish a payment schedule and clear milestones for payments so 
that carriers know when they will be able to obtain payments to 
facilitate a transition.'' They argue that given the scope and scale of 
expenses, waiting for reimbursement until the transition is complete is 
unworkable. As NetNumber states, ``the Commission should provide for 
milestone payments to ensure service providers receive sufficient 
funding at every stage of the network transition process.'' The 
Commission surmises the milestone process suggested is akin to draws on 
a construction loan whereby a lender releases a certain percentage of 
the total loan amount upon satisfaction of certain construction 
milestones, e.g., obtaining the necessary permits, pouring the 
foundation, completing the close-in inspection, and so forth.
    130. The Commission finds milestones would add an unnecessary level 
of complexity to the reimbursement mechanism. For such a system to 
work, the Commission would need to determine the appropriate deployment 
milestones, the percentage of funding to disburse at each stage, the 
documentation needed to demonstrate milestone completion, and some 
inspection verification process to ensure the milestones are indeed 
satisfied prior to disbursing funds. By instead having a rolling system 
of disbursements throughout the transition project based on the 
submission of documentation of eligible expenses incurred, the 
Commission successfully addresses any concerns some providers may have 
of delayed payments until the network transition is complete. 
Accordingly, the Commission declines to use a transition funding 
disbursement mechanism based on milestones. While the Commission 
declines to impose milestone-based disbursements, it delegates the task 
of determining the specific timing of disbursements to WCB as part of 
its implementation of the Reimbursement Program with the goal of 
efficiently and expeditiously disbursing funds to recipients.
    131. Lastly, the Commission declines to provide ``bonuses'' for 
completing the removal, replacement, and removal process ahead of the 
applicable deadline as suggested by Blue Danube. The Secure Networks 
Act already provides an aggressive one-year deadline for completing the 
transition process. This provides ample incentives for Reimbursement 
Program recipients to act quickly to complete the process. Accordingly, 
the Commission finds additional incentive payments unnecessary.
    132. The Secure Networks Act directs the Commission to ``develop an 
application process'' that ``require[s] an applicant to provide an 
initial reimbursement cost estimate at the time of application, with 
supporting materials substantiating the costs.'' Consistent with the 
statute, to participate in the Reimbursement Program, eligible 
providers are required to submit initial estimates of the costs to be 
reasonably incurred for the removal, replacement, and disposal of 
covered communications equipment or services to participate in the 
reimbursement program. The Commission directs WCB to establish an 
initial 30-day filing window for the submission of cost estimates and 
to establish subsequent filing windows as necessary should support 
remain, or additional support become available to fund additional 
requests. Participants are also statutorily required to submit, in 
addition to cost estimates, ``supporting materials substantiating the 
costs,'' a ``specific timeline . . . for the permanent removal, 
replacement and disposal of the covered communications equipment or 
services,'' and the certifications required by section 4(d)(4) as to 
the development of a transition plan and the use of funds if approved 
and in developing and tailoring risk management practices.
    133. The Commission has separately tasked WCB with developing and 
finalizing a Catalog of Eligible Expenses to identify reimbursable 
costs with as much specificity as possible to help entities in 
preparing initial cost estimates. Applicants can reference the final 
Catalog of Eligible Expenses, which will contain a list of many, but 
not necessarily all, of the relevant expenses in lieu of providing 
additional supporting documentation to justify the specific cost 
estimate. If an applicant believes the predetermined estimate does not 
fully account for its specific circumstances or a predetermined cost 
estimate is not provided in the Catalog of Eligible Expenses for the 
cost identified by the applicant, the applicant can provide its own 
individualized cost estimate. Applicants providing such individualized 
cost estimates will be required to submit supporting documentation and 
to certify the estimate is made in good faith.
    134. Regardless of whether they are claiming predetermined cost 
estimates or their own individualized estimated costs, each applicant 
will be required to certify under penalty of perjury, inter alia, that: 
(1) It believes in good faith that it will reasonably incur all of the

[[Page 2927]]

estimated costs that it claims as eligible for reimbursement; (2) it 
will use all money received from the Reimbursement Program only for 
expenses it believes are eligible for reimbursement; (3) it will comply 
with all policies and procedures relating to allocations, draw downs, 
payments, obligations, and expenditures of money from the Reimbursement 
Program; (4) it will maintain for 10 years detailed records, including 
receipts, of all costs eligible for reimbursement actually incurred; 
and (5) it will file all required documentation for its expenses. 
Similar certifications were required by the Commission with the 
broadcast incentive auction reimbursement mechanism. In addition, a 10-
year record retention requirement is consistent with the record keeping 
required for the broadcast incentive auction reimbursement program. The 
Commission will also require applicants to provide detailed information 
on the covered communications equipment or services they are removing, 
replacing, and disposing to assist the Commission in evaluating whether 
the estimated costs reported are reasonably incurred.
    135. For entities that choose to provide their own cost estimate, 
i.e., either a cost estimate higher than the predetermined cost 
estimate or an individualized cost estimate for an expense for which 
the Commission does not provide a predetermined cost estimate, WCB will 
review the required justification for the estimate and may accept it or 
substitute a different amount for purposes of calculating the initial 
allocation. The Commission is statutorily authorized to require 
applicants to update initial cost estimates and/or submit additional 
supporting cost estimate materials. If the applicant has already 
incurred costs eligible for reimbursement, e.g., the applicant already 
started transitioning its network prior to the acceptance of 
applications, then it should report its actual expenses with supporting 
documentation and indicate which costs are actual and not estimated in 
its submission. Doing so will allow WCB to factor in the actual costs 
when determining the funding allocation. WCB may ultimately determine, 
based on its reasonableness review, that an applicant should receive a 
different allocation from that claimed on the application.
    136. After an applicant submits estimated cost forms, WCB will 
review them to determine completeness, the applicant's eligibility for 
reimbursement, and the reasonableness of the cost estimates provided, 
and will allocate funding accordingly for draw down by applicants. The 
funding amount allocated represents the maximum amount eligible for 
draw down by an eligible provider unless a subsequent funding 
allocation is made. This approach is consistent with the suggestion of 
NetNumber to ``cap reimbursement for service providers at their 
estimated replacement costs for covered equipment and services in their 
networks.'' The funding amount allocated represents the maximum amount 
eligible for draw down by an eligible provider unless a subsequent 
funding allocation is made. This approach is consistent with the 
suggestion of NetNumber to ``cap reimbursement for service providers at 
their estimated replacement costs for covered equipment and services in 
their networks.''
    137. Per the Secure Networks Act, WCB must act on applications 
within 90 days of submission. For purposes of calculating the 90-day 
deadline, the Commission will consider the date of submission as the 
date on which the filing window closes for accepting reimbursement 
requests. This approach is consistent with the Commission's historical 
treatment of applications submitted during a filing window as all being 
filed on the last day of the filing window. A filing window also allows 
WCB to efficiently review and act on applications in batch and not in 
piecemeal fashion, and is necessary to manage demand for funding. If 
there is an excessive number of applications, WCB can extend this 
deadline by no more than 45 days. After the initial filing window 
closes, the Commission expects WCB to release a public notice 
announcing the applications accepted for filing and indicate whether an 
extension of time of up to 45 days to review applications is justified. 
Applicants are allowed a 15-day period to cure a material deficiency in 
the application as determined by WCB ``(including by lacking an 
adequate cost estimate or adequate supporting materials) . . . before 
denying the application.'' The statute states that ``[i]f such period 
would extend beyond the deadline . . . for approving or denying the 
application, such deadline shall be extended through the end of such 
period.'' WCB will notify applicants of material deficiencies via 
Public Notice. If the 15-day cure period, ``would extend beyond the 
deadline . . . for approving or denying the application, such deadline 
shall be extended through the end of such period.'' If WCB denies the 
application, the filer will be allowed to resubmit its application or 
submit a new filing at a later date. Resubmitted applications 
previously denied or new applications from filers of previously denied 
applications will be subjected to a subsequent filing window if there 
is available funding. If the Commission were to process such filings as 
part of the applications submitted in the initial filing window, it 
would delay the award of funding allocations as the Commission must 
ensure aggregate demand does not exceed the available funds before 
issuing all allocations for requests filed in the initial filing 
window. Once WCB completes its review, it will issue an allocation from 
the Program to the provider, which will be available to the provider to 
draw down as expenses are incurred.
    138. The Commission has requested Congress to appropriate 
$2,000,000,000 to fund the Reimbursement Program. To date, Congress has 
not yet appropriated any funds. Even if the eventual appropriation is 
substantial, the potential exists for the costs reasonably incurred for 
the removal, replacement, and disposal of covered communications 
equipment or services to exceed the funding appropriated. ETCs with two 
million or fewer customers reported in the Commission's Supply Chain 
Security Information Collection that it would cost $1.62 billion to 
remove and replace Huawei and ZTE equipment in their networks. And this 
figure does not account for other providers of advanced communications 
service that would be eligible to participate in the reimbursement 
program.
    139. In the 2019 Supply Chain Further Notice, the Commission sought 
comment on whether ``[t]o best target available funds,'' the Commission 
should ``prioritize[ ] payments for the replacement of certain 
equipment and services that are identified as posing the greatest risk 
to the security of networks, and what categories of equipment and 
services should that prioritization include.'' The Commission also 
sought comment on whether to ``cap the amount eligible for each 
individual funding request.'' In the subsequently enacted Secure 
Networks Act, Congress did not provide for, or expressly prohibit, any 
funding prioritization scheme. The statute does instruct the Commission 
to ``make reasonable efforts to ensure that reimbursement funds are 
distributed equitably among all applicants . . . according to the needs 
of the applicants, as identified by the applications of the 
applicant.'' The Commission is also required to notify Congress on the 
need for additional funding should anticipated demand exceed $1 
billion. WCB sought further comment on the impact of the Secure

[[Page 2928]]

Networks Act on the proposed reimbursement program in April 2020. Only 
three parties commented on this issue with WTA generally supporting the 
prioritization of ETCs receiving USF support over other providers, 
NetNumber suggesting the Commission use funding caps based on the type 
of service provider and the nature of the project, and RWA asking the 
Commission to prorate reimbursement where each recipient gets a set 
percentage of the appropriated funding.
    140. The Commission decides to establish a prioritization paradigm 
in the event the estimated costs for replacement submitted by the 
providers during the initial or any subsequent filing window in the 
aggregate exceed the total amount of funding available as appropriated 
by Congress for reimbursement requests. The Commission finds 
prioritization preferable to the alternatives suggested by NetNumber 
and RWA. Capping fund amounts depending on the nature of the removal, 
replacement, and disposal project and service provider type presents 
added complexity to the allocation process and fails to ensure demand 
will not exceed the total amount of available funding as the number of 
requests are unlimited. NetNumber suggests the Commission use funding 
caps but ensure ``fair compensation for the full deployment cost for 
replacement equipment.'' If there is no limit on the number of requests 
filed, then NetNumber's approach could lead to a funding deficit as the 
total demand, even when using a capped funding approach, could exceed 
the total amount of available funding. The Commission also finds that 
prorating support equally among all participants based on a set 
percentage of available funding, as the only means of allocating 
support, fails to account for the individual needs of the applicants 
and runs counter to the directive in the Secure Networks Act.
    141. Under the prioritization scheme the Commission adopts, it will 
first allocate funding to eligible providers that are ETCs subject to a 
remove-and-replace requirement under the Commission's rules. If funding 
is insufficient to meet the total demand from this subcategory of 
eligible providers, then the Commission will prioritize funding for 
transitioning the core networks of these eligible providers before 
allocating funds to non-core network related expenses, including 
reasonable costs incurred for removing, replacing, and disposing of a 
provider's radio access network. The Catalog of Eligible Expenses cost 
catalog will include additional detail as to what are considered core 
and non-core network related expenses. If after allocating support to 
ETCs for both core and non-core network expenses funding is still 
available, the Commission will then allocate funding to non-ETC 
eligible provider applicants, prioritizing those non-ETCs that provided 
cost estimate data in response to the Commission Supply Chain Security 
Information Collection over other non-ETCs. The Commission will further 
prioritize funding for core network transition costs over non-core 
network transition costs within each non-ETC category. If available 
funding is insufficient to satisfy all requests in a certain 
prioritization category, then the Commission will prorate the available 
funding equally across all requests falling in that category.

                                        Funding Prioritization Categories
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Priority 1: Advanced communications service providers with 2 million or fewer   Priority 1a: * Costs reasonably
 customers that are Eligible Telecommunications Carriers subject to section      incurred for transitioning core
 [54.11] (new removal and replacement requirement).                              network(s).
                                                                                Priority 1b: * Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
Priority 2: Non-ETC providers of advanced communications service with 2         Priority 2a: * Costs reasonably
 million or fewer customers that participated in the Supply Chain Security       incurred for transitioning core
 Information Collection, OMB Control No. 3060-1270.                              network(s).
                                                                                Priority 2b: * Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
Priority 3: Other non-ETC providers of advanced communications service with 2   Priority 3a: * Costs reasonably
 million or fewer customers.                                                     incurred for transitioning core
                                                                                 network(s).
                                                                                Priority 3b: * Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
----------------------------------------------------------------------------------------------------------------
* If available funding is insufficient to satisfy all requests in this prioritization subcategory, then prorate
  the funding available equally among all requests in subcategory.

    142. In considering prioritization of funding, the Commission 
interprets the Secure Networks Act as requiring it to make reasonable 
efforts to treat all applicants on a just and fair basis while 
accounting for the applicants' individual circumstances. Accordingly, 
the Commission may find some applicants have a greater and more urgent 
need for funding than other applicants. The Commission thus does not 
interpret the statute as requiring equal funding or treatment but 
instead requiring it to make reasonable efforts to treat similarly 
situated applicants fairly.
    143. While the presence of covered communications equipment or 
services threatens network security for all eligible providers equally, 
the Commission finds ETCs who are receiving USF support stand in a 
different position vis-[agrave]-vis other providers. Congress and the 
Commission have undertaken significant efforts over the twenty-plus 
years to subsidize the costs of ETCs to provide service in high-cost, 
hard-to-serve areas to facilitate universal access to essential 
telecommunications and broadband services to all Americans. And these 
efforts have borne fruit, resulting in the affordable availability of 
essential communications services for hard-to-reach Americans. ETCs in 
many instances represent the only provider of such services in the most 
rural areas of our country. Accordingly, the Commission finds the 
protection of ETC networks--networks which are funded through USF and 
serve on the front lines of providing universal service--from national 
security threats to be of the utmost importance. PTA-FL does not 
expressly advocate an alternative prioritization approach but notes, 
without citing any statistics, that some non-ETCs are also sole source 
providers. PTA-FL also states non-ETCs have a greater need for 
reimbursement support than ETCs because their covered equipment was 
acquired without using USF support. Notwithstanding these assertions, 
the Commission has made a substantial investment to help ETCs provide 
service in areas where the economics often do not support viable 
service offerings. Facing the possibility of service disruptions absent 
continued support due to the remove-and-replace prohibition the 
Commission adopts, it

[[Page 2929]]

finds, notwithstanding PTA-FL's recent filing, that ETCs stand in a 
different position than non-ETCs, justifying a prioritization in the 
allocation of reimbursement support. Perhaps most significantly, in 
this document the Commission requires ETCs receiving universal service 
support to remove covered equipment and services from their networks. 
Failure to comply will result in the loss of future universal service 
funding. ETCs, which often provide service in areas where providers are 
less likely to be able to recover their costs from subscribers, are 
more sensitive to the possibility that they could lose universal 
service funding. ETCs thus face greater consequences than non-ETC 
providers if the transition does not occur in a timely manner. The 
potential for enforcement liability or reduced universal service 
funding further distinguishes ETCs from the circumstances of other 
applicants. Based on these factors, the Commission finds there is a 
greater urgency to expeditiously accommodate the transition of ETC 
networks over other applicants. Accordingly, if initial funding is 
insufficient to satisfy reimbursement requests, the Commission will 
first prioritize funding to ETCs over non-ETC applicants. By adopting a 
prioritization scheme, the Commission declines to follow the 
suggestions of RWA to grant an equitable percentage of funding to all 
applicants ``proportionate to need . . . . if there is an insufficient 
amount of funds initially appropriated.'' The Commission will, however, 
pro rate funding within a prioritization subcategory if insufficient 
funds remain for all requests in the subcategory.
    144. Among non-ETC applicants, the Commission will further 
prioritize funding, as recently suggested by RWA, to first allocate 
funding to those non-ETCs that voluntarily provided cost estimate data 
in response to the Supply Chain Security Information Collection over 
other non-ETC applicants. The estimated cost to remove and replace 
covered equipment as reported by the Supply Chain Security Information 
Collection participants with two million or fewer customers totaled 
$1.62 billion with costs reported by all filers totaling $1.84 billion. 
This number includes data reported not only by ETCs required to report 
but also non-ETCs that were encouraged to report on a voluntary basis. 
The Commission asked Congress to appropriate $2 billion in funding for 
the Reimbursement Program, taking into account the cost data collected 
in the Supply Chain Security Information Collection. If Reimbursement 
Program demand were to substantially exceed $2 billion in appropriated 
funding due to the emergence of providers not participating in the 
Supply Chain Security Information Collection, then those non-ETCs that 
participated voluntarily in the collection could go without or with 
reduced funding simply because the costs of non-participating non-ETCs 
were not reported, and thus not considered. The Commission finds this 
result inequitable. Accordingly, the Commission will prioritize funding 
for participating non-ETCs over other non-ETCs.
    145. If funding proves insufficient to meet the estimated 
reimbursement costs reasonably incurred for ETCs or non-ETCs, the 
Commission will further prioritize funding for expenses to transition 
the core networks of providers over non-core network expenses. To 
demarcate core network transition and non-core network transition 
expenses, applicant will need to report estimated costs for such 
activities separately in their submission.
    146. Commenters indicate replacing the core network is the logical 
first step in a network transition and may have the greatest impact on 
eliminating a national security risk from the network. For example, CCA 
states ``[t]he core is where the routing functions and `intelligence' 
resides in today's networks, so starting with the core is a natural 
step both in transitioning networks and prioritizing any national 
security risks.'' WTA also notes that ``limiting removal and 
replacement to core equipment could save the transition time and money 
as the equipment that is least likely to be a threat is on the edge of 
the network.'' While the Commission believes having covered 
communications equipment and service in any portion of the network 
poses a national security risk, it agrees that prioritizing funding for 
core network transition expenses makes sense logically from a network 
migration standpoint and will greatly mitigate risks in the network. 
SNC states that replacing the core without also replacing the radio 
access network may raise interoperability issues but such concerns do 
not dissuade the Commission from finding that funding is best 
prioritized to most efficiently address national security risks by 
first assisting with the replacement of the core network over a 
provider's radio access network when demand exceeds available funding. 
Accordingly, the Commission instructs WCB to further prioritize the 
allocation of funding among applicants.
    147. If available funding is insufficient to satisfy all funding 
requests in a prioritization subcategory, the Commission will prorate 
funding among all requests in the subcategory to ensure that total 
funding allocated does not exceed the funding available. Specifically, 
WCB will reduce each applicant's funding allocation request by an equal 
percentage to bring down the total funding allocation within the 
available support limit. This process will thus result in the equitable 
distribution of funding among applicants within the prioritization 
subcategory, consistent with the statute, while still allocating more 
funding to those applicants with higher transition costs. WCB will 
determine a pro-rata factor by dividing the total amount of available 
funding by the total amount of funding requested. WCB will then 
multiply the pro-rata factor by the total amount of support requested 
by each applicant and will allocate funds to each eligible applicant in 
the prioritization subcategory consistent with this calculation. The 
net result is each eligible applicant in that subcategory will receive 
less support than requested by the same pro-rata factor to bring the 
overall support amount committed within the applicable limit.
    148. Following the acceptance of applications submitted during the 
relevant filing window, WCB will assess the aggregate demand of the 
applications filed during the applicable filing window to determine 
whether demand exceeds available funding, thereby triggering the need 
for funding prioritization. In conducting this assessment, WCB should 
make a cursory review of the applications to determine if any requests 
are clearly ineligible for funding, e.g., equipment to be removed is 
not on the Covered List ineligible or there appears to be a duplicate 
request from an applicant, and should not be included in the aggregate 
demand assessment. Per the Secure Networks Act, the Commission must 
give applicants a 15-day period to cure any material defect in the 
application before denying the application. This cursory review to 
eliminate clearly ineligible or erroneous applications will help to 
ensure a more accurate assessment of aggregate demand to determine 
whether to apply funding prioritization.
    149. WCB will need to account for the administrative cost of 
operating the reimbursement program when assessing aggregate demand to 
the extent such costs are funded by a congressional appropriation and 
do not count towards funding available for reimbursement requests.
    150. Following the allocation of funds to eligible providers and 
after eligible

[[Page 2930]]

providers incur actual costs, they will need to file reimbursement 
claims along with any required supporting invoices and other cost 
documentation, as directed by WCB, to obtain reimbursement funds from 
their allocation. Entities may, and likely will, submit multiple 
reimbursement requests as they incur expenses throughout the 
reimbursement period. WCB will review reimbursement claims to ensure 
that disbursements are made only for costs reasonably incurred.
    151. If an actual cost exceeds the estimated cost for a particular 
line item, the program participant will need to note the nature of the 
variation in the reimbursement claim filing, e.g., the recipient had to 
change equipment vendors resulting in higher replacement costs than 
estimated. The Commission understands the difficulty in accurately 
estimating costs and expect some degree of variation between estimated 
and actual costs. Ultimately, while the Commission will exercise some 
degree of flexibility with such variations, the Reimbursement Program 
participant cannot draw down more than the total funding amount 
allocated to it and can only receive reimbursement for reasonable costs 
incurred. If a recipient's costs exceed the funding allocation, then 
the recipient will need to seek an additional allocation of funding, if 
funding remains available.
    152. To ensure the timely use of allocated funds as intended, the 
Commission will require recipients to submit all applicable 
reimbursement claims by a set date following the expiration of the term 
for completing the removal, replacement, and disposal of covered 
communications equipment and services. Without a deadline, outstanding 
funding would have to remain allocated indefinitely to satisfy possible 
future reimbursement claims filed for actual expenses incurred even if 
the recipient had no intention of filing any future claims. The effect 
would be to essentially strand funding and prevent the reallocation of 
unused funds to other Reimbursement Program participants. Imposing a 
deadline for the filing of reimbursement claims will address these 
concerns.
    153. The Commission recently imposed a deadline on the filing of 
invoices to receive committed funds in the Rural Health Care Program to 
address similar concerns. The Commission similarly adopted an invoicing 
deadline for the E-Rate Program. In that proceeding, the Commission 
found an invoicing deadline of 120 days following the expiration of the 
one-year service delivery deadline, with the possibility of a one-time 
120 day extension, sufficient to give program participants time to 
submit claims for expenses incurred while still providing the certainty 
needed for the efficient de-obligation of funding for use by future 
program participants. For the same reasons, the Commission will apply 
the approach used in the Rural Health Care Program to the Reimbursement 
Program. Recipients are required to file all reimburse claims within 
120 days following the expiration of the removal, replacement, and 
disposal term. Prior to the expiration of the 120-day deadline, 
recipients can request and receive a 120-day extension of the 
reimbursement claim deadline, if timely requested. After the expiration 
of the reimbursement claim deadline, any allocated but as-yet unclaimed 
funds will revert automatically to the Reimbursement Program for 
reallocation to other participants pursuant to a future filing window. 
If a petition for an extension of the removal, replacement, and 
disposal term is pending when the term expires, then automatic 
reversion of the unallocated funds is stayed until, and if, the 
extension request is denied. Additional details on the removal, 
replacement, and disposal term, and extensions thereof, are provided in 
the subsequent section.
    154. The Secure Networks Act requires, unless there is an extension 
provided for by the statute, Reimbursement Program recipients to 
complete the removal, replacement, and disposal of covered 
communications equipment or service ``not later than 1 year after the 
date on which the Commission distributes reimbursement funds to the 
recipient.'' The Commission concludes the one year window for project 
completion commences when the applicant makes the initial draw down 
disbursement of funding during the funding distribution stage. Thus, 
the one-year deadline will vary among recipients depending on when each 
recipient chooses to accept its initial draw down disbursement. The 
Commission finds this approach most accurately complies with a 
straight-forward reading of the statute and that it provides applicants 
a substantial amount of control over when the one-year window opens 
since the applicant chooses when to accept the initial draw-down.
    155. The Commission recognizes there is concern among providers 
that the network transition process will likely take more than a year 
to complete. Congress has made clear its intent, however, and the 
Commission lacks discretion to deviate from what the statute requires. 
By tying the completion term to the actual initial disbursement of 
funds, the Commission adheres to the statutory requirement but also 
provides some flexibility to applicants. Because the Commission has 
declined to use a milestone-based phased funding approach, the 
suggestion to commence the one-year project deadline to the final 
disbursement is unworkable. At the same time, the Commission 
acknowledges applicants may defer taking their initial disbursement to 
further delay commencement of the one-year deadline. Such actions, in 
turn, may delay the network transitions to remove, replace, and dispose 
of equipment and service posing a national security risk. To ensure the 
efficient and expeditious use of funding to facilitate network 
transitions, the Commission will require recipients to file to receive 
their initial disbursement within [one year] of receiving the funding 
allocation approval. Failure to file for an initial disbursement within 
one year of receipt of funding allocation approval will result in the 
automatic reversion of the funding allocation to the program fund for 
reallocation to other or future program participants.
    156. Term Extensions. The Secure Networks Act authorizes the 
Commission to grant extensions of time to complete the removal, 
replacement and disposal of covered communications equipment and 
service. The Commission may grant a ``general'' six-month extension 
``to all recipients of reimbursements . . . if the Commission: (i) 
finds that the supply of replacement communications equipment or 
services needed by the recipients to achieve the purposes of the 
Program is inadequate to meet the needs of the recipients; and (ii) 
provides notice and a detailed justification for granting the extension 
to'' Congress. The Commission is also authorized to grant 
``individual'' extensions on a case-by-case basis to program recipients 
pursuant to petition for a period of time of up to six months. To grant 
an individual extension, the Commission must find that, ``due to no 
fault of such recipient, such recipient is unable to complete the 
permanent removal, replacement, and disposal.'' According to the 
legislative history, ``[t]he Committee expects the Commission to not 
find it the fault of a recipient of the program if such recipient has a 
shortage of qualified workers, either employees or contracted third-
parties, to complete the removal of covered equipment and replacement 
of new equipment under the timeframe established.''
    157. The general extension provision authorizes the Commission to 
issue sua sponte a one-time six-month extension

[[Page 2931]]

to all program recipients. Interpreting this provision to allow for 
more multiple general six month extensions for all participants without 
regard to the circumstances of each individual applicant would seem to 
run counter to the intent of Congress of having a one-year term 
deadline and would seem to moot, or at least significantly diminish, 
the need for, or relevance of allowing, individual extensions. 
Following the funding allocation stage, the Commission directs WCB to 
assess the supply of replacement equipment in the marketplace. The 
Commission expects WCB, in making this assessment, to account for the 
information reported by program recipients in the status updates filed 
as required by the Secure Networks Act. WCB shall inform the Commission 
of its assessment in a timely manner so as to give the Commission 
sufficient time to provide notice and justification to Congress and to 
issue a general extension of time before the initial one-year deadline 
expires for program recipients.
    158. In reading the statutory provision on individual extensions, 
the Commission agrees with commenters who assert that the provision 
allows it to grant more than one extension to a recipient. The Secure 
Networks Act states that the Commission may grant a petition for an 
extension, but does not provide any direct limit as to the number of 
extensions that may be granted. Instead, the only limit to granting an 
extension is whether the Commission finds that, ``due to no fault of 
such recipient, such recipient is unable to complete the permanent 
removal, replacement, and disposal.'' The Commission interprets this 
language to mean that it may grant more than one individual extension 
as factors beyond the control of an applicant may exist for more than 
six months, an interpretation endorsed by all commenters. The 
Commission also agrees with commenters that the statute specifically 
allows it to grant both a general and individual extensions if the 
circumstances warrant. The Commission also agrees with commenters that 
it may not issue a single, across-the-board extension that exceeds six 
months. The Commission believes this is an important safety valve for 
recipients to complete their network transitions. The Commission 
directs WCB to address petitions for extensions in the first instance 
consistent with the following principles. In order to ensure prompt 
replacement in accordance with the goals of the Act, petitions for 
extension will only be granted where the program recipient demonstrates 
the delay is due to factors beyond its control. In making this 
determination, the Commission directs WCB to be guided by the 
Commission's precedent in dealing with similar requests involving 
wireless facilities under Sec.  1.946 of the Commission's rules. Sec.  
1.946(e) allows for extensions of time ``if the licensee shows that 
failure to meet the construction or coverage deadline is due to 
involuntary loss of site or other causes beyond its control.'' The rule 
further provides that ``[e]xtension requests will not be granted for 
failure to meet a construction or coverage deadline due to delays 
caused by a failure to obtain financing, to obtain an antenna site, or 
to order equipment in a timely manner. If the licensee orders equipment 
within 90 days of its initial license grant, a presumption of diligence 
is established.'' The rule further provides that ``[e]xtension requests 
will not be granted for failure to meet a construction or coverage 
deadline because the licensee undergoes a transfer of control or 
because the licensee intends to assign the authorization. The 
Commission will not grant extension requests solely to allow a 
transferee or assignee to complete facilities that the transferor or 
assignor failed to construct.'' The Commission encourages WCB to 
provide guidance as necessary to program recipients to help them in 
seeking an extension of time. This addresses the request of CCA, asking 
the Commission to provide clear guidance on how it will implement the 
provision on individual extensions and what will be expected from 
applicants to satisfy an extension request.
    159. Applicability of USF Support Certification Requirement. The 
new remove-and-replace rule that the Commission adopts requires ETCs to 
certify prior to receiving USF support that they do not use equipment 
or services identified on the Covered List. The Commission recognizes 
Reimbursement Program recipients will likely need to utilize their 
existing covered communications equipment or service on a temporary 
basis during the transition process to mitigate service disruptions for 
existing customers. Accordingly, Reimbursement Program recipients are 
not subject to the new certification requirement until after the 
expiration of their removal, replacement, and disposal term. However, 
once the term has expired, the provider will be subject to the 
certification requirement going forward when seeking to obtain USF 
support.
    160. Effect of Removal from the Covered List. The Secure Networks 
Act provides a process for addressing situations when communications 
equipment or service is removed from the Covered List following the 
filing of an application for reimbursement. If this situation occurs, 
then according to the Secure Networks Act, an applicant may either: (1) 
Return the reimbursement funds received and be released from any 
further removal, replacement, and disposal requirements; or (2) retain 
the reimbursement funds received and remain subject to the applicable 
removal, replacement, and disposal requirements. For purposes of the 
Reimbursement Program established in this document, the Commission 
interprets this statutory provision to mean that if the Covered List 
removal occurs after an application is filed and approved, then it will 
give the applicant the option to either proceed with or withdraw from 
the Reimbursement Program altogether. If withdrawing, then the 
applicant would need to notify the Commission as such and return any 
reimbursement funds previously disbursed to the Commission where 
applicable. If withdrawing, any funding allocated but not yet disbursed 
to the applicant would automatically revert to the Commission for 
potential reallocation to other applicants pursuant to a subsequently 
established filing window. If continuing with the Reimbursement 
Program, then the applicant must continue to comply with all applicable 
program requirements and obligations. Per the Secure Networks Act, if a 
program recipient needs an ``assurance'' as to whether the 
reimbursement funds have been returned, then ``the assurance may be 
satisfied [by the recipient] making an assurance that such funds have 
been returned.'' That said, the Commission will provide recipients with 
confirmation of reimbursement funds returned.
    161. The Commission declines to implement a preapproval process for 
transition plans. Both CCA and NetNumber urge the Commission to provide 
a mechanism by which providers can obtain an upfront approval or at 
least additional guidance for their network transition plans. These 
commenters note the complexity of transitioning a network and explain 
how upfront approval and guidance would mitigate wasted time and 
resources on a plan the Commission ultimately does not support. The 
upfront approval mechanism would apparently need to precede the filing 
window for submitting reimbursement cost estimates.
    162. Although the Commission sees the benefits of having a 
preapproval process, it is concerned the addition of

[[Page 2932]]

another procedural layer will unnecessarily delay the allocation of 
funding for the removal, replacement, and disposal of covered 
communications equipment and service from the networks of eligible 
providers. Because of the national security implications of continuing 
to have insecure equipment in the Commission's communications networks, 
it is striving to receive applications within twelve months of the 
adoption of this document. Adding a processing layer to pre-approve 
transition plans would require building in further time for 
implementation and the redirection of resources to reviewing and 
approving transition plans, instead of immediately implementing a 
system to receive applications. Moreover, the Commission will 
separately be providing participants with guidance on replacement 
equipment and cost estimates. The Commission finds the additional 
guidance will sufficiently help applicants in formulating their network 
transition plans and should alleviate the concerns the commenters 
express. Accordingly, the Commission declines at this time to establish 
a preapproval process for transition plans as suggested by CCA and 
NetNumber. For the same reasons, the Commission declines a similar 
suggestion by SNC, to the extent SNC's proposals differs from the 
process the Commission adopts, to have two separate application rounds 
upfront to obtain a funding allocation, i.e., one to requests funds for 
planning and another for replacement and implementation.
    163. The Secure Networks Act directs the Commission to adopt 
regulations requiring the ``disposal'' of covered communications 
equipment and services by Reimbursement Program recipients to prevent 
the use of such equipment or services in the networks of advanced 
communications service providers. Disposal is defined as the act of 
disposing. To dispose of something means ``to get rid of,'' ``to deal 
with conclusively,'' ``to transfer to the control of another.'' While 
the act of disposing typically means to get rid of or to transfer 
control of something to another, the Commission reads ``disposal'' in 
connection with the statutory language ``to prevent such equipment or 
services from being used in the networks of providers'' as requiring 
the destruction of the equipment or service by the recipient so as to 
make the equipment or service inoperable and incapable of use. The 
Commission adopts a regulation consistent with its interpretation and 
will require recipients to dispose of covered communications equipment 
and service in a manner to prevent the use of the equipment or service 
in the networks of other providers.
    164. The Commission disagrees with PRTC that the statute would 
allow the Commission to permit the transfer of covered communications 
equipment or service to non-U.S. providers in an operable state that 
would allow for use of the equipment or service in another provider's 
network, whether foreign or domestic. At the same time, the Commission 
agrees with CCA and will allow providers to satisfy its disposal 
requirements ``by documenting their transfer of removed equipment to 
third parties tasked with destruction or other disposal of the 
equipment.'' Regardless of the method of disposal or destruction, the 
Commission requires participants to retain detailed documentation to 
verify compliance with this requirement. The Commission expects WCB to 
provide participants with additional guidance to help participants with 
the disposal and verification process.
    165. The Commission directs WCB to create one or more forms to be 
used by entities to claim reimbursement from the Reimbursement Program, 
to report on their use of money disbursed and the status of their 
construction efforts, and for any other Reimbursement Program-related 
purposes. The Commission also directs WCB to establish the timing and 
calculate the amount of the allocations to eligible entities from the 
Reimbursement Program, develop a final Catalog of Eligible Expenses 
with the assistance of a contractor, and make other determinations 
regarding eligible costs and the reimbursement process. The Commission 
further directs WCB to adopt the necessary policies and procedures 
relating to allocations, draw downs, payments, obligations, and 
expenditures of money from the Reimbursement Program to protect against 
waste, fraud, and abuse and to protect Reimbursement Program funds in 
the event of bankruptcy of a support recipient. The Commission expects 
WCB through the implementation process will address many of the 
procedural details highlighted by the Secure Networks Coalition with 
input as needed from the public.
    166. WCB will consult with the Office of General Counsel and the 
Office of the Managing Director (OMD) in carrying out these tasks. The 
Commission also encourages the WCB to work, as necessary, with other 
appropriate Bureaus and Offices in implementing and maintaining the 
Reimbursement Program. The Commission authorizes WCB to engage 
contractors to assist in the reimbursement process and the 
administration of the Reimbursement Program. Lastly, as required by the 
Secure Networks Act, the Commission directs WCB with the assistance of 
the Consumer and Governmental Affairs Bureau to ``engage in education 
efforts with providers of advanced communications service'' to 
encourage participation in the Reimbursement Program and to assist such 
providers in submitting applications.
    167. The Secure Networks Act requires the Commission to take ``all 
necessary steps'' to combat waste, fraud, and abuse in the 
Reimbursement Program. The Secure Networks Act and the associated House 
Report specified that these steps shall include, but are not limited 
to, requiring recipients to submit status updates, detailed spending 
reports and documentation of invoices, and conducting routine audits 
and random field investigations of recipients to ensure compliance with 
Program requirements and this Act. The Commission sought comment in the 
Section 4 Public Notice, 85 FR 26653, May 5, 2020, and the 2019 Supply 
Chain Second Further Notice on these statutory obligations. The 
Commission now adopts rules to protect against the waste, fraud, and 
abuse of taxpayer money consistent with the Secure Networks Act.
    168. Status Updates. While the Commission did not receive any 
comments on how to implement this statutory provision, it will proceed 
as directed by the Secure Networks Act and require program recipients 
to file a status update ``once every 90 days beginning on the date on 
which the Commission approves an application for a reimbursement.'' 
Recipients must file the first report within 90 days of receiving their 
funding allocation. Although the statute allows the Commission to 
require more frequently filed updates, it finds an update every 90 days 
sufficient to keep the Commission informed of ongoing developments 
while not unduly burdening program recipients and diverting limited 
administrative resources away from the network transition process. 
These updates will help the Commission monitor the overall pace of the 
removal, replacement, and disposal process and whether recipients are 
acting consistently with the timelines provided to the Commission or 
whether unexpected challenges are causing delay.
    169. In the update, the recipients shall report on the efforts 
undertaken, and challenges encountered, in permanently removing, 
replacing, and disposing its covered communications equipment or

[[Page 2933]]

services. Recipients shall also report in detail on the availability of 
replacement equipment in the marketplace so the Commission can assess 
whether a general, six-month extension permitted by the statute is 
appropriate. The report must include a certification that affirms the 
information in the status report is accurate. After the program 
recipient has notified the Commission of the completion of the 
permanent removal, replacement, and disposal of the covered 
communications equipment or service pursuant to a final certification, 
updates are no longer required.
    170. The Commission directs WCB to provide additional details on 
the filing requirements and contents for such status updates. Per the 
statute, the Commission directs WCB to publicly post on the 
Commission's website the status update filings within 30 days of 
submission. The Commission further directs WCB to prepare a report for 
Congress within every 180 days following the funding allocation stage. 
The report shall provide an update on the Commission's implementation 
efforts and ``the work by recipients of reimbursements . . . to 
permanently remove, replace, and dispose of covered communications 
equipment or services.''
    171. Spending Reports. The Secure Networks Act directs the 
Commission to require Reimbursement Program recipients to submit 
``reports regarding how reimbursement funds have been spent, including 
detailed accounting of the covered communications equipment or services 
permanently removed and disposed of, and the replacement equipment or 
services purchased, rented, leased or otherwise obtained, using 
reimbursement funds.'' Like status updates, spending reports help 
mitigate waste, fraud, and abuse by allowing the Commission to monitor 
the recipient's funding use to help make sure funds are spent as 
intended. The statute requires the filing of spending reports on a 
regular basis but does not otherwise indicate the filing frequency.
    172. The Commission sought and received limited comment on the 
implementation of this statutory provision. The lone commenter, the 
Rural Wireless Broadband Coalition, understands the benefits of having 
recipients file such reports but encourages the Commission to limit the 
filing frequency to a semi-annual basis. According to Rural Wireless 
Broadband Coalition, [p]roducing these detailed accountings will be a 
burdensome, time-consuming exercise for small wireless carriers, 
requiring them to dedicate scarce resources to track, record, assemble, 
review, and report extensive data related to the removal, replacement, 
and disposal of covered equipment.''
    173. The Commission is sensitive to the reporting burden 
highlighted by Rural Wireless Broadband Coalition. While the removal, 
replacement, and disposal term is for a one-year period with possible 
extensions of time for up to six-months, the Commission finds that 
requiring filings twice a year will provide information with sufficient 
frequency to allow the Commission to monitor against waste, fraud, and 
abuse while mitigating the reporting burden on recipients. Accordingly, 
the Commission will require Reimbursement Program recipients to file 
semiannually. Spending reports will be due within 10 calendar days 
after the end of January and July, starting with the recipient's 
initial draw down of disbursement funds and terminating once the 
recipient has filed a final spending report showing the expenditure of 
all funds received as compared to the estimated costs submitted. A 
final spending report will be due following the filing of a final 
certification by the recipient.
    174. The Commission directs WCB to provide Reimbursement Program 
recipients with additional details on the filing of and information 
contained in the spending reports. The Commission also directs WCB to 
make filed spending reports available to the public via a portal on the 
Commission's website. The Commission will consider detailed accounting 
information on the covered communications equipment or services 
permanently removed and disposed of, and the replacement equipment or 
services purchased, rented, leased, or otherwise obtained, using 
reimbursement funds presumptively confidential and will withhold such 
disaggregated information from routine public inspection.
    175. Final Certification. The Secure Networks Act directs the 
Commission to require Reimbursement Program recipients to file a final 
certification ``in a form and at an appropriate time to be determined 
by the Commission.'' In the final certification, the Reimbursement 
Program recipient must indicate whether it has fully complied with (or 
is in the process of complying with) all terms and conditions of the 
Program and the commitments made in the application of the recipient 
for the reimbursement; has permanently removed from the communications 
network of the recipient, replaced, and disposed of (or is in the 
process of permanently removing, replacing, and disposing of) all 
covered communications equipment or services that were in the network 
of the recipient as of the date of the submission of the application of 
the recipient for the reimbursement; and has fully complied with (or is 
in the process of complying with) the timeline submitted by the 
recipient. The statute also requires the filing of an updated 
certification if at the time the final certification is filed, the 
recipient has not fully complied with and completed its obligations 
under the Reimbursement Program.
    176. No comments were filed addressing the final certification 
required by the Secure Networks Act. As the Commission lacks discretion 
to deviate from clear statutory requirements, it adopts a rule 
requiring recipients to file a final certification and updates as 
necessary per the statute. The Commission will require recipients to 
file the final certification within 10 calendar days of the expiration 
of the removal, replacement and disposal term because the final 
certification relates to the completion of the removal, replacement, 
and disposal process. The final certification will relate to the state 
of compliance and project completion as of the end of the removal, 
replacement and disposal term. Subsequently filed final certification 
updates will relate to the state of compliance and project completion 
as of the date the update is filed. Notwithstanding the statutory 
allowance for a final certification update, the failure to complete the 
removal, replacement, and disposal process in accordance with the 
Reimbursement Program's requirements by the end of the removal, 
replacement and disposal term, as evidenced in the filing of the final 
certification as initially filed, may result in the assessment of 
fines, forfeitures, and/or other enforcement actions against the 
recipient. The Commission directs WCB to provide additional details on 
the filing requirements and contents for the final certification and 
associated updates.
    177. Documentation Retention Requirement. Reimbursement Program 
recipients are required to provide documentation, including relevant 
invoices and receipts, to support requests for the disbursement of 
reimbursement funds for reasonable expenses actually incurred during 
the removal, replacement, and disposal process. This documentation 
helps the Commission assess whether funding is being used as intended 
for reasonable costs, helps the Commission compare actual costs to 
submitted estimated costs, and helps to ensure disbursements for actual 
costs do not exceed the recipients funding allocation. While commenters 
did not

[[Page 2934]]

address document retention, the Commission finds it prudent in its 
effort to combat waste, fraud, and abuse to require program recipients 
to retain all documentation related to their requests for funding 
reimbursement for actual expenses incurred. Recipients must retain the 
documentation for a period of 10 years after the date the final 
disbursement payment is received from the Reimbursement Program. The 
retained documentation will assist the Commission with any subsequent 
investigations should an issue of waste, fraud, and abuse arise 
following the completion of the removal, replacement, and disposal 
process. A 10-year period of time for retaining documentation is 
consistent with the Commission's retention requirement for both the E-
Rate program and the broadcast incentive auction reimbursement program 
and coincides with the 10-year statute of limitations under the False 
Claims Act.
    178. Audits, Reviews, and Field Investigations. In the 2019 Supply 
Chain Further Notice the Commission proposed subjecting program 
recipients to periodic compliance audits and other inquiries, including 
investigations as appropriate, to ensure compliance with the 
Commission's rules and orders. The Commission did not receive any 
comments on this issue. The Commission now directs OMD, or a third-
party identified by OMD, to prepare a system to audit Reimbursement 
Program recipients to ensure compliance with the Commission's rules. 
Consistent with the Commission's experience regarding the USF, the 
Commission finds that audits are the most effective way to determine 
compliance with the Commission's rule requirements. To facilitate 
audits and field investigations, the Commission requires Reimbursement 
Program recipients to provide consent to allow vendors or contractors 
used by the recipient to release confidential information to the 
auditor, reviewer, or other representative. Recipients must also allow 
any representative appointed by the Commission to enter the premises of 
the recipient to conduct compliance inspections.
    179. Enforcement. In the 2020 Supply Chain Second Further Notice, 
the Commission sought comment on implementing the enforcement measures 
contained in section 7 of the Secure Networks Act. The Commission 
received only one comment, from CCA, on the issue. As provided for in 
the statute, a violation of the Secure Networks Act or a regulation 
adopted pursuant to this statute shall constitute a violation of the 
Communications Act. As such, the Commission's authority to impose fines 
and forfeitures pursuant to section 503 of the Communications Act and 
Sec.  1.80 of the Commission's rules, 47 CFR 1.80, will apply equally 
to violations of the Secure Networks Act and Commission regulation 
adopted pursuant to the Secure Networks Act. Potential violators are 
not limited to Reimbursement Program recipients but could also include 
consultants, vendors and contractors that assist entities participating 
in Reimbursement Program. In addition, as directed by the Secure 
Networks Act and consistent with the Commission's proposal in the 2020 
Supply Chain Second Further Notice and the Secure Networks Act the 
Commission requires Reimbursement Program recipients found in violation 
of its rules or the ``commitments made by the recipient in the 
application for the reimbursement'' to repay funds disbursed via the 
Reimbursement Program. Prior to requiring repayment, WCB will send 
notice of the violation to the alleged violator and give the alleged 
violator 180 days to cure the violation as required by the Secure 
Networks Act. In addition to taking steps necessary to address a non-
compliant situation, curing a violation may simply involve a response 
showing that a violation has been cured. The cure period will provide 
alleged violators with ample time to resolve issues of non-compliance 
before the Commission proceeds with taking further enforcement action.
    180. Section 7(c) of the Secure Networks Act requires the 
Commission to take immediate action to recover all reimbursement funds 
awarded to a recipient if the recipient is required to repay funding 
due to a violation. CCA urged the Commission ``to include in its 
enforcement procedures a reasonable opportunity for carriers to cure 
before repayment or other penalty action is triggered. The statute 
already provides program participants a 180-day period to cure 
violations prior to initiating repayment actions, and so the Commission 
finds going beyond what is already required unnecessary. Accordingly, 
consistent with the Commission's proposals in the 2020 Supply Chain 
Second Further Notice, it will initiate a repayment action by sending a 
request for repayment to the recipient immediately following the 
expiration of the opportunity to cure if the recipient fails to respond 
to the notice of violation, indicating the violation is cured. If the 
alleged violator does respond to the notice but is ultimately 
determined by the Commission not to have cured the violation, the 
Commission will then request repayment following that determination.
    181. The Commission directs the Enforcement Bureau (EB) to take all 
steps necessary to initiate enforcement actions against Reimbursement 
Program violators and to recover any outstanding repayment amounts once 
a violation of the Reimbursement Program is referred by WCB to EB. 
Participants found to violate the Commission's rules will also be 
referred to ``all appropriate law enforcement agencies or officials for 
further action under applicable criminal and civil laws.'' Any person 
or entity that violates the Reimbursement Program rules will also be 
banned from further participation in the section 4 reimbursement 
program, and the person or entity may also be barred from participating 
in other Commission programs, including Universal Service support 
programs.
    182. Section 4(d)(1) of the Secure Networks Act requires the 
Commission to develop a list of suggested replacements (Replacement 
List) for the equipment and services being removed, replaced, and 
destroyed. Specifically, Congress directed the Replacement List to 
include ``both physical and virtual communications equipment, 
application and management software, and services or categories of 
replacements of both physical and virtual communications equipment, 
application and management software.'' The list of suggested 
replacements must also be technology neutral and may not advantage the 
use of reimbursement funds for capital expenditures over operational 
expenditures. The Commission sought comment on how to develop the 
Replacement List in April 2020.
    183. Consistent with the Commission's statutory obligation, it 
establishes, and will publish on its website, a Replacement List that 
will identify the categories of suggested replacements of real and 
virtual hardware and software equipment and services to guide of 
providers removing covered communications equipment from their 
networks. The Commission agrees with commenters that the Secure 
Networks Act provides the Commission with the flexibility to choose 
either to create a list of suggested replacements or categories of 
replacements. The Commission also agrees that the Replacement List 
should include categories of replacements rather than try to identify 
suggested replacements, because, as commenters assert, creating a list 
of suggested replacements would have negative consequences, such as the 
Commission being seen as picking

[[Page 2935]]

favored equipment and manufacturers and imposing de facto mandates of 
specific equipment. The Commission agrees with commenters that it 
should provide carriers with the flexibility to select the equipment or 
services that fit their needs from categories of equipment and 
services. The Commission is wary of actions that could harm its 
communications networks, or result in mandatory purchases of specific 
equipment included on the Replacement List. The Commission therefore 
will list categories of suggested replacements on the Reimbursement 
List.
    184. Further, were the Commission to try to identify specific 
equipment and services, it would risk inadvertently overlooking some 
equipment or manufacturers because ``the number and diversity of 
telecommunications equipment is enormous, with varying model numbers, 
releases, and configurations.'' There is no available resource with 
such information in the record. The Commission believes the better 
approach in developing the Replacement List is to identify categories 
of replacement equipment and services that providers of advanced 
communications service could then look to as they determine the proper 
equipment and services for their networks.
    185. Others suggest that rather than creating a list of permissible 
hardware and software equipment and services, the Commission should 
make a list of manufacturers from whom the products and services might 
be purchased. The Secure Networks Act specifically requires the 
Commission to produce a list of ``Suggested Replacements.'' Identifying 
manufacturers would give the imprimatur of government approval and 
create a government approved list of manufacturers. An approved 
government listing could influence purchases and appear to convey that 
the Commission believes certain equipment meets quality and security 
metrics, which would require intensive review of products to ensure 
that the Replacement List was accurate and up-to-date. It could also 
lead to security threats as companies rely on the Commission's ``seal 
of approval'' in lieu of conducting their own research into the 
security of certain equipment. Further, entities seeking to enter the 
market may be dissuaded if their customers are only able to purchase 
equipment from manufacturers approved by the Commission, harming 
competition and innovation right as the move to Open Radio Access 
Networks (O-RAN) and virtualized networks opens up markets to new 
competitors. For these reasons, the Commission declines to name 
specific manufacturers and instead find that a Replacement List with 
categories of suggested equipment and services to guide providers of 
advanced communications service is the better interpretation of its 
obligation.
    186. In compiling this Replacement List, the Commission will use 
the categories of equipment and services in its recently completed 
information collection as guidance for specific categories on the 
Replacement List. Specifically, in the 2019 Supply Chain Order, the 
Commission directed the Office of Economics and Analytics (OEA) and WCB 
to conduct an information collection to determine whether ETCs own 
equipment or services from Huawei and ZTE; what that equipment is and 
services are; the costs associated with purchasing and/or installing 
such equipment and services; and the costs associated with removing and 
replacing such equipment and services. Additionally, the Catalog of 
Expenses adopted as part of the Reimbursement Program will inform the 
Replacement List by helping to target the type of equipment that will 
be removed and replaced. The Commission may also review efforts from 
other Federal partners, such as the Federal Acquisition Security 
Council, or the Department of Homeland Security's Information and 
Communications Technology Supply Chain Risk Management Task Force, if 
those efforts are relevant to the Replacement List. The Federal 
Acquisition Security Council was established pursuant to the SECURE 
Technology Act and the Information and Communications Technology Supply 
Chain Risk Management Task Force is a public-private supply chain risk 
management partnership established in to identify and develop consensus 
strategies that enhance supply chain security.
    187. The Commission agrees with commenters that the Replacement 
List should include equipment and services equipped, or upgradable to, 
be used in O-RAN, or in virtualized networks. Including O-RAN equipment 
and services, which ``could transform 5G network architecture, costs, 
and security,'' is consistent with the Secure Networks Act's 
requirement that the Replacement List be technologically neutral. The 
Secure Networks Act allows for the inclusion of services such as O-RAN 
and virtualized network equipment ``to the extent that the Commission 
determines that communications services can serve as an adequate 
substitute for the installation of communications equipment.'' The 
record shows that these communications services can serve as an 
adequate substitute for communications equipment. The Commission makes 
such a finding here. The Commission encourages providers participating 
in the Reimbursement Program to consider this promising technology, 
along with all other available technologies as they make their 
procurement decisions.
    188. One commenter asserts that the Commission should use a 
software overlay to allow companies with covered communications 
equipment and services to keep the equipment in their networks until 
obsolescence, potentially enabling reimbursement funding to cover more 
networks. They argue the software overlay will make the replacement of 
the risky of covered equipment more efficient ``with proven and fully 
tested technology (tested by [the U.S. government]), that installs as 
software on 3rd party communications equipment and mitigates the 
covered equipment manufacturers'' ability to remotely access, 
manipulate traffic, access private and proprietary data and make 
configuration changes.'' They further suggest that these software 
technologies provide the ability to defend the United States 
communications and data infrastructure, regardless of the location and 
source of manufacturing allowing time for ``rip and replace'' actions 
to be accelerated at lower cost.
    189. Were the Commission to adopt this proposal, covered, 
potentially harmful equipment could remain in its networks for years, 
increasing the risks to the Commission's networks. The Commission 
believes the better approach given the language in the Secure Networks 
Act is take every measure possible to immediately reduce and eliminate 
the risk by removing the equipment promptly. Additionally, the 
Reimbursement Program requires that reimbursement funds be used solely 
for the purposes of ``permanent removal of covered communications 
equipment and services . . . .'' The public interest and its statutory 
goals would be best served by the approach the Commission has adopted.
    190. The Commission also declines at this time to rely solely on a 
third party to create a list of suggested categories or the list of 
replacement equipment and services, as advocated by one commenter. 
First, the Secure Networks Act requires the Replacement List to be 
technologically neutral. Trade associations or membership organizations 
may be inherently biased toward the interests of their membership. 
Rather than risk the impression of self-dealing, the

[[Page 2936]]

Commission believes it is more prudent to maintain control of the 
Replacement List. Second, although the Commission recognizes the 
challenges inherent in creating the Replacement List, the Secure 
Networks Act is clear that the Commission ``shall'' develop the 
Replacement List. Outsourcing the task to a third-party trade 
association or similar organization could be an unlawful subdelegation 
and risk the appearance of abdicating the Commission's responsibility.
    191. Maintenance of the List. The Commission agrees with commenters 
that the list of suggested equipment and service should be transparent 
and current. The Commission will update the list of suggested equipment 
and services, and program recipients and interested third parties may 
also provide information about suggested equipment and services to 
assist the Commission in keeping the list current and reflective of 
changes in the market. The Commission finds that the list should be 
updated at least annually to ensure that it stays current with new 
technologies and innovations while also providing access to evolving 
next-generation communications capabilities to all consumers. Updating 
the Replacement List annually is consistent with the minimum schedule 
that Congress set for the Commission to update the list of covered 
communications equipment and services. The Commission believes updating 
its list of equipment and services that pose a threat to national 
security risks and its Replacement Lists together will provide 
consistency and clarity for providers seeking to comply with the 
Commission's rules.
    192. The Commission declines to update the list quarterly, as some 
commenters argue. By adopting a Replacement List featuring categories 
of equipment and services, the Commission is expressly declining to 
attempt to evaluate every piece of equipment or software released. The 
Commission finds that the relevant categories of equipment and services 
are unlikely to change quarterly, and that an annual review is 
sufficient to keep the list current and foster a competitive 
marketplace. An annual update will be much more comprehensive and avoid 
the need for providers to constantly check the Commission's website 
prior to investing in their networks. For these same reasons, the 
Commission declines to update the list at even shorter intervals, such 
as monthly. The Commission does, however, note that the list may be 
updated at a shorter interval if the Commission deems it necessary.
    193. The Commission directs WCB to issue a Public Notice at least 
annually announcing the updates to the Replacement List.
    194. In the 2019 Supply Chain Order, the Commission sought to 
understand the scope of potentially prohibited equipment or services in 
the communications supply chain to help inform its rulemaking. As a 
result, it adopted the 2019 Supply Chain Information Collection Order, 
which required ETCs, and their non-ETC affiliates and subsidiaries, to 
report on the existence, or lack thereof, of any of their equipment and 
services obtained from Huawei and ZTE. ETCs had to submit information 
on the type of equipment or service obtained from these covered 
companies; the cost to purchase and/or install such equipment and 
services; and the cost to remove and replace such equipment and 
services. All submissions were required to be certified. OEA and WCB 
collected and compiled this data, and the results were published in 
September 2020.
    195. Section 5 of the Secure Networks Act requires that ``providers 
of advanced communications service'' report annually if they have 
``purchased, rented, leased, or otherwise obtained any covered 
communications equipment or service, ``on or after'' August 14, 2018 or 
60 days after an equipment or service has been placed on the Covered 
List. In other words, any equipment or service on the Covered List 
based on one of these two specifications must be reported. Section 5 
also requires that providers of advanced communications service who 
have indicated in the information collection that their network 
contains covered equipment or services, based on the specifications in 
this document, submit a ``detailed justification'' for obtaining such 
equipment or services, as well as information indicating whether the 
covered equipment or services has subsequently been removed and 
replaced and information about plans to continue the purchase, rent, 
lease, installation, or use of such covered equipment or services. Any 
providers that certify to the Commission that they do not have any 
equipment or services are not required to submit annual reports unless 
they acquire covered equipment or services after their last 
certification.
    196. In the 2020 Supply Chain Second Further Notice, the Commission 
proposed to require that advanced communications service providers 
report the type, location, date obtained, and any removal and 
replacement plans of covered equipment and services in their networks. 
The Commission also sought comment on the appropriate information 
needed to satisfy the ``detailed justification'' requirement of the 
Secure Networks Act.
    197. Consistent with the Secure Networks Act and the Commission's 
proposal in the 2020 Supply Chain Second Further Notice, the Commission 
implements a new data collection requirement applying to all providers 
of advanced communications service. The Commission requires that 
providers of advanced communications service annually report on covered 
communications equipment or services in their networks. Specifically, 
with respect to equipment or services on the initial Covered List 
acquired on or after August 14, 2018, or equipment or services added to 
the Covered List that were purchased 60 days or more after the Covered 
List is subsequently updated, providers must report the type of covered 
communications equipment or service purchased, rented or leased; 
location of the equipment or service; date the equipment or service was 
procured; removal or replacement plans for the equipment or service, 
including cost to replace; amount paid for the equipment or service; 
the supplier for the equipment or service; and a detailed justification 
for obtaining such covered equipment and service.
    198. The detailed justification must thoroughly explain the 
provider's reasons for obtaining the covered equipment and/or services, 
including why the provider chose to obtain covered equipment and 
services rather than equipment and services not on the Covered List. 
These reasons can include technical or compatibility issues or the 
source of the vendor was not known by the provider. Providers must also 
indicate whether the equipment and services were published on the 
Covered List at the time of purchase, and whether the covered equipment 
and services supports any other covered equipment and services that do 
not need to be reported, because, for example, the equipment or 
services were obtained before August 14, 2018. This information is not 
only required pursuant to the Secure Networks Act but will inform 
future Commission action to address security issues in communications 
networks.
    199. The Commission will release to the public a list of providers 
that have reported covered equipment or services in their networks, 
consistent with the 2019 Supply Chain Information Collection Order. The 
Commission believes that the public interest in knowing whether 
providers have covered equipment and services in their networks 
outweighs any interest the

[[Page 2937]]

carrier may have in keeping such information confidential. The 
Commission rejects NCTA's argument to the contrary. NCTA argues that 
because the Secure Networks Act directed that status updates under the 
reimbursement program would be made public under section 4(d)(8) while 
remaining silent on whether the section 5 results should be made 
public, Congress intended that section 5 results remain confidential. 
The Commission disagrees. Instead, Congress provided the Commission 
with significant discretion as to the ``form'' and manner of these 
reports, and it believes the public interest in knowing whether covered 
communications equipment and services acquired after August 14, 2018 
are in providers of advanced communications service networks outweigh 
any countervailing interest of the provider in keeping such information 
confidential. Moreover, at the time it passed the Secure Networks Act, 
Congress was aware of the Commission's intention to publish a list of 
ETCs with Huawei and ZTE equipment in their networks based on the 2019 
Supply Chain Information Collection Order, and the Commission believes 
Congress's silence as to whether the section 5 results should be made 
public is better interpreted as endorsing a similar approach to the 
2019 Supply Chain Information Collection Order rather than NCTA's 
reading. Other information, such as location of the equipment and 
services; removal or replacement plans that include sensitive 
information; the specific type of equipment or service; and any other 
provider specific information will be presumptively confidential. The 
Commission believes that this information would likely qualify as trade 
secrets under the Freedom of Information Act.
    200. The Commission directs OEA to administer the collection, which 
includes creating a form for submission through an online portal. The 
form will require that all providers certify that the information 
provided is true and accurate subject to federal regulations. The form 
will have the option for providers to certify that they do not have any 
covered equipment and services. Those providers that certify that they 
do not have any covered equipment and services will not need to refile 
annually unless circumstances change, and they acquire any of these 
covered equipment and services or if equipment they currently use is 
subsequently added to the Covered List. However, a provider of advanced 
communications service that certifies that its network does have 
covered equipment or services will need to continue to file an annual 
report, including the justification, until the provider can certify 
that its network no longer contains covered equipment or services. The 
Secure Networks Act only allows entities that respond to the 
information collection with a negative response to cease filing unless 
their subsequently purchase, rent, lease, or obtain covered 
communications equipment and services.
    201. The Commission reiterates that this information collection 
requirement does not have any effect on the 2019 Supply Chain 
Information Collection Order and its subsequent results. The 2019 
Supply Chain Information Collection Order has closed, and the 
Commission has publicly reported its results. The results of the 2019 
Supply Chain Information Collection Order helped inform the Commission 
of the extent of Huawei and ZTE equipment in its communications 
networks and provided information about the cost of replacing such 
equipment. USTelecom argues that the Secure Networks Act's information 
collection should supersede the 2019 Supply Chain Information 
Collection Order, but that argument has been mooted by the release of 
results from the 2019 Supply Chain Information Collection Order. 
Moreover, the 2019 Supply Chain Information Collection Order and the 
new information collection are distinct. The new information 
collection, as required by Congress in the Secure Networks Act, will 
inform the Commission and public about advanced communications service 
provider action regarding covered communications equipment or services 
on or after August 14, 2018. As the Commission explained in the 2020 
Supply Chain Second Further Notice, the 2019 Supply Chain Information 
Collection Order only covered ETCs. ETCs were required to report any 
Huawei and ZTE equipment and services in their networks, or their 
subsidiaries or affiliates, regardless of when they were obtained.
    202. Effective Date. For the first annual filing, certified 
responses to this information collection from providers of advanced 
communication service will be due through the portal no later than 90 
days after OEA issues a public notice announcing the availability of 
the new reporting portal. Although the Commission proposed a six-month 
window in the proposed rules appendix of the 2020 Supply Chain Second 
Further Notice, a 90-day period would provide the Commission and the 
public with quicker notification of potential security risks to U.S. 
communications networks. The Commission finds that a 90-day period is 
sufficient time for providers to complete the first annual report for 
two reasons. First, it will likely take OEA time to prepare the portal 
for the annual submissions. The Commission expects providers of 
advanced communications service to begin work for the certification and 
reporting requirement before OEA issues the Public Notice, providing 
sufficient time for providers to gather the information when added to 
the 90 days after the Public Notice is published. Second, 90 days is 
roughly consistent with the amount of time the Commission gave ETCs, 
their subsidiaries, and affiliates, to comply with the first 
information collection, including an extension of time to respond. 
Thereafter, all providers of advanced communications service required 
to comply with this information collection must submit their certified 
response through the portal no later than March 31 for the previous 
year.
    203. Based on presently available information obtained through the 
Commission's Information Collection, the Commission estimates the cost 
of requiring the removal and replacement of covered equipment and 
services within the next two years to be $1.8 billion for all ETCs. In 
the 2019 Supply Chain Order, the Commission preliminarily estimated the 
total cost to be between $600 million and $2 billion dollars. Not all 
of that amount, however, is subject to reimbursement. The ETCs that 
appear to initially qualify for reimbursement under the Secure Networks 
Act report it would require approximately $1.6 billion to replace their 
equipment. Yet, as the Commission concluded in the 2019 Supply Chain 
Order, it finds that the affected equipment has a 10-year life and that 
this Order will impact investment decisions starting in 2021. The 
Commission therefore expects to see some replacements, like those 
normally occurring under attrition at the end of both 2020 and 2021, 
covering two years and including up to 20% of the original equipment. 
Hence, the Commission expects the required replacement costs for the 
Huawei or ZTE asset base occurring at the end of the period for all 
ETCs may be as low as $1.5 billion (i.e., about 80% of $1.8 billion) 
and the reimbursement amount for qualifying ETCs may be as low as $1.3 
billion (i.e., 80% of $1.6 billion).
    204. The Commission nonetheless concludes that, even if total 
replacement cost is as high as $1.8 billion reported by all ETCs, that 
cost will be far exceeded by the benefits obtained by addressing the 
important national

[[Page 2938]]

security concerns raised by the enumerated sources who make national 
security determinations. As the Commission explained in the 2019 Supply 
Chain Order, the benefits of removing covered equipment and services 
``extend to [hard] to quantify matters, such as preventing 
untrustworthy elements in the communications network from impacting our 
nation's defense, public safety, and homeland security operations, our 
military readiness, and our critical infrastructure, let alone the 
collateral damage such as loss of life that may occur with any mass 
disruption to our nation's communications networks.''
    205. The other rules enacted in the Order are mandated by the 
Secure Networks Act and the Commission has no discretion to diverge 
from statutory direction. The Commission estimates the reporting costs 
of complying with the new reporting requirement, mandated by section 5 
of the Secure Networks Act, to be approximately $600,000, being the 
product the per provider cost of $167 and the Commission's estimate of 
reporting providers of advanced communications services of 
approximately 3,500 ($167 * 3,500 = $584,500, which the Commission 
rounds to $600,000 recognizing its calculations are only 
approximations). The Commission estimates that complying would take 3 
hours for each ETC subject to that collection, at a cost of about $167 
per carrier, as the reporting requirements for the new collection are 
similar to those in the 2019 Supply Chain Information Collection. The 
Commission estimates there are approximately 3,500 providers of 
advanced communications service, i.e., providers that would have to 
report under the present collection, as follows. There are 3,822 
current 477 filings. Some of these are from filers that affiliated with 
each other. The Commission associated affiliated 477 filers with a 
unique ``parent'' filer, dropping the affiliates from its count. Of the 
remaining 477 filers, the Commission dropped filers who only engage in 
fixed line resale and do not supply mobile service. This left 3,579 
filers, which, recognizing the Commission's process involves 
approximation, it rounds to 3,500. This reporting cost estimate is 
higher than the cost of the data collection of the 2019 Supply Chain 
Information Collection because the universe of respondents includes all 
providers of advanced communications service, not just ETCs. The 
Commission anticipates that the new prohibition on Federal subsidy 
programs administered by the Commission will not have incremental net 
costs beyond those already imposed by Sec.  54.9 of the Commission's 
rules. The Commission accordingly finds that its requirements will 
achieve the stated objectives of Congress's mandated rules in the most 
cost-effective manner. Huawei argues that the ``significant upfront 
costs as well as ongoing expenditures . . . will make it extremely 
difficult to comply with a removal and replacement mandate.'' Huawei 
believes a cost benefit analysis ``likely would result in inequitable 
disbursement or reimbursement funds because some carriers may have 
spent more on covered company equipment that other carriers'' and, for 
non-ETCs, ``the magnitude of equipment replacements costs is not 
something they can afford.'' The Commission disagrees. For non-ETCs, 
the requirement to remove and replace equipment applies only to those 
providers which voluntarily choose to participate in the Reimbursement 
Program. And the Commission received no comments from ETCs who would be 
ineligible to participate in the Reimbursement Program stating the 
requirement to remove and replace covered equipment or services is not 
feasible. Finally, the design of the Reimbursement Program, including 
section 4 of the Secure Networks Act and the rules the Commission 
adopts, will ensure an equitable allocation of funds to replace covered 
equipment and services.

III. Procedural Matters

A. Paperwork Reduction Act of 1995 Analysis

    206. This document contains modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will be submitted to the Office of Management and 
Budget (OMB) for review under Section 3507(d) of the PRA. OMB, the 
general public, and other Federal agencies will be invited to comment 
on the modified information collection requirements contained in this 
proceeding. In addition, the Commission notes that pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission previously sought specific comment on 
how the Commission might further reduce the information collection 
burden for small business concerns with fewer than 25 employees.

B. Congressional Review Act

    207. The Commission has determined, and the Administrator of the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, concurs that this rule is major under the Congressional Review 
Act, 5 U.S.C. 804(2). The Commission will send a copy of this Second 
Report and Order to Congress and the Government Accountability Office 
pursuant to 5 U.S.C. 801(a)(1)(A).
    208. Final Regulatory Flexibility Analysis. The Regulatory 
Flexibility Act of 1980 (RFA) requires that an agency prepare a 
regulatory flexibility analysis for notice and comment rulemakings, 
unless the agency certifies that ``the rule will not, if promulgated, 
have a significant economic impact on a substantial number of small 
entities.'' Accordingly, the Commission has prepared a FRFA concerning 
the possible impact of the rule changes contained in the Report and 
Order on small entities.
    209. The Commission sought written comment on the proposals in the 
2019 Supply Chain Further Notice and 2020 Supply Chain Second Further 
Notice, including comment on the Initial Regulatory Flexibility 
Analysis (IRFA). The present Final Regulatory Flexibility Analysis 
(FRFA) addresses comments received on the IRFAs and conforms to the 
RFA.
    210. Consistent with the Commission's obligation to be responsible 
stewards of the public funds used in USF programs and increasing 
concern about ensuring communications supply chain integrity, and as 
directed by the Secure Networks Act, the Second Report and Order 
(Order) adopts rules to implement sections 2, 3, 4, 5, and 7 of the 
Secure Networks Act and to require recipients of reimbursement funds 
under the Reimbursement Program and ETCs receiving USF support to 
remove and replace from their network operations communications 
equipment and services included on the covered list required by section 
2 of the Covered List.
    211. Specifically, in addition to the requirement to remove-and-
replace, the Commission adopts several rules to implement provisions of 
the Secure Networks Act. The Commission implements section 2 of the 
Secure Networks Act by publishing on its website the Covered List of 
communications equipment or services determined to pose a risk to 
national security, pursuant to the sources of determinations identified 
in section 2(c) of the Secure Networks Act. The

[[Page 2939]]

Commission adopts a rule to prohibit the use of Federal subsidies made 
available through a program administered by the Commission to purchase, 
rent, lease, or otherwise obtain any covered communications equipment 
or service, or maintain any covered communications equipment or service 
previously purchased, rented, leased, or otherwise obtained, and 
identified and published on the Covered List. The Commission 
establishes, as directed by section 4 of the Secure Networks Act, the 
Reimbursement Program to reimburse costs reasonably incurred by 
providers of advanced communications service with two million or fewer 
customers to permanently remove, replace, and dispose of covered 
communications equipment and services from their networks. To further 
administer the Reimbursement Program, the Commission establishes, and 
will publish on its website, a list of suggested replacements 
(Replacement List) for the equipment and services being removed, 
replaced, and destroyed, and establishes a reporting requirement and 
new information collection to require providers of advanced 
communications service to report covered communications equipment and 
service in their networks.
    212. Small entities potentially affected by the rules herein 
include eligible schools and libraries, eligible rural non-profit and 
public health care providers, and the eligible service providers 
offering them services, including telecommunications service providers, 
internet Service Providers, and vendors of the services and equipment 
used for telecommunications and broadband networks.
    213. Requirement to Remove and Replace Covered Equipment and 
Services. The Order requires recipients of reimbursement funds under 
the Reimbursement Program and ETCs receiving USF support to remove and 
replace from their network operations covered equipment and services 
included on the Covered List. The Order conditions this obligation to 
remove and replace covered equipment and services upon a congressional 
appropriation to fund the Reimbursement Program. The Order limits the 
scope of the remove-and-replace requirement to equipment and services 
on the Covered List. Applicants for funds through the Reimbursement 
Program shall satisfy compliance with the remove-and-replace obligation 
in accordance with the deadlines and transition periods associated with 
the Reimbursement Program. Entities required to comply that are not 
recipients of funding through the Reimbursement Program must remove 
covered equipment and services within one year after WCB issues a 
Public Notice announcing the acceptance of applications filed during 
the initial filing window to participate in the Reimbursement Program. 
ETC recipients of USF support must certify that they have complied with 
our new rule requiring the removal of equipment and services on the 
Covered List.
    214. Covered List. Consistent with the Secure Networks Act, no 
later than March 12, 2021, the Commission will publish on its website 
the Covered List of communications equipment or services determined to 
pose an unacceptable risk to the national security of the United States 
or the security and safety of United States persons. The Order 
establishes that the Commission will publish, update, or modify the 
Covered List without providing notice or opportunity to comment; 
however, PSHSB will issue a Public Notice every time the Covered List 
is updated. As directed by the Secure Networks Act, the Order states 
that the Commission may only accept determinations from the four 
sources enumerated in the Secure Networks Act, and will incorporate 
national security determinations into the Covered List automatically, 
when identifying specific communications equipment or services that 
``pose[ ] an unacceptable risk to the national security of the United 
States and the security and safety of United States persons,'' or to 
the extent the class or category of equipment or service identified is 
``capable'' of the 2(b)(2)(A)-(C) criteria, when listed in general 
categories or classes of equipment that pose such a risk. The 
Commission will periodically update or modify the Covered List to 
reflect changes in determinations and will notify the public for every 
twelve-month period during which the Commission does not update the 
Covered List.
    215. Restriction on Use of Federal Subsidies. Pursuant to section 3 
of the Secure Networks Act, the Order adopts a rule that no Federal 
subsidy made available through a program administered by the Commission 
for capital expenditures necessary for the provision of advanced 
communications service shall be used to purchase, rent, lease, or 
otherwise obtain any covered communications equipment or service, or 
maintain any covered communications equipment or service previously 
purchased, rented, leased, or otherwise obtained, as identified and 
published on the Covered List. The Commission has interpreted section 3 
of the Secure Networks Act as intending to apply to all universal 
service programs but not other Federal subsidy programs to the extent 
those programs may tangentially or indirectly involve expenditures 
related to the provision of advanced communications service. In the 
Order, the Commission declines to grandfather existing contracts for 
equipment or services on the Covered List under Sec.  54.10 of the 
Commission's rules. The prohibition on the use of Federal subsidies 
takes effect 60 days after any particular communications equipment or 
services are placed on the Covered List, consistent with the Secure 
Networks Act. The Order requires recipients of universal service 
support from each of the four USF programs to certify that they have 
complied with the new rule prohibiting the use of Federal subsidies for 
equipment and services on the Covered List.
    216. Reimbursement Program. The Order establishes, as directed by 
the Secure Networks Act, the Secure and Trusted Communications 
Reimbursement Program (Reimbursement Program) to reimburse the costs 
reasonably incurred by providers of advanced communication services 
with two million or fewer customers to permanently remove, replace, and 
dispose of covered communications equipment and services from their 
networks. In the Order, the Commission allows eligible providers to 
obtain reimbursement to remove and replace older covered communications 
equipment with upgraded technology and will reimburse providers for 
certain transition expenses incurred prior to the creation of this 
program. Program participants are required to submit estimated costs to 
receive funding allocations, and recipients can then obtain funding 
disbursements on a rolling basis upon a showing of actual expenses 
incurred. If aggregate demand exceeds available funding, the Order 
prioritizes funding for ETCs and expenses for transitioning core 
networks over non-ETCs and non-core network transition expenses. 
Program recipients will have one year from the initial funding 
disbursement to complete the permanent removal, replacement, and 
disposal of covered communications equipment, and the Commission may 
grant a single, general six-month extension for all recipients and/or 
individual extensions of time if circumstances warrant.
    217. Status Updates. As directed by the Secure Networks Act, the 
Order requires program recipients to file a status update ``once every 
90 days beginning on the date on which the Commission approves an 
application for a reimbursement.'' Recipients should file the first 
report within 90 days of

[[Page 2940]]

receiving their allocation. In the update, the recipients shall report 
on the efforts undertaken, and challenges encountered, in permanently 
removing, replacing, and disposing its covered communications equipment 
or services. Recipients shall also report in detail on the availability 
of replacement equipment in the marketplace so the Commission can 
assess whether a general, six-month extension permitted by the statute 
is appropriate. The report must also include information that the 
entity has fully complied with (or is in the process of complying with) 
all terms and conditions of the Program; has fully complied with (or is 
in the process of complying with) the commitments made in the 
application of the recipient for the reimbursement; has permanently 
removed from the communications network of the recipient, replaced, and 
disposed of (or is in the process of permanently removing, replacing, 
and disposing of) all covered communications equipment or services that 
were in the network of the recipient as of the date of the submission 
of the application of the recipient for the reimbursement; and has 
fully complied with (or is in the process of complying with) the 
timeline submitted by the recipient. The report must include a 
certification that affirms the information in the status report is 
accurate. After the program recipient has notified the Commission of 
the completion of the permanent removal, replacement, and disposal of 
the covered communications equipment or service pursuant to a final 
certification, updates are no longer required.
    218. Steps to Mitigate Waste, Fraud, and Abuse. The Order directs 
OMD, or a third-party identified by OMD, to prepare a system to audit 
Reimbursement Program recipients to ensure compliance with the 
Commission's rules. The Order requires recipients found in violation of 
the Commission's rules or the ``commitments made by the recipient in 
the application for the reimbursement'' to repay funds disbursed via 
the Reimbursement Program. Prior to requiring repayment, the Commission 
will provide notice of the violation, and will give the violator 180 
days to cure the violation. The Commission initiates such action by 
sending a request for repayment to the recipient immediately following 
the expiration of the opportunity to cure if the recipient does not 
respond to the notice of violation. If the alleged violator does not 
respond to the notice or does not repay the amounts due, the Commission 
will demand repayment. Participants that are found to violate the 
Commission's rules will also be referred to ``all appropriate law 
enforcement agencies or officials for further action under applicable 
criminal and civil laws.'' Any person or entity that violates the 
Reimbursement Program rules will also be banned from further 
participation in the section 4 Reimbursement Program, and the person or 
entity may also be barred from participating in other Commission 
programs, including Universal Service support programs.
    219. Replacement List. The Order establishes, and the Commission 
will publish on its website, a Replacement List that will identify the 
categories of suggested replacements of real and virtual hardware and 
software equipment and services to guide of providers removing covered 
communications equipment from their networks. The Replacement List of 
suggested equipment and services will be updated at least annually, and 
program recipients and interested third-parties may also provide 
information about suggested equipment and services to assist in keeping 
the list current and informed based upon changes in the market.
    220. Reporting Requirement. The Order requires that providers of 
advanced communications service annually report the type of covered 
communications equipment or service purchased, rented or leased; 
location of the equipment or service; date the equipment or service was 
procured; removal or replacement plans for the equipment or service, 
including cost to replace; amount paid for the equipment or service; 
the supplier for the equipment or service; and a detailed justification 
for obtaining such covered equipment and service. All covered 
communications equipment or services on the initial Covered List 
published under section 2(a) of the Secure Networks Act that was 
purchased, leased, or otherwise obtained by a provider on or after 
August 14, 2018 must be reported. Additional covered equipment or 
services added to the list must be reported in the next annual report 
that is at least 60 days after the list is updated. Those providers 
needing to submit a detailed justification must thoroughly explain 
their reasons for obtaining the covered equipment and/or services. The 
Commission will release to the public a list of providers that have 
reported covered equipment or services in their networks, consistent 
with the 2019 Supply Chain Information Collection Order. For the first 
annual filing, certified responses to this information collection from 
providers of advanced communication service will be due through the 
portal no later than 90 days after OEA issues a public notice 
announcing the availability of the new reporting portal.
    221. The RFA requires an agency to describe the steps the agency 
has taken to minimize the significant economic impact on small entities 
of the final rule, consistent with the stated objectives of the 
applicable statutes, including a statement of the factual, policy, and 
legal reasons in support of the final rule, and why any significant 
alternatives to the rule considered by the agency and which affect the 
impact on small entities were rejected.
    222. Several of the rules in the Order are adopted pursuant to 
statutory obligation under the Secure Networks Act. However, where the 
Commission has discretion in its interpretation or implementation of 
the Secure Networks Act provisions, or adopts rules pursuant to 
alternative statutory authority, the scope of the rules is narrowly 
tailored so as to lessen the impact on small entities. The rules 
adopted in the Order appropriately consider the burdens on smaller 
providers against the Commission's goal of protecting its 
communications networks and communications supply chain from 
communications equipment and services that pose a national security 
threat, while facilitating the transition to safer and more secure 
alternatives.
    223. Consistent with the Commission's proposal in the 2019 Supply 
Chain Further Notice, the requirement to remove and replace covered 
equipment and services is contingent upon appropriation from Congress, 
rather than making the requirement effective before funding is secured 
or based upon funding obtained through alternative measures, such as 
USF. Waiting until appropriated funding is available will reduce the 
burdens imposed upon smaller providers by ensuring that funds are 
available to cover reimbursable expenses through the Reimbursement 
Program. Additionally, the Order ties the administration of the remove-
and-replace requirement to the administration of the Reimbursement 
Program, including limiting the scope of the requirement to equipment 
and services on the Covered List, which will allow providers to easily 
identify equipment and services to remove and replace from their 
networks. Using the Covered List to determine the scope of equipment 
and services applicable to the remove-and-replace requirement, as well 
as the prohibition on the use of Federal subsidies in Sec.  54.10 of 
the Commission's rules and the Reimbursement Program, will enable

[[Page 2941]]

small providers to easily identify equipment and services for 
compliance with these rules.
    224. Consistent with the statutory mandates in the Secure Networks 
Act, the Order establishes a program to reimburse eligible providers of 
advanced communications service for costs reasonably incurred to 
remove, replace, and dispose of covered equipment and services on the 
Covered List. As a general matter, when obtaining replacement products 
for reimbursement, the Commission expects eligible providers to 
``obtain the lowest-cost equipment that most closely replaces their 
existing equipment'' yet will allow, and indeed encourage, eligible 
providers replacing third generation and older equipment to obtain 
reimbursement for the cost of 4G LTE replacement equipment that is 5G-
ready. This will put recipients, including smaller providers, on equal 
footing to their prior position before incurring the costs of removing 
and replacing the covered equipment and services and, ultimately, end 
up placing recipients in a slightly better position than they were 
before having to replace the covered equipment and services.
    225. Although one commenter advocated that the Commission release 
reimbursement funding upfront to provide financial security for smaller 
providers, the Order determines that the Reimbursement Program will 
allocate funds on a rolling basis, similar to the administration of the 
broadcast incentive auction. This methodology, which sufficiently met 
the financial needs of providers, including smaller providers, in the 
broadcast incentive auction context, best achieves Congress's goal of 
mitigating the administrative burden and costs of the program while 
taking steps to avoid waste, fraud, and abuse. Consistent with the 
Secure Networks Act, the Order further sets a term of one year from the 
date upon which funding is received for recipients to remove, replace, 
and dispose of covered equipment or services, though the Secure 
Networks Act authorizes the Commission to grant six-month extensions of 
time, either on a general or case-by-case basis, for compliance.
    226. Lastly, the Commission will update the list of suggested 
equipment and services contained on the Replacement List at least 
annually to ensure that the list stays current and transparent, which 
will help small and rural providers required to remove and replace 
covered equipment and services access advanced products and services 
when transitioning away from covered equipment and services in their 
networks.
    227. Pursuant to Sec.  1.3 of the Commission's rules, any provision 
of the Commission's rules may be waived by the Commission on its own 
motion or on petition ``if good cause therefor is shown.'' The Order 
permits entities to seek a waiver of the requirements if permitted by 
statute. In these ways, the Order seeks to minimize the economic burden 
of these rules on small entities.

IV. Ordering Clauses

    228. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1-4, 201(b), 214, 229, 254, 303(r), 403, and 503 
of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 
201(b), 214, 229, 254, 303(r), 403, 503, sections 2, 3, 4, 5, and 7 of 
the Secure Networks Act, 47 U.S.C. 1601, 1602, 1603, 1604, and 1606, 
section 889 of the 2019 NDAA, Public Law 115-232, and Sec. Sec.  1.1 
and 1.412 of the Commission's rules and 47 CFR 1.1, the Report and 
Order is adopted.
    229. It is further ordered that Parts 1 and 54 of the Commission's 
rules are amended as set forth in the following.
    230. It is further ordered that, pursuant to Sec. Sec.  1.4(b)(1) 
and 1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1), 1.103(a), the 
Report and Order shall be effective 60 days after publication of the 
Report and Order in the Federal Register, with the exception Sec. Sec.  
1.50004(c), (d)(1), (g), (h)(2), (j)-(n), 1.50007, and 54.11, which 
contain new or modified information collection requirements that 
require review and approval by the OMB under the Paperwork Reduction 
Act. The Commission will announce the effective date of those sections 
in the Federal Register after receiving OMB approval.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Civil rights, Claims, 
Communications, Communications common carriers, Communications 
equipment, Cuba, Drug abuse, Environmental impact statements, Equal 
access to justice, Equal employment opportunity, Federal buildings and 
facilities, Government employees, Historic preservation, Income taxes, 
Indemnity payments, Individuals with disabilities, internet, 
Investigations, Lawyers, Metric system, Penalties, Radio, Reporting and 
recordkeeping requirements, Security measures, Satellites, 
Telecommunications, Telephone, Television, Wages.

47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, internet, Libraries, Puerto Rico, Reporting and recordkeeping 
requirements, Schools, Telecommunications, Telephone, Virgin Islands.

Federal Communications Commission
Marlene Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1 and 54 as follows:

PART 1--PRACTICE AND PROCEDURE

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. Effective March 15, 2021, add Subpart DD consisting of Sec. Sec.  
1.50000 through 1.50007 to read as follows:

Subpart DD--Secure and Trusted Communications Networks

    Authority: 47 U.S.C. chs. 5, 15.
Sec.
1.50000 Purpose.
1.50001 Definitions.
1.50002 Covered List.
1.50003 Updates to the Covered List.
1.50004 Secure and Trusted Communications Networks Reimbursement 
Program.
1.50005 Enforcement.
1.50006 Replacement List.
1.50007 [Reserved]

Subpart DD--Secure and Trusted Communications Networks


Sec.  1.50000   Purpose.

    The purpose of this subpart is to implement the Secure and Trusted 
Communications Networks Act of 2019, Public Law 116-124, 133 Stat. 158.


Sec.  1.50001   Definitions.

    For purposes of this subpart:
    (a) Advanced communications service. The term ``advanced 
communications service'' means 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.
    (b) Appropriate national security agency. The term ``appropriate 
national security agency'' means:

[[Page 2942]]

    (1) The Department of Homeland Security;
    (2) The Department of Defense;
    (3) The Office of the Director of National Intelligence;
    (4) The National Security Agency; and
    (5) The Federal Bureau of Investigation.
    (c) Communications equipment or service. The term ``communications 
equipment or service'' means any equipment or service used in fixed and 
mobile networks that provides advanced communication service, provided 
the equipment or service includes or uses electronic components.
    (d) Covered communications equipment or service. The term ``covered 
communications equipment or service'' means any communications 
equipment or service that is included on the Covered List developed 
pursuant to Sec.  1.50002.
    (e) Determinations. The term ``determination'' means any 
determination from sources identified in Sec.  1.50002(b)(1)(i)-(iv) 
that communications equipment or service pose an unacceptable risk to 
the national security of the United States or the security and safety 
of United States persons.
    (f) Covered List. The Covered List is a regularly updated list of 
covered communications equipment and services.
    (g) Reimbursement Program. The Reimbursement Program means the 
program established by section 4 of the Secure and Trusted 
Communications Networks Act of 2019, Public Law 116-124, 133 Stat. 158, 
codified at 47 U.S.C. 1603, as implemented by the Commission in Sec.  
1.50004.
    (h) Reimbursement Program recipient (or recipient). The term 
``Reimbursement Program recipient'' or ``recipient'' means an eligible 
advanced communications service provider that has requested via 
application and been approved for funding in the Reimbursement Program, 
regardless of whether the provider has received reimbursement funds.
    (i) Replacement List. The Replacement List is a list of categories 
of suggested replacements for covered communications equipment or 
service.


Sec.  1.50002   Covered List.

    (a) Publication of the Covered List. The Public Safety and Homeland 
Security Bureau shall publish the Covered List on the Commission's 
website and shall maintain and update the Covered List in accordance 
with Sec.  1.50003.
    (b) Inclusion on the Covered List. The Public Safety and Homeland 
Security Bureau shall place on the Covered List any communications 
equipment or service that:
    (1) Is produced or provided by any entity if, based exclusively on 
the following determinations, such equipment or service poses an 
unacceptable risk to the national security of the United States or the 
security and safety of United States persons:
    (i) A specific determination made by any executive branch 
interagency body with appropriate national security expertise, 
including the Federal Acquisition Security Council established under 
section 1222(a) of title 41, United States Code;
    (ii) A specific determination made by the Department of Commerce 
pursuant to Executive Order No. 13873 (3 CFR, 2019 Comp., p 317); 
relating to securing the information and communications technology and 
services supply chain);
    (iii) Equipment or service being covered telecommunications 
equipment or services, as defined in section 889(f)(3) of the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 
115-232; 132 Stat. 1918); or
    (iv) A specific determination made by an appropriate national 
security agency;
    (2) And is capable of:
    (i) Routing or redirecting user data traffic or permitting 
visibility into any user data or packets that such equipment or service 
transmits or otherwise handles;
    (ii) Causing the networks of a provider of advanced communications 
services to be disrupted remotely; or
    (iii) Otherwise posing an unacceptable risk to the national 
security of the United States or the security and safety of United 
States persons.


Sec.  1.50003   Updates to the Covered List.

    (a) The Public Safety and Homeland Security Bureau shall monitor 
the status of determinations in order to update the Covered List.
    (b) If a determination regarding covered communications equipment 
or service on the Covered List is reversed or modified, the Public 
Safety and Homeland Security Bureau shall remove from or modify the 
entry of such equipment or service on the Covered List, except the 
Public Safety and Homeland Security Bureau may not remove such 
equipment or service from the Covered List if any other of the sources 
identified in Sec.  1.50002(b)(1)(i) through (iv) maintains a 
determination supporting inclusion on the Covered List of such 
equipment or service.
    (c) After each 12-month period during which the Covered List is not 
updated, the Public Safety and Homeland Security Bureau will issue a 
Public Notice indicating that no updates were necessary during such 
period.


Sec.  1.50004   Secure and Trusted Communications Networks 
Reimbursement Program.

    (a) Eligibility. Providers of advanced communications service with 
two million or fewer customers are eligible to participate in the 
Reimbursement Program to reimburse such providers for costs reasonably 
incurred for the replacement, removal, and disposal of covered 
communications equipment or services if:
    (1) The covered communications equipment or service to be removed, 
replaced, or disposed of was purchased, rented, leased or otherwise 
obtained before August 14, 2018 and on the initial Covered List 
published per Sec.  1.50002; or
    (2) The covered communications equipment or service was added to 
the Covered List per Sec.  1.50003, then no later than 60 days after 
the date of addition to the Covered List;
    (3) The provider certifies:
    (i) As of the date of the submission of the application, the 
provider has developed:
    (A) A plan for the permanent removal and replacement of any covered 
communications equipment or service that is in the communications 
network of the provider as of such date; and the disposal of the 
equipment or services removed; and
    (B) A specific timeline for the permanent removal, replacement, and 
disposal of the covered communications equipment or service, which 
timeline shall be submitted to the Commission as part of the 
application per paragraph (c)(1)(iv) of this section; and
    (ii) beginning on the date of the approval of the application, the 
provider:
    (A) Will not purchase, rent, lease, or otherwise obtain covered 
communications equipment or service, using reimbursement funds or any 
other funds (including funds derived from private sources); and
    (B) In developing and tailoring the risk management practices of 
the applicant, will consult and consider the standards, guidelines, and 
best practices set forth in the cybersecurity framework developed by 
the National Institute of Standards and Technology.
    (b) Filing window. The Wireline Competition Bureau shall announce 
the opening of an initial application filing window for eligible 
providers seeking to

[[Page 2943]]

participate in the Reimbursement Program for the reimbursement of costs 
reasonably incurred for the removal, replacement, and disposal of 
covered communications equipment and services. The Wireline Competition 
Bureau may implement additional filing windows as necessary and shall 
provide notice before opening any additional filing window, and include 
in that notice the amount of funding available. The Wireline 
Competition Bureau shall treat all eligible providers filing an 
application within any filing window as if their applications were 
simultaneously received. Funding requests submitted outside of a filing 
window will not be accepted.
    (c) [Reserved]
    (d) Application review process. The Wireline Competition Bureau 
will review applications to determine whether the application is 
complete, whether the applicant is eligible for the Reimbursement 
Program, and to assess the reasonableness of the cost estimates 
provided by the applicant. The Wireline Competition Bureau shall 
approve or deny applications to receive a funding allocation from the 
Reimbursement Program within 90 days after the close of the applicable 
filing window. The Wireline Competition Bureau may extend the deadline 
for granting or denying applications for up to an additional 45 days if 
it determines that an excessive number of applications have been filed 
during the window and additional time is needed to review the 
applications.
    (1) [Reserved]
    (2) Denial of an application shall not preclude the applicant from 
submitting a new application for reimbursement in a subsequent filing 
window.
    (e) Funding allocation. Once an application is approved, the 
Wireline Competition Bureau will allocate funding on the applicant's 
behalf to the United States Treasury for draw down by the Reimbursement 
Program recipient as expenses are incurred pursuant to the funding 
disbursement process provided for in paragraph (g) of this section.
    (f) Prioritization of support. The Wireline Competition Bureau 
shall issue funding allocations in accordance with this section after 
the close of a filing window. After a filing window closes, the 
Wireline Competition Bureau shall calculate the total demand for 
Reimbursement Program support submitted by all eligible providers 
during the filing window period. If the total demand received during 
the filing window exceeds the total funds available, then the Wireline 
Competition Bureau shall allocate the available funds consistent with 
the following priority schedule:

                                Table 1 to Paragraph (f)--Prioritization Schedule
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Priority 1: Advanced communication service providers with 2 million or fewer    Priority 1a: Costs reasonably
 customers that are Eligible Telecommunication Carriers subject to section       incurred for transitioning core
 [54.11] (new removal and replacement requirement).                              network(s).
                                                                                Priority 1b: Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
Priority 2: Non-ETC providers of advanced communications service with 2         Priority 2a: * Costs reasonably
 million or fewer customers that participated in the Supply Chain Security       incurred for transitioning core
 Information Collection, OMB Control No. 3060-1270.                              network(s).
                                                                                Priority 2b: * Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
Priority 3: Other non-Eligible Telecommunication Carriers that are providers    Priority 3a: Costs reasonably
 of advanced communication service with 2 million or fewer customers.            incurred for transitioning core
                                                                                 network(s).
                                                                                Priority 3b: Costs reasonably
                                                                                 incurred for non-core network
                                                                                 transition.
----------------------------------------------------------------------------------------------------------------

    (1) Application of prioritization schedule. The Wireline 
Competition Bureau shall issue full funding allocations for all 
eligible providers in the Priority 1 prioritization category before 
issuing funding allocations in any subsequent prioritization 
categories. The Wireline Competition Bureau shall continue to review 
all funding requests and issue funding allocations by prioritization 
category until there are no available funds remaining. If there is 
insufficient funding to fully fund all requests in a particular 
prioritization category, then the Wireline Competition Bureau will pro-
rate the available funding among all eligible providers in that 
prioritization category. Requests for funds in subsequent 
prioritization categories will be denied for lack of available funding.
    (2) Pro-rata reductions. When pro-rata reductions are required per 
paragraph (f)(1) of this section, the Wireline Competition Bureau 
shall:
    (i) Divide the total remaining funds available by the demand within 
the specific prioritization category to produce a pro-rata factor;
    (ii) Multiply the pro-rata factor by the total dollar amount 
requested by each recipient in the prioritization category; and
    (iii) Allocate funds to each recipient consistent with this 
calculation.
    (g) [Reserved]
    (h) Removal, replacement, and disposal term. Reimbursement Program 
recipients must complete the permanent removal, replacement, and 
disposal of covered communications equipment or service within one year 
of receiving the initial draw down disbursement from their funding 
allocation.
    (1) General extension. The Commission may extend by a period of six 
months the removal, replacement, and disposal term to all Reimbursement 
Program recipients if the Commission:
    (i) Finds that the supply of replacement communications equipment 
or services needed by the recipients to achieve the purposes of the 
Reimbursement Program is inadequate to meet the needs of the 
recipients; and
    (ii) Provides notice and detailed justification for granting the 
extension to:
    (A) The Committee on Energy and Commerce of the House of 
Representatives; and
    (B) The Committee on Commerce, Science, and Transportation of the 
Senate.
    (2) Individual extensions. Prior to the expiration of the removal, 
replacement and disposal term, a Reimbursement Program recipient may 
petition the Wireline Competition Bureau for an extension of the term. 
The Wireline Competition Bureau may grant an extension for up to six 
months after finding, that due to no fault of such recipient, such 
recipient is unable to complete the permanent removal, replacement, and 
disposal by the end of the term. The Wireline Competition Bureau may 
grant more than one extension request to a recipient if circumstances 
warrant.
    (i) Limitations on funding use. A Reimbursement Program recipient 
may not:

[[Page 2944]]

    (1) Use reimbursement funds to remove, replace or dispose of any 
covered communications equipment or service purchased, rented, leased, 
or otherwise obtained:
    (i) On or after August 14, 2018, if on the initial Covered List 
published per Sec.  1.50002; or
    (ii) On or after 60 days after the date of addition to the Covered 
List if the communications equipment or services were subsequently 
added to the Covered List per Sec.  1.50003; or
    (2) Purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service, using reimbursement funds or any 
other funds (including funds derived from private sources).
    (j)-(n) [Reserved]
    (o) Audits, reviews, and field investigations. Recipients shall be 
subject to audits and other investigations to evaluate their compliance 
with the statutory and regulatory requirements for the Reimbursement 
Program. Recipients must provide consent to allow vendors or 
contractors used by the recipient in connection with the Reimbursement 
Program to release confidential information to the auditor, reviewer, 
or other representative. Recipients shall permit any representative 
(including any auditor) appointed by the Commission to enter their 
premises to conduct compliance inspections.
    (p) Delegation of authority. The Commission delegates authority to 
the Wireline Competition Bureau, to adopt the necessary policies and 
procedures relating to allocations, draw downs, payments, obligations, 
and expenditures of money from the Reimbursement Program to protect 
against waste, fraud, and abuse and in the event of bankruptcy, to 
establish a Catalog of Expenses Eligible for Reimbursement and 
predetermined cost estimates, review the estimated cost forms, issue 
funding allocations for costs reasonably incurred, set filing deadlines 
and review information and documentation regarding progress reports, 
allocations, and final accountings.


Sec.  1.50005   Enforcement.

    (a) Violations. In addition to the penalties provided under the 
Communications Act of 1934, as amended, and section 1.80 of this 
chapter, if a Reimbursement Program recipient violates the Secure and 
Trusted Communications Networks Act of 2019, Public Law 116-124, 133 
Stat. 158, the Commission's rules implementing the statute, or the 
commitments made by the recipient in the application for reimbursement, 
the recipient:
    (1) Shall repay to the Commission all reimbursement funds provided 
to the recipient under the Reimbursement Program;
    (2) Shall be barred from further participation in the Reimbursement 
Program;
    (3) Shall be referred to all appropriate law enforcement agencies 
or officials for further action under applicable criminal and civil 
law; and
    (4) May be barred by the Commission from participation in other 
programs of the Commission, including the Federal universal service 
support programs established under section 254 of the Communications 
Act of 1934, as amended.
    (b) Notice and opportunity to cure. The penalties described in 
paragraph (a) of this section shall not apply to a recipient unless:
    (1) The Commission, the Wireline Competition Bureau, or the 
Enforcement Bureau provides the recipient with notice of the violation; 
and
    (2) The recipient fails to cure the violation within 180 days after 
such notice.
    (c) Recovery of funds. The Commission will immediately take action 
to recover all reimbursement funds awarded to a recipient under the 
Program in any case in which such recipient is required to repay 
reimbursement funds under paragraph (a) of this section.


Sec.  1.50006   Replacement List.

    (a) Development of List. The Commission shall develop a list of 
categories of suggested replacements of physical and virtual 
communications equipment, application and management software, and 
services for the covered communications equipment or services listed on 
the Covered List pursuant to Sec. Sec.  1.50002 and 1.50003 of this 
subpart.
    (1) In compiling the Replacement List, the Commission may review 
efforts from, or overseen by, other Federal partners to inform the 
Replacement List.
    (2) The Replacement List shall include categories of physical and 
virtual communications equipment, application and management software, 
and services that allows carriers the flexibility to select the 
equipment or services that fit their needs from categories of equipment 
and services.
    (3) The Wireline Competition Bureau shall publish the Replacement 
List on the Commission's website.
    (b) Maintenance of the List. The Wireline Competition Bureau shall 
issue a Public Notice announcing any updates to the Replacement List. 
If there are no updates to the Replacement List in a calendar year, the 
Wireline Competition Bureau shall issue a Public Notice announcing that 
no updates that have been made to the Replacement List.
    (c) Neutrality. The Replacement List must be technology neutral and 
may not advantage the use of reimbursement funds for capital 
expenditures over operational expenditures.


Sec.  1.50007   [Reserved]

0
3. Delayed indefinitely, in Sec.  1.50004, add paragraphs (c), (d)(1), 
(g), (h)(2), and (j) through (n) to read as follows:


Sec.  1.50004   Secure and Trusted Communications Networks 
Reimbursement Program.

* * * * *
    (c) Application requests for funding. During a filing window, 
eligible providers may request a funding allocation from the 
Reimbursement Program for the reimbursement of costs reasonably 
incurred for the permanent removal, replacement, and disposal of 
covered communications equipment or service.
    (1) Requests for funding allocations must include:
    (i) An estimate of costs reasonably incurred for the permanent 
removal, replacement, and disposal of covered communications equipment 
or service from the eligible provider's network. Eligible providers may 
rely upon the predetermined estimated costs identified in the Catalog 
of Expenses Eligible for Reimbursement made available by the Wireline 
Competition Bureau. Eligible providers that submit their own cost 
estimates must submit supporting documentation and certify that the 
estimate is made in good faith.
    (ii) Detailed information on the covered communications equipment 
or service being removed, replaced and disposed of;
    (iii) The certifications set forth in paragraph (a)(3) of this 
section;
    (iv) A specific timeline for the permanent removal, replacement, 
and disposal of the covered communications equipment or services; and
    (v) The eligible provider certifies in good faith:
    (A) It will reasonably incur the estimated costs claimed as 
eligible for reimbursement;
    (B) It will use all money received from the Reimbursement Program 
only for expenses eligible for reimbursement;
    (C) It will comply with all policies and procedures relating to 
allocations, draw downs, payments, obligations, and expenditures of 
money from the Reimbursement Program;

[[Page 2945]]

    (D) It will maintain detailed records, including receipts, of all 
costs eligible for reimbursement actually incurred for a period of 10 
years; and
    (E) It will file all required documentation for its expenses.
    (d) * * *
    (1) If the Wireline Competition Bureau determines that an 
application is materially deficient (including by lacking an adequate 
cost estimate or adequate supporting materials), the Wireline 
Competition Bureau shall provide the applicant a 15-day period to cure 
the defect before denying the application. If the cure period would 
extend beyond the deadline under this paragraph (d) for approving or 
denying the application, such deadline shall be extended through the 
end of the cure period.
* * * * *
    (g) Funding disbursements. Following the approval and issuance by 
the Wireline Competition Bureau of a funding allocation, a 
Reimbursement Program recipient may file a reimbursement claim request 
for the draw down disbursement of funds from the recipient's funding 
allocation. The recipient must show in the reimbursement claim actual 
expenses reasonably incurred for the removal, replacement, and disposal 
of covered communications equipment or service. The Wireline 
Competition Bureau will review and grant or deny reimbursement claims 
for actual costs reasonably incurred.
    (1) Initial reimbursement claim. Within one year of the approval of 
its Reimbursement Program application, a recipient must file at least 
one reimbursement claim. Failure to file a reimbursement claim within 
the one-year period will result in the reclamation of all allocated 
funding from the Reimbursement Program recipient and revert to the 
Reimbursement Program fund for potential allocation to other 
Reimbursement Program participants.
    (2) Reimbursement claim deadline. All reimbursement claims must be 
filed by the Reimbursement Program recipient within 120 days of 
expiration of the removal, replacement and disposal term. Following the 
expiration of the reimbursement claim deadline, any remaining and 
unclaimed funding allocated to the Reimbursement Program recipient will 
automatically be reclaimed and revert to the Reimbursement Program fund 
for potential allocation to other Reimbursement Program participants.
    (3) Extension of reimbursement claim deadline. A Reimbursement 
Program recipient may request a single extension of the reimbursement 
claim deadline by no later than the deadline discussed in paragraph 
(g)(2). The Wireline Competition Bureau shall grant any timely filed 
extension request of the reimbursement claim filing deadline for no 
more than 120 days.
    (h) * * *
    (2) Individual extensions. Prior to the expiration of the removal, 
replacement and disposal term, a Reimbursement Program recipient may 
petition the Wireline Competition Bureau for an extension of the term. 
The Wireline Competition Bureau may grant an extension for up to six 
months after finding, that due to no fault of such recipient, such 
recipient is unable to complete the permanent removal, replacement, and 
disposal by the end of the term. The Wireline Competition Bureau may 
grant more than one extension request to a recipient if circumstances 
warrant.
* * * * *
    (j) Disposal requirements. Reimbursement Program recipients must 
dispose of the covered communications equipment or service in a manner 
to prevent the equipment or service from being used in the networks of 
other providers of advanced communications service. The disposal must 
result in the destruction of the covered communications equipment or 
service, making the covered communications equipment or service 
inoperable permanently. Reimbursement Program recipients must retain 
documentation demonstrating compliance with this requirement.
    (k) Status updates. Reimbursement Program recipients must file a 
status update with the Commission once every 90 days beginning on the 
date on which the Wireline Competition Bureau approves the recipient's 
application for reimbursement and until the recipient has filed the 
final certification.
    (1) Status updates must include:
    (i) Efforts undertaken, and challenges encountered, in permanently 
removing, replacing, and disposing of the covered communications 
equipment or service;
    (ii) The availability of replacement equipment in the marketplace;
    (iii) Whether the recipient has fully complied with (or is in the 
process of complying with) all requirements of the Reimbursement 
Program;
    (iv) Whether the recipient has fully complied with (or is in the 
process of complying with) the commitments made in the recipient's 
application;
    (v) Whether the recipient has permanently removed from its 
communications network, replaced, and disposed of (or is in the process 
of permanently removing, replacing, and disposing of) all covered 
communications equipment or services that were in the recipient's 
network as of the date of the submission of the recipient's 
application; and
    (vi) Whether the recipient has fully complied with (or is in the 
process of complying with) the timeline submitted by the recipient as 
required by paragraph (c)(1)(iv) of this section.
    (2) The Wireline Competition Bureau will publicly post on the 
Commission's website the status update filings within 30 days of 
submission.
    (3) Within 180 days of completing the funding allocation stage 
provided for in paragraph (e), the Wireline Competition Bureau shall 
prepare a report for Congress providing an update on the Commission's 
implementation efforts and the work by recipients to permanently 
remove, replace, and dispose of covered communications equipment and 
service from their networks.
    (l) Spending reports. Within 10 days after the end of January and 
July, Reimbursement Program recipients must file reports with the 
Commission regarding how reimbursement funds have been spent, including 
detailed accounting of the covered communications equipment or service 
permanently removed and disposed of, and the replacement equipment or 
service purchased, rented, leased, or otherwise obtained, using 
reimbursement funds.
    (1) This requirement applies starting with the recipient's initial 
receipt of disbursement funds per paragraph (g) of this section and 
terminates once the recipient has filed a final spending report. 
certification.
    (2) Following the filing of its final certification per paragraph 
(m) of this section, certifying that the recipient has completed the 
removal, replacement, and disposal process, the recipient must file a 
final spending report showing the expenditure of all funds received as 
compared to estimated costs identified in its application for funding.
    (3) The Wireline Competition Bureau will make versions of the 
spending reports available on the Commission's website subject to 
confidentiality concerns consistent with the Commission's rules.
    (m) Final certification. Within 10 days following the expiration of 
the removal, replacement, and disposal term, Reimbursement Program 
recipient shall file a final certification with the Commission.

[[Page 2946]]

    (1) The final certification shall indicate whether the recipient 
has fully complied with (or is in the process of complying with) all 
terms and conditions of the Reimbursement Program, the commitments made 
in the application of the recipient for the reimbursement, and the 
timeline submitted by the recipient as required by paragraph (c) of 
this section. In addition, the final certification shall indicate 
whether the recipient has permanently removed from its communications 
network, replaced, and disposed of (or is in the process of permanently 
removing, replacing, and disposing of) all covered communications 
equipment or services that were in the network of the recipient as of 
the date of the submission of the application by the recipient for the 
reimbursement.
    (2) If a recipient submits a certification under this paragraph 
stating the recipient has not fully complied with the obligations 
detailed in paragraph (m)(1) of this section, then the recipient must 
file an updated certification when the recipient has fully complied.
    (n) Documentation retention requirement. Each Reimbursement Program 
recipient is required to retain all relevant documents, including 
invoices and receipts, pertaining to all costs eligible for 
reimbursement actually incurred for the removal, replacement, and 
disposal of covered communications equipment or services for a period 
ending not less than 10 years after the date on which it receives final 
disbursement from the Reimbursement Program.
* * * * *

0
5. Delayed indefinitely, add Sec.  1.50007 to subpart DD to read as 
follows:


Sec.  1.50007   Reports on covered communications equipment or 
services.

    (a) Contents of Report. Each provider of advanced communications 
service must submit an annual report to the Commission that:
    (1) Identifies any covered communications equipment or service that 
was purchased, rented, leased or otherwise obtained on or after:
    (i) August 14, 2018, in the case of any covered communications 
equipment or service on the initial list published pursuant to Sec.  
1.50002; or
    (ii) Within 60 days after the date on which the Commission places 
such equipment or service on the list required by Sec.  1.50003;
    (2) Provides details on the covered communications equipment or 
services in its network subject to reporting pursuant to paragraph 
(a)(1) of this section, including the type, location, date purchased, 
rented, leased or otherwise obtained, and any removal and replacement 
plans;
    (3) Provides a detailed justification as to why the facilities-
based provider of broadband service purchased, rented, leased or 
otherwise obtained the covered communications equipment or service;
    (4) Provides information about whether any such covered 
communications equipment or service has subsequently been removed and 
replaced pursuant to Commission's reimbursement program contained in 
Sec.  1.50004 of this subpart;
    (5) Provides information about whether such provider plans to 
continue to purchase, rent, lease, or otherwise obtain, or install or 
use, such covered communications equipment or service and, if so, why; 
and
    (6) Includes a certification as to the accuracy of the information 
reported by an appropriate official of the filer, along with the title 
of the certifying official.
    (b) Reporting deadline. Providers of advanced communications 
service shall file initial reports within 90 days after the Office of 
Economics and Analytics issues a public notice announcing the 
availability of the new reporting platform. Thereafter, filers must 
submit reports once per year on or before March 31st, reporting 
information as of December 31st of the previous year.
    (c) Reporting exception. If a provider of advanced communications 
service certifies to the Commission that such provider does not have 
any covered communications equipment or service in the network of such 
provider, such provider is not required to submit a report under this 
section after making such certification, unless such provider later 
purchases, rents, leases or otherwise obtains any covered 
communications equipment or service.
    (d) Authority to update. The Office of Economics and Analytics may, 
consistent with these rules, implement any technical improvements, 
changes to the format and type of data submitted, or other 
clarifications to the report and its instructions.

PART 54--UNIVERSAL SERVICE

0
5. The authority citation for part 54 is revised to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
229, 254, 303(r), 403, 1004, 1302, and 1601-1609, unless otherwise 
noted.


0
6. Effective March 15, 2021, add Sec.  54.10 to read as follows:


Sec.  54.10   Prohibition on use of certain Federal subsidies.

    (a) A Federal subsidy made available through a program administered 
by the Commission that provides funds to be used for the capital 
expenditures necessary for the provision of advanced communications 
service may not be used to:
    (1) Purchase, rent, lease, or otherwise obtain any covered 
communications equipment or service; or
    (2) Maintain any covered communications equipment or service 
previously purchased, rented, leased, or otherwise obtained.
    (b) The term ``covered communications equipment or service'' is 
defined in Sec.  1.50001 of this chapter.
    (c) The prohibition in paragraph (a) of this section applies to any 
covered communications equipment or service beginning on the date that 
is 60 days after the date on which such equipment or service is placed 
on a published list pursuant to Sec.  1.50003 of this chapter. In the 
case of any covered communications equipment or service that is on the 
initial list published pursuant to Sec.  1.50002 of this chapter, such 
equipment or service shall be treated as being placed on the list on 
the date which such list is published.

0
7. Delayed indefinitely, add Sec.  54.11 to read as follows:


Sec.  54.11   Requirement to remove and replace.

    (a) Each Eligible Telecommunications Carrier receiving Universal 
Service Fund support must certify prior to receiving a funding 
commitment or support that it does not use covered communications 
equipment or services.
    (b) For purposes of paragraph (a) of this section, covered 
communications equipment or services means any communications equipment 
or service that is on the Covered list found in Sec.  1.50002 of this 
chapter.
    (c) The certification required in paragraph (a) of this section is 
not applicable until one year after the date the Commission releases a 
Public Notice announcing the acceptance of applications for filing 
during the initial filing window of the Reimbursement Program per Sec.  
1.50004(b) of this chapter.
    (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 applicable removal, 
replacement, and disposal term per Sec.  1.50004(h).

[FR Doc. 2021-00052 Filed 1-12-21; 8:45 am]
BILLING CODE 6712-01-P