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Rule2021-17279

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

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Published

August 23, 2021

Effective

October 22, 2021

Issuing agencies

Federal Communications Commission

Abstract

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

Full Text

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<title>Federal Register, Volume 86 Issue 160 (Monday, August 23, 2021)</title>
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[Federal Register Volume 86, Number 160 (Monday, August 23, 2021)]
[Rules and Regulations]
[Pages 46995-47022]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17279]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 54

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

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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

DATES: Effective October 22, 2021.

FOR FURTHER INFORMATION CONTACT: Brian Cruikshank, Wireline Competition
Bureau, <a href="/cdn-cgi/l/email-protection#a4c6d6cdc5ca8ac7d6d1cdcfd7ccc5cacfe4c2c7c78ac3cbd2"><span class="__cf_email__" data-cfemail="4220302b232c6c2130372b29312a232c29022421216c252d34">[email&#160;protected]</span></a>, 202-418-3623 or TTY: 202-418-0484.

[[Page 46996]]

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

I. Introduction

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

II. Report and Order

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

A. Eligibility for Participation in the Reimbursement Program

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

[[Page 46997]]

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

B. Equipment and Services Eligible for Reimbursement

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

[[Page 46998]]

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

[[Page 46999]]

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

[[Page 47000]]

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

[[Page 47001]]

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

[[Page 47002]]

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

C. Timing Requirement for the Reimbursement Program

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

[[Page 47003]]

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

D. Prioritization if Reimbursement Program Demand Exceeds Supply

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

[[Page 47004]]

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

1. CAA Prioritization

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

2. Other Considered Prioritization Categories

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

[[Page 47005]]

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

[[Page 47006]]

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

[[Page 47007]]

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

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

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

[[Page 47008]]

Nevertheless, the Commission will amend its definition to explicitly
include these providers.
72. The Secure Networks Act further limited eligibility in the
Reimbursement Program to ``providers of advanced communications service
. . . [with] . . . customers.'' The word ``customers'' is defined as
either customers of the provider of advanced communications services or
the customers of any affiliate of a providers of advanced
communications service. LATAM claims that Congress, by expanding the
definition of ``provider of advanced communications service'' in the
CAA, intended to ``better capture all the networks that may be used for
the provision of advanced communications services to consumers,''
including intermediate providers, who carry traffic for other carriers
only, and neither originate nor terminate that traffic. It also argues
that, from a policy perspective, ``it does not make sense to exclude
intermediate providers from participation in the Reimbursement Program
since the security concerns would be similar to providers of advanced
communications services.''
73. The Commission agrees, but do not think its existing rules
prohibit such intermediate providers from participation in the
Reimbursement Program. Its existing definition did not limit
eligibility to providers who offer service to end users. Rather, it
extended eligibility to providers of ``high-speed, switched, broadband
telecommunications capability that enables users to originate and
receive high-quality voice, data, graphics, and video
telecommunications using any technology with connection speeds of at
least 200 kbps in either direction.'' Intermediate providers, such as
LATAM, likely provide such a service to their customers,
notwithstanding whether those customers are carrier customers or end-
user customers. The Commission intends to include intermediate
providers in the Reimbursement Program because, by doing so, the
Commission can secure against ``potential vulnerabilities to the
broader network.'' Its goal is to ensure the safety and security of the
entire network, not only to those portions that provide service to end
users. Thus, the Commission clarifies that intermediate providers are
eligible for participation in the Reimbursement Program.
74. Finally, the Commission reiterates that the adopted changes to
the definition of ``provider of advanced communication services'' apply
only to the Reimbursement Program. The Commission does not amend the
term as it is defined in any other section of its rules.

F. Reimbursement Program Clarifications

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

[[Page 47009]]

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

[[Page 47010]]

Reimbursement Program, eligible providers are required to submit
initial estimates of the costs to be reasonably incurred for the
removal, replacement, and disposal of covered communications equipment
or services to participate in the Program. In the 2020 Supply Chain
Order, the Commission directed the Wireline Competition Bureau to
establish an initial 30-day filing window for the submission of cost
estimates and to establish additional filing windows as necessary. The
accompanying rules adopted, however, do not specify a period of time
for the filing window. Given the complexity of the Reimbursement
Program, the Commission wants to ensure that applicants have sufficient
opportunity to familiarize themselves with and utilize the application
filing portal. Therefore, the Commission clarifies that the Wireline
Competition Bureau has discretion to establish an initial filing window
that provides sufficient time for applicants to submit cost estimates,
which may be for a period longer than 30 days if a longer window is
needed to help applicants navigate the application filing portal or to
compile the necessary documentation required for the filing
requirements.
86. Individual Extensions. The Commission further clarifies the
factors the Wireline Competition Bureau, with the assistance of the
Fund Administrator, will consider when evaluating whether to grant an
individual extension of the removal, replacement, and disposal term
available to program participants. Program participants are required to
complete the removal, replacement and disposal of the equipment within
one year of the initial disbursement. Its rules permit participants to
petition the Wireline Competition Bureau for an extension of the
removal, replacement, and disposal term prior to the expiration of the
term. The Wireline Competition Bureau will generally review such
requests on a case-by-case basis, and may grant an extension for up to
six months after finding that, due to no fault of such recipient, such
recipient is unable to complete the permanent removal, replacement, and
disposal by the end of the term. The Wireline Competition Bureau may
grant more than one extension request to a recipient if circumstances
warrant.
87. The Commission acknowledges that there are circumstances that
may increase the difficulty of a Reimbursement Program participant's
ability to complete removal, replacement, and disposal within the one-
year term. For example, the Commission understands that some
replacement options, such as O-RAN or virtual RAN, may require
additional time for system integration. For program participants
choosing an O-RAN or virtual RAN replacement option, the Commission
directs the Wireline Competition Bureau, when evaluating an extension
request, to consider the high likelihood of additional time needed as a
significant factor favoring an extension. Additionally, the Commission
understands the concern some commenters raise regarding the
availability of replacement technology and semiconductors. USTelecom
requests that the Commission acknowledge that the current shortage of
semiconductors could impact the availability of replacement equipment,
thereby warranting a waiver. NTCA highlights delays in obtaining
equipment that are impacting providers of all sizes, but especially
smaller providers who are forced to further compete with larger
operators for labor and equipment. The Commission agrees with these
commenters and direct the Wireline Competition Bureau to consider
limited availability of the replacement options as a factor for whether
to grant an individual extension request, including impacts caused by a
shortage of semiconductors. A commenter raised another potential factor
that may delay completion within the one-year team. Union Telephone
Company argues that providers of advanced communications service may
need to modify or replace their outdated network infrastructure,
including cellular towers, to comply with current structural standards,
which will also require federal permitting approval. The Commission
directs the Wireline Competition Bureau to consider delays in federal
permitting as one potential factor to consider when reviewing requests
for extensions of time.
88. Vantage Point Solutions also identifies possible delays caused
by equipment availability, weather considerations for construction, and
cash flow and replacement funding distribution timing that may
specifically impact providers in Alaska. It asks the Commission to
consider extensions of time for these providers to complete the
removal, replacement, and disposal of covered equipment beyond the term
set by the Reimbursement Program.
89. The Commission acknowledges that certain locations will have
challenges meeting the term deadline due to weather or other issues.
The Commission further recognizes that the claims raised by USTelecom
and others regarding the availability of semiconductors are valid, and
that certain situations may impact smaller or rural providers such that
they are unable to meet the timing requirements for removal,
replacement, and disposal through the Reimbursement Program. The
examples included in this item are not an exhaustive list of factors
that the Wireline Competition Bureau will consider in the event a
provider files an individual extension request. The Commission directs
the Wireline Competition Bureau to consider all factors included in an
individual extension request when evaluating the request. Additionally,
the Commission directs the Wireline Competition Bureau to review
individual extension requests on a case-by-case basis. As the
Commission found in the 2020 Supply Chain Order, however, the Secure
Networks Act authorizes the Commission to grant extensions of time to
allow providers of advanced communications services to complete the
removal, replacement, and disposal of covered communications equipment
and services, either as a ``general'' six-month extension to all
recipients of reimbursement funding, or as individual extensions on a
case-by-case basis. In the event circumstances regarding the
availability of equipment do not improve, or if there is sufficient
justification to warrant an extension, such information may influence
the Wireline Competition Bureau's consideration of a six-month
extension, whether for all program participants or on an individual,
case-by-case basis.
90. General Extension. The Secure Networks Act authorizes the
Commission to grant a six-month extension of the removal, replacement,
and disposal term deadline ``to all recipients of reimbursements . . .
if the Commission finds that the supply of replacement communications
equipment or services needed by the recipients to achieve the purposes
of the [Reimbursement] Program are inadequate.'' Several commenters
have recommended that the Commission proactively grant this six-month
general extension immediately, citing supply chain and labor shortages
and the potential non-availability of semiconductors due to the impacts
of the COVID-19 pandemic and the increased demand for scarce resources
driven by the requirement to remove, replace, and dispose of covered
communications equipment and services. However, the Commission finds
such requests to extend a deadline that is not yet established
premature, and run counter to the intent of Congress of having a one-
year removal, replacement, and disposal term.

[[Page 47011]]

Accordingly, the Commission rejects these requests.
91. Removal, Replacement and Disposal Term--Reimbursement Claims.
The Commission clarifies that only reasonable expenses incurred before
the expiration of the removal, replacement, and disposal term are
eligible for reimbursement. Reimbursement Program participants have one
year from the initial disbursement to complete the permanent removal,
replacement, and disposal of covered communications equipment or
services. As a result, program participants may only submit
reimbursement claims for costs incurred within one year of the initial
disbursement date. If a program participant requests, and the Wireline
Competition Bureau grants, a term extension according to its rules, all
reimbursement claims must cover eligible expenses incurred prior to the
term end date as adjusted by the granted extension. Any expenses
incurred after the term ends will be ineligible for reimbursement.
Additionally, any expenses incurred while an individual extension
request is pending will not be reimbursable if the request is
ultimately denied and the expenses were incurred outside of the one-
year term.
92. Final Certification Update Timing. Within 10 days following the
expiration of the removal, replacement, and disposal term,
Reimbursement Program recipients are required to file a final
certification with the Commission indicating, among other things,
whether or not the recipient has fully complied with all terms of
program participation. Program participants stating in their final
certification that they have not ``fully complied'' are then required
by both the Secure Networks Act and the 2020 Supply Chain Order to file
an updated final certification ``when the recipient has fully
complied.'' Both the Secure Networks Act and the 2020 Supply Chain
Order are silent as to a deadline for filing the final certification
update.
93. Program participants are required to complete the permanent
removal, replacement, and disposal of the equipment or services, and
thus the terms of program participation, before the expiration of the
removal, replacement, and disposal term. The Commission recognizes that
unforeseen delays may extend the removal, replacement, and disposal
process beyond the one-year term, and the Commission expects program
participants who anticipate they will not complete removal,
replacement, and disposal by the end of their term will request an
individual extension from the Wireline Competition Bureau before the
end of that term.
94. If a program participant fails to timely submit a final
certification, the program participant may be subject to forfeitures as
provided for under the Communications Act of 1934, as amended. Further,
if a program participant files a final certification indicating that it
has not ``fully complied'' with the terms of the program, but
subsequently fails to file an updated final certification indicating
full compliance within 60 days after the final certification deadline,
the program participant may be subject to forfeitures as provided for
under the Communications Act of 1934, as amended. Additionally, program
participants found in violation of the Secure Networks Act, the
Commission's rules implementing the statute, or the commitments made by
the recipient in the application for reimbursement may be: (1) Required
to repay reimbursement funds; (2) barred from further participation in
the Reimbursement Program; (3) referred to all appropriate law
enforcement agencies or officials for further action under applicable
criminal and civil law; and (4) barred from participation in other
programs of the Commission, including the Federal universal service
support programs established under section 254 of the Communications
Act of 1934, as amended. The aforementioned penalties are within the
Commission's jurisdiction. The Commission notes that applicants that
commit fraud may separately be subject to the False Claims Act or other
legal action as provided by existing statutes.
95. Final Spending Report Timing. Under the Reimbursement Program
rules, program recipients must file their final spending report after
the final certification. The Commission was silent, however, as to the
deadline for filing the final spending report. The Commission clarifies
the timeframe and expect program participants to submit the final
spending report no later than 60 days following the expiration of the
program participant's reimbursement claim deadline. If a program
participant has not submitted a final spending report within 60 days of
the expiration of the reimbursement claim deadline, the matter may be
referred to the Enforcement Bureau for further investigation.
96. Accounting for Removal, Replacement, and Disposal of Covered
Equipment. Some program participants participating in other funding
programs or subject to rate regulation could receive duplicate recovery
for support received from the Reimbursement Program for network
changes. As a result, the Commission clarifies provider requirements
with respect to maintaining books of account using the Uniform System
of Accounts contained in Part 32 of the Commission's rules (USOA
carriers). To the extent a USOA carrier has purchased and installed
covered equipment, that equipment should currently be recognized as an
investment in the USOA carrier's telecommunications plant and subject
to retirement and depreciation rules which require the carrier to
establish estimated lives and ratable depreciation of the assets.
Because the Commission is requiring recipients of reimbursement funds
under the Reimbursement Program and ETCs receiving USF support to
remove and replace from their network and operations environments
equipment and services included on the Covered List, and as defined in
the 2019 Supply Chain Order or as designated pursuant to section 54.9
of the Commission's rules and in the Designation Orders, the Commission
also must address the accounting treatment of USOA carriers' retirement
of covered equipment.
97. To ensure consistent accounting treatment, and to prevent the
removal, replacement, and disposal of covered equipment by USOA
carriers from unduly depleting such carriers' depreciation reserve,
such carriers may treat the removal, replacement and disposal of
covered equipment as an ``extraordinary retirement,'' subject to the
amortization schedule that the Commission provides below. For an event
to be considered an extraordinary retirement, it must satisfy three
requirements: (1) The impending retirement was not adequately
considered in setting past depreciation rates; (2) the charging of the
retirement against the reserve will unduly deplete that reserve; and
(3) the retirement is unusual such that similar retirements are not
likely to recur in the future.
98. The Commission finds that the first and third of these
requirements are met for retirements made in accordance with the 2019
Supply Chain Order. Carriers that purchased covered equipment could not
have anticipated that the Commission and Congress would require
retirement of covered equipment and that Congress would make
reimbursement funds available to replace covered equipment. As a
result, early retirements resulting from Commission and congressional
action were not and could not have been considered in setting past
depreciation rates. Furthermore, given the unusual circumstances that
led to these retirements, it is highly unlikely that

[[Page 47012]]

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

G. Cost-Benefit Analysis

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

[[Page 47013]]

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

III. Procedural Matters

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

A. Need for, and Objectives of, the Rules

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

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

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

[[Page 47014]]

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

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

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

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

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

[[Page 47015]]

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

[[Page 47016]]

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

[[Page 47017]]

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

[[Page 47018]]

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

[[Page 47019]]

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

[[Page 47020]]

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

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

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

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

166. The RFA requires an agency to describe the steps the agency
has taken to minimize the significant economic impact on small entities
of the final rule, consistent with the stated objectives of the
applicable statutes, including a statement of the factual, policy, and
legal reasons in support of the final rule, and why any significant
alternatives to the rule considered by the agency and which affect the
impact on small entities were rejected.
167. All of the rules in the Third Report and Order are adopted
pursuant to statutory obligation under the CAA. However, where the
Commission has discretion in its interpretation or implementation of
the CAA provisions, or adopts rules pursuant to alternative

[[Page 47021]]

statutory authority, the scope of the rules is narrowly tailored so as
to lessen the impact on small entities. The rules adopted in the Third
Report and Order appropriately consider the burdens on smaller
providers against the Commission's goal of protecting its
communications networks and communications supply chain from
communications equipment and services that pose a national security
threat, while facilitating the transition to safer and more secure
alternatives.

G. Report to Congress

168. The Commission will send a copy of the Third Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act. In addition, the Commission will send a copy
of the Third Report and Order, including this FRFA, to the Chief
Counsel for Advocacy of the SBA. A copy of the Third Report and Order
and FRFA (or summaries thereof) will also be published in the Federal
Register.
169. Congressional Review Act. The Commission has determined, and
the Administrator of the Office of Information and Regulatory Affairs,
Office of Management and Budget, concurs, that this rule is major under
the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send
a copy of this Third Report and Order to Congress and the Government
Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

IV. Ordering Clauses

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

List of Subjects

47 CFR Part 1

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

47 CFR Part 54

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

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

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

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

Authority: 47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461 note,
unless otherwise noted.

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

Sec. 1.50004 Secure and Trusted Communications Networks
Reimbursement Program.

(a) Eligibility. Providers of advanced communications service with
ten million or fewer customers are eligible to participate in the
Reimbursement Program to reimburse such providers solely for costs
reasonably incurred for the permanent replacement, removal, and
disposal of covered communications equipment or services:
(1) As defined in the Report and Order of the Commission in the
matter of Protecting Against National Security Threats to the
Communications Supply Chain Through FCC Programs (FCC 19-121; WC Docket
No. 18-89; adopted November 22, 2019 (in this section referred to as
the `Report and Order'); or
(2) As determined to be covered by both the process of the Report
and Order and the Designation Orders of the Commission on June 30, 2020
(DA 20-690; PS Docket No. 19-351; adopted June 30, 2020) (DA 20-691; PS
Docket No. 19-352; adopted June 30, 2020) (in this section collectively
referred to as the `Designation Orders');
* * * * *
(f) Prioritization of Support. The Wireline Competition Bureau
shall issue funding allocations in accordance with this section after
the close of a filing window. After a filing window closes, the
Wireline Competition Bureau shall calculate the total demand for
Reimbursement Program support submitted by all eligible providers
during the filing window period. If the total demand received during
the filing window exceeds the total funds available, then the Wireline
Competition Bureau shall allocate the available funds consistent with
the following priority schedule:

Table 1 to Paragraph (f)
------------------------------------------------------------------------
Prioritization schedule
-------------------------------------------------------------------------
Priority 1

Advanced communication service providers with 2 million or fewer
customers.
------------------------------------------------------------------------
Priority 2

Advanced communications service providers that are accredited public or
private non-commercial educational institutions providing their own
facilities-based educational broadband service, as defined in part 27,
subpart M of title 47, Code of Federal Regulations, or any successor
regulation and health care providers and libraries providing advanced
communications service.
------------------------------------------------------------------------

[[Page 47022]]

Priority 3

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

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

PART 54--UNIVERSAL SERVICE

0
3. The authority citation for part 54 continues to read as follows:

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

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

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