Carri Bennet: Two-thirds of the participants are saying that lack of funding is the main obstacle to the removal. That’s a 17% increase from the FCC’s January report. There’s two reports a year that the FCC gives to Congress. Nearly half, about 40% or so, said they won’t be able to comply with the mandate at all without additional funding. That’s doubling the record of the report from January.
Jeff Johnston: That was Carri Bennet, partner at law firm Womble Bond Dickinson, about the ongoing funding shortfall rural wireless operators face, stemming from five-year-old legislation that requires them to replace non-compliant telecommunications equipment.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast, where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the communications industry. This podcast is brought to you by CoBank’s Knowledge Exchange group.
The Secure and Trusted Communications Network Act from 2019 was designed to address national security risks from having non-compliant equipment in U.S. networks. To help with the network rip and replacement, the Act included $1.9 billion in funding, that ultimately proved way too low. Many rural operators were impacted and have since then been put in an untenable situation.
Carri is active in helping shape policy that supports rural wireless operators and has been intimately involved in the rip and replace program since its inception. So having her back on to discuss this, and what the future of wireless coverage in rural America look like, was a big win.
So, without any further ado, pitter patter let’s see what Carri has to say.
Carri, welcome to the podcast. It’s an absolute pleasure to have you back on the show again.
Bennet: Thank you, Jeff. It’s a pleasure to be here again.
Johnston: Love talking rural wireless with you and all the stuff going on in the market. Certainly been a pretty eventful several years for our folks in rural America running wireless networks. I’d love to get your latest thoughts on, in light of the rip-and-replace program, how are things going, what are you hearing from the operators, maybe just to level set on where things stand right now?
Bennet: We’ve been working on this for six years now, believe it or not, since the FCC first started the rulemaking back in 2018. Now we’re at fast forward, the applications were filed. As you may recall, they thought they needed about $1.9 billion and that’s what Congress allocated for the program. The FCC started diving into the program and found out it was lacking another $3.08 billion. That’s the shortfall based on the projections from the carriers who have to do this.
Interestingly, I was looking at a map that the Senate Commerce Committee put together, and every state is impacted by this. That’s why we had such strong bipartisan support for passing the legislation in the first place. You may recall, we only have about 40% of the funding, 39.5% of the funding to get it done. We haven’t been able to get Congress together to increase the funding to get it done.
It’s supposed to be a national security threat. I’m not arguing that it’s not but if we’re under some national security threat, I think that Congress should come forward and put this money together. The FCC has been getting reports from the participants. As of a report that came out where the FCC gave to Congress in July, 12% of the rip-and-replace participants have completed the process and they’ve removed the unsecure network equipment.
Two-thirds of the participants are saying that lack of funding is the main obstacle to the removal. That’s a 17% increase from the FCC’s January report. There’s two reports a year that the FCC gives to Congress. Nearly half, about 40% or so, said they won’t be able to comply with the mandate at all without additional funding. That’s doubling the record of the report from January. Then another three quarters of the participants are reporting that they are on track to meet their originally submitted timelines for removing the equipment. I would say less than three quarters are saying that. That’s down from the 93% in January. All the lack of funding is slowing the process down. The other thing that’s slowing the process down is the fund administrator, which is a contractor that was hired by the FCC. It’s Ernst Young UI.
They are quite the bean counters and that’s what they’ve been hired to do to make sure there’s no waste, fraud, and abuse in the program. But the amount of inquiries that go on with each invoice that is submitted has really put the carriers underwater and that process drags things out. Not only do we have a lack of funding, just the process itself is inherently long to ensure that there’s no waste, fraud, and abuse.
What we hear, at least from our members at the Rural Wireless Association, is just how cumbersome the process is for submitting the invoices and getting them through. If there’s a modification because now so much time has marched on, sometimes you have to modify because network equipment is available. Remember, this is to build out 4G and we’re on 5G. Equipment is getting scarce.
People are having to pivot because there’s not the equipment available for 4G and they can’t use the money to buy 5G. Ideally Congress, when they allocate this $3 billion more this shortfall, will also say, “You know what? It’s okay to spend the money on 5G if 5G is the replacement for 4G.” I think that would be very helpful. I’ll stop right there. There’s a lot more that I could talk about, but I don’t want to overwhelm you with facts and figures.
Johnston: No, those are some great facts, but also pretty scary too. Just so I’ve got a couple of numbers straight here, Carri, so the $3.08 billion, that’s the shortfall, yes? It has not been appropriated yet, has it?
Bennet: Right.
Johnston: Okay. Maybe we can just spend a moment on that. I think last time you and I talked about this, we had that balloon going over parts of the country that interestingly, if I remember correctly, tracked networks with non-compliant equipment. That raises some questions around national security. With all that, and the money that’s been poured into infrastructure as well, how come you think that this has fallen through the cracks? It feels like a lot of stuff’s come together from an infrastructure-focused perspective and a national security perspective that we would expect this to be a top priority.
Bennet: I think it’s politics. I think that this is a problem, and sometimes politicians don’t want the administration that’s in charge to get credit for the success of a program. But this one in particular has a different problem. You’ve got to figure out where’s the money going to come from to fund the shortfall. A lot of members of Congress have wanted to see it tied to the money that is secured from a spectrum auction. We target that funding to pay for this.
So if you can sell off spectrum, you can use the money that you raise in a spectrum auction to cover this $3 billion shortfall. The problem is the FCC’s auction authority lapsed, and that lapsed back in March of 2023. That’s been almost, what, 18 months now? Congress has to re-approve it.
They’ve got members of Congress that support that, that keep killing the spectrum auction. When you tie this funding to a future spectrum auction, that’s where we’re running into problems and a disconnect. You don’t have to use a spectrum auction to pay for this. There’s other ways to pay for this. A lot of legislation has been introduced from the Republicans, from the Democrats, some bipartisan, some not bipartisan, to come up with how you fund this shortfall.
That’s been just taking a really, really long time. The Senate is controlled by very narrow margin by the Democrats. You have a lot of Republicans not wanting to help them out with their legislation. Then because if it’s introduced by a Republican, you don’t have the Democrats wanting to support that. I see it as politics. There’s a lot of ways to fund this. There’s some must-pass legislation that has to take place. Like the National Defense Authorization Act, where some language could be put in there and then money appropriated to cover the costs of this. That seems like a natural place to put it.
Johnston: Oh boy.
Bennet: Also, we’re in a lame duck session. When Congress comes back, we’re going to have a very short, narrow timeframe before the end of the year, after the elections to get anything done.
What I will say what has happened is because you can’t be in the middle of a network forklift. Some of the companies have said “if this is all the money I have to work with, and it doesn’t look like we’re going to have anything soon because we’ve been working on this problem for a while, I’m going to have to pivot. Maybe I just don’t put up all the sites that I had before. Maybe I go to a hybrid network where I just put in the fixed wireless first, and I’ll try to worry about mobility later.”
Johnston: All of this, it feels like it’s putting the rural wireless operators in really an untenable situation here, right? I can’t imagine trying to run a 3G network and unsure about how you can upgrade to 4G, you don’t have the money, and then would you really want to go to 5G. How are they doing? How are they surviving?
Bennet: The problem is if you still have a Huawei network or a ZTE network in place that’s operating, Huawei and ZTE pulled out of giving any support to those networks. Once something breaks.
Johnston: A while ago, right?
Bennet: Yes, a while ago, I think it was two years ago. If something breaks, God forbid, you have something like a Hurricane Helene and your networks are going down, you’re not going to have replacement parts because you’ve been using all the replacement parts that you might’ve had in the warehouse. Those are all getting used up or they’re gone. You just start having to cannibalize off of other cell sites. Coverage is shrinking as a result. That means you may have no service at all as a result, no 911 service, no emergency services available. That’s not good for anyone because you have to remember, it’s not just impacting the rural areas and the rural consumers that are taking service from these networks. There are roamers coming from Verizon, AT&T, T-Mobile from big cities who are passing through that won’t have networks to roam on. It’s quite problematic.
Johnston: Is there any creative way that BEAD can play a role in this? I’m thinking out loud here, but I don’t know if there’s an opportunity for some of these wireless operators to pivot their business model just from a survival standpoint to take some BEAD money and maybe it’s for fixed wireless or maybe it’s for fiber to the home. I guess that would be one thought. Then what about is there any BEAD money that can be directed more towards this national security risk or is that just completely out the scope of the program?
Bennet: That money’s flowing from NTIA through to the states and the states are the ones that are going to decide how to spend the money based on their state plans. I haven’t read all of the state plans that have been approved by NTIA. I don’t think any of them talked about this issue, but, say, “Hey, let’s use some of this money to do rip-and-replace on this network.” I think what you could do if you’re a small rural wireless carrier that was in a jam like this, is that you could go and apply for the BEAD funding as long as you can deliver.
Again, you wouldn’t be married to just 4G technology, you could look at 5G which has higher speeds and is capable of doing that and you could apply for it. Maybe you put up a fixed wireless network somewhere, it doesn’t necessarily have to be a mobile network if that’s not right. It depends on what you’re replacing.
And remember, it’s not just wireless technology. There was some Huawei fiber stuff that Huawei made that went into some fiber networks as well.
I think CenturyLink had a lot of Huawei fiber in their network, if I recall. That may be something that could be used for that for BEAD, something along those lines. It’s possible. I’m not saying it’s a solution. I don’t think it-- On the wireless side, some of the states don’t want to even fund any wireless projects. That would be a dilemma as well.
Johnston: Not put words in your mouth, but it sounds like from Congress, we really shouldn’t be expecting anything with lame duck coming up, et cetera. We’re probably well into 2025 before there’s any potential decisions made or appropriations or anything like that, I guess. That’s probably the best we can hope for.
Bennet: I think we’re going to have a whole new ballgame because we’re going to probably have a lot of newly elected members of Congress that will have to get up to speed and educated about this issue as well. Both in the House and the Senate. I think it’s going to be a bit of time before we see anything.
I think there’s going to have to probably be some good lawyers that come in and look at things through a different lens. That’s something that I know some folks have started talking about.
There are some method of going through the federal claims court when there’s a federal program and that people are relying on it and it doesn’t come through to go back and basically sue the federal government for the funding. That may be another path forward. I think some of the carriers are starting to pursue that or at least investigate that.
Johnston: That makes sense. We were still talking a lot of time here, regardless of which path we end up going. It’s better than just sitting around doing nothing, I guess.
Bennet: I think that’s what people feel like. Do you want to hire lawyers to go after this money and spend more money? [Is that reimbursable? I think that’s one of the things we come up with solutions and the companies think, “Will they reimburse me for doing that?” Unfortunately, I feel bad for some of these companies. They went ahead and they did the percentage that actually completed it that I told you there are 12% that completed the process. They used their own money to do that. Or they took out a loan to do that.
Then they’re paying interest. Interest rates, they’re coming down, but the past couple of years they’ve been rather high. What does that mean? That means they haven’t been able to build up because they used other money they had in reserve, thinking they’d get reimbursed quickly, and they didn’t. They couldn’t deploy more broadband. It’s a vicious cycle that this has put us in and it’s all in the hands of Congress, unfortunately.
Johnston: Then those living in rural America who rely on this and the operators providing it are bearing the brunt of all of this. It’s got to be brutal for these folks. I just can’t imagine.
Bennet: It is getting harder and harder. Then on top of that, the FCC’s poised within the next year or so to conduct a 5G rural fund reverse auction, and this is to build out 5G. I think you were trying to come up with the solution. Can they use the BEAD money? That may be a solution, but in the case of the 5G fund, this is to build out 5G only. If they built out a 4G network, it seems a little bit silly.
That might be another source, but we’re starting to see in the wireless industry, there’s something called supplemental coverage from space where some of the low earth orbit satellite companies like your Starlinks, AST, and science, and some others would be able to tap into that money and work with some nationwide terrestrial carriers like T-Mobile, AT&T, and Verizon to build out this supplemental coverage from space. Their lunch may be getting eaten anyway, if this stuff comes to fruition. It’s a little bit on the future side, but it’s certainly possible.
Johnston: That’s a great segue to where I want it to go next, which is really the future of wireless coverage in rural America, given the challenges that all of the rural incumbents are facing right now. You saw T-Mobile in the process of acquiring a UScellular and their spectrum assets. I believe a lot of those licenses are in rural America. They seem to be pretty focused on rural America. Do you see the national operators prioritizing or focusing more on rural America in light of some of these challenges that the incumbents are having?
Bennet: It’s interesting that UScellular has decided to exit the market and you have to ask yourself, why are they exiting the market? Is it really that tough? I would argue that if I had, I don’t know, I think it’s four million, five million subscribers, I think that’s a lot, at least compared to what our rural wireless association members have. If they’re saying they can’t make it go with that many customers and be competitive, then it makes you scratch your head and wonder what’s going on there.
UScellular is not a nationwide competitor. It’s a regional provider, but it’s the largest regional provider in the country. T-Mobile gobbling up about 30% of the spectrum and taking all the customers and then agreeing on some long-term tower commitments that they’re providing as part of that transaction, it doesn’t bode well for other competitors, because if you’re a small rural wireless carrier and you want to use some of the UScellular towers, are you going to get the same terms that T-Mobile got? Probably not.
What’s going to happen to roaming? What’s going to happen to the rest of that spectrum, the 70% that UScellular isn’t selling? Is it going to be possible for some of these carriers to get access to that and expand their networks so that they have the capability of having more customers and can be a little more freed up to not rely on universal service support to keep these networks operational? There’s a lot of questions. It seems to be a rockier and rockier road for these rural wireless mobile carriers.
That being said, they have started to pivot to these hybrid networks that I talked about before, where it’s both a combination of fixed and mobile service. Fixed wireless services, I think have a great play in rural America. Even if we use all the BEAD money to get out and try to get fiber, we’re not going to be able to get fiber everywhere. We’re going to have to use alternative technologies like fixed wireless satellite in some cases.
Johnston: It feels like if you just put satellite aside for the moment, because there’s some questions around that, it just feels like we’re headed towards a situation where wireless coverage in rural America just continues to shrink, unless AT&T, Verizon, and all those two in particular decide to build out their network deeper into rural America beyond what they’ve done right now. Is that a fair characterization of where we’re probably headed over the next couple of years or so?
Bennet: Yes, like I said, I started to say this and then I went off on a different path, but T-Mobile was required to build out to rural America as part of its purchase of Sprint. It’s still on a path to do that. It hasn’t done it completely. I think part of the things that probably T-Mobile is struggling with is there are some really rural and remote areas that just the cost of covering them is just too damn high. You start looking at things like supplemental coverage from space.
Can I do it? Can I use my terrestrial spectrum and let a low Earth orbit satellite, use it so that when you go off my terrestrial network, you can access the satellite service on a regular mobile phone? You’re starting to see that now with the, if you have an Apple iPhone, you have the SOS service and you can the 911 text messaging and 911 calls from that. That’s starting to expand and they’re doing some work on that now and developing that and trying to gain access to allow the FCC’s rules to work and do that.
Johnston: Carri, look, we’ve covered a lot here today. This has been wonderful, as always. Before we wrap it up, I just wanted to give you an opportunity to share any closing thoughts that you feel we should touch on before we wrap it up.
Bennet: I will say one of the things that I am pleased to see that the FCC is doing is unlocking the handsets. There’s a rulemaking going on right now, so that should make competition a little better in not tying someone to a provider once they get a handset. I think that’s something to keep an eye on. I think the new rule that they’re moving towards is once you purchase a handset and you get one, say, through Verizon, AT&T, T-Mobile, one of the big carriers, that you should be able to unlock that handset within 60 days and move it to another carrier.
I think that’s a proceeding to keep your eye on because I know some of the rural carriers that I work with have had a hard time getting the top handsets because – there’s a lot of work that goes into making them work on your networks and things like that. We still may have that work to do, but we won’t have at least someone locking someone into a contract for two years and not being able to move off the network. Especially if you move somewhere else. Say you bought your phone in New York City and you signed on with say, I’ll just pick on Verizon and then you decide, “Oh, I can work remotely and now I can live in rural Colorado.” But guess what? There’s no coverage there and that handset doesn’t work. It’s roaming all the time. To be able to unlock that handset and put it on a rural carrier’s network would be a really great thing to happen.
Johnston: That’s great. Carri thank you again so much for being on. I sure hope this starts to go our way for the folks in rural America and the $3.08 billion gets appropriated and these folks can get back to running their businesses and providing coverage to rural America. They have been put through the meat grinder in the last six years.
Bennet: That is true. The good part is now that we can all work remotely and you and I are both doing this remotely from our home, this podcast, is the more people that move out to rural America, the more population there will be and maybe the networks can support themselves and not rely on universal service support as well.
Johnston: That’s true. Thanks again, Carri, really appreciate your time today.
Bennet: All right, Jeff. Thanks for having me. Always good to talk with you.
Johnston: A special thanks goes out to Carri for being on the podcast today.
Boy, my heart goes out to the entire rural wireless industry. When operators built these networks, they believed they were being good stewards of the government support they received by selecting the lowest cost option, not knowing the equipment would become a national security threat. And by the way, if these networks are a national security threat, then it’s simply unacceptable that members of Congress continues to sit on their hands, ignoring the many funding options available to them to neutralize the threat.
Hey thanks for joining me today and a special thanks goes out to my fellow CoBank associates Christina Pope and Tyler Herron who play a critical role in making this podcast a reality. Watch out for the next episode of the All Day Digital podcast.
