Lack of Rip and Replace Funding Could Spell Trouble for BEAD Progress, Event Hears

WASHINGTON, August 2, 2023 – The funding shortage in the rip and replace program, which aims to reimburse carriers to swap out threating Chinese equipment from their networks, if not immediately addressed by Congress, could hobble broadband deployment efforts from other federal grant programs, said panelists in a Broadband Breakfast Live Online event on Wednesday.

The deadline for providers to file their reimbursement applications has passed on July 15. Meanwhile, legislation to address the $3-billion funding gap — which was flagged by the Federal Communications Commission in 2022 — is slow to move through Congress.

Tim Donovan, CEO of the trade group Competitive Carrier Associations, said the funding shortfall would make providers reluctant to go through the whole process, instead opting for a ‘rip and not replace’ strategy.

“If you have to operate with the funds available, you start to look at what sites are a ‘rip and not replace’ site,” said Donovan. “Where am I shutting down service?”

It is not only bad news for local consumers, but also undermines the federal government’s broader attempts to increase broadband availability, he warned.

In places where these companies are the sole providers in town, they are often “the ones best prepared” to help broadband expansion programs succeed, Donovan said. However, because of the funding shortfall, they are bogged down by the maintenance of their existing network before even discussing the path forward.

“It would be a real travesty if at a moment when there’s such a bipartisan focus and more funds that have ever been put towards closing the digital divide, we see towers go dark because of the failure to fund this program,” said Donovan.

Armand Musey, president and founder of consulting firm Summit Ridge Group, added that some states even have a more “aggressive” deadline than the FCC for providers to replace the equipment. Carriers in those states may be barred from receiving state-based support, including the $42.5 billion Broadband Equity, Access, and Deployment funding, unless they remove all Huawei and ZTE equipment from their networks.

Carri Bennet, general counsel of the industry group Rural Wireless Association, highlighted an additional layer of complexity. According to her, some companies borrowed funds from their affiliated sister companies to facilitate the process of replacing equipment in advance. However, this poses a challenge when the sister company is also involved in its own broadband deployment efforts, leading to financial constraints for both parties just to get fiber out, she said.

There have been multiple legislative attempts to address this financing shortfall. In May, the House Energy and Commerce Committee pushed forward a bill to direct spectrum auction money to replenish the rip and replace program. In April, several senators sponsored the Defend Our Network Acts to increase funding for the program from unused Covid funds. Both bills have gathered strong bipartisan support, but Congress has yet to pass the bills.

“It’s kind of ironic that there’s almost no opposition to this and it still won’t go through,” said Musey, noting that the longer Congress waits to act, the more it impacts coverage, emergency services, and access to healthcare, all of which the federal government is attempting to address through other grant programs.

As a stopgap measure, Bennet suggested that carriers become more involved by filing reports and concerns with the FCC in the hopes of catching the attention of members of Congress.

“I really hope that when Congress comes back in September, this can be a top item to move forward to limit the damage and keep the networks together as best as we can,” said Donovan.

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Wednesday, August 2, 2023 – The Future of ‘Rip and Replace’

Amidst escalating concerns over cybersecurity, the Secure and Trusted Communications Networks Reimbursement Program, also known as the “rip and replace” program, is once again in the spotlight. The program, which aims to reimburse providers for removing Chinese equipment from their networks, is currently experiencing a funding shortfall of $3 billion. Despite numerous efforts from lawmakers and the Federal Communications Commission to push Congress for extra funding, the fate of the “rip and replace” program remains uncertain. How does this affect carrier’s efforts to replace the equipment, slated for completion by July next year? What lies behind Congress’s lack of action thus far? What does it mean for national security?

Panelists

Carri Bennet, General Counsel, Rural Wireless Association have been invited
Tim Donovan, President and CEO of Competitive Carriers Association
Armand Musey, President and Founder of Summit Ridge Group
Ahmad Hathout (moderator), Managing Editor, Broadband Breakfast

Having launched several startups, including her own successful boutique communications and technology law firm prior to joining Womble Bond Dickinson, Carri Bennet uses her entrepreneurial spirit to make the seemingly impossible, achievable. Carri is exacting and persistent in achieving her clients’ goals. She is known as a spunky outspoken advocate for small rural carriers, having battled with regulators and large companies for more than 30 years to ensure that small rural businesses have a seat at the table and a strong voice in Washington, D.C.

Tim Donovan serves as President and CEO of Competitive Carriers Association (CCA), the nation’s leading association for competitive wireless providers and stakeholders across the United States. CCA’s members range from small, rural carriers serving fewer than 5,000 customers to regional and nationwide providers serving millions of customers, as well as vendors and suppliers that provide products and services throughout the wireless communications ecosystem. As the highest-ranking executive, Tim leads association advocacy and operations with government entities, press, membership, and the general public.

Armand Musey is President and Founder of Summit Ridge Group. He has over 15 years of equity research, investment banking, and consulting experience. Armand has completed dozens of financial valuation, strategic analysis, business development, corporate governance, and business plan creation assignments in the communications industry and has experience working on numerous financing and M&A transactions. His projects include leading Summit Ridge Group’s support of the U.S. Department of Justice’s Antitrust division’s review of the proposed T-Mobile/Sprint merger.

Ahmad Hathout, Managing Editor of Broadband Breakfast, has spent the last near-decade reporting on the Canadian telecommunications and media industries for leading publications. He is responsible for leading Broadband Breakfast’s hard news coverage, and is the author of the February 2023 Breakfast Club Report, What to Know About Build America, Buy America Provisions in the Bipartisan Infrastructure Law.