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Funding uncertainties wreak havoc

Funding uncertainties wreak havoc

As the United States and China continue to battle in regards to trade, technology and intellectual-property rights, those living in rural America are caught in the middle. The ban on Chinese-made telecom equipment and associated government-funding risks are creating headaches for rural wireless operators.

A new law requires U.S. companies to rip and replace non-compliant telecom equipment from their networks. But the funding to pay for it has yet to be appropriated by Congress. Those funding uncertainties and restrictions are wreaking havoc on affected rural operators. They increase the risks that rural residents will lose access to critical communication services. The confluence of those events could not have come at a worse time. The pandemic has forced people to rely on communication services to live, learn and work like never before. In this report we look at the challenges facing rural operators as they are forced to overhaul their networks, and how the current environment is impacting rural residents.

Communications Networks Act detailed

Enacted in March 2020, the Secure and Trusted Communications Networks Act establishes

  • a mechanism to prevent communications equipment or services that pose a national security risk from entering U.S. networks, and
  • a program to remove any such equipment or services currently used in U.S. networks.

The act authorizes but doesn’t appropriate $1 billion to pay for the rip and replacement of non-compliant equipment for operators that have less than 2 million subscribers. It also prohibits the use of receipts to pay for any products or services sourced from noncompliant vendors.

Everybody waits for answers

Rural operators are waiting for Congress to appropriate the $1 billion that was included in the act. Until then they can’t start signing contracts and procuring new equipment. Those uncertainties and restrictions paralyze an operator’s ability to make the necessary investments in their network to support the surge in data traffic stemming from home-bound consumers, as well as the associated massive digital transformation we’re witnessing. For example some wireless operators have experienced a 200 percent increase in data traffic as more people work and learn from home.

To support that increase in traffic while still maintaining minimum data speeds, operators have two choices – cell split, which is adding new cell sites, or to add additional sectors to a site. Making those investments in the current environment is a massive risk because there’s no guarantee operators will be reimbursed. Another option is to secure a bridge loan, but without assurances that Congress will authorize the funding banks may be unwilling to extend financing.

Access to funding is only part of the problem. The Secure and Trusted Communications Networks Act stipulates that the FCC is responsible for establishing the rules operators need to follow as they rip and replace non-compliant equipment. Unfortunately at this point the FCC has yet to formalize the rules, which keeps operators in a holding pattern that impedes their ability to develop a network-transition strategy. The next opportunity for the FCC to establish those rules is at its Dec. 10 meeting. To provide some much-needed clarity, we encourage the commission to include rip and replace rules on the agenda.

While operators with non-compliant equipment wait for the FCC and Congress to go through their processes, they also run the risk of not complying with pending FCC requirements. In particular, the upcoming “STIR/SHAKEN” mandate – that deals with reducing robocalls – requires operators to implement their solutions by June 30, 2021. Operators who fail to meet FCC mandates are at risk of being fined. But until money is appropriated and FCC rules are established, implementing the required technologies to be in compliance is problematic.

Vendor issues add to problems

For operators who have access to capital, procuring compliant replacement parts is easier said than done. Before the recent advent of O-RAN – a concept to standardize, or “open,” radio-access-network elements – infrastructure manufacturers interpreted and implemented wireless standards differently. And those differing interpretations make it difficult for operators to mix and match vendor equipment in a cell site. For example mixing and matching makes it almost impossible to do end-to-end network testing, which could result in unexpected outages and network-performance issues. That increases network operation costs while negatively impacting customer access to the network.

The lack of interoperability and the closed nature of many systems is especially problematic for networks that are exposed to the wraths of Mother Nature that can destroy radio-access-network equipment. That includes operators in extreme-risk fire, tornado and hurricane areas. The other supply-chain issue rural operators face is gaining access to equipment and labor once the rip and replace rules are finalized and funding has been appropriated. At this point it’s unclear exactly how much time the FCC will give operators to replace their noncompliant equipment. Per the Secure and Trusted Communications Networks Act, operators will have 12 months to rip and replace non-compliant equipment, but the FCC can grant a general extension to everyone for six months.

There’s no doubt rural operators will want to move quickly, but the choke point could quickly become access to labor and equipment. Given the significant amount of wireless-network build activity currently underway – 5G upgrades from national operators, cable operators building new networks, Dish Network’s national build, new networks, etc. – small rural operators are at risk of being pushed to the back of the line. The reality is there are simply much-larger opportunities for manufacturers and construction companies outside of rural America. Those supply-chain issues put rural operators at risk of violating FCC rules if they are not given a reasonable amount of time to complete the rip and replace. They will also increase the risks of network outages.

Limited options exist in rural areas

For rural American residents the fallout from the Secure and Trusted Communications Networks Act would be less of an issue if they had other options – say from the deep-pocketed national operators such as T-Mobile, AT&T and Verizon. But unfortunately for many rural residents the service offered by local wireless operators is their only option. For example in parts of northeast Montana, the national operators combined have about 20 cell sites. Nemont, the local service provider in the region, has about 80 cell sites. So despite all the talk of national operators expanding service to rural America, there simply isn’t evidence that it’s happening in any meaningful way.

That puts some rural residents in an untenable situation. With many affected rural operators unable to access replacement parts, residents are at risk of losing their critical communications services. Given how the pandemic has upended the way people live and work – with no end in sight – not having access to communication services has far-reaching consequences. Think about not having access to 911 or health-care services, not being able to work, needing to attend online classes from a McDonalds parking lot, etc..


Rural wireless operators with Chinese-made equipment have been operating under a great deal of uncertainty for several years. As a result they’ve fallen woefully behind the national operators, which has expanded the digital divide. Operators are terrified that as they plan network upgrades with foreign-made equipment, the nation’s friends of today could become enemies in the future. The last thing they want is to go through another government-mandated network overhaul.

The industry therefore should explore adopting a virtualized O-RAN architecture. That will give operators flexibility to pivot should the need arise. But they will need significant up-front software-development support because most lack the expertise and capital needed to employ that strategy. In the near term operators need funding certainty and defined rules of engagement. Until then they’re stuck in a holding pattern that jeopardizes rural-resident access to any wireless communication services. The FCC also needs to take into account all the supply-chain challenges facing the industry to ensure that rural operators are given sufficient time to rip and replace Chinese-made equipment.

Visit to see a video regarding the issue from CoBank.

Jeff Johnston is a lead economist with CoBank. Visit for more information.

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