FCC Launches Rulemaking to Guard Against USF Funding Being Used Contrary to National Security

The comment period is now open for the FCC’s proposed rule to ensure that USF funds, such as E-rate and Lifeline, are not used in a manner that compromises or poses a threat to national security. On April 17, 2018, the Commission issued a notice of proposed rulemaking that proposes that “USF support may [not] be used to purchase or obtain any equipment or services produced or provided by a company posing a national security threat to the integrity of communications networks.” The rule would apply to USF funds disbursed to the funding recipient and any USF funds used by a contractor or subcontractor of the recipient.

In order to establish this rule, the FCC asks whether it should create a bright line rule, prohibiting the sale of the services of any company or the sale of equipment of any manufacturer that poses a threat to national security, or rather, whether it should limit the scope to equipment and services that relate to the management of a network (and network data) and any system that can interfere with “the confidentiality, availability, or integrity of a network." The FCC requests comment on whether there should be program specific rules or whether a general rule across the USF programs would be sufficient.

The FCC also asks for methods for identifying which companies and manufacturers may pose a national security threat.  Several potential ideas include: FCC-established criteria, referring to existing statutes that list criteria for barred companies, and relying on other federal agencies that maintain lists of prohibited providers. For example, the 2018 National Defense Authorization Act (NDAA) bars the Department of Defense from using telecommunications equipment provided by Huawei Technologies or ZTE Corporation. The FCC asks if it should rely on the companies barred by the NDAA.

The FCC proposes to enforce the rule through USAC compliance audits, and the FCC requests comments on how USAC should recover funds from a rule violation and which party should be liable for any violations. Lastly, the FCC seeks analysis on whether the proposed rule effectively balances the objectives of national security and the goals of universal service. Comments are due June 1, 2018; Replies are due July 2, 2018.