Funding Uncertainties Wreak Havoc for Rural Communications at the Worst Time Possible

Rural network operators stuck in limbo waiting for compliance rules and appropriation of funds associated with new law

DENVER (November 12, 2020) — As the U.S. and China continue to battle over trade, technology, and intellectual property rights, people living in rural America are getting caught in the middle. The ban on Chinese-made telecom equipment, ripe with uncertainties surrounding compliance rules and government funding, is creating significant headaches for rural wireless operators. It is also putting rural residents at risk of losing critical communications services at a time when they are needed the most.

According to a new report from CoBank’s Knowledge Exchange, the confluence of these events could not have come at a worse time as the pandemic has forced people to rely on communication services to live, learn, and work like never before. The report examines the challenges facing rural operators as they are forced to overhaul their networks, and how the current environment is impacting rural residents.

The Secure and Trusted Communications Networks (STCN) Act enacted in March was designed to prevent communications equipment or services that pose a national security risk from entering U.S. networks. The act, largely designed to target Chinese companies, requires U.S. operators to rip and replace all non-compliant equipment in their networks and includes $1 billion of funding for operators with less than 2 million subscribers to pay for changes mandated in the new law.

“The funding is not only insufficient it has yet to be appropriated by Congress,” said Jeff Johnston, lead communications economist at CoBank. “And at this point, the Federal Communications Commission has yet to formalize the rules operators need to follow, which keeps them in a holding pattern that impedes their ability to develop a network transition strategy.”

Rural operators cannot start signing contracts and procuring new equipment until Congress appropriates the $1 billion that was included in STCN. These 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, and the associated massive digital transformation that’s underway.

As 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. For instance, the upcoming STIR/SHAKEN mandate, which deals with reducing robocalls, requires operators to implement their solution 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.

For rural American residents, the fallout from STCN would be less of an issue if they had options from other service providers such as T-Mobile, AT&T and Verizon. But despite the speculation and anticipation surrounding national operators expanding their service to rural America, there simply isn’t evidence that this is happening in any meaningful way. For many rural residents, the service offered by rural wireless operators is their only option.

This puts some rural residents in an untenable situation. With many affected rural operators unable to access replacement parts, rural 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.

Watch a video and read the full report, Funding Uncertainties Wreak Havoc for Rural Communications at the Worst Time Possible.

About CoBank

CoBank is a $148 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

Media Contacts

Julie Davis
Corporate Communications

Leslie Hagele
Corporate Social Responsibility

Dave Harding
Knowledge Exchange