There is at least one thing President Joe Biden and his predecessor, Donald Trump agreed on: Communications technology from foreign adversaries is a national security threat to the supply chain.

President Trump in May 2019 declared, via executive order, that securing information and communications tech services was a supply chain national emergency.

Also: FCC Takes Next Steps on Network Security

That national emergency status was scheduled to end on May 15, but President Biden has extended it for a year.

The White House said Thursday (May 12) that the potential catastrophic effects of such tech in U.S. communications networks remained an ongoing threat. "This threat continues to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States," the White House said.

The dominance of Chinese telecoms in 5G network tech is one of the big issues in the supply chain conversation, which prompted the FCC and Congress to come up with a program to prevent government subsidies for such suspect tech, and weeding it out of current networks with a rip-and-replace program. ■

The spike in fiber construction projects — Altice USA, Comcast, Charter Communications, Frontier Communications and a handful of smaller operators all have plans to build out and expand their plant across the country over the next five years — has created a bit of a dilemma for providers. While there is money (federal grants totaling more than $65 billion have been earmarked for broadband expansion, especially in rural areas), desire (expanding footprints mean more chances to grow customers) and need (about 43% of U.S. homes have access to fiber broadband), shortages of equipment and skilled workers could throw a wrench in what many expect to be the biggest fiber buildout in the past 20 years.

For AmeriCrew, a company founded in August by former U.S. Army officer and long-time telecom executive Kelley Dunne to help fellow veterans train and establish careers in the telecommunications, clean energy and managed services industries, the worker shortage is real, and not just for people who know how to splice fiber.

“Everyone is building at once,” Dunne said. “In the process, the skill sets are converging as well. You need skilled labor out in the workforce, not to mention electricians and higher skilled laborers. I think we’re heading into the largest workforce shortage our nation has ever seen.”

He's not alone in that fear.

A ‘Huge Issue’

“Labor is a huge issue right now,” Jeff Heyner, Dell’Oro Group VP, broadband access and home networking, said. “It’s a big concern, especially for those projects that are subsidized through RDOF [Rural Digital Opportunity Fund] and the other U.S. government or state government grants. The concern there is, can they finish these projects within the time frame allotted before they have to go back and say they need an extension?”

Federal and state broadband funding programs usually have milestones and deadlines that awardees must meet in order for them to continue receiving money. For those that can’t meet those deadlines, they usually have to file for extensions to the respective government agencies, which at best means a ton of additional paperwork and at worst means giving the money back. 

Heyner said that the deficits aren’t only in the employee ranks. Supply chain issues are delaying projects as well. 

“There is still a lot of backlog of projects and it’s not like they’re slowing down any strategic initiatives they have,” Heyner said. “The projects just keep coming and they’re gated by supplies. It’s really difficult to get ahold of fiber itself, conduit, and once everything is installed, the CPE necessary to connect the subscriber. There are certainly labor shortages as well, all across the board when it comes to any technicians or outside plant folks.”

Fiber Broadband Association VP, research and workforce development Deborah Kish said her organization began hearing from its service-provider members about two years ago that they had to turn down jobs and couldn’t get installs done because they didn’t have the skilled workforce. 

“That’s kind of indicative of the telecom industry,” Kish said. “We have a lot of people who have been in the industry for 30 or 40 years, so there are a lot of people aging out. It’s a matter of how do you attract fresh, new people to do these jobs.” 

FBA, she said, launched a 144-hour fiber optic technician training course on March 29 teaching fiber theory, types of fiber, splicing , outside plant installation, FTTH installation, testing and troubleshooting. The course is about half in the classroom, half in the field, and students will emerge from the course as an advanced entry-level fiber-optic technician.

Kish said there are other training programs, from independent associations, community colleges and other educational institutions across the country, but it still might not fill the need.  

She added that the industry expects to build 1.6 million miles of fiber over the next five years. She estimated that potential job creation is in the tens of thousands to hundreds of thousands over the next several years.  

“Yes, it [the worker shortage] will delay projects,” Kish said. “That’s why it’s the right time to do this.”

Eleven of the top telecom trade associations, including the Competitive Carriers Association, the Fiber Broadband Association, INCOMPAS,  NTCA–The Rural Broadband Association, the Wireless Infrastructure Association (WIA) and CTIA, wrote Congress in February 2021 claiming that the industry will need an additional 850,000 man-years of trained fiber technician labor over a five year period to keep up with demand. In comparison, the group said the industry employed about 672,000 technicians, and to meet the short-term labor requirements will have to find and quickly train at least 250,000 new technicians.  

That same year South Dakota Republican Sen. John Thune reintroduced his Telecommunications Skilled Workforce Act bill, U.S.  which would establish a Federal Communications Commission-led interagency working group to develop recommendations for workforce needs and to empower the GAO to conduct a study to determine the specific number of workers required to fill the gap.

The bill was first introduced in February 2020 but appears to have little traction at the moment. 

“When you look at the industry as a whole, there’s simply not enough people,” CCG Consulting president Doug Dawson said, adding that the number of installations is already at record levels and continues to grow. “Somebody is going to get shorted somewhere along the line. It could be that everybody gets shorted.”

At the same time, there are groups who say there is no worker shortage at all. The Communications Workers of America, the union representing more than 150,000 wireless and wireline telecom workers, has said repeatedly that there is no shortage of workers. What has been lacking, according to the union, are decent wages as companies lay off telecom workers. 

In his February testimony before Congress, Communications Workers of America president Christopher Shelton said companies claiming a shortage of skilled workers are really lamenting a lack of non-union employees. 

“AT&T and other telecom companies have laid off tens of thousands of workers in the past few years, including thousands of well-trained construction technicians, while non-union contractor companies claim they can’t find qualified workers,” Shelton said, adding that if there truly was a deficit, wages would increase. Instead, he cited an Economic Policy Institute study that showed that wage growth has slowed over the past 40 years.

“The lowest-paid 10% of workers in telecom actually saw their wages decline by 12% in real terms since the 1970s, driven by outsourcing and the loss of union representation,”  Shelton continued. “When wireless infrastructure companies and their lobbyists start talking about workforce shortages, ask them for proof.”

Size Matters

But as big players like AT&T have the size and the muscle to bring in fiber workers, the pool is still small, meaning if one company attracts a crew, another company is left without.

Dawson, a 45-year veteran of the telecom industry, said the labor shortage depends on who and where you are. For mega-companies like AT&T and Verizon, which have nearly unlimited resources and can attract workers from around the country or train workers on their own, the ability to build a workforce isn’t as hard as it is for a small telco in a rural area.

So AT&T, Verizon and other mega-players may have a leg up on the rest of the industry in attracting work crews, “but that means 20 other smaller companies just got really screwed,” Dawson said.

The road for smaller operators is much rougher, adding that skilled workers can jump from company to company on fiber builds, landing where the pay is best. For many that means bigger companies. 

He used a small fiber project in Oregon, in a town with about 20,000 residents, that he has consulted for about two years as an example.

“During the construction process, every Monday they would make bets about how many construction crews wouldn’t show up,” Dawson said. “Because at that same time Verizon was building a tremendous amount of fiber throughout Washington and Oregon, and they would simply steal away the crews by offering them a higher rate. They weren’t at the bottom of the chain — they were building a $20 million project — but they still had a tremendous struggle trying to keep work crews. If you’re a little city with a $1 million grant, good luck.”

A Loss of Institutional Knowledge 

Dawson agreed that layoffs after the last fiber bubble burst 20 years ago have added to the paucity of fiber technicians. Between 2001 and 2005, AT&T alone reduced its workforce from 215,088 to 162,000 employees, according to the company’s 10-K annual reports. What resulted is that today, many fiber line workers are either baby boomers or Generation Z, meaning they are either about to retire or they’re too young to have much experience. And when those baby boomers retire, they take a lot of the provider’s institutional knowledge with them.

And the projects aren’t last-mile fiber builds alone, Dawson added. Independent companies like Zayo are building massive long-haul networks, cable companies continue to build fiber as they cut their nodes down, wireless service providers are all building 5G networks — which have a huge fiber component — as well as Dish Network, which as part of federal requirements for its spectrum purchases needs to build its 5G to 70% of the country by next June.  

While the available pool of workers is likely to migrate to those bigger projects, smaller companies are having to decide whether roll the dice and hope they can attract enough workers, or build projects with existing staff. Dawson pointed to one client — a municipality in Arkansas — which is doing the latter, but added it will quadruple the time it takes to build the network from one year to four years. 

“Everyone can’t build what they’re announcing, it’s impossible,” Dawson said. “Between materials, engineers, fiber splicers, there are places that are going to run into bottlenecks.” 

It’s Not Just a Job… 

While there are staffing agencies, contractors and subcontractors galore to provide skilled workers for fiber builds, training a fiber tech from scratch can take anywhere from several months to several years. And Dawson said it can take two-to-three years of being on the job before a fiber technician is up to snuff, Dawson said. 

"It's a true apprenticeship program, they're fairly worthless in the beginning," Dawson said. "Just knowing how to safely climb poles and all that, you don't learn in a day."

Workers are well-compensated for their efforts. Fiber-optic technicians make an average of $65,000 per year, according to Glassdoor.com, but depending on the location and the employer, can earn $80,000 or more annually. 

While that is enough to attract a wide range of workers from all walks of life, AmeriCrew's Dunne said he believes veterans are especially geared toward fiber work because of their focus on teamwork and getting the job done.  

For the veterans — Dunne said there are about 100 people in AmeriCrew's fiber program — the attraction is the ability to work wherever they want, to not to be tied to a desk and to build a career. 

“Sitting in a cubicle all day staring at a screen is not a job they are going to resonate towards,” he said.

If You Build It

Even the big guys have had to deal with periodic labor shortages. Almost every major telecom company has announced plans to boost its fiber diet, with AT&T predicting to extend its fiber network to 3.5 million additional homes this year, 4 million in 2023 and 30 million by 2025. Altice USA said earlier this year that it will accelerate its fiber buildout plans, extending its network to 6.5 million homes by 2025. Verizon has completed the core fiber buildout for more than 50% of its markets, so any further construction will be success-based 

Frontier Communications, which emerged from bankruptcy in April 2020, has put forth an aggressive buildout strategy, planning to pass 10 million homes with state-of-the-art technology by 2025.

Frontier chief network officer Veronica Bloodworth said at a recent industry conference that her biggest challenges in building out that network are twofold — labor and equipment.

“We have a much more diverse supply chain of labor partners than we even had nine months ago,” Bloodworth said at the conference. “I have a lot of confidence in our suppliers to meet their commitments. I feel very confident in our ability to meet our commitments. But the supply chain is much tighter than it was before.”

AT&T ran into some supply chain and staffing issues in 2021 around the fiber build — it finished the year adding about 2.6 million homes instead of the 3 million it had earlier predicted — but said that it believes it has solved any problems associated with network construction. 

At the Deutsche Bank Media, Internet & Telecom conference on March 14, AT&T chief financial officer Pascal Desroches said AT&T is in a good spot in its buildout plans. 

“Look, we’re not immune to supply chain issues, but we have first priority on supplies, we are in great position on access to labor relative to others, and what we’re seeing is while there were issues in the summer of last year those issues have been largely resolved and we exited 2021 with good momentum,” Desroches said at the conference. “That continues in 2022, so we feel really good about our ability to deliver 3.5 to 4 million new locations this year.”

But even though big players like AT&T have the size and the muscle to bring in fiber workers, the pool is still small. That means if one company attracts a crew, another is left without.

Smaller Providers Lead the Charge

Other smaller, more rural telecom companies also have aggressive buildout plans, like Shenandoah Telecommunications, which expects to pass 300,000 homes with fiber this year, and TDS Telecom, which plans to nearly double its total service addresses from 1.4 million to 2.2 million over the next five years, mainly through fiber expansion.

At the New Street Research virtual Fiber to the Future conference on March 29, TDS Telecom CEO Jim Butman said that currently, his company passes about 400,000 homes and businesses with fiber. He pledged to grow that to 1.3 million addresses in five years, adding that most of that growth will occur within TDS Telecom’s existing footprint.

“We want to protect what we’ve got in the ILEC first,” Butman said at the conference, adding that those plans don’t include efforts that could be funded through federal programs. With federal funding help, TDS could add another 100,000 to 150,000 homes to its fiber network.

Shentel had about 300,000 broadband passings at the end of 2021 — 200,000 through incumbent cable, 75,000 via its Glo Fiber offering in overbuilder markets and 30,000 through the federal Broadband Equity, Access and Deployment (BEAD) program. At the New Street Research conference, Shentel chief operating officer Edward McKay said the telecom company plans to double its Glo Fiber passings this year, growing to more than 450,000 passings by the end of 2026. 

“In total, we will grow broadband passings from 300,000 to 700,000-plus over the next five years, driven almost entirely by fiber-to-the-home expansion,” McKay said. 

And while competitors have opted to expand into more rural markets using fixed wireless technology, fueled by federal money, McKay said Shentel scrapped its fixed wireless program after it saw the amount of federal money that was pouring into its markets.

“We believe with the funding that is out there today, that will justify building fiber to the vast majority of the homes that we previously targeted for our BEAD fixed wireless,” McKay said. “We’re actually going after some of that funding ourselves.”

In the meantime, the number of wireline projects keeps growing. Earlier this month, Shentel’s Glo Fiber announced plans to expand its fiber network in Lancaster, Pennsylvania;  MetroNet announced plans to build a $130 million fiber network in Colorado Springs, Colorado; and Consolidated Communications said it will build a fiber network in Maine reaching 150,000 homes by the end of the year. 

In addition to building fiber networks for wireline high-speed Internet service, 5G wireless networks have a huge fiber component. 5G service requires a lot more towers than its predecessor technology: 5G cells have a range of about 1,000 feet, compared to 10 miles for 4G cells. 5G cells must also be connected to each other via fiber, which means a lot more fiber needs to be built. 

Dawson added that once the construction is completed, the work shortage could shift again. He said that companies will have to hire permanent fiber technicians for every 2,000 to 3,000 passings to maintain the network. 

“People will tell you there’s no shortage of them [permanent techs] right now,“ he said. ”There will be when there are 10 million more fiber passings.” ■ 

The House has narrowly passed the America COMPETES (Creating Opportunities for Manufacturing, Preeminence in Technology and Economic Strength) Act, which among many other things, provides $1.5 billion for securing the wireless mobile broadband market supply chain. 

The vote was 222-210, with only one Republican voting for the bill, and one Democrat opposing. A Senate version has already passed and will have to be reconciled with the House bill.

The bill was hailed by House Energy & Commerce Committee chairman Frank Pallone (D-N.J.). His committee supplied many elements of the bill including the wireless funding, $45 billion for supply chain resilience.

The bill also has $52 billion in funding to boost domestic semiconductor production, another supply-chain issue that affects network security.

Democrats billed the spending as a way to better compete with China, but Republicans said it would do the opposite.

“This bill is essential to our supply chains, our economy, and our workers, and will unleash the next generation of innovation and manufacturing in the United States,” said Commerce Secretary Gina Raimondo. “I’m urging Congress to move quickly to begin negotiations and work out the differences between the bills, focus on areas of common agreement, and get a final version to President Biden’s desk for his signature.”

“The America COMPETES Act provides a critical boost to America’s technological leadership, economic competitiveness, and national security," said Jason Oxman, president of tech trade association ITI. "Its prioritization of research and development, entrepreneurship, and science will strengthen the national innovation ecosystem. Importantly, its investments in domestic semiconductor production will create a more resilient supply chain in the long-term."

Republicans saw it quite differently.

Rep. Cathy McMorris Rodgers (R-Wash.), the ranking member of Energy & Commerce, branded it the “America Concedes Act” and said it was reckless spending that would “surrender” the country’s competitive edge, not sharpen it. “If the Democrats wanted to make America more competitive, they would abandon their destructive agenda and work with us to reform burdensome permitting, licensing, and regulatory regimes,” she said on the House floor in advance of the vote.

She called the bill a massive government handout to benefit political allies, and went so far to say that the Democrats‘ approach actually takes a page out of the Chinese Communist Party of “stealing, cheating and using their centrally controlled economy to pick winners and losers through massive government subsidies.”

One of the issues with the domestic communications supply chain is that it contains technology from Chinese companies that can undercut U.S. competitors because they have been subsidized by the government.

The broadband and chip funding had bipartisan support, but Rodgers said labor restrictions had been added that “are only going to make it harder for us to lead in 5G and next-generation communications.” 

"This bill was built on numerous bipartisan elements and on shared bipartisan agreement on the need to act," said President Biden. "If House Republicans are serious about lowering prices, making our economy stronger, and competing with China from a position of strength, then they should come to the table and support this legislation, which does just that."■

Suddenly faced with a number of emerging business challenges, Roku took time to carefully explain to investors during its Q3 call this week how the root cause to many of its current issues--the global electronics supply chain shortage--is specifically impacting the company. 

"So the supply chain disruptions that I mentioned are impacting a lot of industries--they're impacting U.S. TV sales, which are down. The market is down 31% year over year, in part because pricing on U.S. TVs on average is up 42%," said Roku CFO Steve Louden

"We believe that some of our TV OEM partners were hit particularly hard with these inventory challenges," added Roku founder and CEO Anthony Wood.

According to Wood, the supply chain issues are having a particular impact on Chinese manufacturers such as TCL, which has been the leading OEM driver of Roku OS growth in North America the last three years. 

Also read: Roku Faces Gathering Storm Clouds in Q3 as Revenue and User Growth Continue to Slow

Roku caught the technology wave early--partnering with smart TV original equipment manufacturers is now the most effective way of proliferating the Roku OS ... and by extension, its larger ad sales juggernaut. 

In the short term, Roku is taking a bit of a bath on its own "pucks" and sticks--its hardware business went from a $20.2 million profit in Q3 of last year to a $14.6 million loss in the most recent quarter. 

But Roku taking that loss, and even selling its gadgets at a discount of 7% relative to 2020, has enabled Roku to maintain player unit sales at above pre-COVID levels, Wood said. 

Unfortunately for Roku, it can't do the same thing with smart TVs--a factor probably not lost on Amazon, which just launched a new line of its own branded sets based on its Fire TV OS. Like Roku does with pucks, Amazon can now sell its TVs at a loss, if it needs to, in the interest of sustaining Fire TV's active user growth. 

Slowing smart TV sales impact the number of new "active accounts" Roku adds to its ranks each quarter. Even with the 31% overall slowdown in TV sales, Roku was able to add 1.3 million active accounts in Q3. But the number of active accounts added each quarter has slipped steadily throughout 2021. 

A slowdown in the growth of new users means a slowdown in the explosive growth of the Roku ad-sales juggernaut, which is real source of Roku's burgeoning market power. 

"Platform" revenue grew by 9.4% in the third quarter, once again a percentage that has steadily declined throughout 2021.

All this begs the question: Why doesn't Roku build its own smart TV, like Amazon is doing?

To that end, Wood said something interesting: "We work with the entire ecosystem. We work with retailers directly, we work with TV brands, we work with the factory directly. We do the engineering. I mean a lot of companies don't realize --a lot of people don't realize it, but Roku is actually one of the few TV companies in the world in the sense that we have all the technology to build a TV."

The global semiconductor shortage that has already roiled the automotive sector is now being broadly felt, with companies in the tech and telecom sectors reducing their guidance to investors into 2022. 

“Given the supply chain issues we face, we anticipate slightly negative player margins for Q2 and the likelihood of increasing negative player margins in the second half of 2021, given the anticipated component cost increases,” Roku CFO Steve Louden told investors last week during his company’s Q1 earnings call. 

Roku reported a 22% year over year increase in hardware revenue in Q1, to $107.7 million. 

CommScope, meanwhile, doesn’t expect a “fully normalized silicon supply environment” to return until early 2022. The company’s Home Networks unit ended the first quarter with more than $1 billion in backlog orders, which is more than twice its 2020 average. Sales for Home Networks, which makes pay TV set-top boxes and broadband gateways, fell 19% to $489 million in Q1, due in part to the supply chain-driven backlog.

“In terms of supply chain shortages, the main one that we're experiencing is in the Home business with our silicon products,” said CommScope President and CEO Charles Treadway, also in a Q1 call last week. 

“We're not immune to the global supply chain constraints,” added Patrick Harshman, CEO of Harmonic, another key tech vendor to the telecom and video industries. “We're seeing shortages of several key components and related significantly higher costs impacting most significantly our DAA and shelf hardware products.”

Harmonic still saw quarterly revenue tick up over 42% to $111.6 million.

Global semiconductor supply has failed to keep up with the demand, as all kinds of sectors now include ever greater amounts of silicon in their products. 

Last month, chipmakers including Intel, Nvidia and Taiwan’s TSMC warned their investors that semiconductor shortages could last until next year. 

And sectors like automotive have already felt the pinch. U.S. automakers General Motors and Ford said in February that the semiconductor scarcity could cut into their full-2021 earnings by as much as $2 billion and $2.5 billion, respectively.

It should be noted that the impact of this chip shortage is somewhat uneven and not universally felt right now. Take for example Los Angeles-based Xperi—the tech company servicing sectors like automotive entertainment, and which recently paid $3 billion to acquire TiVo, reported minimal supply chain effects last week during its Q1 call.

“While it will trim the overall growth number by a few percentage points, we have yet to see, at least from people we are doing more business with, an indication that it's going to materially impact our business beyond what we've already factored in and thought about in our respective guidance range,” said Xperi CEO Jon Kirchner.

President Joe Biden has issued a supply chain executive order that includes an immediate review of semiconductors, as well as rare earths, pharmaceuticals and large-capacity batteries (electric vehicles).

The President outlined the order to a bipartisan group of representatives and senators.

Also Read: Rosenworcel Pushes Deep Dive on ORAN

"The United States is the birthplace of [semiconductor] technology, and has always been a leader in semiconductor development," the White House said. "However, over the years we have underinvested in production—hurting our innovative edge—while other countries have learned from our example and increased their investments in the industry."

The reviews, across federal agencies, must include "critical goods and materials within supply chains, the manufacturing or other capabilities needed to produce those materials, and a variety of vulnerabilities created by failure to develop domestic capabilities."

The dominance of Chinese telecoms in 5G network tech is one of the big issues in the supply chain conversation, which prompted the FCC and Congress to come up with a program to prevent government subsidies for such suspect tech, and weeding it out of current networks with a rip-and-replace program.

The White House signaled it will be looking for help from industry and others to identify supply chain threats. "The E.O. directs the Administration to consult widely with outside stakeholders, such as those in industry, academia, non-governmental organizations, communities, labor unions, and State, local, territorial, and Tribal governments," it said.

It also promised to try ensure that building more secure supply chains will, among other things, "grow the American economy, increase wages, [and] benefit small businesses and historically disadvantaged communities."

Also Read: FCC Takes Next Steps Toward Network Security

Sen Mark Warner (D-Va.) chairman of the Senate Intelligence Committee, who was at the White House meeting, applauded the the Administration for "engaging lawmakers on a bipartisan basis on supply chain security, particularly as it relates to semiconductors. Today’s Executive Order is a good first start but much more work remains to be done – and quickly – including fully funding a number of enacted bills related to promoting supply chain security, resiliency and greater American competitiveness in key foundation technologies like semiconductors and wireless infrastructure," he said. "I was encouraged that in today’s meeting, there was a bipartisan consensus that supply chain security must remain a priority, and I look forward to working with President Biden and my colleagues in the Senate on this issue.”

The Department of Commerce has issued an interim rule for securing the Information and Communications Technology (ICTS) supply chain and Americans' data, and as part of that has identified six countries/regimes as adversarial threats to that chain.

They are the People’s Republic of China (China), the Russian Federation (Russia), the Islamic Republic of Iran (Iran), the Democratic People’s Republic of Korea (North Korea), the Republic of Cuba (Cuba), and Venezuelan politician Nicolás Maduro (Maduro Regime).

Also Read: Commerce Restricts Exports to SMIC

“Aggressively securing the ICTS supply chain will protect American citizens and businesses from vulnerabilities that could undermine the confidentiality, integrity, and availability of their personal information or sensitive data by malicious foreign adversaries and those who wish harm on the United States,” said Commerce Secretary Wilbur Ross.

In May 2019, President Trump issued an executive order that gave Ross the authority to nix certain ICTS transactions that were “designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries.” 

Also Read: Commerce Expands Huawei Restrictions

The rule, which is effective 60 days from its publication in the Federal Register, "allows the Department to promulgate regulations to create the processes and procedures that the Secretary of Commerce will use to identify, assess, and address certain transactions."

Given the timing, it will be up the the Biden Commerce Department to follow through with a permanent rule if it chooses to do so.

White House officials speaking on background said the rule does not prohibit technology or ban imports. Instead, it sets up a process by which suspect tech transactions can be referred to the Secretary of Commerce, that conern investigated, and within 180 days of the referral the secretary will either block, prohibit, or mitigate that transaction. 

As to the timing of the interim rule only days befor Commerce comes under new management, the officials says they expected the Biden Administration would see the need for the rule, but did not want to wait any longer to come out with the rule. 

They said the rule provides a government-private sectors sharing structure for identifying sensitive technology--wireless backbone, controlling software, hardware--in sensitive sectors and making sure the supply chain is as secure as possible, similar to the Committee on Foreign Investment in the United States (CFIUS) reviews of certain transactions that involve foreign investment in U.S. companies. But if a sale--the rule does not cover investment--had already passed CFIUS review, it would not get a second vetting under the rule. 

Among the tech target for review would be software that facilitates the transfer of information. Asked whether than doesn't cover basically any software, the officials said they were only talking about software used by more than 1 million people at any time during the previous 12 months.

Also targeted is tech integral to data hosting of computer services and lcoal area network (LAN) technologies.

Some high-profile senators are proposing legislation to put over $1 billion toward funding alternatives to the 5G technology from Chinese telecoms Huawei and ZTE that the U.S. is looking to scrub from its networks due to national security concerns. 

Related: Kratsios Says U.S., Allies, Must Confront Chinese Tech 

A bipartisan group of senators overseeing national security issues have introduced the Utilizing Strategic Allied (USA) Telecommunications Act. 

The bill would require the FCC to put 5% of the proceeds from any competitive spectrum auctions over a five-year period (or $750,000,000, whichever is greater) into a Public Wireless Supply Chain Innovation Fund, plus another $500 million in Multilateral Telecommunications Security Fund.

Related: Trump Administration Allows U.S. Tech Supplies to Huawei 

The National Telecommunications & Information Administration would be authorized to draw from the Supply Chain Fund fund to promote the development of interoperable 5G technology from trusted suppliers and open standards-based equipment. 

The Secretary of State could draw from the Security Fund, which would go toward working with "foreign partners" to accelerate the adoption of trusted and secure equipment globally. 

The bill would also: 

1. "Create a transition plan for the purchase of new equipment by carriers that will be forward-compatible with forthcoming O-RAN equipment so small and rural carriers are not left behind; 

2. "Increase U.S. leadership in International Standards Setting Bodies (ISSBs) by encouraging greater U.S. participation in global and regional telecommunications standards forums and requiring the FCC write a report to Congress with specific recommendations; 

3. "Expand market opportunities for suppliers and promote economies of scale for equipment and devices by encouraging the FCC to harmonize new commercial spectrum allocations with partners where possible, thus promoting greater alignment with allies and driving down the cost of Huawei alternatives." 

The senators see the bill as crucial to preventing China from winning the race to 5G with technology that could compromise the security of the U.S. and its allies. 

"Heavily subsidized by the Chinese government, Huawei is poised to become the leading commercial provider of 5G, with far-reaching effects for U.S. economic and national security," the senators said in introducing the bill. "With close ties to the Communist Party of China, Chinese state-directed technology companies present unacceptable risks to our national security and to the integrity of information networks globally. However, U.S. efforts to convince foreign partners to ban Huawei from their networks have stalled amid concerns about a lack of viable, affordable alternatives." 

“When it comes to 5G technology, the decisions we make today will be felt for decades to come," said Sen. Richard Burr (R-N.C.), chairman of the Intelligence Committee. "The widespread adoption of 5G has the potential to transform the way we do business, but also carries significant national security risks. Those risks could prove disastrous if Huawei, a company that operates at the behest of the Chinese government, military, and intelligence services, is allowed to take over the 5G market unchecked. This legislation will help maintain America’s competitive advantage and protect our national security by encouraging Western competitors to develop innovative, affordable, and secure 5G alternatives." 

"It is imperative that Congress address the complex security and competitiveness challenges that Chinese-directed telecommunication companies pose,” said Sen. Mark R. Warner (D-Va.), who co-founded wireless company Nextel and is vice chairman of the Intelligence Committee. “We need to move beyond observing the problem to providing alternatives for U.S. and foreign network operators.” 

Also backing the bill are Sens. Marco Rubio (R-Fla.), a member of the committee; Bob Menendez (D-N.J.), ranking member of the Foreign Relations Committee; Michael Bennet (D-Colo.), and John Cornyn (R-Tex.), both members of the Intelligence Committee. 

The FCC has already voted to exclude broadband subsidy funds to any network buildouts using nontrusted suppliers, the first of those identified as ZTE and Huawei, though it has sought comment on that designation before making it official. It is also considering whether to extend that ban beyond those subsidy funds, and how to fund a rip-and-replace of subsidy-funded networks already using those "untrusted" suppliers.

FCC chair Ajit Pai has proposed to ban the use of money from the FCC's Universal Service Fund for equipment or services from "companies that pose a national security threat to United States communications networks or the communications supply chain."

Pai circulated the proposal to the other commissioners Monday (March 26) for a planned vote at the public meeting April 17.

The item is a Notice of Proposed Rulemaking, so if it is approved at the meeting, the public will still have time to comment on it before a final order is voted; a source said the comment period would last 60 days.

The proposal in part stemmed from a Dec. 20 letter from Congress expressing concerns about Chinese companies Huawei and ZTE, plus a follow-up intelligence briefing, both of which were described as impetuses to the effort to monitor the supply chain, senior FCC officials speaking on background said.

They said the FCC is seeking comment in three main areas: (1) how the FCC should identify companies that pose a threat, (2) how to enforce the ban, and (3) how the funds should be recovered.

The rule would only apply to future equipment purchases and does not anticipate requiring carriers to remove equipment from companies identified as a threat, though it asks what should be done when companies want to upgrade that equipment.

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“Threats to national security posed by certain communications equipment providers are a matter of bipartisan concern," Pai said. "Hidden ‘back doors’ to our networks in routers, switches — and virtually any other type of telecommunications equipment—can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more. Although the FCC alone can’t safeguard the integrity of our communications supply chain, we must and will play our part in a government- and industry-wide effort to protect the security of our networks.

“That’s why I’m proposing to prohibit the FCC’s $8.5 billion Universal Service Fund from being used to purchase equipment or services from any company that poses a national security threat to the integrity of communications networks or their supply chains," Pai added. "The money in the Universal Service Fund comes from fees paid by the American people, and I believe that the FCC has the responsibility to ensure that this money is not spent on equipment or services that pose a threat to national security."

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Pai did not say how the FCC would identify the companies that were a threat. The USF subsidies are used to underwrite the deployment and use of advanced telecommunications services, primarily broadband, to rural and low-income areas.

The ban would apply to all four USF funds, high-cost, Lifeline, e-rate and rural healthcare.

FCC commisioner Michael O'Rielly had just gotten the item, but said "it makes a lot of sense."

The Telecommunications Industry Association (TIA) backed the FCC's stepping in to address the issue.

“[TIA] takes supply chain security very seriously and appreciates efforts by the U.S. government to improve the security of the network," said government affairs SVP Cinnamon Rogers. "TIA and our member companies in the information and communications technology industry have been working in partnership with agencies across the federal government to improve cybersecurity. We strongly support efforts by the government to address concerns regarding certain communications equipment providers deemed to pose a heightened security risk.

“The FCC has a key role to play in these efforts, and we appreciate Chairman Pai’s recognition that addressing security concerns requires work across the federal government in partnership with the ICT industry," Rogers said. "We look forward to reviewing the proposal and working with the commission on these important issues in the months ahead.”

USTelecom, which represents telco ISPs including Verizon and AT&T, agreed with the sentiment, but was going to review the item and implications.

“USTelecom members have long considered network integrity a top priority and have worked closely with government partners to improve the security of communications networks," said USTelecom President Jonathan Spalter. "We will continue working with the FCC and other agencies to address supply chain vulnerability issues. Consumers and businesses alike correctly expect their information is secure when travelling across networks, and USTelecom will continue participating in government- and industry-wide efforts to construct responsible, reasonable and effective solutions. We look forward to reviewing the Notice of Proposed Rulemaking (NPRM) and understanding the implications for our industry, our nation, and, most importantly, American families and communities.”