The Federal Communications Commission (FCC) issued a notice of proposed rulemaking this week that will prohibit state and local governments from using Universal Service Fund (USF) dollars for equipment and services from providers identified as a national security risk.  The order is targeting China-backed firms ZTE and Huawei who provide telecommunications equipment to U.S. service providers.  

The impact of the order will be felt by local and rural service providers who rely on cheap Chinese equipment for high-cost broadband deployment projects in rural areas.  The FCC argues it is protecting America’s supply chain and communications work from foreign interference but the USF is the agency’s primary arm for rural broadband funding and the order will have a chilling effect on private investment in rural broadband.