As U.S. regulators weigh how best to discourage telecom operators from buying equipment deemed risky or unsecure, several groups representing mostly small and medium-sized communications service operators are pushing back, warning against agency overreach.

Earlier this year, the Federal Communications Commission issued a notice of proposed rulemaking that considers new rules barring recipients of the agency's Universal Service Fund from purchasing communications network equipment or services from companies deemed to pose a threat to U.S. national security. While the FCC's proposal did not single out any companies by name, it did cite increasing security concerns around the Chinese telecommunications companies Huawei Technologies Co. Ltd. and ZTE Corp. For instance, the U.S. Commerce Department in April imposed export restrictions on ZTE, accusing the company of repeatedly making false statements and violating international sanctions.

The fund makes almost $10 billion available annually to offset the cost of connecting certain users — such as residents of rural areas, Americans with low incomes, or schools and libraries — to phone and internet services.

In a July 2 filing, the Competitive Carriers Association, the Computer & Communications Industry Association, ITTA - The Voice of America's Broadband Providers and NTCA - The Rural Broadband Association said that while they understand the importance of protecting the U.S. telecommunications supply chain from malicious actors, they believe other government bodies would be better able to address "the overall telecommunications network."

Moreover, they believe the proposed rule "goes well beyond the FCC's core jurisdiction." Instead, they believe it is more appropriate for Congress to take up this issue, as Congress can enact comprehensive legislation and coordinate between relevant agencies.

If the FCC moves forward with the rule as is, the groups warned it could "devastate impacted rural carriers" as it would require "many carriers to rip and replace any Huawei and ZTE equipment from their networks to preserve their access to USF funding." The groups noted that some carriers would have to spend millions of dollars — and in some cases, more than $100 million — on just the immediate costs of pulling out and replacing equipment.

In another July 2 filing, the small operator Pine Belt Cellular Inc. described how the FCC's proposed rule is already "jeopardizing future deployment plans and equipment purchases" with its primary wireless infrastructure vendor, ZTE. In particular, Pine Belt said the proposal was negatively impacting strategic plans for the commercial launch of 4G and 5G services wireless services. At this point, Pine Belt said it "desperately needs to add capacity to its network" at multiple sites but cannot because of the proposed rule and the sanctions imposed on ZTE by the Commerce Department.

In explaining his support for the proposal, FCC Chairman Ajit Pai said in March that the White House and Congress have "repeatedly stressed the importance of identifying and eliminating vulnerabilities in communications networks and their supply chains."

And while he noted that the FCC does not have the authority to solve this problem on its own, he said the agency has a responsibility to ensure USF dollars are "not used in a way that undermines our national security."