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FCC’s New Foreign Ownership Review Rules Set To Take Effect

For the first time, the FCC will have formal rules governing the process for Team Telecom review of license applications involving foreign ownership. The FCC, however, declined to adopt exclusions for applications that have undergone review by CFIUS, on the grounds that CFIUS review analyzes distinct foreign ownership concerns.

The Federal Communications Commission’s Report and Order adopting new rules to formally establish the Team Telecom review process are now set to become effective December 28, 2020, for the aspects of the Report and Order that do not require OMB approval. As we previously reported, the Commission’s actions follow President Trump’s April 4, 2020, Executive Order (EO 13913) establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (Committee) to formalize the previously ad hoc Team Telecom review process.

Background

For over 20 years, the Commission has referred certain license applications involving foreign ownership to several Executive Branch agencies for their review of any national security, law enforcement, foreign policy, or trade policy issues related to those applications. In 2016, the Commission sought comment on proposals to improve aspects of this informal referral and review process, but that proceeding lay dormant until President Trump issued EO 13913, which set out specific timeframes for the Committee’s review of certain FCC applications and the types of recommendations the Committee can make to the Commission in response to referred applications.

Key Takeaways: The Report and Order Has Four Main Aspects

  1. Establishing timeframes (120-day initial review, and if necessary, 90-day secondary assessment) for the Executive Branch agencies to complete their review consistent with EO 13913;
  2. Continuing to refer for Executive Branch review three types of applications where the applicants have reportable foreign ownership: (1) applications for international Section 214 authorizations or to assign or transfer control of these authorizations; (2) applications for a submarine cable landing license or to assign or transfer control of such a license; and (3) petitions seeking a foreign ownership ruling under Section 310(b) of the Communications Act for broadcast, common carrier wireless, or common carrier earth station applicants and licensees;
  3. Requiring applicants to make certifications to help protect national security and law enforcement interests and assist the Commission in its ongoing regulatory obligations; and
  4. Requiring applicants with reportable foreign ownership to file with the Committee – prior to or at the same time as they file their application with the Commission – responses to a standardized set of national security and law enforcement questions.

Exclusions From Committee Review

Notably, over Executive Branch objections, the Commission will generally exclude from Committee referral certain applications that the Commission believes present a low or minimal risk to national security, law enforcement, foreign policy, and trade concerns. The following applications will generally be excluded from referral:

  • Pro forma notifications and applications;
  • International section 214 applications, submarine cable applications, and section 310(b) petitions where the only reportable foreign ownership is through wholly-owned intermediate holding companies and the ultimate ownership and control is held by US citizens or entities;
  • International section 214 applications where the applicant has an existing mitigation agreement, there are no new reportable foreign owners of the applicant since the effective date of the mitigation agreement, and the applicant agrees to continue to comply with the terms of that mitigation agreement; or
  • International section 214 applications where the applicant was cleared by the Executive Branch within the past 18 months without mitigation and there are no new reportable foreign owners of the applicant since that review.

In contrast, the Commission declined to adopt other exclusions proposed by stakeholders, including applications that have undergone review by CFIUS, on the grounds that CFIUS review analyzes distinct foreign ownership concerns.

Required Certifications

Applicants, with the exception of certain broadcast petitioners, will also be required to certify that they will:

  • Comply with the Communications Assistance Law Enforcement Act (CALEA);
  • Make certain communications and records available and subject to a lawful request or valid legal process under US law;
  • Designate a point of contact in the United States who is a US citizen or lawful permanent resident;
  • Affirm that all information submitted to the FCC and the Committee is complete and accurate, and will promptly inform the FCC and Committee of any substantial and significant changes in such information while the application is pending and, after the application is no longer pending, regarding any applicant or contact information changes within 30 days; and
  • Affirm their understanding that failure to fulfill any of the conditions of the grant of their applications can result in license revocation or termination and criminal and civil penalties.

Contacts

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