FCC's new foreign ownership review rules set to take effect

Introduction
Background
Key takeaways
Exclusions from committee review
Required certifications

Introduction

For the first time, the Federal Communications Commission (FCC) will have formal rules governing the process for Team Telecom review of licence applications involving foreign ownership. However, the FCC declined to adopt exclusions for applications that have undergone review by the Committee on Foreign Investment in the United States (CFIUS) on the grounds that CFIUS review analyses distinct foreign ownership concerns.

The FCC's report and order adopting new rules to formally establish the Team Telecom review process were set to take effect on 28 December 2020, for the aspects of the report and order that do not require Office of Management and Budget approval. The FCC's actions follow President Trump's 4 April 2020 executive order (EO 13913) establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector to formalise the previously ad hoc Team Telecom review process (for further details please see "Team Telecom emerges from shadows and FCC cracks down on Chinese telecoms companies").

Background

For more than 20 years, the FCC has referred certain licence applications involving foreign ownership to several executive branch agencies for their review of any national security, law enforcement, foreign policy or trade policy issues relating to those applications. In 2016 the FCC sought comment on proposals to improve aspects of this informal referral and review process, but that proceeding lay dormant until Trump issued EO 13913, which set out specific timeframes for the committee's review of certain FCC applications and the types of recommendation that the committee can make to the FCC in response to referred applications.

Key takeaways

The report and order has four main aspects:

• 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;
• continuing to refer for executive branch review three types of application where the applicants have reportable foreign ownership:
  • applications for international Section 214 authorisations or to assign or transfer control of these authorisations;
  • applications for a submarine cable landing licence or to assign or transfer control of such a licence; and
  • 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;
• requiring applicants to make certifications to help protect national security and law enforcement interests and assist the FCC in its ongoing regulatory obligations; and
• 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 FCC – responses to a standardised set of national security and law enforcement questions.

Exclusions from committee review

Notably, over executive branch objections, the FCC will generally exclude from committee referral certain applications that it 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 have been 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; and
• international Section 214 applications where the applicant has been cleared by the executive branch within the past 18 months without mitigation and there have been no new reportable foreign owners of the applicant since that review.

In contrast, the FCC declined to adopt other exclusions proposed by stakeholders, including applications that have undergone review by CFIUS, on the grounds that CFIUS review analyses 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;
• 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 that they will:
  • promptly inform the FCC and the committee of any substantial and significant changes in such information while the application is pending; and
  • after the application is no longer pending, inform the FCC and the committee of any applicant or contact information changes within 30 days; and
• affirm their understanding that failure to fulfil any of the conditions of the grant of their applications can result in licence revocation or termination and criminal and civil penalties.

For further information on this topic please contact Adam D Bowser at Arent Fox LLP by telephone (+1 202 857 6000) or email (adam.bowser@arentfox.com). The Arent Fox LLP website can be accessed at www.arentfox.com.