FCC Adopts New Rules and Procedures for Team Telecom Committee

White & Case LLP

On September 30, 2020, the Federal Communications Commission (FCC) voted to adopt a Report and Order that provides for new rules and procedures to formalize the review process of the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (the Committee), which was established by an Executive Order issued on April 4, 2020 (EO 13913).1 EO 13913 formalized the ad hoc Team Telecom, which advised the FCC on national security and law enforcement aspects of foreign involvement in the US telecommunications services sector.  As previously reported, EO 13913 also established an official structure, timeline, scope of authority, and review process for the Committee, which the Report and Order implements.  The Report and Order will take effect 30 days after its publication in the Federal Register (which as of the date of this alert has not yet happened).

Under the terms of EO 13913, the Committee's primary objective is to assist the FCC in its "public interest" review of national security and law enforcement concerns that may be raised by foreign participation in the US telecommunications services sector.  Although the Committee is facially neutral with respect to reviews of foreign participation in the US telecommunications services sector, EO 13913 was issued as part of broader Executive Branch actions that have increased scrutiny of Chinese involvement.

Summary of the Rules and Procedures

The FCC's Report and Order implements and fills in certain gaps left by EO 13913 for the agency to interpret, although it does leave some issues open for subsequent rulemaking proceedings.

  • Scope of Review – EO 13913 permits Committee review of both new applications and existing licenses.  The Report and Order provides rules and procedures regarding new applications.  With respect to review of existing licenses, it notes that EO 13913 only requires Committee notification to the FCC regarding a final recommendation to the FCC concerning new mitigation conditions or revocation of an existing license, and confirms that the FCC will provide any authorization holder/licensee an opportunity to respond to the recommendation by the Committee before taking action with respect to such existing authorization or license.

    For new applications, applicants must report any foreign individual or entity that directly or indirectly owns at least 10% of the equity in the applicant (referred to as "reportable foreign ownership"). Pursuant to the Report and Order, subject to certain exceptions noted below, the FCC will refer the following to the Committee for review: (i) applications for an international section 214 authorization or to assign, transfer control of, or modify an international section 214 authorization where the applicant has reportable foreign ownership; (ii) applications for a submarine cable landing license or to assign, transfer control of, or modify a submarine cable landing license where the applicant has reportable foreign ownership; and (iii) petitions seeking a foreign ownership ruling under section 310(b) of the Communications Act of 1934, as amended, for broadcast, common carrier wireless, or common carrier satellite earth station applicants and licensees. The following will be generally excluded from such referrals: pro forma applications, situations in which the only reportable foreign ownership is from wholly owned intermediate companies and the applicant is ultimately US owned and controlled, certain international section 214 applications where the applicant is already subject to mitigation, and international section 214 applications where the applicant was cleared within the past 18 months without mitigation and there are no new reportable foreign owners since the prior review.  The FCC does, however, retain the discretion to refer such applications to the Committee if circumstances warrant, such as if there is a change in relations between the United States and the applicant's home country.

  • Requests for Information – EO 13913 contemplates the Committee requesting information in connection with its reviews of new applications.  Traditionally, Team Telecom has issued "triage" questions to applicants, which are somewhat tailored to the given application.  When applying for international section 214 authority, submarine cable licenses, and section 310(b) foreign ownership declaratory rulings, the Report and Order requires 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 standardized set of national security and law enforcement questions (Standard Questions).  The goal of the Standard Questions is to expedite the Committee's review process.  The Committee may later send applicants more tailored questions, as discussed below.  
  • The Report and Order adopts the categories of information that will be required from applicants under the Standard Questions, but does not set forth the specific questions, which will be developed, made available for public comment, and made publicly available once finalized.  The categories for the Standard Questions are as follows:
    • Corporate structure and shareholder information; 
    • Relationships with foreign entities; 
    • Financial condition and circumstance
    • Compliance with applicable laws and regulations; and 
    • Business and operational information, including services to be provided and network infrastructure.
  • Timeline for Review – The Report and Order establishes timeframes for the Committee to complete its review for new applications consistent with EO 13913, as follows:
    • Tailored Questions within 30 days: The Committee is required to send any specifically tailored national security and law enforcement questions (Tailored Questions) to an applicant within 30 days of FCC referral.
    • Initial Review (120 Days): Commencement of the initial 120-day review begins when the Committee Chair (i.e., the Attorney General) notifies the FCC that it has determined that the responses to the questions (including any Tailored Questions) are complete, or, at FCC discretion, when the Committee fails to provide Tailored Questions to the applicant within 30 days of FCC referral. The FCC will have discretion to act on any application if, after 127 days (i.e., the initial 120-day review period plus seven days for the National Telecommunications and Information Administration to notify the FCC of the Committee's recommendation), the Committee has not provided a final recommendation, notification of an extension granted to applicants, or written justification for a secondary assessment.
  • Potential Secondary Assessment (90 Days): Following the initial review, there may be a secondary assessment of up to 90 additional days.  Commencement of a secondary assessment begins when the Committee Chair notifies the FCC that it seeks secondary review of the application because it poses a risk to the national security or law enforcement interests of the United States that cannot be mitigated through standard mitigation measures.

    Consistent with EO 13913, the Committee may extend the initial review or secondary period if the applicant has not been responsive to information requests.  The Report and Order states that in cases where an applicant makes major amendments during the pendency of an application, such amendment would not restart the initial review period, but the Committee could extend the initial review or secondary assessment, as applicable, in the course of obtaining information about the amendment.

  • Required Certifications – The Report and Order requires applicants to certify that they:
    • Will comply with the Communications Assistance Law Enforcement Act (CALEA); 
    • Will make certain communications and records available and subject to lawful request or valid legal process under US law; 
    • Will 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 
    • Understand that failing to fulfill any condition of the grant of their applications or providing materially false information can result in license revocation or termination and criminal and civil penalties. 

The first two certifications do not apply to broadcast petitioners seeking a section 310(b) foreign ownership ruling.

Relation to CFIUS Review

Given their common member agencies and national security mandates, the former Team Telecom and the Committee on Foreign Investment in the United States (CFIUS) worked closely together to identify and address risks to national security in those transactions in the telecommunications services sector that involved both applications to the FCC and notification to CFIUS. We expect this close collaboration to continue.

It is important to note that while the Report and Order establishes timelines on the Committee's reviews, those timelines (120 day initial review, potential 90 day secondary assessment) are still significantly longer than CFIUS's review timelines for a full notice (45 day review, potential 45 day investigation), and subject to imprecise beginnings and potential extensions.  Therefore, we continue to recommend that any foreign investment that might involve both the FCC/Committee process and the CFIUS process begin the FCC/Committee process first and as early as practicable.

1 The FCC's press release regarding the Report and Order is available here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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