At its September 30, 2021 Open Meeting, the Federal Communications Commission (“FCC” or the “Commission”) unanimously adopted a Second Report and Order in IB Docket No. 16-155 requiring applicants with reportable foreign ownership seeking Commission approval for certain applications to answer standardized national security and law enforcement questions (“Standard Questions”) prior to or when filing their applications. The Standard Questions were developed in coordination with the. Departments of Justice, Homeland Security, Defense, State, and Commerce and the United States Trade Representative, which conduct review of national security, law enforcement, foreign policy, or trade policy issues associated with the foreign ownership of the applicants of certain applications filed with the FCC and referred to the agencies. The Standard Questions will apply, following review and approval by the Office of Management and Budget (“OMB”) (and issuance of an associated public notice) to the types of applications the Commission generally refers to the Executive Branch, namely applications for international section 214 authorizations and submarine cable landing licenses, applications to assign, transfer control or modify such authorizations and licenses where the applicant has reportable foreign ownership, and all petitions seeking to exceed foreign ownership limits applicable to broadcast or common carrier wireless licenses set forth in Section 310(b) of the Communications Act of 1934, as amended (the “Act”) (47 C.F.R. § 310(b)).
The adoption of Standard Questions is the FCC’s complements several other reforms in the past year to formalize and streamline the FCC and Executive Branch review process conducted pursuant to Executive Order No. 13913 of April 8, 2020, Establishing the Committee for the Assessment of Foreign Participation in the United State Telecommunications Sector (the “Committee” (commonly referred to as “Team Telecom”)). The Executive Order sets forth procedures and timelines for the Committee to conduct its reviews of referred applications. The Commission’s earlier reforms are detailed in the FCC’s (First) Report and Order in Docket 16-155 Executive Branch Review Order released October 1, 2020 (and Erratum). As noted in the Second Report and Order, the FCC considered comments filed in response to a Public Notice containing proposed Standard Questions.
Matters Detailed in the Second Report and Order
The Second Report and Order largely adopted the Commission’s proposed sets of Standard Questions and a supplement for the provision of personally identifiable information (“PII”), with some refinements and clarifications, resulting the receipt of comments from five interested parties and a series of consultations with the Committee. The sets of Standard Questions are as follows:
- Attachments A and B, for an international section 214 authorization application filed pursuant to 47 C.F.R. § 63.18, including a modification of an existing authorization) and for the assignment or transfer of control of such authorization, respectively;
- Attachments C and D, for a cable landing license application filed pursuant to 47 C.F.R. § 1.767 (including a modification of an existing license) and for the assignment or transfer of control of such license, respectively;
- Attachments E and F for a petition for declaratory ruling for foreign ownership in a broadcast licensee or common carrier wireless or earth station licensee, respectively, above the benchmarks in section 310(b); and
- Attachment G, a supplement to assist the Committee in identifying PII.
Among the more significant clarifications or determinations by the Commission in the Second Report and Order, it
- determined based on Committee input that “reportable foreign ownership” for the Standard Questions is a five percent (5%) or greater equity and/or voting interest (indirect or direct) in the applicant or a controlling interest in the applicant, rejecting a ten percent (10%) threshold based on the Commission’s application rules because of the different purposes of national security and law enforcement review of the Committee and the Commission’s own review, and referral threshold, of applications. Indeed, the Second Report and Order explained that the Committee both emphasized to the FCC that, in some instances, “a less-than-ten percent foreign ownership interest – or a collection of such interests – may pose a national security or law enforcement risk” and observed that “when ownership is widely held, five percent can be a significant interest.”
- clarified that the Standard Questions for transfers of control or assignments of licenses are only applicable to prospective owners or licensees and not to transferors or assignees of authorizations or licenses.
- clarified certain definitions used in the Standard Questions, for example, noting that “Senior Officer” refers to “any individual that has actual or apparent authority to act on behalf of the entity,” and is not title-dependent, although the Second Report and Order identified a number of candidate positions.
- explained that a network operations center, or NOC, located outside the United States is part of the “Domestic Communications Infrastructure” of a network when it can control other parts of an entity’s Domestic Communications Infrastructure.
- retained the request for information concerning Section 310(b) broadcast petitioners’ prior relationships with foreign principals, including funding and employment arrangements (but not retail customer relationships), with no time limit or “defined look-back period;” as the Committee advised that such relationships may be relevant to an assessment of continuing foreign influence over broadcast content; but the Second Report and Order determined not to adopt a similar requirement for Section 301(b) petitions involving common carrier wireless or earth station licenses.
- clarified that “planned relationships” with foreign entities and individuals which must be disclosed in all of the Standard Questions sets are “current relationships or those reasonably anticipated by negotiations or that are identified under current business plans” including all situations in which contracts have been signed and where parties are already in negotiations.
- modified questions with respect to prior filings with the Commission or Committee on Foreign Investment in the United States (“CFIUS”) to provide that that an “involved” or “associated” individual or entity is either the applicant in a prior Commission or CFIUS filing or listed as an owner in such a prior filing, but reiterated that there is no look-back period cutting off such responses.
- clarified questions regarding an applicant’s provision of services to critical infrastructure sectors and what qualifies as a service.
The Interrelationship of the Submission of Responses to Standard Questions and the Committee’s Review Procedures
Applicants with reportable foreign ownership, under the Commission’s Rules, must provide answers to the relevant Standard Questions directly to the Committee prior to or at the same time they file their applications with the FCC. The Second Report and Order underscored that all information submitted in response to the Standard Questions will be treated as business confidential and protected from disclosure without special designation or request by the respondent for business confidential treatment. Similarly, PII will automatically be protected from disclosure outside the Executive Branch agencies in accordance with privacy laws and provisions in Executive Order No. 13913. However, when multiple applicants are required to respond to the Standard Questions, the applicants must, as further guided by the instructions that will accompany the Standard Questions, clearly indicate whether responses are being jointly filed and which responses are being filed separately by a single applicant to ensure that confidential information is not disclosed to the other applicants.
The Commission made clear that, when responding to the Standard Questions, an applicant my not cross-reference information that was previously filed with the FCC. Rather, responses must be self-contained and complete. The Second Report and Order expressly rejected a request that, for petitioners that have previously been granted a declaratory ruling under Section 310(b) approving foreign investment, the petitioner should be permitted to respond to a streamlined questionnaire.
Following the submission of the responses to the Standard Questions, the Committee will have thirty days after referral of the application to the Committee to issue more tailored questions, although it may seek an extension. If no extension is sought, the FCC stated it will begin the 120-day clock for the Committee’s initial review on the 30th day after referral. Otherwise, if tailored questions are issued, the clock will begin when the Committee chair notifies the Commission that the responses to the Standard Questions, and any tailored questions, have been received and are complete.
The Standard Questions and related instructions will be posted on the Commission’s website following OMB approval.