Foreign investment in many entities regulated by the U.S. Federal Communications Commission (FCC) has long been subject to an interagency review process for the consideration of national security, foreign policy, and trade policy issues, referred to as “Team Telecom.” Pursuant to an April 2020 executive order and an October 2020 report and order of the FCC, this process has been formalized and streamlined under the new Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (Committee).
Why Is This Important?
Applications before the FCC related to International Section 214 authority to provide international telecommunications service or submarine landing licenses will be referred to the Committee if an applicant has a 10% or greater direct or indirect foreign investment. Applications to exceed the FCC’s statutory foreign ownership benchmarks found in Section 310 of the Communications Act will also be referred to the Committee. At a minimum, applicants and their investors will need to provide detailed information to the Committee and potentially enter mitigation agreements such as letters of assurances or national security agreements to obtain approval of their applications.
The new process improves the timeliness and transparency of what has long been an opaque and potentially lengthy process.
What Is the Committee?
The Committee comprises the Secretary of Defense; the Secretary of Homeland Security; and the Attorney General, who chairs the Committee. The Secretary of State, Secretary of the Treasury, Secretary of Commerce, Director of the Office of Management and Budget, U.S. Trade Representative, Director of National Intelligence, Administrator of General Services, National Security Adviser, Assistant to the President for Economic Policy, Director of the Office of Science and Technology, and Chair of the Council of Economic Advisers all serve as Committee advisers.
What Is the Process?
The FCC will now require applicants to submit responses to a standardized set of questions at the time the FCC application is filed instead of waiting for the Committee to send a triage questionnaire. The FCC’s International Bureau is still drafting specific questions, but there will be five categories of information requested:
- corporate structure
- relationships with foreign entities
- financial condition and circumstances
- compliance with applicable laws and regulations
- business and operational information, including services to be provided and network infrastructure
Moreover, all applicants for International Section 214 authority or submarine cable licenses or those seeking to exceed the foreign ownership limits will now be required to make five certifications when submitting an application (to the extent the certification is relevant to the type of applicant):
- comply with the Communications Assistance for Law Enforcement Act
- make communications to, from, or within the United States, as well as records thereof, available to U.S. law enforcement officials
- designate a U.S. citizen or permanent U.S. resident as a point of contact for the execution of lawful requests and as an agent for legal service of process
- affirm that all information submitted to the FCC and the Committee as part of the application process is complete and accurate, and promptly inform the FCC and the executive branch agencies of any (a) substantial and significant changes in such information while an application is pending and (b) applicant or contact information changes after the application is no longer pending promptly and in any event within 30 days
- 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
Once the Committee determines an applicant has provided complete responses to these questions, a 120-day initial review period commences. A 90-day extension can occur for a secondary assessment if standard mitigation measures cannot mitigate a risk to national security or law enforcement interests. If the Committee recommends a nonstandard mitigation or denial, the Committee advisers have 21 days beyond the secondary assessment to consider that recommendation. The National Telecommunications and Information Administration has seven days to notify the FCC of the Committee’s determination. That means the process in simple cases should be resolved no later than 127 days after an application is deemed submitted and in the most complex cases no later than 238 days.
Are CFIUS Applications Generally Excluded From Referral?
No. The Committee will decline to exclude from referral an application that has undergone review by the Committee on Foreign Investment in the United States (CFIUS). Review of an application referred by the Commission includes issues not addressed by or outside of the jurisdiction of CFIUS. The Committee will refer an application for feedback on any national security, law enforcement, foreign policy, and trade policy issues, while CFIUS review focuses on national security risks arising from a transaction. Consequently, the Committee will continue to refer an application irrespective of whether the applicant certifies that the underlying transaction has undergone CFIUS review. In most instances, both reviews of a transaction will occur simultaneously.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.