The Federal Communications Commission (“FCC” or “Commission”) on June 24, 2016 unanimously approved a Notice of Proposed Rulemaking(“NPRM”) that aims to streamline and facilitate national security or "Team Telecom" review of certain FCC applications involving foreign ownership. The proposed rules include a 90-day time frame during which Team Telecom is expected to complete its review, as well as up-front certifications and disclosures by certain applicants to minimize the need for future coordination. Comments on the proposed rules will be due 30 days after publication in the Federal Register.
Background: The Commission routinely refers certain applications involving entities with reportable foreign ownership to “Team Telecom,” an informal working group of Executive Branch agencies (the Departments of Justice, Homeland Security, and Defense) for coordination and recommendations on national security and foreign policy issues raised by the applications. Unlike national security reviews conducted by the Committee on Foreign Investment in the United States (“CFIUS”), Team Telecom’s reviews have no explicit statutory or regulatory basis and, as such, its reviews are not time-limited by statute or regulation.
According to the Commission, the number of applications referred to Team Telecom has increased over the years and the process has become burdensome for applicants, potentially discouraging foreign investment in U.S. companies. The proposed rules, part of an ongoing FCC effort to reform its processes, respond to longstanding calls for increased transparency, efficiency, and certainty in Team Telecom reviews. More directly, the proposals reflect input received in a May 10, 2016 letter from NTIA “recommending changes to improve the ability of the Executive Branch to expeditiously and efficiently review the applications.”
Proposed Rules: The Commission's proposals would apply to applications for international section 214 authorizations and submarine cable landing licenses, applications to assign or transfer such authorizations and licenses, and petitions for section 310(b) foreign ownership rulings (related to common carrier wireless, common carrier satellite earth stations, and broadcast licenses). Specifically, the NPRM proposes to:
- Adopt a 90-day time frame for Executive Branch review, with an additional one-time 90-day extension in rare circumstances, provided the Executive Branch provides status updates every 30 days. The proposed 90-day time frame for Team Telecom review mirrors the statutorily mandated time frame for CFIUS reviews, although the vast majority of CFIUS reviews last no more than 75 days. The Commission proposes to start the clock upon release of the public notice. The Commission would make an initial review of the application for completeness and then refer the application to Team Telecom once it is put on public notice as accepted for filing. As is the current practice, Team Telecom would submit any follow-up questions directly to the applicant, but the Commission proposes to require applicants to provide responses to follow-up questions within seven days. If the applicant does not timely respond, the Commission could dismiss the application without prejudice. The applicant could request additional time to respond, but this request would stop the 90-day review clock for Team Telecom until the applicant provided the requested information.
- Require applicants with reportable foreign ownership to provide information on ownership, network operations, and related matters at the time they file their applications. This requirement aims to provide a more efficient and timely method for gathering such information – in contrast to the lengthy information-gathering process that occurs directly between Team Telecom and applicants after referral by the FCC. In order to maintain flexibility, the Commission proposes to include in the rules the categories of questions to be answered, and to make the specific questions available publicly. The Commission also proposes to vary the questions by category of application.
- The Commission seeks comments on whether this information should be provided to the Commission for its initial review or to Team Telecom directly.
- Understanding that the information provided in response to these questions could be confidential and proprietary, the Commission seeks comment on whether its established protective order procedures would provide adequate protection for this information if it were provided to the Commission.
- Require all applicants, with or without foreign ownership, to make certain certifications with respect to the communications services to be provided under the requested license or authorization. Specifically, these certifications would include that the applicant will: 1) comply with all applicable provisions of the Communications Assistance for Law Enforcement Act (“CALEA”); 2) make communications to, from, or within the United States, as well as records thereof, available in a form and location that permits them to be subject to lawful request or valid legal process under U.S. law; and 3) agree to designate a point of contact in the U.S. who is a U.S. citizen or lawful permanent resident for the execution of law requests and/or legal process. The Executive Branch agencies say these certifications will streamline their review.
- Require applicants for international section 214 authorizations and submarine cable landing licenses and applicants to assign or transfer such authorizations and licenses to include in their applications the voting interests, in addition to equity interests, of individuals or entities with ten percent or greater direct or indirect ownership in the applicant. The Commission also proposes to require such applicants to include a diagram of the applicant’s ownership, showing the ten percent or greater direct or indirect ownership interests in the applicant.