On June 3, 2016, Chairman Tom Wheeler announced that the Federal Communications Commission (“FCC”) will vote on a notice of proposed rulemaking (“NPRM”) seeking comment on changes to Executive Branch review of many FCC applications this month. The vote comes on the heels of a brief comment cycle that sought comment on a letter1 from the National Telecommunications and Information Administration (“NTIA”), which aims to “streamline” national security reviews by “Team Telecom”—an ad hoc inter-agency working group comprised of members of the Departments of Justice (including FBI), Defense, and Homeland Security.
Currently, when applications for specific types of FCC authorizations or licenses (such as telecommunications common carrier authorizations) proposing foreign investment are filed with the FCC, the agency defers ruling on them until Team Telecom has completed a national security review. Team Telecom conducts its own confidential investigation of the proposed transaction and solicits additional information from the applicants about their ownership structure, relationships with foreign entities, network operations, and security measures. If this information raises national security or law enforcement issues, Team Telecom negotiates a mitigation agreement with the applicants, and the FCC typically incorporates compliance with these measures as a condition to its grant of an application.
Under NTIA’s proposal, applicants proposing foreign ownership of, or foreign investment in, virtually every type of FCC license or authorization would be required to submit ownership, financial, and network information to the FCC pursuant to a detailed questionnaire.2 Applicants would also certify compliance with certain law enforcement assistance requirements in their initial FCC applications. NTIA’s questionnaire asks for significantly more confidential competitive information than is currently required by the FCC, though it largely tracks with typical “triage questions” asked by Team Telecom. It should be noted, however, that NTIA’s requests for audited financial statements and lender identity go beyond Team Telecom’s standard requests. The new information collection would apply broadly to Section 214 telecommunications authorizations, most spectrum licenses, submarine cable landing licenses, and satellite earth station authorizations. NTIA has not proposed specific confidentiality protections for this competitively sensitive information at this time. Nevertheless, the FCC has often created procedures for protecting such confidential filings and would likely draw on this experience in crafting any new Team Telecom rules.
The NPRM follows very robust debate about the role of Team Telecom in the merger process. Specifically, Republican Commissioner Michael O’Rielly has criticized3 the Team Telecom review process, pushing for formal inter-agency coordination with firm review deadlines and greater transparency in how Team Telecom operates. He contends that greater certainty in the Team Telecom process—coupled with raising the FCC’s foreign ownership limits—would expand access to foreign sources of capital and create new business opportunities for regulated entities. Many industry commenters voice similar concerns. In response to a recent public notice, various telecommunications companies sought enforceable deadlines for Team Telecom review and strong confidentiality protections for any new FCC information requirements. Also, a coalition of broadcasters emphasized the need to differentiate between broadcast and common carrier applications, arguing that broadcast transactions largely do not raise national security or law enforcement concerns. The NPRM will likely seek comment on many of these issues, providing further opportunity for public input on Team Telecom reform.