A carrier’s failure to comply with its letter of assurance or national security agreement may jeopardize its international Section 214 license. In nearly unprecedented enforcement actions, the U.S. Department of Justice, Federal Bureau of Investigation, and U.S. Department of Homeland Security (collectively “Team Telecom”), have recently requested that the Federal Communications Commission (“Commission”) terminate, or declare null and void, the international Section 214 authorization of two carriers for failure to comply with agreed upon conditions reflected in the carriers’ letters of assurances (“LOA”). Responding to Team Telecom’s request, in a pair of Public Notices released on June 27, 2014, the Commission directed Wypoint Telecom, Inc. (“Wypoint”) and ACT Telecommunications, Inc. (“ACT”) to respond, by July 11, 2014, to the Team Telecom allegations of noncompliance and stated that failure to respond would be deemed an admission of the allegations and could result in a show cause order. International service providers subject to Team Telecom compliance obligations should view these revocation requests as a warning that Team Telecom is actively monitoring carrier compliance with agreed upon conditions and noncompliance will be strictly enforced. Moreover, although not explicitly stated, we anticipate that a carrier whose international 214 authorization is revoked for failure to comply with commitments made to United States security agencies would not be granted another authorization or would be subject to significantly more stringent conditions.
Telecommunications carriers that have (or will have as the result of a transaction) controlling or significant minority foreign ownership and that seek to provide international telecommunications service typically receive additional scrutiny by Team Telecom in connection with their FCC applications and often are required to accept conditions on their service authorization in exchange for Team Telecom’s agreement not to object to the application. Both ACT and Wypoint underwent Team Telecom review and accepted several conditions which were reflected in their respective LOAs, and which are typical in the letters of assurance and security agreements that Team Telecom requires foreign-owned carriers to enter into. Among other conditions, ACT agreed to file an annual certification confirming its commitment to the LOA conditions, reporting any violations of the conditions and addressing the company’s ability to comply with the Communications Assistance for Law Enforcement Act (“CALEA”) mandates. The company also agreed to maintain a U.S. point of contact (“POC”) responsible for complying with CALEA requests and notify Team Telecom of changes to the POC. Wypoint also agreed to accept certain conditions on its international Section 214 license. Those conditions were not identified in the Commission’s Public Notice but, again, in our experience, Team Telecom conditions are quite similar across carriers.
The Team Telecom letter seeking revocation of ACT’s authorization cited specific instances of noncompliance as the basis for the request. The letter highlighted the company’s failure to file its 2012 and 2013 annual certifications or to notify Team Telecom of changes in the Company’s POC. The letter noted that ACT’s former legal counsel and POC filed a notification in September 2013 explaining that he no longer represented ACT and had been unable to reach anyone at the company. In addition, Team Telecom alleged that ACT failed to respond to Team Telecom outreach efforts – which included telephone calls and e-mails – and had not yet filed a new POC designation.
Team Telecom’s basis for requesting the revocation of Wypoint’s authorization also rested upon noncompliance with an LOA, but the Wypoint case differs from ACT’s as there is evidence that the company has ceased its international operations. In particular, Team Telecom stated that Wypoint’s legal counsel had been unable to locate the company in September 2012 and that Team Telecom efforts to contact the company by telephone and e-mail in September 2103 and March 2014 were equally unsuccessful. The letter also noted that Team Telecom searched for but could not locate certain filings Wypoint was required to make with the FCC, such as International Traffic and Revenue Reports. Team Telecom’s internet searches returned results identifying the company as dissolved.
The Team Telecom letters highlight the level of monitoring Team Telecom conducts of carrier compliance. Both letters identify the thoroughness of Team Telecom compliance review including reaching out to carrier counsel, sending e-mail correspondence, and calling contacts listed on carrier applications as well as those obtained from “open-source searches for information” about the companies. If a carrier fails to comply with its Section 214 authorization conditions, there is a good chance Team Telecom will actively look for the carrier and demand compliance. Moreover, if a carrier’s international Section 214 authority is revoked for failure to comply with commitments to Team Telecom, it is highly likely that a subsequent application for authority would be subject to additional Team Telecom scrutiny and require, as a condition to not objecting to an application to the FCC for authority, agreement to significantly more stringent conditions than before. The revocation requests also illustrate the critical nature of full compliance with letters of assurance or national security agreements entered into as part of the international Section 214 authority process. These documents can no longer be viewed as routine agreements, necessary to complete the Team Telecom review of FCC applications, that can be filed away and reviewed only occasionally. Instead carriers must ensure that they are aware of and comply in a timely fashion with all commitments identified in letters of assurance or security agreements.