NTIA Suggests Steps to Expedite Executive Review of Applications for Section 214 and Submarine Cable Act Authority; FCC Seeks Comment
Kelley Drye Client Advisory
May 13, 2016

The “Team Telecom” review process of applications involving foreign ownership has long endured a reputation for excessive length and opacity.  It appears change may be on the horizon but will the change be welcomed?  On behalf of the Obama Administration, the National Telecommunications & Information Administration (NTIA) filed a letter (NTIA Letter) on May 10, 2016 with the Federal Communications Commission (FCC or Commission) requesting the Commission require applicants with threshold levels of foreign ownership for certain authorizations submit additional information and certifications with their applications.  The intended purpose is that submitting this information and these certifications up front will streamline the Executive Branch agency review process.  Today, those reviews are undertaken by the Departments of Justice, Homeland Security, Defense, Commerce, State, Federal Bureau of Investigation, and United States Trade Representative (“Team Telecom”).

 The Executive Branch typically reviews applications for international 214 authorizations and transfers, section 310 license ownership rulings, submarine cable landing licenses and satellite earth station authorizations where the applications involve reportable foreign ownership.  In response to the NTIA Letter, the Commission released a Public Notice yesterday seeking comments on NTIA's request.  The Commission suggested that any comments received would inform the Commission’s planned formal rulemaking proceeding.  The FCC seeks comments on or before Monday, May 23, 2016. 

The NTIA proposal purports to streamline Executive Branch review but, if implemented as proposed, the proposal would not appear to obviate the need for all of the review process elements currently in place.  Accordingly, the benefits for applicants of the revised application process may not be as significant as NTIA suggests.  Carriers and licensees should consider participating in this pre-rulemaking proceeding comment process to ensure their views and concerns are reflected in the later formal rulemaking proceeding.   

As NTIA explains, under the current review process for applications involving reportable foreign ownership under the FCC’s rules -- generally at or above ten percent (10 %) direct or indirect equity or voting control, and five percent (5 %) for direct ownership of submarine cable systems -- the FCC refers the application and seeks input from Team Telecom on national security and law enforcement issues.  Typically, when Team Telecom initiates its review, they request information from the applicant(s) beyond what is required in the FCC applications by issuing its so-called “triage questionnaire.”  Team Telecom’s initial set of questions typically follows a set model, with some variations in particular circumstances, and responses are submitted under protection of confidentiality. 

The NTIA proposal seeks to streamline the initial steps in this supplemental information gathering by requiring certain information, not currently requested by the FCC from applicants, be submitted with the initial application rather than later as part of the Team Telecom triage questionnaire process.  NTIA proposes the Commission require applicants to provide certain information about the corporate structure and shareholder information; relationships with foreign entities; financial condition and circumstances; compliance with applicable laws and regulations; and business and operational information, including services to be provided and network infrastructure.  While the above categories are among those usually covered in the triage questionnaire, the list does not cover all of the usual triage questionnaire categories.  Thus, applicants may still be required to answer additional questions posed by Team Telecom in the time frame in which the triage questionnaire is often sent, although possibly a much shorter list.

NTIA also requests that the Commission require applicants, as part of their initial application submission, to agree to and certify compliance with what NTIA refers to as “routine national security and law enforcement mitigation measures.”  NTIA anticipates and suggests this upfront certification could eliminate the need for mitigation for a significant number of applications.  Mitigation often takes the form of a national security agreement (NSA) or letter of assurance (LOA).  The proposed certifications would address compliance with the Communications Assistance for Law Enforcement Act; would commit applicants to make certain categories of communications and records subject to lawful requests under U.S. law; and commit an applicant to establish a U.S. point of contact for the execution of such lawful requests.  As with the information collection categories discussed above, although these certifications cover many of the requirements typically included in NSAs and LOAs, they do not cover all of the requirements which are common in such documents.  Moreover, the NSA and LOA documents typically contain terms and definitions supporting the obligations and commitments related to NTIA’s proposed certifications.  Consequently, many initial authorizations and mergers or acquisitions will still likely require a formal mitigation agreement.

Providers with international or submarine cable authorizations or who plan to seek such authorizations should consider participating in either or both the informal comment process and the future formal rulemaking proceeding.  The Administration’s proposed requirements would place extra burdens on carriers’ initial application submissions and require more extensive certifications than currently required.  It is possible that, in some circumstances, Team Telecom review would not have been engaged in the first instance.  Yet the proposal would place the Team Telecom review burden on all qualifying applicants, prejudging the issue to a certain extent.  However, some carriers may appreciate the chance, as a matter of standard procedure, to address sooner rather than later parts of the Team Telecom triage process, with the prospect of a shorter Executive Branch review. 

Regardless of whether carriers prefer to submit information in the initial application filing or wait for Team Telecom information requests, carriers must carefully consider other issues raised by the proposed changes.  For example, FCC applications are generally not afforded confidential treatment whereas responses to the triage questionnaire are routinely treated as confidential by the Team Telecom agencies.  Will applicants be able to submit the additional information requested by NTIA in a confidential manner?   Further, many carriers address CALEA compliance measures during the Team Telecom review process and commit to have solutions in place before operations commence.  Will the proposed certification requirement necessitate carriers having CALEA solutions in place at the time the application is submitted?  

Carriers will want to pay close attention to this proceeding and consider sharing in comments with the Commission exactly what such additional requirements will mean in terms of burden, implementation, and compliance.  The Commission should receive input on these key issues before acting on the NTIA Letter.

Please be advised that attorneys in Kelley Drye & Warren’s Communications Practice Group are experienced in addressing international reporting issues and are able to assist clients in filing the international carrier reports.  

For further information on any of these filings, please contact your usual Kelley Drye attorney.