On April 25, 2023, the Federal Communications Commission “(FCC” or Commission”) released a Notice of Proposed Rulemaking (“NPRM”) that foreshadows a potentially radical revision to the regulatory framework governing the provision of international telecommunications services. Such services are regulated under Section 214 of the Communications Act of 1934 (“Section 214”), and the FCC’s rulemaking is considering changes to almost every aspect of the authorization lifecycle. If the proposed rules are largely adopted, following public comment and follow-on lobbying in the coming months, the result will be a substantially increased compliance burden for international telecommunications carriers which may complicate their investment and transactional strategies. Right now, this is a situation of a few knowns” and a lot of open questions. (Note that the NPRM generally does not propose rule changes with regard to domestic (i.e., interstate) Section 214 authority obligations.)

Accompanying the NPRM was an Order that mandates a one-time data request for ownership information to all holders of international Section 214 authority. See our FAQs document describing the Order. The response deadline is not yet known as the Office of Management and Budget must first complete a review of the Order’s information collection obligations. The response deadline will be at least thirty days after the OMB review is completed as announced in the Federal Register.

The NPRM sets out a lengthy list of possible rule changes that would address some long-standing concerns of the Commission regarding the Section 214 regulatory framework. For example, the current international Section 214 process lacks standardized post-grant follow-up or monitoring. A 2020 report from a subcommittee of the U.S. Senate Committee on Homeland Security and Government Affairs emphasized the urgency of implementing some method to reliably monitor changes to international Section 214 carriers’ foreign ownership. The concern around lack of monitoring was further elevated by FCC proceedings in the past few years revoking the Section 214 authority of several carriers deemed to be agents of the Chinese government. As the Commission looks to collaborate more closely with Executive Branch agencies (i.e., the Committee for the Assessment of Foreign Participation in the United States Telecommunications Sector, commonly known as the Committee or Team Telecom) in addressing concerns of national security (as well as law enforcement, foreign policy and/or trade policy), the FCC appears to have come to the recognition that advancing these objectives is not served by a set-it-and-forget-it exercise triggered only by new applications or requests for approval when there are substantive changes in ownership and control.

Overview of the NPRM:

The NPRM is quite extensive and this article addresses only some of the principal highlights. Because of the broad range of proposals, this proceeding merits the attention of international Section 214 authorization holders.

1. Potential Section 214 Authorization Renewals:

Currently, there is no renewal requirement for international Section 214 holders of any kind. The FCC proposes to adopt a 10-year renewal requirement for all international section 214 authorization holders (but is open to comment on other renewal timeframes). The NPRM asks, if a renewal obligation is adopted, whether the time for renewal should be reset if the carrier undergoes a separate full FCC review prior to renewal, for example, in connection with a transactional application. The FCC seeks comment on what standards would apply to its review of a renewal application, what actions it could take in response to a renewal application (and would those differ depending on whether the underlying authorization was issued prior to the adoption of the new rules), and proposes that a carrier’s failure to file by the renewal deadline would result in automatic expiration of the authorization.

In connection with a prospective renewal requirement, the FCC further proposes to prioritize its focus on:

  • carriers with foreign ownership as being of the greatest concern for the FCC and the security agencies,
  • the length of time since the last substantive review of the authorization (i.e., initial grant, modification, assignment, or transfer of control),
  • whether the authorization is subject to a mitigation agreement (noting that older mitigation agreements tended to be more general in their particulars and less facilitative of effective Team Telecom verification).
  • carriers with no reportable foreign ownership, but whose authorizations raise other issues of concern for the FCC and the Executive Branch agencies.

The NPRM proposes streamlined processing for renewal applications where carriers have no foreign ownership. The FCC also seeks comment whether, in a renewal context, there are circumstances where it should rely upon prior national security determinations (by Team Telecom, presumably) to streamline review.

As with initial Section 214 applications with at least one 10% or greater direct or indirect foreign interest holder, the FCC proposes to routinely refer to Team Telecom any renewal application of an international carrier with reportable foreign ownership and those without foreign ownership that, in the FCC’s estimation, nonetheless raise other national security, law enforcement, or policy concerns.

As anyone familiar with the Team Telecom review process knows all too well, it is a protracted affair. Even with the institution of timelines for the completion of review, when a review actually begins (and the calendar starts running) is an uncertain matter. The NPRM proposes that a properly and timely filed renewal application will confer provisional continuing authority until the application is resolved which, if adopted, would ensure no gap in authority if the renewal review extends beyond the expiration date of the authorization subject to renewal.

While the NPRM focuses almost exclusively on international Section 214 authority, the Commission solicits comment on what effect, if any, the denial or revocation of a carrier’s international section 214 authority should have upon its domestic Section 214 authority.

2. Alternative Periodic Reviews:

The FCC seeks comment whether, rather than relying on a periodic renewal framework, it should instead adopt a putatively lighter-touch review framework, requiring carriers, say on an every-three-year basis, to submit much of the same information as would be required for a renewal application and with the same prioritization for review as proposed for the renewal protocol. The NPRM seeks comment on what actions the Commission could take after such a review. For example, what standards would apply to such a review and could the FCC revoke an authorization under certain circumstances upon completing the review, or would it have to specifically start a revocation proceeding?

3. Expansion of the Information Required in Section 214 Applications:

The FCC seeks comment on a number of proposed changes in the information that applicants for international Section 214 authority must submit with their applications, whether for initial authority, transaction approvals, or, if adopted, with renewal applications. (Note that the FCC adopted requirements in the 2020 Executive Branch Process Reform Order and the 2021 Standard Questions Order imposing on applicants for international section 214 authorizations or for FCC consent to transfers or assignments the requirement to include with their applications responses to standard Team Telecom questions. Some of the adopted rules from those Orders, including those related to this informational obligation, are not yet in effect.) These include new rules that would require applicants to:

  • Disclose 5% or greater direct and indirect equity and/or voting interests, a change which would align with the threshold applied by Team Telecom when it conducts reviews of FCC applications referred to it; currently, the threshold for disclosure is a 10% direct or indirect ownership interest. In that regard, the NPRM seeks comment on whether certain qualifying ownership interest management agreements should be disclosed, whether disclosure of certain interests from 5% to <10% should be treated as presumptively confidential,” and whether the obligation to disclose interests below 10% should be limited to foreign interest holders or simply holders associated with foreign adversary countries (as defined by the Department of Commerce regulations – that is China (including Hong Kong), Cuba, Iran, North Korea, Russia and the Maduro Regime).

    It is also worth noting that the Commission inquires whether, if it adopts a 5% threshold for reporting foreign ownership in international Section 214 applications it should extend that requirement to submarine cable landing license applications. (We should mention that, otherwise, the NPRM does not expressly propose any changes to the submarine cable landing license regulatory framework, which is involved in many transactions involving international carriers when they are also subsea cable system operators. Like international Section 214 authorizations, submarine cable system authorizations are administered by the newly-minted Office of International Affairs.)
  • Provide, routinely, certain categories of information, so-called specific information,” which FCC staff often requests on an ad hoc basis when reviewing Section 214 applications before putting them on public notice. This specific information” might include details of the applicant’s current and future services, markets, customers, and provisioning (owned facilities, IRUs, leasehold interests or resale).
  • Identify foreign-owned or -controlled Managed Network Service Providers (“MNSPs”) they use, including applicants without reportable foreign ownership. The NPRM is also considering whether to refer any application to Team Telecom, even if the carrier does not or will not have disclosable foreign ownership interest, if it uses and/or will use foreign-owned MNSPs.
  • Provide detailed information regarding cross-border facilities an authorization holder uses or will use to provide Section 214 services between the United States and either Canada or Mexico (including address and coordinates for the facilities, owner information for each facility, and identification of the equipment to be used, among other data points). Indeed, the NPRM suggests the Commission may, in a future order, conduct a one-time information collection concerning cross border facilities. The proposed cross-border facility information rules would apply to both facilities-based and resale carriers, with correspondingly different requirements.
  • Certify as to commitments and practices for cybersecurity, whether the carrier uses equipment or services included in the Commission’s Covered List” of equipment and services made or provided by objectionable entities (such as Huawei) established in connection with the Secure and Trusted Communications Networks Act, and as to compliance with FCC rules/regulations, the Communications Act and other laws.” The Commission also seeks comment on whether to impose a new obligation on international Section 214 applicants as a condition of grant that they will not purchase or use equipment or services obtained from entities on the Commission’s Covered List.”

4. Ensuring the Currency of Information through Updates

The NPRM seeks comment whether, in the scenario where the FCC adopts the proposed periodic renewal requirement, it should impose an ongoing obligation on international Section 214 carriers requiring them to submit reports every three years (or some other period) following the grant of a renewal application, until the next grant of a renewal application, which would reset the three-year reporting requirement. The reports, depending on the scope of any such rule adopted, could include ownership information, cross border facilities information, service and geographic market information, details of their data storage facilities, the foreign locations where U.S. records are stored and from where their U.S. infrastructure is or can be accessed, controlled and/or owned; and the countries in which their employees, subsidiaries, and/or offices are currently located. The NPRM asks a variety of questions about the contents of any ongoing reporting requirement. The Commission also is considering whether to include certifications regarding cybersecurity standards, use of Covered List” equipment or services, regulatory compliance, and other information.

We note that the NPRM also suggests imposition of a series of overlapping reporting requirements in the event that, for example, during a Section 214 license period,” there is a grant of authority to transfer control of a Section 214 authorization. We expect comments on the NPRM will forcefully address any such additional (and arguably duplicative) requirements, and carriers will seek to streamline any new ongoing reporting requirements (or oppose them altogether).

5. Additional Management of International Section 214 Authorizations:

The Commission also seeks comment on a variety of other possible rule changes that could impact carriers’ regulatory compliance (in addition to other administrative revisions and conforming changes to Parts 1 and 63 of the Commission’s Rules), including whether to adopt

  • a rule that would (with few exceptions) limit carriers to holding a single international section 214 authorization.
  • a use it or lose it” rule that requires new international section 214 authorization holders to commence offering service pursuant to the authority within one year following grant and provide the Commission with notice of the same. (This would be similar to other FCC licenses with deadlines to build-out and/or operate.) In the absence of notice of operations, or a good-cause waiver filing, the FCC proposes to cancel the authorization.
  • a general presumption that the international Section 214 authority of carriers that fail to meet compliance filing requirements may be cancelled where, for example, there are no other signs that the carrier is still operating. The NPRM proposes that a public notice would be released regarding the proposed cancellation, allowing thirty days for the holder to respond.
  • a revised international services discontinuance Rule such that any authorization holder that permanently discontinues service provided pursuant to their international section 214 authority must notify the Commission and affirmatively surrender the authorization. In connection with this possible rule change, the NPRM seeks comment on whether to define permanent discontinuance of service as occurring following a period of three consecutive months during which the authorization holder does not provide any service under its international section 214 authority.

The NPRM will be established upon Federal Register publication, with comments due thirty days after publication and replies due sixty days after publication. These dates are not yet set. We expect, given the far reaching potential implications of the rule proposals that the NPRM will likely draw significant input from industry participants.