CommLaw Monitor https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor News and analysis from Kelley Drye’s communications practice group Wed, 03 Jul 2024 03:38:24 -0400 60 hourly 1 FCC Adopts Standard Questions to Facilitate Executive Branch Review of Applications Involving Foreign Interests in Applicants https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-adopts-standard-questions-to-facilitate-executive-branch-review-of-applications-involving-foreign-interests-in-applicants https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-adopts-standard-questions-to-facilitate-executive-branch-review-of-applications-involving-foreign-interests-in-applicants Mon, 11 Oct 2021 11:23:05 -0400 At its September 30, 2021 Open Meeting, the Federal Communications Commission (“FCC” or the “Commission”) unanimously adopted a Second Report and Order in IB Docket No. 16-155 requiring applicants with reportable foreign ownership seeking Commission approval for certain applications to answer standardized national security and law enforcement questions (“Standard Questions”) prior to or when filing their applications. The Standard Questions were developed in coordination with the Departments of Justice, Homeland Security, Defense, State, and Commerce and the United States Trade Representative, which conduct review of national security, law enforcement, foreign policy, or trade policy issues associated with the foreign ownership of the applicants of certain applications filed with the FCC and referred to the agencies. The Standard Questions will apply, following review and approval by the Office of Management and Budget (“OMB”) (and issuance of an associated public notice) to the types of applications the Commission generally refers to the Executive Branch, namely applications for international section 214 authorizations and submarine cable landing licenses, applications to assign, transfer control or modify such authorizations and licenses where the applicant has reportable foreign ownership, and all petitions seeking to exceed foreign ownership limits applicable to broadcast or common carrier wireless licenses set forth in Section 310(b) of the Communications Act of 1934, as amended (the “Act”) (47 C.F.R. § 310(b)).

The adoption of Standard Questions is the FCC’s complements several other reforms in the past year to formalize and streamline the FCC and Executive Branch review process conducted pursuant to Executive Order No. 13913 of April 8, 2020, Establishing the Committee for the Assessment of Foreign Participation in the United State Telecommunications Sector (the “Committee” (commonly referred to as “Team Telecom”)). The Executive Order sets forth procedures and timelines for the Committee to conduct its reviews of referred applications. The Commission’s earlier reforms are detailed in the FCC’s (First) Report and Order in Docket 16-155 Executive Branch Review Order released October 1, 2020 (and Erratum). As noted in the Second Report and Order, the FCC considered comments filed in response to a Public Notice containing proposed Standard Questions.

Matters Detailed in the Second Report and Order

The Second Report and Order largely adopted the Commission’s proposed sets of Standard Questions and a supplement for the provision of personally identifiable information (“PII”), with some refinements and clarifications, resulting the receipt of comments from five interested parties and a series of consultations with the Committee. The sets of Standard Questions are as follows:

  • Attachments A and B, for an international section 214 authorization application filed pursuant to 47 C.F.R. § 63.18, including a modification of an existing authorization) and for the assignment or transfer of control of such authorization, respectively;
  • Attachments C and D, for a cable landing license application filed pursuant to 47 C.F.R. § 1.767 (including a modification of an existing license) and for the assignment or transfer of control of such license, respectively;
  • Attachments E and F for a petition for declaratory ruling for foreign ownership in a broadcast licensee or common carrier wireless or earth station licensee, respectively, above the benchmarks in section 310(b); and
  • Attachment G, a supplement to assist the Committee in identifying PII.
Among the more significant clarifications or determinations by the Commission in the Second Report and Order, it
  • determined based on Committee input that “reportable foreign ownership” for the Standard Questions is a five percent (5%) or greater equity and/or voting interest (indirect or direct) in the applicant or a controlling interest in the applicant, rejecting a ten percent (10%) threshold based on the Commission’s application rules because of the different purposes of national security and law enforcement review of the Committee and the Commission’s own review, and referral threshold, of applications. Indeed, the Second Report and Order explained that the Committee both emphasized to the FCC that, in some instances, “a less-than-ten percent foreign ownership interest – or a collection of such interests – may pose a national security or law enforcement risk” and observed that “when ownership is widely held, five percent can be a significant interest.”
  • clarified that the Standard Questions for transfers of control or assignments of licenses are only applicable to prospective owners or licensees and not to transferors or assignees of authorizations or licenses.
  • clarified certain definitions used in the Standard Questions, for example, noting that “Senior Officer” refers to “any individual that has actual or apparent authority to act on behalf of the entity,” and is not title-dependent, although the Second Report and Order identified a number of candidate positions.
  • explained that a network operations center, or NOC, located outside the United States is part of the “Domestic Communications Infrastructure” of a network when it can control other parts of an entity’s Domestic Communications Infrastructure.
  • retained the request for information concerning Section 310(b) broadcast petitioners’ prior relationships with foreign principals, including funding and employment arrangements (but not retail customer relationships), with no time limit or “defined look-back period;” as the Committee advised that such relationships may be relevant to an assessment of continuing foreign influence over broadcast content; but the Second Report and Order determined not to adopt a similar requirement for Section 301(b) petitions involving common carrier wireless or earth station licenses.
  • clarified that “planned relationships” with foreign entities and individuals which must be disclosed in all of the Standard Questions sets are “current relationships or those reasonably anticipated by negotiations or that are identified under current business plans” including all situations in which contracts have been signed and where parties are already in negotiations.
  • modified questions with respect to prior filings with the Commission or Committee on Foreign Investment in the United States (“CFIUS”) to provide that that an “involved” or “associated” individual or entity is either the applicant in a prior Commission or CFIUS filing or listed as an owner in such a prior filing, but reiterated that there is no look-back period cutting off such responses.
  • clarified questions regarding an applicant’s provision of services to critical infrastructure sectors and what qualifies as a service.
The Interrelationship of the Submission of Responses to Standard Questions and the Committee’s Review Procedures

Applicants with reportable foreign ownership, under the Commission’s Rules, must provide answers to the relevant Standard Questions directly to the Committee prior to or at the same time they file their applications with the FCC. The Second Report and Order underscored that all information submitted in response to the Standard Questions will be treated as business confidential and protected from disclosure without special designation or request by the respondent for business confidential treatment. Similarly, PII will automatically be protected from disclosure outside the Executive Branch agencies in accordance with privacy laws and provisions in Executive Order No. 13913. However, when multiple applicants are required to respond to the Standard Questions, the applicants must, as further guided by the instructions that will accompany the Standard Questions, clearly indicate whether responses are being jointly filed and which responses are being filed separately by a single applicant to ensure that confidential information is not disclosed to the other applicants.

The Commission made clear that, when responding to the Standard Questions, an applicant my not cross-reference information that was previously filed with the FCC. Rather, responses must be self-contained and complete. The Second Report and Order expressly rejected a request that, for petitioners that have previously been granted a declaratory ruling under Section 310(b) approving foreign investment, the petitioner should be permitted to respond to a streamlined questionnaire.

Following the submission of the responses to the Standard Questions, the Committee will have thirty days after referral of the application to the Committee to issue more tailored questions, although it may seek an extension. If no extension is sought, the FCC stated it will begin the 120-day clock for the Committee’s initial review on the 30th day after referral. Otherwise, if tailored questions are issued, the clock will begin when the Committee chair notifies the Commission that the responses to the Standard Questions, and any tailored questions, have been received and are complete.

The Standard Questions and related instructions will be posted on the Commission’s website following OMB approval.

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The FCC’s Packed September Meeting Agenda Includes Focus on IoT Spectrum and Robocall Prevention https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/the-fccs-packed-september-meeting-agenda-includes-focus-on-iot-spectrum-and-robocall-prevention https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/the-fccs-packed-september-meeting-agenda-includes-focus-on-iot-spectrum-and-robocall-prevention Thu, 16 Sep 2021 16:50:28 -0400 The FCC released a full agenda for its next Commission Open Meeting, scheduled for September 30, 2021. The agency will consider a Notice of Proposed Rulemaking (“NPRM”) to improve the Wireless Network Resiliency Cooperative Framework (“Framework”) and outage reporting. The FCC will next address an Order on Reconsideration to vacate a 2020 order that permits states to lease spectrum in the 4.9 GHz band (designated for public safety use) to third parties for non-public-safety use and a Further NPRM (“FNPRM”) to adopt a nationwide framework for the 4.9 MHz band that would allow for public safety and non-public safety uses. The FCC will also consider adopting a Public Notice that would describe the process for the Office of Engineering and Technology (“OET”) to approve automated frequency coordination (“AFC”) systems, which must be used when performing certain unlicensed operations in the 6 GHz band. Rounding out spectrum issues, the FCC will consider a Notice of Inquiry (“NOI”) focused on whether there is adequate spectrum to support the Internet of Things (“IoT”). The FCC will then shift its attention to two FNPRMs regarding robocalls. One FNPRM would propose that voice service providers block autodialed calls to numbers on the Public Safety Answering Points (“PSAP”) Do-Not-Call registry and seek alternative ways to protect PSAPs from robocalls and security threats. The other robocall-related FNPRM would propose that gateway providers take action to prevent robocalls that originate outside of the U.S. on U.S. numbers. Next, the FCC will address another NPRM to clarify that Tribal libraries are eligible to receive support under the E-rate program. The FCC will close its meeting by considering a Second Report and Order that would adopt standard questions to be answered by applicants with reportable foreign ownership that seek the Commission’s approval to obtain or modify certain licenses or to complete transactions involving those licenses.

You will find more information about the items on the September meeting agenda after the break:

Promoting More Resilient Networks - The NPRM would seek comment on various issues related to improving the reliability and resiliency of communications networks during emergencies and natural disasters. The NPRM focuses on whether the Framework (a wireless industry agreement aimed at providing mutual aid during emergencies, ensuring municipal and consumer readiness and communicating about service restoration) can be improved, such as by expanding participation, increasing the scope of participants’ obligations or codifying industry disaster-based coordination obligations. The NPRM would also seek comment on enhancing information provided to the FCC during disasters and network outages through the Network Outage Reporting System and the Disaster Information Reporting System. In addition, the NPRM would ask about communications resilience strategies to mitigate the impact of power outages, including coordination between communications providers and power companies and the use of backup power during disasters.

Reassessing 4.9 GHz Band for Public Safety – The Order on Reconsideration would grant requests by public safety organizations to vacate a 2020 order that permits states to lease spectrum in the 4.9 GHz band (designated for public safety use) to third parties for non-public-safety use. The Order on Reconsideration would also lift a freeze on 4.9 MHz licenses to allow incumbent licensees to modify licenses or seek new permanent fixed sites. The FNPRM would propose to establish a nationwide framework for the 4.9 GHz band to maximize public safety while promoting interoperable communications and interference protection throughout the network. Areas for comment would include how to protect public safety users from harmful interference, the use of the Universal Licensing System or another database to maintain relevant technical data, adoption of consistent technical standards to foster interoperability of equipment using the band and giving public safety uses priority. The NPRM would also seek comment on how to manage the band, incentivize public safety licensees to use the latest commercially available technologies and allow non-public safety use of the band without jeopardizing public safety operations.

Authorizing 6 GHz Band Automated Frequency Coordination Systems - The Public Notice would set forth a process for the OET to authorize AFC systems, which are required to operate standard-power devices in the 6 GHz band. Specifically, unlicensed standard power devices that operate in the 6 GHz band are required to check an AFC system prior to operating to avoid harmful interference to incumbent operations. The Public Notice would explain the approval process for AFC system operators, which would include conditional approval, a public trial period and an opportunity for public comment. The Public Notice would provide detailed information about the content of AFC system proposals and request that such proposals be submitted no later than November 30, 2021 (although proposals will be accepted after that date).

Spectrum Requirements for the Internet of Things - The NOI (which is required to be issued by The William M. (Mac) Thornberry National Defense Authorization Act for FY 2021 (Pub. L. No. 116-28) (the “Act”)) would seek comment on whether there is sufficient spectrum available for current and future IoT needs. As directed by the Act, the LOI would ask for comment on how to ensure that adequate spectrum is available for the increased demand for the IoT, whether regulatory barriers would prevent accessing any additional needed spectrum and the roles of licensed and unlicensed spectrum for supporting the IoT.

Shielding 911 Call Centers from Robocalls – The FNPRM would propose to update the FCC’s rules governing the PSAP Do-Not-Call registry. Although the FCC adopted rules in 2012 to establish the registry as a means to protect PSAPs from unwanted robocalls, the registry has not been fully implemented due to security concerns associated with releasing PSAP telephone numbers to entities accessing the registry. The FNPRM would propose that voice service providers block autodialed calls to PSAP telephone numbers on the PSAP Do-Not-Call registry, as an alternative to allowing entities claiming to use autodialers to access the registry to identify telephone numbers that may not be called. In addition, the FNPRM would seek comment on whether autodialed calls and text messages continue to disrupt PSAPs’ operations, security risks associated with maintaining a centralized registry of PSAP telephone numbers, ways to address security issues (such as enhanced caller vetting and data security requirements) and alternative means to prevent robocalls to PSAPs (such as by utilizing other technological solutions or leveraging the National Do-Not-Call registry).

Stopping Illegal Robocalls From Entering American Phone Networks - The FNPRM would propose to require gateway providers to assist in the battle against illegal robocalls by applying STIR/SHAKEN caller ID authentication and other robocall mitigation techniques to calls that originate abroad from U.S. telephone numbers. The FNPRM would also seek comment on several other proposals aimed at mitigating robocalls, including the following requirements that would be applicable to gateway providers: (1) responding to traceback requests within 24 hours; (2) blocking calls upon notification from the Enforcement Bureau that a certain traffic pattern involves illegal robocalling; (3) utilizing reasonable analytics to block calls that are highly likely to be illegal; (4) blocking calls originating from numbers on a do-not-originate list; (5) confirming that a foreign call originator using a U.S. telephone number is authorized to use that number; (6) including robocall mitigation obligations in contracts with foreign customers; and (7) submitting a certification regarding robocall mitigation practices to the Robocall Mitigation Database. In addition, the FNPRM would seek comment on a requirement that service providers block calls from gateway providers identified as bad actors by the FCC and on whether additional information should be collected by the Robocall Mitigation Database. The FNPRM would ask whether there are alternative means to stop illegal foreign-originated robocalls. Finally, while the rulemaking proceeding is pending, the FCC would not enforce the prohibition in Section 63.6305(c) of the FCC’s rules on U.S.-based providers accepting traffic carrying U.S. NANP numbers that is received directly from foreign voice service providers that are not in the Robocall Mitigation Database.

Supporting Broadband for Tribal Libraries Through E-Rate - Pursuant to Section 254(h)(4) of the Communications Act of 1934, as amended, a library may not receive preferential treatment or rates (such as under the E-rate program) unless it is eligible for assistance from a State library administrative agency under the Library Services and Technology Act (“LSTA”). In 2018, the LSTA was amended to specifically include Tribal libraries as eligible for assistance from a State library administrative agency. The NPRM would propose to amend Sections 54.500 and 54.501(b)(1) of the FCC’s rules to clarify that Tribal libraries are eligible for E-rate support. The NPRM would also seek comment on other measures to enable Tribal schools and libraries to gain access to the E-rate program and ways to increase participation in the E-rate program.

Strengthening Security Review of Companies with Foreign Ownership - The Second Report and Order would adopt standardized national security and law enforcement questions (“Standard Questions”) to be answered by applicants with reportable foreign ownership as part of the Executive Branch review of certain applications filed with the FCC. The issuance of Standard Questions is the FCC’s final step in implementing several reforms to formalize and streamline the FCC and Executive Branch review process consistent with Executive Order No. 13913 (April 20, 2020), which established a Committee for the Assessment of Foreign Participation in the United State Telecommunications Sector (“Committee” (formerly known as Team Telecom)) and set forth procedures and timelines for the Committee to complete its review. The Second Report and Order would include Standard Questions for the following types of applications when reportable foreign ownership (generally a 5 percent or greater equity and/or voting interest (indirect or direct) in the applicant) is present: (1) applications for a new or modified International Section 214 authorization or submarine cable landing license; (2) applications for assignment or transfer of control of an International Section 214 authorization or a submarine cable landing license; and (3) petitions for a declaratory ruling to permit foreign ownership in a broadcast licensee, common carrier wireless licensee or common carrier earth station licensee that exceeds the benchmarks in Section 310(b) of the Communications Act. There would also be a supplement to each set of questions to provide personally identifiable information for individuals with a reportable ownership interest, non-U.S. individuals with access to the applicant’s facilities, corporate officers and directors, and a law enforcement point of contact.

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FCC Begins Proceeding to Broaden its National Security Protections Beyond Universal Service Disbursements; IoT, Cybersecurity in its Sights https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-begins-proceeding-to-broaden-its-national-security-protections-beyond-universal-service-disbursements-iot-cybersecurity-in-its-sights https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-begins-proceeding-to-broaden-its-national-security-protections-beyond-universal-service-disbursements-iot-cybersecurity-in-its-sights Sun, 20 Jun 2021 22:36:29 -0400 Protecting the U.S. telecommunications networks from security threats has long been an area of strong agreement at the FCC. Following several actions by the Pai Commission to ban Huawei and ZTE equipment deemed to pose a national security threat, Acting Chairwoman Rosenworcel has continued the effort. Indeed, in February, at the first meeting she led as acting chair, Rosenworcel called on the FCC to “revitalize” its approach to network security “because it is an essential part of our national security, our economic recovery, and our leadership in a post-pandemic world.”

At the FCC Open Meeting on June 17, 2021, the FCC took its most visible step yet toward Acting Chairwoman Rosenworcel’s vision. The Commission adopted a Notice of Proposed Rulemaking (“NPRM”) and Notice of Inquiry (“NOI”) to further address national security threats to communications networks and the supply chain. The NPRM and NOI sets its sights on the Commission’s rules relating to equipment authorization and competitive bidding. The Commission’s proposals have seeds of a much broader focus on Internet of Things (“IoT”) devices, cybersecurity and RF fingerprinting, to name a few. All participants in the telecommunications ecosystem should take notice.

The NPRM and NOI initiates an inquiry into many proposals to tighten the focus on network security in FCC procedures. Most notably, the Commission opened inquiry into the following areas:

Equipment Authorization Rules and Procedures – The NPRM seeks comment on a proposal to prohibit all future authorizations of equipment on the Covered List under the Secure and Trusted Communications Networks Act of 2019, including equipment subject to the FCC’s certification and Supplier’s Declaration of Conformity processes associated with equipment authorization. This proposal goes beyond the current rules, which prohibit recipients of Universal Service Program funding to use that funding to purchase, lease or maintain equipment on the Covered List.

Under current rules, despite the USF program prohibition, equipment on the Covered List can still obtain equipment authorization (and has already obtained authorization). The NPRM considers whether to revise the rules to ensure that any “covered” equipment cannot qualify for authorization. It also seeks comment on whether to revoke authorizations that were previously granted for equipment on the Covered List. If approved, the FCC seeks to determine which authorizations should be revoked and through what procedures.

Competitive Bidding Certification – The NPRM also seeks comment on a proposal to require applicants who wish to participate in FCC auctions to certify that their bids do not and will not rely on financial support from any entity that the FCC has designated under Section 54.9 of the FCC’s rules as a national security threat to the integrity of communications networks or the communications supply chain. The certification would require applicants to attest that no equipment (including component part) is comprised of any “covered” equipment, as identified on the current published list of “covered” equipment and would cross-reference section 1.50002 of the FCC’s rules that include the Covered List.

Manufacturing Encouragement Efforts – The NOI portion of the FCC document seeks comment on how the FCC can leverage its equipment authorization program to encourage manufacturers who are building devices that will connect to U.S. networks to consider cybersecurity standards and guidelines. The FCC inquires further about how to address security risks associated with IoT devices. Importantly, as we theorized a while back, the FCC notes the work that the National Institute of Standards and Technology (“NIST”) has done on cybersecurity and, in particular, cybersecurity for IoT devices, and asks whether the FCC’s equipment authorization rules should require manufacturers to certify in equipment authorization applications that they have considered this guidance in the design and manufacturing of their devices. The NOI also includes questions regarding the use of “RF fingerprinting” to help identify and isolate insecure devices.

Commissioner Statements

As expected, the NPRM and NOI received unanimous support from the Commissioners. Acting Chairwoman Rosenworcel cited to the rash of ransomware attacks and emphasized the need for broader cybersecurity considerations of IoT. “We need to acknowledge that the equipment that connects to our networks is just as consequential for our national security as the equipment that goes into our networks,” she said. Commissioner Carr discussed the possibility of Chinese interference with missile defense systems in North Dakota and referred to this proceeding as “closing a loophole” in FCC rules. Commissioner Starks, a former staff member in the Enforcement Bureau, emphasized changes intended to make enforcement against foreign actors easier to implement, citing examples from the past decade involving illegal jamming equipment manufactured overseas. Commissioner Simington took credit for adding “RF fingerprinting” to the NOI, stating that the technology “can play a central role in interdiction and enforcement of hacking and cyber-crime.”

With this proposal’s broad support at the Commission, equipment manufacturers (including IoT device manufacturers should pay close attention to the FCC’s actions. Comments will be received over the summer and the Commission could address its rules by year-end. Affected manufacturers may wish to comment in the proceeding.

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FCC June Meeting Agenda Includes Broadened Supply Chain Measures, Improved Emergency Alerts and Robocall Reporting, and Expanded Telehealth Guidance https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-june-meeting-agenda-includes-broadened-supply-chain-measures-improved-emergency-alerts-and-robocall-reporting-and-expanded-telehealth-guidance https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-june-meeting-agenda-includes-broadened-supply-chain-measures-improved-emergency-alerts-and-robocall-reporting-and-expanded-telehealth-guidance Wed, 09 Jun 2021 11:14:41 -0400 The FCC released the agenda for its next Commission Open Meeting, scheduled for June 17, 2021. The meeting will first consider a Notice of Proposed Rulemaking (“NPRM”) and Notice of Inquiry (“NOI”) to broaden the secured communications supply chain beyond the FCC’s universal service programs. Specifically, the NPRM would propose to prohibit all future authorizations for equipment on the FCC’s Covered List, revoke current equipment authorizations for equipment on the Covered List, and require certifications from future FCC auction participants that they will not rely on financial support from any entities designated as a national security threat. The FCC also tees up a Report and Order that would allow for expanded marketing and importation of radiofrequency devices prior to certification, with certain conditions to prohibit sale or operation of those devices prior to authorization. The agency will next consider a Report and Order and FNPRM that would improve and streamline the agency’s Emergency Alert System (“EAS”) and Wireless Emergency Alerts (“WEA”) Systems, as initially proposed in a March 2021 NPRM. The FCC will also consider a Report and Order that would streamline private entity reporting of robocalls and spoofed caller ID by creating a direct reporting portal to the Enforcement Bureau, along with a Report and Order providing additional guidance and clarity on the agency’s telehealth-driven Connected Care Pilot Program. Lastly, the meeting agenda includes items that would explore spectrum options for maritime navigations systems and modify existing low power FM rules.

You will find more information about the most significant items on the June meeting agenda after the break:

Securing the Communications Supply Chain – The NPRM and NOI would seek comment on a proposal to prohibit all future authorizations for equipment on the FCC’s Covered List under the Secure and Trusted Communications Act. The NPRM would seek comment on whether, and how, the FCC should revoke any current authorizations for equipment included on the Covered List, and if it should revise the rules to no longer permit exceptions for equipment authorizations on the Covered List. It would also propose to require participants in any upcoming FCC auctions to certify that their auction bids do not and will not rely on financial support from any entity that the agency has designated as a national security threat to the communications supply chain. The NOI would seek comment on how the FCC can leverage its equipment authorization program to encourage manufacturers to consider cybersecurity standards and guidelines when building devices that will connect to U.S. networks.

Modernizing Equipment Marketing and Importation – The Report and Order would adopt changes to the equipment authorization rules to allow expanded marketing and importation of radiofrequency (“RF”) devices prior to certification, with conditions. The Order would add a new condition to allow importation of up to 12,000 RF devices for certain pre-sale activities prior to authorization. It would additionally amend the FCC’s rules to allow conditional sales of RF devices prior to authorization, so long as those devices will not be delivered to consumers until they are authorized. The Order includes labeling, recordkeeping, and other conditions to ensure that RF devices are not sold or operated prior to equipment authorization.

Improving Emergency Alert Systems – The Report and Order and FNPRM would adopt the rule changes proposed in the FCC’s March 2021 NPRM to update the EAS and WEA systems rules, pursuant with the 2021 National Defense Authorization Act (“NDAA”) requirements. The Order would create a new category of non-optional “National Alerts,” combining WEA Presidential Alerts with FEMA Administrator Alerts, which may be nationally or regionally distributed. States would be encouraged to establish a state EAS plan checklist for State Emergency Communications Committees (“SECCs”), or otherwise establish an SECC if not already formed. This Report and Order would also enable FEMA to report false EAS and WEA alerts and to repeat certain EAS messages if necessary. The FNPRM would seek comment on whether to remove or refine certain EAS emergency event codes that are irrelevant or confusing, and on whether to update the EAS to include a more persistent display and notification of emergency messages for more severe events.

Implementing the TRACED Act – The Report and Order would establish rules pursuant to the TRACED Act to create a process that streamlines the ways in which a private entity may report robocalls or spoofed caller ID to the FCC. The Commission would create on online portal where private entities, meaning any entity other than an individual person or public entity, could submit suspected violations directly to the Enforcement Bureau. The Order clarifies that the new portal would not affect the existing consumer complaint process, and the agency will still use the consumer complaint portal for individual consumer complaints.

Connected Care Pilot Program – The Second Report and Order offers further guidance on the Commission’s Connected Care Pilot Program, including on the Pilot Program budget and administration, eligible services, competitive bidding instructions, invoicing, and data reporting for selected participants. Notably, the Order clarifies that the Pilot Program will reimburse network equipment purchases necessary to make both broadband and connected care information services functional, even if the Pilot Program is not directly supporting the costs of those services. The FCC announced earlier this year that an initial 23 applicants had been selected, with more selected applications to be announced at a later date, and selected applicants could begin the funding request process once this Report and Order becomes effective.

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The State of the Universal Service Fund in 2021 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/the-state-of-the-universal-service-fund-in-2021 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/the-state-of-the-universal-service-fund-in-2021 Wed, 10 Mar 2021 15:57:14 -0500 2021 is well underway and the new leadership at the FCC is taking shape. While we don’t yet know who will fill the Chair on a permanent basis, the FCC under Acting Chairwoman Rosenworcel is proceeding without delay. So far, the Commission has tackled ongoing issues of bipartisan support, including broadband mapping, communications supply chain security and preventing 911 fee diversion. But the biggest challenges ahead are in the universal service fund and, specifically, efforts to bridge the digital divide.

In this post, we’re going to take a look at developments in the FCC’s $9 billion-per-year Federal Universal Service Fund and more recent pandemic-related efforts to address deficiencies in broadband access that have been exposed by our year of remote work, school and social activities.

On the universal service front, the principal activity surprisingly has as much to do with non-Universal Service Fund (“USF”) programs as with the USF itself. The USF is a $9 billion-per-year fund with four primary programs aimed at different elements of the challenge to bring broadband telecommunications to all. For 25 years, the Fund has aimed to provide support to increase broadband availability in rural areas, in schools and libraries, among low-income consumers and to serve rural healthcare needs. These programs all have been modified significantly in the last ten years to re-focus on broadband services and de-emphasize (but not completely eliminate) support for voice services. The FCC also has focused on ensuring that these programs are run efficiently while protecting against waste, fraud and abuse by actors with mal intent. In 2020 and early 2021, we’ve discussed efforts to establish a new Connected Care pilot program, to waive rules during the pandemic and to implement a Rural Digital Opportunity Fund.

Separately, as the USF contribution factor continues to reach new and staggering heights, attention is again returning to the idea of USF contributions reform. With the contribution factor expected to top 33% in the next quarter, Acting Chairwoman Rosenworcel pledged to Senators Thune and Wicker to work with Congress “to explore how to improve [the contributions] system” in the coming months. We’ll have more on contributions reform in a future blog post.

Special Programs Dwarf the USF

But the big news of 2021 is turning out to be the additional funding that is being provided outside the traditional fund. In legislation since December, Congress has authorized four programs that affect USF beneficiaries, to the tune of over $13 billion.

  • In the Consolidated Appropriations Act (“CAA”), Congress authorized a second Telehealth Fund to provide reimbursement for services and equipment used to provide telehealth services during the COVID pandemic. The Telehealth II fund provides $249.95 million in new funding for this program. The FCC already has designated USAC to administer the new fund and promises to adopt criteria for USAC to use in evaluating applications soon.
  • Also in December, Congress authorized an Emergency Broadband Benefit of up to $50 per month for services and a one-time benefit of $100 for a qualifying computer, laptop or tablet for low-income consumers during the pandemic. (For tribal subscribers, the benefit is $75 per month). A total of $3.2 Billion is appropriated for this emergency fund. Importantly, the program is open to providers that do not currently participate in the USF programs, expanding access to the funding. The FCC recently adopted rules for the program and you can read our summary here. The program is expected to begin sometime in April.
  • Congress recently approved an additional $7.1 Billion over several years for E-rate support for remote learning and remote library services. The legislation authorizes funding for the purchase of eligible equipment, advanced telecommunications services and/or information services used to support education of students at locations other than the school and to support delivery of library services at locations other than the library. This fund will reimburse 100% of the cost of the equipment or services, up to the amount the FCC determines is reasonable. Funding remains available until the June 30th that is one year after the COVID-19 public health emergency order is terminated. The FCC will have 60 days to establish rules for this program.
  • Finally, although not related to the COVID emergency, Congress recently appropriated $1.9 Billion to fund the removal and replacement of telecommunications equipment that is deemed to present a national security threat. The FCC has been developing this so-called “Rip and Replace” program for over a year, contingent on the appropriation of funds, after determining in November 2019 to prohibit recipients of federal USF funding to purchase, install or maintain prohibited equipment. The FCC most recently adopted a Further Notice of Proposed Rulemaking to align its reimbursement priorities with the implementing legislation.
All told, this funding will more than double the broadband support offered under the FCC’s Universal Service programs. Moreover, the funding imposes burdens on the FCC in adopting rules (sometimes with a very short 60 day deadline, including comments) and challenges the FCC and USAC to administer dual programs, with different rules, simultaneously. Yet, for beneficiaries of the programs and for consumers on the wrong side of the digital divide, the many changes and resulting influx of money could represent a key lifeline in continued uncertain times. Pulling it all together is the challenge.


To stay up-to-date on these and other USF developments, join us on March 22, 2021 for our annual webinar discussing the state of the federal Universal Service Fund. This webinar, back for its 12th year, provides an in-depth look at all four USF programs and the USF contribution mechanism, highlighting major developments in the last year and trends for the upcoming year. In addition, this year we will discuss how the ongoing pandemic has influenced the importance of the USF and related policy decisions.

This webinar supplements the knowledge our clients gain from the monthly USF Tracker to provide context and analysis of the issues you need to know.

The 12th Annual Update will address the following, among other topics:

  • The COVID-19 Telehealth Program
  • The Connected Care Pilot and Rural Healthcare Program
  • Lifeline and the Emergency Broadband Benefit Program
  • E-Rate Outside the Classroom
  • The Rural Digital Opportunity Fund and Broadband Mapping
  • Rip and Replace
  • Contributions Reform
Register here.

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FCC Wraps Up 2020 with December Meeting Focusing on Supply Chain Security and Equipment Marketing https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-wraps-up-2020-with-december-meeting-focusing-on-supply-chain-security-and-equipment-marketing https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-wraps-up-2020-with-december-meeting-focusing-on-supply-chain-security-and-equipment-marketing Tue, 08 Dec 2020 19:31:15 -0500 The FCC released the agenda for its December Open Meeting, scheduled for December 10, 2020 on November 19, 2020, but the agency has made several changes since. The last meeting of the year will lead with a Report and Order on securing the communications supply chain that would require Eligible Telecommunications Carriers ("ETCs") receiving federal universal service funding to remove and replace equipment and services identified as a risk to national security from their networks. The supply chain rulemaking would establish procedures and requirements for affected providers to seek reimbursement of their removal and replacement costs. The Commission will also consider a Notice of Proposed Rulemaking ("NPRM") that would propose to modernize the marketing and importation rules for regulated equipment. Additionally, the December meeting will include an Order that would amend the invoice filing deadline rule for the E-Rate Program, which supports communications services for schools and libraries, and an Order on Reconsideration clarifying the agency’s interpretation of the Telephone Consumer Protection Act ("TCPA"), although the draft texts of these two items have not been released.

The December meeting may be the first attended by recently-confirmed Republican FCC Commissioner Nathan Simington, who will replace outgoing Commissioner Michael O’Rielly after today’s confirmation vote in the U.S. Senate. In addition, Chairman Pai recently announced that he intends to leave the FCC on Inauguration Day, January 20, 2021. As a result, the January 2021 FCC open meeting will be his last meeting before the change in administration.

You will find more details about the most significant items on the December meeting agenda after the break.

Securing the Communications Supply Chain – The draft Report and Order would require ETCs receiving Universal Service Fund support to remove and replace covered equipment and services posing a national security risk from their networks. It would also establish a reimbursement program to subsidize smaller carriers to remove and replace covered equipment, specifically those providers with two million or fewer customers, once Congress appropriates the estimated $1.6 billion needed to reimburse eligible providers for such costs. The draft Order would establish the procedures and criteria for publishing a list of covered communications equipment or services, and would adopt a reporting requirement for all providers of advanced communications services to annually report on covered equipment and services in their networks.

Modernizing Equipment Marketing and Importation Rules – The draft NPRM would propose updates to the Commission’s marketing and importation rules under its equipment authorization program. The proposed rules would permit, prior to equipment authorization, conditional sales of radiofrequency devices to consumers under certain circumstances. The NPRM also would propose to allow a limited number of radiofrequency devices subject to Certification to be imported into the U.S. prior to equipment authorization for certain pre-sale activities, including packaging and shipping devices, and loading devices with specific software.

TCPA Order on Reconsideration – The draft Order on Reconsideration would clarify the Commission’s previous interpretation of the TCPA that permitted government and government contractor calls without consumers’ prior express consent. The draft item would address long-standing questions regarding a 2016 Declaratory Ruling that first set guardrails on the government and government contractor exemption. The draft text of this item has not been publicly released.

Modernizing the E-Rate Program – The draft Order would amend the E-Rate invoice filing deadline rule to ensure program participants have sufficient time to complete the invoice payment process. Specifically, the Order would address situations where USAC issues a revised E-Rate funding commitment letter, in which case the FCC will allow recipients additional time to complete the work identified in the revised funding commitment. The draft text of this item has not been publicly released.

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FCC Remains Focused on Communications Supply Chain Protection; Seeks Comment on Continued Implementation of Secure Networks Act https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-remains-focused-on-communications-supply-chain-protection-seeks-comment-on-continued-implementation-of-secure-networks-act https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-remains-focused-on-communications-supply-chain-protection-seeks-comment-on-continued-implementation-of-secure-networks-act Wed, 12 Aug 2020 16:53:47 -0400 Protecting the U.S. communications supply chain from national security threats has become a priority for the Federal Communications Commission (“FCC” or “Commission”) and the agency’s recent Communications Supply Chain Protection proceeding resulted in new rules restricting the use of universal service support funds for certain equipment and services and the designation of Huawei and ZTE as national security threats to the communications networks and supply chain. The recently enacted Secure and Trusted Communications Networks Act of 2019 (“Secure Networks Act”) requires the FCC to adopt additional communications supply chain protection measures and the Declaratory Ruling (“Declaratory Ruling”) and Second Further Notice of Proposed Rulemaking (“Second FNPRM”), adopted by the FCC’s at its July Open Meeting, continues the Commission’s implementation of the Secure Networks Act. The Declaratory Ruling/Second FNPRM declares the Commission’s compliance with the Secure Networks Act’s federal funding prohibition requirement and seeks comment on the FCC’s proposed interpretation and implementation of other provisions including key definitions and the identification of equipment and services subject to federal funding prohibitions.

Comments on the Second FNPRM are due by August 31, 2020 and reply comments are due by September 14, 2020.

FCC Declares Compliance with Secure Networks Act’s Federal Funding Prohibition Mandate

Mirroring the Commission’s November 2019 Supply Chain Protection Order in many respects, the Secure Networks Act, enacted in March 2020, seeks to protect the U.S. communications supply chain from equipment and services posing unacceptable national security risks. Among other mandates, Section 3 of the Secure Networks Act requires the Commission to adopt a Report and Order prohibiting federal funds, that are used for capital expenditures necessary to advanced communications services and made available in FCC-administered programs, from being used for certain services and equipment deemed to pose a national security threat. The Declaratory Ruling concluded that, although adopted prior to the Secure Networks Act, the Supply Chain Protection Order’s prohibition on the use of federal universal service funds (“USF”) for any equipment or service provided by a company posing a national security threat, was consistent with and “substantially implemented” the narrower prohibition, set forth in Section 3 of the Secure Networks Act.

Comments invited on FCC Proposed Interpretation and Implementation of the Secure Networks Act

Focusing on the Commission’s proposed implementation of Sections 2, 3, 5, and 7 of the Secure Networks Act, the Second FNPRM invites comment on issues that could significantly affect telecommunications providers and advanced communications service providers that receive federal funds. Among other issues, the Commission seeks comment on the following:

Definitions of Key Terms - The Commission proposes to define two key terms - “advanced communications services” and “communications services and equipment” - used in the Secure Networks Act. Under the Commission’s proposed definition, advanced communications services would use a “200 kbps in either direction” speed threshold to capture equipment that would not meet current advanced telecommunications capability speeds, such as the current 25 Mbps download/3 Mbps upload standard for fixed services, but nonetheless might pose a national security threat. In a proposal that the Commission describes as providing a bright-line rule for easy administration, “communications equipment and services” would be defined to include all of the services and equipment used in fixed and mobile broadband networks, provided they use or include electronic components.

Section 2 “Covered” Equipment and Services List – Section 2 of the Secure Networks Act requires the Commission to publish, for purposes of the federal funding usage prohibition, a list of “covered” communications equipment and services, that are deemed to present an unacceptable risk to national security (the “Covered List”). The Second FNPRM raises several questions regarding how to implement this mandate including, for example:

  • Can executive branch agencies, such as Team Telecom or CFIUS, that are not specified in the Secure Networks Act, determine that equipment or service poses a national security risk (a “determination”)?
  • What is the required level of specificity for determinations, e.g., must a determination identify equipment model numbers or would the mere identification of an equipment or service provider qualify as a determination?
  • What process should the Commission use to permit interested parties to clarify if a specific communications equipment or service is or is not on the Covered List?
  • Because the Commission interprets the Secure Networks Act as requiring that the Covered List be published without a public comment period, the Second FNPRM comment cycle may be of particular interest to entities that could be subject to the Covered List prohibitions.
Section 3 Federal Funding Usage Prohibitions - Although the Commission declared its compliance with one of the Secure Networks Act’s Section 3 mandates, the Second FNPRM tees up other Section 3 implementation issues for comment. Among other issues, the Commission seeks comment on adopting a new rule, prohibiting FCC-administered federal subsidies from being used to purchase or maintain items on the Covered List, to more closely align the Commission’s current national security threat “designated entity” prohibition approach with the “designated equipment and services” approach of the Secure Networks Act. The Commission also recognizes that the Secure Network’s Act’s prohibition timing, requiring prohibitions be effective 60 days after a service or equipment is added to the Covered List, could affect existing contracts and requests comment on whether the Secure Networks Act permits the FCC to grandfather multiyear contracts or contracts with voluntary extensions.

Sections 5 and 7 Reporting and Enforcement – While they are important provisions, Sections 5 and 7 of the Secure Networks Act raise fewer implementation issues. Section 5 requires that advanced communications providers submit annual reports regarding any “purchased, rented, leased, or otherwise obtained” covered equipment and services and include a “detailed justification” for obtaining the equipment and service. The Second FNPRM solicits comment on what must be included in the detailed justification, the proposed report contents, and the confidentiality of such reports. Section 7 directs the FCC to treat violations of the Secure Networks Act and related regulations in the same manner as violations of the Communications Act and also requires federal funding recovery for violations. Noting that the Commission has existing enforcement regulations, the Second FNPRM proposes to adopt regulations addressing only the Section 7 fund recovery requirement and seeks comment on any additional clarifications necessary to enforce the requirement.

Next Steps

The Commission’s Supply Chain Protection proceeding has been and remains active with industry participants initially weighing in on the Commission’s USF spending prohibitions and more recently commenting on the information collection addressing anticipated costs for removing and replacing equipment deemed to pose a national security threat. The Second FNPRM is likely to trigger similar levels of interest as industry participants assess the potential impact of the additional issues related to implementing the Secure Networks Act. Although the Commission has some time to implement those requirements – for example the covered equipment and services list has a required publication date of March 12, 2021 – based on the importance of the issue and the likely significant coordination and logistics necessary to implement the Secure Networks Act requirements, we anticipate that the proceeding, and further Commission action, will progress fairly quickly.

We will continue to monitor the Commission’s Supply Chain Protection efforts. Please reach out to us or your usual Kelley Drye attorneys if you have any questions.

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FCC Continues Supply Chain Protection Efforts; ETCs to Report on Huawei and ZTE Use by April 22, 2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-continues-supply-chain-protection-efforts-etcs-to-report-on-huawei-and-zte-use-by-april-22-2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-continues-supply-chain-protection-efforts-etcs-to-report-on-huawei-and-zte-use-by-april-22-2020 Thu, 27 Feb 2020 12:13:00 -0500 The Federal Communications Commission (“FCC”) is acting swiftly on efforts to protect the communications supply chain from entities posing a national security threat. In a Public Notice (“Public Notice”) released yesterday, the FCC announced that U.S. telecommunications carriers receiving Universal Service Fund (“USF”) support, known as eligible telecommunications carriers (“ETC”), must report on their use of equipment and services from Huawei Technologies Company (“Huawei”) and ZTE Corporation (“ZTE”).

The information collection is mandatory for all entities that were ETCs as of December 31, 2019, and includes the ETC’s subsidiaries and affiliates. The information filings, which must be submitted via the FCC’s online filing portal, are due by April 22, 2020.

As we explained previously, the FCC’s 2019 Report and Order, Further Notice of Proposed Rulemaking, and Order (“2019 Order”) adopted rules prohibiting carriers from using USF support to purchase equipment or services from entities designated as national security threats. Huawei and ZTE were initially identified as national security threats with a potential formal designation to follow after review by the FCC’s Public Safety and Homeland Security Bureau. The 2019 Order also sought comment on proposals requiring ETCs to remove and replace Huawei and ZTE equipment and services and on a potential reimbursement fund to aid with such removal and replacement costs.

The Public Notice notes that the Huawei and ZTE initial national security threat designations may become final this spring. Accordingly, the ETC information collection is intended to provide information regarding the extent of ETC use of Huawei and ZTE equipment and the potential replacement costs should the FCC decide to require removal and replacement of such equipment and services. Among other information, ETCs must report, for themselves and any subsidiaries or affiliates, the costs of purchasing and installing Huawei or ZTE equipment in various network categories such as Access Layer Equipment, Core Layer Equipment, and Services.

The information collection is mandatory only for ETCs, their affiliates and subsidiaries, and ETCs must affirmatively state if they are not using Huawei or ZTE services or equipment. Filing is voluntary, but encouraged, for other entities, such as those with pending ETC designation applications, those considering seeking ETC designation, and USF recipients that are not designated as ETCs.

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FCC Prohibits Carriers Receiving USF Support from Using Providers Deemed to Pose a National Security Risk; Further Notice to Explore Using USF to Replace Equipment Already Installed https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-prohibits-carriers-receiving-usf-support-from-using-providers-deemed-to-pose-a-national-security-risk-further-notice-to-explore-using-usf-to-replace-equipment-already-installed https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-prohibits-carriers-receiving-usf-support-from-using-providers-deemed-to-pose-a-national-security-risk-further-notice-to-explore-using-usf-to-replace-equipment-already-installed Thu, 12 Dec 2019 16:52:21 -0500 In a strongly worded Report and Order, Further Notice of Proposed Rulemaking, and Order (the “Order”) released on November 26, 2019, the FCC adopted several measures to protect U.S. communications networks from potential national security threats. Likely coming as no surprise to anyone following the proceeding or current news, the FCC identified Huawei Technologies Company (“Huawei”) and ZTE Corporation (“ZTE”), both Chinese telecommunications equipment manufacturers, as national security threats based, in large part, on the companies’ close ties to the Chinese government. Adding to numerous recent federal actions addressing national security concerns, the Order takes three significant steps, within the context of the universal service fund (“USF”) program, to try to mitigate national security threats to the nation’s communications networks.

First, the Order adopts rules prohibiting the use of USF support to purchase services and equipment from “Covered Companies” deemed to present national security threats and initially designates Huawei and ZTE as Covered Companies. Second, the Further Notice of Proposed Rulemaking (“FNPRM”) solicits comments on a proposal to require eligible telecommunications carriers (“ETCs”) – and possibly all communications providers – to remove and replace Huawei and ZTE services and equipment subject to the FCC establishing a reimbursement program providing financial assistance. Third, the Order establishes an information collection and requires ETCs to submit information regarding their use of Huawei and ZTE equipment and services as well as the costs associated with removing and replacing such services and equipment from communications networks.

The new rules will take effect immediately upon publication in the Federal Register rather than providing the standard thirty-day post-publication waiting period. Federal Register publication of the Order also initiates a thirty-day comment period regarding the initial designations of Huawei and ZTE. The Public Safety Homeland and Security Bureau will issue a “final designation” on Huawei and ZTE – we fully expect that Huawei and ZTE will be designated as Covered Companies – and set a compliance effective date. In light of the potentially short timeframe before the rules and compliance requirements take effect, USF support recipients should be sure to review the Order/FNPRM carefully and assess whether and how the rules will affect the recipient’s specific circumstances.

A Focus on China

Pulling no punches, the FCC made clear its concern about the potential for the Chinese government to engage in industrial and economic espionage and other malicious acts by exploiting Huawei’s and ZTE’s access to U.S. communications networks. Chairman Pai (here and here), Commissioner O’Rielly, and Commissioner Starks, among others, have spoken out regarding the need to protect U.S. communications networks from security threats. Prohibiting USF recipients from using USF support for Huawei and ZTE services and equipment was an easily foreseeable next step.

While the Order received unanimous support from the FCC, Commissioner O’Rielly expressed some reservation regarding the likely significant equipment replacement costs and advocated for a process to challenge future designations of Covered Companies should there be concern that a designation was mistaken. Interestingly, and suggesting the FCC anticipates that the Order will be appealed, the Order appears to methodically respond to Huawei arguments and provide further support for the FCC’s decision.

We highlight below a few of the key takeaways from the Order.

The Order – USF Support Usage Prohibitions

First, the USF support use prohibitions are broad. The new rules prohibit USF support recipients from using USF support to “purchase, obtain, maintain, improve, modify, or otherwise support any equipment or services [including software] provided or manufactured by a covered company.” The FCC defines a “Covered Company” as including not only the particular company at issue but also the company’s affiliates, subsidiaries, and parents. Consequently, USF support recipients will need to understand a Covered Company’s “family” of companies to avoid inadvertently violating the FCC’s rules.

The rules do not bar USF support recipients from using Covered Company services and equipment, although, in practice, the restrictions may have that effect. While the FCC appears to prefer that Covered Company services and equipment not be used at all, the rules are based on the FCC’s authority over the USF program and, therefore, the restrictions are limited to the use of USF support. USF support recipients are permitted to use Covered Company services and equipment but must self-fund purchases, including ongoing maintenance for existing services and equipment. USF support recipients will need to assess whether they are able to completely self-fund ongoing Covered Company equipment and service maintenance, upgrades, etc. or if they will need to replace the services and equipment.

Second, USF support recipients may find compliance with the new rules challenging. For example, the Order dismisses concerns about compliance difficulties where USF support recipients are unaware that their underlying providers are reselling, such as under “white labeling” arrangements, the services and equipment of Covered Companies. Parties to multiyear contracts for Covered Company services and equipment also could face difficulties because, although the rules apply prospectively only, such contracts are not exempted from the new rules, potentially exposing USF support recipients to early termination or other contract modification costs.

Third, USF support recipients will be required to certify compliance with the new rules once the Wireline Competition Bureau (“WCB”) and USAC develop the specific certifications and information collection revisions for the USF programs. USAC audits will be used to confirm compliance and, unless the WCB or USAC provide guidance on acceptable compliance support, USF support recipients will need to consider what records may best support compliance should they be audited. USAC will seek recovery from the entity that violated the rule, potentially including entities such as schools, healthcare providers, or consortiums, rather than a service provider.

The FNPRM – Potential Replacement and Reimbursement of Covered Company Equipment

The FNPRM seeks comment on a wide range of questions related to removing and replacing Covered Company services and equipment from U.S. telecommunications networks. While the initial draft of the FNPRM limited the removal and replacement proposals to ETCs, the final FNPRM takes a much broader approach. The FCC now questions whether the prohibition on the purchase, maintenance, improvement, etc. of Covered Company services and equipment, as well as the remove and replace requirement, should extend to all communications companies, not just those receiving USF support.

The FNPRM proposes conditioning future USF support on an ETC’s agreement not to use Covered Company services and equipment and requiring such services and equipment be removed and replaced, contingent on the FCC’s establishment of a reimbursement fund to aid ETCs with costs of complying with the changes. The FNPRM seeks comment on a variety of issues related to this proposal, including, but not limited to, the scope of the remove and replace requirement, what costs should be reimbursed, who should be eligible for reimbursement, and the timing of compliance with the proposal. Carriers should note that the FCC also seeks comment on whether Huawei and ZTE handsets should be prohibited even though not supported by the USF program.

The FNPRM also seeks comment on the scope, as well as the authority for, a possible expansion of the Covered Company services and equipment remove and replace requirement to all communications networks. The FNPRM also queries how the FCC should treat entities such as interconnected VoIP providers and facilities-based ISPs for purposes of the proposed service and equipment prohibitions.

ETC Information Collection

The final component of the Order requires an information collection to determine the scope of Huawei and ZTE services and equipment currently in use on ETC networks and the cost of removing and replacing the equipment. The information collection is mandatory for ETCs, including their affiliates and subsidiaries, and ETCs should be prepared for the information collection to proceed quickly as the FCC directed the WCB to request emergency collection approval from the Office of Management and Budget if necessary. While not required, USF recipients that are not ETCs voluntarily may participate in the information collection, particularly should they have pending ETC applications or intend to seek ETC designation in the future.

Kelley Drye will be following these rules and proceedings so check back for further updates.

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FCC to Address Public Safety Concerns at November Meeting https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-to-address-public-safety-concerns-at-november-meeting https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-to-address-public-safety-concerns-at-november-meeting Sun, 03 Nov 2019 04:00:16 -0500 The FCC plans to prohibit the use of Universal Service Fund (“USF”) support to purchase equipment or services from foreign entities that it determines pose national security risks at its next meeting scheduled for November 19, 2019. As we previously reported, the ban may severely impact participants in all federal USF programs and involve a costly “rip and replace” process to remove foreign-made equipment from domestic telecommunications networks. The FCC also expects to move forward on its heavily-anticipated E911 vertical accuracy (i.e., z-axis) proceeding and adopt new requirements for wireless carriers to better identify caller locations in multi-story buildings. Rounding out the major actions, the FCC anticipates proposing new rules for suspending and debarring entities from participating in USF and other funding programs; removing longstanding unbundling and resale requirements for certain telecommunications services; and widening the contribution base for the Internet Protocol Captioned Telephone Service (“IP CTS”) to include intrastate revenues.

The draft items cover the gamut of telecommunications issues, affecting everything from the construction of next-generation 5G networks to legacy intercarrier competition rules, and should be closely watched. You will find more details on the most significant November FCC meeting items after the break:

USF National Security Ban: The draft Order and Further Notice of Proposed Rulemaking seeks to fortify the United States’ communications infrastructure from potential foreign surveillance and denial of service attack and would prohibit the use of USF support to purchase any equipment or services provided by a “covered company” that the FCC determines poses a national security threat to the integrity of domestic communications networks. The initial ban only would apply prospectively, but would include spending related to any maintenance or upgrades to existing equipment and services. The FCC would preliminarily designate Chinese equipment manufactures Huawei Technologies Company and ZTE Corporation as covered companies and seek comment on whether the designation should be made permanent. The FCC also would establish a process to designate other covered companies in the future. In addition, the FCC would propose: (1) requiring all USF recipients to stop using existing equipment and services provided by covered companies and (2) creating a reimbursement program to offset the “reasonable” transition costs associated with this requirement. In order to determine the scope of this potential “rip and replace” project, USF recipients would be required to report to the FCC on whether they use equipment and services from covered companies and the estimated costs of transitioning to new suppliers.

E911 Vertical Location Accuracy Requirements: The draft Order and Further Notice of Proposed Rulemaking is designed to push carriers to better identify 911 callers’ locations within buildings and would adopt an E911 vertical location accuracy standard of +/- 3 meters for 80 percent of E911 calls from z-axis location capable handsets. The nationwide wireless carriers would be required to deploy z-axis location capable technology that meets the new standard in the 25 largest markets by April 3, 2021, and in the 50 largest markets by April 3, 2023. Non-nationwide wireless carriers would have an extra year to meet each of these deadlines. The FCC also would seek comment on tightening the E911 vertical location accuracy standard over time and whether carriers eventually should be obligated to report a caller’s floor number.

New Suspension and Debarment Rules: The draft Notice of Proposed Rulemaking would request input on whether the FCC should adopt new suspension and debarment rules to cover a wider range of misconduct, in accordance with federal guidelines adopted by many other federal agencies. The FCC’s current rules generally only allow the FCC to suspend and/or debar individuals from the USF programs after they are convicted or receive a civil judgment involving fraud or certain criminal offenses. The proposed rules would allow the FCC to suspend and/or debar individuals without a conviction or final judgment and for repeat violations of FCC rules, failures to pay regulatory fees, or other offenses “indicating a lack of business integrity.” The proposed rules would apply not only to USF participants, but also to participants in the Telecommunications Relay Service and National Deaf-Blind Equipment Distribution programs. Participants in these programs would be subject to new disclosure obligations and would be required to verify that they do not work with suspended or debarred entities. The FCC also plans to establish a system of reciprocity, in which entities suspended or debarred from participation in funding programs administered by other agencies would be similarly suspended or debarred from participating in the FCC programs. The FCC further asks whether it should be able to apply the new suspension and debarment rules retroactively to cover conduct occurring before their adoption, significantly increasing the potential liability for program participants.

Eliminating Unbundling/Resale Obligations: The draft Notice of Proposed Rulemaking proposes relieving incumbent local exchange carriers of their longstanding obligations to make certain network elements available on an unbundled basis and offer certain telecommunications services on a wholesale basis to competitive carriers. The draft item would address the few remaining unbundling and resale obligations left over from the Commission’s broad forbearance order adopted earlier this year. Specifically, the FCC would propose removing the unbundling requirements for: (1) DS1 and DS3 loops in competitive areas, with an exemption for DS1 loops providing residential broadband and telecommunications services in rural areas; (2) DS0 loops in urban census blocks; (3) narrowband voice-grade loops; and (4) dark fiber transport for wire centers within a half mile of alternative fiber. The FCC also would propose eliminating resale obligations for services offered in non-price cap incumbent carrier service areas. The FCC would argue that such unbundling and resale obligations are no longer necessary in light of increased competition. The FCC anticipates phasing in the reforms over a three-year period.

Expanding IP CTS Contribution Base: The draft Order would expand the contribution base for IP CTS, which provides call captioning for individuals who are deaf or hard of hearing, to include intrastate end-user revenues from contributing telecommunications carriers and VoIP providers. When the FCC initially authorized support for IP CTS, it decided as an “interim” measure to cover the service’s costs based only on interstate telecommunications revenues. The draft item would find that the interim funding mechanism unfairly burdens providers and users of interstate telecommunications services and is insufficient to address the overall decline in contributions. The FCC would note that the statute governing IP CTS provides it with broad authority to support captioning on intrastate as well as interstate calls and the Communication Act’s general reservation of state authority over intrastate communications does not apply in this instance. The FCC also would note that it does not expect the reforms to increase or otherwise affect the total contributions needed to support IP CTS.

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FCC to Deny Chinese Telecom Provider Access to U.S. Market, Citing National Security Concerns https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-to-deny-chinese-telecom-provider-access-to-u-s-market-citing-national-security-concerns https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-to-deny-chinese-telecom-provider-access-to-u-s-market-citing-national-security-concerns Fri, 26 Apr 2019 14:17:40 -0400 The FCC plans to bar a Chinese telecommunications provider from offering international telecommunications service between the United States and foreign points based on national security concerns at its next open meeting scheduled for May 9, 2019. Under a draft Order released last week, the agency would conclude that China Mobile International USA (“China Mobile USA” or the “Company”) is ultimately controlled by the Chinese government and subject to Chinese government exploitation, influence, and control that could undermine the security and reliability of U.S. networks. The denial of China Mobile USA’s application would mark the first time the FCC has rejected an application to access the U.S. market based on national security concerns raised by the group of federal Executive Branch agencies commonly known as “Team Telecom.” The denial also would represent another salvo in the FCC’s recent efforts to combat network security and corporate espionage issues involving foreign-owned carriers. While the proposed action against China Mobile USA likely will not affect foreign carrier investment or access to the U.S. telecommunications market overall, it serves as a reminder of the barriers foreign-owned telecommunications providers (and particularly those with ties to China) may face when dealing with the FCC.

The FCC’s draft Order stems from a nearly eight-year-old application from China Mobile USA requesting Section 214 authority to provide international telecommunications services between the United States and foreign points. Under Section 214, the Commission must determine whether grant of such authority is in the public interest and the FCC considers the national security, law enforcement, and foreign policy implications of an application. Where an application involves threshold levels of foreign ownership, the Commission routinely solicits the expertise of Team Telecom, which includes the Department of Justice, Department of Defense, Department of Homeland Security, and other government components, to assess any national security concerns arising from an application or transaction. Here, Team Telecom determined after years of review that, although China Mobile USA is a Delaware corporation, it ultimately is owned by a Chinese government-backed enterprise subject to the supervision and control of Chinese authorities. Team Telecom further found that the Chinese government could use its stake in China Mobile USA to force the Company to covertly monitor, degrade, and disrupt U.S. communications, including U.S. government communications. Consequently, and representing a first in Team Telecom’s two decades of reviewing telecommunications applications, Team Telecom recommended the FCC deny China Mobile USA’s application. The petition recommending denial of the application provides a rare glimpse into Team Telecom’s national security analysis considerations, insight that cannot be as easily or fully gleaned from Team Telecom’s mitigation agreements. Based on Team Telecom’s assessment and the FCC’s own review, the FCC plans to deny China Mobile USA’s application due to substantial national security concerns and law enforcement risks that cannot be mitigated. Consistent with its solicitation of, and policy of deferring to, Team Telecom’s expertise on national security issues, the Commission’s proposed decision reflects Team Telecom’s national security assessment of China Mobile USA as well as the FCC’s own review.

China Mobile USA raised a number of arguments against Team Telecom’s findings, none of which the FCC accepted. First, the Company asserted that, despite its connections to Chinese authorities, it would not be subject to foreign influence or control because it is a U.S. corporation. In response, the FCC would note that Chinese law requires state-owned enterprises like China Mobile USA’s parent to cooperate with government intelligence efforts and allow Chinese intelligence agencies to take control of their facilities – including communications equipment – to conduct covert operations. The FCC would place particular emphasis on concerns that, due to the use of least-cost routing in the telecommunications market, China Mobile USA could gain access to the communications of U.S. government agencies even if the agencies are not the Company’s direct customers. Similarly, if granted the requested international Section 214 authority, China Mobile USA would be able to access U.S. communications networks, including fiber optic cables, cellular networks, and communication satellites, and would be able to alter or otherwise disrupt traffic. Thus, while foreign government ownership of a carrier would not (by itself) warrant rejection of an application, the FCC’s proposed order would conclude that China Mobile USA is particularly vulnerable to Chinese government control and exploitation that could undermine national security. Second, China Mobile USA contended that China’s membership in the World Trade Organization (“WTO”) meant that the Company was entitled to a presumption that its application was in the public interest. But while the FCC would agree that China Mobile USA is entitled to a presumption that its application was not contrary to the public interest on competition grounds, the Commission also would find that WTO membership has no bearing on whether grant of the Company’s application was contrary to the public interest based on national security grounds. Third, the Company pointed out that the FCC granted international Section 214 authorizations to foreign-owned carriers in the past (including Chinese-owned carriers) and that denial of China Mobile USA’s application would be unfair. However, the FCC would highlight reported Chinese government involvement in recent network intrusions and corporate espionage as demonstrating “different and heightened” national security risks that require denial of the application. Finally, China Mobile USA argued that a mitigation plan would address the national security concerns raised by Team Telecom. Citing Team Telecom’s experience with monitoring and enforcing mitigation agreements, the FCC’s draft order would conclude that it was appropriate to defer to Team Telecom’s assessment that mitigation would be inadequate to allay national security concerns. In particular, the pervasiveness of Chinese government control over China Mobile USA as well as the legal and procedural barriers to investigating Chinese-owned companies could undercut enforcement efforts.

Nothing in the FCC’s draft Order suggests that the agency is shifting its overall position on foreign-owned carrier access to the U.S. market or its assessment of national security risks. Instead, the proposed denial reflects increasing concerns regarding foreign corporate espionage and the security of U.S. government communications. These concerns arise when carriers are insufficiently independent of foreign governments in general and with Chinese government-owned telecommunications carriers in particular. As a result, the FCC likely will continue to take a hard look at the corporate structure of Chinese-owned telecommunications providers in future Section 214 applications.

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FCC Plans to Bar Chinese Telecom Provider from U.S. Market and Open Up More Shared Use Spectrum at May Open Meeting https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-plans-to-bar-chinese-telecom-provider-from-u-s-market-and-open-up-more-shared-use-spectrum-at-may-open-meeting https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-plans-to-bar-chinese-telecom-provider-from-u-s-market-and-open-up-more-shared-use-spectrum-at-may-open-meeting Tue, 23 Apr 2019 18:48:11 -0400 Highlighting recent network security and corporate espionage issues involving foreign-owned carriers, the FCC plans to take the unprecedented step of denying a Chinese telecommunications provider’s application to offer service in the United States based on law enforcement concerns at its next open meeting on May 9, 2019. The agency would conclude that China Mobile USA, a Delaware corporation ultimately owned by the Chinese government, is vulnerable to foreign exploitation that could undermine the security and reliability of U.S. networks. The proposed denial is in line with the 2018 recommendation of the federal agencies commonly known as “Team Telecom,” which represented the first time the group called for the rejection of a carrier’s application due to security risks. The FCC also anticipates freeing up additional spectrum for commercial wireless operations by allowing shared use of the 1675-1680 MHz band currently allocated for federal weather monitoring operations. Rounding out the major actions on the May agenda, the FCC expects to seek comment on the procedures governing its long-awaited auction of “833” toll free numbers, adopt rules aimed at improving the Video Relay Service (“VRS”) used by individuals with hearing or speech disabilities, and propose the regulatory fees for fiscal year 2019.

You will find more details on the significant May meeting items after the break:

China Mobile Authorization Denial: The draft Order would reject China Mobile USA’s application for authority to provide telecommunications services between the United States and foreign points. The FCC would find that, while foreign government control of a carrier is not (by itself) grounds for denial, the Chinese government’s ultimate control of China Mobile USA could result in covert monitoring and disruption of U.S. communications networks. The FCC also would note prior challenges with prosecuting Chinese-owned companies for violations, even when such entities are incorporated under U.S. law. Unlike prior grants of authority involving foreign-owned carriers, the FCC would conclude that the pervasiveness of Chinese government control over China Mobile USA undermines any potential mitigation measures the company could implement to address its national security concerns.

Shared Use of the 1675-1680 MHz Band: The draft Notice of Proposed Rulemaking (“NPRM”) would request input on permitting fixed/mobile wireless services (except aeronautical mobile services) to share the 1675-1680 MHz band on a co-primary basis with incumbent federal weather monitoring operations. The item appears to be a response to language in President Trump’s proposed 2020 budget that would effectively require the Commission to act on a petition filed by Ligado Networks by requiring the FCC to auction this spectrum for wireless broadband use subject to sharing arrangements with Federal weather satellites. Satellite and weather data stakeholders have previously opposed Ligado’s use of the 1675-1680 MHz band because of concerns that its use would result in harmful interference to meteorological satellites that provide real-time weather and related environmental information. Non-federal operators would be required to comply with power limits and other restrictions designed to protect federal users in the band from harmful interference. The FCC would propose licensing the spectrum in unpaired five-megahertz blocks on a partial economic area basis through competitive bidding. The spectrum auction likely would take place in 2020.

Toll Free Number Auction: The draft Public Notice would set the stage for the auction of over 17,000 numbers in the recently-opened 833 toll free code. While the FCC traditionally assigned toll free numbers on a first-come, first served basis, it adopted rules last year to allow for auctions to improve efficiency and fairness in the toll free number assignment process. The Public Notice would request comment on the application, bidding, assignment, and payment procedures for the auction. Under the FCC’s plan, government entities and non-profit health/safety organizations could petition the agency to set aside specific 833 toll free numbers for their use. The auction would consist of a single round overseen by Somos, Inc., the Toll Free Numbering Administrator. Winning bidders would be able to sell the rights to their toll free numbers through secondary market transactions following the auction. The FCC has not indicated when it expects the auction to occur.

VRS Reform: The draft Order and Further NPRM would facilitate direct video calling between VRS users and customer support call centers by allowing such centers to list their videophones in the VRS numbering directory. To address potential program fraud, the item would require per-call validation of VRS user registrations and force VRS providers to register enterprise and publicly-available videophones. In addition, the FCC would prohibit VRS providers from offering non-VRS-related inducements to encourage customers to sign up for their services. The draft item also would request input on whether the FCC should make permanent a pilot program allowing VRS calls to be handled by at-home interpreters. The item would further ask whether the FCC should allow VRS providers to offer service to new users pending identity verification and require users to “log-in” before using enterprise and publicly-available videophones.

2019 Regulatory Fee Assessment: The draft NPRM would seek comment on the FCC’s proposed collection of $339,000,000 in regulatory fees for fiscal year 2019. The fees would be due in September 2019 and generally would follow the methodology used in past collections. Nearly all service categories would see at least a slight increase to their regulatory fees in order to cover the $16 million projected increase to the agency’s budget and operators should review the NPRM’s proposed fee schedule for the expected impact to their services.

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U.S. Charges Huawei with Theft of Trade Secrets; Risks for Carriers Using Huawei Equipment Increase https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/u-s-charges-huawei-with-theft-of-trade-secrets-risks-for-carriers-using-huawei-equipment-increase https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/u-s-charges-huawei-with-theft-of-trade-secrets-risks-for-carriers-using-huawei-equipment-increase Wed, 30 Jan 2019 14:28:28 -0500 In a move certain to inflame the ongoing trade dispute between the United States and China, Justice Department officials announced criminal charges against Chinese telecommunications equipment manufacturer Huawei, several of its affiliates, and its chief financial officer for alleged theft of trade secrets from U.S. telecommunications providers, bank fraud, obstruction of justice, and other violations. The two indictments issued on January 28, 2019, represent just the latest pushback against foreign telecommunications interests by U.S. officials, citing national security concerns and unfair trade practice claims. The FCC already proposed rule changes last year that would prohibit the use of Universal Service Fund support to purchase equipment or services from foreign companies deemed national security threats, primarily targeting companies from China and Russia. Congress also recently passed legislation prohibiting federal agencies and those working with them from using components provided by Huawei and other Chinese manufacturers. With the Trump Administration reportedly poised to issue an executive order effectively barring American companies from using Chinese-origin equipment in critical telecommunications networks, domestic service providers should keep a close eye on their supply chain security and potential liability when working with foreign entities. A criminal conviction on these charges could lead to broader restrictions on trade in U.S. export-controlled products with the company. Given the presence of encryption in telecom equipment, export controls on such products are relatively widespread

The Justice Department accused Huawei of stealing trade secrets and materials used to test mobile phones from a major U.S. telecommunications carrier. The criminal charges stem from an earlier civil suit brought by the U.S. carrier, in which Huawei was found guilty and ordered to pay compensation. Prosecutors alleged that Huawei encouraged corporate espionage, offering bonuses to employees who succeeded in stealing confidential information from U.S. competitors. In addition, Huawei, several of its affiliates, and its chief financial officer were charged with bank fraud for purportedly misleading U.S. banks into clearing transactions with Iran in violation of international sanctions. Officials also claimed that Huawei obstructed justice by allegedly moving witnesses outside of U.S. jurisdiction, destroying evidence, and lying to Congress about its association with Iranian business interests.

While the U.S. governments’ investigation into Huawei is ongoing, the indictments show the national security and trade risks inherent in working with foreign telecommunications interests. Federal officials continue to advocate action to impede or outright block the use of foreign-made equipment in critical telecommunications networks, particularly those forming the backbone of next-generation 5G wireless technologies. However, some smaller U.S. carriers have raised concerns with the pushback, pointing to potential cost increases due to restricted access to foreign components and resulting detrimental effects on broadband deployment in rural areas. As a result, it remains to be seen how U.S. policymakers plan to balance national security and trade objectives with broadband deployment and telecommunications innovation goals. For those using or considering using Huawei equipment, careful monitoring of the open FCC proceeding is advisable.

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Citing National Security, FCC Begins Proceeding to Bar the Use of Universal Service Monies for Equipment from Certain Countries https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/citing-national-security-fcc-begins-proceeding-to-bar-the-use-of-universal-service-monies-for-equipment-from-certain-countries https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/citing-national-security-fcc-begins-proceeding-to-bar-the-use-of-universal-service-monies-for-equipment-from-certain-countries Fri, 20 Apr 2018 18:24:15 -0400 Echoing concerns raised by other parts of the federal government over the past several years, the FCC, at its open meeting on April 17, 2018, adopted a Notice of Proposed Rulemaking (“NPRM”) to consider a rule which would prohibit Universal Service Fund (“USF”) support from being used “to purchase or obtain any equipment or services produced or provided by a company posing a national security threat to the integrity of communications networks or the communications supply chain.” The NPRM seeks comment on issues such as how such a rule can be implemented and enforced, what types of equipment and services should be covered, and how manufacturers covered by the rule are to be identified and made known to USF recipients. Although this is only the start of the proceeding, the FCC’s action could have a broad-reaching impact for some communications equipment manufacturers and create potential liabilities for entities participating in any of the federal USF programs. All companies purchasing equipment from certain countries – principally China and Russia – may be affected, even if they don’t receive federal USF money.

Recently Congress has expressed concerns about foreign state influence in U.S. communications networks resulting from the use of equipment and/or services by certain foreign entities, particularly from China and Russia. For a number of years, many mitigation arrangements imposed by Team Telecom on certain Section 214 authorization holders and submarine cable landing licensees have required the affected carriers and cable operators to obtain government consent to use principal equipment suppliers, as part of the Team Telecom’s ongoing review of these carriers and operators to ensure equipment used in cable systems or carrier infrastructure does not come from certain companies that raise national security issues. To reinforce existing measures that address these concerns, the FCC proposes the above-stated bright line rule and seeks comment on scope, implementation, and enforcement.

Scope of the Prohibition

One key issue in the NPRM is how to identify companies that pose a national security threat to communications networks or the communications supply chain. Several potential approaches are discussed. First, it asks whether the Commission should “establish the criteria for identifying a covered company,” and if so, how it should determine such criteria. Second, the NPRM suggests that the Commission could “rely on existing statutes listing companies barred from providing certain equipment or services to federal agencies for national security reasons.” Third, another federal agency could “maintain a list of communications equipment or service providers that raise national security concerns regarding the integrity of communications networks or the communications supply chain.” A related definitional issue is whether the prohibition would also apply to a covered company’s subsidiaries, parents, and/or affiliates, and how these entities should be defined.

Implementation Issues

The Commission also has requested input on various implementation issues related to the proposed rule, such as:

  • Whether the prohibition should apply to all equipment and services from companies that have been identified as raising national security risks, or whether the rule should be more narrowly tailored to certain types of equipment and services more prone to supply chain vulnerabilities. One approach would be to “limit the scope of the proposed rule to equipment and services that relate to the management of a network, data about the management of a network, or any system the compromise or failure of which could disrupt the confidentiality, availability, or integrity of a network.” This approach would seem to exclude end user equipment. Another approach could “prohibit the use of any USF funds on any project where equipment or services produced or provided by a company posing a national security threat to the integrity of communications networks or the communications supply chain is being purchased or obtained.” This approach might apply to indirect purchases of services from covered companies as well as direct purchases. This approach potentially could cover end user equipment whether directly or indirectly purchased with USF funds.
  • Whether and how the rule should apply to contractors and subcontractors of USF recipients.
  • Whether the Commission should adopt “rules on a program-specific basis across the four separate USF programs.”
  • The proposed rule would be prospective only, but the item seeks comment on how much time USF recipients would need to come into compliance with the rule, and whether there should be staggered compliance deadlines for certain recipients (e.g., schools and libraries, smaller USF recipients). The Commission tentatively concludes that the proposed rule would extend to upgrades of existing equipment or services.
  • The potential impact of the rule on existing contracts between USF recipients and parties identified as posing a supply chain risk.
  • How to ensure that USF recipients are able to and do comply with the rule (e.g., requiring certifications from USF applicants or recipients).
  • How to enforce the rule, particularly in the E-Rate program, when USF support may be distributed to a school or library rather than a service provider.
  • Whether USF recipients should be permitted to seek a waiver of the rule.
  • The costs and benefits of the rule.
  • The FCC’s legal authority to adopt the proposed rule, which the FCC tentatively concludes from its statutory authority to administer the universal service fund, the absence of statutory limits to place conditions on how such funds are used, and its general rulemaking authority to carry out the provisions of the Communications Act.
Beyond the Federal USF

Finally, and with potentially much farther reaching impact than the proposed rule, the NPRM asks more generally whether the Commission should “consider actions targeted not only at the USF-funded equipment of [covered] companies, but also non-USF funded equipment or services produced or provided by those companies that might pose the same or similar national security threats to the nation’s communications networks.”

Next Steps

This proceeding is at its early stage, and affected parties will have an opportunity to respond to the FCC’s proposal. Already, some smaller rural carriers have raised concerns with the proposal, citing costs and the potential impact on broadband deployment in rural areas. Both direct and indirect recipients of federal USF disbursements should examine the proposal carefully to determine its impact on the company’s operations. Initial comments on the NPRM will be due 30 days after the item is published in the Federal Register, and reply comments will be due 60 days after publication.

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