CommLaw Monitor https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor News and analysis from Kelley Drye’s communications practice group Thu, 28 Nov 2024 17:29:57 -0500 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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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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Webinar: New Developments on Foreign Investment Reviews in the Telecommunications Sector https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/webinar-new-developments-on-foreign-investment-reviews-in-the-telecommunications-sector https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/webinar-new-developments-on-foreign-investment-reviews-in-the-telecommunications-sector Thu, 30 Apr 2020 14:56:39 -0400 For decades, parts of the Federal government have examined transactions that introduce and increase foreign investment in United States telecommunications businesses. Transactions that implicate reviews by the Departments of Justice, Defense, and Homeland Security (collectively, “Team Telecom”) and/or by the Committee of Foreign Investment in the United States (“CFIUS”) can face procedural hurdles and delays that complicate planning and timelines. CFIUS review can even lead to blocked transactions or an unwinding of consummated deals. In 2020, there have already been major developments in the basic framework by which Executive Branch agencies will conduct reviews and in the burdens that telecommunications sector enterprises will or may face under those frameworks.

Join Kelley Drye for a webinar on May 7th at 11:00 AM EDT to look at these significant changes, including:

  • New rules, promulgated earlier this year to implement the Foreign Investment Risk Review Modernization Act of 2018, or FIRRMA, which govern review by CFIUS of certain transactions involving foreign investment in United States businesses, as they apply to the telecommunications sector
  • When telecommunications entities must file disclosures with CFIUS before a transaction, when such entities may file voluntarily (and why they might do so), and what transactions are not covered
  • The President’s recent Executive Order establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (“Committee”) to conduct Executive Branch law enforcement and national security reviews of certain FCC applications and licenses
  • What is known about the new Committee, how it relates to Team Telecom and CFIUS, and what uncertainties remain
Click here to register.

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President Formalizes Executive Agency Review of FCC Applications and Licenses; Quick Action on FCC License Revocation https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/president-formalizes-executive-agency-review-of-fcc-applications-and-licenses-quick-action-on-fcc-license-revocation https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/president-formalizes-executive-agency-review-of-fcc-applications-and-licenses-quick-action-on-fcc-license-revocation Sun, 26 Apr 2020 23:01:11 -0400 For years, there have been critiques about the lack of procedures surrounding the review, by a group of Executive Branch agencies commonly referred to as “Team Telecom”, of applications before the Federal Communications Commission (“FCC” or “Commission”) for licenses and transaction approvals involving foreign ownership, including the absence of timeframes for completing reviews. The FCC tried to implement limited changes within its jurisdiction by launching a rulemaking, but that never progressed to a conclusion. Now, by Executive Order (“EO”) on April 4, 2020, President Trump established a framework to govern such reviews and clearly include reviews of existing licenses and authorizations even where there are no current mitigations. There are still a lot of unknowns regarding the new “Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector” (the “Committee”). It is too soon to know whether the Committee will bring a welcome measure of regularity to a previously unshackled process or will prove to be an even greater bane to applicants and licensees than the Team Telecom process its work will replace.

Review of applications, referred by the FCC to Team Telecom, with certain national security and law enforcement concerns has long been part of the landscape, but, because the Team Telecom review process had had no statutory or regulatory framework, the communications industry had little insight into the review process or the Executive Branch’s related activities. This is not to say that the new Committee will be transparent, and one should not expect that, but the EO better defines the process and the potential scope of the review activities.

Committee Responsibilities

The Committee is tasked to review, for national security and law enforcement concerns raised by foreign participation in the United States telecommunications services sector, those applications before the FCC “for a license or authorization, or the transfer of a license or authorization” which the agency refers to the Committee (“Referred Application”). The EO does not purport to dictate when the FCC, an independent agency, refers applications to the Committee, but the track record of referrals to Team Telecom probably provides a guide of what will be referred. And nothing prevents the Committee, or an executive agency, from asking the Commission to refer an application (which has been the case prior to the EO). Moreover, the interrelationship between the Committee’s activities and those of the Committee on Foreign Investment in the United States (“CFIUS”), whose authority pursuant to statute concerns review of certain covered transactions involving foreign investment in U.S. businesses in the telecom sector and beyond, remains to be seen. Historically the link between Team Telecom review and CFIUS activities has not been susceptible to clear explanation. Indeed, there is only one mention of CFIUS in the EO, in the context of information that the Committee can share with the CFIUS when it is undertaking a review of transactions.

By all appearances, the Committee will replace the functions of Team Telecom which currently conducts such national security reviews but is not governed by any established procedures. The new EO also contemplates review, on the Committee’s own motion, of existing FCC licenses and authorizations to identify “any new or additional risks” to law enforcement and national security. These reviews may result in a recommendation to the FCC to modify or revoke licenses and authorizations even where Team Telecom or the Committee has not imposed mitigation measures earlier. While the EO provides some long-sought clarity and structure to the review process, some uncertainties remain as to how this Committee will operate and use its authority to seek conditions on or denial of FCC licenses, given the White House’s initiative to establish the Committee. However, judging by an executive agency recommendation – a mere five days after the EO was issued – that the FCC revoke China Telecom’s FCC license, albeit not under the guise of the new Committee, and the Commission’s show cause orders issued to four Chinese government owned FCC licensees, the U.S. telecommunications industry should expect to see close review of new applications and potentially renewed scrutiny of previously-granted FCC licenses.

Responding to the release of the EO, FCC Chairman Pai welcomed the EO’s “formalizing Team Telecom review and establishing a process that will allow the Executive Branch to provide its expert input to the FCC in a timely manner.” FCC Commissioner O’Reilly, long an ardent proponent for revising the review process and a champion of the Commission’s rulemaking seeking changes associated with Team Telecom review, similarly lauded the EO for “establishing a formal structure . . . and including deadlines for the relevant agencies to render decisions” and noted that fixing the “incoherent and indefensibly unpredictable review process” had been his priority over the last several years. In its rulemaking proceeding in 2016 the FCC proposed definitive timeframes and a clear review process but, despite receiving industry support, that proceeding stalled.

Committee Structure and Implementation

Comprising, at its core, the same three agencies as Team Telecom, the Committee, chaired by the Attorney General, the head of the Department of Justice, will include the Secretary of Defense, Secretary of Homeland Security, and to the extent the President deems appropriate, the heads of any other executive agencies or Assistants to the President. Officials of other agencies – such as the Director of National Intelligence, the Secretary of Commerce, and the Secretary of State – will have limited roles in certain circumstances.

The EO sets a ninety (90) day timeline, or until June 2, 2020, for the Committee members to enter into a Memorandum of Understanding (that may or may not become public) that, among other requirements, establishes the information to be collected from applicants, defines standard mitigation measures, and identifies the plan for implementing the EO. However, the EO does not set an actual deadline by which the Committee will begin reviewing Referred Applications, but does provide that the purview includes applications “referred by the FCC before the date of [the EO] to the group of executive departments and agencies involved in the review process that was previously in place,” i.e., to Team Telecom. This should provide for something of a seamless transition from the current framework to the new Committee.

The EO Brings Some Insights into the Review Process

While the Committee’s responsibilities generally would be familiar to Team Telecom observers, at least two aspects are worth specific mention.

First, the EO establishes some semblance of definitive timeframes and processes for the Committee’s review of Referred Applications, albeit triggered by a somewhat uncertain date when applicants’ responses to the Committee’s questions and information requests are “complete.” Telecommunications providers and legal practitioners that have been through a Team Telecom review know that the process often was lengthy, with reviews not uncommonly taking nine months and even much longer. Moreover, neither the applicants nor the FCC had any insight into the mechanics of the review process or whether the review was continuing in the background during the often long stretches of time with no communication, from the Executive Branch after responses to the Team Telecom questions and information requests (commonly referred to as “triage” questions) were provided, at least until the end of the review process.

Under the EO, the Committee is to finish its initial review within 120 days of when an applicant’s responses are complete, although the Committee may conclude that a “secondary assessment” is warranted.” Any secondary review must be completed within ninety days of the start of the secondary assessment. So, reviews could take seven months after the triage questions have been completely addressed and still be within the time frames contemplated by the EO. Experience often showed, under the Team Telecom process, that completing triage could take several months itself.

The EO also provides a look “behind the curtain” of the Committee, from a procedural perspective, as it delineates the actions, such as the Director of National Intelligence’s review and written national security threat assessment, that the various Committee components will take during the review process. While knowledge that a process actually exists will be of interest to applicants, the substance of the internal communications will likely not be shared until such time as Committee recommendations are made known in terms of proposed mitigation measures or the lack of objections to a Referred Application.

Second, the EO makes clear that the Committee may take a fresh look at existing licensees for national security and law enforcement risks although the procedures surrounding such license reviews are not as fully flushed out in the EO as are those surrounding examination of Referred Applications. This authority may lead to the Committee seeking license revocation through the FCC or requiring the licensee enter into a mitigation agreement to avoid, presumably, an effort to revoke the license. While Team Telecom has sought license revocations over the past few years where mitigation agreements are already in place and there are issues of compliance, see also here and here, we are unaware of existing licensees being required to enter into new or revised mitigation agreements absent new applications, for example for assignments or transfers of control, being filed with the FCC.

Nevertheless, this explicit authority for the Committee to revisit and possibly modify or require new mitigation agreements is not entirely surprising. As we have reported previously, increased concerns regarding the security of telecommunications equipment from certain foreign-owned equipment manufacturers, such as Huawei and ZTE, recently have led the FCC to restrict and, in some cases, ban the use of such manufacturers’ equipment. The Executive Branch and other agencies similarly have identified numerous national security threats, with cybersecurity as a top concern, arising in the many years since some FCC licenses have been granted. Consequently, the Committee is unlikely to be shy about revisiting existing licensees where there now are perceived law enforcement or national security concerns that the Committee believes need to be addressed by mitigation measures. Of course, having a licensee’s existing mitigation agreement revisited, typically in the form of a generally more robust National Security Agreement (“NSA”) or a frequently “lighter touch” Letter of Assurances (“LOA”), or a licensee being required to enter into such a mitigation agreement for the first time, may have serious implications for the licensee depending on its business and operations models.

The EO explains that, while it does establish certain procedures and timeframes, it does not create any rights or benefits, substantive or procedural, that applicants or licensees can enforce at law or in equity against the government or any other person. Moreover, the EO does not supersede the existing rights or discretion of any Federal agency, outside the activities of the Committee, to conduct inquiries with respect to an FCC application or license or to negotiate, enter into, impose, or enforce contractual provisions” with such applicant or licensee, which would include existing mitigation arrangements with one or more executive branch agency.

The EO Also Creates Some Uncertainty

While the EO provides some transparency in, and certainty to, the Referred Application review process, many questions remain. To mention a few of those questions:

  • What information will Referred Application applicants have to provide? Traditionally, applicants undergoing a Team Telecom review have faced fairly consistent sets of triage questions that vary by the type of application, with additional questions typically customized based on the applicant. The EO directs the Committee to develop the information requests that will be required from Referred Application applicants but it is unknown if those questions will be similar in scope and content to the triage questions or if the Committee will develop different and possibly more burdensome triage questionnaires given the elevated concerns within the government regarding the security of U.S. telecommunications and networks.
  • What compliance obligations will be included in mitigation agreements? Under the current Team Telecom review process, applicants can expect to enter into a comprehensive NSA or an often narrower and lighter LOA. These arrangements are publicly available and provided FCC license applicants with a general sense of the scope of compliance obligations. In more recent years, we have observed a convergence toward more common terms, albeit with some ability to negotiate certain aspects of the mitigation. The EO retains the use of mitigation agreements but refers to “standard” and “non-standard” mitigation agreements. It is unclear if the “standard” vs “non-standard” mitigation dichotomy refers to the difference between LOAs and NSAs or contemplates other compliance frameworks. It is possible that LOAs and NSAs will be considered standard mitigation and non-standard mitigation measures will contain even more stringent or targeted compliance obligations. Alternatively, the Committee may revise the entire mitigation measure regime, and the degree of “negotiation” the government is willing to engage in may be adjusted materially, and not necessarily for the better.
  • Exactly when will the Committee and its new measures replace the current Executive Branch review regime? The EO sets a 90 day deadline for the Committee to develop an implementation plan. It is possible that the Committee may be able to meet this deadline since the three primary member agencies already will be familiar with the review process based on their experience with the Executive Branch reviews. However, the EO does not identify a deadline for when the Committee will begin reviewing Referred Applications (or existing licenses) per the EO framework. The EO suggests that pending reviews may become subject to the EO timelines. If that’s true, will the timelines apply in full? Where the review is well under way? Will already pending reviews be placed on hold until the Committee is up and running? Similarly, will applications referred after the EO was released remain in pending status until the Committee gets things up and running?
Swift Movement to Revoke Licenses

Although not even a month has passed since the EO was released, action already is being taken to revoke the FCC license of China Telecom, and to require four other Chinese government-affiliated licensees to show cause why their FCC licenses should not be revoked. In what clearly was an already pending initiative, within five days of the EO’s release, Team Telecom recommended the FCC revoke China Telecom’s license. The recommendation, exceeding fifty pages and containing hundreds of pages of, often redacted, exhibits, details numerous concerns regarding China Telecom’s operations, which were subject to a 2007 LOA. The concerns range from the company’s failure to comply with its mitigation agreement to making inaccurate statements regarding its cybersecurity practices to providing opportunities for the Chinese government to engage in economic espionage and misroute or disrupt U.S. communications. Although China Telecom currently has only an LOA as its mitigation agreement, and presumably could be required to enter into a more comprehensive NSA, the Executive Branch explicitly rejected the transition to an NSA based on China Telecom being deemed “an untrustworthy and unwilling partner” in its current LOA. Unlike other Executive Branch license revocation recommendations which typically cited to general mitigation agreement noncompliance and, more often, apparent cessation of operations, the China Telecom revocation recommendation identifies numerous and detailed concerns and relies, in part, on information obtained under the Foreign Intelligence Surveillance Act. Similarly, on Friday the Commission issued show cause orders to China Telecom Americas, China Unicom Americas, Pacific Networks, and ComNet giving them thirty days to show cause why their FCC licenses should not be revoked. The show cause orders cite to Team Telecom’s China Telecom revocation recommendation when noting that, as entities ultimately owned or controlled by the Chinese government-owned entities, the four FCC licensees would be vulnerab[le] . . . to the exploitation, influence, and control of the Chinese government.” Although the show cause orders were issued on the Commission’s own motion, the FCC’s action undoubtedly is related to the EO’s review of existing licensees for national security and law enforcement concerns. In light of the national security concerns the Executive Branch outlined in the China Telecom recommendation, the FCC’s show cause orders to China Telecom Americas, China Unicom Americas, Pacific Networks, and ComNet, and the similar concerns regarding Huawei and ZTE equipment, we anticipate the Committee similarly will be proactive in revisiting any licensees that may raise national security concerns.

Key Takeaways

The EO provides some clarity regarding the Referred Application review process and timeframe but many uncertainties remain, including just how long the process will begin after the application is referred.

Applicants contemplating transactions or new FCC licensing that will involve a Referred Application will benefit from a clearly defined review timeframe, once triage is “complete,” but also may face different, and potentially more stringent, mitigation obligations.

Current FCC licensees, whether parties to mitigation agreements or not bound by such agreements, may have their communications operations reviewed for national security concerns and the licensee could be subjected to new or revised mitigation requirements.

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The full impact of the EO will only become known over time. Kelley Drye continues to monitor the issues, so check back for future updates.

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