The FCC recently adopted a Notice of Proposed Rulemaking (“NPRM”) proposing reforms to the Executive Branch “Team Telecom” review process for certain FCC applications and petitions involving foreign ownership. The NPRM seeks to improve the timeliness and transparency of the current “Team Telecom” referral process, which currently can add months, if not indefinitely delay action, on an application.

Background on the Current Process

Currently, Commission staff refers specific applications to the Team Telecom agencies (the Departments of Homeland Security, Justice, Defense and the FBI) when there is “reportable” foreign ownership in the applicant. When an applicant has a ten percent or more direct or indirect owner that is not a US citizen, the Commission refers the application for: (1) international section 214 authority; (2) assignment or transfer of control of domestic or international section 214 authority; (2) a submarine cable landing license; and (4) assignment or transfer of control of a submarine cable landing license. The Commission also refers petitions that seek authority to exceed the section 310(b) foreign ownership limits for broadcast and common carrier wireless licenses, including common carrier satellite earth stations.

Under the current process, once the application is referred to the Team Telecom agencies, they will typically send the applicant questions on the five percent or greater owners of the applicant, the names and identifying information of officers and directors of companies, the business plans of the applicant, and details about the network to be used to provide services. The agencies utilize that information and any follow-up questions to determine whether an application or proposed transaction potentially raise potential national security or law enforcement issues, in which case the agencies may seek to negotiate a letter of assurance (“LOA”) or network security agreement (“NSA”) addressing the concerns. Once the review is complete, the Executive Branch either advises the Commission to move forward on the application or advises the Commission that they have no objection to the grant of an application so long as the applicant complies with the terms of the LOA or NSA. Where such a mitigation agreement is required, it will typically be adopted as a condition of Commission action on the application.

Proposed Process Changes

In order to accelerate the current process, the Commission proposes to require applicants with reportable foreign ownership to provide certain information on ownership, network operations, and related matters when filing their applications in order to provide required information to the Executive Branch in a more expedited manner. The requested information would fall under the following categories: (1) corporate structure and shareholder information; (2) relationships with foreign entities; (3) financial condition and circumstances; (4) compliance with applicable laws and regulations; and (5) business and operational information, including services to be provided and network infrastructure.

In order to maintain flexibility as to the specific questions to be answered by the applicant, the Commission proposes only to include the categories of questions to be answered in the rule, as opposed to the specific questions. Once the new rules are adopted, the Commission would start a Paperwork Reduction Act of 1995 (“PRA”) process with specific questions, and then upon adoption and approval by the Office of Management and Budget under the PRA, would make the questions readily available on a website as a downloadable document. While the questions would be standardized, they would vary by category of application. To address concerns that some of the questions might not be able to be answered at the time the application is filed, the Commission seeks comment on whether completion of the questions should be a prerequisite for filing.

The Commission proposes that as part of its review of an application, staff would review responses to questions for completeness, but leave the substantive review to the Executive Branch. If threshold questions are not answered, staff would notify the applicant and provide them with a reasonable time to respond, e.g. seven days, ultimately subjecting an application to dismissal if questions remain unanswered.

To protect the confidentiality of any sensitive commercial information, the Commission proposes to use its current rules for requesting confidential treatment of information. The Commission seeks comment on this proposal and whether the Commission should take special steps to ensure that responses are secure, such as setting up a secure portal for providing the responses.

The Commission further proposes to add a certification requirement to the rules, including certification that the applicant will:

Comply with applicable provisions of the Communications Assistance for Law Enforcement Act (CALEA);

Make communications to, from, or within the United States, as well as records thereof, available in a form and location that permits them to be subject to lawful request or valid legal process under US law, for services covered under the requested Commission license or authorization; and

Agree to designate a point of contact located in the United States who is a US citizen or lawful permanent resident for the execution of lawful requests and/or legal process.

By implementing the certification requirement, the Commission believes that it can eliminate the need for applicants with reportable foreign ownership to negotiate LOAs or routine mitigation measures, since the certification questions generally mimic commitments agreed to in such LOAs.

In a proposal that has already engendered some opposition, the Commission also seeks comments on whether all applicants seeking an international section 214 authorization or a submarine cable landing license, or applications to assign or transfer control of such authorizations and petitioners for section 310(b) foreign ownership rulings (common carrier wireless, common carrier satellite earth stations, or broadcast) should be required to make the certifications, not just those with reportable foreign ownership.

With regard to timing, the Commission proposes to adopt a 90-day period for Executive Branch review of applications and petitions. The Commission notes that in “rare instances” it proposes to allow a one-time additional 90-day extension provided the Executive Branch shows that complex issues warrant the extension and provides the Commission with the status of its review every 30 days thereafter. The time period for review would begin on the date the application is placed on public notice. If the Executive Branch does not notify the Commission within the 90-day period that it is requesting additional time to review the application, the Commission will act on the application.

Significantly, the Commission proposes that referral of international section 214 and submarine cable applications to the Executive Branch would take the applications off streamlined processing, since the Executive Branch requires more than 14 days to review the application.

Comments will be due 30 days after publication in the Federal Register.