Team Telecom Emerges From the Shadows; FCC Gets Aggressive With Chinese Telecoms

The Committee, like its ad hoc predecessor, has the primary responsibility of reviewing applications for FCC authorizations, including license transfers, involving foreign ownership for national security or law enforcement concerns. In addition, the Committee “may” review existing licenses to identify national security or law enforcement risks, theoretically even if Team Telecom already looked at it during the application stage. The EO tasks the FCC with referring any existing authorizations and applications to the Committee, a practice previously used with Team Telecom.

The EO also imposes time limits for the application review process. This is a major shift from Team Telecom’s legacy process, which had no defined timeframes for review and lasted years in some cases. As discussed below, there are additional differences between Team Telecom’s practices and the process described in the EO.

FCC Implementing Rules Coming Soon

On April 27, 2020, the FCC issued a Public Notice seeking to refresh the record in a proceeding that began in 2016, entitled “Process Reform for Executive Branch Review of Certain FCC Applications and Petitions Involving Foreign Ownership.” In that proceeding, the FCC requested comments in connection with formalizing the practice of referring certain applications to Team Telecom. In the Public Notice, the FCC announced that interested parties may comment on the effect of the EO and any rules that the FCC should implement in connection with it. Comments will be due 30 days after the Public Notice is published in the Federal Register, and reply comments will be due 14 days after that.

Commenters will likely focus on, among other things, one or more of the following: (i) issues generally relating to the activities of the new Committee, (ii) issues concerning the timing and transparency of the new Committee’s activities in particular, (iii) issues relating to the nature of any certifications that applicants will need to make and the timing of those certifications, and (iv) issues relating to which applications should fall under this review process.

With respect to the last topic above, it is important to understand that it has been the FCC’s practice to refer to Team Telecom an application with foreign ownership if it involves one of the following:

1. International section 214 authority, which relates to US-international telecommunications service;
2. assignment or transfer of control of domestic or international section 214 authority involving 10% or greater direct or indirect foreign ownership;
3. a submarine cable landing license; and
4. assignment or transfer of control of a submarine cable landing license.

Additionally, the FCC also currently “refers petitions seeking authority to exceed the section 310(b) foreign ownership limits for broadcast and common carrier wireless licensees, including common carrier satellite earth stations.” Notably, in the FCC’s 2016 NPRM, there was no plan to expand the scope of applications potentially subject to Team Telecom review.

While these were the types of licenses that were of concern in 2016, with the advent of new technology, it is quite possible that new regulations will include additional subject matter that the FCC will choose to refer to the Committee. For example, the Commission may decide that other types of communications infrastructure, such as Voice over Internet Protocol (VoIP) and various wireless spectrum authorizations (e.g., radio frequency identification, or RFID), should be referred. Additionally, as previously analyzed, the US Government has escalated its interest in Chinese-origin telecom technologies and services, including the Administration’s Executive Order related to securing the telecom supply chain from “foreign adversaries,” the Department of Commerce’s proposed rules regarding the same, and amendments to the Federal Acquisition Regulations. Against this backdrop, it is possible the scope of the proceeding will expand to reflect these changes.

Summary of EO: Formalizing Team Telecom

As discussed, the purpose of the EO is to implement a formal process for reviewing FCC applications and certain existing licenses that involve non-US parties.

As with the legacy Team Telecom, the membership of the new Committee is comprised of representatives from several US Government departments and agencies: the Secretary of Defense, the Attorney General, the Secretary of Homeland Security, and “the head of any other executive department or agency, or any Assistant to the President, as the President determines appropriate.” Additionally, the Committee has several officials that will act as “advisors,” including the Secretary of State, the Secretary of the Treasury, the Secretary of Commerce, the Director of the Office of Management and Budget, the US Trade Representative, the Director of National Intelligence, the Administrator of General Services, the President’s National Security Advisor, the Assistant to the President for Economic Policy, the Director of the Office of Science and Technology Policy, the Chair of the Council of Economic Advisors, and “any other Assistant to the President as the President determines appropriate.” The responsibility of all roles can be delegated within each agency or department.

The Committee’s duties are outlined in some detail. As noted above, the ultimate purpose of the Committee is to identify risks to national security or law enforcement in relation to FCC license applications and existing licenses that involve non-US parties. As appropriate, the Committee can request additional information about the application or license from the applicant or licensee. Discussed in more detail below, the Committee can also require the adoption of mitigation measures as conditions to the FCC granting a license, along with ongoing compliance monitoring related to such conditions.

As with the Committee’s duties, the process for reviewing applications and existing licenses is clearly spelled out in the EO. Importantly, the EO ostensibly implements firm deadlines for the review periods, a significant new development given that applications sometimes languished for years in Team Telecom purgatory. However, the deadlines to complete a review are triggered by the Committee chair determining that “the applicant’s responses to any questions and information requests from the Committee are complete.” It thus remains to be seen how quickly the Committee chair will determine that responses are complete in practice.

After completing its review, the Committee has three options in the case of an application:

• Advise the FCC that it has no objection to the license;
• Recommend that the FCC deny the application; or
• Recommend that the FCC implement mitigation measures.

For existing licenses, the Committee can respond with:

• A recommendation that the FCC modify the license to include mitigation measures;
• A recommendation that the FCC revoke the license; or
• Take no action with respect to the license.

If the Committee identifies a national security or law enforcement concern, it can require “standard” mitigation measures, which are not yet formally established. The Committee can also require non-standard mitigation conditions with the approval of any authorization. Further, the Committee is now required to monitor any mitigation measures that get imposed. And it can determine that a licensee has not complied with a mitigation measure and thus revoke the license or potentially impose additional conditions.

FCC Signals More Intense Scrutiny for Chinese Telecoms

On April 24, 2020, the FCC issued “show cause” orders against four Chinese telecom companies, expressing concern over these companies’ relationships with the Chinese government and affording them an opportunity to make arguments against the revocation of their existing authorizations. One of those companies, China Telecom Americas, was the subject of a  highly publicized April 9, 2020, Team Telecom recommendation to revoke more than one international Section 214 authorizations.

The FCC, on May 9, 2019, had denied an application from China Mobile for authorization to provide international telecommunications services. That decision came on the heels of a Team Telecom review that lasted seven years, which frustrated some at the FCC and provided added impetus for the recent Executive Order.

Each of these developments is evidence of the US Government’s intensifying crackdown on Chinese telecoms, including Huawei and ZTE, which it views as significant national security threats.