This month marks two years since the formation of the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (see our previous client alert here). Informally known as Team Telecom, this interagency committee assists the Federal Communications Commission ("FCC" or "the Commission") in reviewing national security and law enforcement concerns that may be raised by foreign participation in the US telecommunications sector1. In this alert, we refresh our 2020 overview of Team Telecom, including its history and notable developments, and provide an outlook on what to expect going forward given the increasingly robust review of the telecommunications sector, in particular as it relates to matters involving China.
Team Telecom Overview
History
Pursuant to the Communications Act of 1934, as amended, no telecommunications carrier may provide certain international services until it obtains from the FCC a certificate that such services will serve the public interest, convenience, and necessity.2 As part of its public interest analysis, the Commission considers whether such an application raises national security, law enforcement, foreign policy, or trade policy concerns related to the applicant's reportable foreign ownership.3 With regard to these concerns, the FCC has sought the expertise of the Executive Branch for over twenty-five years, referring cases to the Departments of Defense, Homeland Security, Justice, State, Commerce, and the US Trade Representative (the "Executive Branch Agencies").4 Although the FCC ultimately makes an independent decision, it has traditionally accorded deference to the Executive Branch Agencies' recommendations.5 Similarly, pursuant to Executive Order 10530, the FCC has been delegated the President's authority to grant licenses for the landing and operation of submarine cables.6 This executive order requires the Commission to obtain the approval of the State Department, and other Executive Branch agencies as necessary, before granting any such license.
Under these authorities, where an applicant has ten percent or greater direct or indirect foreign ownership, the FCC has referred the following types of applications to the Executive Branch Agencies for their input on any national security, law enforcement, foreign policy, and trade policy concerns: (1) international section 214 authority, (2) assignment or transfer of control of domestic or international section 214 authority, (3) submarine cable landing licenses,7 and (4) assignment or transfer of control of submarine cable landing license. The Commission has also referred petitions seeking authority to exceed foreign ownership levels for broadcast and common carrier wireless and common carrier satellite earth station applicants and licensees.8
Prior to 2020, upon receiving a referred application from the FCC, the Departments of Defense, Homeland Security, and Justice (informally known as "Team Telecom") initiated a review of the application by sending the applicant a set of questions seeking further information.9 Relying on the responses to these and any subsequent questions, Team Telecom conducted its review focused specifically on national security and law enforcement concerns.10 These opaque reviews often took years to complete. For example, in the China Mobile case discussed below, Team Telecom did not submit its recommendation to the FCC until seven years after the initial application was filed.11 Even in cases that were ultimately cleared, Team Telecom's average time for review between 2016 and 2019 was 260 days.12 This lack of transparency and timeliness resulted in calls by the FCC and members of the Executive Branch Agencies for telecom reform.13
Executive Order 13913
On April 4, 2020, the President signed Executive Order 13913 (the EO), "Establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector," formalizing Team Telecom (or "the Committee").14 Pursuant to the EO, the Committee's primary objective is to assist the FCC in its public interest review of national security and law enforcement concerns that may be raised by foreign participation in the United States telecommunications sector.15 The "Committee Members" include the Attorney General, who chairs the Committee, and the Secretaries of Homeland Security and Defense.16 For matters that may result in certain recommendations to the FCC, Committee Members consult "Committee Advisors" who include the Secretaries of State, Treasury, and Commerce; the Directors of the Office of Management and Budget, National Intelligence, and the Office of Science and Technology Policy; the United States Trade Representative; the Administrator of General Services; the Chair of the Council of Economic Advisers; and the Assistants to the President for National Security Affairs and to the President for Economic Policy.
New Timelines and Procedures
As we detailed in our last client alert, the EO creates a formal process within an established timeframe for the Committee to review applications for a license or transfer of a license referred by the FCC. The EO also allows the Committee to assess whether new national security or law enforcement concerns exist with respect to existing FCC licenses previously reviewed by interested Executive Branch Agencies.17
- 120-Day Initial Review: Upon receiving referral by the FCC of an application, the Committee reviews the application to evaluate whether granting the requested license or transfer of license may pose a risk to national security or law enforcement interests of the United States.18 Day one of the initial review period begins on the date the Chair determines that the applicant's responses to any questions and information requests from the Committee are complete.19
- For each license or application reviewed by the Committee, the Director of National Intelligence produces a written assessment of any threat to national security interests of the United States posed by granting the application or maintain the license.20 This analysis is provided to the Committee within thirty days from day one of the initial review period.21
- During the initial review period, the Committee may determine: (1) that there is no current risk to national security or law enforcement interests; (2) that any national security or law enforcement interests may be addressed through standard mitigation measures; or (3) that a secondary assessment of an application is warranted because risk to national security or law enforcement interests cannot be mitigated by standard mitigation measures.22
- 90-Day Secondary Assessment: When the Committee has determined that a secondary assessment is warranted, it conducts such an assessment to further evaluate the risk posed to the national security and law enforcement interests of the United States.23
- Recommendations by the Committee: The Committee can: (1) advise the FCC that the Committee has no recommendation for and no objection to the FCC; (2) recommend that the FCC deny the application; or (3) recommend that the FCC grant the license or transfer of the license contingent on the imposition of mitigation measures.24
- 21-Days to Oppose: If the Committee's determination is a recommendation to deny an application, to grant an application contingent on compliance with nonstandard mitigation measures, to modify a license to condition it upon compliance with non-standard mitigation measures, or to revoke a license, the Chair must notify the Committee Advisors. Within 21 days, the Committee Advisors advise the Chair whether they oppose the recommendation.25
- In cases where Committee Members and Committee Advisors cannot reach consensus on recommendations to deny or condition on non-standard mitigation, they submit a recommendation to the President.26
Notable Team Telecom Cases
China Mobile International (USA) Inc. ("China Mobile")
In 2011, China Mobile filed an application with the FCC requesting the authority to provide international telecommunications services.27 In May 2019, the FCC denied the application upon the recommendation of Team Telecom and other agencies28 which found that China Mobile was "vulnerable to [China's] exploitation, influence, and control and that [it] would likely comply with espionage and intelligence requests made by the Chinese government."29
Given the potential national security threat, Team Telecom found that mitigation measures were insufficient to address the risks posed by granting an international section 214 authorization to China Mobile, and recommended denying the application.30 The FCC agreed and concluded that a grant of China Mobile's application would not serve the public interest and subsequently denied the application.31
China Telecom (Americas) Corporation ("China Telecom")
In October 2021, the FCC revoked China Telecom's domestic authority and international authority to provide telecommunications services in the United States.32 The FCC had previously granted China Telecom two international section 214 authorizations conditioned on China Telecom abiding by mitigation measures imposed by Team Telecom in 2007.33 It had also previously authorized China Telecom to provide domestic interstate telecommunications services.
The revocation follows an April 2020 recommendation by Team Telecom that the Commission revoke and terminate China Telecom's international section 214 authorizations due to the "substantial and unacceptable national security and law enforcement risks associated with [China Telecom's] continued access to US telecommunications infrastructure pursuant to its international Section 214 authorizations."34 Team Telecom additionally concluded that China Telecom proved to be an untrustworthy and unwilling partner in the Executive Branch's mitigation efforts under the mitigation agreement imposed in 2007.35
After conducting its own assessment, the FCC agreed with Team Telecom's recommendation, finding that, among other things, China Telecom's "ownership and control by the Chinese government raise significant national security and law enforcement risks by providing opportunities for [China Telecom] and Chinese state-sponsored actors to access, store, disrupt, and/or misroute US communications, which in turn allow them to engage in espionage and other harmful activities against the United States."36
China Unicom (Americas) Operations Limited ("China Unicom")
In February 2022, the FCC revoked China Unicom's domestic and international authority to provide telecommunications services in the United States.37 The FCC had previously granted China Unicom two international section 214 authorizations in 2002, and authorized China Unicom to provide domestic interstate telecommunications services.38
In April 2020, the FCC required China Unicom to demonstrate why the Commission should not initiate revocation proceedings due to the concerns that it is indirectly and ultimately owned and controlled by the Chinese government.39 Supporting its concerns, the FCC referenced the Commission's findings discussed in the China Mobile case. After reviewing China Unicom's responses, and after receiving notice from Team Telecom stating that "the same national security and law enforcement concerns the Executive Branch raised in the [China Telecom] and [China Mobile] recommendations apply equally to [China Unicom]," the FCC revoked China Unicom's authorities.40
Pacific Networks Corp. ("Pacific Networks") and ComNet (USA) LLC ("ComNet")
In March 2022, the FCC revoked the domestic authority of Pacific Networks and its wholly-owned subsidiary, ComNet, and revoked and terminated their international authority. As with the previous cases where the FCC revoked companies' authorities, the Commission found that Pacific Networks and ComNet were "subject to exploitation, influence, and control by the Chinese government and are likely to be forced to comply with Chinese government requests without sufficient legal procedures subject to independent judicial oversight."41 In light of the changed national security environment with respect to China since the Commission first authorized Pacific Networks and ComNet to provide telecommunication services in the United States, such control by the Chinese government raised, in the FCC's view, "significant national security and law enforcement risks . . . ."42 In making its determination, the FCC relied, in part, on Team Telecom's advice and guidance.43
Outlook
As indicated in our April 2020 client alert following the EO, we expected increased scrutiny by the Committee of Chinese involvement in the US telecommunications sector. Since that time, the FCC, upon the advice and guidance of Team Telecom, has revoked various telecommunications licenses held by Chinese entities. We expect this heavy scrutiny—which has persisted during both the previous and current presidential administrations—to continue.
Consistent with this trend and the EO's express directive, we also expect Team Telecom to be more aggressive in reviewing existing licenses.44 In doing so, Team Telecom will apply its more robust procedures, including better coordination among Committee Members, Committee Advisors, and the Intelligence Community, which may not have been consulted when the licenses were first granted under Team Telecom's less formal approach pre-EO. This is also consistent with the FCC's interest in coordinating with the Executive Branch on implementing periodic reviews of foreign carriers' authorizations to "stay on top of evolving national security, law enforcement, policy, and trade risks."45 Unlike in the Committee on Foreign Investment in the United States ("CFIUS"), which provides a safe harbor (absent limited circumstances) to transactions that have cleared CFIUS's review, the FCC may revoke previously granted licenses. As the geopolitical climate becomes more uncertain, and as the Executive Branch's national security and law enforcement interests become more aggressive, we expect increased imposition of mitigation for, and revocation of, existing licenses held by foreign carriers.
For similar reasons, we expect the FCC, in consultation with Team Telecom, to more carefully scrutinize submarine cable landing licenses and more selectively grant special temporary authority related to such licenses. As the FCC noted in its China Telecom order, "[f]or too long, it was the practice of [the FCC] to unilaterally grant applicants special temporary authority to start building submarine cables while their applications were pending, even if those applications reflected ownership by state-owned companies that could represent a national security risk. That's no longer the case. Requests for special temporary authority to start construction can raise national security concerns too, and the FCC now sends such requests to [Team Telecom] for coordinated security review."46
1 Exec. Order No. 13,913, 85 Fed. Reg. 19643 (Apr. 8, 2020).
2 47 U.S.C. § 214(a); see also 47 U.S.C. § 310(d) (applying similar provisions to the transfer of ownership of existing licenses).
3 In the Matter of Rules and Policies on Foreign Participation in the US Telecommunications Market; Market Entry and Regulation of Foreign-Affiliated Entities, IB Docket No. 97-142 and 95-22, Report and Order and Order on Reconsideration, 12 FCC Rcd. 23891, 23918, ¶¶ 59-66 (1997) (hereinafter Foreign Participation Order 1997).
4 Foreign Participation Order 1997, ¶¶ 59-66 (prior to opening the US telecommunications market to foreign entry, the FCC previously referred select cases to the Executive Branch in an ad hoc manner).
5 Foreign Participation Order 1997, ¶ 62.
6 Exec. Order No. 10,530, 19 Fed. Reg. 2709, 2711-12 (May 10, 1954); 3 U.S.C. § 301; Submarine Cable Landing License Act, 47 U.S.C. §§ 34-39; see also Foreign Participation Order 1997 ¶ 87.
7 In the Matter of Process Reform for Executive Branch Review of Certain FCC Applications and Petitions Involving Foreign Ownership, IB Docket No. 16-155, Report and Order, 35 FCC Rcd. 10927 (Oct. 1, 2020) (hereinafter FCC Process Reform for Executive Branch 2020).
8 47 U.S.C. § 310(b)(4) (establishing a 25% benchmark for investment by foreign individuals, governments, and corporations in the controlling U.S. parent of these licensees); 47 U.S.C. § 310(b)(3) (limiting foreign investment in the licensee to 20%); see also FCC Process Reform for Executive Branch 2020, 3.
9 FCC Process Reform for Executive Branch 2020, 3.
10 Foreign Participation Order 1997, ¶¶ 59-66.
11 In the Matter of China Mobile Int'l (USA) Inc., 34 FCC Rcd 3361, at 25 (May 10, 2019).
12 FCC Process Reform for Executive Branch 2020, 5.
13 See China Mobile Int'l (USA) Inc., 34 FCC Rcd 3361, at 25 (Commission Michael O'Reilly noting "I have been calling for Team Telecom reform since 2015 . . . ."); see also Deputy Assistant Attorney General Adam S. Hickey, National Security Division, Department of Justice, Remarks at the Fifth National Conference on CFIUS and Team Telecom (Apr. 24, 2019), https://www.justice.gov/opa/speech/deputy-assistant-attorney-general-adam-s-hickey-national-security-division-delivers-0 ("we must reform the ad hoc process by which the Executive Branch advises on FCC licenses . . .").
14 Exec. Order No. 13913.
15 Id.
16 Id.
17 Id. Sec. 6.
18 Id. Sec. 5(b).
19 Id. Sec. 5(b)(iii).
20 Id. Sec. 7.
21 Id. Sec. 7(b).
22 Id. Sec. 5(b)(i).
23 Id. Sec. 5(c).
24 Id. Sec. 9(a).
25 Id. Sec. 9(f).
26 Id. Sec. 9(g).
27 China Mobile Int'l (USA) Inc., 34 FCC Rcd 3361, at 4.
28 Id. at 1, 2.
29 Id. at 8.
30 Id. at 19.
31 Id. at 20.
32 In the Matter of China Telecom (Americas) Corporation, 35 FCC Rcd 15006, at 1 (Dec. 14, 2020).
33 Id. at 6.
34 Id. at 9.
35 In the Matter of China Telecom (Americas) Corporation, Executive Branch Recommendation to the Federal Communications Commission to Revoke and Terminate China Telecom’s International Section 214 Common Carrier Authorizations, at 53.
36 Id. at 27.
37 In the Matter of China Unicom (Americas) Operations Limited, 36 FCC Rcd 6319, at 1 (Mar. 19, 2021).
38 Id. at 5.
39 Id.
40 Id. at 11.
41 In the Matter of Pacific Networks Corp. and ComNet (USA) LLC, 2022 FCC LEXIS 1010, at 2 (Mar. 23, 2022).
42 Id. at 2.
43 Id. at 13.
44 Exec. Order No. 13,913, Sec. 6.
45 China Telecom (Americas) Corporation, 35 FCC Rcd 15006, at 98.
46 Id.
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