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Industry Warns of FCC Overreach in Proposed International Authorization Rules

Industry groups and telecom investors raised concerns about FCC overreach in comments on an NPRM asking about changes to rules for Section 214 international authorizations, approved by commissioners 4-0 in April (see 2304200039). The FCC sought comment on rules requiring carriers to renew these authorizations every 10 years and on other potential changes to the authorization process. But Team Telecom urged the FCC to strengthen its rules.

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As we have stated previously in this proceeding, the national security landscape has evolved since the Commission granted many International [Section] 214 authorizations,” Team Telecom said in proceeding 23-119: “A complete and accurate ownership picture is critical for the Committee’s comprehensive review of law enforcement and national security risks associated with an authorization.”

The executive branch filing supported adopting a 5% threshold “because 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.” The committee agreed with many of the proposals in the NPRM, opposed by other commenters. “National security is a constantly evolving landscape and the Commission’s approach to International … authorizations should reflect that fact,” Team Telecom said.

Some proposed changes “although well-intentioned, miss the mark and will have a negative impact on the ability for licensees and their financial sponsors to attract capital for investment in U.S. telecommunications sector,” said a filing by five investment firms. Reducing the level of reportable ownership in holders of authorizations “from the longstanding 10 percent threshold to 5 percent is of particular concern,” they said.

A reduced reporting threshold is not necessary and would not advance the Commission’s goals in this proceeding,” the financial players said: “The Commission’s rules already account for cases in which a minority investment may be accompanied [by] control rights by requiring those investments to be disclosed under the Commission’s ‘de facto control’ standard.” Requiring additional disclosures will create confusion for investors and “could cause unforeseen complications that require re-arrangement of investments to comply with existing confidentiality obligations,” they said. The filing was signed by Berkshire Partners, DigitalBridge Group, EQT Fund Management, GI Manager and Palisade Investment Partners.

The Commission’s proposals to require more granular, public ownership disclosures and enhance the licensing requirements for International Section 214 authorizations are well-intentioned but overly broad and unduly burdensome,” said a joint filing by authorization holders: “Reducing the reportable ownership threshold will impact all carriers, regardless of whether they are domestic or foreign owned.” Licensees already face challenges collecting ownership information of their parent entities and investors, the joint filing argues. “These challenges will be heightened if the Commission adopts a lower reporting threshold, and a reduced public reporting threshold could reduce critical sources of legitimate funding for U.S. telecommunications infrastructure.” Companies on the filing include Cincinnati BellBestel (USA), Consolidated Communications, Global Cloud Xchange, GlobeNet Cabos Submarinos America, GTT Communications, Servicio di Telecomunicacion di Aruba and Tata Communications (Americas).

Investment Concerns

CTIA also warned the proposed rules could be harmful to investment in the telecom sector. The FCC already has the authority to revoke Section 214 authorizations for companies presenting a security risk and has done so in the past, CTIA said. “The Commission’s proposals would also dramatically increase the frequency of Team Telecom reviews and the amount of information Team Telecom receives for such reviews,” the group said.

CTIA said the FCC should complete a one-time collection of data from Section 214 authorization holders before taking other steps. The FCC authorized the collection when it approved the NPRM. CTIA noted Congress didn’t subject international authorizations to regular renewal requirements like those required of wireless and broadcast authorizations. “Because Congress did not create a regular renewal process for section 214 authorizations, the Commission should proceed with extreme caution and carefully consider the substantial burdens it will impose on carriers in this proceeding,” the wireless association said.

The Competitive Carriers Association raised similar questions about the legal underpinning of FCC action. CCA urged caution “in proceeding with proposals in the NPRM that are not based upon clear statutory authority or that otherwise may cause significant reporting and compliance burdens that are not narrowly tailored toward meeting the FCC’s stated policy goals.”

Verizon said it supports “targeted, reasonable, risk-driven actions” against companies that pose a threat to U.S. security. “The NPRM proposes sweeping, one-size-fits-all reporting and disclosure mandates by which the Commission would regularly demand proprietary and confidential details about issues such as data storage, access to stored information, and cross-border facilities (and other matters) from all authorization holders, regardless of whether they pose any articulable risk,” Verizon said. It warned about using the authorization process “to pursue an indiscriminate, ‘bulk’ collection of large sets of proprietary and confidential information.”

Others also urged caution. “At most, modest fine-tuning of the current, well-established process may be appropriate,” said T-Mobile. Incompas said the FCC “would benefit from reviewing the results of its onetime information collection and assessing the current state of play of current authorization holders prior to implementing an entirely new burdensome regulatory framework that introduces significant new obligations and so much uncertainty and cost on authorization holders.”