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President Issues Executive Order on Review of Foreign Investment in U.S. Telecommunications Industry

Posted by Ash Johnston | Apr 08, 2020 | 0 Comments

On April 4, 2020, President Trump issued an Executive Order establishing a formal process for the “Team Telecom” national security review of Federal Communications Commission applications involving foreign ownership of communications companies. While telecom companies and foreign investors may find the process more rigorous, it also will likely be more transparent and predictable than the current "Team Telecom" review process.

The EO establishes a three-member Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, comprised of the Secretary of Defense, the Secretary of Homeland Security, and the Attorney General of the Department of Justice (as Chair), with the primary purpose of assisting the FCC in its public interest review of national security and law enforcement concerns that may be raised by foreign participation in the U.S. telecommunications services sector. The Committee's functions are to review applications and licenses for risks to national security and law enforcement interests and to respond to any such risks by recommending specific FCC action as specified in the EO, or advising that it has no recommendation.

The EO arrives during a period of heightened concerns about foreign participation in the U.S. telecommunications market, including recent FCC actions denial China Mobile's licensing application and blocking recipients of the federal Universal Service Fund subsidies from purchasing equipment from foreign companies that are deemed to be a national security threat, including Huawei and ZTE Corp.

Existing Licenses. A significant provision of the EO grants the Committee authority to review existing licenses to identify any additional or new risk to national security or law enforcement interests. Such action may be initiated by a majority vote of Committee members; the Committee may recommend that the FCC modify the license(s) to include a condition of compliance with mitigation measures or revoke the license.

Timelines. The EO establishes timelines for action by the Committee and its advisors (which include the Secretaries of State, Treasury, and Commerce; the Director of National Intelligence (DNI), and other federal officials, including any deemed appropriate by the President). The Committee has 120 days from the date the Chair determines that an applicant's responses to Committee questions and information requests are complete to (1) determine that granting an application for a license or to transfer an existing license raises no current risk to national security or law enforcement interests; (2) identify risks to national security or law enforcement interests raised by an application that may be addressed through standard mitigation measures recommended by the Committee; or (3) find 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. The Committee must complete a secondary assessment within 90 days after it determines that one is warranted.

In addition, the EO requires the DNI to produce a national security threat assessment for each application within 30 days from the date the Chair determines that an applicant's responses to questions or requests for information are complete, or 30 days from the date the Chair requests such an analysis.

Committee Recommendations. Following its initial review or secondary assessment, the Committee will advise the FCC that the Committee (1) has no objection to grant of the license application or transfer; (2) recommends that the FCC deny or revoke the application due to the risk to U.S. national security or law enforcement interests; (3) recommends that the FCC only grant the application or transfer contingent on the applicant's compliance with mitigation measures; or (4) recommends that the FCC modify a license to include a condition of compliance with mitigation measures negotiated by the Committee. The EO establishes a standard of “credible evidence that the application or license poses a risk to the national security of law enforcement interests of the United States” as the basis for any recommendation by the Committee. The Committee must notify the President of any recommendation. The EO also directs the Committee, upon the conclusion of its review and recommendation, to provide the FCC a risk-based analysis.

Implementation. By July 3, 2020, the Committee must enter into a Memorandum of Understanding (MoU) with the DNI describing its plan to implement and execute the EO. Among other things, the MoU must include standard questions and requests for information that will be issued to applicants and licensees and define standard mitigation measures.

FCC Chairman Pai and Commissioners O'Rielly and Carr released statements praising the EO. Commissioner O'Rielly has been highly critical of “Team Telecom” procedures, which he characterized as “incoherent and indefensibly unpredictable.” Commissioner Carr applauded the Committee's broad powers and called for the Committee to “examine every carrier owned by the Chinese government that now connects to networks here in the U.S.… [and to] focus on whether their existing ‘Section 214' authorizations should be revoked.”

About the Author

Ash Johnston

Ash Johnston, Member  Contact: Telephone: 202-552-5121 Email: [email protected] Ash Johnston advises communications and technology companies seeking to implement their legal, policy, and business objectives before federal and state regulators. His practice encompasses a broad range of m...

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