For two decades, the Federal Communications Commission (FCC) has relied on an inter-agency consulting process to evaluate matters before it that potentially raise issues of national security, foreign policy and trade policy.  Specifically, the “Team Telecom” review process engages United States executive branch agencies like the Departments of Justice, Homeland Security and Defense in evaluating the broader national security, foreign relations and trade implications of proposed acquisitions or transfers of control of wireless, broadcast, undersea cable and other FCC-regulated companies. 

Over time, the Team Telecom review process has become widely criticized as inefficient, lengthy and opaque.  FCC Commissioner Michael O’Rielly recently described it as a “black hole . . . delaying or preventing U.S. companies from accessing new capital and opportunities or, even worse, leaving their applications in the ‘ether’ for years.”  Recognizing the need for reform, the FCC recently unanimously approved a Notice of Proposed Rulemaking (NPRM) to bring much needed clarity and predictability to the Team Telecom review process. 

The FCC is seeking comment on one of the NPRM’s proposals intended to make the Team Telecom review process more efficient and transparent, as briefly summarized below.  Comments and Reply Comments are due 30 and 45 days, respectively, after publication of the NPRM in the Federal Register, which is expected within the next two weeks. 

Key Aspects of the Team Telecom Review NPRM

• The FCC proposes a 90-day “shot-clock” for completion of the Team Telecom review process, with an additional one-time, 90-day extension available provided that the executive branch can show that it needs more time.
• The FCC requests comment on executive branch proposals to add affirmative certification requirements for all applicants—regardless of whether they have reportable foreign ownership interests—to certify compliance with several measures designed to mitigate potential national security or law enforcement issues.  These measures include certifying that the applicant has (1) complied with the Communications Assistance for Law Enforcement Act; (2) consented to making records of communications “to, from, or within the United States” available upon lawful request; and (3) agreed to designate a point of contact for service of legal process.
• To further streamline the review process, the NPRM proposes to itemize the information required for filing an application for approval of an acquisition or transfer of control involving reportable foreign ownership.  Under the proposal, applicants with foreign ownership would provide specified advance information about, among other things, ownership, network operations and financial condition.  The FCC’s staff would then review the responses to these threshold questions for completeness, while still leaving the substantive review to Team Telecom.
• The FCC also proposes to narrow the types of applications it will refer to the executive branch.  With respect to the foreign-ownership reporting obligations of Section 214 of the Communications Act (Section 214), by which the FCC grants authority for the provision of domestic and international long distance voice telecom services, the NPRM proposes to exempt applications for FCC approval of transfers of control of domestic Section 214 authority that have reportable foreign ownership interests, but do not include a corresponding international Section 214 transfer of control application.  The commission asks whether there are other categories of applications for foreign ownership that should also be exempt from Team Telecom review.

• Finally, the FCC proposes making some of the executive branch’s questions during the review process both standardized and public.  The FCC requests comment on whether answers should be provided when an application is filed, or if a later filing could serve the goal of expediting executive branch review of the applications.  The NPRM also notes that many answers may contain confidential information, and it requests comment on whether the FCC’s established procedures for protecting confidential information are sufficient.

FCC’s Next Steps

Following the comment cycle, the FCC will likely take six to nine months to adopt its final rules.  Although the NPRM garnered unanimous approval and addressed many of the common criticisms of the Team Telecom process, it is unlikely to be entirely free from controversy.  In particular, the FCC is likely to receive industry pushback on the extent to which it should be consolidating and storing the sensitive information that it receives, and whether responses to threshold questions should be presumptively confidential.  (The NPRM proposes to make threshold responses presumptively non-confidential.)  In addition, the FCC’s sweeping certification proposal is likely to be characterized as an overreach that is not properly tailored to the requirements and purpose of the Team Telecom review process. 

Moreover, the NPRM’s request for comments regarding certification requirements applicable to all “international 214” applicants seemingly runs against the NPRM’s objective of reducing regulatory burdens.  Some may also find the shot-clock proposal to be an inadequate response to the criticisms of the Team Telecom review process.  Nonetheless, the NPRM presents a real opportunity for stakeholders to pursue reforms to make the Team Telecom review faster, more reliable and less burdensome. 

 © 2016 Perkins Coie LLP