Executive Order Formalizes Review of Foreign Investment in Telecommunications

President Donald Trump has issued an executive order creating an inter-agency review body to determine whether foreign investment in U.S. telecommunications companies presents national security issues. However, the executive order merely formalizes and change the longstanding “Team Telecom” process through which proposed foreign investment in the U.S. telecommunications industry have been evaluated. Like the previous body, the new body will consist of representatives from the Departments of Defense, Homeland Security, and Justice and other agencies in an advisory role. Notably, a time limit will be set on how long these reviews should take. Moreover, a number of the changes will align this review process with the reforms enacted in 2018 to the Committee for Foreign Investment in the United States (CFIUS) process, and like the recent reforms to CFIUS, many of these reforms are aimed at countering Chinese companies’ growing investment in or purchase of U.S. companies in key industries.

The Executive Order (EO) “Establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector” creates the new “Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector” (Committee) chaired by the Attorney General. The EO explained “the primary objective of which shall be to assist the Federal Communications Commission (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 services sector.” Moreover, the “The function of the Committee shall be:

(i) to review applications and licenses for risks to national security and law enforcement interests posed by such applications or licenses; and

(ii) to respond to any risks presented by applications or licenses by recommending to the FCC, as appropriate and consistent with the provisions of this order, that it dismiss an application, deny an application, condition the grant of an application upon compliance with mitigation measures, modify a license with a condition of compliance with mitigation measures, or revoke a license.”

The Committee “shall review and assess applications to determine whether granting a license or the transfer of a license poses a risk to national security or law enforcement interests of the United States” and must render its assessment within 120 days. If a secondary assessment is required “is warranted because risk to national security or law enforcement interests cannot be mitigated by standard mitigation measures,” then an additional 90 day review period may commence.

In a statement, Federal Communications Commission Chairman Ajit Pai said, “I applaud the President for formalizing Team Telecom review and establishing a process that will allow the Executive Branch to provide its expert input to the FCC in a timely manner.” He claimed that “[n]ow that this Executive Order has been issued, the FCC will move forward to conclude our own pending rulemaking on reform of the foreign ownership review process.” Pai stated that “[a]s we demonstrated last year in rejecting the China Mobile application, this FCC will not hesitate to act to protect our networks from foreign threats…[but] [a]t the same time, we welcome beneficial investment in our networks and believe that this Executive Order will allow us to process such applications more quickly.”

The pending rulemaking to which Pai referred was started under his predecessor former chair Tom Wheeler and would change the FCC’s review of foreign applications in these ways:

In this Notice of Proposed Rulemaking, we propose changes to our rules and procedures related to certain applications and petitions for declaratory ruling involving foreign ownership(together, “applications”). As discussed below, the Commission refers certain applications to the relevant Executive Branch agencies for their input on any national security, law enforcement, foreign policy, and trade policy concerns that may arise from the foreign ownership interests held in the applicants and petitioners (together, “applicants”). As part of our effort to reform the Commission’s processes, we seek to improve the timeliness and transparency of this referral process. More specifically, our goals here are to identify ways in which both the Commission and the agencies might streamline and facilitate the process for obtaining information necessary for Executive Branch review and identify expected time frames, while ensuring that we continue to take Executive Branch concerns into consideration as part of our public interest review.

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