Team Telecom Proposal Still Taking Shape at FCC
With a week to go before a vote, there are broad industry concerns about an FCC proposal to reform Team Telecom, industry officials said in interviews last week. So-called Team Telecom is a working group of representatives from the federal agencies who look at the national security implications of foreign investment in U.S. communications companies. The commission is to take up a rulemaking at the June 24 commission meeting designed to “streamline” and increase the transparency of the Team Telecom process.
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FCC officials said the NPRM itself isn't expected to be controversial because it only tees up the issue. The “real action” will come if the commission takes up a final order, one agency official said. A senior FCC official said it’s unclear how much the agency can do on its own to reform the Team Telecom process. Chairman Tom Wheeler said last month the FCC can't set deadlines for executive branch review of pending transactions (see 1605250070). A lawyer who represents clients following the issue closely said he has been told the NPRM will propose deadlines for executive agencies to act, though the firmness of those deadlines remains a point of difference among commissioners.
The FCC already routinely establishes a time period for review when it sends applications to the executive branch, a commission official said Friday. The NPRM explores whether the changes proposed by NTIA can help facilitate a faster and more transparent review period and whether the FCC can establish realistic time frames for them to respond, recognizing that some applications may require more time to review based on the individual circumstances, the official said. The commission is working to streamline the process while making certain other federal agencies’ concerns are taken into consideration as part of the FCC's public interest review, the official said. Most commenters on the NTIA letter favored a 90-day review, though with exceptions if the executive branch has additional concerns, the official said.
"Team Telecom serves an important function, yet the process would be improved by additional clarity, including introducing timeframes for completing its review,” said Angela Giancarlo, a former aide to Commissioner Robert McDowell, now at Mayer Brown. “The proposal has the potential to speed the FCC’s consideration of transactions involving foreign investment.”
"I think it's pretty obvious the system needs to be improved," said Roger Entner, analyst at Recon Analytics. "Someone needs to be in charge who can set deadlines and compel others to move. No matter how much the FCC streamlines its process, if it cannot streamline the processes of other agencies or the executive branch, [the agency] will continue to be impacted by their pace."
In 2014, the FCC report on process reform urged a review of how the government examines transactions involving foreign ownership. “The Executive Branch review process, including questions to applicants, can add several months processing time to otherwise streamlined FCC proceedings where there is 10 percent or greater foreign ownership,” the report said. “In certain instances, mitigation agreements are required in order to address Executive Branch concerns.”
Last year, Commissioner Mike O’Rielly said the Team Telecom process was broken. Since the review is secret, industry gets no clarity on what may be acceptable in future transactions and decisions can be subject to politics, O’Rielly wrote. The process is a “black hole,” he said. “Once transaction applications are submitted, there is little to no information available to the Commission, much less applicants, on status or potential areas of concern, no timeline for conclusion, and way to discern which agency, if any, has concerns.”
In May, NTIA sent a letter to the FCC proposing changes, and the commission sought comment (see 1605240048).
Industry lawyers said they're concerned the cure is worse than the disease. NTIA’s idea of a fix is for the FCC to require applicants to “check a box” agreeing to turn over anything requested by law enforcement, a communications lawyer said. “All that’s doing is delegating that entire process to make it the FCC’s problem,” said a former FCC aide.
In a May 23 letter to the FCC, Glenn Richards and Joseph Cohen, lawyers at Pillsbury Winthrop, supported the NTIA letter, calling it a positive step. But they also argued the FCC should seek a timeline, perhaps 30 days, for Team Telecom to review initial applications that would otherwise be subject to streamlined review. “A fixed deadline would provide a degree of certainty that is much sought after by applicants, and should reduce the length of the process,” the Pillsbury letter said. NTIA also doesn’t address confidentiality protections of information filed at the FCC, an issue they said the commission should address.
CTIA, USTelecom and others stressed the importance of timely review, in their comments on the NTIA letter. USTelecom questioned whether the FCC really needs to collect the information requested by NTIA. “Not every application involving foreign ownership (in particular, de minimis foreign ownership) raises national security or related concerns,” USTelecom said. “The scope of any requirements to submit information and certifications up front should be as narrow as possible.” Both associations declined to comment beyond their May filings.
June 2, NTIA sent the FCC a follow-up letter with an “illustrative questionnaire” offering more guidance on the type and extent of information that may be required when submitting applications for various licenses handled by Team Telecom. “These questions would generally cover, to the extent applicable to the particular application, detailed information regarding the business organization and services, network infrastructure, relationships with foreign entities or persons, historical regulatory and penal actions, and capabilities to comply with applicable legal requirements, and would be shared with relevant Executive Branch departments and agencies to assist in the review of public interest factors,” NTIA wrote.