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‘Team Telecom’ Formalized into New Committee; Increased Scrutiny of Chinese Involvement in US Telecommunications Services Continues

On April 4, 2020, President Trump issued an Executive Order (EO) establishing the ‘Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector’ (the Committee). The Committee replaces the ad hoc interagency group known as ‘Team Telecom’ in advising the Federal Communications Commission (FCC) on national security and law enforcement aspects of foreign involvement in the US telecommunications services sector. The EO establishes an official structure, timeline, scope of authority, and review process for the Committee. While this long-anticipated formalization of Team Telecom is facially neutral with respect to reviews of foreign participation in the US telecommunications services sector, it was undertaken as part of broader Executive Branch actions that have increased scrutiny of Chinese involvement.

 

Committee Purpose and Function

Under the terms of the EO, the Committee’s primary objective is to assist the FCC in its “public interest” review of national security and law enforcement concerns that may be raised by foreign participation in the US telecommunications services sector.

  • Members – The Committee retains the same members as the former Team Telecom: the Attorney General, the Secretary of Defense, and the Secretary of Homeland Security (collectively, the Members). The Committee may also include “the head of any other executive department or agency, or any Assistant to the President, as the President determines appropriate”. The Committee is chaired by the Attorney General (the Chair).
  • Advisors – The EO provides that eleven additional Executive Branch officials shall be advisors to the Committee (the Advisors).1 Advisors have no role in the Committee’s functions except as expressly set forth in the EO (described below).
  • Scope of Review – The EO permits Committee review of both new applications and existing licenses.
    • New Applications: The Committee must conduct a review of any application referred to it by the FCC to evaluate whether granting the requested license or license transfer may pose national security or law enforcement risks. The FCC’s practice with Team Telecom has been to refer (i) international section 214 and submarine cable landing license applications where an applicant has 10-percent-or-greater direct or indirect foreign ownership, and (ii) petitions seeking authority to exceed Communications Act Section 310(b) foreign ownership limits for broadcast and common carrier wireless licensees.
    • Existing Licenses: The EO also permits the Committee to review existing FCC licenses “to identify any additional or new risks to national security or law enforcement interests of the United States,” even in the absence of any change in foreign interest in the licensee, and presumably even licenses the applications for which had not qualified for referral to the Committee (or formerly, Team Telecom) in the first instance. Such a review must be approved by a majority vote of the Committee Members and notice of the review must be promptly provided to the Committee Advisors.
  • Requests for Information – The EO contemplates the Committee requesting information in connection with its reviews. Although not specified, this may include information requests akin to the “triage” question approach used by Team Telecom. The EO requires that the Members and the Director of National Intelligence enter into a Memorandum of Understanding (MOU) within 90 days to address their plan to implement the EO, including describing the questions and requests needed to conduct reviews.
  • Intelligence Community Threat Analysis – For each Committee review, the Director of National Intelligence, in coordination with the Intelligence Community, must provide a threat assessment within 30 days of the earlier of either the Chair’s request for such an analysis, or the Chair’s determination that an applicant’s or licensee’s responses to the Committee’s questions and information requests are complete. When requested by the Chair, the Director of National Intelligence must also provide a threat assessment related to compliance with and enforcement of mitigation measures imposed by the FCC as conditions on licenses as a result of Committee recommendations.
  • Timeline for Review – The Committee’s review of an application referred by the FCC potentially has two phases.
    • Initial Review: The Committee must complete an “initial review” within 120 days of the Chair’s determination that the applicant’s responses to the Committee’s questions and information requests are complete.
    • Secondary Assessment: If the Committee determines that additional time is warranted to evaluate national security and law enforcement risks and to decide the Committee’s recommendations, the Committee must complete a “secondary assessment” within 90 days of such determination.

While these timelines appear to impose some discipline on the Committee – indeed, the former Team Telecom was notorious for having no official deadlines, and in one review (China Mobile, see below) Executive Branch agencies reportedly took seven years to provide a recommendation to the FCC – the Committee has some discretion as to when the “initial review” begins (as the Committee itself determines whether responses are complete). The EO also permits both the “initial review” and the “secondary assessment” to be extended, in the Committee’s discretion, for unspecified periods of time if an applicant fails to respond to any additional information requests. 

The EO provides no timelines for a Committee review of an existing license.

  • Potential Outcomes of Review – With respect to a review of an application, the Committee may (i) advise the FCC that it has no objections, (ii) recommend that the FCC deny the application, or (iii) recommend that the FCC only grant the license or license transfer contingent on the applicant’s compliance with mitigation measures negotiated by the Committee.
  •  With respect to a review of an existing license, the Committee may (i) recommend that the FCC modify the license to include a condition of compliance with mitigation measures negotiated by the Committee, (ii) recommend that the FCC revoke the license, or (iii) take no action.
  • Escalation and Notification Processes – The EO instructs the Committee to attempt to reach consensus on any recommendations, and provides for escalation up to the Members themselves to reach consensus. If consensus still is not reached, the Committee’s recommendation is determined by majority vote, with the Chair breaking any tie.

    In addition, certain recommendations require notification to the Advisors and/or the President:

    • Advisors must be notified if the Committee’s recommendation is to deny an application, to grant an application contingent on “non-standard” mitigation measures, to modify an existing license to condition it on “non-standard” mitigation measures, or to revoke a license. (Note: The MOU required under the EO must define “standard” mitigation measures.) An Advisor has 21 days to indicate whether he/she opposes the recommendation. If one or more Advisors objects, the EO provides for coordination and escalation among the Advisors and Members to reach consensus on a recommendation. If consensus still is not reached, the Members (only) determine the recommendation by majority vote, with the Chair breaking any tie.

    • The President must be notified within seven days of any lack of consensus among Members, or objections by Advisors, if the Committee’s recommendation, or any Advisor objection, involves the denial of an application, the granting of an application contingent on “non-standard” mitigation measures, the modification of an existing license to condition it on “non-standard” mitigation measures, or revoking a license. While the EO does not specify what actions the President can or must take in response to such a notification, the Committee cannot transmit its recommendation to the FCC until at least 15 days after the President has been notified.

  • Confidentiality and Information Sharing – Consistent with Team Telecom’s practice, the EO requires that information provided to the Committee by applicants, licensees, or other entities may not be disclosed beyond Members and Advisors except as required by law, for administrative or judicial actions or proceedings, or law enforcement purposes. Information may also be shared with the Committee on Foreign Investment in the United States (CFIUS) with respect to transactions reviewed by CFIUS pursuant to 50 U.S.C. 4565 (see below for further background); and with other “governmental entities” at the Chair’s discretion, provided such governmental entities do not further disclose the information. “Governmental entities” is not defined in the EO, and presumably may include state and local US entities, as well as foreign governmental entities.

Despite the Committee’s newly formalized structure and functions, and potential involvement by a broader number of Advisors and the President, the Committee’s purpose remains that of Team Telecom: to assist the FCC’s “public interest” analysis. Ultimately, the FCC will still make an independent decision with respect to a particular application or license.

 

Broader China Context

The EO’s formalization of Team Telecom does not name any particular countries or persons, but it reflects yet another step in the Executive Branch’s increased scrutiny of Chinese involvement in the US telecommunications sector.

  • The EO itself – by formally involving the Intelligence Community, a broad range of Advisors, and potentially the President himself in Committee reviews – institutes a whole-of-Executive-Branch approach to the identification and resolution of national security and law enforcement concerns, and will likely put increased pressure on the FCC to follow any Committee recommendations.
  • The Executive Branch has recently sought to revoke Chinese authorizations. On April 9, 2020, the Department of Justice announced that the former Team Telecom unanimously recommended that the FCC revoke and terminate China Telecom (Americas) Corp.’s authorizations to provide international telecommunications services to and from the United States. According to the Department of Justice, Team Telecom “identified substantial and unacceptable national security and law enforcement risks associated with China Telecom’s operations, which render the FCC authorizations inconsistent with the public interest.” Team Telecom’s recommendation cited, among other factors: the evolving national security environment; increased knowledge of the PRC’s role in malicious cyber activity targeting the United States; inaccurate statements by China Telecom to US government authorities; inaccurate public representations by China Telecom concerning its cybersecurity practices; and the nature of China Telecom’s US operations, which provide opportunities for PRC state-actors to engage in malicious cyber activity enabling economic espionage and disruption and misrouting of US communications.
  • In May 2019, the FCC – consistent with the recommendation of Team Telecom – denied a separate application by the US subsidiary of China Mobile Ltd., another major Chinese telecommunications company, to provide telecommunications services between the United States and foreign destinations.
  • In May 2019, President Trump issued an Executive Order on “Securing the Information and Communications Technology and Services Supply Chain,” which authorizes the Secretary of Commerce, in consultation with other Executive Branch officials, to prohibit a wide range of transactions involving information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a “foreign adversary”. While no “foreign adversaries” have yet been designated, it is widely expected that they will include Chinese telecommunications companies. See our alerts here and here for further information on this Executive Order and draft implementing regulations.

 

Relation to CFIUS Review

The new Committee established by the EO to replace Team Telecom bears many similarities to CFIUS, such as defined membership, threat assessments provided by the Director of National Intelligence, two-stage reviews, and an emphasis on mitigation compliance and monitoring. Indeed, given their common agencies and common national security mandates, the former Team Telecom and CFIUS worked closely together to identify and address risks to national security in those transactions in the telecommunications services sector that involved both applications to the FCC and filings with CFIUS. We expect this close collaboration to continue under the new Committee.

It is important to note, however, that while the EO imposes some notional timelines on the new Committee’s reviews, those timelines (120 day initial review, 90 day secondary assessment) are still significantly longer than CFIUS’s review timelines (45 day review, 45 day investigation), and subject to imprecise beginnings and extensions. While it is a common belief that the stricter statutorily-mandated timelines of the CFIUS process might help to speed up the Team Telecom (now Committee) process for those transactions that involve both an application to the FCC and a filing with CFIUS, in practice it is equally common that – unless sufficient progress has been made in the Team Telecom (now Committee) review – the parties may need to withdraw and re-submit their CFIUS filing to allow for additional time. In past particularly complex transactions, rather than CFIUS speeding up Team Telecom, Team Telecom slowed down CFIUS. Therefore, we continue to recommend that any foreign investment that might involve both the FCC/Committee process and the CFIUS process begin the FCC/Committee process first and as early as practicable.

 

1 The Secretary of State, the Secretary of the Treasury, the Secretary of Commerce, the Director of the Office of Management and Budget, the United States Trade Representative, the Director of National Intelligence, the Administrator of General Services, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, the Director of the Office of Science and Technology Policy, the Chair of the Council of Economic Advisers, and any other Assistant to the President as the President determines appropriate.

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