Updated August 8, 2023.  Originally posted May 1, 2023.

Last week, comment deadlines were announced for a Federal Communications Commission (“FCC”) Order and Notice of Proposed Rulemaking (“NPRM”) that could have significant compliance implications for all holders of international Section 214 authority (i.e., authorization to provide telecommunications services from points in the U.S. to points abroad).  The rule changes on which the FCC seeks comment are far-reaching and, if adopted as written, could result in significant future compliance burdens, both for entities holding international Section 214 authority, as well as the parties holding ownership interests in these entities.  Comments on these rule changes are due Thursday, August 31, with reply comments due October 2.

Adopted in April, the FCC’s item proposing the new rules also includes an Order requiring all holders of international Section 214 authority to respond to a one-time information request concerning their foreign ownership. Although last week’s Federal Register publication sets a comment deadline for the proposed rules, the reporting deadline for the one-time information request has not yet been established.  However, because the FCC has fulfilled its statutory obligations regarding the new information collection presented by the one-time reporting requirement, carriers — as well as entities holding an ownership interest in these carriers — should prepare for the announcement of the reporting deadline.

The FCC’s latest actions underscore the agency’s ongoing desire to closely scrutinize foreign ownership and involvement in telecommunications carriers serving the U.S. market, as well as to play a more active role in cybersecurity policy. These developments should be of interest to any carrier that serves the U.S. market and any financial or strategic investor focused on the telecommunications space, as well as other parties interested in national security developments affecting telecommunications infrastructure.

Proposed Rule Changes for International Section 214 Authority

The FCC’s proposed changes to its regulation of international Section 214 authorizations generally concern additional compliance, disclosure, and reporting requirements. The FCC’s proposed rule changes are far-reaching, but the most notable of the proposals concern the following:

  • 10-Year Renewal Requirement or Periodic Review. Currently, international Section 214 authority does not expire; once granted, there is no need for the holder to update the FCC regarding its operations or its ownership. The only exceptions are if the holder files for a modification, assignment, or transfer of control, or seeks to stop providing services to existing customers. In these scenarios—and during the initial application process—the FCC’s rules provide for a public interest review, as well as referral to the group of Executive Branch agencies commonly known as “Team Telecom” for an evaluation of potential national security and law enforcement risks. However, the FCC’s current procedures do not otherwise provide an opportunity for the agencies to review existing international Section 214 authorizations. To address this, the FCC proposes two alternatives for comment.
    • 10-Year Renewal Requirement. The first alternative proposes to adopt a renewal framework in which international Section 214 authorizations would need to be renewed every 10 years. The renewal process would subject the license holder to the FCC’s public interest review, through which renewal applicants with reportable foreign ownership would be referred to the Team Telecom agencies for a new assessment of national security and law enforcement concerns. However, the FCC would routinely refer certain renewal applications without reportable foreign ownership, as well. Specifically, the FCC proposes to refer to Team Telecom renewal applications in which an applicant discloses any of the following: (1) Use of (or plans to use) a foreign-owned Managed Network Service Provider (“MNSP”); (2) Critical infrastructure (e.g., terrestrial fiber cables and related facilities) used to provide services crossing the U.S.-Mexico and/or U.S.-Canada borders (“Cross Border Facilities”); and (3) Use of equipment or services included in the FCC’s “Covered List” (e.g., Huawei, ZTE, etc.), created pursuant to the Secure and Trusted Communications Networks Act. We discuss these reporting criteria and the related concepts in further detail below.
    • 3-Year Periodic Review. In the alternative, the FCC proposes a system of periodic review in which it would review all international Section 214 holders in three-year intervals. Although the periodic review process would be similar to the renewal framework, the FCC would not cancel authorizations found contrary to the public interest or raising national security, law enforcement, or other concerns (as it would in a denial of a renewal application). Instead, if during its periodic review the FCC identified concerns warranting revocation of the international Section 214 authorization, the FCC would institute revocation proceedings. This would result in the authorization remaining effective by default until resolution of the revocation action.

The FCC seeks comment on these alternative frameworks, as well as on many other issues associated with the potential implementation of each. In addition, the FCC asks whether it should consider a hybrid approach in which the 10-year renewal framework would apply to international Section 214 applicants granted authority after the effective date of the new rules and the 3-year periodic review process would apply to entities granted international Section 214 authority before the effective date.

  • Ongoing Reporting Requirements. The FCC proposes that upon the grant of any application for international Section 214 authorization—including a modification or an assignment or transfer of control application—the holder of the authorization would have to provide the FCC with updated ownership information, Cross Border Facilities information (discussed below), and other information every three years. This obligation would run every three years until the FCC granted a subsequent application (e.g., a new modification or transfer of control application), at which point the three-year reporting cycle would restart. These reports—which would be required throughout the FCC’s proposed 10-year renewal period, as well—would need to contain information current as of 30 days prior to submission.
  • Five Percent Threshold for Reportable Ownership Interests. As discussed above, the FCC’s current rules require that applicants for international Section 214 authority identify all individuals and entities with a 10 percent or greater economic or voting interest in the applicant. The FCC proposes to lower this reporting threshold to 5 percent, which would require the disclosure of all 5 percent or greater economic or voting interests in new applicants for international Section 214 authority, as well as in assignment and transfer of control applications involving international Section 214 license holders. This would align the FCC’s reportable interest standard with the current disclosure requirements of Team Telecom’s standard triage questionnaire – the initial set of questions sent to parties whose applications have been referred to Team Telecom for a review of national security and law enforcement risks.
  • Disclosure of Current/Expected Services and Associated Geographic Markets. Currently, the FCC only requires an applicant for international Section 214 authority to indicate whether it seeks to provide (1) facilities-based services, (2) resold (i.e., non-facilities-based) services, or (3) unique services not covered by these two general categories. The FCC’s proposed rule changes would require that applicants for international Section 214 authority—as well as international Section 214 holders seeking approval for a modification, assignment, or transfer of control—provide additional information about their current and/or expected future services and the geographic markets in which they offer (or plan to offer) these services. Specifically, applicants would need to provide the following information:
    • A description of the specific services the authorization holder or applicant provides and/or will provide using the international Section 214 authority;
    • A description of the types of customers to which the authorization holder or applicant provides or will provide service;
    • A description of whether the services will be provided through facilities the authorization holder or applicant owns or in which it has an indefeasible-right-of-use or leasehold interest, or through the resale of other companies’ services; and
    • A description of where the authorization holder or applicant currently provides—or in the future intends to market, offer, or provide—services using the international Section 214 authority (e.g., U.S. state or territory, U.S.-international route, and/or globally).
  • Disclosure of Use of Foreign-Owned MNSPs. The FCC proposes that applicants for international Section 214 authority identify in their applications (again, including for modification, assignment, and transfer of control applications) whether they use—or in the future will use—foreign-owned MNSPs. Under the proposed rules, the FCC would consider as an MNSP any “third part[y] with access to [a] telecommunications network, systems, or records [for the purpose of providing] Managed Services [supporting] core domestic and international telecommunications services, functions, or operations.”The FCC seeks comment on many issues related to the potential disclosure of foreign-owned MNSPs, including on the criteria that would determine whether a given MNSP is “foreign-owned.”
  • Information on Cross Border Facilities. Consistent with the FCC’s proposal to require similar information under its renewal framework and periodic reporting requirement, the FCC proposes collecting from current international Section 214 authorization holders information related to their use of critical infrastructure to provide services across U.S. borders. Specifically, the FCC would require the following information on Cross Border Facilities (i.e., physical telecommunications facilities, such as terrestrial fiber, used to provide service crossing the U.S.-Mexico and/or U.S.-Canada borders):
    • Location of each Cross Border Facility (street address and coordinates);
    • Name, street address, e-mail address, and telephone number of the owner of each Cross Border Facility, including the government, state, or territory under the laws of which the facility owner is organized;
    • Description of the equipment to be used in the Cross Border Facilities, including equipment used for transmission and servers and other equipment used for the storage of information and signaling in support of telecommunications;
    • Identification of all IP prefixes and autonomous system domain numbers acquired from the American Registry for Internet Numbers (“ARIN”) used by the Cross Border Facilities; and
    • Identification of any services that the international Section 214 holder or applicants provides—or plans to provide—using the international Section 214 authority.

This requirement would apply to applicants seeking facilities-based international Section 214 authority, as well as applicants for resale-based authority (in which case the application would need to identify the facilities leased—or planned for lease—to provide services from the U.S. into Canada and/or Mexico). The FCC also would require that all current international Section 214 holders provide the above information to the agency within 60 days of the effective date of the new rule (if adopted). The FCC also proposes that all international Section 214 holders notify the FCC within 30 days after commencing service in any new Cross Border Facility (or commencing service with a new underlying Cross Border Facility provider).

  • Additional Certifications. In addition to proposing that applicants for international Section 214 authority provide a general certification that they are in compliance with the Communications Act, the FCC’s rules, and other laws, the FCC proposes the following additional certification requirements, which would apply to new applications, as well as modifications and applications for assignments and transfers of control:
    • Facilities Cybersecurity Certification. Under the proposed rules, applicants would have to certify that they will work to implement and adhere to “baseline cybersecurity standards” based on “universally recognized” standards such as those provided by the Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency (“CISA”) or the Department of Commerce’s National Institute of Standards and Technology (“NIST”).
    • “Covered List” Certification. The FCC proposes that applicants certify whether they use equipment or services identified on the FCC’s “Covered List” (see above). This certification would apply to any covered equipment or services purchased, rented, leased, or otherwise obtained on or after August 14, 2018 (for Huawei, ZTE, Hikvision, Dahua, and Hytera), or on or after 60 days following the date the specific equipment or service was placed on the FCC’s Covered List.
  • Other Changes to the FCC’s International Section 214 Rules. As noted above, the FCC’s proposed rule changes are far-reaching and involve a large number of issues, many of which are complex. The following are some of the other notable issues raised in the NPRM:
    • Limit of One International Section 214 Authorization per Entity. Currently, an entity may hold multiple international Section 214 authorizations. The FCC proposes a rule that would limit an authorization holder to a single international Section 214 authorization (i.e., a specific International Bureau Filing System number), except in certain limited circumstances. This would require that any authorization holder with multiple international Section 214 authorizations file to surrender the excess authorization(s). Because of the way the FCC’s rules are structured (they permit an authorized carrier to provide service through any wholly owned direct or indirect subsidiaries, but not through a mere affiliate), it also could end up requiring certain providers to undertake internal restructurings to facilitate the ability of multiple commonly-owned service provider entities to rely on a single Section 214 authorization.
    • International Signaling Point Codes. An International Signaling Point Code (“ISPC”) is a code used to route domestic voice traffic to an international provider. For applicants seeking to assign or transfer control of their international Section 214 authorization, the FCC proposes that these entities be required to identify in their application whether they hold any ISPCs, as well as whether these ISPCs would be included in the transaction.

Please note that these summaries are not comprehensive—the NPRM asks many questions associated with the rule changes identified above and proposes many additional changes that could affect the compliance obligations of international Section 214 holders and their owners. Given the significance of the changes the FCC proposes, we recommend that international Section 214 holders and any entities with financial interests in these licensees contact legal counsel to discuss the implications of the FCC’s Order and NPRM.

One-Time Information Collection

The FCC’s one-time information collection is relatively straightforward – all entities holding international Section 214 authority will have to submit a filing to the FCC identifying (by name, address, citizenship, and principal business) each foreign individual and foreign-organized entity with a 10% or greater economic or voting interest in the international Section 214 license holder.  This requirement also will apply to any foreign individuals or foreign-organized entities controlling such a “reportable interest.”  Each international Section 214 holder also will need to certify, via an affidavit or other signed verification from an authorized representative, to the accuracy of the ownership information provided.

The disclosure requirement will apply to all international Section 214 holders, but each response may fall into a different submission category based on the nature of a holder’s foreign ownership. There are three categories: (1) reportable foreign ownership, including “foreign adversary” ownership (i.e., China, including Hong Kong; Cuba; Iran; North Korea; Russia; and the Maduro Regime); (2) reportable foreign ownership, with no “foreign adversary” ownership; and (3) no reportable foreign ownership. These categories will be most relevant to determining which filing forms apply, but they also reflect what the FCC cites as a key motivation for the new information collection (and the proposed rule changes the collection is intended to support)—the advancement of national security and foreign policy interests.

The deadline for the foreign ownership disclosure will not be determined until a separate Public Notice appears in the Federal Register.  However, because the FCC received approval for the new information collection in early June, the reporting deadline could be announced soon.  Identifying all 10% or greater foreign ownership interests can be a complex exercise, so it would be prudent for all international Section 214 holders – and any entities with significant ownership in, or control over, an international Section 214 holder – to plan for the forthcoming reporting requirement.

Photo of Matthew DelNero Matthew DelNero

Matt DelNero provides expert regulatory counsel to companies of all sizes in the telecommunications, technology and media sectors. As a former senior official with the FCC and longtime private practitioner, Matt helps clients achieve their goals and navigate complex regulatory and public policy…

Matt DelNero provides expert regulatory counsel to companies of all sizes in the telecommunications, technology and media sectors. As a former senior official with the FCC and longtime private practitioner, Matt helps clients achieve their goals and navigate complex regulatory and public policy challenges.

Matt serves as co-chair of Covington’s Technology & Communications Regulation (“TechComm”) Practice Group and co-chair of the firm’s Diversity, Equity, & Inclusion initiative.

Matt advises clients on the full range of issues impacting telecommunications, technology and media providers today, including:

  • Structuring and securing FCC and other regulatory approvals for media and telecommunications transactions.
  • Obtaining approval for foreign investment in broadcasters and telecommunications providers.
  • Broadband funding under federal and state programs, including under the FCC’s Universal Service Fund (USF) and NTIA’s Broadband Equity, Access, and Deployment (BEAD) Program.
  • Representing broadcasters, media networks, and other content owners and producers on both existing and proposed FCC regulations and policies.
  • FCC enforcement actions and inquiries.
  • Online video accessibility, including under the Communications and Video Accessibility Act (CVAA) and Americans with Disabilities Act (ADA).
  • Equipment authorizations for IoT and other devices.
  • Spectrum policy and auctions, including for 5G.
  • Privacy and data protection, with a focus on telecommunications and broadband providers.

Matt also maintains an active pro bono practice representing LGBTQ+ and other asylum seekers, as well as veterans petitioning for discharge upgrades—including discharges under ‘Don’t Ask, Don’t Tell’ and predecessor policies that targeted LGBTQ+ servicemembers.

Prior to rejoining Covington in January 2017, Matt served as Chief of the FCC’s Wireline Competition Bureau. He played a leading role in development of policies around net neutrality, broadband privacy, and broadband deployment and affordability under the federal Universal Service Fund (USF).

Chambers USA ranks Matt within “Band 1” in his field and reports that he is a “go-to attorney for complex matters before the FCC and other federal agencies, drawing on impressive former government experience.” It also quotes clients who praise him as “an outstanding regulatory lawyer…[who] understands the intersection between what’s important for the client’s operations and how the law impacts those operations.”

Photo of Yaron Dori Yaron Dori

Yaron Dori has over 25 years of experience advising technology, telecommunications, media, life sciences, and other types of companies on their most pressing business challenges. He is a former chair of the firm’s technology, communications and media practices and currently serves on the…

Yaron Dori has over 25 years of experience advising technology, telecommunications, media, life sciences, and other types of companies on their most pressing business challenges. He is a former chair of the firm’s technology, communications and media practices and currently serves on the firm’s eight-person Management Committee.

Yaron’s practice advises clients on strategic planning, policy development, transactions, investigations and enforcement, and regulatory compliance.

Early in his career, Yaron advised telecommunications companies and investors on regulatory policy and frameworks that led to the development of broadband networks. When those networks became bidirectional and enabled companies to collect consumer data, he advised those companies on their data privacy and consumer protection obligations. Today, as new technologies such as Artificial Intelligence (AI) are being used to enhance the applications and services offered by such companies, he advises them on associated legal and regulatory obligations and risks. It is this varied background – which tracks the evolution of the technology industry – that enables Yaron to provide clients with a holistic, 360-degree view of technology policy, regulation, compliance, and enforcement.

Yaron represents clients before federal regulatory agencies—including the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), and the Department of Commerce (DOC)—and the U.S. Congress in connection with a range of issues under the Communications Act, the Federal Trade Commission Act, and similar statutes. He also represents clients on state regulatory and enforcement matters, including those that pertain to telecommunications, data privacy, and consumer protection regulation. His deep experience in each of these areas enables him to advise clients on a wide range of technology regulations and key business issues in which these areas intersect.

With respect to technology and telecommunications matters, Yaron advises clients on a broad range of business, policy and consumer-facing issues, including:

  • Artificial Intelligence and the Internet of Things;
  • Broadband deployment and regulation;
  • IP-enabled applications, services and content;
  • Section 230 and digital safety considerations;
  • Equipment and device authorization procedures;
  • The Communications Assistance for Law Enforcement Act (CALEA);
  • Customer Proprietary Network Information (CPNI) requirements;
  • The Cable Privacy Act
  • Net Neutrality; and
  • Local competition, universal service, and intercarrier compensation.

Yaron also has extensive experience in structuring transactions and securing regulatory approvals at both the federal and state levels for mergers, asset acquisitions and similar transactions involving large and small FCC and state communication licensees.

With respect to privacy and consumer protection matters, Yaron advises clients on a range of business, strategic, policy and compliance issues, including those that pertain to:

  • The FTC Act and related agency guidance and regulations;
  • State privacy laws, such as the California Consumer Privacy Act (CCPA) and California Privacy Rights Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Virginia Consumer Data Protection Act, and the Utah Consumer Privacy Act;
  • The Electronic Communications Privacy Act (ECPA);
  • Location-based services that use WiFi, beacons or similar technologies;
  • Digital advertising practices, including native advertising and endorsements and testimonials; and
  • The application of federal and state telemarketing, commercial fax, and other consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), to voice, text, and video transmissions.

Yaron also has experience advising companies on congressional, FCC, FTC and state attorney general investigations into various consumer protection and communications matters, including those pertaining to social media influencers, digital disclosures, product discontinuance, and advertising claims.

Photo of Jonathan Wakely Jonathan Wakely

Jonathan Wakely practices at the intersection of national security and the private sector, advising clients on a range of significant international trade, cross-border investment, national security, supply chain security, and public policy matters.

Mr. Wakely has been recognized by Chambers USA for his…

Jonathan Wakely practices at the intersection of national security and the private sector, advising clients on a range of significant international trade, cross-border investment, national security, supply chain security, and public policy matters.

Mr. Wakely has been recognized by Chambers USA for his leading expertise in securing national security-related regulatory approvals for foreign investments. He regularly represents clients before the Committee on Foreign Investment in the United States (CFIUS), the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (better known as “Team Telecom”), and the Defense Counterintelligence and Security Agency (DCSA) in proceedings related to the mitigation of foreign ownership, control, or influence (FOCI). He was deeply involved on behalf of clients in the development of the Foreign Investment Review Modernization Act of 2018 (“FIRRMA”), which reformed CFIUS’s authorities, and its implementing regulations.

Mr. Wakely has advised on transactions with an aggregate value in excess of $250 billion across virtually all sectors, including semiconductors, telecommunications, financial services, software, IT services, energy, and real estate. His recent representations include successfully defending Qualcomm against the attempted hostile takeover by Broadcom, securing approval for the acquisition of Genworth Financial by China Oceanwide, and representing Ford Motor Company in connection with a $2.6 billion investment by Volkswagen in Ford’s autonomous driving subsidiary, Argo AI. He has negotiated and advised companies on compliance with many of the most significant, complex, and sensitive national security agreements of the past decade.

Mr. Wakely also regularly advises clients on public policy and government relations matters involving international trade, cross-border investment, and national security. He has represented trade associations, Fortune 100 companies, and sovereign states before Congress and the executive branch, including by designing and executing government relations campaigns to achieve policy, regulatory, and legislative goals.

Mr. Wakely is an adjunct professor at the Georgetown University Law Center, where he teaches a course on national security and the private sector. He has also published extensively on matters related to the regulation of foreign investment; his articles have appeared in the Harvard National Security Journal, The International Lawyer, and the Global Trade and Customs Journal. Before joining Covington, he served as a political analyst with the Central Intelligence Agency (CIA), where he provided strategic analysis to the President and other senior policymakers.

Photo of Janine Slade Janine Slade

Drawing upon her experience at the U.S. Department of Homeland Security (DHS), Janine Slade advises clients on the U.S. national security review process administered by the Committee on Foreign Investment in the United States (CFIUS) and related reviews conducted by the interagency working…

Drawing upon her experience at the U.S. Department of Homeland Security (DHS), Janine Slade advises clients on the U.S. national security review process administered by the Committee on Foreign Investment in the United States (CFIUS) and related reviews conducted by the interagency working group known as “Team Telecom.”

Ms. Slade served in a number of roles during her nearly 10-year tenure at DHS, including as Deputy Director, Foreign Investment Risk Management, and as an Attorney Advisor in the Office of the General Counsel. She advised Department leadership and component offices on matters relating to CFIUS and Team Telecom, assisted with compliance oversight of CFIUS national security agreements, and negotiated national security risk mitigation measures with corporate counsel for companies under review and investigation by CFIUS and Team Telecom. She also provided technical assistance to congressional staff and the CFIUS chair on Foreign Investment Risk Reduction & Modernization Act (FIRRMA) statutory reform and accompanying regulatory reform efforts.

Photo of Corey Walker Corey Walker

Corey Walker advises clients on a broad range of regulatory, compliance, and enforcement matters in the media, technology, satellite and space, and telecommunications sectors. Corey also provides strategic counsel to leading media, sports, and technology companies on gaming matters, with a focus on…

Corey Walker advises clients on a broad range of regulatory, compliance, and enforcement matters in the media, technology, satellite and space, and telecommunications sectors. Corey also provides strategic counsel to leading media, sports, and technology companies on gaming matters, with a focus on sports betting, fantasy sports, and online gaming.

Corey represents clients before the Federal Communications Commission in connection with a range of policy and compliance issues, including satellite and earth station operations, radiofrequency (RF) spectrum use and availability, and experimental licensing for new and innovative technologies. He also advises clients on structuring transactions and securing regulatory approvals at the federal, state, and local levels for mergers, asset acquisitions, and similar transactions involving FCC and state telecommunications licensees and companies holding private remote sensing space system licenses issued by the National Oceanic and Atmospheric Administration.

Corey also maintains an active gaming and sports betting practice, and routinely counsels companies on state licensing and compliance matters, including those that pertain to fantasy sports and online gaming.