Background

For over 20 years, the FCC has referred applications with reportable foreign ownership to a committee of Executive Branch agencies (including the Departments of Defense, Homeland Security, Justice, and others, colloquially referred to as “Team Telecom”) to consider the potential impacts on national security, law enforcement, foreign policy, and trade policy that may arise from the applicants’ foreign ties.  Considering the overlap of agencies and scope, many consider Team Telecom review to be a “sister” process to the more well-known CFIUS review.

While the FCC retains ultimate independent decision-making authority on applications under its purview, it has long been Commission policy to accord an “appropriate level of deference” to other agencies based on their expertise.  Upon referral, the committee would submit a series of questions seeking detailed information about the applicants’ ownership, business practices, and security protocols, among other things.  Based on the applicants’ responses, Team Telecom may: (1) decline to comment on the application (in effect, a green light for the Commission to proceed); (2) recommend that the Commission deny the application; or (3) negotiate a mitigation agreement with the applicants to address potential national security or law enforcement concerns.  Once executed, Team Telecom would file a non-objection with the FCC, subject to the applicants’ compliance with the terms of the agreement.

Impacted Applicants

In cases where an applicant had a 10% or greater direct or indirect foreign investor, the FCC referred applications for:

• Section 214 authority – new international Section 214 authorizations or the assignment or transfer of control of domestic or international Section 214 authority; and

• Submarine cable landing licenses – new licenses and the assignment or transfer of control of a submarine cable landing license.

The Commission also referred petitions seeking authority to exceed the Communications Act’s foreign ownership thresholds for broadcast, common carrier wireless, and common carrier satellite earth station applicants and licensees, and also retained discretion to refer (or exclude) any other applications as it saw fit.

Changes to the Team Telecom Referral Process

Unsurprisingly, the addition of new regulators and information requests led to substantial delays for applicants, who were often left in the dark on the status of their application.  As a result, in connection with an April 2020 Executive Order, the FCC was tasked with streamlining its referral process with the goal of improving transparency and predictability, and generally speeding up Team Telecom’s review.  To this end, while the Commission would continue to refer most of the same applications for Sec. 214 authorizations and submarine cable licenses, as well as foreign ownership petitions, the Commission adopted several changes:

• Categories of Applications: The Commission would no longer routinely refer standalone applications to transfer control of domestic Section 214 authority, or satellite earth station applications not associated with a foreign ownership petition.  The Commission also developed several new categories of applications that are excluded from the Team Telecom review process (while retaining the discretion to refer such applications).

• Standard Questions and Certifications:  Applicants would be required to respond to a set of Standard Questions and provide certain certifications, including compliance with CALEA and otherwise making records available in response to lawful U.S. requests or legal process.

• Filing Requirements:  Applicants would be required to complete and submit to Team Telecom their responses to the standard questions by the time they filed the triggering application and/or petition with the FCC.

• Review Timeline:  For its part, upon receiving complete responses to its questions, Team Telecom is limited to a 120-day initial review period followed by a discretionary 90-day secondary assessment.

Standard Questions

The FCC developed six distinct, though similar, sets of questions depending on the type of application at issue.  The information requested in the new questionnaire (often referred to as the “Triage Questionnaire”) can be broken down into five main categories: (1) corporate structure and shareholder information; (2) relationships with foreign entities; (3) financial condition and circumstances; (4) compliance with applicable laws and regulations; and (5) business and operational information, including services to be provided and network infrastructure.

Team Telecom may still follow up with application- and applicant-specific “Tailored Questions,” though the presence of a standardized questionnaire is intended to expedite, if not outright eliminate, these follow-up inquiries.

New Developments

Though it has been a few years since the Commission adopted these rules, several major elements—including the use of the FCC’s Standard Questions—only went into effect last week.  (The Paperwork Reduction Act of 1980 subjects new or modified information collection requirements from federal agencies to review by the White House’s Office of Management and Budget before they can be imposed on private entities—a process which only recently concluded for many of the FCC’s Team Telecom rules.)

In the intervening years, the FCC continued to refer applications to Team Telecom, which used variations of the then-pending Standard Questions (albeit variations that have, in the view of some applicants, expanded greatly in scope beyond the FCC’s original questionnaire).

For those familiar with the current process, the most impactful change will likely be the deadline by which applicants must submit their responses to the Standard Questions.  Until now, parties have submitted their application to the FCC, waited until the FCC referred the application to Team Telecom, and then waited some more until Team Telecom issued the Triage Questionnaire.  Going forward, applicants will need to determine ahead of time whether they are subject to referral, and must prepare and submit their questionnaire responses by the time they file the underlying FCC application.

As for the responses and materials applicants will be expected to provide, Team Telecom’s “return” to the original questionnaire may not necessarily offer the reprieve some may be expecting.  In addition to the Standard Questions, Applicants will still be subject to any additional Tailored Questions that Team Telecom sees fit to ask.  As a result, current commonplace inquiries that aren’t derived from the Standard Questions may still be fair game.

One additional note for parties that have recent experience with Team Telecom  responses to Triage Questionnaires and other Team Telecom information requests will no longer be transmitted over email.  Instead, applicants will request a link to Team Telecom’s file sharing platform and submit all responsive materials to that platform.

Next Steps

Businesses and other entities with FCC authorizations whose transfer or assignment may trigger Team Telecom review should familiarize themselves with these new processes.  Further, businesses that are considering (or are in the midst of) M&A activity should also take note of the Team Telecom process.  Just as for the related CFIUS review process, companies need to look ahead as early as possible to determine whether they will be subject to Team Telecom review, especially now that responses to the Standard Questions are due alongside the FCC application itself.

Hogan Lovells has full-service, cross-practice capabilities across interactions with the FCC and Team Telecom, the CFIUS review process, and transactions in the telecoms sector. We encourage you to contact your Hogan Lovells counsel to determine how these changes may impact your business and to discuss strategies for compliance.

Authored by Michele Farquhar and Warren Kessler.