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FCC Foreign Ownership Comments
"[M]ultiple parties, cutting across a variety of sectors (including wireless, wireline, satellite, and broadcast), filed comments responding to the FCC Notice of Proposed Rulemaking (IB Docket No. 11-133) concerning simplification of the FCC foreign ownership review process. The comments reflect near-universal support for reform of the FCC foreign ownership review process, which most parties consider expensive, time-consuming, and unpredictable."
We earlier described the FCC Notice of Proposed Rulemaking (IB Docket No. 11-133) concerning simplification of the FCC foreign ownership review process under Section 310(b)(4) of the Communications Act. Initial comments were due by December 5, 2011. As of the deadline, multiple parties, cutting across a variety of sectors (including wireless, wireline, satellite, and broadcast), filed comments. Additionally, the Department of Justice (DOJ) and Department of Homeland Security (DHS) filed a joint comment, supported by the Department of Defense (DOD), to weigh in on matters of national security.
The comments reflect near-universal support for reform of the FCC foreign ownership review process, which most parties consider expensive, time-consuming, and unpredictable. Several commenters encouraged the FCC to assume a leadership role in adopting policies that reduce or eliminate barriers to foreign investment in the communications industry, which could trigger the adoption of similar trade policies by other countries.
A substantial number of parties agreed that, even though the proposed rule changes are a step in the right direction, they do not go far enough. Wireless carriers (including Vodafone, Verizon, and T-Mobile), the Satellite Industry Association, and the European-American Business Council urged the FCC to streamline the Section 310(b)(4) framework by eliminating the need for licensees to seek approval via the declaratory ruling process. Some of these parties proposed a notice regime as an alternative, in which a licensee could notify the FCC if it believed a proposed investment would cause its foreign ownership to exceed the 25% threshold. These proposals also featured a “shot clock,” under which the FCC, after receiving notice, would have a specified period of time (e.g., 30 days) to object to the proposed investment on certain grounds, such as if the investment constitutes a transfer of control under Section 310(d). Absent an objection, however, the proposed foreign investment would be automatically approved.
Another prominent issue on which parties commented concerns how the FCC should interpret Sections 310(b)(3) and (b)(4). In 2004, the FCC’s International Bureau (IB) released non-binding guidelines that concluded Section 310(b)(3)—which imposes a hard 20% cap that the FCC cannot waive—applies in cases of indirect, non-controlling foreign investment, while Section 310(b)(4)—which imposes a 25% cap that the FCC may waive in its discretion—applies in cases of indirect, controlling foreign investment. Several parties objected to the IB’s interpretation as contrary to the plain language and legislative history of the statute, FCC precedent, and U.S. trade commitments made at the World Trade Organization. Moreover, these parties argued that the IB’s construction yields an illogical and contradictory result by making the acquisition of a controlling interest easier than the acquisition of a non-controlling interest. These commenters strongly urged the FCC to correct the IB’s interpretation and clarify that Section 310(b)(3) only addresses direct foreign investment, while Section 310(b)(4) addresses all indirect foreign investment, controlling and non-controlling alike.
The DOJ, DHS, and DOD were the only parties that objected to the FCC's proposed rule changes, which they perceive as potentially impairing their ability to address matters of national security and law enforcement. They recommended that the FCC refrain from adopting any rules that would eliminate their opportunity to review foreign investment in wireless carriers. The other commenters anticipated such concerns, however, and most expressly recognized that the FCC should continue to defer to the Executive Branch on matters of national security, law enforcement, foreign policy, and trade policy.
The Minority Media and Telecommunications Council (MMTC), representing minority interests in broadcasting, asked the FCC to reconsider its policy of restricting foreign investment in broadcasters, as they see no reason to disallow such foreign investment while allowing it for common carriers and other non-broadcast facilities. MMTC argued that relaxing such a restriction would afford broadcast entities, many of which are owned and operated by minorities, greater access to capital.
Reply comments in Docket 11-133 are due by January 4, 2012