On January 22, 2024, all holders of Section 214 authority granted by the Federal Communications Commission ("FCC" or "Commission") to provide international telecommunications services (i.e., common carrier services between U.S. and non-U.S. points) ("International 214 Holders") must respond to a one-time request by the FCC for data regarding their ownership ("Data Request"). The Data Request, adopted in an April 2023, Order, applies even if the International 214 Holder has no foreign ownership. The response to the Data Request is streamlined for certain International 214 Holders that had applications for initial authorization, modifications, or substantive transactions granted by the FCC in the past three years and meet other criteria, as detailed below. Noncompliance will subject International 214 Holders to potential monetary and other penalties up to and including license revocation.
The following Frequently Asked Questions ("FAQs") offers a practical guide to compliance with the Data Request. If you have a question that we did not anticipate below, please do not hesitate to reach out to one of the attorneys of the Kelley Drye Communications Group.
Note that this set of FAQs was prepared prior to the issuance of an anticipated public notice by the Office of International Affairs ("OIA") which will provide the form for reporting International 214 Holders to use in responding to the Data Request. Once that notice is issued, we plan to update these FAQs if necessary to reflect the guidance from the OIA.
Must my company submit a response to the Data Request?
If your company holds an international Section 214 authorization issued by the Commission, it must respond to the Data Request even if no foreign individual or entity has an interest in the International 214 Holder. (See below "What is the scope of the information affected International 214 Holders must provide in response to the Data Request?")
If your company provides international telecommunications only on a private carrier basis or even if your company is not providing any communications services at all, but you are an International 214 Holder, you must respond to the data request.
If a Company's International Section 214 authorization has been, or will be, surrendered (or revoked) prior to January 22, 2024 (the "Filing Deadline"), you need not respond to the Data Request. (The FCC has encouraged International 214 Holders no longer needing their authorizations to surrender them in advance of the Filing Deadline via a surrender letter.)
Does the Data Request apply to carriers that only hold domestic (interstate) Section 214 authority?
No. The Data Request is being issued only to entities holding international Section 214 authority (whether or not they provide Section 214 domestic (i.e., interstate) services as well).
When are responses due to the one-time Data Request imposed by the Order?
Responses to the Data request are due no later than January 22, 2024.
See below "What should my company (if it is an International 214 Holder) do now to prepare for responding to the Data Request?"
What are the consequences for International 214 Holders that fail to respond?
As noted in the Order, the FCC is seeking comment regarding the appropriateness of revoking the authorizations of International 214 Holders that do not respond to the Data Request and/or subjecting International 214 Holders that submit responses after the Filing Deadline (or submit incomplete responses) to the imposition of monetary penalties and other enforcement action. Current FCC rules would provide a basis for forfeiture penalties at a minimum.
What is the scope of the information International 214 Holders must provide in response to the Data Request?
All International 214 Holders must identify all foreign individuals or foreign-organized interest holders ("Reportable Foreign Interest Holders") with a 10% or greater direct or indirect interest in the equity or voting stock of the International 214 Holder as of the date thirty (30) days prior to the Filing Deadline except for those that meet the following criteria ("Exception Criteria"):
- An International 214 Holder that filed an application for either (a) an initial international Section 214 authorization or (b) a modification or substantial (not a pro forma filing) assignment or transfer of control of its authorization that was reviewed by the Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Services Sector (aka "Team Telecom") and was granted by the FCC on or after January 22, 2021, provided that there is no new foreign person or entity having a 10% or greater direct or indirect interest in the International 214 Holder other than those that were disclosed in the application (including any amendment) and there are no changes to the reported foreign interest holders disclosed in the application (including any amendment).
- "Changes," per the FCC's guidance issued to date, include but are not limited to changes in the reported citizenship(s), including dual or multiple citizenships, and/or place(s) of organization of any reportable Foreign Interest Holder; no removal of any reported Foreign Interest Holder from an International 214 Holder's chain of ownership; and no change in a reported Foreign Interest Holder's ownership interests to less than 10% equity and/or voting interests or less than a controlling interest.
For International 214 Holders not meeting the Exception Criteria, the reporting International 214 Holder must submit the information for each such Reportable Foreign Interest Holder currently required by Section 63.18(h), namely the name, address, citizenship and principal businesses of the Reportable Foreign Interest Holder, and the percentage of equity owned or capital stock voted by each such individual or entity (to the nearest one percent). (Under the application of this rule, the Commission has for some time requested both equity and voting interests.) For these purposes, Reportable Foreign Interest Holders include individuals with dual (or more) citizenships and the associated details for each of these citizenships must be provided. Each reporting International 214 Holder will need to certify, through an officer or other authorized representative, to the accuracy of its response.
To facilitate FCC review of the collected information, each response will be submitted in one of three categories by the Filing Deadline (absent a change in FCC instructions issued in the upcoming OIA public notice):
- Reportable Foreign Ownership – Foreign
Adversary – China (including Hong Kong), Cuba, Iran, North
Korea, Russia, Maduro Regime. (International 214
Holders reporting in this category must also include any Reportable
Foreign Interest Holder interests unrelated to the foreign
adversary countries.)
- Reportable Foreign Ownership – No Foreign
Adversary
- No Reportable Foreign Ownership
What information must International 214 Holders meeting the Exception Criteria provide?
International 214 Holders meeting each of the Exception Criteria are exempt from answering questions in the Data Request regarding the identities, specific equity and voting interests, and description of controlling interests, of their Reportable Foreign Interest Holders. Instead, qualifying International 214 Holders are required to identify, on an aggregated basis, all of the citizenship(s) and place(s) of organization of their Reportable Foreign Interest Holders, as applicable. They must also identify the File Numbers for the application which satisfies the Exception Criteria.
What is an indirect equity or voting interest?
Each International 214 Holder has ownership interests in it, whether in the form of corporate stock, company member interests, partnership shares, or an equivalent. The individual(s) and/or entities that equitably or legally hold the ownership interests of the International 214 Holder itself hold a direct interest. But the concern of the FCC regarding ownership of licensees does not stop with direct interests, instead encompassing "indirect" ownership interests, which may be equally or more influential and significant than the direct interests. These are the interests held in the International 214 Holder through one or more intervening entities.
Essentially, determining indirect reportable interests resembles tracing a corporate ownership tree upwards from the International 214 Holder, starting with (i) the direct interest-holders; then (ii) the parties that legally hold ownership or voting interests in those direct interest-holders; followed by (iii) the next tier of parties (if there is one) holding ownership or voting interests in the parties identified in (ii); and so on. Applying multiplication and the FCC's attribution rules, the identification of reportable interests in the International 214 Holder continues until there is no "higher tier" of individuals or entities that indirectly hold at least 10% interest in the International 214 Holder. Depending on the ownership structure of an International 214 Holder, identifying all reportable 10% holders can be quite complex, and may involve accounting for share management agreements, general partners in limited partnerships, etc.
Depending on the structure of the ownership and control of an International 214 Holder, this can be a complex and nuanced exercise. If you have questions about what entities that have indirect interests in your company may need to be reported, we recommend that you seek the advice of Kelley Drye or other competent federal communications regulatory counsel.
What will the FCC do with the collected information?
The foreign ownership information submitted in response to the
Data Request will be used by the FCC to update its records for
International 214 Holders. (And the failure of entities listed as
International 214 Holders in the FCC records to provide a response
will allow the FCC to cull defunct or non-compliant companies from
its international Section 214 authorization rosters.) The collected
information also will provide key information to FCC Staff as they
consider potential rule changes concerning International 214
Holders, whether to require license renewals or other review
protocols.
Will the FCC share the responses of International 214 Holders that report foreign ownership in this information collection with the Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Services Sector aka Team Telecom?
The Order does not propose such referrals, and, traditionally, such referrals by the FCC would not be triggered by mere responses to data requests. But it cannot be definitively ruled out. The rule change proposals described in the pending rulemaking proceeding, which would require periodic renewals or reviews of International 214 Holders, if adopted, are likely to expand the frequency of Team Telecom reviews for international Section 214 carriers with (or possibly even without) changes to their reportable foreign ownership, whether in connection with a mandated renewal or with a periodic review. (Many current Letters of Assurances and National Security Agreements already require affected carriers to notify Team Telecom when certain types of less-than-controlling ownership changes occur.)
Finally, the FCC has continuing discretion to review a carrier's qualifications for holding Section 214 authority. It is not impossible, therefore, that in some situations, they would act upon information received through the Data Request if an urgent Team Telecom referral based on current ownership were deemed justified.
What should my company (if it is an International 214 Holder) do now to prepare for responding to the Data Request?
All International 214 Holders should ensure they have or obtain an FCC Registration Number ("FRN") which will be required in order to respond to the Data Request. The FCC has noted that many international Section 214 authorizations were granted to International 214 Holders prior to the Commission requiring an FRN in 2001.
International 214 Holders should determine whether they meet the Exception Criteria and should start gathering and/or confirming the ownership information required, especially if they have a complicated ownership structure and may find their Data Request responses more burdensome. The scope of the Data Request is limited to submission of foreign ownership information reportable pursuant to the requirements of FCC Rule 63.18(h), as described above. International 214 Holders would do well to review their ownership and control at all layers well in advance of the Data Request effective date, ensuring the availability of additional time as needed to confirm details and conduct any necessary analysis.
Why did the FCC adopt this Order?
The driving motivation underlying this Order is to better equip the FCC, in collaboration with relevant Federal Executive Branch agencies, especially the Departments of Justice, Homeland Security, and Defense, with updated information to address the perceived risks that foreign ownership of International 214 Holders operating in the U.S. may pose for national security, law enforcement, foreign policy, and trade policy consideration. Recent FCC proceedings resulting in the revocation of international Section 214 authorizations held by entities deemed to be agents of the Chinese government have caused such risks to come to the forefront of policy discussions. Moreover, the FCC's current international Section 214 authorization protocol provides for ownership information to be provided only when an initial international authorization is sought or consent is requested either for a modification to the authorization or where there will be a de jure or de facto assignment or transfer of control. Consequently, non-U.S. (and U.S.) persons or entities may obtain significant percentages of ownership in an International 214 Holder but not enough to trigger an application or notice obligation with the Commission. The absence of a Section 214 license renewal obligation or a periodic review process allows potentially significant changes to carriers' foreign ownership to occur out of sight from FCC or, depending on the terms of any mitigation arrangement with the Executive Branch as the result of a Committee review or CFIUS approval, Team Telecom review. In 2020, the U.S. Senate Committee on Homeland Security and Government Affairs, Permanent Subcommittee on Investigations, underscored the importance of implementing some method to reliably monitor changes to International Section 214 carriers' foreign ownership.
The Data Request is a first step in gaining current ownership information and only applies to covered carriers as of today. The FCC's pending Section 214 rulemaking proceeding may lead to rule changes that, in some form, require International 214 Holders to disclose ownership information periodically. Another motivation for the Data Request is to assist the Commission in determining the scale of active International 214 Holders, which the FCC estimates is less than a third of the number of currently issued Section 214 authorizations. The Data Request will help the Commission to identify International 214 Holders listed in its database that are no longer active companies, allowing the FCC to cancel the associated authorizations.
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Determination of reportable ownership, pursuant to the FCC's rules, through direct equity or voting interests in the carrier as well as indirect control up the chain to the ultimate owner can be challenging and packaging the information that must be provided can prove difficult, requiring correct application of the FCC's attribution rules and appropriate characterization of the various forms of direct and indirect interests to be included. The Kelley Drye Communications Group has extensive experience working with carriers to identify reportable ownership information for FCC filings. Please do not hesitate to reach out to one of the lawyers in the Group. If you have any further questions or if we can be of any assistance if your company must respond to the Data Request.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
