As yet another example of the U.S. government’s ongoing concerns about the potential vulnerability of U.S. telecommunications networks and supply chains, the FCC recently released a Notice of Proposed Rulemaking (NPRM) proposing to prohibit the use of funds disbursed from the Universal Services Fund (USF) to purchase equipment or services from any providers posing a national security threat to the U.S. The USF distributes funds and subsidies to companies who provide service to unserved and underserved locations and low-income consumers. The NPRM dovetails with recent governmental actions targeting perceived Chinese threats to U.S. telecommunications infrastructure, including the passage of the National Defense Authorization Act (NDAA) for Fiscal Year 2018 (which prohibits the Department of Defense from using the equipment or services of certain Chinese telecommunications companies), the Committee on Foreign Investment in the United States’ (CFIUS) blocking of chipmaker Broadcom’s hostile takeover bid for Qualcomm, and the Department of Commerce’s denial of export privileges against a Chinese telecommunications manufacturer for seven years. It also precedes a recent report by the Wall Street Journal on May 2, 2018 detailing the possibility of executive action by the Trump administration to restrict Chinese companies’ ability to sell telecommunications equipment in the U.S. Chinese companies have already taken action as a result of this increased focus on Chinese telecommunications equipment, including one firm’s request for a stay of a U.S. order banning American companies from selling to the firm.
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Chips on Their Shoulders: CFIUS Intervenes in Broadcom’s Hostile Takeover Bid for Qualcomm
- CFIUS takes an unprecedented step to fend off a potential foreign acquisition
- The threat that China will eclipse the U.S. in telecommunications infrastructure and technology is central to U.S. national security
- Five key takeaways from the most recent CFIUS action
Since late 2017, Singapore-based semiconductor company Broadcom has been pursuing a $117 billion hostile takeover bid for Qualcomm, its U.S.-based rival whose chips are omnipresent in U.S. telecommunications infrastructure, including consumer devices like smartphones and tablets. As part of its hostile bid, Broadcom nominated its own slate of six directors who were to be voted on at Qualcomm’s annual stockholders meeting, originally scheduled for March 6th. However, earlier this week the Committee on Foreign Investment in the United States (CFIUS) announced that it “issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days. This measure will afford CFIUS the ability to investigate fully Broadcom’s proposed acquisition of Qualcomm.”
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FCC Proposes Expedited Treatment For New Technologies
“Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road” – Stewart Brand
Last week, the FCC released a Notice of Proposed Rulemaking (NPRM) proposing guidelines and procedures designed to “breathe life” into Section 7 of the Communications Act. A somewhat obscure part – or, as Chairman Ajit Pai prefers, the “neglected stepchild” – of the Communications Act, Section 7 requires the FCC to make a public interest determination on proposals for new technologies or services within one year. Although a one-year timeframe may seem like quite a lengthy period for regulatory approval, it represents an increase to warp speed for an FCC that sometimes can take many years to approve challenging new technologies.
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ExteNet v City of Houston: Who pays for access to Texas rights-of-way?
On April 13, 2017, the Texas Public Utilities Commission will hear oral arguments on the issue whether companies with certificates of public convenience and necessity from the Commission may place their facilities in local rights-of-way and provide wireline backhaul and Distributed Antenna Systems (DAS) service without additional local authority or the obligation to pay fees. DAS providers say “yes” while local governments contend that such companies must negotiate separate license agreements and fees with individual cities to access their rights of way. The Commission will be considering the recommendation of two Texas administrative law judges to side with the companies.
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FCC Liberalizes Rules for Foreign Investment in U.S. Broadcast Licensees
On September 30, 2016, the FCC adopted an order designed to liberalize and streamline the foreign ownership review process for broadcast licensees (the “Broadcast Liberalization Order”). Section 310(b) of the Communications Act caps at 25 percent the amount of indirect foreign investment permissible in a U.S. broadcast, common carrier, or aeronautical fixed or en route radio licensee without obtaining FCC approval. Prior to 2013, the long-standing presumption among FCC practitioners was that the FCC simply would not allow indirect foreign ownership of a U.S. broadcast licensee in excess of the 25% benchmark in the Communications Act, even though the Act expressly contemplated such investments so long as they were blessed by the FCC. The Commission issued an Order in 2013 clarifying that the 25% foreign investment mark served only as a trigger requiring the FCC to review applications on a case-by-case basis, not an automatic bar to such investment. Foreign investment in broadcast licensees above 25% required prior express consent, based on an evaluation of public interest and national security considerations. Also in 2013, the FCC streamlined the process for reviewing foreign ownership amounts in excess of 25% for common carrier and aeronautical radio licensees. The recent Broadcast Liberalization Order largely extended these same rules and procedures to broadcast licensees, with certain exceptions and modifications.
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Hailing on All Frequencies: The FCC Releases the Spectrum Frontiers Order
In a move that will support the development of 5G networks, the FCC issued an Order last week in the “Spectrum Frontiers” proceeding that should open up large amounts of high-band spectrum for licensed and unlicensed use. The Commission adopted a new framework for flexible-use licensing in several spectrum bands above 24 GHz, permitting mobile operations in those bands and instituting rules to ensure shared access with incumbent licensees. The Commission also noted that the new licensing framework may serve as a template for rulemaking in additional high-frequency bands in the future, and issued an NPRM seeking feedback on proposals that would open nearly 18 GHz more to mobile use.
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Patient Zero – Public Knowledge Seeks FCC Review of A New “Zero Rated” Service
Consumer advocacy group Public Knowledge recently filed a petition with the Federal Communications Commission (“FCC”) challenging a multi-system operator’s (“MSO”) online video service as violative of conditions imposed as part of a 2011 merger and the agency’s Open Internet rules. The service allows the MSO’s customers to stream its licensed video content to computers, tablets, and mobile devices without incurring additional data usage charges. The MSO maintains the content of this service does not touch the public Internet – and thus is not subject to the Open Internet rules – because it is delivered on the same private, managed network as its cable services.
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EXIM Bank Back in Business
Last week, Congress reauthorized the Export-Import Bank of the United States as part of the “Fixing America’s Surface Transportation (FAST) Act,” a law funding new transportation infrastructure. The bill was signed into law on Dec. 4. EXIM Bank has been unable to lend to new projects since its charter expired on June 30 this year. The FAST Act reauthorizes it for four years – through Sept. 30, 2019 – and enables it to begin lending again.
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Headin’ Down the Copperhead Road – the FCC Proposes New Rules for Legacy Infrastructure
Although it could be said that the FCC’s recent focus has been firmly fixed on the future, in particular IP-based communications (see, e.g., high-visibility proceedings involving the Open Internet, possible merger conditions in the Time Warner Cable-Comcast merger, the ongoing TDM to IP transitions, and the $44 billion (and counting) of bidding in the AWS-3 auction), in November the FCC proposed regulations to ensure that the transition to this IP-based world does not betray core values of the Communications Act: public safety, consumer protection, and competition.[1]
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If They Could Be All You Wanted: The FCC Gets Serious About Small Cells
Say what you will about inside-the-Beltway leadership vacuums, political gridlock and the indecipherable output from the grey, grinding gears of our government agencies, but once in a while Washington actually gets it right. Or mostly right.
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