Section 214 Licensees Should Ready for Data Collection, Rule Changes

Companies holding international Communications Act Section 214 authorizations should be preparing for the FCC’s one-time data collection authorized in April (see 2304270039) and brace for tighter foreign-ownership disclosure rules and additional filing requirements to come out of that order’s accompanying NPRM, said Morgan Lewis attorneys Patricia Cave and Ulises Pin in an Incompas webinar Wednesday. Once the data collection order takes effect, companies need to “start reacting relatively quickly because there's going to be a short window in order to react” -- probably 30 days -- and the penalty for failure to do so could be “significant,” said Pin.

The data collection will focus on foreign ownership and target the approximately 7,000 Section 214 international licenses the FCC has issued, and, because the licenses don’t have expiration dates, many of them are likely not being used or are linked to incomplete or incorrect FCC records, Pin said. Companies that don’t respond to the data request likely initially will receive only warnings but could lose their licenses or face forfeitures.

Companies with foreign ownership that held Section 214 licenses in the past but no longer need them could seek to turn them in rather than participate in the data collection, said Pin. That would spare them having to deal with the data collection but would likely mean they would have to go through the lengthy Team Telecom process if they later needed another Section 214 license, Cave noted.

Companies that have gone through FCC approval processes in the past three years and haven’t had a material ownership change may get a streamlined filing option for their response to the one-time data collection, but the agency hasn’t defined what a “material change” is, the attorneys said. It's expected to be a 10% threshold, which would be consistent with other FCC rules, Cave said. A lower threshold, or an undefined one, would likely make things too unwieldy for the agency with 7,000 licenses, Pin said. The FCC “would have a hard time digesting the information that applicants provide. So it's a balance of both collection as well as absorption of that information,” said Pin. “And obviously, the FCC has finite resources.”

The proposals in the NPRM are expected to lead to actual rules in 2024, the attorneys said. The proposals include a 10-year renewal requirement for Section 214 licenses, smaller threshold for reportable foreign ownership, additional review and disclosures for companies using equipment from companies that have been flagged by the agency for national security reasons or are foreign managed network service providers.

The proposal for a 10-year license renewal requirement for 214 licenses is in line with the practice of much of the rest of the world, Pin said. Most other licenses the FCC grants have expiration dates, he noted. A proposal to lower the foreign-ownership threshold to 5% could be difficult for companies that are backed by private equity or are publicly traded, Pin said. Such a change could greatly increase the amount of reporting required and could capture investors that may “have absolutely no, no bearing or no control whatsoever with the day-to-day operation of a licensee.” This proposal is likely to mean much lobbying activity, Pin said.