Current Regulatory Approach to Section 310(b)(4)

Current Regulatory Approach to Section 310(b)(4)

12. 
    Commission implementation of section 310(b)(4) since 1995 has evolved from a case-by-case evaluation¹⁸ to a review of foreign ownership in the controlling U.S. parents of common carrier and aeronautical licensees in accordance with a policy framework intended to promote liberalization of telecommunications markets internationally. Under that framework, we apply an “open entry standard” to foreign investment from WTO Member countries, and an effective competitive opportunities (“ECO”) standard to foreign investment from non-WTO Member countries, as a means to facilitate foreign investment in the U.S. telecommunications market and encourage non-WTO Member countries to open their telecommunications markets to competition and to join the WTO.¹⁹
    
13. 
    In the 1997 Foreign Participation Order, the Commission concluded that the public interest would be served by permitting greater investment by foreign individuals and entities from WTO Member countries in U.S. common carrier and aeronautical radio licensees pursuant to the discretionary authority in section 310(b)(4).²⁰ The Commission therefore adopted a rebuttable presumption by which it presumes that foreign investment from WTO Member countries in such licensees does not pose competitive concerns in the U.S. market.²¹ For purposes of determining whether foreign investors are based in WTO Member countries and, thus, afforded greater investment opportunities under section 310(b)(4) of the Act, the Commission uses the “principal place of business” test to determine the nationality or “home market” of foreign entities that seek to invest directly or indirectly in the U.S. parent of a common carrier or aeronautical radio licensee.²² The Commission’s public interest analysis under section 310(b)(4) also considers any national security, law enforcement, foreign policy or trade policy concerns raised by the proposed foreign investment.²³ In assessing the public interest, the Commission takes into account the record developed in each particular case and accords deference to Executive Branch agencies on issues related to national security, law enforcement, foreign policy and trade policy.²⁴
    
14. 
    With respect to foreign investment from countries that are not Members of the WTO, the Commission determined in the Foreign Participation Order to continue to apply the ECO test as part of its public interest analysis under section 310(b)(4).²⁵ The Commission found in the Foreign Participation Order that the markets of non-WTO Member countries, in almost all cases, had not been liberalized since adoption of the Foreign Carrier Entry Order, and continued to present legal and practical barriers to entry.²⁶ Thus, the Commission stated that it would deny an application if it found that more than 25 percent of the ownership of an entity that controls a common carrier radio licensee is attributable to parties whose principal place(s) of business are in non-WTO Member countries that do not offer effective competitive opportunities to U.S. investors in the particular service sector in which the applicant seeks to compete in the U.S. market, unless other public interest considerations outweigh that finding.²⁷ The Commission concluded that its goals of increasing competition in the U.S. telecommunications service market and opening foreign telecommunications service markets would continue to be served by opening the U.S. market to investors from non-WTO Member countries only to the extent that the investors’ home markets are open to U.S. investors.²⁸
    

1. The NPRM, Forbearance Public Notice, and First Report and Order

15. 
    In the NPRM, the Commission sought comment on measures to revise and simplify the regulatory framework under section 310(b)(4) for authorizing foreign ownership of common carrier and aeronautical radio licensees. The Commission also proposed to codify whatever measures it ultimately adopts in this proceeding to provide more predictability and ensure transparency of our section 310(b)(4) filing requirements and review process.²⁹ The Commission estimated that adopting the proposals and other options discussed in the NPRM would result in a more than 70 percent reduction in the number of section 310(b)(4) petitions for declaratory ruling filed with the Commission annually, as compared to the current regulatory framework.³⁰ The Commission also anticipated a reduction in the time and expense associated with filing petitions under the proposed framework.
    
16. 
    Eleven comments and seven reply comments were filed in response to the NPRM.³¹ We also received a letter from the U.S. Trade Representative (USTR) and a letter filed jointly by the Department of Justice (DOJ) and the Department of Homeland Security (DHS) (together, the “Departments”) supplementing the joint comments they filed in this proceeding.³² Several of the parties that filed comments in response to the NPRM asked that the scope of this proceeding – which was limited to section 310(b)(4) of the Act – be broadened to consider the relationship of section 310(b)(3) and section 310(b)(4) as applied to foreign interests in a common carrier licensee held through an intervening U.S.-organized entity that does not control the licensee. These commenters requested that the Commission adopt an approach that analyzes such foreign interests under section 310(b)(4), and not under section 310(b)(3).³³
    
17. 
    On April 11, 2012, the International Bureau issued the Forbearance Public Notice, which expanded the scope of the proceeding by requesting comment on the legal and policy implications of forbearing under section 10 of the Act³⁴ from applying section 310(b)(3) to certain foreign interests in common carrier licensees held through an intervening U.S.-organized entity that itself holds non-controlling equity and voting interests in the licensee.³⁵ Four comments and one reply comment were filed in response to the Forbearance Public Notice.³⁶
    
18. 
    As noted in paragraph 9 above, in the First Report and Order we determined to forbear from applying the 20 percent limit in section 310(b)(3) to the class of common carrier licensees in which the foreign investment is held through U.S.-organized entities that do not control the licensee, to the extent we determine such foreign ownership is consistent with the public interest under the policies and procedures we use for assessing foreign ownership under section 310(b)(4).³⁷ Under the section 310(b)(3) forbearance approach adopted in the First Report and Order, we will approve foreign investment in a common carrier licensee, held through U.S.-organized entities that do not control the licensee, if, upon the licensee’s filing of a petition for declaratory ruling or similar request, the Commission finds the particular foreign interests to be consistent with the public interest. We stated that we would evaluate petitions from common carrier licensees subject to section 310(b)(3) forbearance consistent with the Commission’s section 310(b)(4) foreign ownership policies established in the Foreign Participation Order.³⁸
    
19. 
    In the First Report and Order, we deferred to this second phase of the proceeding a decision on whether to apply any changes we adopt to the section 310(b)(4) policy framework to our analysis of petitions for declaratory ruling or similar filings under our section 310(b)(3) forbearance approach.³⁹ We adopt in this Second Report and Order a comprehensive set of rules that will apply, as detailed below, to common carrier radio station licensees subject to our section 310(b)(3) forbearance approach that seek Commission approval to exceed the 20 percent foreign ownership limit in section 310(b)(3), and to common carrier and aeronautical radio station licensees that seek approval for the foreign ownership of their controlling U.S. parents to exceed the 25 percent foreign ownership benchmark in section 310(b)(4).
    

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   attachmatch -> Federal Communications Commission fcc 15-77 Before the Federal Communications Commission
   attachmatch -> Statement of commissioner ajit pai
   
   
   
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