W&G Regulatory Advisory: FCC Seeks Further Comment on Foreign Ownership Policies Under Section 310(b)(3)

May 03, 2012

The FCC has issued a Public Notice seeking further comment on its foreign ownership policies (“Foreign Ownership Notice“) in IB Docket No. 11-133.  This Foreign Ownership Notice follows a Notice of Proposed Rulemaking released in the fall of 2011 proposing to revise and simplify the policies and procedures that apply to foreign ownership of common carrier and aeronautical radio station licensees (“Foreign Ownership NPRM“). Comments are due to be filed by May 15, 2012.  Reply comments are due to be filed by May 25, 2012.

Common carrier and radio station licensees are subject to the foreign ownership limitations in 47 U.S.C. §310(b).  The Foreign Ownership NPRM requested comment on the FCC’s policies and procedures under Section 310(b)(4), which deals with indirect foreign ownership of a licensee through an intervening U.S.-organized entity with a controlling stake in the licensee (“indirect controlling foreign interests”).  Many commenters in that proceeding asked the FCC to find that all indirect foreign interests, even those held through an intervening U.S. entity without  a controlling stake in the licensee (“indirect, non-controlling foreign interests”), should be analyzed under Section 310(b)(4).  The FCC’s current Foreign Ownership Guidelines state that such interests are governed instead by Section 310(b)(3).

Under Section 310(b)(4), licensees must seek a declaratory ruling from the FCC if foreign ownership will exceed 25 percent.  In practice, this means that a licensee may have up to 100 percent foreign ownership by indirect controlling foreign interests if the FCC finds that it is in the public interest to allow that ownership.  In contrast, under Section 310(b)(3), foreign ownership by indirect, non-controlling foreign interests is capped at 20 percent, with no provision for a higher level of ownership.  Commenters to the Foreign Ownership NPRM suggested that this approach is inconsistent with the statutory language, and that a change to this policy would be one of the most helpful actions the FCC could take in reducing regulatory barriers to foreign investment.

The Foreign Ownership Notice requests comment on the NPRM commenters’ assertion that its current policies and procedures are inconsistent with the statute.  The FCC also seeks comment on whether it might address this issue by exercising its authority under Section 10 of the Communications Act of 1934, as amended (the “Act”), to forbear from applying Section 310(b)(3) to indirect non-controlling foreign interests.

Under Section 10, the FCC may forbear from applying any regulation or provision of the Act if:

(1)  enforcement is not necessary to ensure that the
regulations for a service are just and reasonable and are not unjust and
unreasonably discriminatory;

(2)  if it is not necessary for the protection of
consumers; and

(3)  if forbearance is consistent with the public
interest.

Section 10 forbearance does not apply to broadcast, aeronautical fixed, and aeronautical en route licenses, and the FCC’s proposed forbearance approach would not be used when such licenses are involved.

The FCC seeks comment on whether forbearing from analyzing indirect non-controlling foreign interests under Section 310(b)(3) would satisfy all three prongs of Section 10.  It also seeks comment on whether a forbearance approach would allow it to authorize ownership by indirect non-controlling foreign interests greater than 20 percent and, if so, whether the FCC should adopt similar procedures as those it uses under its Section 310(b)(4) analysis when foreign ownership will exceed 25 percent – e.g., requiring licensees to file a petition for declaratory ruling, subject to public comment and reviewable by the Executive Branch.  Commenters are also asked to explain whether the forbearance approach would present any national security, law enforcement, or public safety concerns, or would conflict with U.S. trade policy.

For more information about the Foreign Ownership Notice or our telecommunications or international trade and investment practices, or for advice about participating in this proceeding, please contact Kent Bressie at +1 202 730 1337 or kbressie@wiltshiregrannis.com or John Nakahata at +1 202 730 1320 or jnakahata@wiltshiregrannis.com.

This advisory is not intended to convey legal advice. It is circulated as a convenience and is not intended to reflect or create an attorney-client relationship as to its subject matter.

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