Team Telecom: Is This Another CFIUS?

The federal government is taking a hard look at the security of internet, technology, and telecommunications companies. While the Committee on Foreign Investment in the United States (CFIUS) has gained considerable attention for keeping our critical infrastructure safe from nefarious foreign investment, a lesser-known interagency committee known as “Team Telecom” has strengthened its role in the national security space after an executive order (EO) signed earlier this month.

President Trump’s new EO came as no surprise, as CFIUS was also strengthened under the new regulations implementing the Foreign Investment Risk Review Modernization Act (FIRRMA) last month. Since the national security community is used to an emboldened screening of foreign investments, it may be tempting to label the new Team Telecom standards as a “new CFIUS,” but the overlapping goals of these two bodies diverge in many key areas. Read on for a comparison that will help you distinguish how these two bodies exercise their discretion in reviewing, identifying, and ultimately recommending action to deal with national security risks.

What is Team Telecom?

Team Telecom is an advisory body that enables the Federal Communications Commission (FCC) to assess risks from foreign ownership of common telecommunications carriers. Made up of representatives from the U.S. Department of Homeland Security, the U.S. Department of Justice, and the U.S. Department of Defense, Team Telecom is charged with reviewing foreign investments in U.S. communications assets by examining the national security, law enforcement, trade, foreign policy, and public safety implications of proposed transactions. The two primary ways it does this are mandated under the Communications Act of 1934, which requires that:

  • Telecommunications service providers must seek a “certificate” from the FCC prior to constructing, acquiring, transferring, or operating a new international telecommunications channel, or “line” (214 certificate).
  • FCC review broadcast licenses applications for concerns related to foreign ownership, and to determine whether “the public interest would be served by the refusal or revocation” (301(b) licenses).

In 1997, the FCC issued a set of policies governing its review of these types of licenses—known as its Foreign Participation Order—stating it would seek input on such applications from the executive branch agencies with the best expertise in those areas. Thus, Team Telecom as we know it was born.

CFIUS, an overview

CFIUS is an interagency committee chaired by the U.S. Treasury, and its members include the Departments of Justice, Homeland Security, Commerce, Defense, State, and Energy, among others. It is authorized to review certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons, in order to determine if such transactions pose a threat to the national security of our country.

As mentioned, CFIUS gained broader influence early this year when FIRRMA was updated to expand the national security review of investments that previously fell outside its jurisdiction. Under the new regulations, a U.S. company that “produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies” may undergo heightened scrutiny by CFIUS. This enhanced oversight of proposed foreign investments is especially stringent for U.S. companies involved with what’s known as “critical infrastructure,” including energy, telecommunications, and transportation, as well as those U.S. companies that collect “sensitive personal data” for healthcare, finance, and geolocation purposes.

Team Telecom and CFIUS: How They’re Alike

As mentioned, the Team Telecom EO closely follows the new regulations implementing FIRRMA, which strengthen and reform the CFIUS foreign investment review process. Even prior to the new EO, these two committee structures integrated much of their complementary review processes. Here’s how they’re alike.

Focus

First and foremost, they are both concerned (CFIUS entirely, and Team Telecom, partially) with national security risks that arise from an investment, merger, or acquisition by a foreign acquirer. Through this lens, the two committees will (and have in the past) shared review responsibilities and jurisdiction over “covered transactions” involving foreign investment.

Players

Second, both CFIUS and Team Telecom involve many of the same U.S. government players. While Team Telecom formally includes only three agencies (CFIUS includes nine formally, and others informally), the FCC has shared that applications are typically reviewed for executive branch concerns by nearly every current CFIUS member agency, except the Departments of Treasury and Energy. The new EO expands the additional agencies to the roles of “Committee Advisors”, including the Director of National Intelligence who provides assessments on potential threats to national security “posed by granting the application or maintaining the license.” 

Agreements

Finally, much like CFIUS and other areas of U.S. government discretion over certain regulated commercial conduct, the parties to a transaction reviewed by Team Telecom can agree to address the risks identified by the government by entering into binding mitigation agreements as a condition for the granting of the license. As is required of CFIUS, mitigation measures in Team Telecom agreements are based on a risk-based analysis produced by one or more of the Team Telecom agencies. 

Team Telecom and CFIUS: How They’re Different

With similar jurisdiction, players, and proposed solutions you may be wondering how Team Telecom and CFIUS differ. Here are the fundamental differences between the two interagency bodies.

Authority

The fundamental distinction between the two lies in the scope of their authority. Team Telecom reviews the issuance of a license, over which the FCC maintains continued oversight and discretion—including a decision whether to revoke the license. Since only the FCC can act on a license application, Team Telecom’s role is solely advisory.

By contrast, CFIUS’ actions—ultimately to either “clear” a case with or without mitigation, or to recommend Presidential prohibition—encompass the whole of an investment or relationship among companies.

Discretion

In its introduction to FIRRMA, Congress expressed that CFIUS “should not consider issues of national interest absent a national security nexus.” The Defense Production Act supports that restriction by defining those national security concerns.

A Team Telecom review is similar since its purview is to determine “that granting an application for a license (or transfer) raises no current risk to national security or law enforcement interests.” However, because the FCC relies on a more general standard of “public interest” when deciding to grant a 310(b) broadcast license it may challenge Team Telecom’s findings, weigh certain factors in the recommendation more heavily than Team Telecom recommended, or use its discretion to increase a foreign broadcast share under Section 310(b).

While it’s assumed that the FCC will defer to the Team Telecom members in their areas of expertise, the FCC’s discretion over the granting of the license may not always be in accordance with Team Telecom’s recommendation.

Timing

By law, CFIUS has only 45 days for its initial review of a filing, to include its determination whether a transaction is “covered.” During the 45-day period, CFIUS collects information from the parties involved in the transaction via Q&A and in-person discussions as required.

If CFIUS identifies a national security risk arising from the transaction, it will conduct an investigation over a subsequent 45-day period with the expectation that the risk will be mitigated—through a finalized national security agreement or other mechanism—or that the transaction will be terminated in that time. 

In contrast, Team Telecom begins its work at a referral by the FCC, starting with Q&A and other information-gathering. Team Telecom’s initial assessment period begins on the date the Attorney General determines that all questions have been satisfactorily answered, and lasts a full 120 days.

Similar to a CFIUS investigation, Team Telecom can initiate a secondary assessment period on the identification of a risk to national security or law enforcement that would arise from the FCC’s issuance of the license. They only have 90 days for the second period. In the event Team Telecom determines either that an applicant’s responses are incomplete, or if an applicant is unresponsive to questions, either assessment periods can be extended beyond the 210 days.   

Duration or permanence

Fundamentally, CFIUS’s reviews have been limited by the fact that they are a snapshot in time and that national security risks could arise long after its review is completed. CFIUS determinations—embodied in certifications to Congress or terminated transactions—have always been fixed and enduring, providing safe harbor to its filers.

With the passage of FIRRMA, CFIUS is now able to review non-controlling foreign investments (so-called “other investments”). This new review standard allows CFIUS to revisit cases with small initial investments that it cleared through if future incremental investments are made. Though such reviews require additional CFIUS filings—generally voluntary actions—and ultimately result in a final CFIUS determination if a risk is identified.

Team Telecom has a more nuanced role under the new EO. Initially, its review of a new FCC license application is completed when Team Telecom determines “that granting an application for a license or the transfer of a license raises no current risk to national security or law enforcement interests”. 

While the FCC’s International 214 licenses—and Team Telecom’s supporting recommendations—are “permanent,” the EO clearly opens the door for Team Telecom to revisit prior recommendations. It provides a procedure for Team Telecom to review existing licenses “to identify any additional or new risks to national security or law enforcement interests of the United States.” Ultimately, because the license is the focus of the inquiry, the FCC’s ability to revoke, modify, or otherwise revisit a current license ultimately drives a key difference between Team Telecom’s role and that of CFIUS in a foreign investment.

Team Telecom and CFIUS comparison

What Increased Jurisdiction Means for National Security

Despite the fact that each committee has its own unique nuances, their missions are similar where they count—both play a crucial role in protecting American business. And given the increase in Chinese economic aggression, their bolstered powers to assess foreign investments are a welcome development. Both the Team Telecom EO and FIRRMA signal a positive step for U.S. national security and provides decision-makers with effective tools in deterring foreign economic aggression.

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