FCC 375

The Federal Communications Commission today (Sept. 30) approved new procedures for the review process that deals go through when foreign ownership implications are at play. In its unanimous decision, the Commission said the improvements to the transparency and timeliness of the cross-agency review process will help attract foreign investors to participate in the U.S. telecommunications market, including radio.

The FCC rulemaking (IB Docket 16-155) examining the foreign ownership review process first began in 2016, after the FCC green-lighted radio and television station owners to go past the traditional 25% cap on foreign ownership. It picked up steam when President Trump issued an executive order in April that directed the FCC to rework the review process that applications need to go through when foreign ownership implications are involved.

FCC Chair Ajit Pai said the current system is “broken” as it often blocks or places “inappropriate conditions” on deals. “The review process often has taken too long and lacked basic transparency,” he said. Under the new deadlines, Pai said most executive branch reviews should be completed within 127 days from the date the committee determines an application is complete, as compared to the average time of 260 days for Commission action on applications between 2016 and 2019. “Our actions today provide for a more efficient and effective review of foreign ownership applications,” he said.

Pai said the new process formalizes the close working relationship that federal agencies have had while offering “much-needed clarity” for the private sector on what the “rules of the road” actually are. Pai said there is a competing interest in foreign investments. While on the one had it allows American companies to tap financial reserves in order to grow, it also raises “serious” national security, law enforcement, foreign policy and trade policy issues.

Commissioner Michael O’Rielly has long complained about the “opaque” review process, urging for revisions so that applicants and licensees are not trapped in a “regulatory black hole,” never knowing what concerns executive agencies have, how long the review will last, or who they can talk to about getting their application out of the morass. O’Rielly said he came close to getting a rulemaking that would have updated the rules across the finish line four years ago under former FCC Chair Tom Wheeler. But O’Rielly said “someone slammed the brakes just hours after the 2016 election” without any explanation.

Even as O’Rielly supported the decision, he said he would have gone further such as including a more definitive and objective standard for starting the review clock, shortening the review periods even more, and limiting the ability of the new committee to review previous decisions. The Commission did agree to go along with his suggestion that the list of standard questions to be asked of applicants be finalized within 90 days.

How We Got Here

What’s known as the Team Telecom review has been on an ad-hoc basis to date, offering what critics have argued has been an incoherent and unpredictable review process. Under the new FCC rules, the process would be formalized with the establishment of firm time frames for review. Among other requirements, the order says most applications referred to the Team Telecom group will get 120 days for initial review, plus an additional 90 days for secondary assessment if the group determines that the risk to national security or law enforcement interests requires extra scrutiny. Some companies will also be required to make certain certifications that the FCC said should allow for faster reviews.

The Commission says in the order that the “predictable timelines” are critical to securing foreign capital and “maintaining U.S. competition and innovation, especially in light of economic challenges resulting from the global COVID-19 pandemic.”

In the broadcast sector, the 25% foreign ownership cap remains in place so any proposed deal involving offshore investors greater than that threshold will still need to go through the process. But broadcasters that do will find the process less cumbersome with a standardized set of national security and law enforcement questions to focus on.

The number of radio groups that have lined-up offshore investors has grown in the past few years. Cumulus Media was the most recent, having secured Team Telecom approval in February to become as much as 100% foreign-controlled once the FCC adds its approval in the coming months. The Cumulus move is, in large part, an extension of its bankruptcy reorganization plan. A similar proposal is currently pending before Team Telecom from iHeartMedia as is an application filed in April by Univision’s proposed new owners. It came just a few months after the FCC in December gave Univision Radio permission to allow Mexico-based subsidiary Notivision to surpass the 25% cap that dates to the 1930s.