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Ajit Pai Investment Firm Concerned About FCC’s Foreign Reporting Threshold Proposal

The FCC is proposed reducing the threshold for disclosing ownership stake in companies.



Photo of former FCC Chairman Ajit Pai

WASHINGTON, April 13, 2023 – Former Federal Communications Commission Chairman Ajit Pai has expressed concern with agency commissioners about a proposed rule to be voted on by the commission next week that would lower the threshold for which companies would need to report investors in telecoms operating in the country.

To reduce national security risks, commission chairwoman Jessica Rosenworcel proposed last month periodic national security reviews of companies that seek to offer international services originating and terminating in the country – known as a section 214 authorization – and to reduce the ownership reporting threshold from investors with a 10 percent to a 5 percent stake. Under the current rules, after it is granted authorization, a company is only required to update the commission with ownership information when there has been a modification, transfer of control or discontinuance of service.

But two investment firms that submitted a letter to the FCC Wednesday recapping a previous meeting said they spoke with commissioners Geoffrey Starks and Brendan Carr warning that lowering the threshold risks deterring investments from those minority owners in part because their investments are conditional on being confidential.

“For example, some investors’ bylaws prohibit public disclosure of their investments and confidentiality has been negotiated between the funds and the investors ahead of any investments being made or even identified as a prospect,” said the letter, which came after the meeting that included Pai’s private equity firm Searchlight Capital Partners and representatives from investment firm DigitalBridge Group. The firms said they already “perform appropriate due diligence” on investors, who contribute money that the firms then invest in companies, such as telecoms.

“A significantly larger number of investors – foreign and domestic – would be reportable under a 5 percent threshold than is reportable under the current 10 percent regime,” the letter said. “In the vast majority of cases, these minority limited partners are passive investors, and it is extremely rare for any investors holding an equity interest of less than 10% to have any indicia of control (such as governance rights or board or observer seats).”

The firms said these minority investors “lack substantive rights and receive only high-level financial information regarding the overall performance of an investment.” Reporting that information would “not promote any legitimate national security interest” to require disclosure of such investors who have “insignificant equity interest and lack any control of day-to-day operations,” the letter said.

Concerns about retroactive effect for existing investors and a negative impacts on future investors

The firms added that the new rules would have a “retroactive effect” for existing investors and a “negative prospective impact on future capital formation and fundraising efforts.”

“The practical effect, therefore, would be to discourage critical investments by institutional investors of capital into the U.S. telecommunications sector without any corresponding national security benefits,” the letter noted, adding the rules could trigger other countries to lower their thresholds and expose minority U.S. investors overseas.

The firms requested that the commission delete the threshold reduction. If it does not, they proposed a possible exemption to these minority investors that they say already exists in broadcast ownership rules.

The FCC will vote on whether to adopt the proposed rulemaking at next week’s open meeting. If adopted, it will go through a consultation process where the public can comment on it.

The FCC says it works with the Department of Justice’s Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector to assess national security risks.

The commission has offered the executive branch with help in dealing with these threats, such as from Chinese companies. Rosenworcel’s proposal is based in part on recommendations from a 2020 report from a Senate subcommittee on Homeland Security that suggested periodic section 214 reviews. Rosenworcel reintroduced the idea after the commission first introduced proceedings to revoke the operating authorities of China Unicom Americas, Pacific Networks and subsidiary ComNet.

The proposed rules come as Washington seeks to remove national security threats from the country’s critical infrastructure. The commission has already halted authorizations to certain companies to operate in the country until it reviews the certification rules.

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Digital Inclusion

Broadband Association Argues Providers Not Engaged in Rollout Discrimination

Trade group says telecoms are not discriminating when they don’t build in financially difficult areas.



Image of redlining from historic map of the Home Owners’ Loan Corporation of Richmond, Virginia, from PBS.

WASHINGTON, September 18, 2023 – Broadband association US Telecom sent a letter to the Federal Communications Commission last week saying internet service providers don’t build in certain areas because it is financially difficult, not because they are being discriminatory.

The FCC proposed two definitions of digital discrimination in December 2022: The first definition includes practices that, absent technological or economic constraints, produce differential outcomes for individuals based a series of protected characteristics, including income, race, and religion. The second definition is similar but adds discriminatory intent as a necessary factor.

“To make business determinations regarding capital allocation, an ISP must consider a host of commercially important factors, none of which involve discrimination,” said the September 12 letter from USTelecom, which represents providers including AT&T, Verizon, Lumen, Brightspeed, and Altafiber.

“As the Commission has consistently recognized, such deployment is extremely capital-intensive…This deployment process is therefore subject to important constraints related to technical and economic feasibility” added the letter.

US Telecom explained that ISPs’ will choose to invest where they expect to see a return on the time and money they put into building broadband.

The association added that factors like population density, brand reputation, competition and the availability of the providers’ other services all go into deciding where broadband gets deployed.

“The starting point of the Commission’s approach to feasibility should be a realistic acknowledgement that all ISPs must prioritize their resources, even those that invest aggressively in deployment,” added the letter.

The association also highlighted the fact that it hopes to see as little government intervention in broadband deployment activity as possible, a concern that has been echoed by lobbyists before.

“Rather than attempting to use Section 60506 to justify taking extra-statutory intrusive actions that could paradoxically undermine ongoing broadband investment, the Commission must enable ISPs to make decisions based on their own consideration of the kinds of feasibility factors discussed above” read the letter.

Section 60506 of the Infrastructure, Investment and Jobs Act says that the FCC may implement new policies to ensure equal access to broadband.

The FCC is also looking to develop guidelines for handling digital discrimination complaints filed against broadband providers.

USTelecom said that ISPs should be allowed to demonstrate financial and logistical concerns as a rebuttal to those claims, in addition to disclosing other reasons for directing investment elsewhere to demonstrate non-discriminatory practice.

Reasons for investment elsewhere would include rough terrain, low-population density, MTE owners not consenting to deployment, zoning restrictions, or historical preservation review.

“To aid in the success of the Infrastructure Act and facilitate equal access, the Commission must continue to foster an environment conducive to ISP investment in the high-speed broadband infrastructure that Congress rightly views as central to our connected future,” concluded the letter.

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FCC Comments

CAF II Auction Recipients Push FCC to Extend Letter of Credit Waiver, Relax Restrictions

The agency proposed a shorter, more restrictive waiver.



Photo of $100 bills

WASHINGTON, September 14, 2023 – Internet service providers who received project funding under the Connect America Fund Phase II Auction are asking the Federal Communications Commission to continue waiving their letter of credit requirements. 

The FCC requested in August comments on a proposal to extend the waiver for one year — through December 2024 from the current December 31, 2023 date — and limit it to providers who have filed all location reports on time and have finished at least 60 percent of the total locations they agreed to build in each state. In 2020 the FCC waived the letter of credit requirements — requiring a cash collateral on agreements for risk assessment — for auction recipients in response to the pandemic, allowing them to comply with the less restrictive Rural Digital Opportunity Fund letter of credit rules. 

Without the waiver, providers would need to secure letters of credit for all support they had previously received, plus the money they are slated to receive in the coming year. The waiver reduces that requirement to a single year of funding if providers build infrastructure at the agreed upon pace.

Auction recipients, through the Connect America Fund Phase II Coalition, pushed back on both conditions in a filing to the FCC dated Monday and asked for a two-year extension on the waiver, citing long-term economic effects of the pandemic and rising interest rates. That would keep the waiver in place until December 31, 2025, the entire remaining build timeline.

The coalition asked for a lighter deployment threshold, 57 percent of a provider’s obligated locations rather than 60. It also pushed the FCC to include providers who have missed a filing deadline in the waiver, calling the “one strike and you’re out” proposal “disproportionate,” the filing said. 

The CAF II auction provided in 2018 nearly $1.5 billion for providers to build out network infrastructure in areas that are expensive to serve. Recipients of funds under the auction are not required to provide broadband speeds, with a minimum requirement of 10 Mbps upload and 1 Mbps upload.

RDOF, which concluded a similar reverse auction in 2020, has allocated over $9 billion for the same purpose, with up to $11.2 million available for a second phase. 

Future auctions are in jeopardy, though, as providers defaulted on nearly $3 billion of the initial award. Those that have not defaulted are pressing the FCC for more funding.

More than 300 people in the broadband industry asked the National Telecommunications and Information Administration to remove the requirement for the upcoming $42.5 billion BEAD grant program, arguing it prevents smaller providers with less capital on hand from participating.

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Senate Approves Anna Gomez as Fifth Federal Communications Commissioner

The Democrat-held Senate voted 55-43 in favor of Biden’s second nominee for the spot, after Gigi Sohn withdrew.



Photo from the National Hispanic Caucus of State Legislators.

WASHINGTON, September 7, 2023 – The Senate voted Thursday to approve Anna Gomez as the fifth commissioner of the Federal Communications Commission, finally completing the panel and breaking the party deadlock in favor of the Democrats. 

The Democrat-held Senate voted 55-43 in favor of President Joe Biden’s May nomination

The vote breaks the almost two-and-a-half year delay in filling the last commissioner seat after the FCC was stuck in a deadlock. 

Gigi Sohn, an internet advocate and co-founder of Public Knowledge, was originally nominated for the fifth commissioner in October 2021, but stepped down earlier this year, citing “dark money political groups” tainting her career. She had been in front of the Senate commerce committee three times about her nomination, with Republicans accusing her of being partial on the relevant issues. 

“Congratulations to Anna Gomez on her confirmation by the United States Senate,” FCC Chairwoman Jessica Rosenworcel said in a statement. “Anna brings with her a wealth of telecommunications experience, a substantial record of public service, and a history of working to ensure the United States stays on the cutting edge of keeping us all connected. 

“Her international expertise will be a real asset to the agency. I look forward to working with her to advance the agency’s mission to ensure the benefits of modern communications reach everyone, everywhere and that the United States can continue to lead in the digital age,” Rosenworcel added. 

Positive comments poured from organizations including Free Press Action, America’s Communication Association, and Competitive Carriers Association. 

“CCA is enthusiastic about collaborating with Commissioner Gomez and a full Commission to address the evolving challenges and opportunities in the rapidly changing wireless landscape” said CCA president and CEO Tim Donovan in a statement. 

Chris Lewis, CEO of Public Knowledge, offered his congratulations to the new commissioner. “We are excited for the diversity and experience Ms. Gomez brings to the agency.” 

Gomez served as a senior advisor for international information and communications policy in the State Department’s Bureau of Cyberspace and Digital Policy. She served as the National Telecommunications and Information Administration Deputy Administrator from 2009 to 2013 and spent over a decade in various positions at the FCC.  

Current commissioners Geoffrey Starks and Brendan Carr were also nominated by Biden in May but have yet to get Senate votes. Starks must be voted in before the end of the year or he must resign; Carr can serve throughout 2024 without reconfirmation. 

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