FCC Cites National Security Risks in Denying Digitalsystem Telecom License
Agency says executive branch committee review found national security risks that could not be resolved.
WASHINGTON, July 8, 2026 – Federal regulators have taken another step to exclude telecommunications firms considered national security risks.
The Federal Communications Commission denied an application from California-based Digitalsystem Technology Inc. to provide international telecommunications services.
In an order adopted June 30 and released Monday, the FCC rejected Digitalsystem's request for international Section 214 authority, which would have allowed the company to provide telecommunications services between the United States and foreign destinations.
The FCC also added Digitalsystem services to its Covered List, designating them as posing an unacceptable risk to U.S. national security.
According to the order, Digitalsystem is a California corporation that is 70 percent owned by Hui Xie, a Chinese citizen, and 30 percent owned by Yi Zhou, a U.S. citizen. The FCC concluded that the company's majority ownership and control placed it under the jurisdiction and influence of the Chinese government, raising concerns about the security of U.S. telecommunications infrastructure.
The FCC also pointed to Digitalsystem’s partnerships with a Hong Kong affiliate and other entities, as well as its proposed international operations, which the agency said presented additional cybersecurity and law enforcement concerns.
The company markets services including data center management, cloud migration, cybersecurity, network implementation, and disaster recovery for customers in industries such as healthcare, finance, logistics, manufacturing, and energy.
The FCC found that granting the application would create “serious and substantial” national security and law enforcement risks. It further concluded that those risks could not be addressed through a mitigation agreement, the type of security arrangement that has historically allowed some foreign-owned telecommunications companies to operate under government oversight.
The FCC said its decision was based on the public interest standard under Section 214 of the Communications Act and relied heavily on a recommendation from the Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Services Sector, an interagency body led by the Department of Justice and including representatives from the Departments of Defense and Homeland Security.
Digitalsystem applied for the authorization in March 2024. After the application was accepted for filing, the FCC referred it to the Executive Branch for national security review under procedures established by Executive Order 13913.
Following an initial review and a secondary assessment, the committee formally recommended denial in April 2026. Digitalsystem subsequently filed an opposition to the recommendation before the FCC issued its final decision.
In recommending denial, the Executive Branch committee also cited what it described as Digitalsystem's “conflicting, incomplete, and/or misleading responses" during the review process. According to the FCC, those responses undermined confidence that the company would comply with any future mitigation measures.
