Joshua Levine: Getting the FACTs About Foreign Adversary Investment in Telecoms

Cyber attacks on US telecommunications networks, government agencies, and western allies have been met by calls to improve security and close potential entry points for bad actors. To boost our telecommunications security, we should heed the phrase: “follow the money.”

The Foreign Adversary Communications Transparency Act, recently introduced in the House and Senate, would operationalize this adage by requiring public disclosure of ownership stakes in American telcos that could pose a threat to national security. The FACT Act is a sensible continuation of efforts to increase transparency around investment in critical infrastructure within the United States.  

The FACT Act has two separate prongs to provide such information: one focused on the short term and one on the medium term. In the short term, the Federal Communications Commission would be required within 120 days of enactment to publish a list of all entities that own a license for broadcasting or common carrier services obtained through a competitive bidding process in two circumstances.

The first is if a covered entity holds an equity or voting interest that is reported to the FCC under ownership rules. The second is if an appropriate national security agency determines that a “covered entity” exerts controls over an entity with ownership in a license holder, regardless of total equity share. The legislation defines “covered entity” as the governments of North Korea, China, Russia, and Iran, as well as any entity incorporated in one of these countries or a subsidiary of a covered entity. 

In the medium term, the FCC has 18 months to create rules for collecting and publicly disclosing entities that fall under the definitions of the bill. This list will be broader than the initial list required, as it covers any authorization, license, or other grant of authority issued by the FCC. Within one year of the conclusion of the rulemaking, each qualifying entity will be placed on the list described above, which will be available online and updated annually.

 The FACT Act builds upon previous reforms related to foreign ownership of telecom licenses by improving access to information and increasing flexibility of existing rules. In 2023, then-chair of the FCC Jessica Rosenworcel undertook a rulemaking to lower the ownership equity reporting threshold for foreign entities from 10 to 5 percent.

While this rulemaking resulted in a one-time information collection requirement related to foreign ownership, it is a static solution responding to a fluid threat. In contrast to this rule, the FACT Act focuses specifically on governments and firms incorporated under the rule of governments that have undermined America’s, as well as American allies’, economic and national security. Of 290 significant cyber incidents since 2006, more than half can be attributed to actors associated with “covered governments.”

The FACT Act offers a forward-looking approach to identify potential vectors of vulnerability within American communications networks. In order to convince people of national security threats, policymakers and civil society must point to tangible evidence of potential risk.

The successful cases made against dangerous foreign companies such as Huawei, China Telecom, and Kaspersky,  providers of telecommunications equipment and software, respectively, all of which were removed from the U.S. market, were the result of years of investigative efforts outlining their associations with foreign adversaries, and their complicity in behavior detrimental to the interests of the American people. As the nations identified under the “covered government” definition continue to carry out cyber espionage operations, provide a haven for cyber criminals, and build closer economic and security relationships, investment from firms into critical infrastructure should be treated with skepticism. 

Foreign investment is important, but should not come at the expense of exposing critical infrastructure to malign operations from foreign adversaries. Increasing transparency around adversarial governments and entities beholden to such states financial control of US telecommunications networks creates an additional layer of scrutiny toward actors whose behavior warrants it. Congress should pass this legislation and give the American people the FACTs about foreign ownership of telecommunications networks.

Joshua Levine is a Research Fellow at FAI. His work focuses on policies that foster digital competition and interoperability in digital markets, online expression, and emerging technologies. Before joining FAI, Josh was a Technology and Innovation Policy Analyst at the American Action Forum, where he focused on competition in digital markets, data privacy, and artificial intelligence. This Expert Opinion is exclusive to Broadband Breakfast.

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