[Federal Register Volume 76, Number 204 (Friday, October 21, 2011)]
[Proposed Rules]
[Pages 65472-65485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26826]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 25

[IB Docket No. 11-133; FCC 11-121]


Review of Foreign Ownership Policies for Common Carrier and 
Aeronautical Radio Licensees

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission is initiating a review of its 
policies and procedures that apply to foreign ownership of common 
carrier, aeronautical en route and aeronautical fixed radio station 
licensees. The Commission seeks to reduce to the extent possible the 
regulatory costs and burdens imposed on common carrier, aeronautical en 
route and aeronautical fixed radio station applicants, licensees, and 
spectrum lessees; provide greater transparency and more predictability 
with respect to the Commission's foreign ownership filing requirements 
and review process; and facilitate investment from new sources of 
capital, while continuing to protect important interests related to 
national security, law enforcement, foreign policy, and trade policy.

DATES: Submit comments on or before December 5, 2011, and replies on or 
before January 4, 2012. Written comments on the Paperwork Reduction Act 
(PRA) proposed information collection requirements must be submitted by 
the public, Office of Management and Budget (OMB) and other interested 
parties on or before December 20, 2011.

ADDRESSES: You may submit comments, identified by Docket No. 11-133, by 
any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's ECFS Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail to [email protected], phone: 202-418-
0530 (voice), tty: 202-418-0432.
    In addition to filing comments as described above, a copy of any 
comments on the PRA information collection requirements contained 
herein should be submitted to the FCC via email to [email protected] and to 
Nicholas A. Fraser, OMB, via e-mail to [email protected] 
or via fax at 202-395-5167.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Susan O'Connell or James Ball, Policy 
Division, International Bureau, FCC, (202) 418-1460 or via e-mail to 
[email protected], [email protected]. On PRA matters, contact 
Cathy Williams, Office of the Managing Director, FCC, (202) 418-2918 or 
via e-mail to [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking in IB Docket No. 11-133, FCC 11-121, adopted and 
released on August 9, 2011. The full text of this document is available 
for inspection and copying during normal business hours in the FCC 
Reference Center, 445 12th Street, SW., Washington, DC 20554. The 
document also is available for download over the Internet at http://transition.fcc.gov/Daily_Releases/Daily_Business/2011/db0809/FCC-11-121A1.pdf. The complete text also may be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc. 
(BCPI), located in Room CY-B402, 445 12th Street, SW., Washington, DC 
20554. Customers may contact BCPI at its Web site, http://www.bcpiweb.com, or call 1-800-378-3160.

Comment Filing Procedures

    Pursuant to Sec. Sec.  1.415, 1.419, interested parties may file 
comments and reply

[[Page 65473]]

comments on or before the dates indicated above. Comments may be filed 
using the Commission's Electronic Comment Filing System (ECFS). See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 
(1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the Commission's ECFS Web site at 
http://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. If more than one docket 
or rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St., SW., Room TW-A325, Washington, DC 20554. The filing hours 
are 8 a.m. to 7 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street, SW., Washington, DC 20554.

Summary of Notice of Proposed Rulemaking

    1. The Notice of Proposed Rulemaking (NPRM) initiates a review of 
the policies and procedures of the Federal Communications Commission 
(Commission) that apply to foreign ownership of common carrier radio 
station licensees--e.g., companies using wireless licenses to provide 
phone service--and of aeronautical en route and aeronautical fixed 
radio station licensees (together, aeronautical licensees) pursuant to 
section 310(b)(4) of the Communications Act of 1934, as amended (the 
Act), 47 U.S.C. 310(b)(4). For ease of reference, the NPRM refers to 
applicants, licensees, and spectrum lessees collectively as 
``licensees'' unless the context warrants otherwise. ``Spectrum 
lessees'' are defined in section 1.9003 of the Commission's rules, 47 
CFR 1.9003.
    2. The Commission seeks to reduce to the extent possible the 
regulatory costs and burdens imposed on wireless common carrier and 
aeronautical applicants, licensees, and spectrum lessees; provide 
greater transparency and more predictability with respect to the 
Commission's filing requirements and review process; and facilitate 
investment from new sources of capital, while continuing to protect 
important interests related to national security, law enforcement, 
foreign policy, and trade policy. The NPRM does not address Commission 
policies with respect to the application of section 310(b)(4) to 
broadcast licensees.
    3. The Commission seeks comment in the NPRM on measures to revise 
and simplify the agency's regulatory framework under section 310(b)(4) 
for authorizing foreign ownership of common carrier and aeronautical 
radio licensees. The Commission also proposes to codify whatever 
measures it ultimately adopts to provide more predictability and ensure 
transparency of the section 310(b)(4) filing requirements and review 
process. The Commission estimates that adopting the proposals and other 
options discussed in the NPRM would result in a more than 70 percent 
reduction in the number of section 310(b)(4) petitions for declaratory 
ruling filed with the Commission annually, as compared to the current 
regulatory framework. The Commission also anticipates a reduction in 
the time and expense associated with filing petitions under the 
proposed framework.
    4. Section 310(b)(4) of the Act establishes a 25 percent benchmark 
for investment by foreign individuals, corporations, and governments in 
U.S.-organized entities that directly or indirectly control a U.S. 
broadcast, common carrier, or aeronautical radio station licensee. This 
section also grants the Commission discretion to allow higher levels of 
foreign ownership of a controlling U.S.-organized parent company--up to 
and including 100 percent of its equity and voting interests--unless 
the Commission finds that such ownership is inconsistent with the 
public interest. Licensees must request Commission approval of their 
U.S. parents' foreign ownership under section 310(b)(4), normally done 
by filing a petition for declaratory ruling with the agency. In order 
for the Commission to make the required public interest findings, 
licensees must file the petition and obtain Commission approval before 
direct or indirect foreign ownership of their U.S. parent companies 
exceeds 25 percent.
    5. In the 1997 Foreign Participation Order, the Commission 
concluded that the public interest would be served by permitting 
greater investment in U.S. common carrier and aeronautical radio 
licensees by foreign individuals and entities from countries that are 
Members of the World Trade Organization (WTO) pursuant to the 
discretionary authority in section 310(b)(4).\1\ The Commission adopted 
a rebuttable presumption by which it presumes that foreign investment 
from WTO Member countries does not pose competitive concerns in the 
U.S. market. For purposes of determining whether foreign investors are 
based in WTO Member countries, the Commission uses the ``principal 
place of business'' test to determine the nationality or ``home 
market'' of foreign entities that seek to invest directly or indirectly 
in the U.S. parent of a common carrier or aeronautical radio licensee. 
The Commission's public interest analysis under section 310(b)(4) also 
considers any national security, law enforcement, foreign policy or 
trade policy concerns raised by the proposed foreign investment. In 
assessing the public interest, the Commission takes into account the 
record developed in each particular case and accords deference to the 
expertise of Executive Branch agencies in identifying and interpreting 
issues of concern related to national security, law enforcement, 
foreign policy and trade policy.
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    \1\ See Rules and Policies on Foreign Participation in the U.S. 
Telecommunications Market: Market Entry and Regulation of Foreign-
Affiliated Entities, IB Docket No. 97-142 and 95-22, Report and 
Order and Order on Reconsideration, 12 FCC Rcd 23891, 23893-97, 
paras. 1-12, 23935-42, paras. 97-118 (1997) (Foreign Participation 
Order).
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    6. With respect to foreign investment from countries that are not 
Members of the WTO, the Commission determined in the Foreign 
Participation Order to continue to apply the ``effective competitive 
opportunities'' (ECO) test, adopted in the 1995 Foreign Carrier Entry 
Order, as part of the Commission's public interest analysis under 
section 310(b)(4).\2\ Thus, to the extent non-WTO Member investment in 
the controlling U.S. parent of a common carrier or aeronautical radio 
licensee would exceed 25 percent, the Commission requires the 
petitioner to submit an ECO showing for the relevant wireless service 
sector in each non-WTO Member country where an investor has its home 
market. The Commission

[[Page 65474]]

found in the Foreign Participation Order that the circumstances that 
existed when it adopted the Foreign Carrier Entry Order had not changed 
sufficiently with respect to countries that were not Members of the 
WTO, as the markets of non-WTO Members, in almost all cases, were not 
liberalized and presented legal and practical barriers to entry. Thus, 
the Commission determined that it would deny an application if it found 
that more than 25 percent of the ownership of an entity that controls a 
common carrier or aeronautical radio licensee is attributable to 
parties whose principal place(s) of business are in non-WTO Member 
countries that do not offer effective competitive opportunities to U.S. 
investors in the particular service sector in which the applicant seeks 
to compete in the U.S. market, unless other public interest 
considerations outweigh that finding. The Commission concluded that its 
goals of increasing competition in the U.S. telecommunications service 
market and opening foreign telecommunications service markets would 
continue to be served by opening the U.S. market to non-WTO investors 
only to the extent that the investors' home markets are open to U.S. 
investors.
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    \2\ See Market Entry and Regulation of Foreign-Affiliated 
Entities, IB Docket No. 95-22, Report and Order, 11 FCC Rcd 3873, 
3941-64, paras. 179-238 (1995) (Foreign Carrier Entry Order).
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Proposals and Other Options To Modify Current Regulatory Framework

    7. The Distinction Between WTO and non-WTO Investment. The 
Commission requests comment whether there is a policy basis for 
retaining the distinction between WTO and non-WTO Member investment in 
its current form, modifying the Commission's application of the 
distinction, or eliminating the distinction. The Commission asks 
commenters to identify changes that have occurred in U.S. and foreign 
wireless telecommunications markets since 1997 that support their 
position. In particular, the Commission seeks comment on the extent of 
foreign ownership in the U.S. telecommunications market today and the 
trends over the last several years. The Commission also seeks comment 
on the relative costs and benefits of maintaining the current 
distinction between WTO and non-WTO Member investment. Specifically, 
the Commission asks commenters to provide for the record quantification 
of the costs and burdens currently associated with filing a section 
310(b)(4) petition, complying with the limitations of the section 
310(b)(4) declaratory ruling, and the extent to which a change in 
policy would result in cost savings to U.S. wireless carriers and 
consumers. The Commission also asks commenters to address to what 
extent any costs and burdens have either deterred foreign investment or 
added significant transaction costs to the flow of such investments.
    8. If the Commission were to eliminate the distinction between WTO 
and non-WTO Member investment, a U.S. wireless carrier would no longer 
be required to demonstrate in its section 310(b)(4) petition that non-
WTO Member investment in its U.S-organized parent company does not 
exceed 25 percent or, alternatively, that non-WTO Member investment is 
from countries that satisfy the ECO test. The Commission would presume, 
subject to rebuttal, that direct or indirect foreign ownership of a 
wireless carrier's U.S. parent company does not pose competitive 
concerns in the U.S. market regardless of the nationality (in the case 
of an individual) or principal place(s) of business (in the case of a 
business entity) of the U.S. parent's foreign investor(s). The 
Commission seeks comment on whether it is prudent to presume that non-
WTO Member investment in U.S. parent companies does not raise 
competitive concerns in the U.S. market and the circumstances, if any, 
that would allow the leveraging of market power in foreign 
telecommunications services or facilities into U.S. wireless markets.
    9. Commenters should also address whether maintaining the 
distinction between WTO and non-WTO Member investment, including the 
ECO test, focuses Commission resources on the most pressing 
international competitive concerns, and whether eliminating the 
distinction between WTO and non-WTO Member investment and the ECO test 
would produce net public interest benefits by reducing asymmetries in 
regulation of wireless and wireline carriers, which are not subject to 
the foreign ownership restrictions in section 310(b) except to the 
extent they hold a common carrier radio license.
    10. The Commission does not propose to change its long-standing 
requirement that applies to a licensee's determination of basic 
compliance with the 25 percent statutory benchmark in section 
310(b)(4). In making that determination, licensees and their U.S. 
parent companies are required to count all equity and voting interests 
held in the U.S. parent, including interests held indirectly in the 
parent through intermediate companies. The agency seeks comment, 
however, on whether there are ways to reduce the costs and burdens of 
ascertaining the level of non-WTO investment in U.S. parent companies 
while continuing to support the agency's objectives to promote 
competition in the U.S. market and encourage market-opening in non-WTO 
Member countries. In particular, the Commission requests comment on 
allowing U.S. parent companies filing section 310(b)(4) petitions to 
exclude from their calculations of non-WTO investment those equity and 
voting interests that are held by a single non-WTO investor or 
``group'' of non-WTO investors in an amount that constitutes 5 percent 
or less of the U.S. parent company's total capital stock (equity) and/
or voting stock. Should the Commission continue to issue section 
310(b)(4) rulings subject to the standard condition that prohibits the 
U.S. parent from accepting non-WTO investment that exceeds, in the 
aggregate, 25 percent of the U.S. parent's equity interests or 25 
percent of its voting interests? If so, should the Commission allow the 
U.S. parent to exclude from the 25 percent amount those equity and 
voting interests that are held by a single non-WTO investor or 
``group'' of non-WTO investors in an amount that constitutes 5 percent 
or less of the U.S. parent company's total capital stock (equity) and/
or voting stock?
    11. The Commission asks whether it should treat two or more non-WTO 
investors as a ``group'' when the investors have agreed to act together 
for the purpose of acquiring, holding, voting, or disposing of their 
equity and/or voting interests in the U.S. parent company or any 
intermediate company(ies) through which any of the investors holds its 
interests in the U.S. parent. As part of such an approach, should the 
Commission subject any individual or entity that, directly or 
indirectly, creates or uses a trust, proxy, power of attorney, or any 
other contract, arrangement, or device with the purpose of divesting 
itself, or preventing the vesting, of an equity interest or voting 
interest in the U.S. parent as part of a plan or scheme to evade the 
application of our policies that apply to non-WTO investment under 
section 310(b)(4) to enforcement action by the Commission, including an 
order requiring divestiture of the investor's direct or indirect 
interests in the U.S. parent? Should a 5 percent or less exclusion for 
non-WTO investments apply only when the U.S. parent or an entity that 
controls the U.S. parent is a publicly-traded company, or also when 
they are privately-held companies?
    12. The Commission requests comment on whether a 5 percent or less 
exclusion would allow the Commission to adequately screen and 
potentially disallow non-WTO investment that may be contrary to the 
public interest; or would the exclusion amount be more

[[Page 65475]]

properly set at some other level? Are there ways to simplify the 
principal place of business test? Alternatively, should the agency 
eliminate the test in favor of a different approach? The Commission 
also seeks input on whether it is feasible and desirable to modify the 
ECO test to acknowledge and further encourage the efforts of non-WTO 
Member countries to open their markets to foreign investment and 
competition.
    13. Regardless of whether the Commission retains the current 
distinction between WTO and non-WTO Member investment in a modified 
form or eliminates the distinction, it would continue to coordinate all 
section 310(b)(4) petitions with the appropriate Executive Branch 
agencies and accord deference to their views in matters related to 
national security, law enforcement, foreign policy, or trade policy 
that may be raised by a particular transaction. The Commission does not 
propose to adopt any change in policy that would affect the 
Commission's ability to condition or disallow foreign investment that 
may pose a risk of harm to important national policies.
    14. Issuing Section 310(b)(4) Rulings to the Licensee's U.S. 
Parent. The Commission proposes to issue section 310(b)(4) rulings in 
the name of the controlling U.S. parent company of the licensee(s) that 
are the subject of the petition. Where there are successive, 
controlling U.S. parent companies in the vertical ownership chain of 
the licensee, it proposes to issue the ruling in the name of the 
lowest-tier, controlling U.S. parent. The Commission makes this 
proposal to ensure that it issues the foreign ownership ruling to the 
particular entity whose aggregate, direct and/or indirect foreign 
ownership would trigger the applicability of section 310(b)(4) to the 
extent it exceeds 25 percent, based on the company's ownership 
structure at the time the ruling is granted, and to accommodate other 
aspects of the proposed framework, such as allowing the U.S. parent's 
ruling to cover automatically any of its subsidiaries or affiliates.
    15. Approval of Named Foreign Investors. The Commission proposes to 
continue to entertain petitions that request authority for foreign 
individual(s) and entity(ies) named in the petition to hold specified 
percentages of equity and/or voting interests in the U.S. parent 
whether directly or indirectly through intervening U.S.-organized 
entities. It proposes several key changes to the current framework for 
authorizing ownership of the U.S. parent by named foreign investors and 
by other potential foreign investors, to reduce the need for U.S. 
parent companies to return to the Commission, after receiving an 
initial ruling, to obtain prior approval for subsequent changes in 
their foreign ownership (including increased interests by foreign 
investors that the Commission already has approved in the initial 
ruling and interests to be acquired by new foreign investors).
    16. The proposed rules would require a U.S. parent company to 
include in its section 310(b)(4) petition a request for specific 
approval of any named foreign individual or entity that holds, or would 
hold upon closing of any transactions contemplated by the petition, a 
direct or indirect equity and/or voting interest in the U.S. parent in 
excess of 25 percent or a controlling interest at any level. The U.S. 
parent would be required to monitor and stay ahead of changes in 
ownership of its approved foreign investors to ensure that the parent 
has an opportunity to obtain Commission approval before a change in 
ownership of an approved investor results in an unapproved investor 
acquiring an indirect interest in the U.S. parent that exceeds 25 
percent. As is the case under the current regulatory framework, the 
proposed framework may necessitate the placement of restrictions in the 
bylaws or other organic documents of the controlling U.S. parent and/or 
other entities situated above it in the vertical chain of ownership to 
ensure the parent is able to comply with the terms of its section 
310(b)(4) ruling. The Commission seeks comment on this aspect of the 
proposed framework, including whether it would present any new issues 
for U.S. common carrier and aeronautical radio licensees. It also 
requests comment on whether the proposal would be consistent with the 
statute. To the extent this proposal raises concern regarding the 
Commission's ability to monitor foreign investment in regulated 
entities, the Commission seeks comment on how it should modify the 
proposed framework.
    17. The Commission proposes to provide the petitioning U.S. parent 
with the option of requesting specific approval for any named foreign 
investor to increase its equity and/or voting interests in the U.S. 
parent from existing levels (or levels that would exist upon closing of 
any related transactions) up to a non-controlling, 49.99 percent equity 
and/or voting interest (the ``49.99 percent approval option for named 
foreign investors''). It requests comment on this option and 
specifically seeks input whether, once it has reviewed and approved 
foreign ownership of a licensee's U.S. parent by a named foreign 
investor after coordination with relevant Executive Branch agencies, 
there is any public interest reason for the Commission to scrutinize 
additional investments by the same foreign individual or entity where 
the investment would not effectuate a transfer of control of the 
licensee. Commenters who oppose this approach should specify the 
potential harms such an approach may pose. Would the 49.99 percent 
approval option encourage the filing of speculative requests to the 
extent that the resulting administrative costs and burdens on the 
Commission and relevant Executive Branch agencies would outweigh the 
potential benefits to U.S. carriers and consumers? Or, are there 
reasons why a U.S. parent should only request 49.99 percent approval 
for a particular named foreign investor where the carrier has a 
reasonable expectation of needing such approval? Would this option 
increase the likelihood of unauthorized transfers of control because de 
facto control may be implicated at ownership levels below 49.99 percent 
depending on the distribution of other shares? To the extent that 
foreign investment raises unique issues with regard to potential 
unauthorized transfers of control, what mechanisms, if any, could the 
Commission adopt or are already in place to minimize such transfers in 
the event it adopts the 49.99 percent approval option?
    18. The Commission also seeks comment on its proposal to provide 
foreign transferees with the option of seeking approval at the outset, 
in the section 310(b)(4) petition that is filed in connection with a 
transfer of control application, to acquire 100 percent of the equity 
and/or voting interests in the licensee's U.S. parent company (the 
``100 percent approval option for controlling foreign investors'').
    19. The Aggregate Allowance for Unnamed Foreign Investors. The 
Commission seeks comment on whether, in addition to approving ownership 
interests held or to be held directly or indirectly in the U.S. parent 
by named foreign investors for which the petition requests specific 
approval, it should, as a general rule, authorize the U.S. parent to 
have, on a going-forward basis, 100 percent aggregate foreign 
ownership, including by foreign investors for which the parent did not 
request specific approval in its petition, provided that no single 
foreign investor or ``group'' of foreign investors acquires, directly 
or indirectly, an ownership interest that exceeds 25 percent of the 
parent's equity interests or 25 percent of its voting interests, or a 
controlling interests at any level, without the Commission's prior 
approval. In recent

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rulings, the Commission and its International Bureau have permitted 100 
percent aggregate foreign ownership of U.S. parent companies subject to 
a 25 percent ceiling on interests acquired by a single foreign investor 
and the aggregate 25 percent limit on non-WTO investment. The 
Commission is not aware of any problems that have resulted from this 
approach or objections raised in the context of any particular 
proceedings. If the Commission determines to retain the current 
distinction between WTO and non-WTO Member investment, the Commission 
would continue to condition the ruling to require that non-WTO 
investment not exceed, directly or indirectly, in the aggregate, 25 
percent of the U.S. parent's equity interests or 25 percent of its 
voting interests without prior Commission approval.
    20. The Commission recognizes that, if it were to adopt such a 100 
percent aggregate allowance, the 25 percent aggregate allowance that it 
currently includes in section 310(b)(4) rulings would effectively 
increase to 100 percent. It seeks comment on any burdens the current 25 
percent allowance may impose on U.S. wireless carriers and whether it 
can mitigate any such burdens by increasing the allowance in a manner 
that would not compromise its statutory obligations under the Act. For 
example, if the Commission were to adopt a 100 percent aggregate 
allowance, should it provide public notice and an opportunity for 
comment when a foreign investor's interest would increase from a 
minority to a majority interest? Or, is it sufficient to rely on the 
Commission review process that would take place pursuant to section 
310(d) of the Act, 47 U.S.C. 310(d)? The Commission requests that 
commenters also address whether it should apply a 100 percent aggregate 
allowance only to publicly-traded companies or also to privately-held 
companies. In addition, the Commission seeks input on the feasibility 
of applying a 25 percent allowance to a U.S. parent that is wholly 
owned and controlled by a foreign public company that is traded only on 
foreign exchanges and that is owned substantially by foreign citizens 
and entities. Is it possible for such foreign public companies to 
comply with a 25 percent allowance? Other than including a 100 percent 
allowance in the U.S. parent's section 310(b)(4) ruling in these 
circumstances, is there another way to address the possibility that the 
foreign company may be wholly foreign owned on any given day? If there 
is no alternative to using a 100 percent allowance in such a case, is 
there a policy basis for applying a more restrictive 25 percent 
allowance to U.S. parents that are owned in whole or in part by U.S. 
public companies? Would such an approach have the effect of treating 
foreign companies more favorably than U.S. companies? The Commission 
requests comment on each of these questions. It also seeks comment 
whether, if it were to adopt a 100 percent aggregate allowance, it 
should include it in the petitioning U.S. parent's section 310(b)(4) 
ruling regardless of whether, under the proposed rules, the U.S. parent 
is required to, or otherwise chooses to, request specific approval for 
any named foreign investors.
    21. The Commission requests comment whether it should adopt a non-
controlling, 25 percent standard for triggering prior approval of new 
or increased foreign investment by a foreign individual or entity, or 
by a ``group'' of foreign investors, that has not received specific 
approval in the U.S. parent's foreign ownership ruling. An investment 
greater than 25 percent may confer upon a foreign investor substantial 
influence over the core operations of a U.S. carrier and thus may 
warrant imposing additional conditions on the operations of the U.S. 
parent and licensee or disallowing the investment in whole or in part. 
At the same time, it would appear that the potential for harm from a 
non-controlling interest at an equity and/or voting level of 25 percent 
or less can be addressed sufficiently at the time of the initial grant 
of the parent's ruling through the negotiation of a security agreement 
or similar arrangement between the U.S. parent and relevant Executive 
Branch agencies and pursuant to the Commission's authority to impose 
conditions on a ruling where the Commission deems it is warranted in 
the public interest.
    22. Expanding Beyond Carrier-Specific Rulings. The Commission 
currently issues foreign ownership rulings to cover only the 
licensee(s) named in the underlying petition. An affiliated entity must 
submit its own petition for declaratory ruling pursuant to section 
310(b)(4). Similarly, where a licensee is the subject of a transfer of 
control application under section 310(d) of the Act, the fact that the 
Commission previously has approved the transferee's foreign ownership 
does not relieve the transferee of the obligation to obtain section 
310(b)(4) approval in the name of licensees in which it proposes to 
acquire a controlling interest.
    23. The Commission proposes to issue section 310(b)(4) rulings in 
the name of the U.S. parent of the licensee(s) that are the subject of 
the petition, but also to provide for automatic extension of the U.S. 
parent's ruling to cover any subsidiary or affiliate of the U.S. 
parent, whether existing at the time of the ruling or formed or 
acquired subsequently. It would define ``subsidiary or affiliate'' as 
an entity that is wholly owned and controlled by, or is under 100 
percent common ownership and control with, the U.S. parent. Any 
subsidiary or affiliate of the U.S. parent, as so defined, would be 
covered by the parent's ruling, provided that the U.S. parent remains 
in compliance with the terms of its ruling(s). The Commission proposes 
to require that a subsidiary or affiliate attach to any common carrier 
or aeronautical wireless application a certification, signed by the 
U.S. parent, stating that the U.S. parent is in compliance with the 
terms and conditions of its section 310(b)(4) ruling(s) and providing 
citations to the ruling(s). The Commission also proposes to extend 
automatically the U.S. parent's section 310(b)(4) ruling to cover 
successors-in-interest to the parent, provided that foreign ownership 
of any such successors-in-interest complies with the terms of the 
ruling. The Commission proposes to require that successors-in-interest 
notify it within 30 days of the reorganization. The Commission requests 
comment on these two automatic extension proposals. In particular, are 
they likely to achieve the intended purpose of reducing the number of 
section 310(b)(4) petitions that wireless carriers must file under 
current procedures?
    24. Introducing New Foreign-Organized Entities into the Vertical 
Ownership Chain. A controlling U.S. parent of a licensee may itself 
have one or more controlling foreign-organized companies situated above 
it in the vertical chain of ownership, and new foreign-organized parent 
companies may be added to the vertical chain of ownership over time as 
a result of internal reorganizations. The Commission seeks input on 
whether it should permit the insertion of new, controlling foreign-
organized companies at any level in the vertical ownership chain above 
the U.S. parent that has received a foreign ownership ruling without 
prior Commission approval, provided that any new foreign-organized 
company(ies), either alone or together, are under 100 percent common 
ownership and control with the controlling foreign parent for which the 
U.S. parent has received prior Commission approval. The Commission

[[Page 65477]]

also requests comment on whether it should permit a U.S. parent 
company's approved, non-controlling foreign investors to insert new, 
foreign-organized companies into their vertical chains of ownership 
without the U.S. parent having to return to the Commission for prior 
approval, provided that the new foreign company is under 100 percent 
common ownership and control with the approved foreign investor. It 
requests comment on the costs and benefits of allowing foreign-
organized companies to be introduced into the vertical ownership chains 
of the U.S. parent company and its approved, non-controlling foreign 
investors without prior approval once the Commission has issued the 
U.S. parent a section 310(b)(4) ruling. If the Commission determines to 
allow such post-ruling changes in foreign ownership, should it require 
the U.S. parent company to notify the Commission about the changes in 
ownership and, if so, would 30 days be a reasonable timeframe within 
which to require the U.S. parent to notify the Commission?
    25. Service- and Geographic-Specific Rulings. The Commission 
requests comment on whether to retain its general practice of issuing 
rulings on a service-specific and geographic-specific basis. Section 
310(b)(4) rulings typically cover only the particular wireless 
service(s) referenced in the petition for declaratory ruling, and the 
scope of the ruling may also be limited to the geographic service area 
of the licenses or spectrum leasing arrangements referenced in the 
petition. The Commission has previously recognized, in the Secondary 
Markets Second Report and Order, that service-specific and geographic-
specific rulings might require carriers to make multiple filings for 
section 310(b)(4) approval, resulting in increased transaction costs 
and regulatory delay.\3\ The Commission found that a policy of 
entertaining petitions that seek ``blanket'' approval, under section 
310(b)(4), to cover future spectrum leasing arrangements and license 
assignments/transfers for services and geographic coverage areas 
specified in the petition would eliminate unnecessary regulatory 
hurdles for carriers seeking maximum flexibility to expand the scope of 
their service offerings, while continuing to ensure that the Commission 
and the Executive Branch have a meaningful opportunity to review 
applications and petitions for potential harms to national security, 
law enforcement, foreign policy and trade policy. The Commission seeks 
input on the public interest costs and benefits of issuing section 
310(b)(4) rulings on a service-specific basis; and, similarly, on the 
costs and benefits of issuing section 310(b)(4) rulings on a 
geographic-specific basis. It requests that comments that advocate a 
change in policy include specific proposals as to the appropriate 
service and geographic limitations of section 310(b)(4) rulings, if 
any.
---------------------------------------------------------------------------

    \3\ See Promoting Efficient Use of Spectrum Through Elimination 
of Barriers to the Development of Secondary Markets, Second Report 
and Order, Order on Reconsideration, and Second Further Notice of 
Proposed Rulemaking, FCC 04-167, 19 FCC Rcd 17503, 17515, para. 22 
(2004) (Secondary Markets Second Report and Order), Second Order on 
Reconsideration, FCC 08-243, 23 FCC Rcd 15081 (2008).
---------------------------------------------------------------------------

    26. Contents of Section 310(b)(4) Petitions for Declaratory 
Rulings. The Commission proposes to require that all section 310(b)(4) 
petitions contain the name, address, citizenship, and principal places 
of business of any individual or entity, regardless of citizenship, 
that directly or indirectly holds or would hold, after effectuation of 
any planned ownership changes described in the petition, at least 10 
percent of the equity or voting interests in the controlling U.S. 
parent company or a controlling interest at any level. Petitioners also 
would be required to provide the percentage of equity and/or voting 
interests held or to be held by each such ``disclosable interest 
holder'' (to the nearest one percent). The Commission proposes a 10 
percent ownership threshold for its disclosure requirement because it 
essentially mirrors the ownership disclosure requirements that 
currently apply to most common carrier wireless applicants under the 
Commission's licensing rules. A foreign investor holding a non-
controlling equity and/or voting interest of less than 10 percent in 
the U.S. parent would not need to be identified in the petition, unless 
the parent seeks specific approval for that investor (as a ``named 
foreign investor''). The Commission seeks comment on the proposed 
ownership disclosure requirement. It also seeks comment on whether a 
lower ownership percentage disclosure threshold, such as an interest 
that exceeds 5 percent, may be appropriate. Additionally, it seeks 
input on whether to require a description of the control structure of 
the U.S. parent, including an ownership diagram and/or identification 
of the real party-in-interest disclosed in any companion licensing or 
spectrum leasing applications.
    27. The Commission also proposes that section 310(b)(4) petitions 
include ownership information for each foreign individual or entity for 
which the petition seeks specific approval: Its name, citizenship, 
principal business(es), and the percentage of equity and/or voting 
interest held or to be held by the foreign investor (to the nearest one 
percent). It proposes that, where the named foreign investor is a 
corporation or other business entity, the petition shall identify each 
of the named foreign investor's direct or indirect 10 percent interest 
holders, specifying each by name, citizenship, principal business(es), 
and percentage of equity and/or voting interest held in the named 
foreign investor. The Commission believes that this ownership 
information is necessary for it to verify the identity and ultimate 
control of the foreign investor for which the petitioner seeks specific 
approval. It seeks comment on these proposed information collection 
requirements, including whether to set the proposed disclosure 
threshold at interests of more than 5 percent. The Commission believes 
that it will be particularly critical to obtain ownership information 
with respect to foreign investors for which a U.S. parent seeks 
specific approval to the extent the agency adopts its proposal to 
entertain a U.S. parent's request for approval to allow one or more 
named foreign investors to increase its interest in the U.S. parent up 
to and including a non-controlling 49.99 percent equity and/or voting 
interest.
    28. The Commission proposes to adopt rules that set forth the 
methodology for calculating a petitioner's disclosable interest 
holders. It also proposes that petitioners requesting specific approval 
for named foreign investors use the same methodology to calculate the 
foreign investors' equity and voting interests in the U.S. parent. The 
proposed rules largely track the methodology articulated in the Foreign 
Ownership Guidelines for determining the level of foreign equity and 
voting interests that are held directly and/or indirectly in the U.S. 
parent of a common carrier or aeronautical licensee that is the subject 
of a section 310(b)(4) petition.\4\
---------------------------------------------------------------------------

    \4\ See Foreign Ownership Guidelines for FCC Common Carrier and 
Aeronautical Radio Licenses, 19 FCC Rcd 22612, 22627-31 (Int'l Bur. 
2004), erratum, 21 FCC Rcd 6484 (Foreign Ownership Guidelines), pet. 
for recon. pending.
---------------------------------------------------------------------------

    29. That is, in calculating foreign equity interests in a parent 
company, the Commission uses a multiplier to dilute the percentage of 
each investor's equity interest in the parent when those interests are 
held through intervening companies, regardless of whether any 
particular link in the chain represents a controlling interest in the 
company positioned in the next lower tier. By

[[Page 65478]]

contrast, in calculating foreign voting interests in a parent company, 
the multiplier is not applied to any link in the vertical ownership 
chain that constitutes a controlling interest in the company positioned 
in the next lower tier.
    30. In circumstances where voting interests in the U.S. parent are 
held through one or more intervening partnerships, the multiplier is 
not applied to dilute a general partnership interest or uninsulated 
limited partnership interest held by a foreign individual or entity. A 
general partner, and a limited partner that does not specifically 
demonstrate it is insulated from active involvement in partnership 
affairs, are considered to hold the same voting interest as the 
partnership holds in the company situated in the next lower tier of the 
vertical ownership chain. Where a foreign investor holds an ownership 
interest indirectly in the U.S. parent through an intervening limited 
partnership, and the investor is effectively insulated from active 
involvement in partnership affairs, the U.S. parent may apply the 
multiplier in calculating the foreign investor's voting interest in the 
U.S. parent under section 310(b)(4), and its voting interest will be 
calculated as equal to its equity interest in the U.S. parent. 
Similarly, where the U.S. parent is itself organized as a limited 
partnership, an insulated limited partner's voting interest in the U.S. 
parent will be calculated as equal to the limited partner's equity 
interest in the parent. A limited partnership interest will be treated 
as insulated where the section 310(b)(4) petition contains a showing 
that the foreign limited partner is prohibited by the relevant 
partnership agreement from participating in the day-to-day management 
of the partnership, and that only the usual and customary investor 
protections are contained in the limited partnership agreement.
    31. The Commission requests comment on the proposed rules for 
calculating the equity and voting interests held, or to be held, in a 
petitioner by its disclosable interest holders and by foreign investors 
for which the petitioner requests specific approval. In particular, it 
requests comment on whether to revise its current methodology for 
calculating voting interests held in U.S. parent companies of common 
carrier or aeronautical licensees through intervening limited 
partnerships. It also requests comment on the appropriate methodology 
for calculating voting interests held in U.S. parent companies of 
common carrier or aeronautical licensees through intervening limited 
liability companies, an issue not addressed in the Foreign Ownership 
Guidelines.
    32. The Commission additionally requests comment on whether the 
insulation standard that applies to foreign limited partners investing 
in U.S. parents of common carrier and aeronautical licensees is 
sufficient to support a presumption that an insulated limited partner 
will not be materially involved in managing partnership affairs. To the 
extent such a presumption holds true, would it justify treating the 
limited partner as having no voting interest in the limited partnership 
under section 310(b)(4), effectively treating the limited partner like 
a non-voting stockholder of a corporation? Is there a need to relax or 
clarify the insulation standard: e.g., to require insulation only with 
respect to the telecommunications-related businesses of the 
partnership? Alternatively, is there a perceived legal or policy reason 
to tighten the insulation standard, particularly if the agency 
determines to treat insulated limited partnership interests like non-
voting stock interests? For example, should the Commission codify in 
its rules a list of investor protections which would not, in 
themselves, result in a limited partner being deemed uninsulated? Are 
the matters listed in proposed rule 47 CFR 1.993(c) underinclusive or 
overinclusive of matters properly considered to be usual and customary 
investor protections? Regardless of its determination on this issue, 
the Commission would continue to calculate the pro rata equity holdings 
of insulated limited partners investing in a U.S. parent directly, 
where the parent is itself organized as a limited partnership, or 
indirectly through intervening limited partnerships, as required by 
section 310(b)(4).
    33. The Commission also requests comment as to how it should 
calculate the voting interests held in U.S. parent companies of common 
carrier or aeronautical licensees through intervening limited liability 
companies (and, to the extent they may be used, registered limited 
liability partnerships). The Commission has previously determined, in 
the context of its broadcast attribution rules, to treat limited 
liability companies in the same manner as limited partnerships and has 
declined to differentiate its treatment of limited liability companies 
based on whether their management form is centralized or decentralized. 
It also concluded that it would treat registered limited liability 
partnerships in the same manner as limited partnerships and limited 
liability companies. The Commission asks that commenters address 
whether the Commission should apply to limited liability companies and 
registered limited liability partnerships the same principles that it 
ultimately adopts for calculating voting interests in limited 
partnerships.
    34. The Commission additionally requests comment whether it is 
reasonable for it to rely on a petitioner's certification that it has 
calculated the ownership interests disclosed in its petition based upon 
its review of the Commission's rules and that the interests disclosed 
satisfy each of the pertinent standards and criteria required by the 
rules. The Commission preliminarily finds that it is reasonable to 
adopt a certification approach in the context of its section 310(b)(4) 
ownership disclosure rules, and it seeks comment on the draft 
certification that is included in the proposed rules. Finally, the 
Commission requests comment regarding the nature of any other 
information which the Commission should require to be submitted in 
support of section 310(b)(4) petitions.
    35. Filing and Processing of Section 310(b)(4) Petitions for 
Declaratory Rulings. The Commission proposes to continue to: place 
section 310(b)(4) petitions on public notice as accepted for filing 
after International Bureau staff has reviewed each petition for 
completeness; ensure that the appropriate Executive Branch agencies 
receive a copy of each petition; act on each petition after the 
Executive Branch agencies have completed their review and in light of 
any comments or objections that the agencies or other interested 
parties file for the record; and, unless it otherwise specifies in the 
ruling, issue the ruling subject to the standard terms and conditions 
that it adopts in this proceeding and codifies in the Commission's 
rules. The Commission asks whether it should retain its current 
approach to streamlining section 310(b)(4) petitions. In particular, it 
seeks input on whether extending the streamlined processing procedures 
is likely to result in more efficient and timely Commission processing 
of section 310(b)(4) petitions while continuing to ensure that 
Executive Branch agencies have sufficient opportunity to engage in a 
meaningful review. Finally, it seeks comment on whether there may be 
additional ways to accelerate the section 310(b)(4) review process. It 
asks commenters addressing ideas for modernizing the current process to 
discuss how any new approach would

[[Page 65479]]

affect the Commission's public interest review.
    36. Continued Compliance with Section 310(b)(4) Declaratory 
Rulings. The Commission requests comment on whether to require the U.S. 
parent to file a periodic certification with the Commission to 
demonstrate the parent is in compliance with its foreign ownership 
ruling. The agency asks whether to require a certification every 4 
years after the anniversary of the effective date of the ruling or, 
alternatively, with a licensee's renewal applications.
    37. Transition Issues. The Commission does not propose to change 
retroactively the terms and conditions of any section 310(b)(4) ruling 
issued prior to the effective date of the rules adopted in this 
proceeding. It proposes to permit the controlling U.S. parent company 
of a wireless carrier with an existing ruling to file a new petition 
under the rules adopted in this proceeding. It seeks comment on this 
approach and on alternative approaches that would extend the benefits 
of the rules in a way that minimizes the need for U.S. parent companies 
to return to the Commission for a new ruling. For example, if the 
Commission modifies or eliminates current policy with respect to non-
WTO Member investment, should it adopt a rule that modifies all 
existing section 310(b)(4) rulings to incorporate the new policy? If 
the Commission adopts a 100 percent aggregate allowance, should it 
adopt a rule that would incorporate this provision in all rulings in 
place of the current, standard 25 percent aggregate allowance? Are 
there public policy reasons to require in all cases that a U.S. parent 
company return to the Commission for a new ruling to obtain the 
benefits of the rules adopted in this proceeding?

Paperwork Reduction Act of 1995 Analysis

    38. This document contains proposed new or modified information 
collection requirements. The Commission, as part of its continuing 
effort to reduce paperwork burdens, invites the general public and the 
Office of Management and Budget (OMB) to comment on the information 
collection requirements contained in this document, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency 
comments are due on or before December 20, 2011. Comments should 
address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; (d) ways to minimize the burden of the collection of 
information on respondents, including the use of automated collection 
techniques or other forms of information technology; and (e) ways to 
further reduce the information collection burden on small business 
concerns with fewer than 25 employees. In addition, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), we seek specific comment on how we might further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees.
    39. To view a copy of this information collection request (ICR) 
submitted to OMB: (1) Go to the web page http://www.reginfo.gov/public/do/PRAMain, (2) look for the section of the Web page called ``Currently 
Under Review,'' (3) click on the downward-pointing arrow in the 
``Select Agency'' box below the ``Currently Under Review'' heading, (4) 
select ``Federal Communications Commission'' (FCC) from the list of 
agencies presented in the ``Select Agency'' box, (5) click the 
``Submit'' button to the right of the ``Select Agency'' box, and (6) 
when the list of FCC ICRs currently under review appears, look for the 
title of this ICR and then click on the ICR Reference Number. A copy of 
the FCC submission to OMB will be displayed.
    40. The proposed information collection requirements are as 
follows:
    OMB Control Number: 3060-xxxx.
    Title: Regulations Applicable to Common Carrier and Aeronautical 
Radio Licensees Under Section 310(b)(4) of the Communications Act of 
1934, as Amended.
    Form No.: N/A.
    Type of Review: New Collection.
    Respondents: Businesses or other profit entities.
    Number of Respondents and Responses: 79 respondents and 79 
responses.
    Estimated Time per Response: 1 hour to 46 hours.
    Frequency of Response: On occasion and one-time reporting 
requirements.
    Obligation to Respond: Required to obtain or retain benefits. The 
statutory authority for these proposed information collections is found 
in Sections 1, 4(i)-(j), 211, 309, 310, and 403 of the Communications 
Act of 1934, as amended, 47 U.S.C. 151, 154(i)-(j), 211, 309, 310, and 
403.
    Total Annual Burden Hours: 942 hours.
    Total Annual Costs: $282,600.
    Nature and Extent of Confidentiality: An assurance of 
confidentiality is not offered. This information collection does not 
require the collection of personally identifiable information (PII) 
from individuals.
    Privacy Act Impact Assessment: No impacts.
    Needs and Uses: On August 9, 2011, the Commission adopted a Notice 
of Proposed Rulemaking in (FCC 11-121) in Review of Foreign Ownership 
Policies for Common Carrier and Aeronautical Radio Licensees under 
Section 310(b)(4) of the Communications Act of 1934, as Amended, IB 
Docket No. 11-133 (rel. Aug. 9, 2011) (Section 310(b)(4) NPRM). The 
Section 310(b)(4) NPRM initiates a review of the Commission's policies 
and procedures that apply to foreign ownership of common carrier and 
aeronautical en route and aeronautical fixed radio station licensees 
pursuant to section 310(b)(4) of the Communications Act of 1934, as 
amended. It seeks comment on measures to revise and simplify the 
Commission's regulatory framework under section 310(b)(4) for 
authorizing foreign ownership in the U.S. parents of common carrier and 
aeronautical radio licensees. It also proposes to codify whatever 
measures the Commission ultimately adopts in this proceeding to provide 
more predictability and ensure transparency of its section 310(b)(4) 
filing requirements and review process.

Initial Regulatory Flexibility Analysis

    41. The Regulatory Flexibility Act of 1980, as amended (RFA),\5\ 
requires that an initial regulatory flexibility analysis be prepared 
for notice-and-comment rule making proceedings, unless the agency 
certifies that ``the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities.'' \6\ The 
RFA generally defines the term ``small entity'' as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' \7\ In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act.\8\ A

[[Page 65480]]

``small business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
---------------------------------------------------------------------------

    \5\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), Public Law 104-121, Title II, 110 Stat. 857 (1996).
    \6\ 5 U.S.C. 605(b).
    \7\ 5 U.S.C. 601(6).
    \8\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in the Small Business Act, 15 U.S.C. 
632). Pursuant to 5 U.S.C. 601 (3), the statutory definition of a 
small business applies ``unless an agency, after consultation with 
the Office of Advocacy of the Small Business Administration and 
after opportunity for public comment, establishes one or more 
definitions of such term which are appropriate to the activities of 
the agency and publishes such definitions(s) in the Federal 
Register.''
---------------------------------------------------------------------------

    42. In this NPRM, the Commission seeks comment on proposed changes 
and other options to revise and simplify its policies and procedures 
implementing section 310(b)(4) of the Act, 47 U.S.C. 310(b)(4), for 
common carrier and aeronautical radio station licensees while 
continuing to ensure that the agency has the information it needs to 
carry out its statutory duties. The proposals in this NPRM are designed 
to reduce to the extent possible the regulatory costs and burdens 
imposed on wireless common carrier and aeronautical applicants, 
licensees, and spectrum lessees; provide greater transparency and more 
predictability with respect to the Commission's filing requirements and 
review process; and facilitate investment from new sources of capital, 
while continuing to protect important interests related to national 
security, law enforcement, foreign policy, and trade policy.
    43. We estimate that the rule changes discussed in this NPRM, if 
adopted, would result in a more than 70 percent reduction in the number 
of section 310(b)(4) petitions for declaratory ruling filed with the 
Commission annually, as compared to the current regulatory 
framework.\9\ We also anticipate a reduction in the time and expense 
associated with filing petitions under the proposed framework. For 
example, we propose that U.S. parent companies of common carrier and 
aeronautical licensees that seek Commission approval to exceed the 25 
percent benchmark in section 310(b)(4) no longer be required to 
request, in their section 310(b)(4) petitions, specific approval of 
named foreign investors unless a foreign investor proposes to acquire a 
direct or indirect equity and/or voting interest in the U.S. parent 
that exceeds 25 percent, or a controlling interest at any level. 
Another proposal would, if adopted, allow the U.S. parent to request 
specific approval for foreign investors named in the section 310(b)(4) 
petition to increase their direct or indirect equity and/or voting 
interests in the U.S. parent at any time after issuance of the section 
310(b)(4) ruling, up to and including a non-controlling 49.99 percent 
equity and/or voting interest. Under another proposal, if adopted, the 
Commission would issue section 310(b)(4) rulings in the name of the 
U.S. parent of the licensee, and allow for automatic extension of the 
U.S. parent's ruling to cover any of the U.S. parent's subsidiaries or 
affiliates, whether existing at the time of the ruling or formed or 
acquired subsequently, provided that the U.S. parent remains in 
compliance with the terms of its ruling.
---------------------------------------------------------------------------

    \9\ This estimate is based on the International Bureau staff's 
review of the 21 section 310(b)(4) petitions filed with the 
Commission during a randomly-selected period (September 1, 2007 
through August 31, 2008).
---------------------------------------------------------------------------

    44. The Commission believes that the streamlining proposals and 
other options in the Section 310(b)(4) NPRM will reduce costs and 
burdens currently imposed on licensees, including those licensees that 
are small entities, and accelerate the foreign ownership review 
process, while continuing to ensure that the agency has the information 
it needs to carry out its statutory duties. Therefore, the Commission 
certifies that the proposals in the Section 310(b)(4) NPRM, if adopted, 
will not have a significant economic impact on a substantial number of 
small entities. The Commission will send a copy of the NPRM, including 
a copy of this Initial Regulatory Flexibility Certification, to the 
Chief Counsel for Advocacy of the SBA.\10\ This initial certification 
will also be published in the Federal Register.\11\
---------------------------------------------------------------------------

    \10\ 5 U.S.C. 605(b).
    \11\ Id.
---------------------------------------------------------------------------

Ordering Clauses

    45. It is ordered that, pursuant to the authority contained in 47 
U.S.C. 151, 152, 154(i), 154(j), 211, 303(r), 309, 310 and 403, this 
Notice of Proposed Rulemaking is adopted.
    46. It is futher ordered that notice is hereby given of the 
proposed regulatory changes to Commission policy and rules described in 
this Notice of Proposed Rulemaking and that comment is sought on these 
proposals.
    47. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy 
of the Small Business Administration.

List of Subjects in 47 CFR Parts 1 and 25

    Communications common carriers, Radio, Reporting and recordkeeping 
requirements, Satellites, Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR parts 1 and 25 as 
follows:

PART 1--PRACTICE AND PROCEDURE

    1. The authority citation for part 1 is revised to read as follows:

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 225, 227, 303(r), 309, and 310.

    2. Section 1.907 is amended by adding definitions for Spectrum 
leasing arrangement and Spectrum lessee to read as follows:


Sec.  1.907  Definitions.

* * * * *
    Spectrum leasing arrangement. An arrangement between a licensed 
entity and a third-party entity in which the licensee leases certain of 
its spectrum usage rights to a spectrum lessee, as set forth in Subpart 
X of this part (47 CFR 1.9001 et seq.). Spectrum leasing arrangement is 
defined in Sec.  1.9003.
    Spectrum lessee. Any third party entity that leases, pursuant to 
the spectrum leasing rules set forth in Subpart X of this part (47 CFR 
1.9001 et seq.), certain spectrum usage rights held by a licensee. 
Spectrum lessee is defined in Sec.  1.9003.
* * * * *
    3. Subpart F is amended by adding Sec. Sec.  1.990 through 1.994 
and an undesignated center heading to read as follows:

Sec.

Foreign Ownership of U.S.-Organized Entities That Control Common 
Carrier, Aeronautical en Route, and Aeronautical Fixed Radio Station 
Licensees

1.990 Filing requirements.
1.991 Contents of petitions for declaratory ruling.
1.992 How to calculate indirect equity and voting interests.
1.993 Insulation Criteria for Interests in Limited Partnerships and 
Limited Liability Companies.
1.994 Routine terms and conditions.

Foreign Ownership of U.S.-Organized Entities That Control Common 
Carrier, Aeronautical en Route, and Aeronautical Fixed Radio Station 
Licensees


Sec.  1.990  Filing requirements.

    (a)(1) The controlling U.S.-organized parent company of a common 
carrier,

[[Page 65481]]

aeronautical en route or aeronautical fixed radio station applicant, 
licensee, or spectrum lessee shall file a petition for declaratory 
ruling pursuant to section 310(b)(4) of the Communications Act to 
obtain Commission approval before the parent company's aggregate 
foreign ownership exceeds, directly or indirectly, 25 percent of its 
equity interests and/or 25 percent of its voting interests.
    (2) Where there are successive, controlling U.S.-organized parent 
companies in the vertical ownership chain of the applicant, licensee or 
spectrum lessee, the petition for declaratory ruling required by 
paragraph (a)(1) of this section shall be filed by, or on behalf of, 
the lowest-tier, controlling U.S.-organized parent company.

    Example 1. U.S.-organized Licensee A is wholly owned and 
controlled by U.S.-organized Corporation B, that is, in turn, wholly 
owned and controlled by U.S.-organized Corporation C. Foreign-
organized Corporation D plans to acquire a non-controlling 30% 
equity and voting interest in U.S.-organized Corporation C. The 
petition for declaratory ruling required by paragraph (a)(1) of this 
section should be filed by or on behalf of U.S.-organized 
Corporation B.
    Example 2. U.S.-organized Licensee A is wholly owned and 
controlled by U.S.-organized Corporation B, that is, in turn, wholly 
owned and controlled by U.S.-organized Corporation C. U.S.-organized 
Corporation C is 51% owned and controlled by U.S.-organized 
Corporation D, which is, in turn, wholly owned and controlled by 
Foreign-organized Corporation E. The remaining 49% equity and voting 
interests in U.S.-organized Corporation C are owned by U.S.-
organized Corporation F, which is, in turn, wholly owned and 
controlled by Foreign-organized Corporation G. The petition for 
declaratory ruling required by paragraph (a)(1) of this section 
should be filed by or on behalf of U.S.-organized Corporation B.

    (b) The petition for declaratory ruling required by paragraph 
(a)(1) of this section shall be filed electronically on the Internet 
through the International Bureau Filing System (IBFS). For information 
on filing your petition through IBFS, see part 1, subpart Y and the 
IBFS homepage at http://www.fcc.gov/ib.
    (c) The U.S. parent filing the petition for declaratory ruling 
required by paragraph (a)(1) of this section shall certify to the 
information contained in the petition in accordance with the provisions 
of Sec.  1.16.
    (d) The following definitions shall apply to this section and 
Sec. Sec.  1.991 through 1.994.
    (1) Individual refers to a natural person as distinguished from a 
partnership, association, corporation, or other organization.
    (2) Entity includes a partnership, association, estate, trust, 
corporation, limited liability company, governmental authority or other 
organization.
    (3) Control includes actual working control in whatever manner 
exercised and is not limited to majority stock ownership. Control also 
includes direct or indirect control, such as through intervening 
subsidiaries.


Sec.  1.991  Contents of petitions for declaratory ruling.

    The petition for declaratory required by Sec.  1.990(a)(1) shall 
contain the following information:
    (a) The name(s) and FCC Registration Number(s) (FRN) of the 
applicant(s), licensee(s), or spectrum lessees for which a ruling is 
requested.
    (b)(1) For each named licensee or spectrum lessee, specify:
    (i) The Call Sign(s) or, in the case of a spectrum leasing 
arrangement, the File No(s). under which the licensee or spectrum 
lessee is authorized to provide common carrier, aeronautical fixed or 
aeronautical en route service; and
    (ii) The type(s) of radio service authorized (e.g., cellular radio 
telephone service; microwave radio service; mobile satellite service; 
aeronautical fixed service).
    (2) If the petition is filed in connection with an application for 
a radio station license or a spectrum leasing arrangement, or an 
application to acquire a license or spectrum leasing arrangement by 
assignment or transfer of control, specify for each named applicant:
    (i) The File No(s). of the associated application(s), if available 
at the time the petition is filed; otherwise, specify the anticipated 
filing date for each application; and
    (ii) The type(s) of radio services covered by each application 
(e.g., cellular radio telephone service; microwave radio service; 
mobile satellite service; aeronautical fixed service).
    (c) With respect to the petitioning U.S.-organized parent company, 
its name; FCC Registration Number (FRN); mailing address; place of 
organization; telephone number; facsimile number (if available); 
electronic mail address (if available); type of business organization 
(e.g., corporation, unincorporated association, trust, general 
partnership, limited partnership, limited liability company, trust, 
other (include description of legal entity)); name and title of officer 
certifying to the information contained in the petition.
    (d) If the petitioning U.S.-organized parent company is represented 
by a third party (e.g., legal counsel), that person's name, the name of 
the firm or company, mailing address and telephone number/electronic 
mail address may be specified.
    (e) With respect to the petitioning U.S.-organized parent company, 
the name of any individual or entity that holds directly 10 percent or 
more of the U.S. parent's equity interests and/or voting interests, or 
a controlling interest at any level as follows:
    (1) In the case of a U.S. parent that is organized as a 
corporation, the name of any individual or entity that holds 10 percent 
or more of the U.S. parent company's total capital stock and/or voting 
stock, or a controlling interest at any level.
    (2) In the case of a U.S. parent that is organized as a general 
partnership, the names of its constituent general partners.
    (3) In the case of a U.S. parent that is organized as a limited 
partnership, the name(s) of the general partner(s), any uninsulated 
limited partner(s), and any insulated limited partner(s) with an equity 
interest in the U.S. parent of at least 10 percent (calculated 
according to the percentage of the limited partner's capital 
contribution). With respect to each named limited partner, state 
whether its partnership interest is insulated or uninsulated, based on 
the insulation criteria specified in Sec.  1.993.
    (4)(i) Except as otherwise provided in paragraph (e)(4)(ii) of this 
section, in the case of a U.S. parent that is organized as a limited 
liability company, the name(s) of each uninsulated member, regardless 
of its equity interest in the U.S. parent, any insulated member with an 
equity interest in the U.S. parent of at least 10 percent (calculated 
according to the percentage of the member's capital contribution), and 
any non-member manager(s). With respect to each named member, state 
whether its membership interest is insulated or uninsulated, based on 
the insulation criteria specified in Sec.  1.993, and whether the 
member is a managing member.
    (ii) Where a U.S. parent is organized as a limited liability 
company and demonstrates in its section 310(b)(4) petition that the 
company is governed in a manner similar to a corporation, the name of 
any individual or entity that holds 10 percent or more of the U.S. 
parent company's total equity interests and/or voting interests, or a 
controlling interest at any level. For purposes of this paragraph, 
equity interests shall be calculated according to the percentage of the 
member's capital contribution, and voting interests shall be calculated 
based on the governance provisions of the particular limited liability 
company

[[Page 65482]]

agreement and other operative documents. The demonstration required by 
this paragraph shall include a description of the members' respective 
voting rights and roles in managing the affairs of the company.
    (f) With respect to the petitioning U.S.-organized parent company, 
the name of any individual or entity that holds indirectly, through one 
or more intervening entities, 10 percent or more of the U.S. parent's 
equity interests and/or voting interests, or a controlling interest at 
any level. Equity interests and voting interests held indirectly shall 
be calculated in accordance with the principles set forth in Sec.  
1.992.
    (g)(1) For each 10 percent interest holder named in response to 
paragraphs (e) and (f) of this section, specify the equity interest 
held and the voting interest held (each to the nearest one percent); in 
the case of an individual, his or her citizenship; in the case of a 
business organization, its place of organization, type of business 
organization (e.g., corporation, unincorporated association, trust, 
general partnership, limited partnership, limited liability company, 
trust, other (include description of legal entity)); and principal 
business(es).
    (2) For purposes of this paragraph (g), where the petitioning U.S. 
parent is organized as a limited partnership or limited liability 
company, any limited partner or member that is insulated as specified 
in Sec.  1.993 shall be deemed to hold no voting interest in the U.S. 
parent. Thus, the U.S. parent is not required to calculate any voting 
interest for its insulated limited partners or insulated members.
    (h) Attach an ownership diagram illustrating the vertical ownership 
structure of the applicant(s), licensee(s), or spectrum lessee(s) that 
are the subject of the petition, including the direct and indirect 
ownership (equity and voting) interests held in the petitioning U.S. 
parent by the person(s) and/or entity(ies) named in response to 
paragraphs (e) and (f) of this section, each of which should be 
depicted in the ownership diagram. All controlling interests should be 
labeled as such.
    (i)(1) Provide the name of each foreign individual and/or entity 
for which the petitioning U.S. parent company requests specific 
approval, if any, and the respective percentages of equity and/or 
voting interests that each holds, or would hold, upon consummation of 
any transactions described in the petition, directly or indirectly in 
the U.S. parent company. Equity and voting interests shall be 
calculated in accordance with the principles set forth in paragraphs 
(e) and (f) of this section and in Sec.  1.992.
    (2) The petitioning U.S. parent must request specific approval for 
any foreign individual and/or entity that holds, or would hold, upon 
consummation of any transactions described in the petition, a direct 
and/or indirect equity and/or voting interest in the U.S. parent in 
excess of 25 percent, or a controlling interest at any level. The U.S. 
parent may, but is not required to, request specific approval for any 
other foreign individual or entity that holds, or would hold, a direct 
and/or indirect equity and/or voting interest in the U.S. parent.
    (3) The Commission will not authorize a U.S. parent to have 
aggregate, direct or indirect investment exceeding 25 percent of the 
parent's equity interests or 25 percent of its voting interests from 
individuals or entities that have their ``home markets'' in countries 
that are not Members of the World Trade Organization (WTO), unless the 
petitioning U.S. parent demonstrates in its petition that the non-WTO 
Member country(ies) offer effective competitive opportunities to U.S. 
investors in the particular service sector in which the parent 
competes, or seeks to compete, in the U.S. market, or that 
countervailing public interest considerations weigh in favor of 
authorizing the non-WTO investment.
    (4) For purposes of calculating its non-WTO Member investment, the 
U.S. parent may exclude those equity and/or voting interests that are 
held by a single non-WTO investor or ``group'' of non-WTO investors in 
an amount that constitutes 5 percent or less of the U.S. parent's total 
capital stock (equity) and/or voting stock. For this purpose, two or 
more non-WTO investors will be treated as a ``group'' when the 
investors have agreed to act together for the purpose of acquiring, 
holding, voting, or disposing of their equity and/or voting interests 
in the U.S. parent company or any intermediate company(ies) through 
which any of the investors holds its interests in the U.S. parent.
    (5) The Commission generally considers a foreign individual's 
``home market'' to be his or her country of citizenship. Where the 
interest would be held by a foreign corporation, partnership, or other 
business organization, the petition must establish the investing 
entity's principal place of business by specifying the following 
information: the country of a foreign entity's incorporation, 
organization, or charter; the nationality of all investment principals, 
officers, and directors; the country in which the world headquarters is 
located; the country in which the majority of the tangible property, 
including production, transmission, billing, information, and control 
facilities is located; and the country from which the foreign entity 
derives the greatest sales and revenues from its operations.
    (6) In applying the effective competitive opportunities (ECO) test, 
the Commission will consider the legal and practical limitations on 
U.S. investment in the foreign investor's home market for the 
particular wireless service (or analogous service) in which the 
investor seeks to participate in the U.S. market. The ECO analysis 
compares restrictions on U.S. participation in the home market for the 
particular wireless service in which the foreign investor seeks to 
participate in the U.S. market. If the services in the U.S. and home 
markets are not precisely matched, we will use the most closely 
substitutable wireless service in the home market, as determined from 
the consumers' perspective. The petition should demonstrate the 
existence and extent of any legal restrictions on U.S. investment in 
the relevant market(s) and the absence of practical limitations on U.S. 
participation, including the price, terms and conditions of 
interconnection, competitive safeguards, and the regulatory framework 
of the relevant market(s).
    (j) The petitioning U.S. parent company may, but is not required 
to, request advance approval in its petition for any foreign individual 
or entity named in response to paragraph (i) of this section to 
increase its direct and/or indirect equity and/or voting interests in 
the petitioning U.S. parent above the percentages specified in response 
to paragraph (i) of this section. Requests for advance approval shall 
be made as follows:
    (1) Where a foreign individual or entity named in response to 
paragraph (i) of this section holds, or would hold upon consummation of 
any transactions described in the petition, a de jure or de facto 
controlling interest in the U.S. parent, the U.S. parent may request 
advance approval in its petition for the foreign individual or entity 
to increase its interests up to any amount, including 100 percent of 
the direct and/or indirect equity and/or voting interests in the U.S. 
parent. Specify for the named controlling foreign person(s) the maximum 
percentages of equity and/or voting interests for which advance 
approval is sought or, in lieu of a specific amount, state that the 
petitioner requests advance approval for the named controlling foreign 
person to increase its interests up to and including 100 percent of the 
U.S.

[[Page 65483]]

parent's direct and/or indirect equity and/or voting interests.
    (2) Where a foreign individual or entity named in response to 
paragraph (i) of this section holds, or would hold upon consummation of 
any transactions described in the petition, a non-controlling interest 
in the U.S. parent, the U.S. parent may request advance approval in its 
petition for the foreign individual or entity to increase its interests 
up to any non-controlling amount. Specify for the named foreign 
person(s) the maximum percentages of equity and/or voting interests for 
which advance approval is sought or, in lieu of a specific amount, 
state that the petitioner requests advance approval for the named 
foreign person(s) to increase their interests up to and including a 
non-controlling 49.99 percent direct and/or indirect equity and/or 
voting interest in the U.S. parent. See Sec.  1.990(i)(3).


Sec.  1.992  How to calculate indirect equity and voting interests.

    (a) The criteria specified in this section shall be used for 
purposes of calculating equity and voting interests held indirectly in 
a petitioning U.S. parent under Sec.  1.991.
    (b)(1) Equity interests held indirectly in the petitioning U.S. 
parent. Equity interests that are held by any individual or entity 
indirectly in a petitioning U.S.-organized parent company through one 
or more intervening entities shall be calculated by successive 
multiplication of the equity percentages for each link in the vertical 
ownership chain, regardless of whether any particular link in the chain 
represents a controlling interest in the company positioned in the next 
lower tier.

    Example. Assume that a foreign individual holds a 30 percent 
equity and voting interest in Corporation A which, turn, holds a 
non-controlling 40 percent equity and voting interest in U.S. Parent 
Corporation B. The foreign individual's equity interest in U.S. 
Parent Corporation B would be calculated by multiplying the foreign 
individual's equity interest in Corporation A by that entity's 
equity interest in U.S. Parent Corporation B. The foreign 
individual's equity interest would be 12 percent (30% x 40% = 12%). 
Even if Corporation A's 40% voting interest in U.S. Parent 
Corporation B constituted a controlling interest, the foreign 
individual's equity interest would still be calculated as 12 percent 
(30% x 40% = 12%).

    (2) Voting interests held indirectly in the petitioning U.S. 
parent. Voting interests that are held by any individual or entity 
indirectly in a petitioning U.S.-organized parent company through one 
or more intervening entities will be determined depending upon the type 
of business organization(s) through which the person or entity holds a 
voting interest as follows:
    (i) Voting interests that are held through one or more intervening 
corporations shall be calculated by successive multiplication of the 
voting percentages for each link in the vertical ownership chain, 
except that wherever the voting interest for any link in the chain is 
equal to or exceeds 50 percent or represents actual control, it shall 
be treated as if it were a 100 percent interest.

    Example. Assume that a foreign individual holds a 30 percent 
equity and voting interest in Corporation A which, turn, holds a 
controlling 40 percent equity and voting interest in U.S. Parent 
Corporation B. Because Corporation A's 40 percent voting interest in 
U.S. Parent Corporation B constitutes a controlling interest, it is 
treated as a 100 percent interest. The foreign individual's 30 
percent voting interest in U.S. Parent Corporation B would flow 
through in its entirety to U.S. Parent Corporation B and thus be 
calculated as 30 percent (30% x 100% = 30%).

    (ii) Voting interests that are held through one or more intervening 
partnerships shall be calculated depending upon whether the individual 
or entity holds a general partnership interest, an uninsulated limited 
partnership interest, or an insulated limited partnership interest as 
specified in paragraphs (b)(2)(ii)(A) and (B) of this section.
    (A) General partnership and uninsulated limited partnership 
interests. A general partner and uninsulated limited partner shall be 
deemed to hold the same voting interest as the partnership holds in the 
company situated in the next lower tier of the vertical ownership 
chain. A limited partner shall be treated as uninsulated unless the 
limited partnership agreement or other operative agreement satisfies 
the insulation criteria specified in Sec.  1.993.
    (B) Insulated limited partnership interests. A limited partner that 
satisfies the insulation criteria specified in Sec.  1.993 shall be 
treated as an insulated limited partner that has no voting interest in 
the limited partnership. Thus, the petitioning U.S. parent is not 
required to calculate any voting interest for the insulated limited 
partners of any limited partnership situated above the petitioning U.S. 
parent in its vertical chain of ownership.
    (iii) Voting interests that are held through one or more 
intervening limited liability companies shall be calculated depending 
upon whether the individual or entity is a non-member manager, an 
uninsulated member or an insulated member as specified in paragraphs 
(b)(2)(iii)(A) and (B) of this section.
    (A) Non-member managers and uninsulated membership interests. A 
non-member manager and an uninsulated member of a limited liability 
company shall be deemed to hold the same voting interest as the limited 
liability company holds in the company situated in the next lower tier 
of the vertical ownership chain. A member shall be treated as 
uninsulated unless the limited liability company agreement satisfies 
the insulation criteria specified in Sec.  1.993.
    (B) Insulated membership interests. A member of a limited liability 
company that satisfies the insulation criteria specified in Sec.  1.993 
shall be treated as an insulated member that has no voting interest in 
the limited liability company. Thus, the petitioning U.S. parent is not 
required to calculate any voting interest for the insulated members of 
any limited liability company situated above the petitioning U.S. 
parent in its vertical chain of ownership.


Sec.  1.993  Insulation Criteria for Interests in Limited Partnerships 
and Limited Liability Companies.

    (a)(1) Where the petitioning U.S. parent is organized as a limited 
partnership, the U.S. parent's limited partners shall be treated as 
uninsulated within the meaning of Sec.  1.992(b)(2)(ii)(A) unless the 
petitioning U.S. parent's limited partners are prohibited by the 
limited partnership agreement or other operative agreement from 
participating in the day-to-day management of the partnership and only 
the usual and customary investor protections are contained in the 
limited partnership agreement or other operative agreement.
    (2) Where there is one or more limited partnerships situated above 
the U.S. parent in its vertical chain of ownership, the limited 
partners of each such partnership shall be treated as uninsulated 
within the meaning of Sec.  1.992(b)(2)(ii)(A) unless the petitioning 
U.S. parent's limited partners are prohibited by the limited 
partnership agreement or other operative agreement from participating, 
and in fact do not participate, in the day-to-day management of the 
partnership and only the usual and customary investor protections are 
contained in the limited partnership agreement or other operative 
agreement.
    (b)(1) Where the petitioning U.S. parent is organized as a limited 
liability company, members of the limited liability company shall be 
treated as uninsulated for purposes of Sec.  1.992(b)(2)(iii)(A) unless 
a member is

[[Page 65484]]

prohibited by the limited liability company agreement from 
participating, and in fact does not participate, in the day-to-day 
management of the company and only the usual and customary investor 
protections are contained in the agreement.
    (2) Where there is one or more limited liability companies situated 
above the U.S. parent in its vertical chain of ownership, the members 
of each such company shall be treated as uninsulated for purposes of 
Sec.  1.992(b)(2)(iii)(A) unless a member is prohibited by the limited 
liability company agreement from participating, and in fact does not 
participate, in the day-to-day management of the company and only the 
usual and customary investor protections are contained in the 
agreement.
    (c) The usual and customary investor protections referred to in 
paragraphs (a) and (b) of this section shall consist of:
    (1) The power to prevent the sale or pledge of all or substantially 
all of the assets of the limited partnership or limited liability 
company or a voluntary filing for bankruptcy or liquidation;
    (2) The power to prevent the limited partnership or limited 
liability company from entering into contracts with majority investors 
or their affiliates;
    (3) The power to prevent the limited partnership or limited 
liability company from guaranteeing the obligations of majority 
investors or their affiliates;
    (4) The power to purchase an additional interest in the limited 
partnership or limited liability company to prevent the dilution of the 
partner's or member's pro rata interest in the event that the limited 
partnership or limited liability company issues additional instruments 
conveying interests in the partnership or company;
    (5) The power to prevent the change of existing legal rights or 
preferences of the limited partners or members, as provided in the 
limited partnership or limited liability company agreement or other 
operative agreement;
    (6) The power to vote on the removal of a general partner or 
managing member in situations where the general partner or managing 
member is subject to bankruptcy, insolvency, reorganization, or other 
proceedings relating to the relief of debtors; adjudicated insane or 
incompetent by a court of competent jurisdiction (where the general 
partner or managing member is a natural person); convicted of a felony; 
or otherwise removed for cause, as determined by an independent party;
    (7) The power to prevent the amendment of the limited partnership 
agreement or limited liability company agreement, or other 
organizational documents of the partnership or limited liability 
company with respect to the matters described in paragraph (c)(1) 
through (6) of this section.


Sec.  1.994  Routine terms and conditions.

    Section 310(b)(4) rulings issued pursuant to Sec. Sec.  1.990 
through 1.994 shall be subject to the following terms and conditions, 
except as otherwise specified in the U.S. parent's particular ruling:
    (a)(1) In addition to the foreign ownership interests approved 
specifically in the section 310(b)(4) ruling, the U.S.-organized parent 
company named in the ruling (or a U.S.-organized successor-in-interest 
formed as part of a pro forma reorganization) may have up to and 
including an additional, aggregate 25 percent direct or indirect equity 
and/or voting interests from other foreign individuals or foreign-
organized entities without prior Commission approval, provided that no 
foreign person or foreign-organized entity acquires a direct or 
indirect equity and/or voting interest in excess of 25 percent, or a 
controlling interest at any level, unless approved specifically in the 
ruling and provided that aggregate investment from individuals or 
entities that have their ``home markets'' in countries that are not 
Members of the World Trade Organization (WTO) does not exceed, directly 
or indirectly, 25 percent of the U.S.-organized parent company's equity 
and/or voting interests.

    Note to paragraph (a)(1): For purposes of calculating compliance 
with the 25 percent aggregate ceiling on foreign investment from 
non-WTO Member countries, the U.S.-organized parent may exclude 
those equity and/or voting interests that are held by a single non-
WTO investor or ``group'' of non-WTO investors in an amount that 
constitutes 5 percent or less of the U.S. parent's total capital 
stock (equity) and/or voting stock. For this purpose, two or more 
non-WTO investors will be treated as a ``group'' when the investors 
have agreed to act together for the purpose of acquiring, holding, 
voting, or disposing of their equity and/or voting interests in the 
U.S. parent company or any intermediate company(ies) through which 
any of the investors holds its interests in the U.S. parent.
    (2) Any individual or entity that, directly or indirectly, 
creates or uses a trust, proxy, power of attorney, or any other 
contract, arrangement, or device with the purpose of divesting 
itself, or preventing the vesting, of an equity interest or voting 
interest in the U.S. parent as part of a plan or scheme to evade the 
application of the Commission's rules or policies that apply to non-
WTO investment under section 310(b)(4) shall be subject to 
enforcement action by the Commission, including an order requiring 
divestiture of the investor's direct or indirect interests in the 
U.S. parent.

    (b) The section 310(b)(4) ruling issued to the U.S. parent named in 
the ruling shall cover the applicant(s), licensees(s), and spectrum 
lessee(s) that are the subject of the ruling and any other subsidiary 
or affiliate of the named U.S. parent, whether existing at the time the 
ruling is issued or formed or acquired subsequently, provided that the 
U.S. parent remains in compliance with the terms and conditions of its 
ruling.
    (1) For purposes of this paragraph (b), ``subsidiary or affiliate'' 
is defined as any entity that is wholly owned and controlled by, or is 
under 100 percent common ownership and control with, the U.S. parent.
    (2) A subsidiary or affiliate filing an application for an initial 
common carrier, aeronautical en route, or aeronautical fixed radio 
station license or spectrum leasing arrangement, or an application to 
acquire such license or spectrum leasing arrangement by assignment or 
transfer of control, shall attach to its application a certification, 
signed by the U.S. parent, stating that the U.S. parent is in 
compliance with the terms and conditions of its section 310(b)(4) 
ruling(s). The certification shall also provide the citation(s) of the 
U.S. parent's section 310(b)(4) ruling(s) (i.e., the DA or FCC Number, 
FCC Record citation when available, and release date).
    (c) The section 310(b)(4) ruling issued to the U.S. parent named in 
the ruling shall cover any successor-in-interest to the U.S. parent 
that takes the place of the U.S. parent in the vertical ownership chain 
of the applicant(s), licensee(s), or spectrum lessee(s) covered by the 
U.S. parent's section 310(b)(4) ruling, provided that the foreign 
ownership of the successor-in-interest complies with the terms of the 
ruling. The successor-in-interest shall notify the Commission within 30 
days of the reorganization. The notification shall include a 
certification, signed by the successor-in-interest, stating that it is 
in compliance with the terms and conditions of the section 310(b)(4) 
ruling(s) issued to the former U.S. parent, which shall be named in the 
certification. The certification shall also provide the citation(s) of 
the section 310(b)(4) ruling(s) (i.e., the DA or FCC Number, FCC Record 
citation when available, and release date). The notification shall be 
filed electronically on the Internet through the International Bureau 
Filing System (IBFS). For information on filing the notification 
through IBFS, see part 1, subpart Y and the IBFS homepage at http://www.fcc.gov/ib.
    (d) The section 310(b)(4) ruling issued to the U.S. parent named in 
the ruling

[[Page 65485]]

shall permit the insertion of new, foreign-organized companies at any 
level in the vertical ownership chain above the U.S. parent provided 
that any new foreign-organized company(ies), either alone or together, 
are under 100 percent common ownership and control with the controlling 
foreign parent for which the U.S. parent has received prior Commission 
approval.

    Example. U.S. parent company (``U.S. Parent A'') receives a 
section 310(b)(4) ruling that approves its 100% foreign ownership by 
a foreign-organized company (``Foreign Company''). Foreign Company 
is minority owned (20%) by U.S.-organized Corporation B, with the 
remaining 80% controlling interest held by Foreign Citizen C. After 
issuance of the section 310(b)(4) ruling to U.S. Parent A, Foreign 
Company forms a wholly-owned, foreign-organized subsidiary 
(``Foreign Subsidiary '') to hold all of Foreign Company's shares in 
U.S. Parent A. There are no other changes in the direct or indirect 
foreign ownership of U.S. Parent A. The insertion of Foreign 
Subsidiary into the vertical ownership chain of U.S. Parent A would 
not require prior Commission approval.

    (e) The section 310(b)(4) ruling issued to the U.S. parent named in 
the ruling shall permit the insertion of new, foreign-organized 
companies into the vertical ownership chains of non-controlling foreign 
investors for which the U.S. parent has received specific approval 
under Sec.  1.991(i) provided that any new foreign company is under 100 
percent common ownership and control with the approved foreign 
investor.

    Example. U.S. parent company (``U.S. Parent A'') receives a 
section 310(b)(4) ruling that specifically approves Foreign Citizen 
B's planned acquisition of a non-controlling, 30% common stock 
interest in U.S. Parent A. Two years after issuance of the section 
310(b)(4) ruling to U.S. Parent A, Foreign Citizen B organizes a 
wholly-owned foreign corporation to hold Foreign Citizen B's common 
stock interest in U.S. Parent A. U.S. Parent A would not be required 
to seek Commission approval for this change.

    (f) The U.S.-organized parent company named in the section 
310(b)(4) ruling (or a U.S.-organized successor-in-interest formed as 
part of a pro forma reorganization) shall file a new petition for 
declaratory under Sec.  1.990 to obtain Commission approval before its 
direct or indirect foreign ownership exceeds the routine terms and 
conditions of this section and any specific terms or conditions of its 
ruling.
    (g)(1) A U.S.-organized parent company that has received a section 
310(b)(4) ruling from the Commission shall file with the Commission a 
certification of compliance with the section 310(b)(4) ruling every 
four (4) years after the anniversary of the effective date of the 
ruling. The U.S. parent shall base its certification of compliance on 
information that is current at least as of 8 months prior to the date 
the certification must be filed with the Commission. Its certification 
of compliance with respect to the calculation of ownership interests 
disclosed in its petition shall be based upon its review of the 
Commission's rules, such that it is able to certify that the interests 
disclosed satisfy each of the pertinent standards and criteria required 
by the rules.
    (2) If at any time the U.S. parent knows, or has reason to know, 
that it is no longer in compliance with its ruling, the U.S. parent 
shall file a statement with the Commission explaining the circumstances 
within 30 days of the date the U.S. parent knew, or had reason to know, 
that it was no longer in compliance with its ruling. Subsequent actions 
taken by or on behalf of the U.S. parent to remedy its non-compliance 
shall not relieve the U.S. parent of the obligation to notify the 
Commission of the circumstances (including duration) of non-compliance. 
The U.S. parent, any affiliated licensees or spectrum lessees covered 
by the section 310(b)(4) ruling, and any controlling companies, whether 
U.S.- or foreign-organized, shall be subject to enforcement action by 
the Commission for non-compliance with the section 310(b)(4) ruling.

PART 25--SATELLITE COMMUNICATIONS

    4. The authority citation for part 25 is revised to read as 
follows:

    Authority: 47 U.S.C. 701-744. Interprets or applies sections 4, 
301, 302, 303, 307, 309, 310 and 332 of the Communications Act, as 
amended, 47 U.S.C. 154, 301, 302, 303, 307, 309, 310 and 332, unless 
otherwise noted.

    5. Subpart A is amended by adding Sec.  25.105 to read as follows:


Sec.  25.105  Citizenship.

    The Commission will not grant an authorization governed by this 
part to any individual or entity that is precluded from holding such 
authorization by section 310(a)-(b) of the Communications Act of 1934, 
as amended (47 U.S.C. 310(a)-(b)). The rules that establish the 
requirements and conditions for obtaining the Commission's prior 
approval of foreign ownership in common carrier licensees that would 
exceed the 25 percent benchmark in section 310(b)(4) are set forth in 
Sec. Sec.  1.990 through 1.994 of this chapter.

[FR Doc. 2011-26826 Filed 10-20-11; 8:45 am]
BILLING CODE 6712-01-P