[Federal Register Volume 77, Number 163 (Wednesday, August 22, 2012)]
[Rules and Regulations]
[Pages 50628-50630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20704]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 25

[IB Docket No. 11-133; FCC 12-93]


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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission adopts a new approach to its 
review of foreign ownership in common carrier radio station licensees, 
where the foreign ownership is held in the licensee through U.S.-
organized entities that do not control the licensee. This action 
responds to pleadings filed in response to the Notice of Proposed 
Rulemaking initiating this docket and to the Public Notice in this 
docket seeking further comment on the new approach.

DATES: Effective August 22, 2012.

FOR FURTHER INFORMATION CONTACT: Kathleen Collins or Susan O'Connell, 
Policy Division, International Bureau, FCC, (202) 418-1460 or via the 
Internet at [email protected] and Susan.O'[email protected]

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's First 
Report and Order in IB Docket No. 11-133, FCC 12-93, adopted August 17, 
2012, and released August 17, 2012. The full text of this document is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street SW., 
Washington, DC 20554. The complete text may also be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc., 
Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone: (800) 378-3160, fax: (202) 488-5563, or via its web site, 
http://www.bcpiweb.com. The complete text also is available on the 
Commission's Web site at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-93A1.pdf. To request the document in accessible 
formats for people with disabilities (Braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

Summary of First Report and Order

    1. On April 11, 2012, the International Bureau, on behalf of the 
Commission, issued a Public Notice in this docket (77 FR 24452, April 
24, 2012) inviting comment on the legal and policy implications of 
forbearing under section 10 of the Communications Act of 1934, as 
amended (the Act), 47 U.S.C. 160, from applying section 310(b)(3) of 
the Act to certain foreign ownership interests in common carrier 
licensees, where those interests are held through U.S.-organized 
entities that do not control the licensee. The First Report and Order 
forbears, pursuant to section 10(a) of the Act, from applying the 20 
percent foreign ownership limit set forth in section 310(b)(3) of the 
Act to the class of common carrier licensees in which foreign ownership 
in the licensee is held through U.S.-organized entities that do not 
control the licensee, to the extent the Commission determines such 
foreign ownership is consistent with the public interest under the 
policies and procedures the Commission has adopted for the public 
interest review of foreign ownership subject to section 310(b)(4) of 
the Act. The First Report and Order refers to this class of licensees 
as ``licensees subject to section 310(b)(3) forbearance.'' The 
forbearance approach applies only to such foreign ownership in common 
carrier licensees and not to broadcast or other licensees covered by 
section 310(b)(3). Nor does the approach apply to foreign ownership 
held in a licensee other than indirectly through an intervening U.S.-
organized entity that does not control the licensee.
    2. Section 10(a) of the Act enables the Commission to forbear from 
applying any regulation or any provision of the Act to a 
telecommunications carrier or service, or a class of telecommunications 
carriers or services, if the Commission determines that forbearances 
satisfies the following three-pronged test: (1) Enforcement of such 
regulation or provision is not necessary to ensure that the charges, 
practices, classifications, or regulations by, for, or in connection 
with that telecommunications carrier or telecommunications service are 
just and reasonable and are not unjustly or unreasonably 
discriminatory; (2) enforcement of such regulation or provision is not 
necessary for the protection of consumers; and (3) forbearance from 
applying such provision or regulation is consistent with the public 
interest. 47 U.S.C. 160(a).
    3. The First Report and Order finds that forbearing from applying 
section 310(b)(3)'s 20 percent foreign equity and voting limits to the 
class of common carrier licensees in which foreign interests in the 
licensee are held through U.S.-organized entities that do not control 
the licensee, to the extent such foreign ownership serves the public 
interest as determined under the

[[Page 50629]]

policies and procedures the Commission uses for assessing foreign 
ownership of the controlling U.S.-organized parents of common carrier 
licensees under section 310(b)(4), satisfies each of the three section 
10 criteria. The First Report and Order requires licensees subject to 
section 310(b)(3) forbearance to file a petition for declaratory ruling 
or similar request to obtain Commission approval before foreign 
ownership held in the licensee through U.S.-organized entities that do 
not control the licensee, together with foreign ownership held in the 
licensee itself, exceeds 20 percent of the licensee's equity interests 
and/or 20 percent of its voting interests.
    4. In the First Report and Order, the Commission concludes that, 
under the first prong of section 10, it is not necessary to apply the 
foreign ownership limits in section 310(b)(3) to licensees subject to 
section 310(b)(3) forbearance to ensure that their charges and 
practices are just and reasonable and not unjustly or unreasonably 
discriminatory. Based on the Commission's experience in applying its 
policies under section 310(b)(4), the Commission finds no evidence that 
the foreign ownership of a common carrier licensee, in and of itself, 
is directly relevant to the carrier's compliance with the requirements 
of sections 201 and 202 of the Act that charges, practices, 
classifications, and regulations be just and reasonable and not 
unjustly or unreasonably discriminatory. In addition, the Commission 
has other, more tailored tools at its disposal, such as section 201, 
202, and 208 of the Act, to ensure that rates, practices and 
classifications of common carrier licensees are just and reasonable and 
not unjustly or unreasonably discriminatory.
    5. The Commission also concludes that, under the section prong of 
section 10, it is unnecessary for the protection of consumers to apply 
section 310(b)(3)'s 20 percent limit to foreign interests in licensees 
subject to section 310(b)(3) forbearance. Under the forbearance 
approach, the Commission will give notice and seek public comment on a 
petition for declaratory ruling or similar request asking for approval 
of proposed foreign equity and/or voting interests in a common carrier 
licensee over 20 percent. This notice and comment process will inform 
any Commission decision to grant a petition for declaratory ruling to 
exceed section 310(b)(3)'s 20 percent limit and allow the Commission to 
assess any potential harm to consumers.
    6. The Commission concludes, under the third prong of section 10, 
that the public interest would be served by not applying the foreign 
ownership limit of section 310(b)(3) to licensees subject to section 
310(b)(3) forbearance--where the licensee has greater than 20 percent 
foreign ownership held through U.S.-organized entities that do not 
control the licensee--for the same reasons that the public interest is 
served when the Commission allows, under section 310(b)(4), greater 
than 25 percent foreign ownership in the controlling U.S.-organized 
parent of a common carrier licensee under otherwise identical 
circumstances. In the context of common carrier licensees, the 
Commission discerns no public interest distinction between the two 
situations.
    7. By incorporating the Commission's section 310(b)(4) policies and 
procedures, the forbearance approach will protect the national security 
objectives underlying the Act. These policies and procedures provide 
Executive Branch expert agencies the opportunity to review proposed 
foreign ownership in the controlling U.S.-organized parents of common 
carrier licensees for any national security, law enforcement, or public 
safety issues. The forbearance approach will provide the Executive 
Branch agencies the same opportunity to assess proposed foreign 
ownership in licensees subject to section 310(b)(3) forbearance.
    8. In addition, the forbearance approach will ensure that foreign 
ownership from World Trade Organization (WTO) Member countries will be 
reviewed under the Commission's open entry standard, whether the 
foreign investment is held through U.S.-organized entities that control 
the licensee or through U.S.-organized entities that do not control the 
licensee. The forbearance approach also comports with commenters' 
request in this docket that the Commission treat all ``indirect'' 
foreign ownership in a common carrier licensee in a manner consistent 
with the Commission's section 310(b)(4) policies and procedures so as 
to further the objectives of the WTO Basic Telecom Agreement. 
Conforming the Commission's foreign ownership policies for sections 
310(b)(3) and 310(b)(4) will clarify and simplify Commission regulation 
of foreign ownership of common carrier licensees. The forbearance 
approach also will enhance competitive market conditions for common 
carrier licensees by allowing them and their potential owners to 
structure foreign investment in the licensee in a manner that best 
accommodates their financial considerations and business needs.
    9. The forbearance approach requires a licensee to file a petition 
for declaratory ruling or similar request seeking Commission approval 
before foreign ownership held in the licensee through U.S.-organized 
entities that do not control the licensee, together with foreign 
ownership held in the licensee itself, exceeds 20 percent of the 
licensee's equity interests and/or 20 percent of its voting interests. 
The Commission, or the International Bureau on delegated authority, 
will place the request on notice for public comment and forward the 
petition to the Executive Branch agencies for review. Following 
conclusion of this process, the Commission, or the International Bureau 
on delegated authority, will issue a declaratory ruling as to whether 
the proposed foreign ownership is in the public interest. The licensee 
shall not be allowed to have foreign ownership under section 310(b)(3) 
in excess of 20 percent unless and until the Commission or the 
International Bureau has granted the licensee's request.
    10. The Commission finds that the benefits of adopting the 
forbearance approach outweigh the costs. By forbearing from applying 
the section 310(b)(3) foreign ownership limit to the subject class of 
common carrier licensees, licensees and their potential owners will 
have flexibility in the structuring of their investment, free of a 
statutory constraint. The Commission anticipates that the costs of the 
approval process for proposed foreign ownership of licensees subject to 
section 310(b)(3) forbearance will be far less for licensees than the 
costs they have to incur in structuring their investments to comply 
with the section 310(b)(3) limit. Moreover, under the forbearance 
approach, the approval process will be consistent with the Commission's 
policy framework for foreign ownership of the controlling U.S. parents 
of licensees under section 310(b)(4). For these reasons, the Commission 
expects this approach to reduce unnecessary costs and burdens on common 
carrier licensees. Finally, the forbearance approach will not 
compromise the Commission's ability to carry out its statutory duties 
under section 310(b) of the Act, including protection of national 
security and law enforcement interests.
    11. The First Report and Order defers consideration, to a later 
stage of the proceeding, of the comments urging the Commission to 
simplify the section 310(b)(4) requirements and apply those revised 
requirements to the evaluation of foreign interests in a common carrier 
licensee held through U.S.-organized entities that do not control the 
licensee.

[[Page 50630]]

Regulatory Flexibility Certification

    12. The Regulatory Flexibility Act of 1980, as amended (RFA),\1\ 
requires that a 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.'' \2\ The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' \3\ In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act.\4\ A ``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).
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    \1\ 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, Public Law 104-121, Title II, 110 Stat. 857 (1996).
    \2\ 5 U.S.C. 605(b).
    \3\ 5 U.S.C. 601(6).
    \4\ 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.''
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    13. The approach adopted in the First Report and Order will remove 
a statutory constraint on common carrier licensees, by forbearing from 
applying the 20 percent ownership limit under section 310(b)(3) to the 
class of common carrier licensees in which the foreign ownership is 
held in the licensee through intervening U.S.-organized entities that 
do not control the licensee. Instead of prohibiting foreign ownership 
in excess of 20 percent under section 310(b)(3), the Commission will 
assess whether the proposed foreign ownership in excess of 20 percent 
is in the public interest through an approval process that is 
consistent with its policies and procedures for approval of foreign 
ownership in a U.S.-organized entity that controls a licensee, under 
section 310(b)(4). The Commission believes that the new approach will 
reduce costs and burdens currently imposed on common carrier licensees, 
including those licensees that are small entities, while continuing to 
ensure that the Commission has the information it needs to carry out 
its statutory duties. Therefore, the Commission certifies that the new 
approach will not have a significant economic impact on a substantial 
number of small entities. The Commission will send a copy of the First 
Report and Order, including a copy of this Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the SBA.\5\ This 
certification also will be published in the Federal Register.\6\
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    \5\ 5 U.S.C. 605(b).
    \6\ Id.
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Paperwork Reduction Act of 1995 Analysis

    14. The First Report and Order does not contain new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, Public Law 104-13. The information collection requirements 
for the section 310(b) foreign ownership approval process are included 
in OMB Control No. 3060-0686. In addition, therefore, this document 
does not contain any new or modified information collection burden for 
small business concerns with fewer than 25 employees, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4).

Report to Congress

    15. The Commission has included a copy of the First Report and 
Order in a report sent to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act. See 5 U.S.C. 
801(a)(1)(A).

Ordering Clauses

    16. It is ordered, pursuant to sections 1, 2, 4(i), 4(j), 5(c), 10, 
303(r), 308(b), 309, 310(b), 310(d), and 403 of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 154(j), 155(c), 160, 
303(r), 308(b), 309, 310(b), 310(d), and 403, that the First Report and 
Order in IB Docket No. 11-133 IS ADOPTED.
    17. It is further ordered that the requirements of this First 
Report and Order shall be effective upon publication in the Federal 
Register.\7\
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    \7\ See 47 CFR 1.103, 1.427(b). As set forth above, by 
forbearing from applying the strict section 310(b)(3) foreign 
ownership limit to the subject class of common carrier licensees, we 
afford these licensees and their potential owners greater 
flexibility in the structuring of their investment, free of a 
statutory constraint. Our action thereby ``relieves a restriction'' 
within the meaning of 5 U.S.C. 553(d)(1).
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    18. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2012-20704 Filed 8-21-12; 8:45 am]
BILLING CODE 6712-01-P