Fixed providers of common-carrier services other than VoIP
Fixed providers of common-carrier services other than VoIP must register with the FCC and are authorised by a blanket FCC authorisation to provide interstate domestic services (ie, no prior authorisation is required) but must obtain affirmative prior authorisation from the FCC pursuant to section 214 of the Communications Act (international section 214 authorisation) to provide services between US and foreign points - whether facilities-based or resale, or whether using undersea cables, domestic or foreign satellites, or cross-border terrestrial facilities - regardless of whether the traffic originates or terminates in the United States or both. For intrastate services, a fixed provider must generally be licensed by the relevant state PUC. PUC processes and requirements vary, with procedures less strict for long-distance services and more rigorous for local services. The FCC does not limit the number of licences for telecommunications service providers. Some state PUCs may refuse to grant operating authority to multiple intrastate local telecommunications providers in rural areas. A fixed provider of common-carrier services must obtain FCC consent prior to discontinuing interstate and international services and generally state PUC consent prior to discontinuing intrastate services.
Public mobile service providers
Public mobile service providers (commercial mobile radio service (CMRS)), including resellers, must register with the FCC but are not required to obtain prior authorisation for domestic service; however, they must obtain international section 214 authorisations to provide services between US and foreign points even by resale, and appropriate spectrum use authorisation. As discussed below, the FCC must grant terrestrial RF licences by auction if there are two or more competing, mutually exclusive applications. FCC rules do not require CMRS operators to deploy particular air interface technologies (eg, LTE). Accordingly, and unlike many other jurisdictions, the US authorisation and licensing regime does not distinguish among ‘generations’ of licensed wireless technologies (eg, 2/3/4G) used by operators. States cannot regulate the rates or entry of CMRS providers, but can regulate other terms and conditions. Facilities-based mobile service operators must obtain licences or leases to use RF spectrum, except where the FCC rules permit licence-exempt (ie, unlicensed) operation. Public mobile service providers are not required to obtain FCC consent to discontinue domestic services.
In the United States, Wi-Fi operates on an ‘unlicensed’ basis under the Commission’s Part 15 rules. These rules set power levels, out-of-band emission limits and other technical limits. The FCC designates certain frequency bands where unlicensed devices may operate at higher power levels. The most important of these bands are the 900MHz, 2.4GHz and 5GHz bands. The rules for each of these bands, and sometimes their sub-bands, differ in terms of power and emission mask, and sometimes include special requirements. Special requirements include, but are not limited to, the use of dynamic frequency selection in the U-NII-2a and U-NII-2c sub-bands of the 5GHz band, and the availability of higher power with the use of a down-pointing antenna design in the U-NII-1 sub-band of the 5GHz band. But, importantly, as long as a Wi-Fi and other unlicensed device complies with these rules and operates within these designated bands, it does not require a licence to operate. Note that the FCC allows lower-power unlicensed operations on a co-channel ‘underlay’ basis in many other bands, but these low power levels make the bands inappropriate for Wi-Fi.
Wi-Fi continues to grow in importance in the United States. The FCC has stated that consumers receive more data over Wi-Fi than over licensed cellular networks, and soon Wi-Fi will deliver more data to consumers than even wired networks. Consequently, the FCC has undertaken to make additional spectrum bands available for Wi-Fi. For example, the FCC:
- opened the ‘white spaces’ between television broadcast channels for unlicensed operation, and is currently considering how and where such unlicensed devices would operate after the recent broadcast incentive auction in the 600MHz band;
- designated additional spectrum in millimetre wave bands for unlicensed use;
- adopted more liberal unlicensed rules in the U-NII-1 sub-band of the 5GHz band, thereby allowing traditional Wi-Fi services in these frequencies; and
- is considering opening the U-NII-4 sub-band of the 5GHz band for Wi-Fi through a proceeding exploring how unlicensed services can share the band with incumbent Intelligent Transportation Services.
Notably, in 2016 the FCC decided not to open the U-NII-2b sub-band of the 5GHz band to Wi-Fi after analysing the potential of sharing with incumbent government operations. The FCC also recently opened the 3.5GHz band for a mix of light-licensed and ‘licensed-by-rule’ operations. While the licensed-by-rule operations are not unlicensed or governed by Part 15 rules, they are likely to share many characteristics with Wi-Fi deployments. Finally, the FCC has issued a notice of inquiry seeking input on potential uses of ‘mid band’ spectrum (ie, spectrum above 3.7GHz but below millimetre wave) for wireless broadband, potentially including unlicensed operations in the 6GHz band.
Interconnected VoIP (VoIP services that can place calls to and receive calls from the traditional telephone network as part of a single service) are not subject to prior authorisation. Some states have asserted the ability to require prior approval for fixed interconnected VoIP services, which is currently being challenged in the courts. Interconnected VoIP providers must seek prior authorisation from the FCC, however, before discontinuing service.
Non-interconnected VoIP (VoIP services that can only send or receive calls (but not both) from the traditional telephone network) are not subject to prior authorisation or discontinuance requirements.
Satellite service providers
Satellite service providers must obtain licences to use RF spectrum and must ensure that their handsets or antennae meet FCC interference requirements. If providing common-carrier services between US and foreign points, satellite service providers must also obtain international section 214 authorisations. They are not subject to state rate or market-entry regulation or to FCC price regulation.
Satellite space stations
Satellite space stations notified to the International Telecommunication Union by the United States or using US orbital slots, as well as transmit-receive earth stations, must be licensed by the FCC prior to launch or services commencement, respectively. Receive-only earth stations communicating with US-licensed space stations require only FCC registration. Earth stations in certain frequency bands are covered by blanket authorisations (ie, the FCC does not require individual licensing or registration). Foreign-licensed satellites may serve US earth stations on a streamlined basis if they appear on the FCC’s Permitted Space Station List, but may also make an individualised market access showing in connection with transmissions to and from a specific earth station.
Undersea cable infrastructure
Before installing or operating undersea cable infrastructure in the United States or its territories, an operator must first receive a cable landing licence from the FCC, coordinated with the US Department of State, pursuant to the Cable Landing Licence Act of 1921. For an undersea cable to be operated on a common-carrier basis, the operator must also apply for and receive an international section 214 authorisation from the FCC, as described above.
Internet services other than VoIP
The FCC does not require prior authorisations to provide service or to discontinue service for BIAS. The FCC does not regulate internet services other than VoIP and BIAS.
Foreign ownership restrictions - international wireline
The FCC applies a public interest analysis in determining whether to allow a foreign investor to enter the US telecommunications market. For international telecoms service authorisations (international section 214 authorisations), the FCC presumes that the public interest is served by direct and indirect foreign ownership (up to 100 per cent) in facilities-based and resale providers of interstate and international telecommunications services, where the investor’s home country is a World Trade Organization (WTO) member, and in undersea cables landing in WTO member countries. For investors from non-WTO member countries - and undersea cables landing in non-WTO member countries - the FCC does not presume that the public interest is served by direct and indirect foreign ownership (up to 100 per cent). Instead, it will require such investors from non-WTO member countries to make a showing whether they have market power in non-WTO member markets and evaluate whether US carriers or submarine cable operators are experiencing problems in entering such non-WTO member markets. The FCC determines an investor’s home market and consequent WTO status by applying a principal place-of-business test.
Foreign ownership restrictions - RF licences
The United States imposes limitations on both direct and indirect foreign ownership. US WTO commitments reflect these statutory restrictions on foreign ownership. Regardless of WTO status, section 310 of the Communications Act prohibits a foreign government, corporation organised under foreign law, non-US citizen or representative of a foreign government, or non-US citizen from directly holding a common-carrier RF (for terrestrial wireless/microwave, mobile or satellite service) or aeronautical licence. Section 310 does, however, permit direct and indirect foreign ownership in such licensees, subject to a number of additional requirements:
- Common-carrier RF licence not controlled by a foreign investor: for non-controlling investments that result in aggregate direct and indirect foreign ownership of 20 per cent or less, the FCC does not require prior approval. For non-controlling investments that result in aggregate direct and indirect foreign ownership in a licensee in excess of 20 per cent, the FCC requires that the licensee first obtain a declaratory ruling finding that such foreign ownership would serve the public interest.
- Common-carrier RF licence controlled by a foreign investor: section 310(b)(3) prohibits direct, controlling ownership in the licensee in excess of 20 per cent. For controlling investments that result in aggregate direct and indirect foreign ownership in a licensee in excess of 25 per cent, the FCC requires that the licensee first obtain a declaratory ruling finding that such foreign ownership would serve the public interest.
Regardless of whether the foreign investor would control or not control the common-carrier RF licence, the FCC presumes that aggregate foreign ownership of up to 100 per cent serves the public interest, a presumption that applied only to investors from WTO member countries prior to August 2013.
Interplay with national security and trade concerns
The FCC may nonetheless deny approval if the Executive Branch raises serious concerns regarding national security, law enforcement, foreign policy or trade issues, or if the entry of the foreign investor (or cable landing) into the US market presents a risk to competition. In practice, applications for carrier licences for facilities-based and resale international telecommunications services, common-carrier RF licences, and non-common-carrier licences used for mobile or wireless networking services are typically subject to national security reviews by the Team Telecom agencies (see question 1). These agencies (which also review mergers and acquisitions - see questions 28 and 30) often require negotiation of security agreements or assurances letters prior to licensing or transaction consummation.
Although the FCC has adopted detailed licensing timelines (for example, a 14-day streamlined review for most international section 214 applications, a 45-day streamlined review for most cable landing licence applications, and a statutory 30-day review for applications involving common-carrier wireless, mobile and transmit-receive satellite earth station applications), these are typically suspended in cases involving aggregate foreign ownership exceeding 10 per cent, as Team Telecom (see question 1) generally asks the FCC to defer action on such applications pending sometimes lengthy national security reviews. See question 28 for a description of the timing of consents for mergers, stock and asset-based acquisitions, and joint ventures (JVs) for the telecommunications and broadcasting sectors.
Licence durations vary by service and infrastructure type. International section 214 authorisations have no set term or expiry date. Cable landing licences have a 25-year term. Commercial wireless licences, private microwave and industrial wireless licences, and transmit-receive satellite earth station authorisations generally have 10-year terms. Space stations are generally authorised for 15-year terms, but direct broadcast satellite authorisations are authorised only for 10 years. These licences are generally eligible for extension as long as the licensee has complied with the relevant FCC service rules. Cable systems are generally authorised by local franchising authorities for a set term, subject to renewal.
The FCC assesses application processing fees for new and modified-licence applications involving telecommunications and broadcasting services and infrastructure, and for applications seeking consent for transactions involving transfers or assignments of FCC licences. The FCC also assesses annual regulatory fees for the providers it regulates. All of these fees vary by licence and service type; the FCC revises application processing fees periodically and regulatory fees annually. The FCC also assesses fees for a variety of federal programmes involving providers of interstate telecommunications and interconnected VoIP, including: federal universal service (as discussed in question 6); relay services for the hearing-impaired; numbering administration; and number portability. Non-interconnected VoIP providers are required to pay fees to support relay services for the hearing-impaired. State and territorial fees and contributions vary by jurisdiction.
Modification or assignment of licences (including transfers of common-carrier authorisation or assets)
FCC procedures and requirements for licence modifications vary significantly by licence type and service, and, in some cases, by whether the modification is ‘major’ or ‘minor’. The FCC permits assignments of many types of licences, including common-carrier authorisations, though it distinguishes between a pro forma assignment of a licence or transfer of control of a licensee (where ultimate control of the licence does not change, such as with an internal corporate reorganisation), and a substantial assignment or transfer of control to an unrelated third party. Substantial assignments and transfers of control generally require prior FCC consent, as do any transfers of non-mobile common-carrier assets. Pro forma transfers of common-carrier authorisations and common-carrier RF licences do not require prior FCC consent, but the FCC must be notified within 30 days of consummation. Pro forma transfers of non-common-carrier RF licences require prior FCC consent. In general, prior FCC approval is required either when the licence or authorisation itself is transferred to another entity, or when control of the entity holding the licence of authorisation is changing (even if the licence or authorisation is staying within the same entity).
FCC licences and financial security interests
FCC licences may not be pledged as security for financing purposes. Nevertheless, a lender may take a security interest in the proceeds of the sale of an FCC licensee. Lenders are also permitted to take a pledge of the shares of a company holding an FCC licence, though FCC consent must be obtained prior to a lender consummating any post-default transfer of control of an FCC licensee or assignment of an FCC licence. In structuring arrangements for protection in the event of a borrower default or insolvency, lenders, security-interest holders, and FCC licensees need to be mindful of the FCC’s rules on security interests and requirements for approval of transfers of control and assignments, whether voluntary or involuntary.
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