Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:
- Foreign Ownership Violation by Telecommunications Provider Leads to $50,000 Penalty and Four-Year Compliance Plan
- Arizona LPFM Station Hit with $20,000 Penalty and $41,500 Suspended Penalty for Underwriting Violations
- Unauthorized Station Transfers Result in $8,000 Consent Decree
Telecommunications Provider to Pay $50,000 and Implement Four-Year Compliance Plan After Foreign Ownership Violations
A Guam-based telecommunications provider (Telecom Provider) settled an investigation by the Federal Communications Commission (FCC) into its ownership structure by entering into a consent decree that requires a $50,000 payment to the government and implementation of a 48-month compliance plan. The Telecom Provider holds domestic and international Section 214 authorizations, 84 wireless licenses, three submarine cable licenses, and an earth station satellite license. The FCC’s investigation concerned the Telecom Provider’s ownership, which includes two foreign corporations and a foreign government’s finance ministry.
Section 310(b)(4) of the Communications Act of 1934, as amended (Act), places a 25 percent limit on ownership by foreign individuals, corporations, and governments in U.S.-organized entities controlling common carrier licensees. Under the Act, the FCC may permit higher levels of foreign ownership of an FCC licensee if it determines it is not contrary to the public interest. Since 2013, FCC approval has also been required for any foreign individual or entity not previously approved by the FCC to acquire more than a five percent equity or voting interest in the entity. These public interest determinations by the FCC incorporate input from a federal Executive Branch review of national security, law enforcement, foreign policy, and trade policy concerns conducted by a multi-agency group known as Team Telecom.
In 2015, the FCC granted an application that allowed the Telecom Provider to have 100 percent foreign ownership consisting of a parent entity two steps up in the ownership chain (Indirect Parent Entity) (owning up to 65.15 percent of the equity and voting interests) and the finance ministry (owning up to 26.95 percent of the equity interests and 41.53 percent of the voting interests). Five years later, the Indirect Parent Entity commenced a tender offer for outstanding shares in the parent entity directly above the telecom provider (Direct Parent Entity). Two months later, the Indirect Parent Entity acquired the tendered shares, which increased its indirect ownership interests in the Telecom Provider to 91.46 percent. At the end of 2020, the Indirect Parent Entity also acquired all shares of the Direct Parent Entity’s common stock held by the remaining minority shareholders, resulting in it owning 100 percent of the equity and voting interests of the Telecom Provider. These transactions led to the finance ministry having an indirect ownership interest in the Telecom Provider (held through Indirect Parent Entity) of 33.93 percent equity and voting. The result was higher levels of foreign ownership in the Telecom Provider than had previously been approved by the FCC.
The Telecom Provider attempted to correct the problem by filing a Petition for Declaratory Ruling seeking approval for the Indirect Parent Entity and finance ministry to exceed their previously approved foreign ownership limits. In late 2021, the International Bureau granted the Petition, but the FCC’s Enforcement Bureau pursued the prior foreign ownership violation, resulting in a Consent Decree with the Telecom Provider.
In addition to paying a $50,000 civil penalty for exceeding the foreign ownership levels approved by the FCC, the Telecom Provider must implement a plan to ensure compliance with the terms of the Consent Decree, including developing a compliance manual, administering employee compliance training, and submitting compliance reports to the Commission for four years regarding foreign ownership compliance. During that time, the Telecom Provider must also report instances of noncompliance with the FCC’s foreign ownership rules and the terms of the Consent Decree within 15 days of discovering them.
Violations of Noncommercial Broadcast Underwriting Laws Result in $20,000 Penalty and a $41,500 Suspended Penalty for Low Power FM Station
The FCC’s Enforcement Bureau entered into a Consent Decree with the licensee of an Arizona LPFM station to resolve an investigation into violations of the FCC’s rules regarding underwriting. Under the Consent Decree, the licensee agreed to implement a compliance plan and pay a $20,000 civil penalty, with a suspended civil penalty of $41,500 to be levied in the event of default. Continue reading →