FCC Proposes New Regulations To Assess and Protect Against National Security Risks in Submarine Cable Networks

On November 21, 2024, the Federal Communications Commission ("FCC") approved a Notice of Proposed Rulemaking ("NPRM") focused on enhancing FCC review and oversight of the global subsea communications cable network through proposed updates to the FCC's current submarine cable landing licensing rules. If adopted, these new rules would significantly increase the burden of applying for, transferring, assigning, and maintaining cable landing licenses and would expand the scope of entities subject to the agency's disclosure, compliance, and certification obligations associated with holding or seeking such licenses.

The proposed changes aim to enhance the FCC's oversight of submarine cable systems, including their ownership, operation, and provisioned services, in response to increasing national security and foreign policy risks to the U.S. communications infrastructure. Many of these measures will be familiar to those entities and attorneys already operating in the subsea cable space, as the proposed changes, if adopted, would formalize many conditions typically imposed by the Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Services Sector (also referred to as "Team Telecom") in mitigation agreements with subsea cable licensees. However, other measures will be fresh and unfamiliar to all industry participants and, if adopted, will substantially increase the number of applicable regulations.

Key elements of the NPRM include proposed modifications to the rules for new submarine cable landing license applications, as well as applications to modify, transfer, assign, or renew existing licenses. These changes would include:

• Defining a "submarine cable system" for licensing purposes as "cable(s) laid beneath the water that transmits voice, data, and Internet between terminal cable landing stations that, among other functions, contain the [Submarine Line Terminal Equipment ("SLTE")] located in the continental United States, Alaska, Hawaii, or the U.S. territories or possessions";
• Clarifying and expanding the scope of entities required to be identified as an applicant for a cable landing license to include SLTE owners and operators, indefeasible right of use ("IRU") holders, data center owners, and potentially any entity that owns an interest in or has leased capacity on a cable system;
• Updating information required in license applications, including revising the FCC's disclosure and certification rules with an emphasis on reportable foreign ownership;
• Subjecting third parties to disclosure and certification requirements when they have access to cable systems, including Managed Network Service Providers ("MNSPs") and providers of Network Operations Centers ("NOCs");
• Establishing a presumption of ineligibility for entities whose license applications were previously denied or revoked due to national security or law enforcement concerns, as well as those with ties to specific foreign governments;
• Establishing a process for periodic reviews of cable landing licenses every three (3) years and/or reducing the current 25-year license term; and
• Expanding data collection efforts related to the use of cable system infrastructure and capacity, including through a modified capacity reporting requirement that would apply to IRU holders and inter-carrier leaseholders.

Comments and reply comments on the NPRM's proposals will be due 30 and 60 days, respectively, after the date of publication in the Federal Register, which has not yet occurred.

Expanding the Scope of Entities Required To Be Identified as an Applicant for a License

Currently, FCC rules provide that no entity may "land or operate" a subsea cable in the U.S. without a license. Any entity that "owns or controls a cable landing station in the United States" and "[a]ll other entities owning or controlling a five percent (5%) or greater interest in the cable system and using the [system's] U.S. points" must be named as applicants for a subsea cable landing license. However, in the interest of national security and to ensure the FCC has a better understanding of what entities own/control cable systems and connect with U.S. terrestrial networks, the agency seeks comment on whether it should further expand the scope of entities required to obtain a license.

The FCC seeks comment on whether an expanded scope of required applicants should include: (1) entities that own or operate SLTE or equivalent equipment; (2) IRU holders or entities that lease a portion of the cable system's capacity; and (3) data center owners. With respect to SLTE owners and IRU holders, the agency tentatively concludes that such entities meet the FCC's "land or operate" qualifier, although with respect to IRU holders specifically the agency implies that such a conclusion could be limited only to the subclass of IRU holders that have access, control, or use rights related to a cable system's SLTE. With respect to data center owners, the agency notes that many such owners currently seek and receive waivers from licensing requirements given their lack of access to/control over the cable system or its operations; but the FCC seeks comment on data center owner access rights generally and whether the licensing rules should apply to such entities.

Additionally, the Commission seeks comment on whether it should retain its current rule requiring any entity owning or controlling a 5% or greater interest in a subsea cable and using its U.S. points be named as an applicant for a license. In lieu of this requirement, the FCC is interested in hearing whether the ownership or control threshold should be lower or higher and why, and whether the agency should eliminate the threshold entirely and require any entity that owns any interest in or has capacity on the subsea cable system to be identified as a license applicant. The agency also seeks comment on whether it should proscribe a specific method for calculating ownership interests and, given all of the varying pieces of infrastructure in a subsea cable system, asks whether interests should be calculated using factors such as ownership of specific fiber pairs, capacity holdings, capital contributions, or other related factors.

Adopting any or all of the changes contemplated above would practically make the application process considerably more complex and time-consuming for many of the entities involved in the operation or use of a subsea cable system, particularly given that many entities with certain ownership or control rights over cable system components would also need to satisfy the FCC's public interest and foreign ownership conditions.

Updated Application Requirements

The FCC also seeks comment on substantial updates to the requirements and contents of a cable landing license application. Among those requirements that the agency is considering changing and requesting feedback on are:

• Foreign Ownership Reporting Threshold: The agency seeks comment on whether license applicants should be required to disclose and provide information for all entities owning or controlling a 5% or greater direct or indirect voting or equity interest in the applicant. This proposal is consistent with the agency's 2023 proposal to decrease the ownership reporting threshold for International Section 214 license applications from 10% to 5%, and the "standard questions" required of all applicants subject to the Team Telecom review process.
• Cable Infrastructure Information: While presently license applicants are only required to submit a "description of the submarine cable," the FCC seeks comment on whether applicants should also be required to further detail: (1) the system's components (e.g., the number and length of the cable's segments, branching units, and optical fiber pairs, and design capacity); (2) the system's anticipated deployment and service activation timeframe; (3) the locations where the system lands and where each landing station is located; (4) the system's current and potential future service offerings and where services will be offered; and (5) terms and conditions of customer contracts and any IRU/capacity lease agreements.
• Compliance Certifications: The FCC proposes and seeks comment on requiring license applicants to make various certifications – many of which may be triggered for certain entities with disclosable foreign interests through the Team Telecom or mitigation agreement processes. These would include certifications related to: (1) the applicant's compliance with the Cable Landing License Act, FCC rules, and other federal laws; (2) the applicant's prior criminal history, including violations of antitrust or other competition laws; (3) whether the applicant has been found to have engaged in fraudulent conduct before a federal agency; (4) any pending FCC investigations; (5) the existence and contents of cybersecurity and logical/ physical security plans; and (6) the applicant's commitment to not install or use equipment from companies on the FCC's "Covered List" of entities deemed national security risks.

New Disclosure and Certification Requirements Related to Third-Party System Access

Noting the agency's concerns generally about the risks posed by non-licensee individuals and entities having access to licensed subsea cable systems, the FCC seeks comment on whether its license application disclosure requirements should be further updated to require information on a host of third-party access issues. For example, the agency proposes requiring information about: (1) an applicant's lessors of landing station or data center housing structures; (2) the address/location of, and GIS information for, the system's NOC and back-up NOC (if any), data centers, points of presence, and main distribution facilities; and (3) an applicant's planned or current use of foreign-owned MNSPs – i.e., an entity with whom the system licensee contracts to manage, operate, monitor, or install or replace equipment in the U.S. portion of the cable system.

Parties with reportable foreign ownership that are currently operating in this space will likely be familiar with these proposals, as the disclosure of this information is already required through the Team Telecom process. However, the FCC is proposing to extend these disclosure requirements to all license applicants. The agency is also considering whether to refer for Team Telecom review any application where the applicant indicates a foreign-owned MNSP may be used.

Presumption of Entities Not Qualified to Become Licensees

Beyond potentially expanding the scope of entities required to be named as a license applicant, the FCC also seeks comment on whether it should adopt a presumption that certain entities and their current and future affiliates and subsidiaries are not qualified to become a licensee.

The agency's "presumptively unqualified" list would potentially include any entity, or its affiliates/subsidiaries, that: (1) was previously denied an international Section 214 license; (2) was previously denied any other type of FCC license or authorization under national security or law enforcement grounds; or (3) has had their international or domestic Section 214 license, or other type of FCC license or authorization, revoked for national security or law enforcement reasons.

The FCC is also considering whether it should instead adopt a categorical qualifying condition that would preclude the grant of any application filed by an entity that is directly or indirectly owned or controlled by, or under the influence of: (1) a government organization of a "foreign adversary" country; (2) an entity that is a citizen or has a place of organization in a "foreign adversary" country; or (3) an individual or entity on the FCC's "Covered List." The agency further seeks comment on what ownership threshold should apply to any categorical preclusion (e.g., directly or indirectly majority-owned by a qualifying entity, where a qualifying entity holds a 10% or greater direct or indirect interest in the licensee, etc.), and whether a qualifying entity should be prohibited from entering into an IRU or lease for capacity on any U.S.-licensed system. It also asks whether 10% is the appropriate threshold, or if it should adopt a greater or lesser threshold.

Three-Year Periodic Reporting and Review of Licenses

Recognizing that current FCC rules do not require licensees to provide updated ownership or cable system information during the 25-year license term, the agency seeks comment on whether it should adopt a three-year periodic reporting requirement for all current and future licensees. As part of this reporting requirement, the agency proposes requiring existing licensees to provide updated cable infrastructure information and a list of current foreign-owned MNSP relationships, as well as new compliance certifications, updated ownership information, and updated contact information for the licensee generally, and their point(s) of contact.

The FCC signals that such reports (if required) would be filed by existing licensees under a tiered process, with licensees assigned to one of four categories. These categories are:

• Category 1: Systems that have a licensee that is directly or indirectly wholly or partially owned by a government of, or that have a place of organization in, a "foreign adversary" country, or that land in a "foreign adversary" country;
• Category 2: Systems where the FCC's most recent grant of approval occurred four or more years ago and have a licensee with a reportable foreign ownership interest;
• Category 3: Systems where the FCC's most recent grant of approval occurred less than four years ago and have a licensee with a reportable foreign ownership interest; and
• Category 4: All other U.S.-licensed systems, including those where no licensee has a reportable foreign ownership interest.

Licensees of systems in Category 1 would be required to submit their first report within six months of the new rule's effective date, while licensees of systems in the other three categories would be required to submit their first report in fixed intervals separated by six months. A complete list of which licensed systems would fall into each category is provided in Appendix D (page 158) to the NPRM.

The agency also seeks input on how to handle systems with joint licensees and suggests that a single licensee could provide responses on behalf of the entire group, consistent with existing industry practices during ad hoc reviews conducted by Team Telecom.

Reducing the 25-Year License Term

The FCC seeks comment on whether it should reduce the current 25-year license in lieu of or in addition to adopting a three-year reporting framework. While no specific duration is proposed, the agency considers five, 10, and 15 years as potential options.

The agency also tentatively plans to maintain its authority to conduct ad hoc reviews at any time, regardless of any changes to the license term, and it invites feedback on whether a shortened license term should apply to both existing and future licenses. (For instance, under a 15-year term, a license already active for 10 years would have five years remaining.)

Other Proposals

In addition, the FCC seeks input on: (1) various strategies to streamline the sharing of specific submarine cable data with other federal agencies to improve response times to national security threats; (2) updating its foreign carrier affiliation notice requirements; and (3) ways to improve the quality of the annual circuit capacity data that existing licensees are required to provide. Each of these proposals, and the agency's specific requests for comment, are detailed in the NPRM.

With respect to today's circuit capacity reporting requirement specifically, the agency notes certain gaps in its understanding of those entities that hold capacity on cable systems. The FCC therefore proposes requiring all capacity holders on cables landing in the U.S. file reports, including all IRU holders, inter-carrier leaseholders, and those entities that hold capacity on a specific fiber pair or on a spectrum basis.

Takeaways

Many of the FCC's proposed requirements and updates should be familiar to existing cable system operators with reportable foreign interests or that have gone through the Team Telecom and/or mitigation agreement negotiation process. However, the FCC is clearly concerned about minority interest holders in foreign countries (and, in particular, countries of concern) influencing cable operations or compromising national security. Further, these proposals reflect new concerns over the potential influence other stakeholders may have on a system's overall operations.

While these rules signal the FCC's intent to incorporate certain elements of the Team Telecom process into the FCC application process, any new rules would inevitably create more work and bureaucratic delay at the front end, almost certainly increasing application approval timelines. And, if adopted, such changes would significantly increase both the time and resources required for an entity looking to purchase or construct a U.S.-licensed system for the first time, as well as compliance costs for those entities that presently hold an interest in a currently licensed system.

Interested parties should use this opportunity to make their concerns known and to explain to the agency why certain rule changes may or may not be necessary under today's practical realities. Please let us know if you have any questions about the FCC's proposals or comment process.