McNabb Associates, P.C. - Attorneys at Law

McNABB ASSOCIATES, P.C.

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Q: Are all sectors of the U.S. communications industry heavily regulated?
A: No. Aside from broadcast services, common carrier, or commercial mobile radio services, aeronautical fixed or aeronautical en route services, other sectors of the industry typically have few restrictions on foreign nongovernmental ownership.

Q: What are examples of these lesser-regulated sectors?
A: Cable television and business radio licenses for facilities that use internal company communications.

Q: What statutes and/or government agencies govern foreign investment in the communications industry?
A: The Communications Act of 1934, as amended and the Federal Communications Commission (FCC) govern most of the foreign investment in the industry.

Q: What types of restrictions does the Communications Act impose on foreign investment?
A: §§ 310(a) and 310(b) of the Communications Act of 1934 impose restrictions on the wireless communications industry in the following ways:

The station license required under this Act shall not be granted to or held by any foreign government or the representative thereof;
No broadcast or common carrier or aeronautical en route or aeronautical fixed radio station license shall be granted to or held by –
1. Any alien or the representative of any alien;
2. Any corporation organized under the laws of any foreign government;
3. Any corporation of which more than one-fifth of the capital stock is owned of record or voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country;
4. Any corporation directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country, if the Commission finds that the public interest will be served by the refusal or revocation of such license.

Q: What kinds of services require a station license from the FCC?
A: Nearly all commercially significant wireless transmission services including broadcasting, microwave, and mobile radio services require a station license for lawful operation.

Q: How does the FCC assess compliance with the restrictions on foreign ownership and foreign voting rights?
A: The FCC treats "ownership" and "voting" as separate elements and analyzes them independent from one another. It uses a multiplier for each investor’s ownership interest and then aggregates the pro rata equity holdings of each investor in the licensee or parent to determine whether the sum of their interests exceeds the statutory benchmark.

Q: What are some other opportunities for foreign participation in the wireless communications industry?
A: Any foreign involvement that falls short of ownership or control is permitted. For example, the Communications Act does not restrict the provision of broadcast programming to U.S. broadcast stations by foreign sources, the employment of noncitizens by licensee companies, or the purchase and use of communications services by noncitizens so long as those activities do not amount in the aggregate to actual foreign control of a licensee or a parent company of a licensee without FCC approval. Noncitizens may also serve as employees or officers and directors of licensees and of the companies that control them. Noncitizens may purchase and use common carrier radio services and may purchase programming time and advertising on broadcast stations. The Communications Act also does not restrict aliens from owning broadcast television networks so long as the network does not also control broadcast or other radio licenses listed above.

Q: What about radiofrequency devices that may be operated without a "station license"? Can noncitizens hold and operate those?
A: Yes, the FCC issues equipment authorizations for a variety of low power transmission devices, and noncitizens may hold equipment authorizations for the manufacturing, sale, marketing, ownership and operation of those devices listed under Part 15 of the FCC regulations.

Q: When the Communications Act mentions a "corporation," how broad is that term?
A: Under the Communications Act, any business organization including trusts, partnerships, membership corporations, not-for-profit corporations, mutual insurance companies, and limited liability companies constitutes a "corporation."

Q: Does the FCC apply the same restrictions on ownership and voting rights to non-corporate forms of business organization like partnerships?
A: Yes, since the FCC now allows noncitizens to serve as officers or directors, partners may also be noncitizens, and must satisfy the restrictions on voting and ownership interests regardless of the organizations' structures.

Q: Are there any other regulations or agreements that affect foreign investment in the communications industry?
A: Yes, in 1998, the U.S. agreed to the adoption of the World Trade Organization Basic Telecommunications Agreement (WTO BTA), and as a result, the FCC determined that foreign investment from WTO member nations was presumptively entitled to a favorable public interest determination. However, the FCC has decided on only one occasion to grant a station license to a company that is directly or indirectly controlled by another company having foreign interest or voting rights in excess of 25% or any of the other characteristics described in §310(b)(4) above.