Wireless Data Roaming Rules Upheld by D.C. Circuit

By J. Bradford Currier, Marc Martin, and Marty Stern

Mobile wireless data providers must offer roaming agreements to competing carriers on “commercially reasonable” terms following the D.C. Circuit Court’s decision to uphold rules first adopted by the Federal Communications Commission in 2011. The FCC’s data roaming requirements were designed to supplement existing roaming obligations on mobile carriers that only applied to voice services by facilitating access to data services when customers travel outside of their providers’ networks. As we reported previously, the data roaming rules were adopted by a closely-divided FCC and were subsequently challenged by Cellco Partnership, more commonly known as Verizon Wireless.

Verizon Wireless challenged the data roaming obligations on three grounds, arguing that: (1) the FCC lacked statutory authority to impose “common carrier” type rules on mobile data providers; (2) new rules were unnecessary because mobile data providers were already entering into voluntary roaming agreements with competing carriers; and (3) roaming obligations would reduce incentives to expand wireless infrastructure if providers must share their networks with competitors.  Verizon Wireless alleged that the roaming requirements would unfairly benefit smaller carriers with limited networks at the expense of larger providers. In response, the FCC stated that the new rules did not impose common carrier type regulations on mobile data providers and the requirements were necessary in order to prevent larger carriers from excluding smaller providers from their networks. 

The D.C. Circuit began by noting that the FCC may not impose common carrier type obligations on providers of “information services,” including mobile data providers. However, the court found that the data roaming rules allow providers to negotiate the terms of their roaming arrangements on an individualized basis and do not require providers to serve other carriers indiscriminately on standardized terms. While the court recognized that the data roaming requirements “plainly bear[] some marks of common carriage,” the court deferred to the FCC’s determination that the new rules did not amount to common carriage regulation because providers can negotiate flexible terms and conditions. The court further concluded that the data roaming rules did not constitute an unconstitutional taking of Verizon Wireless’s data network or represent arbitrary and capricious rulemaking. Although supporters of the roaming rules also suggested that the court’s decision supports the FCC’s net neutrality rules currently subject to a separate appeal, the court in the data roaming case found that the FCC has explicit jurisdiction over wireless carriers under its broad authority over radio communications under Title III of the Communications Act.

FCC Proposes Streamlined Foreign Ownership Reviews for Wireless Mobile Companies

By Marc Martin and Marty Stern

The FCC launched a review of its foreign ownership rules for common carrier radio licensees, such as wireless carriers, as well as certain aeronautical radio licensees and spectrum lessees in a Notice of Proposed Rulemaking adopted earlier this month. The NPRM aims to reduce the regulatory hurdles on companies petitioning the FCC to exceed the agency’s 25% foreign ownership benchmark, adopted under Section 310(b) of the Communications Act, which in general requires an FCC public interest finding for 25% indirect foreign ownership of common carrier, aeronautical, and broadcast licensees. According to the Commission, the streamlined procedures would reduce the number of required filings by more than 70%. The NPRM does not affect radio or television broadcast licensees.

The Commission noted the continued difficulties companies encounter under the agency’s foreign ownership rules which were last significantly revised in 1998. Specifically, companies must currently compile detailed records concerning the citizenship and principal places of business of their investors, including entities which hold only de minimus interests through intervening investments and holding companies. The NPRM also recognized that under the current rules, companies must repeatedly submit foreign ownership updates to the FCC. To reduce these burdens, the NPRM offered a number of suggestions for comment, including:

  • Eliminating the requirement that companies obtain specific approval for named foreign investors, unless the foreign investor seeks to acquire an interest in the parent company that exceeds 25 percent or represents a controlling interest at any level
  • Allowing parent companies to request specific approval for foreign investors named in their initial petitions to increase their interests in the parent at any time after issuance of the initial ruling up to and including a non-controlling 49.99 percent equity and/or voting interest
  • Issuing foreign ownership rulings in the name of the parent company of the licensee, allowing for automatic extension of the parent’s ruling to cover any of its subsidiaries or affiliates, provided that the parent company remains in compliance with the terms of its ruling
  • Authorizing parent companies with a foreign ownership ruling to have up to and including 100 percent aggregate foreign ownership by investors that are not named in its initial foreign ownership petition, provided that that no single foreign investor or “group” of foreign investors acquires an interest in the parent that exceeds 25 percent, or a controlling interest at any level, without prior FCC approval
  • Permitting internal reorganizations of a parent company in certain circumstances where a new, foreign-organized controlling parent is inserted into the vertical ownership chain above the U.S. company
  • Amending the FCC’s practice of issuing foreign ownership rulings on a service-specific basis and on a geographic-specific basis

In a statement accompanying the NPRM, FCC Chairman Genachowski predicted the proposed paperwork reductions would save companies both time and money while increasing transparency and predictability for foreign investors. Commissioner Clyburn similarly highlighted the importance foreign investment plays in encouraging broadband deployment and economic growth. By contrast, Commissioner Copps questioned whether the current review process actually discouraged foreign investment and warned that the elimination of some foreign ownership rules carries potential risks.

Comments on the NPRM will be due 45 days after its publication in the Federal Register, which is pending, and reply comments will be due 30 days later.