FCC International 214 Licensure

The most common question asked by a communication provider is whether an FCC 214 (a 214 license) is required by the Federal Communications Commission. The answer entirely depends on the service you provide. It’s often a misconception that the technology that you use, such as VoIP, changes the nature of the service you provide. This is incorrect. There are two essential elements to determining whether or not you must seek an FCC 214 license for your company. First is whether your company’s services will be offered to the public – consumers. Second is whether your company be providing international services. If both are true, then yes, a 214 license must be sought before you offer services within the United States. 47 U.S.C. § 214 requires all providers of international long distance telecommunication services that provide their services to the general public for profit must have the prior approval (license) from the Federal Communication Commission (FCC) before beginning operations.

The requirement to seek authority pursuant to 47 U.S.C. § 214 before providing international long distance telecommunications service is absolute. The law prohibits any sale and provision of any international service before FCC approval. This requirement is not only limited to upstart companies, but also to the assignment, transfer or merger of telecommunication carriers by other carriers or companies. This means that even if a company has an FCC 214 authority and you acquire it, you must be approved to take over the operations under the license before you can operate it. This applies to small sized companies as well as large organizations.

Aside from the requirements of the law, many established U.S. carriers will not do business with an international telecommunication provider unless they have obtained an FCC 214 and FCC 499-A filer ID first. This is particularly true for U.S. based resellers and other providers who may resell but are not exclusively reselling within the U.S. and may have some retail operations or applications for their services. This is also true for foreign owned resellers. U.S. carriers may wish that the company is firmly within the U.S. as a telecommunications carrier before they do business and pass traffic.

FCC 214 Special Temporary Authority Applications

There are times that client approach us seeking an FCC 214 license, however, the reality is that they are already operating. These are delicate situations. The FCC has the power to deny an applicant or fine an applicant if they are operating without prior Section 214 authority granted by the Commission. Fines by the FCC for operating international telecommunications carriers without authority begin at $100,000.00 USD. In such situations, a special and temporary authority (STA), to cover the interim of obtaining the full license, may be necessary. This said, it must be remembered that the key words are SPECIAIL and TEMPORARY. Mere negligence of an owner or management is not a special event. Similarly, the FCC may only grant the license for a specific period of time, for example six (6) months with the requirement to extend the authority by another application explaining the need. An STA is merely a gap stop cover for a limited time, and, does not substitute for a full grant of authority by the FCC. However, they are sometime necessary when errors and omissions have been made by the company and an FCC 214 has not been obtained before service begins. If you believe that you may need an STA before applying for an FCC 214 license, please inform us in consultation so that we may explore options.

The FCC 214 application process

All applications for FCC 214 licenses are electronically filed or processed with a formal Petition or supplemental information attachments. Our firm uses formal Petitions for all our clients because the eventual license record will be public and will be publicly accessible information on your company. For companies that are owed by U.S. citizens, the application process is streamlined, meaning the applications are generally placed on an expedited (or fast-track) docket process for approval. The streamlined process generally takes 31 days from application submission being placed on the FCC Public Notice. FCC 214 applicants who are foreign owned by more than 5% by non-U.s. parties or wireless carriers that more than 25% indirect ownership is held by foreign (non-U.S. parties) are tracked differently within the FCC and are not streamlined under their Rules.

The FCC 214 application filing fees

The FCC charges a filing fee about $1,200.00 USD (payable directly to the FCC) to process any FCC 214 application, including assignment and transfers. Updates to contact information, Pro Forma Transfers for purposes of restructure by the same approved owners, and surrenders of FCC 214 licenses are not charged a filing fee. All filing fees are paid directly by the applicants to link the application filing to the applicant, and, generally show proof of the individual application should there be question by the FCC as to date or in the event that an internal error occurs and the application is not placed on Public Notice by the FCC in a timely manner.

Problems delaying or complicating the FCC 214 Application

Problems for providers generally arise when they are under-budgeted and enter the market first, and later seek the FCC 214 authority months or years after their market entry. Providers can, and have been, heavily fined in such scenarios. Applications under this type of scenario generally are processed on a non-streamlined basis once the prior operation is discovered by the FCC. Similarly, if a company or an owner has an existing debt with the FCC (e.g. unpaid regulatory fees, penalties or a unpaid forfeiture fine) , any FCC 214 application will be Red Lighted and frozen in the application process until the debt is paid, or, a settlement of the debt has been arranged. Generally debts owed to the FCC or USAC over a 6 month period or more can trigger a Red Light hold of any application. Likewise, problems can also arise when providers acquire a carrier, or substantial parts of its assets, and seek the FCC 214 transfer of control in a post-transaction clean-up of items under the new administration. The major concern for both types of scenarios is that operating without the prior approval of the FCC under 47 U.S.C. § 214 is a violation of the Communication Act of 1934, as amended, and can result in an enforcement action or a Notice of Apparent Liability (NAL) for forfeiture based upon that violation. All the above can make the application process more complex and cause time delay in the grant of the license.

Maldonado Law has worked with FCC 214 applicants since 1998. We have guided clients ranging from new FCC 214 applicants, to pro forma transfers, to complex FCC 214 approvals associated with assignments and mergers, to surrender of their FCC 214 due to cessation of business or bankruptcy. This has involved clients both large and small-sized. We have also had extensive experience in working with foreign-owned carriers and foreign carriers establishing operations in the U.S. that requires FCC 214 license.

Team Telecom (Department of Homeland Security) review of foreign owners in FCC 214 applications

When there is foreign ownership of more than 5% in an FCC 214 Applicant, or more than 25% indirect foreign ownership of Wireless Carrier’s 214 License, the FCC refers the application to the Executive Branch for national security, law enforcement, foreign policy or trade concerns review. A foreign owner is defined by the Act as someone (person or beneficial owner that is not a U.S. Citizen. Lawful permanent residents and investors on an E-1 or E2 Visa would be considered foreigners owners for purposes of an FCC 214 application.

The referral is made to an interagency group called Team Telecom. Team Telecom is comprised of staff from the Department of Homeland Security (DHS) and other inter-agencies including the U.S. Department of Justice (FBI), Department of Commerce, Department of Defense, Department of State, Department of Treasury, and the U.S. Trade Representative. Based on its review, Team Telecom may have no comment (or objection) on the application, or, may have concerns and request that the FCC condition grant of the FCC 214 license with assurances on the part of the licensee under a formal agreement called a Letter of Assurance (LOA). The LOA is an agreement made directly with DHS and often requires periodic compliance reporting to the DHS on areas which it had concerns. The FCC will not act on an application until Team Telecom has completed its review of the application.

Review by Team Telecom is applicant-specific, meaning that individual character of owners, their past history, circumstances in the U.S., and their country of origin, is investigated to ensure compliance with the Act and U.S. laws. Therefore, unlike streamlined processing with most FCC 214 applications of U.S. citizen owned companies, Team Telecom review of a foreign-owned applicant can take as long as six (6) to eleven (11) months. Sometimes the review can be longer. A lack of full disclosure on the questions presented by Team Telecom to the applicant can also extend the review process. Though sometime long, this processes cannot be avoided, It is important to remember is that the company with foreign ownership cannot operate in providing telecommunication services without the FCC 214 license, or it will be fined.

Team Telecom post-Licensing Compliance Review and Upkeep

Post grant of FCC 214 license to a foreign-owned company often presents distinct compliance challenges. Under Letters of Assurance (LOA) with the DHS, a foreign-owned FCC 214 carrier will often need to implement and report on its compliance with the federal Computer Assistance Law Enforcement Act (CALEA) requirements, independent of compliance obligations it has with the FCC. System Security and Integrity plans and protocols for lawful legal requests under CALEA are often critical to such compliance and reporting. Failure to abide by the commitments and obligations of an LOA with DHS can, and will, result in the termination of a carrier’s FCC 214 license by the FCC. Our firm has worked with large scale and small-sized carriers to comply with LOA requirements for the past decade. Such compliance must comport with actual operations of the carrier. We have also worked with clients to properly report and file its compliance with the FCC and DHS and teach the client to be able to do its own self-filing on an ongoing basis. When clients have come to us with non-compliance LOA issues or proposed termination of FCC 214 licenses, we have worked with both the client and the DHS to reconcile the non-compliance and help the client implement internal safeguards to avoid future problems.

Maldonado Law has been assisting clients navigate and respond to the Team Telecom process for over a decade. We have also helped clients plan and implement CALEA and System Security and Integrity compliance plans while they are being reviewed by Team Telecom to address possible concerns or meet periodic compliance reporting to the DHS on areas of concern.

FCC Merger and Assignment Process

Pursuant to 47 USC Section 214 and in combination with sections 63.03 and 63.04 of the Commission’s Rules, any stock sales or mergers of a license FCC 214 carrier, or the sales of an FCC 214 carrier’s assets (including subscribers or customer accounts) requires the prior approval of the FCC over the new ownership. This applies to both the international FCC 214 license as well as applicable de-regulated authority for domestic long distance and Interconnected VoIP services. The sale of stock or assets of an FCC 214 carrier implies the potential approval of the FCC. Furthermore, contracts for the sale of stock or assets of an FCC 214 carrier should carry with them a clause that certain aspects of performance of the contract are subject to the prior approval of the FCC and closing of the transaction will not occur until that approval is obtained. Our firm has worked with both the transactional side of carrier stock sales, mergers, and sale of assets, AND the FCC process for obtaining prior approval to clear the transaction to close. This has included transactions involving foreign owned carriers, those held by layered holding companies, those held by trusts, and those being transacted as a part of bankruptcy proceedings. We have represented single parties in such FCC merger proceedings as well as jointly-filed applications for domestic and international services on behalf of both parties. Often this implicates our involvement early in the due diligence process. Under FCC Rules, should the transaction result in a reduction or impairment of service or impact the customers of the selling carrier then the application with the FCC must be withdrawn or discontinued. When a purchasing carrier is acquiring all or part of another carrier’s subscriber base, it must notify all subscribers and meet other requirements in section 64.1120(e) Rules. International FCC 214 mergers and acquisitions are furthermore subject to Team Telecom review. All these requirements must be addressed in the transactional side before application is made.

Pro Forma Mergers

Pro Forma transactions are the exception to the general processes at the FCC. A Pro Form transfer occurs when the direct or indirect ownership of the carrier does not change, but structured or layered holding companies or trusts are transferred ownership for the benefit of those owners. This type of re-structure may involve entities in various states or in foreign countries. The FCC treats these types transfers differently and requires no filing fee as the direct or indirect owners previously approved remains the same. However, should the proposed restructure implicate a new owner or independent company obtaining equity and managerial control of the FCC 214 licensee, then the application may be in fact a regular merger for purposes of FCC approval. This is significant because Pro Forma Transfers do not require prior approval of the FCC to consummate. They require a notice of consummation after the re-structure has been implemented. They also do not involve a filing fee to the FCC for their processing. However, if the re-structure in fact involves a change in control of the FCC 214 licensee, the transfer may violate the FCC’s Rules, and the carriers or parties involved in the transaction may be fined.

Maldonado Law has worked in all aspects of mergers, sale of carrier assets and Pro Forma transfers on behalf of clients since 2001. We have helped clients in FCC regulatory Due Diligence, contract negotiation and drafting, and submission of FCC transfer applications to ensure compliance with the Commission’s Rules and successful closing of the transaction. We have also assisted clients in their Pro Forma Transfers to ensure that the intended structure does not violate the Rules and can be effectuated in an efficient manner.

Surrender of the FCC 214 License

Per Commission Rules, those companies that no longer offer telecommunication services, that close, or that did not commence the telecommunication services for which the FCC 214 was sought must Surrender their FCC 214 license as soon as practicable. The filing process is straightforward, by filing either a letter or a formal request, but it is contingent on the company not having any debt to the Commission, USAC, TRS, NANPA, LNP, or be on Red Light status. Our firm has worked with clients in the shut-down process and the Surrender of their FCC 214 license since 2001. This process involves review of regulatory and communication tax debt, and other carrier liabilities to ensure no objections in the Surrender, or post-surrender timeframe. Our services typically include cancellation of all other FCC licenses and registrations held by the FCC 214 licensee including FCC 499 ID and permits for spectrum frequency or international SPIN codes.

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