China Telecom (Ams.) Corp. v. Fed. Commc'ns Comm'n
| Decision Date | 20 December 2022 |
| Docket Number | 21-1233 |
| Parties | CHINA TELECOM (AMERICAS) CORPORATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Russell M. Blau argued the cause for petitioner. With him on the briefs were Andrew D. Lipman and Raechel K. Kummer.
Scott M. Noveck, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, U.S. Department of Justice, Sharon Swingle, Casen Ross, and Dennis Fan, Attorneys, and Jacob M. Lewis, Acting Deputy General Counsel, Federal Communications Commission. Matthew J. Dunne, Counsel, Federal Communications Commission, entered an appearance.
Before: Henderson and Katsas, Circuit Judges, and Edwards, Senior Circuit Judge.
Confronted with reliable claims of escalating Chinese cyber threats targeting the United States, the Federal Communications Commission ("FCC" or "Commission") revoked the authority of China Telecom (Americas) Corp. ("China Telecom") to operate domestic and international transmission lines pursuant to section 214 of the Communications Act of 1934. China Telecom (Ams.) Corp ., FCC 21-114, 36 FCC Rcd. ––––, 2021 WL 5161884 (Nov. 2, 2021) (" Revocation Order "), Joint Appendix ("JA") 562-662. China Telecom now petitions for review.
After two rounds of written submissions and one round of public comments, the Commission found that China Telecom, "a U.S. subsidiary of a Chinese state-owned enterprise, is subject to exploitation, influence, and control by the Chinese government." Revocation Order, JA 563. The Commission also found that China Telecom's "ownership and control by the Chinese government raise significant national security and law enforcement risks by providing opportunities for [China Telecom], its parent entities, and the Chinese government to access, store, disrupt, and/or misroute U.S. communications, which in turn allow them to engage in espionage and other harmful activities against the United States." Id. The Commission additionally found that China Telecom breached "the 2007 Letter of Assurances with the Executive Branch agencies, compliance with which is an express condition of its international section 214 authorizations." Id . Finally, the Commission found that "classified evidence submitted by the Executive Branch agencies further supports [the FCC] decisions to revoke the domestic authority and revoke and terminate the international authorizations issued to [China Telecom]." Id . at 563-64. Although the Commission offered support from the classified record, consisting of evidence obtained pursuant to the Foreign Intelligence Surveillance Act ("FISA"), it has made it clear throughout these proceedings that its decision is entirely justified by the unclassified record alone.
Before this court, China Telecom argues that the Revocation Order is arbitrary, capricious, and unsupported by substantial evidence. It dismisses as speculative the Commission's concern that China Telecom will be used as a vector of cyberwarfare against the United States and disputes the Commission's conclusion that its conduct constituted breaches of the Letter of Assurances. China Telecom also argues that the paper hearing it received was procedurally deficient. It contends that pursuant to the Commission's past practice, the requirements of the Administrative Procedure Act, and the strictures of the Due Process Clause of the U.S. Constitution, the FCC was obligated to grant China Telecom discovery, an opportunity to demonstrate or achieve compliance, and a live hearing before a neutral adjudicator.
We find no merit in China Telecom's claims. Therefore, we deny the petition for review. In reaching this judgment, we have not found it necessary to rely on the classified record. The Commission's determinations that China Telecom poses a national security risk and breached its Letter of Assurances are supported by reasoned decisionmaking and substantial evidence in the unclassified record. In addition, we hold that no statute, regulation, past practice, or constitutional provision required the Commission to afford China Telecom any additional procedures beyond the paper hearing it received.
The Communications Act of 1934 tasks the FCC with regulating the nation's communications infrastructure. One of the principal purposes of the statute is "national defense." 47 U.S.C. § 151. In furtherance of this statutory purpose, any carrier seeking to use or operate a transmission line for interstate or foreign communications must first obtain a "section 214 authorization" from the Commission. 47 U.S.C. § 214(a). And the Commission "may attach to the [214 authorization] such terms and conditions as in its judgment the public convenience and necessity may require." Id. § 214(c).
The Commission has granted blanket authority for any carrier to construct, operate, or transmit over domestic transmission lines, see 47 C.F.R. § 63.01(a), "subject to the Commission's ability to revoke [that] authority when warranted to protect the public interest." Revocation Order, JA 565. If a carrier seeks to construct, operate, or transmit over international transmission lines, it must obtain specific authorization from the Commission, see 47 C.F.R. § 63.18, and the Commission may later revoke that authorization if warranted to protect the public interest. Revocation Order, JA 565.
A crucial factor considered by the Commission in granting or revoking section 214 authorizations is whether a carrier's use of domestic or international transmission lines raises any national security, law enforcement, or foreign policy concerns. Revocation Order, JA 566; see also 47 U.S.C. § 214(b) (). The Commission has had a longstanding practice of seeking "the expertise of the relevant Executive Branch agencies" – including the Department of Justice ("DOJ"), the Department of Homeland Security ("DHS"), and the Department of Defense ("DoD") – to help assess national security and other concerns that might arise from a carrier's foreign ownership. Revocation Order, JA 566; see also Rules & Policies on Foreign Participation in the U.S. Telecomms. Mkt ., 12 FCC Rcd. 23891, 23919 (1997) ("Foreign Participation Order") (recognizing that "foreign participation in the U.S. telecommunications market may implicate significant national security or law enforcement issues uniquely within the expertise of the Executive Branch"). Under established policies and practice, the Executive Branch agencies may review existing authorizations for national security risks and recommend revocation if the risks cannot be mitigated. Process Reform for Executive Branch Review of Certain FCC Appls. & Pets. Involving Foreign Ownership , 35 FCC Rcd. 10927, 10962-63 (2020).
The Communications Act does not specify any procedures to be followed in conjunction with an action to revoke a section 214 authorization. Nor has the Commission promulgated any regulations setting forth any such procedures. Although the Commission has adopted regulations prescribing certain trial-type procedures for the revocation of station licenses and construction permits, those regulations do not apply to the revocation of a section 214 authorization. See 47 C.F.R. §§ 1.201 - 1.377 ; 47 C.F.R. § 1.91(a), (d).
What the FCC has done is opt in favor of a "written hearing process" for the revocation of 214 authorizations:
Procedural Streamlining of Admin. Hr'gs , 35 FCC Rcd. 10729, 10732-33 (2020) ("Streamlining Order") (internal quotations omitted).
Before the Revocation Order issued, China Telecom had one domestic section 214 authorization (given pursuant to the blanket authorization issued under FCC regulations) and two international section 214 authorizations. The international authorizations were conditioned on a 2007 Letter of Assurances to the DOJ, Federal Bureau of Investigation ("FBI"), and DHS. The Letter provides, inter alia , that China Telecom will "take all practicable measures to prevent unauthorized access to, or disclosure of the contents of, communications or U.S. Records," and "will notify the FBI, DOJ and DHS if there are material changes in any of the facts represented in this letter or if it undertakes any actions that require notice to or application to the FCC." Letter from Yi-jun Tan, President, China Telecom (USA) Corp., to Sigal P. Mandelker, Deputy Assistant Attorney General, U.S. Dep't of Justice, et al. (July 17, 2007) ("Letter of Assurances"), JA 89-90.
The FCC issued the first international section 214 authorization to China Telecommunications Corporation, China Telecom's indirect corporate...
To continue reading
Request your trial