Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees, 41314-41331 [2013-15314]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Rules and Regulations]
[Pages 41314-41331]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15314]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 25

[IB Docket No. 11-133; FCC 13-50]


Review of Foreign Ownership Policies for Common Carrier and 
Aeronautical Radio Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) modifies the policies and procedures that apply to foreign 
ownership of common carrier, aeronautical en route and aeronautical 
fixed radio station licensees. The Commission found that the new 
measures will reduce regulatory costs and burdens imposed on wireless 
common carrier and aeronautical applicants, licensees and spectrum 
lessees, provide greater transparency and more predictability with 
respect to the Commission's foreign ownership filing requirements and 
review process, facilitate investment in U.S. telecommunications 
infrastructure and capacity, while continuing to protect important 
interests related to national security, law enforcement, foreign 
policy, and trade policy.

DATES: Effective August 9, 2013.

FOR FURTHER INFORMATION CONTACT: Susan O'Connell or James Ball, Policy 
Division, International Bureau, FCC, (202) 418-1460 or via the Internet 
at Susan.OConnell@fcc.gov and James.Ball@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Report and Order, IB Docket No. 11-133, FCC 13-50, adopted April 18, 
2013, and released April 18, 2013. The full text of the Second Report 
and Order is available for inspection and copying during normal 
business hours in the FCC Reference Center, 445 12th Street SW., 
Washington, DC 20554. The document also is available for download over 
the Internet at https://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db0418/FCC-13-50A1.pdf. The complete text also may be 
purchased from the Commission's copy contractor, Best Copy and 
Printing, Inc. (BCPI), located in Room CY-B402, 445 12th Street SW., 
Washington, DC 20554. Customers may contact BCPI at its Web site: 
https://www.bcpiweb.com or call 1-800-378-3160.

Summary of Second Report and Order

    1. In the Second Report and Order, the Federal Communications 
Commission (Commission) revises its regulatory framework for 
authorizing foreign ownership of common carrier radio station 
licensees--i.e., companies that provide fixed or mobile 
telecommunications service over networks that employ spectrum-based 
technologies, either in whole or in part--pursuant to sections 
310(b)(3) and 310(b)(4) of the Communications Act of 1934, as amended 
(the Act), 47 U.S.C. 310(b)(3), (4). These new measures will also apply 
to foreign ownership of aeronautical en route and aeronautical fixed 
(hereinafter, ``aeronautical'') radio station licensees pursuant to 
section 310(b)(4). The new rules will be codified in 47 CFR 1.907, 
1.990-1.994 and 25.105. For ease of reference, the Second Report and 
Order refers to common carrier and aeronautical radio station 
applicants, licensees, and spectrum lessees collectively as 
``licensees'' unless the context warrants otherwise. ``Spectrum 
lessees'' are defined in 47 CFR 1.9003. The Second Report and Order 
does not address Commission policies with respect to the application of 
section 310(b)(4) to broadcast licensees.
    2. Section 310(b)(4) of the Act establishes a 25 percent benchmark 
for investment by foreign individuals, governments, and corporations in 
U.S.-organized entities that directly or indirectly control a U.S. 
broadcast, common carrier, or aeronautical radio station licensee. This 
section also grants the Commission discretion to allow higher levels of 
foreign ownership of a controlling U.S.-organized parent company--up to 
and including 100 percent of its equity and voting interests--unless 
the Commission finds that such ownership is inconsistent with the 
public interest. Section 310(b)(3) of the Act prohibits foreign 
individuals, governments, and corporations from owning more than 20 
percent of the capital stock of a broadcast, common carrier, or 
aeronautical radio station licensee. In the First Report and Order in 
this docket (77 FR 50628, August 22, 2012) the Commission determined to 
forbear, under section 10 of the Act, 47 U.S.C. 160, from applying the 
20 percent foreign ownership limit in section 310(b)(3) to the class of 
common carrier licensees in which the foreign investment is held 
through U.S.-organized entities that do not control the licensee, to 
the extent the Commission determines such foreign ownership is 
consistent with the public interest under the policies and procedures 
the Commission uses for assessing foreign ownership under section 
310(b)(4). The Commission deferred to this second phase of the 
proceeding a decision whether to apply any changes it adopts to the 
section 310(b)(4) regulatory framework to its analysis of petitions for 
declaratory ruling or similar filings under the Commission's section 
310(b)(3) forbearance approach. The Commission's forbearance authority 
under 47 U.S.C. 160 does not extend to broadcast or aeronautical radio 
stations licensees.
    3. The Second Report and Order adopts a comprehensive set of rules 
that will apply to common carrier and aeronautical radio station 
licensees that seek approval for the foreign ownership of their 
controlling U.S.-organized parent companies to exceed the 25 percent 
foreign ownership benchmark in section 310(b)(4) and to common carrier 
radio station licensees subject to the section 310(b)(3) forbearance 
approach that seek Commission approval to exceed the 20 percent foreign 
ownership limit in section 310(b)(3). The Commission estimates that the 
new rules will reduce the number of section 310(b) petitions for 
declaratory ruling filed with the Commission annually in the range of 
40 to 70 percent as compared to the current regulatory framework. The 
Commission also concludes that the new rules will reduce substantially 
the number of hours that licensees will have to spend in preparing and 
submitting the petitions that they will need to file under the new 
rules.
    4. The Second Report and Order adopts several of the proposals set 
forth in the Notice of Proposed Rulemaking

[[Page 41315]]

(NPRM) as well as other measures that respond to comments filed in this 
proceeding on the various options and questions raised in the NPRM. The 
Commission has revised certain of its initial proposals in light of the 
views of the Executive Branch agencies that filed comments, in order to 
ensure their continued ability to review proposed foreign investment in 
advance (through either section 310(b) petitions or license or spectrum 
lease applications) and assess whether such investment is consistent 
with national security, law enforcement, foreign policy, and trade 
policy concerns. Under the new rules, the Commission will continue to 
coordinate with the relevant Executive Branch agencies all petitions 
for declaratory ruling and applications for licenses and spectrum 
leases, and for transfers and assignments thereof, where the applicant 
has foreign ownership exceeding the limits in section 310(b)(3) and/or 
section 310(b)(4), and continue to accord deference to the agencies' 
views on matters related to national security, law enforcement, foreign 
policy, and trade policy that may be raised by a particular petition 
for declaratory ruling or application. The Commission will also 
maintain its ability to condition or disallow foreign investment that 
may pose a risk of harm to important national policies.

WTO and Non-WTO Investment

    5. The Second Report and Order eliminates the current distinction 
between foreign investment from World Trade Organization (WTO) Member 
countries and non-WTO Member countries for purposes of reviewing 
foreign investment in common carrier and aeronautical licensees. 
Instead, the Commission will apply an ``open entry standard'' in its 
public interest assessment of all foreign investment under the 
Commission's section 310(b)(3) forbearance approach and under its 
section 310(b)(4) review. The Second Report and Order finds that, on 
balance, the costs of maintaining the distinction between WTO and non-
WTO Member investment in common carrier and aeronautical licensees 
outweigh any remaining benefits.

Revised and Codified Standards for Public Interest Determinations

    6. Prior Approval of Foreign Ownership Under section 310(b)(3) 
Forbearance and section 310(b)(4). The Second Report and Order adopts 
the NPRM proposal to retain and codify the Commission's long-standing 
policy that requires common carrier and aeronautical radio station 
licensees to seek and obtain Commission approval before their U.S. 
parents' foreign ownership exceeds the 25 percent benchmark in section 
310(b)(4) of the Act. The Second Report and Order also codifies the 
same requirement for common carrier licensees subject to section 
310(b)(3) forbearance to obtain prior Commission approval before 
foreign ownership in the subject licensee exceeds the 20 percent limit 
in section 310(b)(3).
    7. Issuing section 310(b)(3) and (b)(4) Rulings to Named Licensees. 
The Commission determined in the Second Report and Order to continue 
its practice of issuing foreign ownership rulings in the name of the 
licensee that is the subject of a petition for declaratory ruling, 
regardless of whether the ruling authorizes the licensee to have 
foreign ownership in excess of the 20 percent limit in section 
310(b)(3) or authorizes foreign ownership of the licensee's controlling 
U.S. parent to exceed the 25 percent benchmark in section 310(b)(4). 
The NPRM had proposed to issue section 310(b)(4) rulings in the name of 
the licensee's lowest-tier, controlling U.S. parent. The Second Report 
and Order finds that issuing section 310(b)(3) and section 310(b)(4) 
rulings in the name of the licensee will help to provide the 
consistency sought by commenters in the Commission's public interest 
review of foreign ownership under section 310(b)(3) forbearance and 
section 310(b)(4).
    8. Approval of Named Foreign Investors. The rules adopted in the 
Second Report and Order will require common carrier and aeronautical 
licensees to identify and request specific approval in their section 
310(b)(4) petitions for declaratory ruling for any foreign individual 
or entity, or ``group'' of foreign individuals or entities, that holds 
or would hold directly, and/or indirectly through one or more 
intervening U.S.- or foreign-organized entities, more than five percent 
of the U.S. parent's total outstanding capital stock (equity) and/or 
voting stock, or a controlling interest in the U.S. parent. (See Sec.  
1.991(i)(1).) The Second Report and Order also adopts a five percent 
identification and specific approval requirement for common carrier 
licensees subject to section 310(b)(3) forbearance. (See Sec.  
1.991(i)(2)). In certain limited circumstances, however, the Commission 
will presumptively require identification and specific approval of a 
foreign investor's non-controlling interest only when it would exceed, 
directly and/or indirectly, ten percent of the equity and/or voting 
interests of a U.S. parent (for section 310(b)(4) petitions) or 
licensee (for petitions filed under section 310(b)(3) forbearance). The 
Commission will presume, subject to rebuttal in a particular case, that 
a non-controlling foreign interest of ten percent or less in a U.S. 
parent or licensee is exempt from the five percent specific approval 
requirement in the circumstances specified in Sec.  1.991(i)(3)(ii)(A)-
(C).
    9. The Non-Controlling 49.99 Percent Approval Option for Named 
Foreign Investors. The Second Report and Order adopts the proposed non-
controlling 49.99 percent approval option with certain modifications to 
accommodate the Commission's forbearance decision in the First Report 
and Order. Section 1.991(k) of the new rules will allow common carrier 
and aeronautical licensees to request advance approval for any named 
foreign investor to increase, at some future time, its equity and/or 
voting interest held directly or indirectly in the licensee's 
controlling U.S. parent from existing levels (or levels that would 
exist upon closing of any transactions contemplated by the petition) up 
to any non-controlling amount, not to exceed 49.99 percent. Section 
1.991(k) will similarly permit common carrier licensees subject to 
section 310(b)(3) forbearance to request specific approval of any named 
foreign investor to increase, at some future time its equity and/or 
voting interest in the licensee, held through intervening U.S. entities 
that do not control the licensee, from existing levels (or levels that 
would exist upon closing of any transactions contemplated by the 
petition) up to any non-controlling amount, not to exceed 49.99 
percent. As proposed, the rule will permit the licensee to request such 
approval for named foreign investors to acquire on a going-forward 
basis up to and including a non-controlling 49.99 percent interest--
even if the aggregate of such interests would exceed 100 percent.
    10. The 100 Percent Approval Option for Controlling Foreign 
Investors. The Second Report and Order adopts the proposed 100 percent 
approval option for foreign investors that seek to hold a controlling 
interest in the controlling U.S. parent of a common carrier or 
aeronautical radio licensee. The Commission clarifies that the rule, as 
adopted, will apply only to section 310(b)(4) petitions filed in 
connection with applications for an initial license or spectrum leasing 
arrangement as well as applications for consent to assign or transfer 
control of a license or spectrum leasing arrangement. Thus, where the 
controlling U.S. parent of the licensee or spectrum lessee named in the 
application is controlled (in the case of

[[Page 41316]]

an initial application), or would be controlled (in the case of a 
transfer/assignment application) by a foreign individual, entity or 
``group,'' Sec.  1.991(k) will allow the petitioner to request advance 
approval for the controlling foreign investor or group to increase its 
equity and/or voting interests at some future time, up to any amount, 
including 100 percent, to the extent the controlling foreign investor's 
interests at the time of filing the petition and application are less 
than 100 percent.
    11. The Aggregate Allowance for Unnamed Foreign Investors. Section 
1.994(a) of the new rules will provide that, in addition to the foreign 
ownership interests approved specifically in the licensee's section 
310(b)(4) ruling, the controlling U.S. parent named in the ruling (or a 
U.S.-organized successor-in-interest formed as part of a pro forma 
reorganization) may be 100 percent owned directly, and/or indirectly 
through one or more U.S.- or foreign-organized entities, on a going-
forward basis (i.e., after issuance of the ruling) by other foreign 
investors without prior Commission approval. The aggregate allowance 
for unnamed foreign investors will be subject to the requirement that 
the licensee seek and obtain Commission approval before any foreign 
individual, entity, or ``group'' not previously approved acquires, 
directly and/or indirectly, more than five percent of the U.S. parent's 
outstanding capital stock (equity) and/or voting stock (or more than 
ten percent, where the criteria for exclusion in Sec.  
1.991(i)(3)(ii)(A)-(C) are satisfied), or a controlling interest.
    12. Similarly, for common carrier licensees that have received a 
ruling under the Commission's section 310(b)(3) forbearance approach, 
Sec.  1.994(b) will provide that, in addition to the foreign ownership 
interests approved specifically in the licensee's ruling, the licensee 
may be 100 percent owned on a going forward basis by other foreign 
investors holding interests in the licensee through U.S.-organized 
entities that do not control the licensee without prior Commission 
approval. The aggregate allowance for unnamed investors will be subject 
to the requirement that the licensee seek and obtain Commission 
approval before any foreign individual, entity, or ``group'' not 
previously approved acquires directly, and/or indirectly through one or 
more U.S.-organized entities that do not control the licensee, more 
than five percent of the licensee's outstanding capital stock (equity) 
and/or voting stock. The five percent prior approval requirement will 
not apply to any foreign investor that acquires an equity and/or voting 
interest of ten percent or less, provided that the interest satisfies 
the criteria for exclusion in Sec.  1.991(i)(3)(ii)(A)-(C). Section 
1.994(a)(2) specifies that foreign ownership interests held directly in 
the licensee shall not be permitted to exceed an aggregate 20 percent 
of the licensee's equity and/or voting interests.
    13. The Commission also determined in the Second Report and Order 
that licensees may find it necessary or desirable to file a petition to 
exceed the foreign ownership limits in sections 310(b)(3) and/or (b)(4) 
in circumstances where no foreign investor holds or proposes to 
acquire, at the time the petition is filed, an interest that would 
require specific approval under the new rules--particularly where the 
licensee or U.S. parent is, or is owned in whole or in part, by a 
public company. Accordingly, the new rules will permit licensees to 
file petitions for declaratory ruling requesting approval to exceed the 
foreign ownership limits in section 310(b)(3) and/or section 310(b)(4) 
in circumstances where the licensee is not required to, and otherwise 
does not choose to, request specific approval for any named foreign 
investor. The standard terms and conditions in Sec.  1.994 of the new 
rules, including the 100 percent aggregate allowance, will apply to 
Commission grant of such petitions unless the Commission finds it 
necessary to specify otherwise in a particular ruling.
    14. The Commission emphasizes that, under the new rules, licensees 
that have received a foreign ownership ruling will still have an 
obligation to monitor and stay ahead of changes in foreign ownership to 
ensure that the licensee obtains Commission approval before such a 
change renders the licensee out of compliance with its ruling(s) or the 
Commission's rules. Thus, as is the case under the current regulatory 
framework, licensees, their controlling parent companies, and other 
entities in the licensee's vertical ownership chain may also need to 
place restrictions in their bylaws or other organizational documents to 
enable the licensee to ensure such continued compliance with the terms 
of its ruling. The Commission notes that stock ownership restrictions 
are a common means of ensuring compliance with the foreign ownership 
limitations in section 310(b) of the Act and other federal statutory 
provisions that restrict foreign ownership of U.S. companies and 
assets. (See Sec.  1.994(a), Note to paragraph (a)).
    15. Expanding Beyond Carrier-Specific Rulings. The Commission will 
issue foreign ownership rulings to cover all of the petitioning 
licensee's subsidiaries and affiliates, whether existing at the time 
the ruling is issued or formed or acquired subsequently, provided that 
foreign ownership of the licensee and its subsidiaries and affiliates 
that are relying on the licensee's ruling remains within the parameters 
of the ruling and the new rules. (See Sec.  1.994(b).)
    16. Section 1.990(d)(10) of the new rules will define 
``subsidiary'' as any entity in which the licensee holds, directly or 
indirectly, more than 50 percent of the total voting power of the 
outstanding voting stock of the entity, where no other individual or 
entity has de facto control. Section 1.990(d)(2) will define 
``affiliate'' as any entity that is under common control with the 
licensee, again defined by reference to the holder, directly or 
indirectly, of more than 50 percent of total voting power, where no 
other individual or entity has de facto control. Once a licensee has 
received a foreign ownership ruling, any ``subsidiary'' or 
``affiliate'' of the licensee, as so defined, will not be required to 
file a petition for declaratory ruling in connection with its own 
common carrier or aeronautical license applications, but can instead 
rely on the licensee's ruling, provided that the foreign ownership of 
the licensee and its subsidiary or affiliate complies with the terms 
and conditions of the licensee's foreign ownership ruling and the new 
rules. Compliance will require that the licensee and any subsidiary or 
affiliate obtain Commission approval before any previously unapproved 
foreign investor acquires an ownership interest in the licensee or 
subsidiary/affiliate in excess of the five percent (or ten percent) 
limits established in the new rules. The rules will require the 
subsidiary or affiliate to state in its application the name of the 
affiliated licensee that has received a ruling(s), provide a citation 
to the ruling(s), and attach to the application a certification, signed 
by the applicant and licensee (or by a controlling parent company), 
stating that the applicant and licensee are in compliance with the 
terms and conditions of the licensee's foreign ownership ruling(s) and 
the requirements of the rules.
    17. Section 1.990(c)(2) will require that all affiliated entities 
that contemporaneously hold, or are filing applications for, common 
carrier or aeronautical licenses or common carrier spectrum leasing 
arrangements, and that would have foreign ownership exceeding the 
limits in section 310(b)(3) and/or section 310(b)(4), be named as joint 
petitioners in a petition for declaratory ruling seeking approval for 
the affiliated entities' foreign

[[Page 41317]]

ownership. To the extent an affiliated entity does not 
contemporaneously hold, or is not filing an application for, a covered 
license or spectrum leasing arrangement, it need not be named as a 
joint petitioner. If the entity later files a covered application--
after issuance of a ruling to an affiliate--Sec.  1.994(b) will permit 
the entity to rely on the affiliate's ruling for purposes of filing its 
own applications.
    18. Introducing New Foreign-Organized Entities into the Vertical 
Ownership Chain. The Commission we will issue foreign ownership rulings 
to permit, without prior Commission approval, the insertion of new, 
controlling foreign-organized companies in the vertical ownership chain 
above the controlling U.S. parent of a common carrier or aeronautical 
radio station licensee, under section 310(b)(4), or above a U.S.-
organized entity that does not control the common carrier licensee, 
under section 310(b)(3) forbearance. (See Sec.  1.994(c).) 
Authorization under this rule will require any new foreign-organized 
companies to be under 100 percent common ownership and control with the 
controlling foreign parent of the licensee's controlling U.S. parent, 
under section 310(b)(4), or with the controlling foreign parent of the 
U.S.-organized entity that does not control the licensee, under section 
310(b)(3) forbearance, for which the licensee has received prior 
approval.
    19. The Commission will also issue foreign ownership rulings to 
permit, without prior Commission approval, the insertion of new, non-
controlling foreign-organized companies in the vertical ownership chain 
above the controlling U.S. parent of a common carrier or aeronautical 
radio station licensee, under section 310(b)(4), or above a U.S.-
organized entity that does not control the common carrier licensee, 
under section 310(b)(3) forbearance. (See Sec.  1.994(d).) 
Authorization under this rule will require any new, foreign-organized 
companies to be under 100 percent common ownership and control with a 
previously approved foreign investor. To the extent a licensee subject 
to section 310(b)(3) forbearance obtains specific approval in its 
ruling of a foreign investor's direct ownership interest in the 
licensee (subject to the 20 percent aggregate limit on direct foreign 
investment), the rules will also permit the licensee to insert, without 
prior Commission approval, a new foreign-organized entity in the 
vertical ownership chain of the approved foreign investor, provided 
that any new foreign-organized entity is under 100 percent common 
ownership and control with the approved foreign investor. (See Sec.  
1.994(d), Note to paragraph (d)(1).)
    20. The Second Report and Order finds it reasonable to allow these 
internal reorganizations to proceed without requiring the licensee to 
return to the Commission for specific approval to insert the new, 
foreign-organized company in the previously approved vertical ownership 
chain. The new, foreign-organized company will remain under 100 percent 
common ownership and control with the previously approved foreign 
investor. Under other circumstances, the Commission has acknowledged 
that non-substantial changes in corporate organization merit 
streamlined treatment. The Commission cautions, however, that while it 
has previously streamlined or forborne in many situations from 
enforcement of the separate requirement under section 310(d) of the Act 
for prior Commission approval of such internal reorganizations that do 
not involve ``a substantial change in ownership or control,'' the 
Commission's action in the Second Report and Order extends only to its 
requirements in enforcing the foreign ownership restrictions of section 
310(b) and does not eliminate any continuing section 310(d) approval 
requirements.
    21. The new rules will require that licensees file a letter to the 
attention of the Chief, International Bureau, within 30 days after 
introduction of a new, foreign-organized entity in the vertical 
ownership chain above the controlling U.S. parent or licensee 
certifying that the new, foreign-organized entity complies with the 100 
percent common ownership and control requirement and referencing the 
underlying ruling by the International Bureau Filing System (IBFS) File 
No. and FCC Record citation, if available. (See Sec. Sec.  1.994(c)(2), 
(d)(2).) The Commission believes that it is important to maintain 
complete and current records of approved foreign ownership, including 
the insertion of new, foreign-organized entities in the approved 
vertical ownership chain above the controlling U.S. parent or licensee. 
Section 1.994 of the rules will not require such separate notification 
if the ownership change is instead the subject of a pro forma 
application or pro forma notification already filed with the Commission 
via the Universal Licensing System (ULS) (for wireless licensees) or 
IBFS (for satellite radio licensees).
    22. The Commission also stated that applications for consent to a 
spectrum leasing arrangement or for consent to a transfer of control or 
assignment of licenses or spectrum leasing arrangements filed by a 
licensee's subsidiaries or affiliates will not be eligible for the 
Commission's immediate approval or immediate processing procedures in 
Sec. Sec.  1.9020(e), 1.9030(e), 1.9035(e) and 1.948(j). The Commission 
noted that such procedures do not provide an opportunity for Commission 
or Executive Branch agency review prior to grant of an eligible 
application. The applications are granted upon filing and, thus, there 
is no public notice of the application or opportunity for the filing of 
comments or oppositions.
    23. Service- and Geographic-Specific Rulings. The Second Report and 
Order eliminates the current practice of issuing foreign ownership 
rulings on a service-specific and geographic-specific basis. This 
change in practice will apply to petitions filed under the Commission's 
section 310(b)(3) forbearance approach and under section 310(b)(4). 
Under the current regulatory framework, foreign ownership rulings 
typically cover only the particular wireless service(s) referenced in 
the petition for declaratory ruling, and the scope of the ruling may 
also be limited to the geographic service area of the licenses or 
spectrum leasing arrangements referenced in the petition. As a result, 
although the ruling authorizes the foreign ownership of the licensee, 
the licensee is required to file additional petitions for declaratory 
ruling to ``extend'' its existing ruling to cover licenses or spectrum 
leasing arrangements in different services and/or in different 
geographic service areas. Industry commenters supported eliminating 
service- and geographic-specific rulings, while the Department of 
Justice (DOJ) and the Department of Homeland Security (DHS) supported 
continuing the practice.
    24. In determining to eliminate the practice, the Commission finds 
that it and the relevant Executive Branch agencies will have sufficient 
opportunities during the licensing process to consider whether a 
licensee's proposed expansion of service or coverage area raises 
concerns with respect to national security, law enforcement, foreign 
policy and trade policy due to the licensee's foreign ownership. The 
agencies will have the opportunity to raise any concerns with respect 
to a licensee's acquisition of new licenses during the section 308 
licensing process (see 47 U.S.C. 308) or, in the case of the 
acquisition of licenses by assignment or transfer of control, during 
the section 310(d) proceeding (see 47 U.S.C. 310(d)).
    25. The Commission also stated that it will maintain the current 
requirement that applicants with foreign ownership exceeding the 
section 310(b) limits will qualify for the immediate approval and

[[Page 41318]]

immediate processing procedures in Sec. Sec.  1.9020(e), 1.9030(e), 
1.9035(e), and 1.948(j) only where the applicant is able to certify in 
its application that it has already received a service-specific and 
geographic-specific ruling that covers the spectrum leasing 
arrangements or licenses that are the subject of the application and 
that there has been no change in its foreign ownership in the meantime. 
Thus, unless an applicant has already received a foreign ownership 
ruling for the same wireless service in the same geographic service 
area specified in its application for consent to a spectrum leasing 
arrangement, or for consent to a transfer or assignment of licenses or 
spectrum leasing arrangements (e.g., the application involves a request 
only for additional spectrum in the same service(s) and the same 
area(s)), the application will not be eligible for immediate approval 
or processing. The Commission makes no change to its rules in this 
respect because, as discussed above, such procedures do not provide an 
opportunity for Commission or Executive Branch review prior to grant of 
an eligible application. These applications are granted upon filing 
and, thus, there is no public notice of the application or opportunity 
for the filing of comments or oppositions.

Contents of Petitions for Declaratory Ruling

    26. Information on Disclosable Interest Holders and Foreign 
Investor Interests. The Second Report and Order adopts the ten percent 
ownership disclosure threshold proposed in the NPRM. (See Sec.  
1.991(e), (f).) Specifically, all section 310(b)(4) petitions for 
declaratory ruling must contain the name, address, citizenship, and 
principal business(es) of any individual or entity, regardless of 
citizenship, that directly or indirectly holds or would hold, after 
effectuation of any planned ownership changes described in the 
petition, at least ten percent of the equity or voting interests in the 
controlling U.S. parent of a common carrier or aeronautical radio 
station licensee or a controlling interest. Petitions for declaratory 
ruling filed by common carrier licensees subject to section 310(b)(3) 
forbearance must contain the same information for any individual or 
entity, regardless of citizenship, that directly or indirectly holds or 
would hold, after effectuation of any planned ownership changes 
described in the petition, at least ten percent of the equity or voting 
interests in the common carrier licensee. Petitioners will also be 
required to provide the percentage of equity and voting interest held 
or to be held by each such ``disclosable interest holder'' (to the 
nearest one percent). The ten percent ownership disclosure requirement 
is consistent with the ownership disclosure requirements that currently 
apply to most common carrier applicants under the Commission's 
licensing rules. The Commission also finds that submission of such 
ownership information is necessary to verify the principal stakeholders 
and ultimate control of the U.S. parent company of a common carrier or 
aeronautical licensee, in the case of section 310(b)(4) review, and in 
a common carrier licensee, in the case of petitions filed under the 
Commission's section 310(b)(3) forbearance approach, and that requiring 
its submission would impose a minimal burden on petitioners.
    27. The Commission will also require petitions to include a 
percentage estimate of the licensee's and/or U.S. parent's aggregate 
direct and indirect foreign equity and voting interests, a general 
description of the methods used to determine the percentages, and a 
statement addressing the circumstances that prompted the filing of the 
petition for declaratory ruling and demonstrating that the public 
interest would be served by grant of the petition. (See Sec.  
1.991(h)(1).) The Commission will require petitioners to describe the 
ownership and control structure of the U.S. parent, under section 
310(b)(4), and of the common carrier licensee, under its section 
310(b)(3) forbearance approach, including an ownership diagram and 
identification of the real party-in-interest disclosed in any companion 
licensing or spectrum leasing applications. (See Sec.  1.991(h)(2).) 
The Commission finds that requiring an ownership diagram will impose a 
minor burden on petitioners which will be more than offset by the 
significant benefits that will accrue to the Commission in processing 
petitions as expeditiously as possible.
    28. The Commission also adopts the proposal in the NPRM that 
section 310(b)(4) petitions include ownership information for each 
foreign individual or entity for which the petition seeks specific 
approval: specifically, their names, citizenship, principal businesses, 
and the percentage of equity and/or voting interest held or to be held 
by the foreign investor (to the nearest one percent). This same 
requirement will apply to petitions for declaratory ruling filed by 
common carrier licensees subject to section 310(b)(3) forbearance. (See 
Sec.  1.991(j).) Where the named foreign investor is a corporation or 
other business entity, the petition shall identify each of the named 
foreign investor's direct or indirect ten percent interest holders, 
specifying each by name, citizenship, principal businesses, and 
percentage of equity and/or voting interest held in the named foreign 
investor. This ownership information is necessary for the Commission to 
verify the identity and ultimate control of the foreign investor for 
which the petitioner seeks specific approval.
    29. Methodology for Calculating Disclosable Interests and Foreign 
Investor Interests. The NPRM requested comment on whether the 
insulation standard used to calculate limited partnership interests in 
U.S. parents of common carrier and aeronautical licensees ``is 
sufficient to support a presumption that an insulated limited partner 
will not be materially involved in managing partnership affairs.'' It 
also sought comment on whether the same principles should govern its 
consideration of limited liability companies (LLCs) and limited 
liability partnerships (LLPs). No comments were submitted on either of 
these issues, and, in the absence of any comments, the Commission 
declined to revise its current insulation standard, which applies to 
limited partnership interests held in a common carrier or aeronautical 
licensee or its U.S. parent, or in any intermediate entity in their 
vertical chains of ownership.
    30. The Commission clarifies in the Second Report and Order, 
however, the insulation, or ``active involvement,'' standard. The 
Commission will treat an interest as insulated only where the 
governance documents of the limited partnership prohibit the limited 
partner from becoming actively involved in the management or operation 
of the partnership and limit the limited partner's voting or consent 
rights to the investor protections set forth in Sec.  1.993 of the new 
rules. Notwithstanding the inclusion of such limitations, a petitioner 
shall not treat a limited partner as insulated if the U.S. parent or 
licensee has actual knowledge of material involvement by the limited 
partner. The Commission will maintain the current policy that treats an 
insulated limited partner as having a voting interest in the limited 
partnership that is equal to its equity interest.
    31. The Commission will apply to LLCs and LLPs the same principles 
that it is adopting for the calculation of voting interests in limited 
partnerships. Thus, for example, where a foreign investor holds an 
interest indirectly in the U.S. parent of a common carrier or 
aeronautical licensee through an intervening LLC, and the investor is

[[Page 41319]]

effectively insulated from active involvement in the affairs of the 
LLC, the U.S. parent may apply the multiplier in calculating the 
foreign investor's voting interest as well as its equity interest in 
the U.S. parent. An ownership interest in an LLC or LLP will be treated 
as insulated where the governance documents of the LLC or LLP prohibit 
the interest holder from becoming actively involved in the management 
or operation of the LLC or LLP and limit the holder's voting or consent 
rights to the investor protections in Sec.  1.993 of the new rules. 
Notwithstanding the inclusion of such limitations, a petitioner shall 
not treat the interest holder as insulated if the U.S. parent or 
licensee has actual knowledge of material involvement by the interest 
holder. Consistent with the media ownership rules, the Commission finds 
no basis in the record of this proceeding to differentiate between 
these alternative forms of business association for purposes of 
calculating voting interests held in common carrier and aeronautical 
licensees and their U.S. parent companies.
    32. The Commission further finds it reasonable to rely on a 
petitioner's certification that the petitioner has calculated the 
ownership interests disclosed in its petition based upon its review of 
the Commission's rules and that the interests disclosed satisfy each of 
the pertinent standards and criteria required by the rules. The 
Commission relies on certifications of compliance with its rules in 
numerous licensing and related contexts, including compliance with the 
foreign ownership limitations in section 310(b), reporting of 
disclosable interest holders under common carrier licensing rules, and 
disclosure of attributable interests under the media ownership rules. 
The Commission therefore includes in Sec.  1.991 of the new rules a 
provision allowing petitioners to certify to compliance with the 
Commission's ownership disclosure rules in their section 310(b) 
petitions for declaratory ruling.
    33. Other Content Requirements. As discussed above, Sec.  
1.990(c)(2) will require applicants, licensees, and spectrum lessees to 
file a joint petition for declaratory ruling where the entities are 
under common control and contemporaneously hold, or are 
contemporaneously filing applications for, common carrier or 
aeronautical licenses or spectrum leasing arrangements. This rule also 
provides that, where the joint petitioners have different disclosable 
interest holders and/or request specific approval for different foreign 
investors, such information should be set out separately for each joint 
petitioner. In addition, Sec.  1.991(d) will require all petitioners to 
state whether they request a ruling under the Commission's section 
310(b)(3) forbearance policy and/or under section 310(b)(4). The 
Commission also modified Sec.  1.991, as proposed in the NPRM, to 
eliminate the requirement that petitions list all of a petitioning 
licensee's or lessee's call signs and spectrum leasing file numbers.

Filing and Processing of Petitions for Declaratory Rulings

    34. The Second Report and Order maintains the Commission's current 
``streamlined'' procedures for processing section 310(b)(4) petitions 
and the existing categories of section 310(b)(4) petitions subject to 
streamlined processing. The Commission will also apply the same 
procedures to the processing of petitions for declaratory ruling under 
its section 310(b)(3) forbearance approach. Thus, petitions for 
declaratory ruling that also involve an assignment of license or a 
transfer of control or any initial licensing applications, which 
involve service-specific rules and other portions of Title III of the 
Act, will not be eligible for ``streamlined'' processing. In addition, 
Commission staff retains the discretion to deem a petition ineligible 
for streamlined processing either because it raises market power 
concerns or because an Executive Branch agency raises concerns with 
respect to issues within its expertise. Petitions that are eligible for 
streamlined processing have a 14-day public notice period and, unless a 
formal opposition is filed or the petition is removed from streamlined 
processing at the discretion of Commission staff, they are granted 
automatically, effective on the 15th day after public notice. Petitions 
that are not eligible for streamlined processing have a 28-day public 
notice period. Non-streamlined petitions and petitions that are removed 
from streamlined processing within the 14-day public notice period are 
granted by public notice or order.
    35. The Second Report and Order additionally provides guidance as 
to a licensee's obligation to obtain a section 310(b)(3) ruling when it 
has already received a section 310(b)(4) ruling and vice versa. The 
Commission stated that, where a common carrier licensee obtains a 
section 310(b)(4) ruling to allow foreign ownership of its U.S. parent 
to exceed 25 percent, but then seeks to accept foreign investment that 
would be held in the licensee through U.S.-organized entities that do 
not control the licensee, the licensee must file a petition for 
declaratory ruling under its section 310(b)(3) forbearance approach 
before such additional foreign interests, aggregated with any foreign 
interests held directly in the licensee, exceed 20 percent of the 
licensee's equity and/or voting interests. Conversely, where the 
licensee first obtains a foreign ownership ruling under the 
Commission's section 310(b)(3) forbearance approach and then, for 
example, a foreign-organized company seeks to acquire all of the 
capital stock of the licensee's controlling U.S. parent, the licensee 
must file (in conjunction with a section 310(d) transfer of control 
application) a petition to obtain prior approval for its U.S. parent's 
foreign ownership under section 310(b)(4). (See also Sec.  1.990(a), 
Example 3.)

Continued Compliance With Section 310(b) Declaratory Rulings

    36. The Commission will not require periodic certification of 
compliance with section 310(b) declaratory rulings, but will require 
certification whenever a licensee files an application with the 
Commission for a new license, a transfer of control, or an assignment 
of license that does not also require the filing of a section 310(b) 
petition for declaratory ruling. The Commission will also require 
certification in renewal applications. Such a requirement is sufficient 
to remind licensees of their obligations, ensure accountability, and 
inform the Commission and licensees of any potential divergences from 
their rulings.
    37. In addition, the Commission will give deference to requests 
from DOJ and DHS that the Commission require more frequent 
certifications as a condition on the granting of a license on a case-
by-case basis, where appropriate to address law enforcement or national 
security concerns. The Commission will make changes to the relevant FCC 
Forms (Forms 312, 601, 603, and 608) to the extent necessary so that 
this aspect of the applicant's certification to the information in the 
application is clear. The Commission also reminded licensees that they 
have a continuing obligation to monitor their foreign ownership and 
ensure that they remain compliant with the requirements of the Act, the 
rules the Commission adopted in the Second Report and Order, and a 
licensee's particular foreign ownership ruling.

Transition Issues

    38. In the Second Report and Order, the Commission did not adopt a 
rule that changes the terms and conditions of

[[Page 41320]]

existing foreign ownership rulings issued prior to the effective date 
of the rules adopted in this proceeding. The Commission stated that, 
given the scope of the changes being made to its foreign ownership 
rules and policies, it is important to afford the Commission and the 
relevant Executive Branch agencies the opportunity to evaluate the 
potential effect of applying the new rules in each case where a 
licensee has already received a ruling. Accordingly, the Commission 
will permit licensees that have received a ruling prior to the 
effective date of the new rules to file a new petition for declaratory 
ruling under the new rules, but the Commission will not require them to 
do so. The Commission will continue to apply its existing foreign 
ownership policies and procedures to such licensees within the 
parameters of their existing rulings. The Commission will also afford 
them flexibility in the manner in which they request a new ruling from 
the Commission, should they decide to do so. For example, a licensee 
could request a new ruling as part of an application for a new license 
or spectrum leasing arrangement, or an application for consent to a 
transfer of control or assignment of license. Alternatively, the 
licensee could file a stand-alone petition for declaratory ruling at 
any time. The Commission believes this flexibility, and the modified 
content requirements in the new rules, will minimize the costs and 
burdens associated with any new filing.

Other Issues

    39. Several commenters asked the Commission to amend FCC Form 312 
to relieve non-common carrier space station applicants from the 
requirement to respond to the section 310(b)-related questions in FCC 
Form 312, because section 310(b) does not apply to non-common carrier 
radio station licenses. The Commission does not address this issue in 
the Second Report and Order because the rules applicable to non-common 
carrier space station applicants are outside the scope of this 
proceeding.

Paperwork Reduction Act of 1995 Analysis

    40. The Second Report and Order does not contain new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, Public Law 104-13. The information collection requirements 
for the section 310(b) foreign ownership approval process are contained 
in OMB Control No. 3060-1163.\1\ In addition, therefore, this document 
does not contain any new or modified information collection burden for 
small business concerns with fewer than 25 employees, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4).
---------------------------------------------------------------------------

    \1\ The Office of Management and Budget preapproved the 
information collection requirements at the NPRM stage of this 
proceeding, and the information collection requirements are adopted 
with nonsubstantial modification in this Second Report and Order.
---------------------------------------------------------------------------

Final Regulatory Flexibility Certification

    41. The Regulatory Flexibility Act of 1980, as amended (RFA),\2\ 
requires that a final regulatory flexibility analysis be prepared for 
notice-and-comment rule making proceedings, unless the agency certifies 
that ``the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities.'' \3\ The RFA 
generally defines the term ``small entity'' as having the same meaning 
as the terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' \4\ In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act.\5\ A ``small business concern'' is one 
which: (1) Is independently owned and operated; (2) is not dominant in 
its field of operation; and (3) satisfies any additional criteria 
established by the Small Business Administration (SBA).\6\
---------------------------------------------------------------------------

    \2\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), Public Law 104-121, Title II, 110 Stat. 857 (1996).
    \3\ 5 U.S.C. 605(b).
    \4\ 5 U.S.C. 601(6).
    \5\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in the Small Business Act, 15 U.S.C. 
632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a 
small business applies ``unless an agency, after consultation with 
the Office of Advocacy of the Small Business Administration and 
after opportunity for public comment, establishes one or more 
definitions of such term which are appropriate to the activities of 
the agency and publishes such definitions(s) in the Federal 
Register.''
    \6\ 15 U.S.C. 632.
---------------------------------------------------------------------------

    42. The Second Report and Order adopts rules that will apply to 
foreign ownership of common carrier and certain aeronautical radio 
station applicants, licensees and spectrum lessees (hereinafter 
referred to collectively as ``licensees''). These rules will simplify 
the policies and procedures the Commission currently applies in 
reviewing foreign ownership of these licensees' controlling U.S. parent 
companies under the discretionary provisions in section 310(b)(4) of 
the Act, 47 U.S.C. 310(b)(4), while continuing to ensure that we have 
the information we need to carry out our statutory duties. The new 
rules will simplify to the same extent the policies and procedures that 
currently apply to Commission review of foreign ownership in common 
carrier licensees pursuant to the section 310(b)(3) forbearance policy 
that the Commission adopted in the First Report and Order in this 
proceeding. The rules are designed to reduce to the extent possible the 
regulatory costs and burdens that our current foreign ownership 
policies and procedures impose on common carrier and aeronautical 
licensees, including those that are small entities; provide greater 
transparency and more predictability with respect to the Commission's 
filing requirements and review process; and facilitate investment in 
U.S carriers from new sources of capital, while continuing to protect 
important interests related to national security, law enforcement, 
foreign policy, and trade policy.
    43. The Commission estimates that the rule changes will reduce the 
number of section 310(b) petitions for declaratory ruling filed with 
the Commission annually in the range of 40 to 70 percent as compared to 
the current regulatory framework. This estimate is based on two reviews 
done by International Bureau staff. In the first review, based on the 
21 section 310(b)(4) petitions filed with the Commission during a 
randomly-selected period (September 1, 2007 through August 31, 2008), 
staff concluded that adoption of the proposals and other options 
discussed in the NPRM would result in a more than 70 percent reduction 
in the number of petitions for declaratory ruling filed with the 
Commission annually, as compared to the current regulatory framework. 
In the second review, based on the 13 section 310(b)(4) petitions filed 
between January 1, 2011 and October 1, 2012, staff concluded that the 
rules adopted in the Second Report and Order would result in at least a 
40 percent reduction. The Second Report and Order notes that a large 
proportion of the filings during the first review period involved 
requests by licensees with existing foreign ownership rulings for 
approval, under section 310(b)(4), to acquire licenses in new wireless 
services being auctioned. In the second review period, these auctions 
had been completed and no auction-related petitions were filed. The 
lack of auction-related filings by licensees with existing foreign 
ownership rulings during the second review period accounts in large 
part for the difference between the higher 70 percent reduction figure 
and the 40

[[Page 41321]]

percent reduction figure for the two review periods. Significantly, 
industry commenters in this proceeding broadly supported elimination of 
the requirement that licensees with existing rulings return to the 
Commission for a new ruling when they apply for a license in a new 
service or geographic service area.
    44. The Commission also anticipates a significant reduction in the 
time and expense associated with filing petitions. For example, 
licensees filing petitions for declaratory ruling under our section 
310(b)(3) forbearance approach or under section 310(b)(4) will no 
longer be required to demonstrate the percentage of their equity and 
voting interests that are, or may be, held by investors from non-WTO 
Member countries. The United States Trade Representative (USTR) 
commented that this requirement imposes a ``non-trivial burden on 
applicants by requiring them to demonstrate whether foreign investors 
are from a WTO or non-WTO Member.'' USTR noted that the requirement 
``also imposes a not insignificant burden on FCC staff to evaluate the 
information.'' As another example, under the new rules licensees filing 
petitions will no longer be required to include requests for specific 
approval of named foreign investors unless a foreign investor would 
hold, in the licensee (in the case of a petition filed under section 
310(b)(3) forbearance) or in the U.S. parent (in the case of a petition 
filed under section 310(b)(4)), an interest exceeding five percent, 
subject to an exception for certain ten percent interests. Industry 
commenters generally agree that, under current requirements, companies 
face significant difficulties and costs in trying to ascertain the 
citizenship and principal places of business of their investors, which 
often hold their interests indirectly through multiple investment 
vehicles and holding companies. USTelecom, for example, describes the 
Commission's current requirement as a ``tortuous process of identifying 
each ultimate shareholder.''
    45. Although the commenters in this proceeding did not quantify the 
extent to which current costs and burdens would be reduced by the 
proposals and other options raised in the NPRM, the qualitative 
descriptions they provided in the record, and the sheer volume of 
information that petitioners have had to produce in particular 
proceedings (and which the Commission has had to analyze in its 
decisions), leave no doubt that the current requirements impose 
significant costs and burdens that the new rules will reduce.
    46. In summary, the Commission believes that the new rules will 
reduce costs and burdens currently imposed on licensees, including 
those licensees that are small entities, and accelerate the foreign 
ownership review process, while continuing to ensure that the 
Commission has the information it needs to carry out its statutory 
duties. Therefore, the Commission certifies that the rules adopted in 
the Second Report and Order will not have a significant economic impact 
on a substantial number of small entities. The Commission will send a 
copy of this Order, including a copy of this Final Regulatory 
Flexibility Certification (FRFC), to the Chief Counsel for Advocacy of 
the SBA.\7\ This final certification will also be published in the 
Federal Register.\8\
---------------------------------------------------------------------------

    \7\ 5 U.S.C. 605(b).
    \8\ Id.
---------------------------------------------------------------------------

Report to Congress

    47. The Commission will send a copy of the Second Report and Order, 
including this FRFC, in a report to be sent to Congress and the 
Government Accountability Office pursuant to the Congressional review 
Act.\9\ In addition, the Commission will send a copy of the Second 
Report and Order, including a copy of this FRFC, to the Chief Counsel 
for Advocacy of the SBA. A copy of the Second Report and Order and FRFC 
(or summaries thereof) will also be published in the Federal 
Register.\10\
---------------------------------------------------------------------------

    \9\ See 5 U.S.C. 801(a)(1)(A).
    \10\ See 5 U.S.C. 604(b).
---------------------------------------------------------------------------

Ordering Clauses

    48. Accordingly, it is ordered, pursuant to the authority contained 
in sections 1, 2, 4(i), 4(j), 10, 303(r), 309, 310, and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 
154(j), 160, 303(r), 309, 310 and 403, that this Second Report and 
Order is adopted and parts 1 and 25 of the Commission rules are amended 
as set forth in this Second Report and Order. The rule revisions will 
take effect 30 days after a summary of this Second Report and Order is 
published in the Federal Register.
    49. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center shall send a 
copy of this Second Report and Order, including the Final Regulatory 
Flexibility Certification, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with section 603(a) of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
    50. It is further ordered that this proceeding, IB Docket No. 11-
133, is hereby terminated.

List of Subjects in 47 CFR Parts 1 and 25

    Communications common carriers, Radio, Reporting and recordkeeping 
requirements, Satellites, Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1 and 25 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 is revised to read as follows:

    Authority:  15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 225, 227, 303(r), 309 and 310, Cable Landing License Act 
of 1921, 47 U.S.C. 35-39, and the Middle Class Tax Relief and Job 
Creation Act of 2012, Pub. L. 112-96.


0
2. Section 1.907 is amended by adding definitions for Spectrum leasing 
arrangement and Spectrum lessee to read as follows:


Sec.  1.907  Definitions.

* * * * *
    Spectrum leasing arrangement. An arrangement between a licensed 
entity and a third-party entity in which the licensee leases certain of 
its spectrum usage rights to a spectrum lessee, as set forth in subpart 
X of this part (47 CFR 1.9001 et seq.). Spectrum leasing arrangement is 
defined in Sec.  1.9003.
    Spectrum lessee. Any third party entity that leases, pursuant to 
the spectrum leasing rules set forth in subpart X of this part (47 CFR 
1.9001 et seq.), certain spectrum usage rights held by a licensee. 
Spectrum lessee is defined in Sec.  1.9003.
* * * * *

0
3. Subpart F is amended by adding Sec. Sec.  1.990 through 1.994 and an 
undesignated center heading to read as follows:

Subpart F--Wireless Radio Services Applications and Proceedings

* * * * *
Sec.

Foreign Ownership of U.S.-Organized Entities That Control Common 
Carrier, Aeronautical en Route, and Aeronautical Fixed Radio Station 
Licensees

1.990 Filing requirements under the Communications Act of 1934.

[[Page 41322]]

1.991 Contents of petitions for declaratory ruling under the 
Communications Act of 1934.
1.992 How to calculate indirect equity and voting interests.
1.993 Insulation criteria for interests in limited partnerships, 
limited liability partnerships, and limited liability companies.
1.994 Routine terms and conditions.

Foreign Ownership of U.S.-Organized Entities That Control Common 
Carrier, Aeronautical en Route, and Aeronautical Fixed Radio Station 
Licensees


Sec.  1.990  Citizenship and filing requirements under the 
Communications Act of 1934.

    These rules establish the requirements and conditions for obtaining 
the Commission's prior approval of foreign ownership in common carrier, 
aeronautical en route, and aeronautical fixed radio station licensees 
and common carrier spectrum lessees that would exceed the 25 percent 
benchmark in section 310(b)(4) of the Communications Act of 1934, as 
amended (47 U.S.C. 310(b)(4)). These rules also establish the 
requirements and conditions for obtaining the Commission's prior 
approval of foreign ownership in common carrier (but not aeronautical 
en route or aeronautical fixed) radio station licensees and spectrum 
lessees that would exceed the 20 percent limit in section 310(b)(3) of 
the Act (47 U.S.C. 310(b)(3)).
    (a)(1) A common carrier, aeronautical en route or aeronautical 
fixed radio station licensee or common carrier spectrum lessee shall 
file a petition for declaratory ruling to obtain Commission approval 
under section 310(b)(4) of the Act, and obtain such approval, before 
the aggregate foreign ownership of any controlling, U.S.-organized 
parent company exceeds, directly and/or indirectly, 25 percent of the 
U.S. parent's equity interests and/or 25 percent of its voting 
interests. An applicant for a common carrier, aeronautical en route or 
aeronautical fixed radio station license or common carrier spectrum 
leasing arrangement shall file the petition for declaratory ruling 
required by this paragraph at the same time that it files its 
application.
    Note 1 to paragraph (a)(1): Paragraph (a)(1) of this section 
implements the Commission's foreign ownership policies under section 
310(b)(4) of the Act (47 U.S.C. 310(b)(4)), for common carrier, 
aeronautical en route, and aeronautical fixed radio station licensees 
and common carrier spectrum lessees. It applies to foreign equity and/
or voting interests that are held, or would be held, directly and/or 
indirectly in a U.S.-organized entity that itself directly or 
indirectly controls a common carrier, aeronautical en route, or 
aeronautical fixed radio station licensee or common carrier spectrum 
lessee. A foreign individual or entity that seeks to hold a controlling 
interest in such a licensee or spectrum lessee must hold its 
controlling interest indirectly, in a U.S.-organized entity that itself 
directly or indirectly controls the licensee or spectrum lessee. Such 
controlling interests are subject to section 310(b)(4) and the 
requirements of paragraph (a)(1) of this section. The Commission 
assesses foreign ownership interests subject to section 310(b)(4) 
separately from foreign ownership interests subject to section 
310(b)(3).
    (2) A common carrier radio station licensee or spectrum lessee 
shall file a petition for declaratory ruling to obtain approval under 
the Commission's section 310(b)(3) forbearance approach, and obtain 
such approval, before aggregate foreign ownership, held through one or 
more intervening U.S.-organized entities that hold non-controlling 
equity and/or voting interests in the licensee, along with any foreign 
interests held directly in the licensee or spectrum lessee, exceeds 20 
percent of its equity interests and/or 20 percent of its voting 
interests. An applicant for a common carrier radio station license or 
spectrum leasing arrangement shall file the petition for declaratory 
ruling required by this paragraph at the same time that it files its 
application. Foreign interests held directly in a licensee or spectrum 
lessee, or other than through U.S.-organized entities that hold non-
controlling equity and/or voting interests in the licensee or spectrum 
lessee, shall not be permitted to exceed 20 percent.

    Note to paragraph (a)(2): Paragraph (a)(2) of this section 
implements the Commission's section 310(b)(3) forbearance approach 
adopted in the First Report and Order in IB Docket No. 11-133, FCC 
12-93 (released August 17, 2012), 77 FR 50628 (Aug. 22, 2012). The 
section 310(b)(3) forbearance approach applies only to foreign 
equity and voting interests that are held, or would be held, in a 
common carrier licensee or spectrum lessee through one or more 
intervening U.S.-organized entities that do not control the licensee 
or spectrum lessee. Foreign equity and/or voting interests that are 
held, or would be held, directly in a licensee or spectrum lessee, 
or indirectly other than through an intervening U.S.-organized 
entity, are not subject to the Commission's section 310(b)(3) 
forbearance approach and shall not be permitted to exceed the 20 
percent limit in section 310(b)(3) of the Act (47 U.S.C. 310(b)(3)).

    Example 1. U.S.-organized Corporation A is preparing an application 
to acquire a common carrier radio license by assignment from another 
licensee. U.S.-organized Corporation A is wholly owned and controlled 
by U.S.-organized Corporation B. U.S.-organized Corporation B is 51 
percent owned and controlled by U.S.-organized Corporation C, which is, 
in turn, wholly owned and controlled by foreign-organized Corporation 
D. The remaining non-controlling 49 percent equity and voting interests 
in U.S.-organized Corporation B are held by U.S.-organized Corporation 
X, which is, in turn, wholly owned and controlled by U.S. citizens. 
Paragraph (a)(1) of this section requires that U.S.-organized 
Corporation A file a petition for declaratory ruling to obtain 
Commission approval of the 51 percent foreign ownership of its 
controlling, U.S.-organized parent, Corporation B, by foreign-organized 
Corporation D, which exceeds the 25 percent benchmark in section 
310(b)(4) of the Act for both equity interests and voting interests. 
Corporation A is also required to identify and request specific 
approval in its petition for any foreign individual or entity, or 
``group,'' as defined in paragraph (d) of this section, that holds 
directly and/or indirectly more than five percent of Corporation B's 
total outstanding capital stock (equity) and/or voting stock, or a 
controlling interest in Corporation B, unless the foreign investment is 
exempt under Sec.  1.991(i)(3).
    Example 2. U.S.-organized Corporation A is preparing an application 
to acquire a common carrier radio license by assignment from another 
licensee. U.S.-organized Corporation A is 51 percent owned and 
controlled by U.S.-organized Corporation B, which is, in turn, wholly 
owned and controlled by U.S. citizens. The remaining non-controlling 49 
percent equity and voting interests in U.S.-organized Corporation A are 
held by U.S.-organized Corporation X, which is, in turn, wholly owned 
and controlled by foreign-organized Corporation Y. Paragraph (a)(2) of 
this section requires that U.S.-organized Corporation A file a petition 
for declaratory ruling to obtain Commission approval of the non-
controlling 49 percent foreign ownership of U.S.-organized Corporation 
A by foreign-organized Corporation Y through U.S.-organized Corporation 
X, which exceeds the 20 percent limit in section 310(b)(3) of the Act 
for both equity interests and voting interests. U.S.-organized 
Corporation A is also required to identify and request specific 
approval in its petition for any

[[Page 41323]]

foreign individual or entity, or ``group,'' as defined in paragraph (d) 
of this section, that holds an equity and/or voting interest in 
foreign-organized Corporation Y that, when multiplied by 49 percent, 
would exceed five percent of U.S.-organized Corporation A's equity and/
or voting interests, unless the foreign investment is exempt under 
Sec.  1.991(i)(3).
    Example 3. U.S.-organized Corporation A is preparing an application 
to acquire a common carrier radio license by assignment from another 
licensee. U.S.-organized Corporation A is 51 percent owned and 
controlled by U.S.-organized Corporation B, which is, in turn, wholly 
owned and controlled by foreign-organized Corporation C. The remaining 
non-controlling 49 percent equity and voting interests in U.S.-
organized Corporation A are held by U.S.-organized Corporation X, which 
is, in turn, wholly owned and controlled by foreign-organized 
Corporation Y. Paragraphs (a)(1) and (2) of this section require that 
U.S.-organized Corporation A file a petition for declaratory ruling to 
obtain Commission approval of foreign-organized Corporation C's 100 
percent ownership interest in U.S.-organized parent, Corporation B, and 
of foreign-organized Corporation Y's non-controlling, 49 percent 
foreign ownership interest in U.S.-organized Corporation A through U.S-
organized Corporation X, which exceed the 25 percent benchmark and 20 
percent limit in sections 310(b)(4) and 310(b)(3) of the Act, 
respectively, for both equity interests and voting interests. U.S-
organized Corporation A's petition also must identify and request 
specific approval for ownership interests held by any foreign 
individual, entity, or ``group,'' as defined in paragraph (d) of this 
section, to the extent required by Sec.  1.991(i).
    (b) The petition for declaratory ruling required by paragraph (a) 
of this section shall be filed electronically on the Internet through 
the International Bureau Filing System (IBFS). For information on 
filing your petition through IBFS, see part 1, subpart Y and the IBFS 
homepage at https://www.fcc.gov/ib.
    (c)(1) Each applicant, licensee, or spectrum lessee filing a 
petition for declaratory ruling required by paragraph (a) of this 
section shall certify to the information contained in the petition in 
accordance with the provisions of Sec.  1.16 and the requirements of 
this paragraph. The certification shall include a statement that the 
applicant, licensee and/or spectrum lessee has calculated the ownership 
interests disclosed in its petition based upon its review of the 
Commission's rules and that the interests disclosed satisfy each of the 
pertinent standards and criteria set forth in the rules.
    (2) Multiple applicants and/or licensees shall file jointly the 
petition for declaratory ruling required by paragraph (a) of this 
section where the entities are under common control and 
contemporaneously hold, or are contemporaneously filing applications 
for, common carrier licenses, common carrier spectrum leasing 
arrangements, or aeronautical en route or aeronautical fixed radio 
station licenses. Where joint petitioners have different responses to 
the information required by Sec.  1.991, such information should be set 
out separately for each joint petitioner, except as otherwise permitted 
in Sec.  1.991(h)(2).
    (i) Each joint petitioner shall certify to the information 
contained in the petition in accordance with the provisions of Sec.  
1.16 of this part with respect to the information that is pertinent to 
that petitioner. Alternatively, the controlling parent of the joint 
petitioners may certify to the information contained in the petition.
    (ii) Where the petition is being filed in connection with an 
application for consent to transfer control of licenses or spectrum 
leasing arrangements, the transferee or its ultimate controlling parent 
may file the petition on behalf of the licensees or spectrum lessees 
that would be acquired as a result of the proposed transfer of control 
and certify to the information contained in the petition.
    (3) Multiple applicants and licensees shall not be permitted to 
file a petition for declaratory ruling jointly unless they are under 
common control.
    (d) The following definitions shall apply to this section and 
Sec. Sec.  1.991 through 1.994.
    (1) Aeronautical radio licenses refers to aeronautical en route and 
aeronautical fixed radio station licenses only. It does not refer to 
other types of aeronautical radio station licenses.
    (2) Affiliate refers to any entity that is under common control 
with a licensee, defined by reference to the holder, directly and/or 
indirectly, of more than 50 percent of total voting power, where no 
other individual or entity has de facto control.
    (3) Control includes actual working control in whatever manner 
exercised and is not limited to majority stock ownership. Control also 
includes direct or indirect control, such as through intervening 
subsidiaries.
    (4) Entity includes a partnership, association, estate, trust, 
corporation, limited liability company, governmental authority or other 
organization.
    (5) Group refers to two or more individuals or entities that have 
agreed to act together for the purpose of acquiring, holding, voting, 
or disposing of their equity and/or voting interests in the relevant 
licensee, controlling U.S. parent, or entity holding a direct and/or 
indirect equity and/or voting interest in the licensee or U.S. parent.
    (6) Individual refers to a natural person as distinguished from a 
partnership, association, corporation, or other organization.
    (7) Licensee as used in Sec. Sec.  1.990 through 1.994 of this part 
includes a spectrum lessee as defined in Sec.  1.9003.
    (8) Privately held company refers to a U.S.- or foreign-organized 
company that has not issued a class of equity securities for which 
beneficial ownership reporting is required by security holders and 
other beneficial owners under section 13(d) or 13(g) of the Securities 
Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act), 
and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a 
substantially comparable foreign law or regulation.
    (9) Public company refers to a U.S.- or foreign-organized company 
that has issued a class of equity securities for which beneficial 
ownership reporting is required by security holders and other 
beneficial owners under section 13(d) or 13(g) of the Securities 
Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act) 
and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a 
substantially comparable foreign law or regulation.
    (10) Subsidiary refers to any entity in which a licensee owns or 
controls, directly and/or indirectly, more than 50 percent of the total 
voting power of the outstanding voting stock of the entity, where no 
other individual or entity has de facto control.
    (11) Voting stock refers to an entity's corporate stock, 
partnership or membership interests, or other equivalents of corporate 
stock that, under ordinary circumstances, entitles the holders thereof 
to elect the entity's board of directors, management committee, or 
other equivalent of a corporate board of directors.
    (12) Would hold as used in Sec. Sec.  1.990 through 1.994 includes 
equity and/or voting interests that an individual or entity proposes to 
hold in an applicant, licensee, or spectrum lessee, or their 
controlling U.S. parent, upon consummation of any transactions 
described in the petition for declaratory ruling filed under Sec.  
1.990(a)(1) or (2) of this part.

[[Page 41324]]

Sec.  1.991  Contents of petitions for declaratory ruling under the 
Communications Act of 1934.

    The petition for declaratory ruling required by Sec.  1.990(a)(1) 
and/or Sec.  1.990(a)(2) shall contain the following information:
    (a) With respect to each petitioning applicant or licensee, provide 
its name; FCC Registration Number (FRN); mailing address; place of 
organization; telephone number; facsimile number (if available); 
electronic mail address (if available); type of business organization 
(e.g., corporation, unincorporated association, trust, general 
partnership, limited partnership, limited liability company, trust, 
other (include description of legal entity)); name and title of officer 
certifying to the information contained in the petition.
    (b) If the petitioning applicant or licensee is represented by a 
third party (e.g., legal counsel), specify that individual's name, the 
name of the firm or company, mailing address and telephone number/
electronic mail address.
    (c)(1) For each named licensee, list the type(s) of radio service 
authorized (e.g., cellular radio telephone service; microwave radio 
service; mobile satellite service; aeronautical fixed service).
    (2) If the petition is filed in connection with an application for 
a radio station license or a spectrum leasing arrangement, or an 
application to acquire a license or spectrum leasing arrangement by 
assignment or transfer of control, specify for each named applicant:
    (i) The File No(s). of the associated application(s), if available 
at the time the petition is filed; otherwise, specify the anticipated 
filing date for each application; and
    (ii) The type(s) of radio services covered by each application 
(e.g., cellular radio telephone service; microwave radio service; 
mobile satellite service; aeronautical fixed service).
    (d) With respect to each petitioner, include a statement as to 
whether the petitioner is requesting a declaratory ruling under Sec.  
1.990(a)(1) and/or Sec.  1.990(a)(2).
    (e)(1) Direct U.S. or foreign interests of ten percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.990(a)(1), provide the name of any individual or entity that holds, 
or would hold, directly 10 percent or more of the equity interests and/
or voting interests, or a controlling interest, in the controlling U.S. 
parent of the petitioning common carrier or aeronautical radio station 
applicant(s) or licensee(s) as specified in paragraphs (e)(1)(i) 
through (e)(4)(iv) of this section.
    (2) Direct U.S or foreign interests of ten percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.990(a)(2), provide the name of any individual or entity that holds, 
or would hold, directly 10 percent or more of the equity interests and/
or voting interests, or a controlling interest, in each petitioning 
common carrier applicant or licensee as specified in paragraphs 
(e)(1)(i) through (e)(4)(ii) of this section.
    (3) Where no individual or entity holds, or would hold, directly 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the controlling U.S. parent (for petitions 
filed under Sec.  1.990(a)(1)) or in the applicant or licensee (for 
petitions filed under Sec.  1.990(a)(2)), the petition shall state that 
no individual or entity holds or would hold directly 10 percent or more 
of the equity interests and/or voting interests, or a controlling 
interest, in the U.S. parent, applicant or licensee.
    (4)(i) Where a named U.S. parent, applicant, or licensee is 
organized as a corporation, provide the name of any individual or 
entity that holds, or would hold, 10 percent or more of the outstanding 
capital stock and/or voting stock, or a controlling interest.
    (ii) Where a named U.S. parent, applicant, or licensee is organized 
as a general partnership, provide the names of the partnership's 
constituent general partners.
    (iii) Where a named U.S. parent, applicant, or licensee is 
organized as a limited partnership or limited liability partnership, 
provide the name(s) of the general partner(s) (in the case of a limited 
partnership), any uninsulated partner(s), and any insulated partner(s) 
with an equity interest in the partnership of at least 10 percent 
(calculated according to the percentage of the partner's capital 
contribution). With respect to each named partner (other than a named 
general partner), the petitioner shall state whether the partnership 
interest is insulated or uninsulated, based on the insulation criteria 
specified in Sec.  1.993.
    (iv) Where a named U.S. parent, applicant, or licensee is organized 
as a limited liability company, provide the name(s) of each uninsulated 
member, regardless of its equity interest, any insulated member with an 
equity interest of at least 10 percent (calculated according to the 
percentage of its capital contribution), and any non-equity manager(s). 
With respect to each named member, the petitioner shall state whether 
the interest is insulated or uninsulated, based on the insulation 
criteria specified in Sec.  1.993, and whether the member is a manager.
    Note to paragraph (e): The Commission presumes that a general 
partner of a general partnership or limited partnership has a 
controlling interest in the partnership. A general partner shall in all 
cases be deemed to hold an uninsulated interest in the partnership.
    (f)(1) Indirect U.S or foreign interests of ten percent or more or 
a controlling interest. With respect to petitions filed under Sec.  
1.990(a)(1), provide the name of any individual or entity that holds, 
or would hold, indirectly, through one or more intervening entities, 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the controlling U.S. parent of the petitioning 
common carrier or aeronautical radio station applicant(s) or 
licensee(s). Equity interests and voting interests held indirectly 
shall be calculated in accordance with the principles set forth in 
Sec.  1.992.
    (2) Indirect U.S or foreign interests of ten percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.990(a)(2), provide the name of any individual or entity that holds, 
or would hold, indirectly, through one or more intervening entities, 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the petitioning common carrier radio station 
applicant(s) or licensee(s). Equity interests and voting interests held 
indirectly shall be calculated in accordance with the principles set 
forth in Sec.  1.992.
    (3) Where no individual or entity holds, or would hold, indirectly 
10 percent or more of the equity interests and/or voting interests, or 
a controlling interest, in the controlling U.S. parent (for petitions 
filed under Sec.  1.990(a)(1)) or in the petitioning applicant(s) or 
licensee(s) (for petitions filed under Sec.  1.990(a)(2)), the petition 
shall specify that no individual or entity holds indirectly 10 percent 
or more of the equity interests and/or voting interests, or a 
controlling interest, in the U.S. parent, applicant(s), or licensee(s).
    Note to paragraph (f): The Commission presumes that a general 
partner of a general partnership or limited partnership has a 
controlling interest in the partnership. A general partner shall in all 
cases be deemed to hold an uninsulated interest in the partnership.
    (g) For each 10 percent interest holder named in response to 
paragraphs (e) and (f) of this section, specify the equity interest 
held and the voting interest held (each to the nearest one percent);

[[Page 41325]]

in the case of an individual, his or her citizenship; and in the case 
of a business organization, its place of organization, type of business 
organization (e.g., corporation, unincorporated association, trust, 
general partnership, limited partnership, limited liability company, 
trust, other (include description of legal entity)), and principal 
business(es).
    (h)(1) Estimate of aggregate foreign ownership. For petitions filed 
under Sec.  1.990(a)(1), attach an exhibit that provides a percentage 
estimate of the controlling U.S. parent's aggregate direct and/or 
indirect foreign equity interests and its aggregate direct and/or 
indirect foreign voting interests. For petitions filed under Sec.  
1.990(a)(2), attach an exhibit that provides a percentage estimate of 
the aggregate foreign equity interests and aggregate foreign voting 
interests held directly in the petitioning applicant(s) and/or 
licensee(s), if any, and the aggregate foreign equity interests and 
aggregate foreign voting interests held indirectly in the petitioning 
applicant(s) and/or licensee(s). The exhibit required by this paragraph 
must also provide a general description of the methods used to 
determine the percentages; and a statement addressing the circumstances 
that prompted the filing of the petition and demonstrating that the 
public interest would be served by grant of the petition.
    (2) Ownership and control structure. Attach an exhibit that 
describes the ownership and control structure of the applicant(s) and/
or licensee(s) that are the subject of the petition, including an 
ownership diagram and identification of the real party-in-interest 
disclosed in any companion applications. The ownership diagram should 
illustrate the petitioner's vertical ownership structure, including the 
controlling U.S. parent named in the petition (for petitions filed 
under Sec.  1.990(a)(1)) and the direct and indirect ownership (equity 
and voting) interests held by the individual(s) and/or entity(ies) 
named in response to paragraphs (e) and (f) of this section. Each such 
individual or entity shall be depicted in the ownership diagram and all 
controlling interests labeled as such. Where the petition includes 
multiple petitioners, the ownership of all petitioners may be depicted 
in a single ownership diagram or in multiple diagrams.
    (i) Requests for specific approval. Provide, as required or 
permitted by this paragraph, the name of each foreign individual and/or 
entity for which each petitioner requests specific approval, if any, 
and the respective percentages of equity and/or voting interests (to 
the nearest one percent) that each such foreign individual or entity 
holds, or would hold, directly and/or indirectly, in the controlling 
U.S. parent of the petitioning common carrier or aeronautical radio 
station applicant(s) or licensee(s) for petitions filed under Sec.  
1.990(a)(1), and in each petitioning common carrier applicant or 
licensee for petitions filed under Sec.  1.990(a)(2).
    (1) Each petitioning common carrier or aeronautical radio station 
applicant or licensee filing under Sec.  1.990(a)(1) shall identify and 
request specific approval for any foreign individual, entity, or group 
of such individuals or entities that holds, or would hold, directly 
and/or indirectly, more than 5 percent of the equity and/or voting 
interests, or a controlling interest, in the petitioner's controlling 
U.S. parent unless the foreign investment is exempt under paragraph 
(i)(3) of this section. Equity and voting interests shall be calculated 
in accordance with the principles set forth in paragraphs (e) and (f) 
of this section and in Sec.  1.992.
    (2) Each petitioning common carrier radio station applicant or 
licensee filing under Sec.  1.990(a)(2) shall identify and request 
specific approval for any foreign individual, entity, or group of such 
individuals or entities that holds, or would hold, directly, and/or 
indirectly through one or more intervening U.S.-organized entities that 
do not control the applicant or licensee, more than 5 percent of the 
equity and/or voting interests in the applicant or licensee unless the 
foreign investment is exempt under paragraph (i)(3) of this section. 
Equity and voting interests shall be calculated in accordance with the 
principles set forth in paragraphs (e) and (f) of this section and in 
Sec.  1.992.
    Note to paragraphs (i)(1) and (2): Two or more individuals or 
entities will be treated as a ``group'' when they have agreed to act 
together for the purpose of acquiring, holding, voting, or disposing of 
their equity and/or voting interests in the licensee and/or controlling 
U.S. parent of the licensee or in any intermediate company(ies) through 
which any of the individuals or entities holds its interests in the 
licensee and/or controlling U.S. parent of the licensee.
    (3) A foreign investment is exempt from the specific approval 
requirements of paragraphs (i)(1) and (2) of this section where:
    (i) The foreign individual or entity holds, or would hold, directly 
and/or indirectly, no more than 10 percent of the equity and/or voting 
interests of the U.S. parent (for petitions filed under Sec.  
1.990(a)(1)) or the petitioning applicant or licensee (for petitions 
filed under Sec.  1.990(a)(2)); and
    (ii) The foreign individual or entity does not hold, and would not 
hold, a controlling interest in the petitioner or any controlling 
parent company, does not plan or intend to change or influence control 
of the petitioner or any controlling parent company, does not possess 
or develop any such purpose, and does not take any action having such 
purpose or effect. The Commission will presume, in the absence of 
evidence to the contrary, that the following interests satisfy this 
criterion for exemption from the specific approval requirements in 
paragraphs (i)(1) and (i)(2) of this section:
    (A) Where the relevant licensee, controlling U.S. parent, or entity 
holding a direct or indirect equity and/or voting interest in the 
licensee or U.S. parent is a ``public company,'' as defined in Sec.  
1.990(d)(9), provided that the foreign holder is an institutional 
investor that is eligible to report its beneficial ownership interests 
in the company's voting, equity securities in excess of 5 percent (not 
to exceed 10 percent) pursuant to Exchange Act Rule 13d-1(b), 17 CFR 
240.13d-1(b), or a substantially comparable foreign law or regulation. 
This presumption shall not apply if the foreign individual, entity or 
group holding such interests is obligated to report its holdings in the 
company pursuant to Exchange Act Rule 13d-1(a), 17 CFR 240.13d-1(a), or 
a substantially comparable foreign law or regulation.
    Example. Common carrier applicant (``Applicant'') is preparing a 
petition for declaratory ruling to request Commission approval for 
foreign ownership of its controlling, U.S.-organized parent (``U.S. 
Parent'') to exceed the 25 percent benchmark in section 310(b)(4) of 
the Act. Applicant does not currently hold any FCC licenses. Shares of 
U.S. Parent trade publicly on the New York Stock Exchange. Based on a 
shareholder survey and a review of its shareholder records, U.S. Parent 
has determined that its aggregate foreign ownership on any given day 
may exceed an aggregate 25 percent, including a six percent common 
stock interest held by a foreign-organized mutual fund (``Foreign 
Fund''). U.S. Parent has confirmed that Foreign Fund is not currently 
required to report its interest pursuant to Exchange Act Rule 13d-1(a) 
and instead is eligible to report its interest pursuant to Exchange Act 
Rule 13d-1(b). U.S. Parent also has confirmed that Foreign Fund does 
not hold any other interests in U.S. Parent's equity securities, 
whether of a class of

[[Page 41326]]

voting or non-voting securities. Applicant may, but is not required to, 
request specific approval of Foreign Fund's six percent interest in 
U.S. Parent.
    Note to paragraph (i)(3)(ii)(A): Where an institutional investor 
holds voting, equity securities that are subject to reporting under 
Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a substantially 
comparable foreign law or regulation, and equity securities that are 
not subject to such reporting the investor's total capital stock 
interests may be aggregated and treated as exempt from the 5 percent 
specific approval requirement in paragraphs (i)(1) and (2) of this 
section so long as the aggregate amount of the institutional investor's 
holdings does not exceed ten percent of the company's total capital 
stock or voting rights and the investor is eligible to certify under 
Exchange Act Rule 13d-1(b), 17 CFR 240.13d-1(b), or a substantially 
comparable foreign law or regulation that it has acquired its capital 
stock interests in the ordinary course of business and not with the 
purpose nor with the effect of changing or influencing the control of 
the company. In calculating foreign equity and voting interests, the 
Commission does not consider convertible interests such as options, 
warrants and convertible debentures until converted, unless 
specifically requested by the petitioner, i.e., where the petitioner is 
requesting approval so those rights can be exercised in a particular 
case without further Commission approval.
    (B) Where the relevant licensee, controlling U.S. parent, or entity 
holding a direct and/or indirect equity and/or voting interest in the 
licensee or U.S. parent is a ``privately held'' corporation, as defined 
in Sec.  1.990(d)(8), provided that a shareholders' agreement, or 
similar voting agreement, prohibits the foreign holder from becoming 
actively involved in the management or operation of the corporation and 
limits the foreign holder's voting and consent rights, if any, to the 
minority shareholder protections listed in paragraph (i)(5) of this 
section.
    (C) Where the relevant licensee, controlling U.S. parent, or entity 
holding a direct and/or indirect equity and/or voting interest in the 
licensee or U.S. parent is ``privately held,'' as defined in Sec.  
1.990(d)(8), and is organized as a limited partnership, limited 
liability company (``LLC''), or limited liability partnership 
(``LLP''), provided that the foreign holder is ``insulated'' in 
accordance with the criteria specified in Sec.  1.993.
    (4) A petitioner may, but is not required to, request specific 
approval for any other foreign individual or entity that holds, or 
would hold, a direct and/or indirect equity and/or voting interest in 
the controlling U.S. parent (for petitions filed under Sec.  
1.990(a)(1)) or in the petitioning applicant or licensee (for petitions 
filed under Sec.  1.990(a)(2)).
    (5) The minority shareholder protections referenced in paragraph 
(i)(3)(ii)(B) of this section consist of the following rights:
    (i) The power to prevent the sale or pledge of all or substantially 
all of the assets of the corporation or a voluntary filing for 
bankruptcy or liquidation;
    (ii) The power to prevent the corporation from entering into 
contracts with majority shareholders or their affiliates;
    (iii) The power to prevent the corporation from guaranteeing the 
obligations of majority shareholders or their affiliates;
    (iv) The power to purchase an additional interest in the 
corporation to prevent the dilution of the shareholder's pro rata 
interest in the event that the corporation issues additional 
instruments conveying shares in the company;
    (v) The power to prevent the change of existing legal rights or 
preferences of the shareholders, as provided in the charter, by-laws or 
other operative governance documents;
    (vi) The power to prevent the amendment of the charter, by-laws or 
other operative governance documents of the company with respect to the 
matters described in paragraphs (i)(5)(i) through (v) of this section.
    (6) The Commission reserves the right to consider, on a case-by-
case basis, whether voting or consent rights over matters other than 
those listed in paragraph (i)(5) of this section shall be considered 
permissible minority shareholder protections in a particular case.
    (j) For each foreign individual or entity named in response to 
paragraph (i) of this section, provide the following information:
    (1) In the case of an individual, his or her citizenship and 
principal business(es);
    (2) In the case of a business organization:
    (i) Its place of organization, type of business organization (e.g., 
corporation, unincorporated association, trust, general partnership, 
limited partnership, limited liability company, trust, other (include 
description of legal entity)), and principal business(es);
    (ii) The name of any individual or entity that holds, or would 
hold, directly and/or indirectly, through one or more intervening 
entities, 10 percent or more of the equity interests and/or voting 
interests, or a controlling interest, in the foreign entity for which 
the petitioner requests specific approval. Specify for each such 
interest holder, his or her citizenship (for individuals) or place of 
legal organization (for entities). Equity interests and voting 
interests held indirectly shall be calculated in accordance with the 
principles set forth in Sec.  1.992.
    (iii) Where no individual or entity holds, or would hold, directly 
and/or indirectly, 10 percent or more of the equity interests and/or 
voting interests, or a controlling interest, the petition shall specify 
that no individual or entity holds, or would hold, directly and/or 
indirectly, 10 percent or more of the equity interests and/or voting 
interests, or a controlling interest, in the foreign entity for which 
the petitioner requests specific approval.
    (k) Requests for advance approval. The petitioner may, but is not 
required to, request advance approval in its petition for any foreign 
individual or entity named in response to paragraph (i) of this section 
to increase its direct and/or indirect equity and/or voting interests 
in the controlling U.S. parent of the common carrier or aeronautical 
radio station licensee, for petitions filed under Sec.  1.990(a)(1), 
and/or in the common carrier licensee, for petitions filed under Sec.  
1.990(a)(2), above the percentages specified in response to paragraph 
(i) of this section. Requests for advance approval shall be made as 
follows:
    (1) Petitions filed under Sec.  1.990(a)(1). Where a foreign 
individual or entity named in response to paragraph (i) of this section 
holds, or would hold upon consummation of any transactions described in 
the petition, a de jure or de facto controlling interest in the 
controlling U.S. parent, the petitioner may request advance approval in 
its petition for the foreign individual or entity to increase its 
interests, at some future time, up to any amount, including 100 percent 
of the direct and/or indirect equity and/or voting interests in the 
U.S. parent. The petitioner shall specify for the named controlling 
foreign individual(s) or entity(ies) the maximum percentages of equity 
and/or voting interests for which advance approval is sought or, in 
lieu of a specific amount, state that the petitioner requests advance 
approval for the named controlling foreign individual or entity to 
increase its interests up to and including 100 percent of the U.S. 
parent's direct and/or indirect equity and/or voting interests.

[[Page 41327]]

    (2) Petitions filed under Sec.  1.990(a)(1) and/or Sec.  
1.990(a)(2). Where a foreign individual or entity named in response to 
paragraph (i) of this section holds, or would hold upon consummation of 
any transactions described in the petition, a non-controlling interest 
in the controlling U.S. parent of the licensee, for petitions filed 
under Sec.  1.990(a)(1), or in the licensee, for petitions filed under 
Sec.  1.990(a)(2), the petitioner may request advance approval in its 
petition for the foreign individual or entity to increase its 
interests, at some future time, up to any non-controlling amount not to 
exceed 49.99 percent. The petitioner shall specify for the named 
foreign individual(s) or entity(ies) the maximum percentages of equity 
and/or voting interests for which advance approval is sought or, in 
lieu of a specific amount, shall state that the petitioner requests 
advance approval for the named foreign individual(s) or entity(ies) to 
increase their interests up to and including a non-controlling 49.99 
percent equity and/or voting interest in the licensee, for petitions 
filed under Sec.  1.990(a)(2), or in the controlling U.S. parent of the 
licensee, for petitions filed under Sec.  1.990(a)(1).


Sec.  1.992  How to calculate indirect equity and voting interests.

    (a) The criteria specified in this section shall be used for 
purposes of calculating indirect equity and voting interests under 
Sec.  1.991.
    (b)(1) Equity interests held indirectly in the licensee and/or 
controlling U.S. parent. Equity interests that are held by an 
individual or entity indirectly through one or more intervening 
entities shall be calculated by successive multiplication of the equity 
percentages for each link in the vertical ownership chain, regardless 
of whether any particular link in the chain represents a controlling 
interest in the company positioned in the next lower tier.
    Example. Assume that a foreign individual holds a non-controlling 
30 percent equity and voting interest in U.S.-organized Corporation A 
which, in turn, holds a non-controlling 40 percent equity and voting 
interest in U.S.-organized Parent Corporation B. The foreign 
individual's equity interest in U.S.-organized Parent Corporation B 
would be calculated by multiplying the foreign individual's equity 
interest in U.S.-organized Corporation A by that entity's equity 
interest in U.S.-organized Parent Corporation B. The foreign 
individual's equity interest in U.S.-organized Parent Corporation B 
would be calculated as 12 percent (30% x 40% = 12%). The result would 
be the same even if U.S.-organized Corporation A held a de facto 
controlling interest in U.S.-organized Parent Corporation B.
    (2) Voting interests held indirectly in the licensee and/or 
controlling U.S. parent. Voting interests that are held by any 
individual or entity indirectly through one or more intervening 
entities will be determined depending upon the type of business 
organization(s) in which the individual or entity holds a voting 
interest as follows:
    (i) Voting interests that are held through one or more intervening 
corporations shall be calculated by successive multiplication of the 
voting percentages for each link in the vertical ownership chain, 
except that wherever the voting interest for any link in the chain is 
equal to or exceeds 50 percent or represents actual control, it shall 
be treated as if it were a 100 percent interest.
    Example. Assume that a foreign individual holds a non-controlling 
30 percent equity and voting interest in U.S.-organized Corporation A 
which, in turn, holds a controlling 70 percent equity and voting 
interest in U.S.-organized Parent Corporation B. Because U.S.-organized 
Corporation A's 70 percent voting interest in U.S.-organized Parent 
Corporation B constitutes a controlling interest, it is treated as a 
100 percent interest. The foreign individual's 30 percent voting 
interest in U.S.-organized Corporation A would flow through in its 
entirety to U.S. Parent Corporation B and thus be calculated as 30 
percent (30% x 100% = 30%).
    (ii) Voting interests that are held through one or more intervening 
partnerships shall be calculated depending upon whether the individual 
or entity holds a general partnership interest, an uninsulated 
partnership interest, or an insulated partnership interest as specified 
in paragraphs (b)(2)(ii)(A) and (B) of this section.
    (A) General partnership and other uninsulated partnership 
interests. A general partner and uninsulated partner shall be deemed to 
hold the same voting interest as the partnership holds in the company 
situated in the next lower tier of the vertical ownership chain. A 
partner shall be treated as uninsulated unless the limited partnership 
agreement, limited liability partnership agreement, or other operative 
agreement satisfies the insulation criteria specified in Sec.  1.993.
    Note to paragraph (b)(2)(ii)(A): The Commission presumes that a 
general partner of a general partnership or limited partnership has a 
controlling interest in the partnership. A general partner shall in all 
cases be deemed to hold an uninsulated interest in the partnership.
    (B) Insulated partnership interests. A partner of a limited 
partnership (other than a general partner) or partner of a limited 
liability partnership that satisfies the insulation criteria specified 
in Sec.  1.993 shall be treated as an insulated partner and shall be 
deemed to hold a voting interest in the partnership that is equal to 
the partner's equity interest.
    (iii) Voting interests that are held through one or more 
intervening limited liability companies shall be calculated depending 
upon whether the individual or entity is a non-member manager, an 
uninsulated member or an insulated member as specified in paragraphs 
(b)(2)(iii)(A) and (B) of this section.
    (A) Non-member managers and uninsulated membership interests. A 
non-member manager and an uninsulated member of a limited liability 
company shall be deemed to hold the same voting interest as the limited 
liability company holds in the company situated in the next lower tier 
of the vertical ownership chain. A member shall be treated as 
uninsulated unless the limited liability company agreement satisfies 
the insulation criteria specified in Sec.  1.993.
    (B) Insulated membership interests. A member of a limited liability 
company that satisfies the insulation criteria specified in Sec.  1.993 
shall be treated as an insulated member and shall be deemed to hold a 
voting interest in the limited liability company that is equal to the 
member's equity interest.


Sec.  1.993  Insulation criteria for interests in limited partnerships, 
limited liability partnerships, and limited liability companies.

    (a) A limited partner of a limited partnership and a partner of a 
limited liability partnership shall be treated as uninsulated within 
the meaning of Sec.  1.992(b)(2)(ii)(A) unless the partner is 
prohibited by the limited partnership agreement, limited liability 
partnership agreement, or other operative agreement from, and in fact 
is not engaged in, active involvement in the management or operation of 
the partnership and only the usual and customary investor protections 
are contained in the partnership agreement or other operative 
agreement. These criteria apply to any relevant limited partnership or 
limited liability partnership, whether it is the licensee, a 
controlling U.S.-organized parent, or any partnership situated above 
them in the vertical chain of ownership.
    (b) A member of a limited liability company shall be treated as 
uninsulated

[[Page 41328]]

for purposes of Sec.  1.992(b)(2)(iii)(A) unless the member is 
prohibited by the limited liability company agreement from, and in fact 
is not engaged in, active involvement in the management or operation of 
the company and only the usual and customary investor protections are 
contained in the agreement. These criteria apply to any relevant 
limited liability company, whether it is the licensee, a controlling 
U.S.-organized parent, or any limited liability company situated above 
them in the vertical chain of ownership.
    (c) The usual and customary investor protections referred to in 
paragraphs (a) and (b) of this section shall consist of:
    (1) The power to prevent the sale or pledge of all or substantially 
all of the assets of the limited partnership, limited liability 
partnership, or limited liability company or a voluntary filing for 
bankruptcy or liquidation;
    (2) The power to prevent the limited partnership, limited liability 
partnership, or limited liability company from entering into contracts 
with majority investors or their affiliates;
    (3) The power to prevent the limited partnership, limited liability 
partnership, or limited liability company from guaranteeing the 
obligations of majority investors or their affiliates;
    (4) The power to purchase an additional interest in the limited 
partnership, limited liability partnership, or limited liability 
company to prevent the dilution of the partner's or member's pro rata 
interest in the event that the limited partnership, limited liability 
partnership, or limited liability company issues additional instruments 
conveying interests in the partnership or company;
    (5) The power to prevent the change of existing legal rights or 
preferences of the partners, members, or managers as provided in the 
limited partnership agreement, limited liability partnership agreement, 
or limited liability company agreement, or other operative agreement;
    (6) The power to vote on the removal of a general partner, managing 
partner, managing member, or other manager in situations where such 
individual or entity is subject to bankruptcy, insolvency, 
reorganization, or other proceedings relating to the relief of debtors; 
adjudicated insane or incompetent by a court of competent jurisdiction 
(in the case of a natural person); convicted of a felony; or otherwise 
removed for cause, as determined by an independent party;
    (7) The power to prevent the amendment of the limited partnership 
agreement, limited liability partnership agreement, or limited 
liability company agreement, or other organizational documents of the 
partnership or limited liability company with respect to the matters 
described in paragraphs (c)(1) through (6) of this section.
    (d) The Commission reserves the right to consider, on a case-by-
case basis, whether voting or consent rights over matters other than 
those listed in paragraph (c) of this section shall be considered usual 
and customary investor protections in a particular case.


Sec.  1.994  Routine terms and conditions.

    Foreign ownership rulings issued pursuant to Sec. Sec.  1.990 et 
seq. shall be subject to the following terms and conditions, except as 
otherwise specified in a particular ruling:
    (a)(1) Aggregate allowance for rulings issued under Sec.  
1.990(a)(1). In addition to the foreign ownership interests approved 
specifically in a licensee's declaratory ruling issued pursuant to 
Sec.  1.990(a)(1), the controlling U.S.-organized parent named in the 
ruling (or a U.S.-organized successor-in-interest formed as part of a 
pro forma reorganization) may be 100 percent owned, directly and/or 
indirectly through one or more U.S- or foreign-organized entities, on a 
going-forward basis (i.e., after issuance of the ruling) by other 
foreign investors without prior Commission approval. This ``100 percent 
aggregate allowance'' is subject to the requirement that the licensee 
seek and obtain Commission approval before any foreign individual, 
entity, or ``group'' not previously approved acquires, directly and/or 
indirectly, more than five percent of the U.S. parent's outstanding 
capital stock (equity) and/or voting stock, or a controlling interest, 
with the exception of any foreign individual, entity, or ``group'' that 
acquires an equity and/or voting interest of ten percent or less, 
provided that the interest is exempt under Sec.  1.991(i)(3).
    (2) Aggregate allowance for rulings issued under Sec.  1.990(a)(2). 
In addition to the foreign ownership interests approved specifically in 
a licensee's declaratory ruling issued pursuant to Sec.  1.990(a)(2), 
the licensee(s) named in the ruling (or a U.S.-organized successor-in-
interest formed as part of a pro forma reorganization) may be 100 
percent owned on a going forward basis (i.e., after issuance of the 
ruling) by other foreign investors holding interests in the licensee 
indirectly through U.S.-organized entities that do not control the 
licensee, without prior Commission approval. This ``100 percent 
aggregate allowance'' is subject to the requirement that the licensee 
seek and obtain Commission approval before any foreign individual, 
entity, or ``group'' not previously approved acquires directly and/or 
indirectly, through one or more U.S.-organized entities that do not 
control the licensee, more than five percent of the licensee's 
outstanding capital stock (equity) and/or voting stock, with the 
exception of any foreign individual, entity, or ``group'' that acquires 
an equity and/or voting interest of ten percent or less, provided that 
the interest is exempt under Sec.  1.991(i)(3). Foreign ownership 
interests held directly in a licensee shall not be permitted to exceed 
an aggregate 20 percent of the licensee's equity and/or voting 
interests.
    Note to paragraph (a): Licensees have an obligation to monitor and 
stay ahead of changes in foreign ownership of their controlling U.S.-
organized parent companies (for rulings issued pursuant to Sec.  
1.990(a)(1)) and/or in the licensee itself (for rulings issued pursuant 
to Sec.  1.990(a)(2)), to ensure that the licensee obtains Commission 
approval before a change in foreign ownership renders the licensee out 
of compliance with the terms and conditions of its declaratory 
ruling(s) or the Commission's rules. Licensees, their controlling 
parent companies, and other entities in the licensee's vertical 
ownership chain may need to place restrictions in their bylaws or other 
organizational documents to enable the licensee to ensure compliance 
with the terms and conditions of its declaratory ruling(s) and the 
Commission's rules.
    Example 1 (for rulings issued under Sec.  1.990(a)(1)). U.S. Corp. 
files an application for a common carrier license. U.S. Corp. is wholly 
owned and controlled by U.S. Parent, which is a newly formed, privately 
held Delaware corporation in which no single shareholder has de jure or 
de facto control. A shareholders' agreement provides that a five-member 
board of directors shall govern the affairs of the company; five named 
shareholders shall be entitled to one seat and one vote on the board; 
and all decisions of the board shall be determined by majority vote. 
The five named shareholders and their respective equity interests are 
as follows: Foreign Entity A, which is wholly owned and controlled by a 
foreign citizen (5 percent); Foreign Entity B, which is wholly owned 
and controlled by a foreign citizen (10 percent); Foreign Entity C, a 
foreign public company with no controlling shareholder (20 percent); 
Foreign Entity D, a foreign pension fund that is

[[Page 41329]]

controlled by a foreign citizen and in which no individual or entity 
has a pecuniary interest exceeding one percent (21 percent); and U.S. 
Entity E, a U.S. public company with no controlling shareholder (25 
percent). The remaining 19 percent of U.S. Parent's shares are held by 
three foreign-organized entities as follows: F (4 percent), G (6 
percent), and H (9 percent). Under the shareholders' agreement, voting 
rights of F, G, and H are limited to the minority shareholder 
protections listed in Sec.  1.991(i)(5). Further, the agreement 
expressly prohibits G and H from becoming actively involved in the 
management or operation of U.S. Parent and U.S. Corp.
    As required by the rules, U.S. Corp. files a section 310(b)(4) 
petition concurrently with its application. The petition identifies and 
requests specific approval for the ownership interests held in U.S. 
Parent by Foreign Entity A and its sole shareholder (5 percent equity 
and 20 percent voting interest); Foreign Entity B and its sole 
shareholder (10 percent equity and 20 percent voting interest), Foreign 
Entity C (20 percent equity and 20 percent voting interest), and 
Foreign Entity D (21 percent equity and 20 percent voting interest) and 
its fund manager (20 percent voting interest). The Commission's ruling 
specifically approves these foreign interests. The ruling also provides 
that, on a going-forward basis, U.S. Parent may be 100 percent owned in 
the aggregate, directly and/or indirectly, by other foreign investors, 
subject to the requirement that U.S. Corp. seek and obtain Commission 
approval before any previously unapproved foreign investor acquires 
more than five percent of U.S. Parent's equity and/or voting interests, 
or a controlling interest, with the exception of any foreign investor 
that acquires an equity and/or voting interest of ten percent or less, 
provided that the interest is exempt under Sec.  1.991(i)(3).
    In this case, foreign entities F, G, and H would each be considered 
a previously unapproved foreign investor (along with any new foreign 
investors). However, prior approval for F, G and H would only apply to 
an increase of F's interest above five percent (because the ten percent 
exemption under Sec.  1.991(i)(3) does not apply to F) or to an 
increase of G's or H's interest above ten percent (because G and H do 
qualify for this exemption). U.S. Corp. would also need Commission 
approval before Foreign Entity D appoints a new fund manager that is a 
non-U.S. citizen and before Foreign Entities A, B, C, or D increase 
their respective equity and/or voting interests in U.S. Parent, unless 
the petition previously sought and obtained Commission approval for 
such increases (up to non-controlling 49.99 percent interests). (See 
Sec.  1.991(k)(2).) Foreign shareholders of Foreign Entity C and U.S. 
Entity E would also be considered previously unapproved foreign 
investors. Thus, Commission approval would be required before any 
foreign shareholder of Foreign Entity C or U.S. Entity E acquires (1) a 
controlling interest in either company; or (2) a non-controlling equity 
and/or voting interest in either company that, when multiplied by the 
company's equity and/or voting interests in U.S. Parent, would exceed 5 
percent of U.S. Parent's equity and/or voting interests, unless the 
interest is exempt under Sec.  1.991(i)(3).
    Example 2 (for rulings issued under Sec.  1.990(a)(2)). Assume that 
the following three U.S.-organized entities hold non-controlling equity 
and voting interests in common carrier Licensee, which is a privately 
held corporation organized in Delaware: U.S. corporation A (30 
percent); U.S. corporation B (30 percent); and U.S. corporation C (40 
percent). Licensee's shareholders are wholly owned by foreign 
individuals X, Y, and Z, respectively. Licensee has received a 
declaratory ruling under Sec.  1.990(a)(2) specifically approving the 
30 percent foreign ownership interests held in Licensee by each of X 
and Y (through U.S. corporation A and U.S. corporation B, respectively) 
and the 40 percent foreign ownership interest held in Licensee by Z 
(through U.S. corporation C). On a going-forward basis, Licensee may be 
100 percent owned in the aggregate by X, Y, Z, and other foreign 
investors holding interests in Licensee indirectly, through U.S.-
organized entities that do not control Licensee, subject to the 
requirement that Licensee obtain Commission approval before any 
previously unapproved foreign investor acquires more than five percent 
of Licensee's equity and/or voting interests, with the exception of any 
foreign investor that acquires an equity and/or voting interest of ten 
percent or less, provided that the interest is exempt under Sec.  
1.991(i)(3). In this case, any foreign investor other than X, Y, and Z 
would be considered a previously unapproved foreign investor. Licensee 
would also need Commission approval before X, Y, or Z increases its 
equity and/or voting interests in Licensee unless the petition 
previously sought and obtained Commission approval for such increases 
(up to non-controlling 49.99 percent interests). (See Sec.  
1.991(k)(2).)
    (b) Subsidiaries and affiliates. A foreign ownership ruling issued 
to a licensee shall cover it and any U.S.-organized subsidiary or 
affiliate, as defined in Sec.  1.990(d), whether the subsidiary or 
affiliate existed at the time the ruling was issued or was formed or 
acquired subsequently, provided that the foreign ownership of the 
licensee named in the ruling, and of the subsidiary and/or affiliate, 
remains in compliance with the terms and conditions of the licensee's 
ruling and the Commission's rules.
    (1) The subsidiary or affiliate of a licensee named in a foreign 
ownership ruling issued under Sec.  1.990(a)(1) may rely on that ruling 
for purposes of filing its own application for an initial common 
carrier or aeronautical license or spectrum leasing arrangement, or an 
application to acquire such license or spectrum leasing arrangement by 
assignment or transfer of control provided that the subsidiary or 
affiliate, and the licensee named in the ruling, each certifies in the 
application that its foreign ownership is in compliance with the terms 
and conditions of the foreign ownership ruling and the Commission's 
rules.
    (2) The subsidiary or affiliate of a licensee named in a foreign 
ownership ruling issued under Sec.  1.990(a)(2) may rely on that ruling 
for purposes of filing its own application for an initial common 
carrier radio station license or spectrum leasing arrangement, or an 
application to acquire such license or spectrum leasing arrangement by 
assignment or transfer of control provided that the subsidiary or 
affiliate, and the licensee named in the ruling, each certifies in the 
application that its foreign ownership is in compliance with the terms 
and conditions of the foreign ownership ruling and the Commission's 
rules.
    (3) The certifications required by paragraphs (b)(1) and (b)(2) of 
this section shall also include the citation(s) of the relevant 
ruling(s) (i.e., the DA or FCC Number, FCC Record citation when 
available, and release date).
    (c) Insertion of new controlling foreign-organized companies. (1) 
Where a licensee's foreign ownership ruling specifically authorizes a 
named, foreign investor to hold a controlling interest in the 
licensee's controlling U.S.-organized parent, for rulings issued under 
Sec.  1.990(a)(1), or in an intervening U.S.-organized entity that does 
not control the licensee, for rulings issued under Sec.  1.990(a)(2), 
the ruling shall permit the insertion of new, controlling foreign-
organized companies in the vertical ownership chain above the 
controlling U.S. parent, for rulings issued under Sec.  1.990(a)(1), or 
above an intervening U.S.-organized entity that does not

[[Page 41330]]

control the licensee, for rulings issued under Sec.  1.990(a)(2), 
without prior Commission approval provided that any new foreign-
organized company(ies) are under 100 percent common ownership and 
control with the foreign investor approved in the ruling.
    (2) Where a previously unapproved foreign-organized entity is 
inserted into the vertical ownership chain of a licensee, or its 
controlling U.S.-organized parent, without prior Commission approval 
pursuant to paragraph (c)(1) of this section, the licensee shall file a 
letter to the attention of the Chief, International Bureau, within 30 
days after the insertion of the new, foreign-organized entity. The 
letter must include the name of the new, foreign-organized entity and a 
certification by the licensee that the entity complies with the 100 
percent common ownership and control requirement in paragraph (c)(1) of 
this section. The letter must also reference the licensee's foreign 
ownership ruling(s) by IBFS File No. and FCC Record citation, if 
available. This letter notification need not be filed if the ownership 
change is instead the subject of a pro forma application or pro forma 
notification already filed with the Commission pursuant to the relevant 
wireless radio service rules or satellite radio service rules 
applicable to the licensee.
    (3) Nothing in this section is intended to affect any requirements 
for prior approval under 47 U.S.C. 310(d) or conditions for forbearance 
from the requirements of 47 U.S.C. 310(d) pursuant to 47 U.S.C. 160.
    Example (for rulings issued under Sec.  1.990(a)(1)). Licensee 
receives a foreign ownership ruling under Sec.  1.990(a)(1) that 
authorizes its controlling, U.S.-organized parent (``U.S. Parent A'') 
to be wholly owned and controlled by a foreign-organized company 
(``Foreign Company''). Foreign Company is minority owned (20 percent) 
by U.S.-organized Corporation B, with the remaining 80 percent 
controlling interest held by Foreign Citizen C. After issuance of the 
ruling, Foreign Company forms a wholly-owned, foreign-organized 
subsidiary (``Foreign Subsidiary'') to hold all of Foreign Company's 
shares in U.S. Parent A. There are no other changes in the direct or 
indirect foreign ownership of U.S. Parent A. The insertion of Foreign 
Subsidiary into the vertical ownership chain between Foreign Company 
and U.S. Parent A would not require prior Commission approval, except 
for any approval otherwise required pursuant to section 310(d) of the 
Communications Act and not exempt therefrom as a pro forma transfer of 
control under Sec.  1.948(c)(1).
    Example (for rulings issued under Sec.  1.990(a)(2)). An applicant 
for a common carrier license receives a foreign ownership ruling under 
Sec.  1.990(a)(2) that authorizes a foreign-organized company 
(``Foreign Company'') to hold a non-controlling 44 percent equity and 
voting interest in the applicant through Foreign Company's wholly-
owned, U.S.-organized subsidiary, U.S. Corporation A, which holds the 
non-controlling 44 percent interest directly in the applicant. The 
remaining 56 percent of the applicant's equity and voting interests are 
held by its controlling U.S.-organized parent, which has no foreign 
ownership. After issuance of the ruling, Foreign Company forms a 
wholly-owned, foreign-organized subsidiary to hold all of Foreign 
Company's shares in U.S. Corporation A. There are no other changes in 
the direct or indirect foreign ownership of U.S. Corporation A. The 
insertion of the foreign-organized subsidiary into the vertical 
ownership chain between Foreign Company and U.S. Corporation A would 
not require prior Commission approval.
    (d) Insertion of new non-controlling foreign-organized companies. 
(1) Where a licensee's foreign ownership ruling specifically authorizes 
a named, foreign investor to hold a non-controlling interest in the 
licensee's controlling U.S.-organized parent, for rulings issued under 
Sec.  1.990(a)(1), or in an intervening U.S.-organized entity that does 
not control the licensee, for rulings issued under Sec.  1.990(a)(2), 
the ruling shall permit the insertion of new, foreign-organized 
companies in the vertical ownership chain above the controlling U.S. 
parent, for rulings issued under Sec.  1.990(a)(1), or above an 
intervening U.S.-organized entity that does not control the licensee, 
for rulings issued under Sec.  1.990(a)(2), without prior Commission 
approval provided that any new foreign-organized company(ies) are under 
100 percent common ownership and control with the foreign investor 
approved in the ruling.
    Note to paragraph (d)(1): Where a licensee has received a foreign 
ownership ruling under Sec.  1.990(a)(2) and the ruling specifically 
authorizes a named, foreign investor to hold a non-controlling interest 
directly in the licensee (subject to the 20 percent aggregate limit on 
direct foreign investment), the ruling shall permit the insertion of 
new, foreign-organized companies in the vertical ownership chain of the 
approved foreign investor without prior Commission approval provided 
that any new foreign-organized companies are under 100 percent common 
ownership and control with the approved foreign investor.
    Example (for rulings issued under Sec.  1.990(a)(1)). Licensee 
receives a foreign ownership ruling under Sec.  1.990(a)(1) that 
authorizes a foreign-organized company (``Foreign Company'') to hold a 
non-controlling 30 percent equity and voting interest in Licensee's 
controlling, U.S.-organized parent (``U.S. Parent A''). The remaining 
70 percent equity and voting interests in U.S. Parent A are held by 
U.S.-organized entities which have no foreign ownership. After issuance 
of the ruling, Foreign Company forms a wholly-owned, foreign-organized 
subsidiary (``Foreign Subsidiary'') to hold all of Foreign Company's 
shares in U.S. Parent A. There are no other changes in the direct or 
indirect foreign ownership of U.S. Parent A. The insertion of Foreign 
Subsidiary into the vertical ownership chain between Foreign Company 
and U.S. Parent A would not require prior Commission approval.
    Example (for rulings issued under Sec.  1.990(a)(2)). Licensee 
receives a foreign ownership ruling under Sec.  1.990(a)(2) that 
authorizes a foreign-organized entity (``Foreign Company'') to hold 
approximately 24 percent of Licensee's equity and voting interests, 
through Foreign Company's non-controlling 48 percent equity and voting 
interest in a U.S.-organized entity, U.S. Corporation A, which holds a 
non-controlling 49 percent equity and voting interest directly in 
Licensee. (A U.S. citizen holds the remaining 52 percent equity and 
voting interests in U.S. Corporation A, and the remaining 51 percent 
equity and voting interests in Licensee are held by its U.S.-organized 
parent, which has no foreign ownership. After issuance of the ruling, 
Foreign Company forms a wholly-owned, foreign-organized subsidiary 
(``Foreign Subsidiary'') to hold all of Foreign Company's shares in 
U.S. Corporation A. There are no other changes in the direct or 
indirect foreign ownership of U.S. Corporation A. The insertion of 
Foreign Subsidiary into the vertical ownership chain between Foreign 
Company and U.S. Corporation A would not require prior Commission 
approval.
    (2) Where a previously unapproved foreign-organized entity is 
inserted into the vertical ownership chain of a licensee, or its 
controlling U.S.-organized parent, without prior Commission approval 
pursuant to paragraph (d)(1) of this section, the licensee shall file a 
letter to the attention of the Chief, International Bureau, within 30 
days after the insertion of the new, foreign-organized

[[Page 41331]]

entity. The letter must include the name of the new, foreign-organized 
entity and a certification by the licensee that the entity complies 
with the 100 percent common ownership and control requirement in 
paragraph (d)(1) of this section. The letter must also reference the 
licensee's foreign ownership ruling(s) by IBFS File No. and FCC Record 
citation, if available. This letter notification need not be filed if 
the ownership change is instead the subject of a pro forma application 
or pro forma notification already filed with the Commission pursuant to 
the relevant wireless radio service rules or satellite radio service 
rules applicable to the licensee.
    (e) New petition for declaratory ruling required. A licensee that 
has received a foreign ownership ruling, including a U.S.-organized 
successor-in-interest to such licensee formed as part of a pro forma 
reorganization, or any subsidiary or affiliate relying on such 
licensee's ruling pursuant to paragraph (b) of this section, shall file 
a new petition for declaratory ruling under Sec.  1.990 to obtain 
Commission approval before its foreign ownership exceeds the routine 
terms and conditions of this section, and/or any specific terms or 
conditions of its ruling.
    (f)(1) Continuing compliance. If at any time the licensee, 
including any successor-in-interest and any subsidiary or affiliate as 
described in paragraph (b) of this section, knows, or has reason to 
know, that it is no longer in compliance with its foreign ownership 
ruling or the Commission's rules relating to foreign ownership, it 
shall file a statement with the Commission explaining the circumstances 
within 30 days of the date it knew, or had reason to know, that it was 
no longer in compliance therewith. Subsequent actions taken by or on 
behalf of the licensee to remedy its non-compliance shall not relieve 
it of the obligation to notify the Commission of the circumstances 
(including duration) of non-compliance. Such licensee and any 
controlling companies, whether U.S.- or foreign-organized, shall be 
subject to enforcement action by the Commission for such non-
compliance, including an order requiring divestiture of the investor's 
direct and/or indirect interests in such entities.
    (2) Any individual or entity that, directly or indirectly, creates 
or uses a trust, proxy, power of attorney, or any other contract, 
arrangement, or device with the purpose or effect of divesting itself, 
or preventing the vesting, of an equity interest or voting interest in 
the licensee, or in a controlling U.S. parent company, as part of a 
plan or scheme to evade the application of the Commission's rules or 
policies under section 310(b) shall be subject to enforcement action by 
the Commission, including an order requiring divestiture of the 
investor's direct and/or indirect interests in such entities.

PART 25--SATELLITE COMMUNICATIONS

0
4. The authority citation for part 25 is revised to read as follows:

    Authority:  47 U.S.C. 701-744. Interprets or applies Sections 4, 
301, 302, 303, 307, 309, 310 and 332 of the Communications Act, as 
amended, 47 U.S.C. Sections 154, 301, 302, 303, 307, 309, 310 and 
332, unless otherwise noted.


0
5. Section 25.105 is added to read as follows:


Sec.  25.105  Citizenship.

    The rules that establish the requirements and conditions for 
obtaining the Commission's prior approval of foreign ownership in 
common carrier licensees that would exceed the 20 percent limit in 
section 310(b)(3) of the Communications Act (47 U.S.C. 310(b)(3)) and/
or the 25 percent benchmark in section 310(b)(4) of the Act (47 U.S.C. 
310(b)(4)) are set forth in Sec. Sec.  1.990 through 1.994 of this 
chapter.

[FR Doc. 2013-15314 Filed 7-9-2013; 8:45 am]
BILLING CODE 6712-01-P