FCC Decision To Revoke Operating Certificates from Chinese Telecommunications Company Upheld

On December 24, the U.S. Ninth Court of Appeals upheld the Federal Communications Commission's (FCC) decision to revoke the exporting certificates of a telecommunications company owned by the Chinese government.

It was a decision that reflects the current scrutiny and regulatory actions that the United States has taken against foreign-owned enterprises with state ties, particularly those perceived as national security threats.

How It All Started

The legal dispute started when China Unicom sought to challenge the FCC's 2002 order that revoked its licenses, arguing that the commission had overstepped its statutory authority. The company alleged that the FCC's decision was arbitrary and that the FCC failed to follow protocol.

China Unicom fought back, maintaining that it has complied with American laws and regulations and should not have operational licenses revoked without just cause.

Circuit Court Ruling

Judge Daniel Collins, writing for the majority, affirmed that the FCC acted within the boundaries of the law under the Communications Act, which grants the agency the authority to revoke telecommunication licenses for reasons related to national defense.

Judge Collins asserted that the existing geopolitical landscape, particularly our current relationship with China, places the U.S. at a higher risk and vulnerability. It allows them to have the upper hand if China is given such easy access to U.S. telecommunications infrastructure. He also wrote that there have been increasing threats of economic espionage, cyber-attacks, and intelligence-gathering activities. For these reasons, Judge Collins says, the FCC was within its authority.

The FCC's power stems from the federal Communications Act, which grants the agency the authority to revoke telecommunications licenses for reasons related to national defense.

Ample Evidence

According to the majority, the FCC had significant evidence to support its conclusion that China Unicom's ownership by the Chinese government, combined with the affiliations of its board members with the Chinese Communist Party (CCP), rendered the company vulnerable to coercion and influence from Beijing.

China Unicom customers in the United States may now have to find other carriers.

Takeaways

There are two broad takeaways to note. The first is that federal appellate courts are now applying a post-Chevron analysis to agency decisions. Here, the Ninth Circuit was not obligated to give deference to the FCC's interpretation of the Communications Act. However, the court agreed with the FCC's interpretation regardless.

Secondly, the court's decision not only affects the operational status of China Unicom but also serves as a warning to other foreign telecommunication companies regarding the potential consequences of being linked to state actors from nations deemed hostile to U.S. interests. Combined with the current TikTok case before the Supreme Court, the case reflects a heightened vigilance on the part of the U.S. government concerning foreign investments in critical infrastructure sectors. This ruling can set a precedent against other foreign state-owned enterprises, particularly those with ties to China or other nations that pose similar security concerns.

Related Resources

• Unbundled Sports Streaming Service Benched by Legal Challenge from FuboTV (FindLaw's Federal Courts)
• TikTok on the Chopping Block as Court Backs U.S. Ban (FindLaw's Courtside)
• The History of the Chevron Doctrine (FindLaw's Federal Courts)