The structuring of minority indirect foreign investments in U.S. wireless telecommunications carriers may become slightly easier for some companies, thanks to a decision released by the FCC late last week. The decision, in IB Docket No. 11-133, dealt with the rather esoteric question of whether a foreign investment, held indirectly through a U.S.-organized entity that does not control the licensee, should be analyzed under Section 310(b)(3) of the Communications Act (“Act”) – which contains a hard 20% cap on foreign ownership – or under Section 310(b)(4) of the Act – which sets a 25% initial limit, but permits up to 100% indirect foreign ownership if prior FCC approval is obtained.
The FCC’s International Bureau (but not the full Commission) had previously interpreted the 20% cap in Section 310(b)(3) to apply in these cases, while at the same time permitting, under Section 310(b)(4), greater indirect foreign ownership if the foreign interest was held through a U.S. entity that controlled the licensee. Many wireless industry commenters in the proceeding pointed out the nonsensical result of allowing controlling entities to have greater levels of foreign ownership than non-controlling entities. Furthermore, they argued that Congress only intended Section 310(b)(3) to apply to direct investments in common carrier licensees, while Section 310(b)(4) was crafted to deal with all indirect investments.