Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 in the Matter of China Telecom (Americas) Corporation )

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554

In the Matter of ) ) GN Docket 20-109 China Telecom (Americas) Corporation )

REPLY COMMENTS OF CHINA TELECOM (AMERICAS) CORPORATION TO ORDER INSTITUTING PROCEEDINGS

Andrew D. Lipman Catherine Wang Russell M. Blau Raechel Keay Kummer

MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., NW Washington, D.C. 20004 (202) 739-3000 (202) 739-3001 (Fax) [email protected] [email protected] [email protected] [email protected]

Counsel to China Telecom (Americas) Corporation March 1, 2021 TABLE OF CONTENTS

Page

I. INTRODUCTION AND SUMMARY ...... 1 II. THE FCC MUST PROVIDE CTA AN OPPORTUNITY FOR HEARING ...... 3 A. A Hearing Is Required by the Commission’s Rules ...... 4 1. Commission Precedent Holds That Section 1.91 of the Rules Applies to Revocation of Section 214 Authorizations ...... 4 2. The Commission Has Not Attempted to Explain or Justify Its Departure from Past Practice ...... 9 3. The Commission Is Ignoring Its Own Rules...... 11 B. A Hearing Is Required by the Due Process Clause...... 13 1. CTA Is Entitled To Due Process Protections Regarding Its Section 214 Authorizations ...... 13 2. The Procedures Adopted in the Order Instituting Proceedings Violate CTA’s Due Process Rights...... 15 3. Denying CTA an Evidentiary Hearing is Arbitrary and Capricious ...... 17 C. APA Section 558(c) Does Not Create a Relevant Exemption ...... 23 D. The Commission Cannot Avoid a Hearing by Claiming That No Material Facts Are in Dispute...... 29 1. Material Facts Remain Disputed ...... 29 2. Even if Some Evidentiary Facts Are Undisputed, the Issue of Whether Those Facts Justify Revocation Must Be Designated for Hearing ...... 33 III. THE EVIDENCE CITED BY THE COMMISSION DOES NOT JUSTIFY REVOCATION OR TERMINATION ...... 37 A. The Burden of Proof Is on the Commission ...... 38 B. Revocation Requires a Showing of Misconduct ...... 39 C. The Evidence in the Record Does Not Justify Revocation or Termination ...... 43 1. CTA Stands by Its Response to the Order to Show Cause ...... 43 2. The Commission Should Not Revoke CTA’s Authorizations Based Solely on Allegations Against Its Corporate Parent(s) ...... 45 3. The Additional Allegations in the Executive Branch Comments Do Not Justify Revocation or Termination...... 51 IV. IF THE COMMISSION DOES REVOKE OR TERMINATE CTA’S AUTHORIZATIONS, IT MUST PROVIDE SOME TRANSITION PERIOD FOR EXISTING CUSTOMERS ...... 58

-i- TABLE OF CONTENTS (continued) Page

A. CTA’s Resold Mobile Services Do Not Present National Security Risks and Should be Excluded from Any Revocation Order ...... 60 V. CONCLUSION ...... 62

-ii- Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554

In the Matter of ) ) GN Docket 20-109 China Telecom (Americas) Corporation )

REPLY COMMENTS OF CHINA TELECOM (AMERICAS) CORPORATION TO ORDER INSTITUTING PROCEEDINGS

China Telecom (Americas) Corporation (“CTA”), by its undersigned counsel, hereby sub- mits these reply comments to the Order Instituting Proceedings on Revocation and Termination and Memorandum Opinion and Order (“Order Instituting Proceedings”)1 of the Federal Commu- nications Commission (“FCC” or “Commission”) and the Executive Branch Response2 filed in the above-captioned dockets.

I. Introduction and Summary

In the Order Instituting Proceedings, the Commission gives CTA an “opportunity” to respond to the allegations against it, and contends that this opportunity is all the procedural protection to which CTA is entitled before revocation or termination3 of its domestic and international

1 See China Telecom (Americas) Corporation, Order Instituting Proceedings on Revocation and Termination and Memorandum Opinion and Order, 35 FCC Rcd. 15006 (2020). 2 See Executive Branch Response to December 10, 2020 Order Instituting Proceedings on Revocation and Termination and Memorandum Opinion and Order, GN Docket 20-109, File Nos. ITC-214-20010613-00346, ITC-214-20020716-00371, ITC-T/C-20070725-00285 (filed Jan. 14, 2021) (“Exec. Br. Response”). 3 The Order Instituting Proceedings appears to draw a distinction between “revocation” and “termination” of Section 214 authorizations, where “termination” appears to result from violation of an express condition of the authorization while “revocation” appears to encompass a wider range of reasons. CTA has been unable to identify any previous Commission decision establishing this distinction in the context of Section 214 authorizations. In a case involving spectrum licenses, the staff has distinguished between revocation and a termination that occurred “automatically” due

1 authorizations under Section 214 of the Communications Act of 1934 (the “Act”). This opportunity is largely illusory, however, since CTA has already responded once to the same allegations and the Commission has made clear that it will not accept CTA’s position on any of the issues. The additional allegations raised in the Executive Branch Response are misleading and unfounded, and even if they were accurate they would not materially affect the Commission’s action in this case.

The process that the Commission proposes to follow in this case ignores the Commission’s own rules and precedents, and deprives CTA of a property interest in its authorizations without the due process of law required by the Constitution. Until now, the Commission has consistently in- terpreted its own rules as requiring that issues in revocation proceedings be designated for hearing, and the Order neither acknowledged that precedent nor offered any rationale for departing from it.

The exceptions from section 558(c) of the Administrative Procedure Act cited in the Order are not applicable; and the Commission’s assertion that there are no material facts in dispute simply ignores a long list of disputed evidentiary issues, as well as the ultimate issue of whether any facts that have been established are sufficient to justify revocation.

As stated in CTA’s June 8, 2020, response to the Order to Show Cause in this docket, which is incorporated herein by reference, the allegations presented by the Executive Branch agencies and apparently endorsed by the Commission in the Order Instituting Proceedings do not demonstrate the kind of egregious misconduct that the Commission has previously required to justify revocation of Section 214 authorizations. At most, the Executive Branch’s allegations

to a condition in the license. Northstar Tech., LLC, 29 F.C.C. Rcd. 14679, 14680-81 (WTB 2014). In that case, however, there was no dispute that the termination condition had occurred, in contrast to this case where CTA does dispute the claim that it breached its letter of assurances with the Executive Branch agencies. Since either revocation or termination would have the same result of preventing CTA from continuing to offer interstate and international telecommunications services as a common carrier, we refer to both interchangeably as “revocation” for purposes of these Reply Comments.

- 2 - amount to painting all Chinese government-owned entities with an indiscriminate brush of suspicion and distrust, rather than showing any particularized behavior by CTA that actually harms the public interest. The Commission’s unprecedented assertion that it can revoke authorizations simply due to changes in foreign policy considerations, without requiring evidence of any misconduct by the carrier, would discourage investment and injure consumer welfare by depriving all carriers of any expectation in their ability to continue providing services in the future.

Because the Fourth Circuit Court of Appeals has adopted an expedited briefing schedule for its consideration of CTA’s petition for review of the Order Instituting Proceedings, the Com- mission should not conduct any further adjudication in this proceeding until the court has reached a decision in that matter.4 After such a decision, the Commission should either terminate this proceeding entirely, or, failing that, at least designate issues for hearing before an Administrative Law

Judge as it consistently has done in all past contested revocation proceedings. At such a hearing,

CTA reserves its right to present additional evidence and information regarding why the Commis- sion should not revoke or terminate CTA’s Section 214 authorizations. If, notwithstanding the above, the Commission were to proceed as it has proposed and revoke CTA’s authorizations without a hearing, it would at a minimum have to provide some reasonable transition period for the tens of thousands of customers who currently rely on CTA’s services.

II. The FCC Must Provide CTA an Opportunity for Hearing

The FCC’s failure to designate CTA’s Section 214 revocation proceedings for a hearing prior to termination of its authorizations was arbitrary and capricious because the FCC deviated

4 China Telecom (Americas) Corp. v. FCC, Case No. 20-2365 (4th Cir.), Accelerated Brief- ing Order (Feb. 16, 2021).

- 3 - from its own precedent without acknowledgement; and, independently, it violated CTA’s constitutional rights under the Due Process Clause. Courts have repeatedly held that “an unexplained inconsistency in agency policy is a reason for holding an interpretation to be an arbitrary and capricious change from agency practice.”5 “At a minimum, an agency must ‘display awareness that it is changing position and show that there are good reasons for the new policy.’”6

A. A Hearing Is Required by the Commission’s Rules

The Communications Act is entirely silent as to either substantive standards or processes for revocation of an authorization under Section 214. Nonetheless, by its consistent practice and precedents, as discussed in the following section, the FCC has determined that the same process that governs revocation of radio licenses under Section 312(c) and (d) of the Act7 also governs revocation of Section 214 authorizations. This process includes notice, an opportunity to respond, and a hearing before an Administrative Law Judge to assess the reasons for revocation, including whether the evidence presented was sufficient to justify revocation.

1. Commission Precedent Holds That Section 1.91 of the Rules Applies to Revocation of Section 214 Authorizations

Section 1.91 of the FCC Rules generally requires that issues in a revocation or cease and desist proceeding be submitted to an Administrative Law Judge for an evidentiary hearing, unless the respondent waives its right to a hearing.8 The rule by its terms concerns station licenses and

5 Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2126 (2016) (alterations omitted). See also Kreis v. Sec'y of Air Force, 406 F.3d 684, 687 (D.C. Cir. 2005) (“It is axiomatic that an agency must treat similar cases in a similar manner unless it can provide a legitimate reason for failing to do so.” (alterations omitted)). 6 Jimenez-Cedillo v. Sessions, 885 F.3d 292, 298 (4th Cir. 2018) (quoting Encino Motorcars, 136 S. Ct. at 2126). 7 47 U.S.C. § 312. 8 47 C.F.R. §§ 1.91(d), 1.92.

- 4 - construction permits (that is, licenses and permits for use of radio frequencies), but the FCC has consistently applied Rule 1.91 to Section 214 revocation proceedings as well, and by these precedents has effectively adopted it as a rule of procedure applicable to such proceedings.9 Multiple cases demonstrate this practical construction.

In response to widespread complaints that a group of carriers were changing consumers’ preferred carriers without authorization, the FCC issued a show cause order that included a notice of opportunity for hearing.10 The FCC cited Section 312 of the Act and Section 1.91 of its rules, among other provisions, as authority for conducting the hearing and for the process to be followed, respectively.11 The issues designated for hearing included determining four categories of evidentiary facts, and in addition the following –

(e) To determine, in view of the evidence adduced on issues (a) through (d) above, whether any or all of the Fletcher Companies, violated one or more … provisions of the Communications Act of 1934, as amended, and the Commission's rules….

(f) To determine, in view of the evidence adduced on the foregoing issues, whether the continued operation of the Fletcher Companies as common carriers would serve the public convenience and necessity.

(g) To determine, in view of the evidence adduced on the foregoing issues, whether the issuance of an order restraining the principal or principals of the Fletcher Companies and the Fletcher Companies from future provision of interstate common carrier services is in the public interest.

9 The Executive Branch dismisses CTA’s citation of Section 312(d) of the Act and Section 1.91 of the rules because these provisions facially apply only to revocation of radio licenses. Exec. Br. Response, p. 4. But this ignores that the FCC has repeatedly cited both of these provisions in orders designating proposed revocation of Section 214 authorizations for hearing, and has thereby adopted them as the relevant standards for Section 214 revocation proceedings. 10 CCN, Inc., et al., 12 FCC Rcd. 8547 (1997). 11 Id. at 8559-61, ¶¶ 20, 21, 24, 25.

- 5 - The FCC subsequently found that the respondents failed to enter an appearance and therefore had waived their right to a hearing pursuant to Sections 1.91 and 1.92, and revoked their authority to operate.12

In another case, the FCC ordered a company alleged to have made fraudulent claims on an

FCC-administered fund to show cause why it would serve the public convenience and necessity to continue to operate and retain its Section 214 authorization for interstate common carrier services.13 It designated 18 issues for hearing, including “to determine, in light of all the foregoing, whether Publix Network’s authorization to operate as a common carrier should be revoked.”14 The show cause order cited Section 1.91 of the rules for the hearing procedures, and Section 312 of the

Act for the burden of proof.15 The FCC and the respondents subsequently entered into a consent decree that resulted in penalties and relinquishment of Section 214 authority.16

In 2003, the FCC designated two Section 214 revocation cases for hearing. All the respondent companies were suspected of misleading telemarketing campaigns and both cases were resolved by consent decree. First, it issued a show cause order and notice of opportunity for hearing to Business Options, Inc.17 This order directed that an Administrative Law Judge resolve multiple issues, including “whether Business Options, Inc.’s authorization pursuant to section 214 of the

12 CCN, Inc., 13 FCC Rcd. 13599 (1998). 13 Publix Network Corp., 17 FCC Rcd. 11487 (2002) (“Publix”) 14 Id. at ¶ 46(p). The order also designated for hearing the issue of whether the various respondents, allegedly owned and controlled by a single individual, “should, for purposes of this proceeding, be considered one and the same entity.” Id. at ¶ 46(r). 15 Id. at ¶¶ 47, 48. 16 Publix Network Corp., Consent Order, FCC 05M-12 (rel. March 15, 2005), https://docs.fcc.gov/public/attachments/FCC-05M-12A1.pdf. 17 Business Options, Inc., 18 FCC Rcd. 6881 (2003), case terminated by consent, 19 FCC Rcd. 2916 (2004).

- 6 - Act to operate as a common carrier should be revoked”; and directed the respondent to appear pursuant to Section 1.91 of the rules.18 It issued a virtually identical order, again referencing Sec- tion 1.91, in a second case.19 In 2007, the Commission issued a third and similar show cause order and notice of opportunity for hearing that relied upon section 1.91 and designated for an Admin- istrative Law Judge proceeding the issue of whether the authority of the respondents “to provide interstate common carrier services should be revoked.”20

The FCC has revoked Section 214 authorizations without referring issues to an Adminis- trative Law Judge for an evidentiary hearing only in cases where the respondent had gone out of business and did not respond to notices from the FCC. Beginning in 2015 the FCC terminated, without evidentiary hearings, a series of authorizations held by carriers that allegedly breached their agreements with executive agencies. These companies had failed to respond to multiple contact attempts by the government and therefore were presumed to have gone out of business.21 There is no need to conduct a hearing for a company that has not responded to notice of the proposed action against it, but this precedent is obviously inapplicable to CTA, which has vigorously op- posed the FCC’s proposed revocation.

18 Id. at ¶¶ 36, 38. 19 NOS Communications, Inc., 18 FCC Rcd. 6952 (2003), case terminated by consent, FCC 03M-42 (2003). 20 Kurtis J. Kintzel et al., 22 FCC Rcd. 17197, ¶ 1 (2007), case terminated by consent, FCC 09M-52 (2009). 21 See, e.g., Wypoint Telecom, Inc. Termination of International Section 214 Authorization, Order, 30 FCC Rcd. 13431, ¶ 4 (IB 2015); LDC Telecommunications, Inc., File No.: ITC-214- 20080523-00238, Order to Pay or to Show Cause, 31 FCC Rcd. 7228 (EB 2016), Revocation Or- der, 31 FCC Rcd. 11661, 11662, ¶ 5 (EB, IB & WCB 2016) (revoking domestic and international Section 214 authorizations for failure to pay regulatory fees after carrier failed to respond to order to show cause); WX Communications Ltd. Termination of International Section 214 Authorization, Order, DA 19-130, ¶ 5 (IB 2019).

- 7 - In a 2016 case, the FCC issued a notice of apparent liability for forfeiture against a Hawai- ian company, and additionally ordered the company “to submit a report, within sixty (60) days of the release of this [notice], explaining why the Commission should not initiate proceedings against

[it] to revoke its Commission authorizations, including but not limited to, its Section 214 authorizations.”22 The Commission has not yet taken any action to initiate the revocation proceeding con- templated by that notice, and therefore has not had occasion to state what procedures would be followed in such a proceeding.23

In 2017, the FCC staff, acting on delegated authority, issued an order to a group of related companies that had already surrendered their international Section 214 authorizations, and had reportedly gone out of business, directing them to show cause why their domestic Section 214 authorization should not be revoked.24 The staff order gave the companies an opportunity to submit a written response to the show cause order, but was silent as to what procedures, if any, would be followed if such a response was filed. In any event, the FCC’s electronic filing system does not indicate that any written response was filed by any of the companies, and the Commission has taken no further action pursuant to the show cause order.25

22 Sandwich Isles Communications, Inc. et al., 32 FCC Rcd. 12947, 12974, ¶ 84 (2016). 23 In a subsequent order finalizing the forfeiture, the FCC noted that the respondent had submitted written objections to the proposed revocation, and that it would “address SIC’s authorizations in an appropriate separate order.” Sandwich Isles Communications, Inc. et al., 35 FCC Rcd. 10831, 10855, ¶ 48 (2020). As of the date of this filing, no such separate order has been issued. 24 OneLink Communications, Inc. et al., Order to Show Cause, 32 FCC Rcd. 1884, 1886, ¶ 8 (EB & WCB 2017). 25 A similar 2016 staff order directed another company to file a written statement showing cause why its Section 214 authorization should not be revoked or declared terminated. New Cen- tury Telecom, Inc., Admonishment Order, 31 FCC Rcd. 5187 (EB 2016). The ECFS does not show that the company responded to the order and the Commission has taken no further action in the proceeding.

- 8 - In sum, these cases show a consistent Commission practice of requiring that all proposed revocations be designated for hearing if the respondent has not waived that opportunity.26 Further, the FCC’s designation orders in CCN, Publix, Business Options, and NOS establish that the issues to be designated for hearing include not only specific evidentiary questions, but also the ultimate issue of whether the facts found justify revocation of the authorization.

2. The Commission Has Not Attempted to Explain or Justify Its Departure from Past Practice

The FCC proposes to revoke CTA’s Section 214 authorizations without the opportunity for an evidentiary hearing. Although the Order Initiating Proceedings rejects CTA’s argument that a hearing is required, it neither acknowledges nor attempts to distinguish this case from the past cases in which it has provided such an opportunity. Instead, the FCC invokes its authority to set its own procedural rules and proclaims that the process it has established for this case is “sufficient.”27 Although the Commission does indeed have authority to adopt rules of procedure, it is not at liberty to ignore those rules when they do not suit it.28 Here, a clear line of precedent requires

26 The recent staff orders cited in notes 24 and 25 do not expressly contradict that practice, although they also do not acknowledge it. And they effectively became moot when the carriers in those cases failed to respond to the orders. Even if the staff had purported to revoke authorizations without an opportunity for hearing, however, their actions would not be binding on the Commis- sion. As the Executive Branch points out, “Bureau-level orders issued by staff are not precedent and do not bind the Commission.” Exec. Br. Response, p. 5, citing Comcast Corp. v. FCC, 526 F.3d 763, 769 (D.C. Cir. 2008) (“an agency is not bound by the actions of its staff if the agency has not endorsed those actions …”). A fortiori, the staff cannot overrule a precedential decision of the agency. 27 Order Instituting Proceedings, 35 FCC Rcd. at 15015, ¶ 16. 28 See Morton v. Ruiz, 415 U.S. 199, 235 (1974) (“Where the rights of individuals are affected, it is incumbent upon agencies to follow their own procedures.”); Morris v. McCaddin, 553 F.2d 866, 870 (4th Cir. 1977) (“The rule is well established that: ‘An agency of the government must scrupulously observe rules, regulations, or procedures which it has established. When it fails to do so, its action cannot stand and courts will strike it down.’”) (citations omitted); Black v. ICC, 737 F.2d 643, 652 n.3 (7th Cir. 1984) (“[O]nce an agency exercises its discretion and creates the procedural rules under which it desires to have its actions judged, it denies itself the right to violate

- 9 - an opportunity for hearing before revocation of a Section 214 authorization.29 The Commission cannot depart from that precedent without providing a reasonable justification for its decision.

“Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change…. The agency must at least display awareness that it is changing position and show that there are good reasons for the new policy.”30 The Fourth Circuit applied the logic of Encino Motorcars, LLC v. Navarro when it found that the Department of Homeland Se- curity failed to give a reasoned explanation for its rescission of the Deferred Action for Childhood

Arrivals: it is not enough to merely articulate the view that prior policy was unlawful without identifying any conflicting statutory provisions.31 Similarly, the Fourth Circuit found that the

Board of Immigration Appeals departed from its longstanding policy of finding that an alien who entered the country under specific circumstances was considered free from official restraint.32 It is arbitrary and capricious for an agency to change policy or fail to apply longstanding policy without justification. The FCC’s decision to change policy without explanation is plainly arbitrary and capricious and must be set aside.

these rules. If an agency in its proceedings violates its rules and prejudice results, any action taken as a result of the proceedings cannot stand.”); National Conservative Political Action Committee v. FEC, 626 F.2d 953, 959 (D.C. Cir. 1980) (“Agencies are under an obligation to follow their own regulations, procedures, and precedents, or provide a rational explanation for their departures.”). 29 Indeed, while this proceeding was pending, the Commission adopted amendments to its rules of procedure for administrative hearings that, among other things, make specific reference to waiver of hearings relating to revocation of Section 214 authorizations. Procedural Streamlining of Administrative Hearings, 35 FCC Rcd. 10729, 10731 n.20, 10741 n.106 (2020) (“Administra- tive Hearings Order”). The FCC would not have adopted rules applicable to revocation proceedings designated for hearing if it did not believe that hearings were required in such cases. 30 Encino Motorcars, 136 S. Ct. at 2125. 31 Casa De Maryland v. U.S. Dep't of Homeland Sec., 924 F.3d 684, 704 (4th Cir. 2019), cert. denied sub nom. Dep't of Homeland Sec. v. Casa de Maryland, 141 S. Ct. 156 (2020). 32 De Leon v. Holder, 761 F.3d 336, 344 (4th Cir. 2014).

- 10 - 3. The Commission Is Ignoring Its Own Rules

In September, the Commission amended 47 C.F.R. § 1.91 to provide that “[a]n order to show cause why an order of revocation and/or a cease and desist order should not be issued will designate for hearing the matters with respect to which the Commission is inquiring.”33 Although

§ 1.91 does not specifically refer to revocation of Section 214 authorizations, the Commission has applied that rule in past Section 214 revocation cases, as shown in Section II.A.1 above. In addition, according to the Administrative Hearings Order, “[t]o determine whether due process requires live testimony in a particular case, the presiding officer will apply the three-part test the Supreme

Court adopted in Mathews v. Eldridge.”34 Specifically, one will consider: (1) “the private interest that will be affected by the official action;” (2) “the risk of erroneous deprivation of such interest through the procedures used as well as the probable value, if any, of additional or substitute procedural safeguards;” and (3) “the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.”35 The Order Instituting Proceedings, however, arbitrarily and capriciously ignores the Ad- ministrative Hearing Order (and Supreme Court precedent) and did not “designate for hearing the matters with respect to which the Commission is inquiring” or adequately assess (or even refer to) the Mathews factors in assessing CTA’s due process protections. This is arbitrary and capricious.

33 Administrative Hearings Order at Appendix A, 47 C.F.R. § 1.91(b) (emphasis added). The previous version of the rule similarly provided, “An order to show cause why an order of revocation and/or a cease and desist order should not be issued will contain a statement of the matters with respect to which the Commission is inquiring and will call upon the person to whom it is directed (the respondent) to appear before the Commission at a hearing … and given [sic] evidence upon the matters specified in the order to show cause.” 47 C.F.R. § 1.91(b) (Oct. 1, 2019). 34 Administrative Hearings Order, 35 FCC Rcd. at 10733, ¶ 12. 35 Mathews v. Eldridge, 424 U.S. 319, 335 (1976).

- 11 - When an agency fails to follow its own rules, regulations, or procedures, “its action cannot stand and courts will strike it down.”36 An administrative determination will be invalidated where, as here, there is: (1) “a violation,” (2) “of a regulation intended for the [individual’s] benefit,” (3)

“that causes prejudice to the [individual].”37 Here, the FCC violated its own rules requiring a live hearing, which were intended to “[safeguard] the rights of parties to a full and fair hearing.”38

These rules are intended to benefit parties in administrative proceedings, like CTA, by safeguard- ing their due process rights. Therefore, the rule that the FCC violated was intended for CTA’s benefit.

The Commission’s behavior prejudices CTA. When an agency violates a rule intended for an individual’s benefit, its dereliction causes prejudice “where compliance with the regulation is mandated by the constitution” or “where an entire procedural framework, designed to insure the fair processing of an action affecting an individual is created but then not followed by an agency.”39

CTA is prejudiced because the FCC failed to adhere to its rules that are intended to provide to

CTA the due process mandated by the Constitution. Moreover, the FCC created these rules to

“[safeguard] the rights of parties to a full and fair hearing” in revocation proceedings, and then failed to adhere to them when initiating revocation proceedings against CTA.

36 United States v. Heffner, 420 F.2d 809, 911 (4th Cir. 1976) (citing United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954)); see also Nader v. Blair, 549 F.3d 953, 962 (4th Cir. 2008) (“[W]hen an agency fails to follow its own procedures or regulations, that agency’s actions are generally invalid.”). 37 Yanez-Marquez v. Lynch, 789 F.3d 434, 474 (4th Cir. 2015) (citing United States v. Mor- gan, 193 F.3d 252, 266 (4th Cir. 1999)). 38 Administrative Hearings Order, 35 FCC Rcd. at 10729, ¶ 2. 39 See Morgan, 193 F.3d at 267 (quoting Garcia-Flores, 17 I. & N. Dec. 325, 329 (BIA 1980)); see also Yanez-Marquez, 789 F.3d at 474 (finding no prejudice because the regulations that the agency violated did not create any substantive or procedural rights).

- 12 - The FCC violated its own rules requiring a live hearing, which were intended to benefit parties like CTA by protecting due process rights and this violation prejudiced CTA. Likewise, the

Commission failed to apply its own test to determine whether CTA’s due process rights would be substantially protected, failing to even reference the Mathews test in its Order Instituting Proceed- ings. The Commission’s decision to ignore its own rules is arbitrary and capricious and may not stand.

B. A Hearing Is Required by the Due Process Clause

1. CTA Is Entitled To Due Process Protections Regarding Its Section 214 Authorizations

CTA’s Section 214 authorizations are protected property interests.40 To have a protectable property interest in a business license or permit, an individual must have “more than a unilateral expectation” in the continued effect of the license.41 Where, as here, the government’s discretion to revoke a license is limited, the licensee holds a protected property interest.

In 3883 Connecticut LLC v. District of Columbia, the court considered whether the plaintiff had a constitutionally protected property interest in the building permits the city issued to him.42

Under the applicable city code, an official could only revoke or suspend the plaintiff’s permit under five specifically enumerated circumstances.43 Because the applicable city code limited the city’s discretion to revoke issued permits, the D.C. Circuit found that the plaintiff had “more than a

40 See, e.g., Spinelli v. New York, No. 07-1237-cv, 2009 WL 2413929 (2d Cir. Aug. 7, 2009) (holding that a business license, once granted, is a protected property interest warranting due process protection). 41 See 3883 Conn. LLC v. Dist. of Columbia, 336 F.3d 1068, 1072 (D.C. Cir. 2003). 42 Id. at 1069. 43 Id. at 1073.

- 13 - unilateral expectation” in the permit’s continued effect.44 Because of this expectation in the permit’s continued effect, the D.C. Circuit held that the building permit was a property interest protected by the due process clause of the U.S. Constitution.45

So too, here. CTA has a property interest in its Section 214 authorizations because applicable rules constrain the FCC’s discretion in revoking those authorizations. The FCC’s discretion to revoke Section 214 authorizations is limited to cases of adjudicated misconduct.46 “Adjudicated misconduct” means “a violation of the terms of an authorization, the [Communications] Act, or a

Commission rule or order.”47 To impose any sanctions on a carrier, the FCC is required to prove with reliable, probative, and substantial evidence that the carrier engaged in a violation of the

Communications Act, the FCC’s rules or orders, or the terms of its Section 214 authorizations.48

44 Id. at 1072. 45 Id. 46 See Foreign Participation Order, 12 FCC Rcd. 23891, ¶ 295 (1997). 47 See Marpin Telecoms and Broadcasting Co. Ltd. v. Cable & Wireless, Inc., 18 FCC Rcd. 508, 515 (2003), denying recon. of 17 FCC Rcd. 7601 (2002). 48 See 47 U.S.C. § 312(d) (requiring in the analogous context of revocation of station licenses and construction permits that “both the burden of proceeding with the introduction of evidence and the burden of proof shall be upon the Commission”); see also 47 C.F.R. § 1.91(d).

- 14 - Historically, the FCC only revoked Section 214 authorizations under circumstances where the adjudicated misconduct was of an “egregious nature.”49 CTA thus has “more than a unilateral expectation” in its Section 214 authorizations’ continued effect. The authorizations are a constitutionally protected property interest.50

2. The Procedures Adopted in the Order Instituting Proceedings Violate CTA’s Due Process Rights

After a protectable interest has been established the question becomes, what process is due? The U.S. Constitution requires “that the government take reasonable measures to ensure basic fairness to the private party and that the government follow procedures reasonably designed to protect against erroneous deprivation of the private party’s interests.”51 “The [Supreme] Court has consistently held that some kind of hearing is required at some time before a person is finally deprived of his property interests.”52 “The requirement for some kind of a hearing applies to the

49 See Protecting Consumers from Unauthorized Carrier Changes & Related Unauthorized Charges, 33 FCC Rcd. 5773 (2018) (“[W]e will consider initiating proceedings to revoke Section 214 operating authorization in cases of ‘egregious misconduct and the demonstrated harm to consumers from the apparent violations.’”); Sandwich Isles Commc’ns, Inc., 31 FCC Rcd. 12947 (2016) (issuing order to show cause why Commission should not revoke carrier’s Section 214 authorizations “in light of [its] egregious misconduct and the demonstrated harm”); Int’l Settle- ments Policy Reform, 27 FCC Rcd. 15521, ¶¶ 61–62 (2012) (finding that because revocation of a Section 214 authorization “is a severe remedy . . . such a remedy should be reserved for cases of sustained circuit disruption or other egregious behavior”); FCC Enf’t Advisory, 26 FCC Rcd. 16411, 16412 (2011) (“In egregious cases a carrier could face . . . even revocation of its section 214 authorization to operate as a carrier.”). 50 Even assuming arguendo that a court were to accept the FCC’s position that its “public interest” authority to revoke Section 214 authorizations does not require a showing of particularized misconduct, it still would be the case that the FCC cannot revoke a Section 214 authorization at will. Any revocation would still be subject to judicial review under the arbitrary and capricious standard, so a licensee would have an expectation that its authorization would not be revoked without cause. 51 Al Haramain Islamic Found., Inc. v. U.S. Dep’t of Treasury, 686 F.3d 965, 980 (9th Cir. 2012). 52 Wolff v. McDonnell, 418 U.S. 539, 557–58 (1974).

- 15 - taking of private property, Grannis v. Ordean, 234 U.S. 385, 1363 (1914), the revocation of licenses, In re Ruffalo, 390 U.S. 544, 88 S.Ct. 1222, (1968), the operation of state dispute-settlement mechanisms, when one person seeks to take property from another, or to government-created jobs held, absent ‘cause’ for termination [citation omitted].”53

Due process usually requires a pre-deprivation hearing where the loss of property or liberty results from established state procedures; this analysis turns on whether the alleged deprivation is foreseeable and will occur at a predictable point, such that pre-deprivation safeguards would be of use in preventing the kind of deprivation alleged.54 That is the situation here.

CTA will be predictably deprived of its property interest without due process of law if the

FCC revokes its authorizations without an evidentiary hearing. The Commission apparently already has determined that CTA “has failed to rebut the serious concerns of the Executive Branch about its continued presence in the United States.”55 This is so despite CTA’s continued insistence that the Recommendation relies on misrepresentations of fact, as described in Section II.D.1. In such a circumstance, a pre-deprivation hearing is the only way to ensure that due process is main- tained. Absent a hearing, the tenor of the Order Instituting Proceedings makes it obvious that the outcome of the FCC’s proceeding is preordained.

Importantly, the Commission cannot say that “predeprivation process [is] impossible here,”56 because the Commission has arranged for an evidentiary hearing before an Administrative

53 Id. 54 See Zinermon v. Burch, 494 U.S. 113, 132 (1990) (“In situations where the State feasibly can provide a predeprivation hearing before taking property, it generally must do so.”). 55 Order Instituting Proceedings, 35 FCC Rcd. at 15006-07, ¶ 1. 56 Zinermon, 494 U.S. at 136–37.

- 16 - Law Judge in every other contested Section 214 revocation.57 The Commission’s own rules provide a process for administrative hearings that, if followed, would protect CTA’s due process rights against erroneous deprivation. It is the Commission’s arbitrary and capricious decision to ignore those procedures that deprives CTA of due process of law.

3. Denying CTA an Evidentiary Hearing is Arbitrary and Capricious

According to the Commission’s recent Administrative Hearings Order, “[t]o determine whether due process requires live testimony in a particular case, the presiding officer will apply the three-part test the Supreme Court adopted in Mathews v. Eldridge.”58 Specifically, one will consider: (1) “the private interest that will be affected by the official action;” (2) “the risk of erroneous deprivation of such interest through the procedures used as well as the probable value, if any, of additional or substitute procedural safeguards;” and (3) “the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.”59 The Order Instituting Proceedings, however, arbitrarily and capriciously ignores the Administrative Hearings Order (and Supreme Court precedent) and does not adequately assess (or even refer to) the Mathews factors. When one faithfully applies the

Mathews factors, they weigh strongly in favor of a live hearing in this case.

a. Mathews Factor 1: CTA’s Interest Will Be Harmed Without an Evidentiary Hearing

The first Mathews factor asks the court to consider “the private interest that will be affected by the official action;” here, that includes CTA and its many local employees and customers who depend on CTA’s services. Without its Section 214 authorizations, CTA would have to cease

57 See Section II.A.1, above. 58 Administrative Hearings Order, 35 FCC Rcd. at 10733, ¶ 12. 59 Mathews, 424 U.S. at 335.

- 17 - providing telecommunications services to U.S. customers on a common carrier basis. That includes tens of thousands of consumers who subscribe to its MVNO service. Where, as here, a business license is “essential to its entire business,” the private interest is “clearly substantial.”60

b. Mathews Factor 2: The Commission’s Procedure Creates An Unacceptable Risk of Erroneous Deprivation of CTA’s Due Process Rights

The second Mathews factor assesses “the risk of erroneous deprivation of such interest through the procedures used as well as the probable value, if any, of additional or substitute procedural safeguards.” In assessing the risk of erroneous deprivation, Mathews directs the court to consider “the probable value, if any, of additional or substitute procedural safeguards.”61 “[T]he

Supreme Court has indicated that the risk of an erroneous deprivation is too high where an individual is not provided ‘notice of the factual basis’ for a material government finding and ‘a fair opportunity to rebut the Government’s factual assertions before a neutral decisionmaker.’”62 “In- deed, the Supreme Court has ‘consistently observed that these [two safeguards] are among the most important procedural mechanisms for purposes of avoiding erroneous deprivations.”’63 CTA has been deprived of both of these “most important procedural mechanisms.”

60 Chalkboard, Inc. v. Brandt, 902 F.2d 1375, 1381 (9th Cir. 1989). 61 Mathews, 424 U.S. at 335. 62 Kirk v. Comm’r of Soc. Sec. Admin., No. 19-1989, 2021 WL 387022, at *8 (4th Cir. Feb. 4, 2021). 63 Id.

- 18 - (1) CTA Has Been Denied Notice of the Factual Basis of Material Government Findings Against It

Fundamental to a fair opportunity to rebut the government’s factual assertions is the right to know what evidence the government intends to present against CTA.64 For that reason,

“[e]xcluding parties from directly accessing the evidence against them is strongly disfavored, so reliance on undisclosed classified evidence is permissible only in the most extraordinary circumstances.”65 This is because the risk of erroneous deprivation of due process is “especially high” when, as here, the government action is based on “redacted evidence” and thus limits the interest- holder’s “opportunity to probe or cross-examine on that evidence.”66

64 See Interstate Commerce Comm’n v. Louisville & N.R. Co., 227 U.S. 88, 93 (1913) (“All parties must be fully apprised of the evidence submitted or to be considered, and must be given opportunity to cross-examine witnesses, to inspect documents, and to offer evidence in explanation or rebuttal. In no other way can a party maintain its rights or make its defense.”); see also “Some Kind of Hearing,” 123 U. PA. L. REV. 1267, 1283 (1975) (“There can … be no fair dispute over the right to know the nature of the evidence on which the administrator relies.”). 65 See Fares v. Smith, 901 F.3d 315, 323–24 (D.C. Cir. 2018) (internal citations and alterations omitted). 66 See id.; see also Nat’l Council of Resistance of Iran v. Dep’t of State, 251 F.3d 192, 196– 97 (D.C. Cir. 2001) (“As judges, we are necessarily wary of one-sided process [because]…there is an exceptionally high risk of erroneous deprivation when undisclosed information is used.”).

- 19 - CTA cannot defend itself in this proceeding in accordance with its due process rights in a vacuum.67 Yet, at this point, CTA has not received notice of all allegations against it and an opportunity to respond to them68 because the Commission’s decision to initiate revocation proceedings for CTA’s Section 214 authorizations was largely based on undisclosed information. CTA’s ability to meaningfully probe or cross-examine that evidence is limited severely, thereby creating an unacceptably high risk of erroneous deprivation. A live hearing provides one of the “most important” procedural safeguards to combat that risk.

While the government’s use of classified information alone does not violate due process, the court has, in narrow circumstances where the government uses classified information that it refuses to disclose, “authorized strictly necessary adaptations of ordinary administrative and judicial process to ensure … notice and process via alternative means, while respecting compelling national security interests.”69 This is particularly the case where there may be a means to provide the information without implicating national security (e.g., an unclassified summary or review by counsel with the appropriate security clearance).70 Even where unclassified information may be

67 Currently pending before the United States District Court for the District of Columbia is the United States’ Petition for a Determination that FISA Surveillance Was Lawfully Authorized and Conducted. See Case No. 1:20-mc-00116-DLF at ECF No. 9 (D.D.C. filed Dec. 15, 2020). Despite a Freedom of Information Act Request and a request to the Commission, CTA remains ignorant of the information that will be used against it. In opposition to the United States’ Petition, CTA has requested access to the materials for this same reason. Id. at ECF No. 13 (D.D.C. filed Feb. 4, 2021). 68 5 U.S.C. § 558(c). 69 See Fares, 901 F.3d at 324; see also Haramain Islamic Found., Inc. v. U.S. Dep’t of Treas- ury, 686 F.3d 965, 1001 (9th Cir. 2012) (finding that the government violated due process by “failing to provide constitutionally adequate notice and a meaningful opportunity to respond, and by failing to mitigate the use of classified information by, for example, preparing and disclosing an unclassified summary”). 70 See, e.g., Haramain Islamic Found, 686 F.3d. at 1001 (finding that Office of Foreign As- sets Control violated due process rights by “failing to provide constitutionally adequate notice and

- 20 - sufficient to support the agency’s decision, courts often require the government to disclose the classified information “ex parte and in camera” to a neutral adjudicator to determine whether reliance on non-disclosed classified information is appropriate.71 CTA requested that the Executive

Branch undertake a declassification review in order for CTA to understand the allegations levied against it.72 To the best of CTA’s knowledge, no such declassification review has occurred.

(2) CTA Has Been Denied a Fair Opportunity To Rebut The Government’s Factual Assertions Before a Neutral Decision Maker

There is high value in providing CTA the opportunity to rebut the misrepresentations made against it that form the basis of the Recommendation and the subsequent decision by the Commis- sion to initiate revocation proceedings related to CTA’s Section 214 authorizations. “As the Su- preme Court has recognized, the ‘opportunity for [an individual affected by government action] to present his side of the case is ... of obvious value in reaching an accurate decision.”’73 The Com- mission’s procedures implicitly acknowledge the value of a live hearing by providing a procedural rule that allows for a live hearing where due process requires.74

a meaningful opportunity to respond, and by failing to mitigate the use of classified information by, for example, preparing and disclosing an unclassified summary”). 71 See, e.g., People’s Mojahedin Org. v. U.S. Dep’t of State, 613 F.3d 220, 227 (D.C. Cir. 2010) (per curium) (noting that court may review classified information in administrative record); Holy Land Found. For Relief & Devel. v. Ashcroft, 333 F.3d 156, 164 (D.C. Cir. 2003) (noting that International Emergency Economic Powers Act authorizes in camera review of classified information for decisions based on such information); KindHearts for Charitable Humanitarian Dev., Inc. v. Geithner, 710 F. Supp. 2d 637, 660 (N.D. Ohio 2010) (suggesting that an agency would need to provide documents for in camera review by counsel if the agency could not declas- sify adequate information to provide constitutionally adequate notice). 72 China Telecom (Americas) Corp., File Nos. ITC-214-20010613-00346, ITC-214- 20020716-00371, ITC-T/C-20070725-00285, CTA FOIA Request, p. 2 (filed June 3, 2020). 73 Kirk, 2021 WL 387022, at *9 (quoting Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 543 (1985)). 74 Administrative Hearings Order, 35 FCC Rcd. at 10733, ¶ 12.

- 21 - CTA has serious concerns about its ability to obtain a fair opportunity to rebut the factual assertions levied against it without a hearing by a neutral adjudicator such as an Administrative

Law Judge. Several of the past and present Commissioners have spoken publicly about their desire to strip CTA of its ability to operate in the United States.75 And, as discussed in Section II.D.1 below, the Commission’s Order Instituting Proceedings reflects a willful blindness to the many material disputed issues in these proceedings. The Supreme Court long ago decided that “[i]n al- most every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses.”76

c. Mathews Factor 3: Providing CTA a Live Hearing Furthers The FCC’s Interest and Fundamental Fairness

The final Mathews factor assesses “the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.” In considering the third factor, courts look beyond the mere “ad hoc weighing of fiscal and administrative burdens.”77 Instead, the courts must decide “when, under our constitutional system, judicial-type procedures must be imposed upon administrative action to as- sure fairness.”78 That is the case here.

For CTA to be meaningfully heard outweighs the burden that a live hearing would place on the FCC and actually advances the FCC’s interest in accurately determining whether CTA’s

75 See, e.g., David Shepardson, Departing U.S. FCC chair warns of threats to telecoms from China, REUTERS (Jan. 20, 2021). 76 Kirk, 2021 WL 387022, at *9 (quoting Goldberg v. Kelly, 397 U.S. 254, 269 (1970)). 77 Mathews, 424 U.S. at 348. 78 Id.

- 22 - Section 214 authorizations should be revoked.79 The FCC’s procedural rules acknowledge that while conducting live hearings can impose some costs and burdens on the agency, due process is important enough to require a live hearing—especially when there are disputed facts—based on

“the subject matter or circumstances of a particular proceeding, or the parties involved.”80 As established above, the property interest CTA has in its Section 214 authorizations and the high risk that the FCC may erroneously deprive CTA of that property interest based on undisclosed information and misrepresentations constitute circumstances where due process requires a live hearing.

C. APA Section 558(c) Does Not Create a Relevant Exemption

The Commission claims that the Bureau’s Order to Show Cause provided CTA with any notice and opportunity that 5 U.S.C. § 558 may require before the institution of a proceeding to revoke its authority, and further surmises that “it appears from the record that ‘the public … interest, or safety’ may require revocation in any event.”81

As an initial matter, where a statute such as the APA is administered by several different agencies, courts do not defer to any one agency’s particular interpretation.82 Rather, the Commis- sion is bound by the interpretation used by courts in determining whether the public interest exception to the notice and opportunity requirement in Section 558(c) applies.

79 See Kirk, 2021 WL 387022, at *10 (“While SSA certainly has ‘a substantial interest in preventing ... fraud and in avoiding erroneously providing benefits,’ Ching v. Mayorkas, 725 F.3d 1149, 1158 (9th Cir. 2013), allowing beneficiaries to contest reason-to-believe findings would only advance that interest by helping the agency accurately determine which evidence is actually tainted by fraud and which is not.”). 80 Administrative Hearings Order, 35 FCC Rcd. at 10731, 10733, ¶¶ 7, 12. 81 Order Instituting Proceedings, 35 FCC Rcd. at 15015, ¶ 18. 82 See Envirocare of Utah, Inc. v. Nuclear Regulatory Commission, 194 F.3d 72, n.7 (D.C. Cir. 1999).

- 23 - Contrary to the Commission’s framing, the Section 558(c) “public interest” exception is not relevant to an agency’s decision to revoke a license, but instead dictates the limited circumstances in which an agency can revoke a license without following the statutorily prescribed procedures that apply to most revocation proceedings. Specifically, Section 558(c) imposes procedural restrictions on the ability for an agency to withdraw, suspend, revoke or annul a license.

Such actions are “lawful only if, before the institution of agency proceedings therefor, the licensee has been given—(1) notice by the agency in writing of the facts or conduct which may warrant the action; and (2) opportunity to demonstrate or achieve compliance with all lawful requirements.”

Section 558(c) provides limited exceptions to the requirement for an agency to provide notice and opportunity. Those circumstances include only “cases of willfulness or those in which public health, interest, or safety requires otherwise[.]”

Courts that have considered the exceptions to the notice and opportunity requirements of

Section 558(c) – and “public interest” standards that apply in similar contexts of administrative procedure – have agreed that exceptions to notice and opportunity should be construed narrowly and are intended only for unusual, emergency situations. For example, the Ninth Circuit squarely rejected an argument advanced by the Department of Transportation, virtually identical to the

Commission’s position here, that the revocation of an airline’s operating certificate was exempt from Section 558(c) because the Department had found by rulemaking that automatic revocation in certain cases was in the public interest.83 The court explained,

The Department's proposed interpretation would render section 558(c) nonsensical. The Department would limit section 558(c) to cases in which the agency revoked a license though it did not believe the revocation to be in the public interest. Yet every agency action is taken because the agency believes the action to be in the public interest, at least in theory. Thus, to read section 558(c) as the Department proposes would nullify every word of that section except the "public interest" exception, and

83 See Air N. Am. v. Dep’t of Transp., 937 F.2d 1427, n.8 (9th Cir. 1991).

- 24 - the "public interest" clause would swallow the section. A number of courts have had occasion to address the meaning of exception clauses like that in section 558(c). Not surprisingly, these courts have uniformly concluded that such exceptions are directed to unusual, emergency, situations. See Air East, Inc. v. National Transpor- tation Safety Board, 512 F.2d 1227 (3d Cir.), cert. denied, 423 U.S. 863, 96 S.Ct. 122, 46 L.Ed.2d 92 (1975); Nader v. FAA, 440 F.2d 292 (D.C. Cir. 1971); New England Air Express v. CAB, 194 F.2d 894 (D.C. Cir. 1952). Cf. United States v. Vertol H21C, 545 F.2d 648 (9th Cir. 1976) (considering Fifth Amendment due process). It is apparent that there was no such emergency in this case. As such, section 558(c)'s "public interest" exception is inapplicable.84

Section 553(b)(B) contains a similar exception to notice and comment procedures where an agency for good cause finds that such procedures are “impracticable, unnecessary, or contrary to the public interest.” In the analogous context of Section 553(b)(B), “[t]he question is not whether dispensing with notice and comment would be contrary to the public interest, but whether providing notice and comment would be contrary to the public interest.”85 As the D.C. Circuit has explained, the “public interest prong … is met only in the rare circumstance when ordinary procedures—generally presumed to serve the public interest—would in fact harm that interest.”86

For example, courts have found this exception properly invoked when the timing and disclosure requirements of the usual procedures would defeat the purposes of a proposal.87 Similarly, courts have primarily upheld an agency’s invocation of the good cause exception (which relies on justification in the public interest) where it was necessary to issue rules of life-saving importance im- mediately.

84 Id. In Nader v. FAA, supra, the court agreed that “the claim that smoking annoys and dis- comforts non-smoking passengers does not justify the exercise of … emergency power” and de- clined to overturn the Federal Aviation Administrator’s determination that no emergency existed with respect to smoking on commercial aircraft. 85 See Mack Trucks, Inc. v. EPA, 682 F.3d 87, 95 (D.C. Cir. 2012). 86 Id. 87 Util. Solid Waste Activities Grp. v. EPA, 236 F.3d 749, 755 (D.C. Cir. 2001) (finding the public interest standard in Section 553(b)(B) met when “announcement of the proposed rule would enable the sort of financial manipulation the rule sought to prevent”).

- 25 - The legislative history of the APA confirms this interpretation. Specifically, the Senate

Judiciary Committee’s report on this provision explains that this provision “is designed to preclude the withdrawal of licensees, except in cases of willfulness or the stated cases of emergency, without affording the licensee an opportunity for the correction of conduct questioned by the agency.”88

Likewise, the House Judiciary Committee’s report indicates that the “public interest” exception

“means a situation where clear and immediate necessity for the due execution of the laws overrides the equities or the injury to the licensee; the term does not confer upon agencies authority at will to ignore the requirement of notice and an opportunity to demonstrate compliance.”89

The Commission has identified no “emergency” or “clear and immediate necessity” that would support a departure from the requirements of Section 558(c). If the circumstances here involved an “emergency” or “clear and immediate necessity” to revoke CTA’s authorizations, pre- sumably the Commission already would have taken that action. The Commission first intimated it would review CTA’s authorizations nearly two years ago,90 and the Recommendation and Order to Show Cause were issued nearly one year ago. The Commission granted an extension of time for

CTA to respond and issued the instant Order more than eight months after it received the Recom- mendation. The fact that the Commission believes revocation may be in the public interest is not

88 S. Rep. No. 248, 79th Cong., 2d Sess. 35 (1946). 89 H.R. Rep. No. 1980, 79th Cong., 2d Sess. 275 (1946) (emphasis added). 90 See China Mobile International (USA) Inc., Application for Global Facilities-Based and Global Resale International Telecommunications Authority Pursuant to Section 214 of the Com- munications Act of 1934, as Amended, Memorandum Opinion and Order, 34 FCC Rcd. 3361, 3388 (2019) (Commissioner Carr calling for the “national security agencies” to “examine whether the FCC should revoke … existing Section 214 authorizations” of China Unicom and China Telecom and stating that “the FCC should open a proceeding on those matters”). During a press conference later in 2019, then-Chairman Ajit Pai indicated that CTA’s Section 214 authorizations were under “active review by the FCC staff, including staff in my office.” See FCC, November 2019 Open Commission Meeting, at 2:53:35 (Nov. 22, 2019), https://www.fcc.gov/news- events/events/2019/11/november-2019-open-commission-meeting.

- 26 - sufficient to override the injury CTA would suffer should the Commission ultimately decide to revoke its Section 214 authorizations. The Commission has not identified any evidence that demonstrates that permitting CTA the opportunity required under Section 558(c) would cause clear or immediate harm and relies only on speculation that CTA’s ownership and alleged years-old violations of its LOA justify the proposed revocation.

Nor does the willfulness exception to Section 558(c) apply. The Commission cites Coose- mans Specialties, Inc. to assert that “CTA has acted willfully in taking the actions identified in the

Executive Branch Recommendation to Revoke and Terminate.”91 However, the Commission failed to cite the “willfulness” standard in full. As the D.C. Circuit explained, “[i]n this context,

‘an action is willful if a prohibited act is done intentionally, irrespective of evil intent, or done with careless disregard of statutory requirements.’”92 In other words, “[w]illfulness” for purposes of the exception “must be manifest.”93

Coosemans involved revocation of a license issued by the Department of Agriculture where the company’s vice president admitted to making repeated, unlawful payments to officials, pled guilty to a criminal charge in connection with those payments, and whose admissions the court found supported the Secretary of Agriculture’s conclusion that he acted “with at least careless disregard” of the implied duty clause of the Perishables Agricultural Commodities Act

(“PACA”).94 Similarly, Finer Foods Sales Co., Inc. involved violations of PACA in connection with failure of a licensee to “truly and correctly … account and make full payment promptly in

91 See Order Instituting Proceedings, 35 FCC Rcd. at 15015-16, n.56 (citing Coosemans Spe- cialties, Inc. v. Dep’t of Agriculture, 482 F.3d 560, 567–68 (D.C. Cir. 2007)). 92 Coosemans, 482 F.3d at 567 (citing Finer Foods Sales Co. v. Block, 708 F.2d 774, 778 (D.C. Cir. 1983)) (emphasis added). 93 H.R. Rep. No. 1980, 79th Cong., 2d Sess. 275 (1946). 94 Coosemans, 482 F.3d at 567–68.

- 27 - respect of any transaction” in commodity transactions.95 The court in Finer Foods noted the petitioner’s “awareness” of the statutory requirements and found that “[w]hen the petitioner made the purchases involved in this case, it necessarily knew that it probably would not be able to pay for them in accordance with the statutory requirement.”96 The court further explained that the opportunity for correction of violations in Section 558(c)(2) is inapplicable “[i]f in fact the violations were willful[.]”97

In contrast, it is not manifest that CTA intentionally committed any prohibited act. And, it is apparent that there is disagreement between CTA and the Executive Branch as to whether the

LOA – which the Executive Branch acknowledges “came with fewer requirements than more recent Executive Branch Mitigation Agreements”98 – required CTA to maintain a single, consoli- dated written cybersecurity policy and also whether the LOA required the company to notify the

Executive Branch when CTA sought to obtain International Signaling Point Codes (“ISPCs”).99

The Executive Branch argues that CTA’s “willfulness is demonstrated by its failure to engage appropriately with the Executive Branch for more than a year after it was notified of its breaches of the [LOA] and asked to propose mitigation to those breaches[,] … by its improper redaction of the 2018 U.S. Records Security Agreement[.]”100 It also claims that CTA “has not

95 Finer Foods Sales Co. v. Block, 708 F.2d 774, 776 (D.C. Cir. 1983). 96 Id. at 778. 97 Id. 98 Exec. Br. Response, p. 7. 99 See China Telecom (Americas) Corporation, Response to Order to Show Cause, GN Docket No. 20-109, File Nos. ITC-214-20010613-00346, ITC-214-20020716-00371, ITC-T/C- 20070725-00285, pp. 65-71 (filed June 8, 2020) (“CTA Response”) (filing with the Commission a public filing and a non-public business confidential filing). 100 Exec. Br. Response, p. 7.

- 28 - made good faith efforts to achieve compliance for more than a year[.]”101 However, these arguments miss the point of the exception, which requires engagement in a prohibited act, whether intentionally or though careless disregard of statutory requirements. Specifically, it is CTA’s compliance with the terms of the LOA to which the “willfulness” exception is relevant, not what may or may not have happened after the Executive Branch raised questions about “potential breaches of the LOA[.]”102 Nor does the fact that CTA did not propose further mitigation support a finding of willfulness. As CTA previously explained, “companies do not propose mitigation measure to

Team Telecom. Team Telecom dictates mitigation measures to companies, essentially on a take- it-or-leave-it basis. Without being asked, CTA is unable to guess what potential new mitigation measures Team Telecom might consider adequate.”103

At a minimum, the contention that CTA acted willfully is disputed, and there is a material issue of fact as to whether CTA committed any prohibited act intentionally or knowingly. That issue, as well as other issues discussed in the following section, should have been designated for hearing.

D. The Commission Cannot Avoid a Hearing by Claiming That No Material Facts Are in Dispute

1. Material Facts Remain Disputed

The Commission denied CTA’s request for an adjudicatory hearing before an Administra- tive Law Judge and stated that “there are no substantial and material questions of fact in this case”

101 Id. 102 Executive Branch Recommendation to the Federal Communications Commission to Re- voke and Terminate China Telecom Americas’ International Section 214 Common Carrier Au- thorizations, File Nos. ITC-214-20010613-00346, ITC-214-20020716-00371, ITC-T/C- 20070725-00285, Ex. 102 at EB-2103 (filed Apr. 9, 2020) (“Exec. Br. Recommendation”). 103 CTA Response, Ex. 16 at 71.

- 29 - warranting a hearing.104 Instead, the Commission said that “the written record is already extensive, and [CTA] will have a further opportunity to respond to this Order and to any additional evidence or argument that may be submitted.”105

At the outset, the Commission’s claim that there are no substantial and material questions of fact contradicts its request for comment regarding the standard of proof governing a proposed revocation,106 as the standard of proof is only relevant if material facts remain disputed such that adjudication is necessary. By inviting parties to comment on the appropriate standard of proof, the

Commission tacitly admits the existence of material disputed facts that warrant an evidentiary hearing.

CTA’s response to the Order to Show Cause107 demonstrates that there are material facts in dispute with respect to the allegations in the Executive Branch’s Recommendation in relation to the requirements of the LOA, CTA’s compliance therewith, CTA’s statements to the Executive

Branch, and Executive Branch misunderstandings of Chinese law, among others.

To start, CTA disputes that it should be found to have violated its obligations under the

LOA for failing to inform the Executive Branch that other CTA affiliates would have access to

CTA’s U.S. Records,108 and disagrees with the Executive Branch’s allegations that CTA’s prior

104 Order Instituting Proceedings, 35 FCC Rcd. at 15015, ¶ 17. 105 Id. 106 Id. at 15014, n.49 (inviting the parties to address the question of the standard of proof governing administrative hearings in subsequent filings). 107 China Telecom (Americas) Corporation, Response to Order to Show Cause, GN Docket No. 20-109, File Nos. ITC-214-20010613-00346, ITC-214-20020716-00371, ITC-T/C-20070725- 00285 (filed June 8, 2020) (filing with the Commission a public filing and a non-public business confidential filing) (“CTA Response”). 108 CTA Response, Ex. 16, p. 19, 22, 29-36.

- 30 - statements about storage and access to the U.S. records were contradictory.109 CTA also disputes the assertion that CTA failed to take “all practicable measures” to prevent unauthorized access to

U.S. records.110 Furthermore, there is clear disagreement between CTA, the Executive Branch, and the Commission as to whether the LOA requires CTA to notify the Executive Branch of “substantive applications,” rather than “ministerial requests” such as the assignment of numbering re- sources, namely, the ISPCs.111

In addition to the material disputes surrounding the LOA, CTA also takes issue with the

Executive Branch’s allegations that CTA “may have” made inaccurate statements to the Executive

Branch and U.S. customers about its cybersecurity practices and “may have” failed to comply with the U.S. cybersecurity and privacy law.112 Such unfounded allegations do not articulate any specific claims of violating rules or regulations under federal or state law and there is no evidence that

CTA’s services were not in fact secure.113

The existence of factual disputes is further underscored by the Commission’s cherry-pick- ing of the record relating to the communications between CTA and the Executive Branch. The

Commission (and the Executive Branch before it) discounts CTA’s diligence and contends that

CTA has not been consistent, transparent, and timely in its interactions with the Executive

Branch.114 The Commission, however, does not address, let alone rebut, the facts in the record

109 CTA Response, Ex. 16, pp. 4, 20-23, 25, 28, 37-38. 110 CTA Response, Ex. 16, pp. 4, 6, 39-42, 65-69; see also Order Instituting Proceedings, 35 FCC Rcd. at 15035-36, ¶ 52 (stating that CTA has not explained its cybersecurity measures in detail, provided copies to the Commission to verify if and when they were implemented and “it is unclear whether such policies even existed” at the time of the Executive Branch’s request). 111 CTA Response, Ex. 16, pp. 6, 24-26, 69-71; Ex. 9, p. 1; Ex. 14, pp. 1-2. 112 Order Instituting Proceedings, 35 FCC Rcd. at 15029, ¶ 37. 113 CTA Response, pp. 3-4; CTA Response, Ex. 16, p. 42-45; Ex. 3, p. 5. 114 Order Instituting Proceedings, 35 FCC Rcd. at 15029, ¶ 37.

- 31 - demonstrating that CTA has cooperated with and timely responded to inquiries from the Executive

Branch agencies since at least 2007.115

Without citing to any proof, the Commission speculates that CTA is “highly likely” to be forced to comply with Chinese government requests without sufficient legal procedures subject to independent judicial oversight. 116 In essence, the Commission agrees with the Executive Branch that CTA is controlled by the PRC government and its existence as a separate corporate entity should be disregarded. Such a speculation runs counter to CTA’s legal status as a profit-making, commercial enterprise governed by the General Corporation Law of the State of Delaware that operates independently and without interference from its parent company.117

Moreover, the concerns alleged and resulting implications made by the Commission and the Executive Branch regarding the amendments to CTCL’s Articles of Association are similarly misplaced, as CTA’s articles of incorporation and by-laws contain no references to any foreign government, any of its agencies, or any foreign political party.118 And instead of providing any evidence showing that CTA is vulnerable to “foreign government” requests, the only example provided in support of the Executive Branch’s allegation is based on a (mis)interpretation of a

Records Security Agreement between CTA and its parent company, entered for the purpose of ensuring compliance with the LOA.119

115 CTA Response, Ex. 16, pp. 23-29, 64. 116 Order Instituting Proceedings, 35 FCC Rcd. at 15017, 15020-21, ¶¶ 21, 25. 117 CTA Response, Ex. 3, pp. 1, 4; Ex. 15, pp. 2-3, 5-6. 118 CTA Response, Ex. 15, p. 6. 119 CTA Response, Ex. 16, p. 52.

- 32 - Last but not least, CTA disputes that its U.S. operations provide opportunities for Chinese state-sponsored actors to engage in economic espionage and to disrupt and misroute U.S. communications traffic.120 The other factual disputes center on the Commission’s concerns resulting from its misunderstanding of the Chinese laws.121

In sum, there is an abundance of material facts that remain in dispute. Even assuming arguendo that the record contains sufficient evidence to support the Commission’s apparent findings on these issues (which CTA does not admit), it is utterly incredible to assert that this evidence is undisputed. As a result, the Commission’s conclusion that CTA was not entitled to a hearing was arbitrary and capricious. The Commission should designate these factual issues for hearing by an

Administrative Law Judge.

2. Even if Some Evidentiary Facts Are Undisputed, the Issue of Whether Those Facts Justify Revocation Must Be Designated for Hearing

The FCC cannot escape the requirement of a hearing by contending that it can decide this case solely on the basis of those facts that are not disputed, such as CTA’s corporate structure and ultimate ownership, and dismissing all other factual disputes as “immaterial” to its decision. The issue of whether these undisputed facts are sufficient by themselves to justify revocation of Section

214 authorizations is itself a material issue that must be designated for hearing. That was the approach taken in each contested case cited in Section II.A.1 where the issues designated for hearing included not only the finding of evidentiary facts, but also the question of whether the facts found justified revocation.

120 Order Instituting Proceedings, 35 FCC Rcd. at 15017, ¶ 21; CTA Response, Ex. 16, pp. 3- 5, 57-63. 121 Order Instituting Proceedings, 35 FCC Rcd. at 15020, ¶ 24, CTA Response, Ex. 16, pp. 4- 5, 47-57.

- 33 - Although there are some cases permitting agencies to dispose of adjudicatory matters without a hearing when there are no material facts to be decided, the issues posed in those cases were very different from those here, and their holdings are inapplicable to this proceeding. In United

States v. Storer Broadcasting Co., the Supreme Court reviewed the FCC’s adoption of a television multiple ownership rule, which among other things allowed the FCC to dismiss without a hearing an application for a license that would exceed the ownership limit.122 The FCC permitted only written responses by those seeking a waiver of its rules. The Supreme Court upheld the FCC’s decision to deny hearings, stating that the hearing provisions of the Communications Act did not withdraw “from the power of the Commission the rule-making authority necessary for the orderly conduct of its business.”123 In other words, the Commission had already made a determination after a notice-and-comment rulemaking proceeding that the public interest was served by avoiding concentration of licenses among too few station owners.124 There was no basis for a factual dispute over whether the conditions of the multiple ownership rule were satisfied in any given case – the

FCC’s own records determined whether the applicant held the maximum number of stations permitted. In contrast, the Commission here is considering whether the public interest (as a general matter) is served by continued validity of CTA’s – and only CTA’s – Section 214 authorizations, a particularized determination that necessarily involves an analysis of facts that apply only to CTA and not to all holders of Section 214 authorizations.125 There is no Commission rule, for example,

122 United States v. Storer Broadcasting Co., 351 U.S. 192 (1956). 123 Id. at 202. 124 Id. at 201 (repeating the Commission’s argument that the rules “give concreteness to a standard of public interest, and that the right to a hearing does not exist where an applicant admit- tedly does not meet those standards as there would be no facts to ascertain”). 125 See National Broadcasting Co. v. United States, 319 U.S. 190, 225 (1943) (“In each case that comes before it the Commission must still exercise an ultimate judgement whether the grant

- 34 - categorically prohibiting a corporation ultimately owned by a Chinese state-owned enterprise from holding a Section 214 authorization, analogous to the rule in Storer that categorically prohibited any person holding five television licenses from obtaining a sixth. In any event, the Court in Storer did not hold that a hearing would never be appropriate, rather it simply agreed with the Commis- sion’s contention that “a full hearing … would not be necessary on all such applications.”126

Likewise, the Ninth Circuit in Air North America v. Department of Transportation considered the automatic revocation of the certificate of an airline carrier that had remained dormant for more than one year after having been deemed fit to provide air transportation services.127 The carrier appealed, arguing (among other things) that the Department’s certificate revocation procedures were inappropriate in that no notice or hearing were provided before the Department revoked the certificate.128 The Ninth Circuit disagreed, noting that its “conclusion follows from the general principle that an agency need not conduct a factual hearing if there are no factual questions to resolve.”129 The Ninth Circuit explained that a hearing was not required because “the Department had eliminated through its rule factual questions that might otherwise have been resolved through a hearing.”130 In other words, the dormancy rule “fill[ed] in some of the terrain covered by the

of a license would serve the ‘public interest, convenience, or necessity.’”). See also Superior Oil v. Federal Power Commission, 322 F.2d 601, 611–12 (9th Cir. 1963) (opining that “absent [a general rule, applied prospectively, in which the Commission had given concreteness to a standard of public interest], or absent Commission action reasonably based thereon, the Commission may not rule adversely upon rate and certificate filings without granting a hearing”). 126 Storer, 351 U.S. at 205 (emphasis added). 127 See Air North America v. Dep’t of Transp., 937 F.2d 1427, 1430 (9th Cir. 1991). 128 See id. at 1433. 129 Id. at 1433–34. 130 Id. at 1434.

- 35 - broad statutory concept ‘lack of fitness’” and “the wide-ranging factual hearing that might otherwise have been needed to do justice to the statute became superfluous.”131

The Ninth Circuit contrasted the circumstances of Air North America from Civil Aero- nautics Board v. Delta Airlines, in which the Supreme Court rejected the argument that a hearing was not required before revoking Delta’s certificate despite the order granting the certificate noting that the certificate might be modified at a later date.132 The Ninth Circuit explained that “there was no question of general rulemaking” in Delta Airlines nor was “Delta Airlines … a case in which a valid administrative rule eliminated factual questions and thereby rendered a fact-seeking hearing superfluous.”133 The distinctions noted by the Ninth Circuit in Air North America are equally applicable here. In this case, the Commission has not issued a general rule that affects every holder of Section 214 authority, for example by prescribing specific criteria for assessing whether continued Section 214 authorization is in the public interest. The Commission has not prescribed by regulation – and the Communications Act does not identify – specific circumstances in which a

Section 214 holder should be deemed unfit. Rather, the Commission here issued an order that is specifically directed towards CTA as to whether continued validity of its Section 214 authorizations serves the public interest, an analysis that necessarily is based on considerations of CTA’s individual circumstances.134 As such, the Commission was required to designate for hearing before an Administrative Law Judge the issue of whether the facts alleged justify revocation (or termination) of CTA’s Section 214 authorizations, as it has in prior cases involving the proposed revocation of Section 214 authorizations.

131 Id. 132 Civil Aeronautics Board v. Delta Air Lines, Inc., 367 U.S. 316 (1961). 133 See Air North America, 937 F.2d at 1435–36. 134 See id. at 1435.

- 36 - Furthermore, to the extent the Commission seeks to rely on allegations about CTA’s trust- worthiness resulting from alleged past conduct and representations to the Executive Branch,135 those issues are facts that must be assessed through an evidentiary hearing process. “Questions of intent are factual[.]”136 The D.C. Circuit has required an evidentiary hearing in cases where the only conflicting facts centered around statements made to third parties.137 Here, the Commission is seeking to rely on assertions about CTA’s interactions with third parties, at least in part, to revoke (or terminate) CTA’s Section 214 authorizations, and CTA has put forward substantial evidence that the picture presented by the Executive Branch is not accurate or, in other cases, lacks context. The Commission cannot “in effect obviate[] the need for a hearing by finding itself that one factual version was the true and correct one.”138 Rather, “the determination of which factual version is indeed accurate is precisely the function of an evidentiary hearing.”139 Accordingly, the

Commission must at a minimum conduct a hearing to determine which version of events as to

CTA’s interactions with the Executive Branch is the true and correct one.

III. The Evidence Cited by the Commission Does Not Justify Revocation or Termination

The Commission bears the burden of proof to justify any revocation or termination of

CTA’s Section 214 authorizations. Under current Commission rules and precedent, revocation of

135 See Order Instituting Proceedings, 35 FCC Rcd. at 15029-32, ¶¶ 37-43 (stating that CTA’s “past conduct and representations to the Executive Branch agencies raise concerns” and that “the record presents a troubling picture of [CTA’s] lack of forthrightness in its responses to the Exec- utive Branch agencies’ mitigation monitoring”). 136 California Public Broadcasting Forum v. FCC, 752 F.2d 670, 679 (D.C. Cir. 1985) (“Cal- ifornia Broadcasting”) (citing Pullman-Standard v. Swint, 456 U.S. 273, 278 (1982) (“Treating issues of intent as factual matters for the trier of fact is commonplace.”). 137 See Citizens Committee to Save WEFM v. FCC, 506 F.2d 246, 166 (D.C. Cir. 1974) (en banc). 138 California Broadcasting, 752 F.2d at 680. 139 Id.

- 37 - a Section 214 authorizations requires a showing of misconduct by the licensee. In other words, a revocation must be justified by some act of the regulated party, not based on speculation or attenuated and nebulous changes in circumstance or foreign policy considerations that are beyond a licensee’s control.

As explained below and in CTA’s response to the Order to Show Cause, the evidence in the record does not justify revocation or termination of CTA’s Section 214 authorizations. The

Commission has not identified any act of misconduct by CTA that would justify revocation or termination, but instead is seeking to hold CTA liable for allegations against CTA’s corporate parent(s) in contravention of Commission precedent. Moreover, the new factual allegations made by the Executive Branch subsequent to the Order Instituting Proceedings are based solely on circumstantial evidence or public statements that have been taken out of context or misattributed, and provide no additional basis for revocation.

A. The Burden of Proof Is on the Commission

The Commission invites the parties to address the standard of proof governing this proceeding.140 But, contradictorily, it also asserts that “there are no substantial and material questions of fact in this case warranting an adjudicatory hearing before an Administrative Law Judge or other presiding officer.”141 Although Section 312(d) of the Communications Act explains that in radio license revocation proceedings, “both the burden of proceeding with the introduction of evidence and the burden of proof shall be on the Commission[,]”142 and Commission precedent has extended

140 Order Instituting Proceedings, 35 FCC Rcd. at 15014, n.49. 141 Id. at 15015, ¶ 17. 142 47 U.S.C. § 312(d). See also FCC Enforcement Bureau, Enforcement Overview, p. 21 (April 2020), https://www.fcc.gov/sites/default/files/public_enforcement_overview.pdf (“The FCC bears the burden of proceeding with the introduction of evidence and the burden of proof.”).

- 38 - this principle to Section 214 revocations,143 opining on the burden of proof the Commission must meet is meaningless if the Commission will not permit CTA a hearing to address disputed facts.

Should the Commission change course, CTA will provide further argument as to the burden the

Commission must carry to justify revocation of its Section 214 authorizations.

B. Revocation Requires a Showing of Misconduct

The Commission concedes that a license revocation that is based solely on a specific violation may require the agency to find egregious misconduct, but finds it “unreasonable” to infer that simply because the Commission has stated that it “may … revoke the authorization in cases of … misconduct”144 the Commission impliedly may not revoke Section 214 authorization without evidence of misconduct.145 This stance, however, is contradicted by Commission precedent which has without exception cited to misconduct as potential grounds for Section 214 license revocation.

The FCC has alleged misconduct in all cases where it has revoked a Section 214 license,146 in all

143 See Section II.A.1, above. 144 Foreign Participation Order, 12 FCC Rcd. 23891, ¶ 295 (1997). 145 Order Instituting Proceedings, 35 FCC Rcd. at 15016, ¶ 19. 146 See WX Commc'ns Ltd. Termination of Int'l Section 214 Authorization, 34 FCC Rcd. 1028, ¶ 1 (2019) (respondent failed to comply with an express condition of its authorization, the Com- munications Act, and Commission rules); Cablemas Int'l Telecomm, LLC Termination of Int'l Sec- tion 214 Authorization, 34 FCC Rcd. 1377, ¶ 1 (2019) (same); Air Channel Commc'ns, Inc. Termination of Int'l Section 214 Authorization, 34 FCC Rcd. 1907 (2019) (same); Starvox Commc'ns, Inc. & Capital Telecommunications, Inc. Termination of Int'l Section 214 Authoriza- tions, 34 FCC Rcd. 2056 (2019) (same); Domestic Section 214 Auth. & Int'l Section 214 Authori- zations of Angel Americas, LLC & Angel Mobile, Inc., 34 FCC Rcd. 10346 (2019) (same); Final Notice of Intent to Declare the Int'l Section 214 Authorization of Space Net LLC Terminated, 33 FCC Rcd. 11126 (2018) (respondent did not respond to government allegations and “may be in violation of several other Commission statutory and rule provisions”); LDC Telecommunications, Inc., 31 FCC Rcd. 11661, 11661 (2016) (respondent failed to pay delinquent regulatory fees); ACT Telecommunications, Inc., 31 FCC Rcd. 188, ¶ 1(2016) (respondent failed to comply with an express condition of its authorization, the Communications Act, and Commission rules); Ocean Tech. Ltd., 31 FCC Rcd. 357, ¶ 1 (2016) (same); Jube Commc'ns, LLC, 31 FCC Rcd. 7096, ¶ 1 (2016) (same); Redes Modernas De La Frontera Sa De Cv, 31 FCC Rcd. 12709 (2016) (same); IP to Go,

- 39 - cases where it issued a show cause147 or admonishment order,148 and in all cases where it considered initiating revocation proceedings.149 Unsurprisingly, the Commission does not cite to a single case in support of its proposition that a violation is sufficient but not necessary—nor can it cite to any such case in the Section 214 context because, to CTA’s knowledge, no such cases exist.150

LLC, 31 FCC Rcd. 12713, ¶ 1 (2016) (same); Wypoint Telecom, Inc., 30 FCC Rcd. 13431, ¶ 1 (2015) (same). 147 See Onelink Commc'ns, Inc. et al., 32 FCC Rcd. 1884 (2017) (seeking evidence of respondents’ compliance with various statutory and regulatory requirements); Kurtis J. Kintzel et al., 22 FCC Rcd. 17197, ¶ 1 (2007) (issuing a show cause order and notice of opportunity for hearing where respondents “willfully and repeatedly violated multiple terms of a Consent Decree to which they were signatories and apparently willfully and repeatedly violated multiple Commission rules and provisions of the Act relating to the provision of interstate common carrier services”), case terminated by consent, FCC 09M-52 (2009); NOS Commc'ns, Inc., 18 FCC Rcd. 6952, ¶ 2 (2003) (finding respondents “may have willfully or repeatedly violated sections 201(b) of the Communi- cations Act of 1934… by conducting a misleading marketing campaign”); Bus. Options, Inc., 18 FCC Rcd. 6881, ¶ 2 (2003) (finding respondent made misrepresentations and showed lack of can- dor in responses to governmental inquiries and rule violations); Publix Network Corp., 17 FCC Rcd. 11487, ¶ 2 (2002) (respondents may have unlawfully obtained payments from the telecommunications relay services fund by making repeated misrepresentations to the Commission and violating a number of statutorily-mandated requirements, and Commission rules); CCN, Inc., 12 FCC Rcd. 8547, ¶ 17 (1997) (finding respondents “are either unwilling or unable to conduct lawful common carrier operations”). 148 See New Century Telecom, Inc., 31 FCC Rcd. 5187, ¶ 1 (2016) (respondent failed to comply with a Commission subpoena). 149 See Sandwich Isles Commc’ns, Inc., et al., 31 FCC Rcd. 12947 (2016) (alleging respondent violated the Communications Act and Commission Rules by submitting and certifying inaccurate data). 150 Recent guidance issued from the FCC’s Enforcement Bureau recognizes that “[t]he FCC will typically open a revocation proceeding for violations that raise significant questions about whether a licensee, permittee, or authorization holder has the basic qualifications to hold an FCC license, permit or authorization and/or whether it is in the public interest for an entity to remain a licensee, permittee, or authorization holder.” See FCC Enforcement Bureau, Enforcement Over- view, p. 21 (April 2020), https://www.fcc.gov/sites/default/files/public_enforcement_over- view.pdf.

- 40 - Section 214 does not contain any reference to revocation. The most analogous provision in the Communications Act is Section 312, which applies to revocation of station licenses and construction permits. Section 312, as the Commission points out, allows the Commission to revoke a license “because of conditions coming to the attention of the Commission which would warrant it in refusing to grant a license or permit on an original application.”151 However, this provision must be read in the context of the other enumerated reasons for revocation: knowingly false statements; willful or repeated failure to operate substantially as set forth under the license; willful or repeated violation of a statute, rule, or regulation; failure to observe a Commission order; violation of certain sections of Title 18; and willful or repeated failure to allow reasonable access by a candidate for public office.152 These are each concrete and highly particularized examples of misconduct by a

Commission licensee that may result in revocation of a license.

The provision for license revocation based on new conditions therefore is not a grant of free-wheeling discretion to the Commission to claw back duly issued authorizations as a result of circumstances outside the control of the licensee. Rather, Section 312(a)(2) implies that there must be some act or omission of the licensee that warrants revocation. Commission practice confirms this, as revocation invariably results from some particularized concern about the licensee’s conduct, character, or other qualifications.153 Further, Section 312(a)(2) does not permit revocation

151 47 U.S.C. § 312(a). 152 Id. 153 See, e.g., KWK Radio, Inc. v. FCC, 337 F.2d 540 (D.C. Cir. 1964) (licensee had conducted two treasure hunts in a manner which constituted deliberate fraud upon the public); Theodore E. Sousa, 93 FCC 2d 1064 (Rev. Bd. 1983) (revoking Citizens Band license based on repeated violations of Commission rules that would justify denial of an initial license application); Roger Thomas Scaggs, 19 FCC Rcd. 7123 (EB 2004) (revoking amateur operator’s license after convic- tion for murder).

- 41 - based on facts that were actually presented in the original application.154 Thus, the Commission cannot revoke CTA’s authorization solely because its corporate parent is ultimately controlled by a Chinese state-owned enterprise, as these facts were disclosed both in the original Section 214 applications and in the pro forma transfer of control notification that led to the approval of the

LOA. Moreover, the Commission has stated expressly that ownership of a carrier by a foreign government is not, by itself, ground for denying a Section 214 application.155 A fortiori, that cannot be a sufficient basis for revoking an authorization.

Here, the new conditions alleged by the Commission (i.e., “changed circumstances in the national security environment, including the U.S. government’s increased concern in recent years about the Chinese government’s malicious cyber activities”156) are attenuated and nebulous concerns that are not tied to any circumstance that CTA can control. If the Commission were to revoke

CTA’s Section 214 authorizations on such intangible and unsubstantiated “conditions coming to the attention of the Commission” it will be setting a new precedent of overreach that goes against the intent of the Communications Act.

Likewise, revoking a carrier’s Section 214 authorizations based solely on foreign policy considerations would be a departure from Commission precedent that requires a showing of misconduct to justify revocation. The Commission should not revoke an individual carrier’s Section

214 authorizations based solely on foreign policy concerns in the absence of any evidence what-

154 See Trans Video Communications, Inc., 22 FCC Rcd. 855, ¶ 16 (WTB 2007); Theodore E. Sousa, 92 FCC 2d 173 (1982) (distinguishing between facts presented in an application and facts otherwise known to some branch of FCC staff). 155 China Mobile, 34 FCC Rcd. at 3371, ¶ 20. 156 Order Instituting Proceedings, 35 FCC Rcd. at 15011, ¶ 9.

- 42 - soever of specific misconduct by the carrier in question. The Commission may only revoke a company’s authorization based on a standard that gives the company notice of the conduct required of it, and an opportunity to conform to that standard.

This approach does not just threaten the continued operations of CTA and other carriers controlled by Chinese state-owned enterprises. If generalized foreign policy concerns suffice to revoke an authorization, then some future Commission may revoke the authorizations of carriers controlled by foreign governments other than China; carriers controlled by private citizens from disfavored countries; or even carriers controlled by American citizens just because they provide service to a disfavored country. In short, no carrier could have a legitimate expectation in the continued validity of its Section 214 authorization if these could be revoked at the whim of any future Commission, and there would be little if any incentive for carriers to invest in developing and maintaining facilities for international communications under these conditions. This outcome would be contrary to the public interest and over time would result in reduced availability and reduced quality of telecommunications services to American customers.

CTA is not in any position to express an opinion about the Executive Branch’s position on alleged policies of the Chinese government. It is impossible for any company to predict what foreign country may or may not become involved in future political disputes with the United States, or to modify its behavior in a way that will alter the state of international relations.

C. The Evidence in the Record Does Not Justify Revocation or Termination

1. CTA Stands by Its Response to the Order to Show Cause

The Order Instituting Proceedings stated that CTA would have an opportunity to make a filing “demonstrating why the Commission should not revoke and/or terminate its Section 214

- 43 - authority[.]”157 It also stated that this filing would permit CTA “a further opportunity to respond to this Order and to any additional evidence or arguments that may be submitted.”158

CTA has already demonstrated, in considerable detail, why the Commission should not revoke its Section 214 authorizations, in its Response filed June 8, 2020. The further comments filed by the Executive Branch subsequent to the Order rely largely on the same facts and arguments presented by them in their April 9, 2020, Recommendation to the Commission (with a few minor additional points that are addressed in Section III.C.3 below). CTA responded to that Recommen- dation as a substantial part of its June 8 Response. It therefore incorporates the CTA Response herein by reference as part of its reply to both the Order Instituting Proceedings and the subsequent

Executive Branch Response.

In addition, CTA respectfully objects again to the process adopted by the Commission in this matter. The “further opportunity” to respond provided by the Order is a meaningless sham, given that CTA is being permitted to respond to exactly the same allegations to which it has already responded, and after the Commission has already declared that it agrees with the Executive

Branch’s allegations and arguments and rejected CTA’s arguments in opposition. The Commission is not conducting a bona fide adjudication but is simply effectuating a preordained conclusion.

As CTA has previously explained, the Commission should have designated issues for hearing before an Administrative Law Judge, and still has the opportunity to correct that error. CTA reserves the right to present additional evidence and information as to why its Section 214 authorizations should not be revoked or terminated at such a hearing.

157 Order Instituting Proceedings, 35 FCC Rcd. at 15045, ¶ 71. 158 Id. at 15015, ¶ 17.

- 44 - 2. The Commission Should Not Revoke CTA’s Authorizations Based Solely on Allegations Against Its Corporate Parent(s)

Citing the Commission’s decision in Sandwich Isles,159 the Executive Branch argues that the Commission should find that CTA is controlled by the PRC government and pierce CTA’s corporate veil.160 The Executive Branch also cites Section 63.24(d), Note 1 of the Commission’s rules as rejecting “reliance on corporate formalities” for determining “control” for purposes of

Section 214.161 The Executive Branch acknowledges that the Commission has only disregarded corporate formalities and pierced the corporate veil “[i]f warranted by the facts[.]”162 As discussed below, the facts do not warrant piercing the corporate veil here.163

As a general rule, “a corporation will be looked upon as a legal entity.” 164 “Absent power- ful countervailing considerations, [the Commission will] not interfere with legitimate business transactions that assign rights and responsibilities among legally separate entities.”165 Rather, the

159 Exec. Br. Response, p. 9 (citing Sandwich Isles, 31 FCC Rcd. 12947, 12968-69 ¶¶ 69-70 (2016)). 160 The FCC has explained that the “piercing the veil” inquiry at the FCC “is distinct from the standards for “piercing the corporate veil” or finding an “alter ego” under common law. See Im- proving Pub. Safety Commc’ns in the 800 MHz Band, Fifth Report and Order, Eleventh Report and Order, Sixth Report and Order, and Declaratory Ruling, 25 FCC Rcd. 13874, 13888-89 (2010). 161 Exec. Br. Response, p. 9. 162 Id. 163 Moreover, even if the Executive Branch had alleged sufficient facts here to justify a veil- piercing inquiry, which it has not, under Commission precedent this issue would have to be designated for hearing before a neutral adjudicator. See note 14, supra. 164 Capital Tel. Co., Inc. v. FCC, 498 F.2d 734, 739 (D.C. Cir. 1974) (finding that the Com- mission correctly treated an individual and the corporation he controlled as the same entity and granted only one license, and that “substantial evidence supports the Commission’s decision to pierce Capital's corporate veil in order to carry out the statutory mandate ‘to provide a fair, efficient, and equitable distribution of radio service.’”). 165 Improving Pub. Safety Commc’ns in the 800 MHz Band, Fifth Report and Order, Eleventh Report and Order, Sixth Report and Order, and Declaratory Ruling, 25 FCC Rcd. 13874, 13887- 88 (2010).

- 45 - Commission’s decision to pierce the corporate veil needs to be supported upon a showing that “the statutory purpose could ... be easily frustrated through the use of separate ... entities.”166

The Commission applies a three-factor test to determine whether an entity or individual should be held liable for the action(s) or failure to act of a different related entity, considering: “(i) where there is a common identity of officers, directors, or shareholders; (ii) where there is common control between the entities; and (iii) when it is necessary to preserve the integrity of the Act and to prevent the entities from defeating the purpose of statutory provisions.”167 The Commission has pierced the corporate veil when an individual shared common identity (e.g., sharing the same address and being the sole director and officer) and exercised total control over the corporate entity

(e.g., signing and executing all corporate documents),168 where separate corporate entities were formed to evade regulatory requirements169 or shared a common identity (e.g., common officers and directors, operational space),170 and where an individual exercised total control over the business (e.g., controlling the finances).171 The Executive Branch neglects this three-factor test and instead suggests that CTA should be treated as an alter ego of the PRC government due solely to

166 Id., at 13887-88 (citing Gen. Tel. Co. of the S.W. v. United States, 449 F.2d 846, 854 (5th Cir. 1971)). 167 See Telseven, LLC, and Patrick Hines, Forfeiture Order, 31 FCC Rcd. 1629 (2016). 168 Id. 169 See, e.g., Petition by Telecable Corp. to Stay Construction or Operation of a CATV System in Bloomington and Normal Ill. by G.T.&E. Communications Inc., Decision, 19 FCC 2d 574, ¶¶ 31-32 (1969); Petition by Manatee Cablevision Inc. to Stay Construction and Operation of a CATV Distribution Facility in Manatee County Fla. by Gen. Tel. System, Decision, 22 FCC 2d 841, ¶¶ 52-58 (1970); Comark Cable Fund III v. Northwestern Indiana Tel. Co., Memorandum Opinion and Order, 3 FCC Rcd. 3096 (1988); see also Application of Gen. Tel. & Electronics Corp. to Acquire Control of Telenet Corp. and its wholly-owned subsidiary, Telenet Communications, Memorandum Opinion and Order, 72 FCC 2d 91 (1979). 170 Sandwich Isles, 31 FCC Rcd. at 12969-70, ¶¶ 71-73. 171 Id. at 12970, ¶ 74.

- 46 - its indirect ownership interests in CTA’s parent entities.172 A proper analysis of the three factors does not support imputing the conduct of, or allegations against, CTA’s parent entities or indirect owners to CTA.

With respect to the first two factors (i.e., “common identity” and “common control”), CTA has explained in detail that although it is a wholly owned subsidiary of CTCL, it is nevertheless a for-profit corporation organized and under the laws of the State of Delaware and subject to the requirements of Delaware corporate law.173 Certainly, the mere fact that CTA is a wholly-owned subsidiary of another corporation is not, by itself, sufficient reason to disregard CTA’s separate corporate identity. If it were, there would be no need for a three-part test, since the Commission could disregard the identity of any corporate subsidiary whenever it wanted. There is no allegation that CTA has disregarded corporate formalities or commingled assets or operations with its parent entity. In the United States, CTA has 224 employees, half of which are either U.S. citizens or permanent residents and over 97 percent of which were hired directly by local CTA management.

CTA and CTCL do not share identical officers, directors, or senior management officials.174 Nor does CTA share operational space with CTCL, as CTA has its principal place of business in Hern- don, Virginia, in addition to offices in six other U.S. cities. CTCL, on the other hand, is based in

Beijing and has no offices in the United States.

172 Exec. Br. Response, pp. 9-10. 173 See CTA Response, Ex. 3, pp. 2-4; id., Ex. 16, pp. 46-49. 174 See CTA Response, Ex. 4 (identifying the officers and directors of CTA); id., Ex. 5 (identifying the officers and directors of CTCL and CT).

- 47 - Furthermore, unlike cases in which the Commission has treated two corporations as one where they were owned by a common set of owners,175 CTA’s owners do not actively direct CTA’s daily operations. As previously explained, CTA operates its U.S. business as an independent corporation that runs on a day-to-day basis under the direction of its own local managers on core business matters including investment, vendor relations, sales, service provisioning, billing and accounting, collection and receivables, financing, labor, contracts, legal affairs, regulatory compliance and other business matters.176 Internally, CTA independently develops and manages its own investment plan, sets forth its budget requirement, and manages its own payroll, employee recruitment, commissions, labor costs and planning.177 And externally, CTA negotiates contracts with its customers to set forth acceptable pricing margins, manages its own provisioning, procures its facilities, and manages vendors and service providers—all transactional documents and agreements are executed and signed under CTA’s name.178 And, unlike Sandwich Isles where certain affiliates “only existed to service each other[,]”179 CTA exists and operates as an independent business that would be able to serve its customers without CTCL (e.g., by engaging in similar agreements with other carriers) further rebutting the notion that CTA and its parents should be considered as one.180

175 See Mansfield Journal Co. (FM) v. FCC, 180 F.2d 28, 37 (D.C. Cir. 1950) (finding appropriate the denial of applications by two separate corporations where the one family owned all of the stock in both corporations and the owners had an active role in the control and policy of the separate entities). 176 CTA Response, Ex. 3, p. 1. 177 CTA Response, Ex. 3, pp. 4-5. 178 Id. 179 Sandwich Isles, 31 FCC Rcd. at 12970, ¶ 73. 180 See CTA Response, Ex. 3, pp. 4-5.

- 48 - CTCL’s ability to review and approve certain major decisions is no different than protections given to investors that the Commission has found do not convey “control” over the regulated entity.181 Rather than looking to a single factor (e.g., appointment of board members), the Com- mission applies a totality of the circumstances test, and considers whether – in practical terms – the investor has been inserted into the “overarching policymaking activities” or “day-to-day operations” of the company.182 As discussed above and in CTA’s prior response, CTA maintains control of its day-to-day operations without interference by CTCL or any other entity.

Furthermore, while discharging their fiduciary duties, CTA’s directors and management exercise duties of care and loyalty that prohibit them from engaging in any illegal activities or conducting its business in any illegal fashion. CTA operates in accordance with applicable U.S. law and corporate best practices, including establishment of internal corporate policies and compliance with federal and state regulatory and other legal requirements.183

Both the Executive Branch and the Order Instituting Proceedings place great weight on amendments to CTCL’s Articles of Association regarding the role of the Party organization within

181 See Baker Creek Communications, LLC, Memorandum Opinion and Order, 13 FCC Rcd. 18709, 18714-18715, ¶ 9 (1998) (“[p]ermissible investment protections typically give … a decision-making role, through supermajority or similar mechanisms, in major corporate decisions that fundamentally affect their interests”). 182 See Roy M. Speer, Memorandum Opinion and Order, 11 FCC Rcd. 14147, 14158, ¶ 25 (1996), aff’d, 13 FCC Rcd. 19911 (1998) (finding an ability to approve “fundamental matters” to be a permissible investor protection that does not rise to the level of attributable influence where an entity had no ability to become involved in the overarching policymaking activities of the licensee or day-to-day operations). 183 CTA Response, Ex. 3, pp. 5.

- 49 - CTCL.184 Such amendments were introduced only in the broader context of the Chinese government’s reform of supervision and management of state-owned assets.185 The amendments focused on capital management, and investors recognized these amendments as increasing the clarity and transparency of the role of Party organization while giving state-owned enterprises more inde- pendence from the Chinese government.186 But, in any event, CTCL is not the entity that holds a

Commission authorization. CTA’s articles of incorporation and by-laws that govern its activities in the U.S. contain no references to any foreign government, any of its agencies, or any foreign political party.187 This is because, as an U.S. entity, CTA is committed and obliged to comply with the applicable U.S. law, conduct codes, and articles of association.

With respect to the third criterion (i.e., the need to preserve the integrity of the Act and to prevent the entities from defeating the purpose of statutory provisions), CTA’s Section 214 authorizations were lawfully obtained through the procedures and requirements promulgated by the

Commission. The Executive Branch has not presented any evidence that CTA has followed any illegal instructions from CTCL or the PRC government that would eviscerate the integrity of the

Act. Nor has any evidence been presented that CTA was created for purposes of circumventing any law or regulation that would prohibit its corporate parents from conducting the business or

184 Exec. Br. Recommendation, pp. 36-37; Order Instituting Proceedings, 35 FCC Rcd. at 15017-18, ¶¶ 22-23. 185 CTA Response, Ex. 15, p. 5. 186 Id. 187 CTA Response, Ex. 16, p. 49.

- 50 - providing the services that CTA provides.188 As such, the evidence and factors used by the Com- mission in prior cases do not support piercing CTA’s corporate veil.

3. The Additional Allegations in the Executive Branch Comments Do Not Justify Revocation or Termination

The Executive Branch Response offers two new factual allegations against CTA. First, it suggests (based solely on circumstantial evidence) that a third-party source cited in CTA’s June 8

Response was somehow influenced by CTA. Second, it argues that CTA has made several statements supportive of the Chinese government’s “One Belt One Road” Initiative, which it implies constitutes support for that government’s foreign policies. Neither of these charges has any merit.

a. Allegations Regarding Brenden Kuerbis

In its June 8 Response, CTA cited a blog post by Brenden Kuerbis of the Internet Govern- ance Project, in connection with the Executive Branch’s allegations of misrouting of Internet traffic by China Telecom. Mr. Kuerbis is a research scientist with the Internet Governance Project at the School of Public Policy at Georgia Institute of Technology. He previously was a Fellow in

Internet Security Governance at the Citizen Lab, Munk School of Global Affairs at the University of Toronto. His work focuses generally on the governance of Internet identifiers and the intersec- tion of nation-state and global cybersecurity concerns with forms of Internet governance. His research has been featured in numerous publications including Circle ID, Forbes, Washington

Internet Daily and the International Studies Review and Journal of Cyber Policy.189

188 See Transcontinental Gas Pipe Line Corp. v. FERC, 998 F.2d 1313, 1321-22 (5th Cir. 1993) (finding appropriate the treatment of a parent and subsidiaries as a single entity where the parent set up subsidiaries to sell gas at prices at which the parent could not legally sell). 189 Mr. Kuerbis’ professional background is derived from his publicly-available website at: https://spp.gatech.edu/people/person/brenden-kuerbis.

- 51 - The Executive Branch complains that the blog post was not fully cited in the CTA Re- sponse.190 This was due to an error by undersigned counsel in editing the voluminous CTA Re- sponse; apparently, in the course of revising the document, the original citation to Kuerbis’ blog post was deleted and only a subsequent, incomplete citation was kept in the final version. Counsel apologizes for this error. If the Executive Branch had inquired about the incomplete citation (which it did not), counsel would readily have provided the full citation. In the event, however, it is clear that the Executive Branch had no difficulty identifying the source of the quotation appearing in the CTA Response, which could be located easily using Internet search engines.

The Executive Branch then cites to public Foreign Agent Registration Act filings by the public relations firm Ogilvy, which was retained by CTA in the exercise of its First Amendment rights to challenge misperceptions about the company in the U.S. media. It notes that Ogilvy contacted Mr. Kuerbis on several occasions (the first being on April 15, 2019), and insinuates that

Ogilvy or CTA somehow influenced Mr. Kuerbis to express views favorable to CTA. Specifically, the Executive Branch suggests that “China Telecom Americas should be transparent about the role its influence efforts have played in generating support for its position that it has cited to the Com- mission[.]”191

Besides the fact that this accusation is based entirely on insinuation and suspicion, it would require CTA to have the use of a time machine, because Mr. Kuerbis had publicly disputed allegations against China Telecom many months before Ogilvy (or CTA) first contacted him. Specif- ically, on November 29, 2018, Mr. Kuerbis published a blog post titled, “The folly of treating

190 Exec. Br. Response, p. 2 & n.5. 191 Id., p. 3.

- 52 - routing hijacks as a national security problem” (the “November 2018 Blog”).192 The November

2018 Blog responded to an article in the Military Cyber Affairs journal in October 2018, and co- authored by researchers at the U.S. Naval War College and Tel Aviv University (the “MCA Arti- cle”).193 The MCA Article accused China Telecom, and by extension the Chinese government, of deliberately causing the misrouting of Internet traffic. CTA has already responded in detail to the

MCA Article’s baseless accusations.194 Mr. Kuerbis stated the following in the November 2018

Blog regarding the MCA Article:

“The [MCA] paper’s weakness is that it unproductively feeds into the national se- curitization of Internet governance… the article (and similar hijack accounts) de- fines hijacks as having malicious intent, but fails to compare their prevalence to all possible hijack types (malicious, accidental). This is important because, even if one wants to frame hijacks as a US national security problem, current data doesn’t necessarily support it.”

After his contacts with Ogilvy and CTA, and at his own initiative, Mr. Kuerbis published a second blog post in September 2019 relating to BGP hijacking that mentioned China Telecom

(the “September 2019 Blog”).195 The September 2019 Blog explains the meaning and magnitude of “route leaks” including the operators that had experienced route leak events. In the September

2019 Blog, Mr. Kuerbis concluded that the best solution to BGP hijacking is for operators to adopt

192 See Brenden Kuerbis, The folly of treating routing hijacks as a national security problem, Internet Governance Project (Nov. 29, 2018), https://www.internetgovernance.org/2018/11/29/the-folly-of-treating-routing-hijacks-as-a-national-security-problem/. 193 See Chris C. Demchak & Yuval Shavitt, China’s Maxim – Leave No Access Point Unex- ploited: The Hidden Story of China Telecom’s BGP Hijacking, MILITARY CYBER AFFAIRS (2018), https://scholarcommons.usf.edu/mca/vol3/iss1/7/. 194 See CTA Response, Ex. 16, Sec. V.D, pp. 59-63. 195 See Brenden Kuerbis, The summer of routing leaks, and good MANRS, Internet Govern- ance Project (Sep. 4, 2019), https://www.internetgovernance.org/2019/09/04/the-summer-of-routing-leaks-and-good-manrs/.

- 53 - MANRS recommendations (which China Telecom has since done) and argued against considering

BGP routing incidents as national security threats without sufficient evidence. He stated:

[R]esearch and press stories driven by geopolitical conflict and national security concerns that equate transnational operators with governments (ala China Telecom) and treat them as adversaries are doing the global Internet a disservice. Getting details correct and substantiating claims with evidence matters.

This was the passage quoted in the CTA Response. Contrary to the Executive Branch’s insinuation that Mr. Kuerbis’ views were the result of an “influence effort,” it is clear that the opinions he expressed in September 2019 were entirely consistent with his November 2018 post, which he published months before first being contacted on behalf of CTA. The Executive Branch’s assumption that CTA somehow influenced the views expressed by Mr. Kuerbis confuses cause and effect, and the Commission should reject its accusations.

b. One Belt One Road Allegations

The Executive Branch takes public statements out of context to imply that CTA “deliberately furthers the PRC government’s foreign policy goals, and that its operations are intertwined with those goals.”196 It conflates the pursuit of economic opportunities associated (in some cases) with China’s One Belt One Road Initiative with support for that government’s foreign policy objectives. When considered with full context, the statements cited reveal a company that seeks to meet the needs of commercial customers while respecting and seeking to comply with varying local laws and requirements.

First, the Executive Branch asserts that three partial quotes regarding the One Belt One

Road initiative “are evidence that [CTA] has endorsed and actively supports the PRC government’s foreign policy objectives.” The first is a quote from an interview of CTA’s President stating

196 Exec. Br. Response, pp. 12-13.

- 54 - that CTA “will follow the One Belt One Road initiative[.]”197 In context, however, this statement clearly meant that the company would “follow” the commercial opportunities created by the initiative. He explained that “at global level, we will follow the One Belt and One Road Initiative continuing to expand our global network to enter into more countries, especially emerging markets.”198 CTA’s President further explained that the expansion of CTA’s global network meant that the company’s plans to “continue to strengthen our network construction in America,” “to continue to grow our businesses,” to “explore business opportunities in other South American countries and enter those markets when time is right,” and to “step into the Canadian market and offer mobile communication services since we have achieved success in this sector in the US.”

Taken together, all of the statements are purely about CTA’s business plans. Many multinational companies (including U.S.-based companies) have expressed similar interest in profiting from the

One Belt One Road Initiative.199 These statements are exactly what could be expected from a pure commercial actor, and do not evidence any endorsement or support of the PRC government’s foreign policy or foreign policy objectives.

197 https://www.facebook.com/chinatelecomglobal/videos/steven-tan-xu-president-of-china- telecom-americas-corporation-shares-his-insight/940268502821658/. 198 Id. 199 Multinational companies that have expressed interest in this initiative include Honeywell, Waters (a producer of analytical instruments and software), HSBC, Siemens, and Schneider Elec- tric, among others. See, e.g., Evelyn Cheng, Honeywell, other US companies look to benefit from China’s gigantic ‘Belt and Road’ initiative, CNBC (Mar. 12, 2018), https://www.cnbc.com/2018/03/12/honeywell-other-us-companies-look-to-benefit-from-chinas- gigantic-belt-and-road-initiative.html; Honeywell, What is the Belt and Road Initiative (Sep. 7, 2017), https://www.honeywell.com/us/en/news/2017/09/what-is-the-belt-and-road-initiative (“The Belt and Road Initiative (BRI) can bring huge opportunities to Honeywell … Multi-national companies like Honeywell can bring a set of technology solutions to Chinese Engineering Pro- curement Construction (EPC) companies throughout the value chain. … Through these efforts, we closely align with the Belt and Road Initiative[.]”); Keith Bradsher, U.S. firms want in on China’s global ‘One Belt, One Road’ spending, NEW YORK TIMES (May 14, 2017), https://www.ny- times.com/2017/05/14/business/china-one-belt-one-road-us-companies.html.

- 55 - The second and third quotes cited by the Executive Branch are likewise taken out of context from a video on CTA’s YouTube account.200 The video states that China Telecom has “pledged to strive for better global economic cooperation” and has “implemented a pioneering global information strategy.” These statements concerning global economic cooperation evidently refer to commercial operations and opportunities, not promotion of any government’s foreign policy.

The Executive Branch’s fourth citation is to statements by a CTA executive during a public meeting held by the Inter-American Dialogue (the “I-A Dialogue”).201 The I-A Dialogue is a U.S.- based think tank that focuses on fostering democratic government, prosperity, and social equity in

Latin America and the Caribbean. This public meeting was entitled “Inter-American Dialogue,

China’s Belt and Road: What Role for Latin America?” (the “I-A Dialogue Meeting”).

During the I-A Dialogue Meeting, CTA’s representative was asked about the challenges of representing a Chinese-owned company in Latin America.202 In response, CTA’s representative explained that CTA was a late entrant in Latin America markets. As a new company entering into a new country, CTA needed to learn the local market, how to deal with the local government, and how to deal with the local people. An additional challenge in some Latin American jurisdictions is a lack of clarity from local governments as to how to engage, in contrast to the much clearer rules “from the China-side as to how to do an investment.” As one example, Chinese companies must conduct an environmental assessment that can be costly before receiving any funding, while local laws “are a little bit different” with “less protection or less concern” about environmental issues. CTA’s representative further explained (referencing local laws that apply to companies

200 Exec. Br. Response, p. 12. 201 Id., p. 12 & n.44. 202 Inter-American Dialogue, CHINA’S BELT AND ROAD: WHAT ROLE FOR LATIN AMERICA?, https://youtu.be/YnUpwPJHOok?t=3187 (starting at 53:07 to 57:30).

- 56 - seeking to engage in foreign investment projects) that “as a company, we have no say over what their laws are.”

During the I-A Dialogue Meeting, CTA’s representative referred to (without identifying the project by name) a smart city project called Yachay, or the City of Knowledge. Yachay, the largest national high-tech project in Ecuador, is a free trade zone focused on attracting international investment and development of a new university, and managed by an Ecuadorian state-owned enterprise, Yachay E.P. CTA and 14 other U.S. companies were invited in 2012 by the Ecuadorian

Ambassador to the United States to explore investment opportunities in Ecuador. During this visit,

CTA began discussions with the Ecuadorian government about participating in the Yachay project.

In 2014, Yachay E.P. requested that CTA provide best practices recommendations for cybersecurity for the new city and the university. Yachay was modeled on Germany’s concept of using higher education in the development of cities. Yachay City was modeled on South Korea’s master planned city, Songdo, within the Incheon Free Economic Zone.

In connection with the Yachay project, CTA was asked to recommend policies to address the physical and cyber security requirements to operate the city of Yachay. During the I-A Dia- logue Meeting, CTA’s representative explained that the Ecuadorian local government “want[ed]

[the security laws] to be much more stringent as far as protecting digital and physical security, and all these things that make it into law.” CTA advised Yachay E.P. about security policies as a con- sultant. CTA did not draft any actual laws and CTA’s recommendations were not always adopted by the Ecuadorian side. Moreover, Ecuador did not join the One-Belt-One-Road Initiative until

2018, which was six years after the initial invitation from the Ecuadorian Embassy, four years after

CTA received the Yachay consulting contract, and the year after the I-A Dialogue Meeting. CTA’s participation in the Yachay project was purely for unrelated commercial reasons, so the Executive

- 57 - Branch’s effort to associate CTA’s work on the Yachay project with support of the One-Belt-One-

Road Initiative is unjustified.

Rather than demonstrating any “allegiance to the Belt and Road Initiative” or that CTA’s operations are “intertwined” with the PRC government’s foreign policy goals as the Executive

Branch claims,203 these statements only demonstrate that CTA operates as a commercial enterprise using its expertise to offer products and services that customers want, and to provide services in a way that complies with requirements under local law.

IV. If the Commission Does Revoke or Terminate CTA’s Authorizations, It Must Provide Some Transition Period for Existing Customers

To the best of CTA’s knowledge, this is the first case in the Commission’s history in which it has proposed to revoke (or terminate) the Section 214 authorization of a carrier with active operations and customers. As discussed in Section II.A.1, above, there have been very few contested

Section 214 revocation proceedings. In CCN, the first reported revocation case, the respondents defaulted and apparently had ceased operations a year before the revocation order was adopted.204

Publix, Business Options, NOS Communications, and Kintzel, apparently the only proposed revocations before 2020 in which respondents did not default, were all resolved by consent decrees.

All other proceedings that went to final orders involved carriers that had gone out of business, or that the Commission had been unable to contact.

203 Exec. Br. Response, 13. 204 CCN, supra, 13 FCC Rcd. at 13600, ¶ 1. The Commission also considered and rejected a petition to intervene filed by third party carriers who alleged that (notwithstanding the earlier finding that the respondents had ceased operations) they provided service used by approximately 50,000 customers of one of the respondents. The Commission noted that its staff would “continue to work with [the third party] to craft a solution to protect those current … customers.” Id. at 13610, ¶ 19.

- 58 - Thus, the Commission has never had occasion to consider what, if any, measures should be taken to protect the interests of customers being served by a carrier at the time of the revocation of the carrier’s Section 214 authorizations. It is nonetheless clear that the Commission has an obligation to consider the effect of revocation on tens of thousands of current CTA customers. Sec- tion 214(a) of the Act, among other things, provides that, “[n]o carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby.” It would be absurd if the Commission could require a carrier to discontinue operations involuntarily without at least considering the effect on the public convenience and necessity, just as it considers it in the case of a voluntary discontinuance.205

The Commission must consider “the public interest in affording a reasonable transition period to users … in order to minimize disruption to business and other activities.”206 Many of

CTA’s MVNO customers have limited English language skills, and have subscribed to CTA’s service because of its Chinese-language customer service. Relatively few other carriers offer this service to Chinese speakers, and it will likely be more difficult for them to locate and subscribe to replacement services than it would be for the average customer. Furthermore, since the Commis- sion is also currently considering the possible revocation of authority of several other carriers that

205 Cf. Pass Word, Inc., 86 FCC 2d 437 (1981) (rejecting respondent’s argument that revocation of its common carrier radio license should be reconsidered based on customer impacts, but finding that a transition period of 180 days would be appropriate to protect customers). 206 Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets, Report and Order and Further Notice of Proposed Rulemaking, 18 FCC Rcd. 20604, 20679, ¶ 187, n.364 (2003) (noting that revoking an authorization for a licensee that has leased its spectrum to another party “will require the lessee to terminate its operations” and accounting for an appropriate transition period).

- 59 - facilitate bilateral communications between the U.S. and China, customers will be uncertain as to which carriers will be able to continue offering these international communications services on a long-term basis. At a minimum, the Commission should permit CTA to continue serving its existing customers for at least 18 months to allow for all customers to transition to other services. The

Commission has allowed even longer transition periods in some cases.207

A. CTA’s Resold Mobile Services Do Not Present National Security Risks and Should be Excluded from Any Revocation Order

In the event that the Commission decides to proceed with a revocation order, despite the fact that the evidence does not support one, the Commission should exclude CTA’s resold mobile services from any such order. CTA’s resold mobile service inside the United States does not present the same alleged national security risks as facilities-based services. Even assuming that the

Commission were to accept all of the Executive Branch’s claims about the Chinese government’s

207 See also Modernizing Unbundling and Resale Requirements in an Era of Next-Generation Networks and Services, Report and Order, 35 FCC Rcd. 12425, 12449, ¶ 46 (2020) (adopting a 42-month transition period for existing UNE DS1 Loops and a 36-month transition period for UNE DS3 Loops); id. at 12464-65, ¶ 75 (adopting a 48-month transition period for UNE DS0 Loops); id. at 12475-76, ¶ 95 (adopting a three-year transition period for UNE Narrowband Voice-Grade Loops); Petition of USTelecom for Forbearance Pursuant to 47 U.S.C. § 160(c) to Accelerate Investment in Broadband and Next-Generation Networks, Memorandum Opinion and Order, 34 FCC Rcd. 6503, 6514-15, ¶ 23, 6526, ¶¶ 45-46 (2019) (adopting a three-year transition period for UNE Analog Loops and Avoided-Cost Resale services to provide time for competitive LECs and their customers to transition to alternative service arrangements and avoid undue service disrup- tions); Petition of USTelecom for Forbearance Pursuant to 47 U.S.C. § 160(c) to Accelerate In- vestment in Broadband and Next-Generation Networks, Report and Order on Remand and Memorandum Opinion and Order, 34 FCC Rcd. 5767, ¶ (2019) (conditioning forbearance from UNE DS1/DS3 Transport obligations on a three-year transition period, taking into account “practical details of arranging for” alternative transport); Revisions to Rules Authorizing the Operation of Low Power Auxiliary Stations in the 698-806 Mhz Band, Report and Order and Further Notice of Proposed Rulemaking, 25 FCC Rcd. 643, 652-53, ¶ 20 (2010) (providing a one-year transition period for low power auxiliary stations to cease operations in the 700 MHz Band); 47 C.F.R. § 1.1164(f)(5) (providing that “[n]o order of revocation [due to failure to pay regulatory fees] shall become final until the licensee has exhausted its right to judicial review of such order under 47 U.S.C. § 402(b)(5).”).

- 60 - alleged power to obtain access to CTA’s customer communications (which CTA denies), those claims would only apply to services offered over CTA’s own facilities. Because of the way CTA’s resold domestic mobile service is offered in the United States, none of the customers’ communications passes over any CTA facilities.208

CTA offers its resold mobile services through an MVNO aggregator, using an unaffiliated

U.S. carrier’s mobile network. The aggregator maintains the direct commercial relationship with the underlying carrier, and CTA buys services from the aggregator. The aggregator interconnects to the carrier’s business support systems to provision mobile services on the carrier’s network for a CTA customer. Individual consumers purchase CTA’s CTExcel SIM card and obtain service on a monthly basis for the plan of their choice. All U.S. domestic calls are terminated within the mobile carrier’s network. When an international call is established, the U.S. mobile carrier routes the call to another unaffiliated U.S. carrier that provides international transport service to Hong

Kong, from where the international call is routed to its destination.209 Therefore, the theoretical

208 See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Twentieth Report, 32 FCC Rcd. 8968, ¶ 15 (2017) (“Resellers and mobile virtual network operators (MVNOs) do not own any network facilities, but instead purchase mobile wireless services wholesale from facilities-based service providers and resell these services to consumers.”). See also 47 C.F.R. 63.09(a) (defining “facilities-based carrier” as “a carrier that holds an ownership, indefeasible-right-of-user, or leasehold interest in bare capacity in the U.S. end of an international facility, regardless of whether the underlying facility is a common carrier or non-common carrier submarine cable or satellite system”). Moreover, as CTA previously explained, CTA “cannot offer facilities-based mobile services” because it is ineligible to hold a common carrier radio license under Section 310(b)(3) of the Communications Act, 47 U.S.C. § 310(b)(3), because all of its stock is owned by CTCL, a corporation organized under foreign law. See CTA Response, Ex. 16, pp. 19-20. 209 CTA Response, Ex. 16, pp. 34-36.

- 61 - risk of any sensitive information falling into the hands of the Chinese government from within the

U.S. is practically zero, even under the Executive Branch’s theory.210

Accordingly, given the potential harm to customers from discontinuance of service and the lack of any potential harm from continuing service, the balancing of public interest considerations should lead the Commission to allow CTA to continue its provision of resold mobile service, and should exclude this service from any revocation order.

V. Conclusion

For the reasons stated herein and in the June 8 Response, the Commission should not revoke or terminate the Section 214 authorizations held by CTA, and should instead close this proceeding. Alternatively, if the Commission wishes to continue with this proceeding, it should designate issues for hearing before an Administrative Law Judge.

210 The vast majority of CTA’s resold international calls terminate in China. To the extent that there is any risk of sensitive information being obtained at the terminating point of the call, that risk will not be mitigated by preventing CTA from reselling mobile service to customers in the U.S. The calls will simply be delivered to a Chinese terminating carrier by a different U.S. origi- nating carrier.

- 62 - Respectfully submitted,

/s/ Andrew D. Lipman Andrew D. Lipman Catherine Wang Russell M. Blau Raechel Keay Kummer

MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., NW Washington, D.C. 20004 (202) 739-3000 (202) 739-3001 (Fax) [email protected] [email protected] [email protected] [email protected]

Counsel to China Telecom (Americas) Cor- poration March 1, 2021

- 63 -