Washington

DOJ Asks FCC to Defer SoftBank/Sprint Decision

Cites continued FBI, DHS review of national security, public safety issues 1/31/2013 10:34:28 AM Eastern

Citing potential national security and safety issues that
still need vetting, the Justice Department has asked the FCC to defer action
regarding the proposed purchase of Sprint by Japanese company SoftBank.

That review also includes the sale of spectrum from
Clearwire, whose purchase by Sprint from a consortium of cable operators and
Google the FCC approved back in December, to SoftBank. SoftBank is seeking a
waiver of the FCC's 25% cap on foreign ownership to be able to own Clearwire.

In a letter dated Jan. 28, Jennifer Rockoff, an adviser to
Justice's National Security Division, asked the commission to defer any action
until the FBI and the Department of Homeland Security, as well as DOJ, have
completed their review of issues including national security and public safety.

"This is a routine request when working with the CFIUS
agencies
regarding national security," said a Sprint spokesman in a
statement. "We continue to anticipate that the transaction will be
completed in mid-2013."

In fact, DOJ sent virtually an
identical letter
to the FCC when it was reviewing the T-Mobile/MetroPCS
deal.

The FCC and DOJ routinely coordinate their reviews, and a
Sprint source speaking on background suggested that Justice was simply asking
the FCC to defer to its subject matter expertise on national security and
safety, since a deal that threatened either would not meet the FCC's public
interest standard and Justice, not the FCC, has the subject matter expertise to
make that national security call.

"We have no reason at the moment to regard DOJ's Feb.
28 letter as a red flag or as unusual," said Jeffrey Silva, senior policy
director of telecommunications at analyst Media and Technology Medley Global
Advisors LLC, in a note to investors. "Quite simply, there is nothing to
defer. The FCC is only at day 60 [now day 61] of the agency's nonbinding
180-day deadline for completing its review of SoftBank-Sprint-Clearwire. The
commission's regulatory analysis of the transactions was always going to take
longer than the national security assessment. The national security review is
30 days, which can be extended to 45."

DOJ said it would let the FCC know when it was ready for the
commission to weigh in.

Some national security concerns have been raised about the
deal in the FCC docket.

In its comments, the Communications Workers of America said
they were concerned about the connections of SoftBank and Clearwire's
association with Chinese vendors Huawei and ZTE, which are supplying equipment
for their networks. At minimum, CWA wants restrictions on the use of Huawei and
ZTE technology in Spring/Clearwire networks, which it concedes would have the
possible side benefit of boosting jobs in domestic equipment companies.

Back in October and following an almost year-long
investigation, the House Permanent Select Committee on Intelligence recommended
that telecom providers steer
clear of Chinese-based global tech companies Huawei and ZTE.

During congressional debates over cybersecurity, one issue
both sides of the aisle agreed on was that the country needed to better track
the foreign-made telecom-related hardware and software in critical U.S. telecom
systems.

If the FCC and DOJ do sign off on the SoftBank/Sprint deal,
it will likely be with conditions agreed to by the companies to insulate the
U.S. operations from ZTE or Huawei network equipment.

Dish has also asked the FCC to hold off on a decision on
the deal, but that is because it has made a counter offer for Clearwire.

 

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