China Telecom (Americas) Corporation v. FCC (PUBLIC) ( 2023 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 20, 2022 Decided December 20, 2022
No. 21-1233
CHINA TELECOM (AMERICAS) CORPORATION,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
On Petition for Review of an Order
of the Federal Communications Commission
Russell M. Blau argued the cause for petitioner. With him
on the briefs were Andrew D. Lipman and Raechel K. Kummer.
Scott M. Noveck, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were Brian M. Boynton, Principal Deputy Assistant
Attorney General, U.S. Department of Justice, Sharon Swingle,
Casen Ross, and Dennis Fan, Attorneys, and Jacob M. Lewis,
Acting Deputy General Counsel, Federal Communications
Commission. Matthew J. Dunne, Counsel, Federal
Communications Commission, entered an appearance.
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Before: HENDERSON and KATSAS, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: Confronted with
reliable claims of escalating Chinese cyber threats targeting the
United States, the Federal Communications Commission
(“FCC” or “Commission”) revoked the authority of China
Telecom (Americas) Corp. (“China Telecom”) to operate
domestic and international transmission lines pursuant to
section 214 of the Communications Act of 1934. China
Telecom (Ams.) Corp., FCC 21-114, 36 FCC Rcd. ---, 2021 WL
5161884 (Nov. 2, 2021) (“Revocation Order”), Joint Appendix
(“JA”) 562-662. China Telecom now petitions for review.
After two rounds of written submissions and one round of
public comments, the Commission found that China Telecom,
“a U.S. subsidiary of a Chinese state-owned enterprise, is
subject to exploitation, influence, and control by the Chinese
government.” Revocation Order, JA 563. The Commission
also found that China Telecom’s “ownership and control by the
Chinese government raise significant national security and law
enforcement risks by providing opportunities for [China
Telecom], its parent entities, and the Chinese government to
access, store, disrupt, and/or misroute U.S. communications,
which in turn allow them to engage in espionage and other
harmful activities against the United States.” Id. The
Commission additionally found that China Telecom breached
“the 2007 Letter of Assurances with the Executive Branch
agencies, compliance with which is an express condition of its
international section 214 authorizations.” Id. Finally, the
Commission found that “classified evidence submitted by the
Executive Branch agencies further supports [the FCC]
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decisions to revoke the domestic authority and revoke and
terminate the international authorizations issued to [China
Telecom].” Id. at 563-64. Although the Commission offered
support from the classified record, consisting of evidence
obtained pursuant to the Foreign Intelligence Surveillance Act
(“FISA”), it has made it clear throughout these proceedings that
its decision is entirely justified by the unclassified record alone.
Before this court, China Telecom argues that the
Revocation Order is arbitrary, capricious, and unsupported by
substantial evidence. It dismisses as speculative the
Commission’s concern that China Telecom will be used as a
vector of cyberwarfare against the United States and disputes
the Commission’s conclusion that its conduct constituted
breaches of the Letter of Assurances. China Telecom also
argues that the paper hearing it received was procedurally
deficient. It contends that pursuant to the Commission’s past
practice, the requirements of the Administrative Procedure Act,
and the strictures of the Due Process Clause of the U.S.
Constitution, the FCC was obligated to grant China Telecom
discovery, an opportunity to demonstrate or achieve
compliance, and a live hearing before a neutral adjudicator.
We find no merit in China Telecom’s claims. Therefore,
we deny the petition for review. In reaching this judgment, we
have not found it necessary to rely on the classified record. The
Commission’s determinations that China Telecom poses a
national security risk and breached its Letter of Assurances are
supported by reasoned decisionmaking and substantial
evidence in the unclassified record. In addition, we hold that no
statute, regulation, past practice, or constitutional provision
required the Commission to afford China Telecom any
additional procedures beyond the paper hearing it received.
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I. BACKGROUND
A. Section 214 Authorizations
The Communications Act of 1934 tasks the FCC with
regulating the nation’s communications infrastructure. One of
the principal purposes of the statute is “national defense.” 47
U.S.C. § 151. In furtherance of this statutory purpose, any
carrier seeking to use or operate a transmission line for
interstate or foreign communications must first obtain a
“section 214 authorization” from the Commission. 47 U.S.C. §
214(a). And the Commission “may attach to the [214
authorization] such terms and conditions as in its judgment the
public convenience and necessity may require.” Id. § 214(c).
The Commission has granted blanket authority for any
carrier to construct, operate, or transmit over domestic
transmission lines, see 47 C.F.R. § 63.01(a), “subject to the
Commission’s ability to revoke [that] authority when
warranted to protect the public interest.” Revocation Order, JA
565. If a carrier seeks to construct, operate, or transmit over
international transmission lines, it must obtain specific
authorization from the Commission, see 47 C.F.R. § 63.18, and
the Commission may later revoke that authorization if
warranted to protect the public interest. Revocation Order, JA
565.
A crucial factor considered by the Commission in granting
or revoking section 214 authorizations is whether a carrier’s
use of domestic or international transmission lines raises any
national security, law enforcement, or foreign policy concerns.
Revocation Order, JA 566; see also 47 U.S.C. § 214(b)
(requiring notice of section 214 applications to the Secretary of
Defense and the Secretary of State). The Commission has had
a longstanding practice of seeking “the expertise of the relevant
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Executive Branch agencies” – including the Department of
Justice (“DOJ”), the Department of Homeland Security
(“DHS”), and the Department of Defense (“DoD”) – to help
assess national security and other concerns that might arise
from a carrier’s foreign ownership. Revocation Order, JA 566;
see also Rules & Policies on Foreign Participation in the U.S.
Telecomms. Mkt., 12 FCC Rcd. 23891, 23919 (1997) (“Foreign
Participation Order”) (recognizing that “foreign participation
in the U.S. telecommunications market may implicate
significant national security or law enforcement issues
uniquely within the expertise of the Executive Branch”). Under
established policies and practice, the Executive Branch
agencies may review existing authorizations for national
security risks and recommend revocation if the risks cannot be
mitigated. Process Reform for Executive Branch Review of
Certain FCC Appls. & Pets. Involving Foreign Ownership, 35
FCC Rcd. 10927, 10962-63 (2020).
The Communications Act does not specify any procedures
to be followed in conjunction with an action to revoke a section
214 authorization. Nor has the Commission promulgated any
regulations setting forth any such procedures. Although the
Commission has adopted regulations prescribing certain trial-
type procedures for the revocation of station licenses and
construction permits, those regulations do not apply to the
revocation of a section 214 authorization. See 47 C.F.R.
§§ 1.201-1.377; 47 C.F.R. § 1.91(a), (d).
What the FCC has done is opt in favor of a “written hearing
process” for the revocation of 214 authorizations:
The Communications Act gives the Commission the
power of ruling on facts and policies in the first
instance. In exercising that power, the Commission
may resolve disputes of fact in an informal hearing
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proceeding on a written record. And the Commission
may reach any decision that is supported by substantial
evidence in the record.
[] Accordingly, we amend our rules to codify and
expand the use of a written hearing process that can be
used in most adjudicative proceedings, including those
conducted by an administrative law judge, whenever
factual disputes can be adequately resolved on a
written record. . . . [T]he Commission or the presiding
officer (if other than the Commission) may order that
a hearing be conducted on a written record whenever
material factual disputes can be adequately resolved in
this manner. To 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[, 424
U.S. 319, 335 (1976)].
Procedural Streamlining of Admin. Hr’gs, 35 FCC Rcd. 10729,
10732-33 (2020) (“Streamlining Order”) (internal quotations
omitted).
Before the Revocation Order issued, China Telecom had
one domestic section 214 authorization (given pursuant to the
blanket authorization issued under FCC regulations) and two
international section 214 authorizations. The international
authorizations were conditioned on a 2007 Letter of
Assurances to the DOJ, Federal Bureau of Investigation
(“FBI”), and DHS. The Letter provides, inter alia, that China
Telecom will “take all practicable measures to prevent
unauthorized access to, or disclosure of the contents of,
communications or U.S. Records,” and “will notify the FBI,
DOJ and DHS if there are material changes in any of the facts
represented in this letter or if it undertakes any actions that
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require notice to or application to the FCC.” Letter from Yi-jun
Tan, President, China Telecom (USA) Corp., to Sigal P.
Mandelker, Deputy Assistant Attorney General, U.S. Dep’t of
Justice, et al. (July 17, 2007) (“Letter of Assurances”), JA 89-
90.
B. National Security Landscape
The FCC issued the first international section 214
authorization to China Telecommunications Corporation,
China Telecom’s indirect corporate parent company, on July
20, 2001. Since that time, the national security landscape has
changed significantly, with the focus shifting from terrorism to
Chinese cyber threats. The Office of the Director of National
Intelligence now warns of cyberattacks by the Chinese
government and the potential use of Chinese information
technology firms as systemic espionage platforms. The DHS
now warns that China has used cyber intrusions to steal private
sector proprietary information and sabotage military and other
critical infrastructure. The FBI now warns that no country
poses a broader, more severe intelligence collection threat than
China. Indeed, by the end of 2018, the DOJ indicted multiple
Chinese state actors targeting the U.S. private sector. The
foregoing points are detailed in the Executive Branch
Recommendation to the Federal Communications Commission
to Revoke and Terminate China Telecom’s International
Section 214 Common Carrier Authorizations (“Executive
Branch Recommendation”), JA 17, 20-24.
Meanwhile, China has augmented the level of state control
over the cyber practices of Chinese companies. Its 2017
Cybersecurity Law requires Chinese companies to cooperate
with state agencies on cybersecurity supervision and
inspection. Id. at 57. And its 2018 Regulation on Internet
Security Supervision by Public Security Organs authorizes the
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Ministry of Public Security to conduct on-site and remote
inspections of Chinese telecommunication and network
companies. Id. at 57-58. Consistent with this increasing state
control over Chinese telecommunication companies, China
Telecom’s parent company amended its Articles of
Association, pursuant to “the Constitution of the Communist
Party of China,” to set up Party organizations to perform “core
leadership and political functions” and advise the board of
directors. Id. at 54-55 (emphasis omitted); Revocation Order,
595-96.
C. Proceedings Before the FCC
In April 2020 – against this backdrop of tightening
Chinese government control over Chinese companies and
escalating Chinese cyber threats – several Executive Branch
agencies, including the DOJ, DHS, and State Department,
recommended that the FCC revoke China Telecom’s section
214 authorizations. JA 17-87. The Executive Branch agencies
focused on “the substantial and unacceptable national security
and law enforcement risks associated with China Telecom’s
continued access to U.S. telecommunications infrastructure
pursuant to its international Section 214 authorizations.” Id. at
19.
Shortly after receiving the Executive Branch agencies’
recommendation, the Commission issued a show cause order
directing China Telecom to show why the Commission should
not initiate revocation proceedings. In response, China
Telecom filed a seventy-two-page brief with fifteen additional
exhibits. In December 2020, the Commission found sufficient
cause and initiated full revocation proceedings, granting China
Telecom a public comment period and another opportunity to
file written submissions. In addition to its public comments,
China Telecom filed another sixty-two pages of legal and
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factual arguments. After reviewing the record, the Commission
found China Telecom’s arguments unconvincing. In November
2021, the Commission revoked China Telecom’s section 214
authorizations and ordered the company to discontinue by
January 2022 any services that it offered pursuant to its FCC
authorizations.
The Commission’s Revocation Order is based on both the
national security risks posed by China Telecom and its breach
of the 2007 Letter of Assurances. As to the national security
risks, the Commission found that the Chinese government
could exercise control over China Telecom directly and
through its parent companies. The Commission determined
that this control, when combined with China Telecom’s ability
to conduct cyberattacks and disrupt U.S. communications
traffic, constituted an unacceptable national security risk. As to
the breach of the Letter of Assurances, the Commission found
that China Telecom failed to take all practicable measures to
prevent unauthorized access to U.S. records and failed to notify
the Executive Branch agencies of two FCC applications. On
November 15, 2021, China Telecom timely petitioned for
review of the Commission’s Revocation Order.
In April 2020, before the FCC issued the Revocation
Order, the DOJ had provided notice that it intended to use FISA
evidence in the Commission’s revocation proceedings pursuant
to 50 U.S.C. § 1806(c). On November 24, 2020, the United
States filed an action in the U.S. District Court for the District
of Columbia to determine whether the FISA information must
be produced or suppressed. Revocation Order, JA 570; see
Letter from John C. Demers, United States Assistant Attorney
General, et al., to Marlene H. Dortch, Federal Communications
Commission (Dec. 8, 2020), JA 430-31; Petition to Initiate a
Determination by United States of America, United States v.
China Telecom (Ams.) Corp., No. 20-mc-116, 2021 WL
104707612 (D.D.C. Nov. 24, 2020). After full briefing, the
District Court held that the FISA information was lawfully
collected and need not be suppressed or disclosed to China
Telecom. United States v. China Telecom (Ams.) Corp., 2021
WL 4707612 (D.D.C. 2021). The District Court also rejected
China Telecom’s arguments that it was entitled to disclosure of
FISA material on the theory that due process requires a hearing
and an opportunity to respond to evidence against it. China
Telecom appealed the District Court’s decision in the FISA
proceeding, and that appeal has been dismissed as moot,
vacated, and remanded. No. 21-5215, slip op. (D.C. Cir. 2022).
As mentioned above, although the Commission claims that
the classified record supports the Revocation Order, it has
made it clear that the Revocation Order is entirely justified by
the unclassified record alone. The court’s judgment in this
matter is based solely on the evidence in the unclassified
record.
II. ANALYSIS
A. Standards of Review
Because the brief filed on behalf of Respondents, the
Federal Communications Commission and the United States of
America, amply and accurately sets forth the Standard of
Review and finds no objection from Petitioner, China Telecom,
we adopt much of what has been offered by Respondents:
Under the Administrative Procedure Act, a court may not
overturn agency action unless it is arbitrary, capricious, or
otherwise contrary to law. See 5 U.S.C. § 706(2). Under this
“deferential” standard, “[a] court simply ensures that the
agency has acted within a zone of reasonableness and, in
particular, has reasonably considered the relevant issues and
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reasonably explained the decision.” FCC v. Prometheus Radio
Project, 141 S. Ct. 1150, 1158 (2021). Courts must “presume[]
the validity of agency action and must affirm unless the
Commission failed to consider relevant factors or made a clear
error in judgment.” Cellco P’ship v. FCC, 357 F.3d 88, 93-94
(D.C. Cir. 2004) (citations omitted). And a reviewing court
must “‘accept the Commission’s findings of fact so long as they
are supported by substantial evidence on the record as a
whole.’” PSSI Glob. Servs., L.L.C. v. FCC, 983 F.3d 1, 7 (D.C.
Cir. 2020) (quoting Neustar, Inc. v. FCC, 857 F.3d 886, 896
(D.C. Cir. 2017)).
The Commission’s interpretation of statutes it administers,
such as section 214, is reviewed under the principles set forth
in Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S.
837 (1984). Under Chevron, “if the statute is silent or
ambiguous with respect to [a] specific issue, the question for
the court is whether the agency’s answer is based on a
permissible construction of the statute.” Id. at 843. “Chevron
deference does not apply where the statute is clear.” Johnson v.
Guzman Chavez, 141 S. Ct. 2271, 2291 n.9 (2021).
Finally, as to agency procedures, the “established
principle” is that “administrative agencies ‘should be free to
fashion their own rules of procedure and to pursue methods of
inquiry capable of permitting them to discharge their
multitudinous duties.’” FCC v. Schreiber, 381 U.S. 279, 290
(1965) (quoting FCC v. Pottsville Broad. Co., 309 U.S. 134,
143 (1940)); see also Vermont Yankee Nuclear Power Corp. v.
Nat. Res. Def. Council, Inc., 435 U.S. 519, 543 (1978); 47
U.S.C. § 154(j) (“The Commission may conduct its
proceedings in such manner as will best conduce to the proper
dispatch of business and to the ends of justice.”).
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B. Substantial Evidence in the Unclassified Record
Supports the Revocation Order
We hold that the Commission’s Revocation Order is
supported by reasoned decisionmaking and substantial
evidence in the unclassified record. As noted above, in
assessing China Telecom’s petition for review, we have given
no consideration or weight to any evidence in the classified
record.
We find that the Commission’s conclusion that China
Telecom poses an unacceptable national security risk is
supported by the record and justifies the Commission’s
Revocation Order. We also find the Commission’s conclusion
that China Telecom breached its Letter of Assurances is
supported by the record and independently justifies the
Commission’s Revocation Order.
1. The Record Supports the Commission’s National
Security Findings
The Commission grounded its conclusion that China
Telecom poses an unacceptable national security risk in its
determination that the Chinese government is able to exert
significant influence over China Telecom and China Telecom
is able to conduct cyberattacks against the United States. We
find that the record supports these determinations and,
therefore, supports the Commission’s Revocation Order.
On appeal, China Telecom does not dispute that it is
ultimately owned by the Chinese government. Nor has China
Telecom disputed that its direct parent entity amended its
Articles of Association to set up Chinese Communist Party
organizations within the company to “perform core political
and leadership functions,” including advising the board. Nor
13
has China Telecom disputed that the majority of the officers
and directors of its parent entity are also officers and directors
of the entity owned by the Chinese government and exercise
control over China Telecom’s operations, including reviewing
and approving major decisions. And finally, China Telecom
has not disputed that China’s 2017 Cybersecurity Law on its
face requires Chinese telecommunication companies to
cooperate with state-directed cybersecurity supervision and
inspection. These undisputed facts fully support the
Commission’s conclusion that China Telecom is unacceptably
vulnerable to Chinese government influence.
Likewise, substantial evidence in the record supports the
Commission’s conclusion that China Telecom’s operations
give it the capability to access, monitor, store, disrupt, and
misroute U.S. communications. On appeal, China Telecom has
not disputed the Commission’s exhaustive findings regarding
China Telecom’s access to U.S. records and technical
capabilities. Among other things, China Telecom has not
disputed that its foreign affiliates may access U.S. records due
to their storage on a shared database. Revocation Order, 607-
08. China Telecom has not disputed that, as a mobile virtual
network operator, it is able to collect customer information,
including identifiable personal information, call detail records,
and metadata pertaining to customer communications. Id. at
609. China Telecom has not disputed that, as a provider of
international private leased circuit, international ethernet
private line, and multiprotocol label switching services, it is
capable of passively monitoring unencrypted content and
actively misrouting traffic that traverses its network. Id. at 614-
16. China Telecom has not disputed that as an internet service
provider, it has access to routers, switches, or servers that store
and forward traffic and is thus capable of disrupting data and
controlling signaling operations. Id. at 615-16. China Telecom
has not disputed that as an internet router, it is capable of
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rerouting U.S. communications traffic, including by redirecting
it through China. Id. at 617-18. And China Telecom has not
disputed that its physical distribution points of presence in the
United States allow it to access and manipulate data when one
of its points of presence is on the preferred path for U.S.
customer traffic. Id. at 622-23. These undisputed facts fully
support the Commission’s conclusion that China Telecom
undoubtedly has the technical capability to commit
cyberattacks against the United States.
On appeal, China Telecom attempts to dismiss this
evidence as “mere speculation” regarding what might happen,
not what has happened. Petitioner’s Br. at 43. This is a specious
claim. The Executive Branch agencies’ recommendations to
the FCC are supported by compelling evidence that the Chinese
government may use Chinese information technology firms as
vectors of espionage and sabotage. Indeed, the record reveals a
recent string of state-sponsored cyberattacks against the United
States. China Telecom fails to acknowledge the DOJ’s
indictment of multiple Chinese state actors, including – in 2018
alone – indictments of Chinese intelligence officers and
hackers targeting information related to commercial airline
engines; a Chinese state-owned company engaging in
economic espionage related to U.S. trade secrets protecting
dynamic random access memory; and two defendants affiliated
with Chinese intelligence services stealing proprietary
information on telecommunications, electronics, medical
equipment, and biotechnology, among other things. Executive
Branch Recommendation, JA 22-23.
Moreover, contrary to China Telecom’s suggestion, the
Commission need not wait for a risk to materialize before
revoking a section 214 authorization. In the national security
context, “conclusions must often be based on informed
judgment rather than concrete evidence, and that reality affects
15
what we may reasonably insist on from the Government.”
Olivares v. Transportation Sec. Admin., 819 F.3d 454, 466
(D.C. Cir. 2016) (internal quotations omitted) (quoting Holder
v. Humanitarian Law Project, 561 U.S. 1, 34-35 (2010)).
“[W]hen it comes to collecting evidence and drawing factual
inferences [regarding risks to national security], the lack of
competence on the part of the courts is marked, and respect for
the Government’s conclusions is appropriate. Where no factual
certainties exist or where facts alone do not provide the
answer[,] we require only that the agency so state and go on to
identify the considerations it found persuasive.” Olivares, 819
F.3d. at 466 (citations omitted) (internal quotations omitted).
On substantial evidence review, we “cannot interfere with
the agency’s latitude not merely to find facts and make
judgments, but also to select the policies deemed in the public
interest.” United States v. FCC, 652 F.2d 72, 96 (D.C. Cir.
1980) (internal quotations omitted). This is especially true
when national security is implicated. See Haig v. Agee, 453
U.S. 280, 292 (1981) (citing Harisiades v. Shaughnessy, 342
U.S. 580, 589 (1952)) (“Matters intimately related to foreign
policy and national security are rarely proper subjects for
judicial intervention.”). Seeing that the record supports the
Commission and the Executive Branch agencies’ policy
judgment regarding the national security risk posed by China
Telecom, we have no basis upon which to question the
propriety of the Revocation Order.
2. The Record Supports the Commission’s
Determination that China Telecom Breached the
Letter of Assurances
We also find that the Commission’s determination that
China Telecom breached the Letter of Assurances is supported
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by substantial evidence and independently supports the
Commission’s Revocation Order.
First, the Commission’s conclusion that China Telecom
failed to take all practicable measures to prevent unauthorized
access to, or disclosure of the contents of, communications or
U.S. Records is supported by the record. When negotiating its
Letter of Assurances, China Telecom assured the Executive
Branch agencies that it would “inform [the Government] if it
intend[ed] to store any U.S. business records outside the United
States prior to doing so.” Revocation Order, JA 628 (internal
quotations omitted). In a 2016 letter, however, China Telecom
belatedly notified the Government that “at times between May
2013 and June 2014, U.S. Records were temporarily stored
outside of the U.S.” Id. at 628. Furthermore, it remains
undisputed that, as of March 2021, U.S. records remained
accessible in foreign locations, including China, by virtue of
their storage on a shared database. Id. at 631-33, 648-49.
What constitutes “all practicable measures” involves an
expert policy judgment that warrants deference. See SBC
Commc’ns Inc. v. FCC, 407 F.3d 1223, 1230 (D.C. Cir. 2005)
(deferring to agency interpretation of contract); accord Scenic
Am., Inc. v. United States Dep't of Transportation, 836 F.3d 42,
56-57 (D.C. Cir. 2016); Nat'l Fuel Gas Supply Corp. v. FERC,
811 F.2d 1563, 1569 (D.C. Cir. 1987). Recognizing the
deference we owe to the Executive Branch agencies’
recommendations and the Commission’s judgment, we hold
that the Commission was within its discretion to conclude that
allowing China Telecom’s foreign affiliates to access U.S.
records fell short of taking “all practicable measures” to
prevent unauthorized access to U.S. records and therefore
breached the Letter of Assurances.
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Second, the Letter of Assurances requires China Telecom
to “notify the FBI, DOJ and DHS if there are material changes
in any of the facts represented in this letter or if it undertakes
any actions that require notice to or application to the FCC.”
Letter of Assurances, JA 89-90. China Telecom does not
dispute that it failed to notify the Executive Branch agencies of
two FCC applications it filed for International Signaling Point
Codes. Revocation Order, JA 627, 638-30, 650. Rather, it
contends that the Letter of Assurances merely requires
notifications with respect to material applications to the FCC.
We reject this contorted construction of the Letter. “Material”
only modifies the first disjunct regarding “changes in any of
the facts represented in this letter” and does not modify the
second disjunct regarding “undertak[ing] any actions that
require notice to or application to the FCC.” Thus, on the
undisputed record, the Commission properly concluded that
China Telecom breached at least two of the conditions laid out
in the Letter of Assurances.
China Telecom argues in the alternative that even if it failed
to adhere to all of the terms of the Letter of Assurances, its
breaches were not “egregious” enough to justify the FCC’s
revocation of its authorizations. Petitioner’s Br. at 45-46. In
response, the Government says that “the potential disruption or
misrouting of U.S. communications would be ‘egregious’ by
any definition; so too the failure to comply with commitments
made to the government for the protection of national security
and public safety, or making inaccurate, incomplete, or
misleading representations to government agencies about such
matters.” Respondent’s Br. at 38-39. We agree with the
Government.
The Government also says China Telecom is wrong in
suggesting that “egregious misconduct” is the sole basis for
revoking authorizations. Id. at 39. Again, we agree. The
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Commission has revoked a number of section 214
authorizations without an official finding of egregious
misconduct. See WX Communications Ltd., 34 FCC Rcd. 1028
(2019); LDC Telecommunications, Inc., 31 FCC Rcd. 11661
(2016); Wypoint Telecom, Inc., 30 FCC Rcd. 13431 (2015).
And the Commission has long emphasized the importance of
prospective national security and law enforcement
considerations for section 214 authorizations. See, e.g.,
Foreign Participation Order, 12 FCC Rcd. at 23919-21.
Thus, on the record before us, we find that there is
substantial evidence supporting the Commission’s
determination that China Telecom poses a national security risk
and breached its Letter of Assurances. These determinations
each justify the Commission’s Revocation Order.
C. No Additional Procedures Are Required
China Telecom insists that it is entitled to discovery, a live
hearing before a neutral adjudicator, and an opportunity to
demonstrate or achieve compliance. Given the record in this
case, however, we hold that none of the additional procedures
sought by China Telecom is required by statute, regulation,
FCC practice, or the Constitution.
1. There Are No Statutory or Regulatory
Requirements That Impose Additional Procedures
Congress has granted the Commission broad authority to
“conduct its proceedings in such manner as will best conduce
to the proper dispatch of business and to the ends of justice.”
47 U.S.C. § 154(j). As explained above, the FCC has broad
discretion to craft its own rules “of procedure and to pursue
methods of inquiry capable of permitting them to discharge
their multitudinous duties.” Schreiber, 381 U.S. at 290 (internal
19
quotations omitted); see also Vermont Yankee, 435 U.S. at 543.
The Commission has exercised this discretion to “resolve
disputes of fact in an informal hearing proceeding on a written
record.” Streamlining Order, 35 FCC Rcd. at 10732. Here, the
Commission reasonably determined that the issues raised in
this case could be properly resolved through the presentation
and exchange of full written submissions before the
Commission itself.
As mentioned above, nothing in section 214 itself
prescribes any procedure for revocation proceedings. See 47
U.S.C. § 214. And China Telecom concedes that the
regulations prescribing trial-type procedures do not by their
express terms apply to section 214 revocation hearings. Indeed,
those regulations implement Title III of the Communications
Act and pertain to proceedings regarding station licenses and
construction permits, which are not at issue here. See 47 C.F.R.
§§ 1.201-1.377; 47 C.F.R. § 1.91(a), (d). While the
Commission has at times borrowed these procedures for the
revocation of a section 214 authorization, see Procedural
Streamlining of Admin. Hr’gs, 34 FCC Rcd. 8341, 8343 n.16
(2019) (noting Commission’s discretion to apply Title III
procedures to section 214 hearing), there has been no consistent
practice of doing so for all section 214 revocations, see WX
Communications Ltd., 34 FCC Rcd. 1028 (2019) (revoking
section 214 authorization on written record); LDC
Telecommunications, Inc., 31 FCC Rcd. 11661 (2016) (same);
Wypoint Telecom, Inc., 30 FCC Rcd. 13431 (2015) (same).
Without any consistent past practice of affording trial-type
procedures before revoking a section 214 authorization, there
is nothing to suggest that the Commission erred in law or
judgment in declining to grant China Telecom discovery or a
live hearing before a neutral adjudicator.
20
2. China Telecom Was Not Improperly Denied
Appropriate Opportunities to Demonstrate or
Achieve Compliance
China Telecom contends that under the Administrative
Procedure Act, it was entitled to an opportunity to cure its
alleged misconduct. Petitioner’s Br. at 61 (citing 5 U.S.C.
§ 558(c)). The Government responds that section 558(c) does
not apply “in cases of willfulness or those in which public
health, interest, or safety requires otherwise.” Respondent’s Br.
at 65 (citing 5 U.S.C. § 558(c)). According to the Government,
“the national security imperatives here could have allowed the
Commission to proceed immediately to a decision on whether
to revoke [China Telecom’s] section 214 authorizations . . . on
the basis that ‘public health, interest, or safety requires’ doing
so.” Revocation Order, JA 585. China Telecom does not
effectively refute this claim.
In any event, even if section 558(c) applies, the
Government convincingly argues that the FCC satisfied its
requirements by providing multiple opportunities for China
Telecom to respond to the Commission’s concerns, including
to identify any possible mitigation measures. Revocation
Order, JA 583-84, 653-54; see also Order Instituting
Proceedings on Revocation and Termination, 35 FCC Rcd.
15006, 15032-33, 15041-42 (2020), JA 458-59, 467-68 (asking
whether the FCC’s concerns could be mitigated by measures
short of revocation). Based on this record, we see no error in
the Commission’s determination that China Telecom failed to
show any further mitigation measures that could address the
serious national security and law enforcement concerns it
identified. Revocation Order, JA 652-54.
We agree with the Government that “China Telecom’s
problem . . . was not that it lacked the opportunity to
21
demonstrate compliance, but that it was unable to do so.”
Respondent’s Br. at 64. The Commission noted that China
Telecom “has not proffered any argument as to how it can
address . . . concerns over [its] ownership and control by the
Chinese government [that raise] substantial and unacceptable
national security and law enforcement risks.” Revocation
Order, JA 584. And Petitioner appears to concede that, because
the Revocation Order focuses on “changes in U.S. foreign
policy towards China,” China Telecom cannot “conceivably
come into compliance” in a way that will satisfactorily address
the concerns raised by the FCC and Executive Branch officials.
Petitioner’s Br. at 62. China Telecom objects that the
Commission’s determination is not based on a “lawful
requirement,” id., but we find no merit in this claim. As we
have already explained, the Commission’s national security
concerns alone suffice to justify the Revocation Order.
In sum, even if we assume that section 558(c) applies in
this case, we find no procedural error by the Commission.
Given the futility of offering China Telecom even more of an
opportunity to demonstrate or achieve compliance than they
received, the Commission did not err in denying it.
3. China Telecom Was Not Deprived of Any
Constitutional Rights to Procedural Due Process
China Telecom argues that by refusing to provide the
hearing that it sought, the FCC violated China Telecom’s due
process rights. We find no merit in this claim.
In order to support its claim, China Telecom must show
that (1) “the private interest that will be affected by the official
action” and (2) the “risk of an erroneous deprivation of such
interest through the procedures used and the probable value, if
any, of additional or substitute procedural safeguards”
22
outweigh (3) “the Government’s interest, including the
function involved and the fiscal and administrative burdens that
the additional or substitute procedural requirement would
entail.” Mathews, 424 U.S. at 335. China Telecom concededly
has a significant interest in retaining its authorizations and the
concomitant rights to offer services pursuant thereto. However,
the value of additional procedures is low, as China Telecom
has not shown how such procedures would have better
protected its rights or how different procedures might have
affected the Commission’s judgment.
In requesting discovery, China Telecom failed to identify
any unclassified information it sought but was denied. Instead,
China Telecom speculates that parts of the classified record
could be exculpatory. The simple answer to this concern is that
we have independently reviewed the classified record and
conclude that it does not contain any potentially exculpatory
evidence. FISA makes it clear that a court may conduct in
camera review of classified materials to determine whether the
materials may be suppressed. See 50 U.S.C. § 1806(f).
Therefore, even though we have relied solely on the
unclassified record in assessing the merits of China Telecom’s
claims, we deemed it appropriate to examine the classified
materials in camera to determine whether they include any
matters that might be exculpatory and justify discovery. See,
e.g., United States v. Muhtorov, 20 F.4th 558, 624 (10th Cir.
2021) (noting no favorable material in FISA evidence after
independent review); United States v. Moalin, 973 F.3d 977,
1002 (9th Cir. 2020) (following in camera review, court
determined that FISA materials did not contain favorable,
material information); United States v. Aldawsari, 740 F.3d
1015, 1019 n.7 (5th Cir. 2014) (same). On the record before us,
we safely conclude that China Telecom cannot show that it was
in any way prejudiced by a lack of discovery.
23
China Telecom also contends that it was entitled to a live
or written-record hearing, with a neutral adjudicator. China
Telecom was afforded two rounds of extensive written
submissions, as well as a round of public comments. The
company fails to indicate what, of consequence, it might have
sought to do in a live hearing before a neutral adjudicator that
it was not allowed to do during the procedure with written
submissions before the Commission.
Furthermore, it is telling that China Telecom has not
disputed on appeal the most significant findings of fact made
by the Commission. For instance, China Telecom has not
disputed that it is ultimately owned by the Chinese government.
Nor has China Telecom disputed that it has the technical
capability to monitor and disrupt U.S. communications.
Likewise, the Commission’s determination that China Telecom
breached its Letter of Assurances does not turn on contested
credibility judgments. The conclusion that China Telecom
failed to take “all practicable measures” to protect U.S. records
because U.S. records remained accessible in foreign locations
and the conclusion that China Telecom failed to notify the
Commission of two FCC applications as required by the Letter
reflect permissible judgments reached by the Commission
based on undisputed evidence. What China Telecom disputes
are the Commission’s legal interpretations of and policy
judgments arising from the undisputed facts. A live hearing
before a neutral adjudicator was not necessary to resolve those
disputes. See Mathews, 424 U.S. at 344 (noting no oral hearing
required where credibility and veracity are not at issue).
As to the Government’s interest, “[i]t is obvious and
unarguable that no governmental interest is more compelling
than the security of the Nation.” Haig, 453 U.S. at 307 (internal
quotations omitted). Accordingly, our “inquiry into matters of
. . . national security is highly constrained.” Trump v. Hawaii,
24
138 S. Ct. 2392, 2420 (2018); see also Dep’t of Navy v. Egan,
484 U.S. 518, 530 (1988) (“[C]ourts traditionally have been
reluctant to intrude upon the authority of the Executive in
military and national security affairs.”). Here, we are not well-
poised to question the FCC’s judgment regarding the need for
procedural expediency and the need to protect classified
intelligence. See Hamdi v. Rumsfeld, 542 U.S. 507, 533 (2004)
(holding that exigencies of national security caution against full
trial-type procedures to alleviate burden on Executive);
Morrissey v. Brewer, 408 U.S. 471, 481 (1972) (noting “due
process is flexible and calls for such procedural protections as
the particular situation demands”); Jifry v. FAA, 370 F.3d 1174,
1183 (D.C. Cir. 2004) (holding pilot’s private interest in airman
certificates “pales in significance to the government's security
interests” and thus no disclosure of classified information
required); Kashem v. Barr, 941 F.3d 358, 379 (9th Cir. 2019)
(noting that “keeping sensitive information confidential in
order to protect national security is a compelling government
interest” (internal quotations omitted)).
Weighing the Mathews factors, the low value of additional
procedures and the Executive’s weighty interest in national
security counsel against requiring any additional procedures in
this case. Thus, all things considered, the FCC was not required
to afford China Telecom any additional procedures.
III. CONCLUSION
For the reasons set forth above, we deny the petition for
review.
So ordered.