Summary

The document outlines a proposed rule by the Federal Communications Commission (FCC) to conduct a comprehensive review of the rules and procedures governing submarine cable landing licenses. This review is the first major overhaul since 2001, aiming to enhance the security and management of the United States' submarine cable infrastructure. The proposed regulations are aimed at better protecting submarine cables, mitigating national security risks, and facilitating their deployment and capacity into the market. Among the proposals is a three-year periodic reporting requirement for submarine cable landing licenses. The alternative option considered is to shorten the current 25-year license term or a combination thereof with periodic reporting. The Commission also focuses on codifying its legal jurisdiction to provide regulatory clarity, and it seeks recommendations on updated programs to address cybersecurity risks, foreign ownership, and information sharing with other federal agencies.

There are important issues for stakeholders to consider. One notable concern is the potential imposition of new certifications, particularly around cybersecurity plans, which may result in substantial costs and compliance burdens, especially for small enterprises. Additionally, the document and proposals are highly technical and filled with procedural details, making them possibly difficult for the general public to digest without expert knowledge.

The impacts of this document on the public could be broad. The proposed rules aim to bolster national security by ensuring better oversight and protection of submarine cable infrastructure. This could lead to more secure cable networks, with more effective measures against national and international security threats. However, the implementation of these changes also carries the potential for significant costs, possibly affecting the financial conditions and resource availability of smaller businesses involved in the operation and management of submarine cables.

This review highlights the FCC's intention to create a structured and systematic approach for evaluating submarine cable landing licenses, taking into account the rapidly evolving landscape of technology and global political considerations, such as the influence of foreign adversaries and the need for robust cybersecurity measures. By considering both periodic reporting requirements and potentially shorter license terms, the Commission aims to more frequently assess and address risks, thereby providing enhanced protection for U.S. communications networks.

Using standardized processes and engaging with federal partners, including the Department of Homeland Security and the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, the FCC intends these regulatory updates to bolster the national security posture while balancing the regulatory burden on the industry, including small business entities, by streamlining the application and reporting processes. However, precise requirements for certifications like cybersecurity plans remain somewhat ambiguous, which may lead to implementation challenges and cost concerns for entities affected by the proposed rules. The FCC seeks comments on how to mitigate potential burdens, especially for small business concerns. The agency estimates an annual cost not exceeding $1.32 million industry-wide but looks forward to feedback for more precise calculations and alternative solutions.

The proposed rules may impose additional compliance requirements, which might be challenging for smaller entities due to limited resources. However, they also aim to secure a vital communication infrastructure, which is integral to national security, economic stability, and public safety. Access to critical non-public submarine cable data would be shared with Federal agencies, enhancing their ability to prevent and respond to national security threats in a timely manner. The Commission aims to balance these needs with efforts to streamline the application process to minimize regulatory burden while enhancing security and oversight. Feedback from the public, especially smaller entities, could influence the final shape of the rules and address potential concerns surrounding costs and administrative burdens.

The document implies potential consequences for non-compliance, including enforcement actions such as license revocations, implying a need for regulated entities to maintain thorough and accurate records of their compliance. The discussion of cost-benefit estimates and the potential burden on small businesses is an essential part of the document, ensuring the rules are economically viable for those impacted while balancing the nation's security and economic interests. As drafted, these proposed rules under the "NPRM" aim to bridge the information gap regarding submarine cable systems, ultimately supporting the Commission in safeguarding national communications networks.

One of the most significant areas of concern is the cost and complexity involved, especially for small entities, in adhering to the new certification and reporting requirements. The need for cybersecurity risk management plans, compliance certifications, and potential periodic fees could impose additional financial or regulatory burdens, though the document suggests the final rules will be crafted with efforts to minimize economic impacts, particularly for small businesses. Stakeholders are invited to provide feedback on such potential impacts and help shape any rules the Commission might adopt with a focus on maintaining national security and protecting public interests. While the benefits of protecting critical submarine cable infrastructure are clear, the potential cost implications for smaller entities warrant thorough consideration during the consultation process.

Commentary on Financial References in the "Review of Submarine Cable Landing License Rules and Procedures" Document

The Federal Communications Commission (FCC) has proposed a comprehensive review of the submarine cable rules for the first time since 2001. Nestled within the proposed rule changes, several financial aspects could impact entities involved in the submarine cable industry, particularly smaller businesses with fewer resources for compliance activities.

Proposed Application Fee

The document seeks public comment on whether a new application fee of $2,725 should be imposed on cable landing licensees submitting three-year periodic reports. This fee is suggested based on the Commission's existing methodology, which aligns with costs associated with "International Service" as outlined in the 2020 Application Fee Report and Order. If implemented, the fee collected would be deposited into the general fund of the U.S. Treasury, as required by law.

Economic Losses Due to Disruption

The document emphasizes the vital role that submarine cables play in the digital economy. Notably, it mentions that submarine cables carry more than 99% of transoceanic digital communications. Given the considerable size of the U.S. economy—over $26 trillion in 2023—and the digital economy accounting for $3.7 trillion in 2021, any disruption in submarine cable communications could result in significant economic losses, even reaching into the billions of dollars. This potential severity highlights the economic importance of ensuring uninterrupted service and the protection of these critical infrastructures.

Cost Estimates

The Commission has provided a tentative estimate for the annual aggregate cost of implementing the proposed rules. This cost is not expected to exceed approximately $1.32 million per year over the 25-year licensing period. This estimate considers several assumptions, including the potential preparation and review workload associated with new licensing applications, renewals, modifications, transfer of control, and the proposed three-year periodic reporting reviews.

For a new or renewal application, the Commission estimates it will require 80 hours of work by attorneys and another 80 hours of work by support staff, resulting in a total cost of $27,200 per application. Additionally, applicants will incur an estimated cost of $9,100 related to the cybersecurity certification that is required for all new and renewal applications.

Regarding the three-year periodic reporting, the Commission estimates it will necessitate twelve hours of attorney and twelve hours of support staff time, costing $4,100 (over three years). Annually, this translates into an estimated cost of $1,370, which together with the license application and corporate regulatory review totals approximately $1.32 million per year for the entire industry.

The recurring nature, every three years, of the periodic reporting requirement could mean reduced costs in later rounds, as much of the background research done for the initial application might remain valid and require only updates rather than from-scratch preparation.

Implications for Small Entities

The document estimates that approximately 50 or fewer submarine cable system applicants might be small entities. While the proposals aim to safeguard national security and public interests, the document acknowledges the potential financial burden on all stakeholders involved, including small entities. The costs may stem from the various compliance tasks, including capacity reporting, certifications regarding cybersecurity practices, and demonstrating how applications meet public interest criteria.

The document discusses potential alternatives to mitigate financial burdens, including possibly maintaining current reporting thresholds or altering them based on specific national security concerns. It proposes flexibility in the implementation of cybersecurity risk management plans, which might help reduce costs for smaller businesses. The availability of free and low-cost resources from institutions like NIST and CISA is highlighted as a potential aid for small entities, eliminating the need for hiring specialized external experts.

Moreover, the proposed periodic reporting requirement, which compels licensees to provide updated cable system and ownership data every three years, is designed to be less burdensome on small entities by allowing streamlined electronic submissions through existing filing systems and accepting certificates when certain information remains unchanged.

Considerations for Further Cost Reductions

The document underscores the possibility of reducing economic impact by implementing streamlined and simplified processes. It seeks feedback on potential cost estimates and invites small entities to highlight specific concerns about the potential financial burden of compliance with the proposed rules.

Additionally, there is a consideration for further shortening the submarine cable license term from the current 25 years, either alone or in combination with periodic reporting. There is an open call for feedback regarding the economic impact of a shortened license term on investment incentives, maintenance, and upgrade of submarine cable systems, as small entities may experience distinct consequences due to significant capital expenditures and long planning phases for cable construction.

The policy changes are crafted to ensure regulatory clarity and certainty for entities applying for submarine cable landing licenses or similar variations, but the financial implications for smaller entities remain an important point of consideration in the ongoing review process. The Federal Communications Commission continues to solicit comments to better understand and mitigate these potential impacts on small businesses in the sector.