D.C. Circuit Upholds FCC's Pacific Networks/Comnet Order in National Security Case

The U.S. Court of Appeals for the D.C. Circuit upheld a 2022 FCC decision revoking Pacific Networks’ and its subsidiary ComNet’s authority to offer domestic or international services in the U.S. The FCC “revoked these authorizations based on concerns that the carriers posed national-security risks and had proven themselves untrustworthy,” said a decision written by Judge Gregory Katsas, in docket 22-1054. “The carriers argue that the FCC’s reasoning was substantively arbitrary and was rendered with inadequate process,” he said: “We reject both contentions.”

The U.S. “has grown increasingly concerned about espionage and other threats from Chinese-owned telecommunications companies,” Katsis wrote. He noted that after the FCC ordered Pacific Networks and ComNet to show cause in 2020 why their authorizations shouldn’t be revoked Team Telecom weighed in, finding that “China’s Ownership” of the companies “raised ‘significant concerns’ that the carriers would be ‘forced to comply with Chinese government requests, including requests for communications intercepts.’”

The carriers contend that the FCC “unreasonably found a threat to national security,” Katsis said. “But the Commission meticulously explained -- over the span of 62 pages -- how the carriers’ domestic operations threaten national security,” he said. “We cannot second-guess the FCC’s judgment that allowing China to access this information poses a threat to national security,” the court found. The FCC “adequately explained its decision to revoke Pacific Networks’ and ComNet’s authorizations, and it afforded adequate process to the carriers,” Katsis wrote: “We therefore deny the petition for review.” Circuit judges Harry Edwards and Karen Henderson joined the decision. The judges were on the same panel that last year upheld the FCC's revocation of China Telecom Americas’ domestic and international authorities.