US Government Increases Influence Over the Telecom Industry

by Istvan Fekete on August 29, 2013

The US government is after increasing its influence over the telecommunications industry through a series of increasingly restrictive security agreements between the telecom companies and national security agencies, the Wall Street Journal reports.

Although this isn’t something new, as security agreements go back more than a decade, the news is that consolidation in the industry and an influx of overseas investment is leading to much of the industry being under the government’s sway.

Considering that Sprint has been taken over by the Japanese Softbank Corp., the German-owned T-Mobile merged with MetroPCS Communications, and Verizon nearing completion of a $130 billion deal with Vodafone, such agreements have become very timely, especially in the light of the growing debate over the extensive collection of phone and Internet traffic by US spy agencies.

But it is not only carriers that are the target of such agreements: three major equipment suppliers have inked an agreements with US national security agencies: Alcatel-Lucent SA has signed an agreement as part of its 2006 merger between the France-based Alcatel and US-based Lucent Technologies.

Another major player, Nokia Solutions & Networks, signed an agreement back in 2011 relating to its acquisition of Motorola Solution Inc’s network assets, and Ericcson’s Nortel Networks Corp acquisition also triggered a similar agreement.

The telecom deals have to receive green light from the Federal Communications Commission, which oversees broadcast and spectrum licenses, alongside antitrust authorities, such as the Justice Department.

But this isn’t all: mergers involving foreign parties need to receive approval from either the Committee on Foreign Investment in the US, or a group informally called Team Telecom. Both of them represent security and law-enforcement interests at the departments of Defense and Justice.

They also have the power to prohibit certain moves, such as sharing communication data with foreign governments, and to interview employees and inspect “communications infrastructure” upon reasonable notice.

Such inspection rights have improved the government’s understanding of how the networks are put together, said Andrew Lipman, a partner at Bingham McCutchen LLP who has worked on about three dozen agreements over the last 20 years.

“The fact they have these rights to inspect gives them a window into equipment vendors that otherwise the government wouldn’t have,” he said. The government is using these agreements to “go to school” on network operations. “It’s like a shadow foreman at the factory,” he said.

That knowledge, he added, facilitates “the ability to—when appropriate—engage in record collection, data collection and wiretapping.”

These agreements are intended to lessen growing fears of foreign spying, as the national security agreement signed by the companies and the government agencies give officials the right to review and approve certain network equipment vendors.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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