DOJ Asks FCC to Defer SoftBank/Sprint Decision

Cites Continued FBI, DHS Review of National Security, Public Safety Issues

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 not to hold off on a decision on the deal, but that is because it has made a counter offer for Clearwire.