Background: On December 24, 2024, the Court of Appeals for the Ninth Circuit denied a petition for review brought by China Unicom (Americas) Operations Limited (CUA). CUA challenged the Federal Communications Commission’s (FCC) revocation of certificates under § 214 of the Communications Act of 1934 (the Act), which authorized CUA to provide domestic and international telecommunications.

The revocation came shortly after the FCC denied an application for § 214 authorization in May 2019 submitted by China Mobile, a different carrier that is also owned by the Chinese Government. In April 2020, President Trump signed Executive Order No. 13913, which directed certain executive agencies to “assist the FCC in its public interest review of national security and law enforcement concerns that may be raised by foreign participation in the United States telecommunications services sector.”

In revoking the certificates, the FCC found that CUA had “failed to dispel the national security concerns arising from its ultimate Chinese government ownership and that CUA had demonstrated a lack of candor and trustworthiness in its representations to the FCC.”

CUA is incorporated in California, headquartered in Virginia, and wholly owned by China Unicom Global Limited (CUG), a Hong Kong company, which is owned by China Unicom (Hong Kong) Limited (CUHK), a publicly traded company on the Hong Kong Stock Exchange.

Issue: CUA contended that the FCC lacked statutory authority to revoke CUA’s certificates, that its decision to do so was arbitrary and capricious, and that it revoked the certificates without following proper procedures.

This blog post focuses on the Ninth Circuit’s “independent judgment” analysis under Loper Bright related to CUA’s contention that the FCC lacked statutory authority to revoke certificates under § 214.

Relevant Authorities:

Section 214(a): “No carrier shall undertake the construction of a new line or of an extension of any line, or shall acquire or operate any line, or extension thereof, or shall engage in transmission over or by means of such additional or extended line, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line . . . .

[n]o carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby.”

Section 214(c): “The Commission shall have power to issue such certificate as applied for, or to refuse to issue it, or to issue it for a portion or portions of a line, or extension thereof, or discontinuance, reduction, or impairment of service, described in the application, or for the partial exercise only of such right or privilege, and may attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require.”

Section 154(i): “The Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.”

Section 214(a) of the Act requires any “carrier” to obtain a “certificate” from the FCC before it may construct, operate, or acquire any “lines” used for telecommunications services.

The Ninth Circuit noted that the § 214(c) authorizes the FCC to “attach to the issuance” of any such certificate “such terms and conditions as in its judgment the public convenience and necessity may require.”

Under these relevant provisions, over the years, the FCC has “construed its authority to grant, refuse, and condition § 214 certificates as including the power to revoke a common carrier’s certificate either when the carrier has violated the Commission’s rules or when the Commission concludes that, for other reasons, the public interest so requires.”

The Ninth Circuit noted that the FCC has stated its right to revoke authorizations in the “Domestic Blanket Order” (14 FCC Rcd. 11364 (1999)(FCC reserved the authority “to revoke a carrier’s section 214 authority when warranted in relatively rare instances in which carriers may abuse their market power or their common carrier obligations.”)). and the “Foreign Participation Order” (12 FCC Rcd. 23891 (1997)(FCC has authority to “enforce [its] safeguards through fines, conditional grants of authority and the revocation of authorizations.”)).

Argument: CUA argued that the FCC lacks any statutory authority to revoke a § 214 certificate, except as a penalty imposed in connection with adjudicated violations of applicable law. On that basis, CUA asked the courts to set aside the FCC’s revocation order.

The FCC asked, in reviewing the issue, to defer to FCC’s interpretation of the Act under Chevron. However, with the Supreme Court’s recent overruling of Chevron in Loper Bright Enterprises v. Raimondo, the Ninth Circuit conducted an independent judgment analysis in deciding whether the FCC acted within its statutory authority. The Ninth Circuit reviewed de novo whether the FCC correctly interpreted the scope of its authority under the Act.

CUA argued that because § 214 expressly refers only to a power to “issue” a certificate, to “refuse to issue” a certificate, or to “attach” conditions to “the issuance of the certificate,” the FCC has not been granted the power to revoke a certificate. The Ninth Circuit found CUA’s argument unpersuasive, explaining that the “statute’s grant of authority to “issue” certificates to telecommunications carriers must be understood as carrying with it an implied incidental authority to revoke such documents.”

Regarding the FCC’s ancillary authority:

First, CUA’s argument ignores the concept of implied ancillary authorities. If Congress’s failure to include an express power to “revoke” a certificate truly means that the agency lacks such a power, then once a certificate is issued it could never be revoked. CUA doesn’t even endorse this position because it acknowledges that the FCC could revoke certificates as an enforcement penalty for misconduct, without pointing to a specific statutory authority to do so. The FCC has explained that its ancillary authority to revoke a certificate as a penalty comes from § 154(i), which gives the FCC authority to “perform any and all acts,” and “issue such orders, . . . as may be necessary in the execution of its functions.” Nothing in the language of the statute supports limiting the FCC’s revocation power to only the penalty context. As a result, the Ninth Circuit found, “CUA’s argument itself become atextual.”

Second, the Ninth Circuit points to Haig v. Agee, in which the Supreme Court faced the question of whether the State Department has the authority to revoke a passport on the grounds of the person’s activities in foreign countries are causing or likely to cause damage to national security. There, the Supreme Court acknowledged that the relevant statutory language only referred to granting and issuing passports. And the Supreme Court concluded that this textual omission did not preclude recognition of a revocation power generally or of a specific revocation power based on national security concerns. Therefore, in this case, the Communications Act’s express reference of only the power to issue or to refuse to issue a certificate “is not dispositive.”

Distinguishing Title II and Title III

The Ninth Circuit then addressed CUA’s argument that § 214 should be read to lack a general authority to revoke certificates once issued, relying on United States v. Seatrain Lines, Inc., 329 U.S. 424 (1947), which found that the Interstate Commerce Commission (ICC) lacked authority to partially revoke a certificate issued to a water carrier under Part III of the Interstate Commerce Act (ICA). There, the Supreme Court found significant and intentional the statutory language in the ICA that authorized the ICC to issue certificates to all three types of carriers (i.e., railroads, motor, and water carriers) but only specified the power to revoke certificates for motor carriers. Accordingly, the Supreme Court held that a water-carrier certificate under the ICA was not subject to revocation unless authorized by Congress.

CUA used Seatrain to argue that Title III of the Act expressly contains a provision empowering the FCC to “revoke any station license” for a variety of reasons in § 312. Therefore, similar to Seatrain, the exclusion of a power to revoke certificates in Title II requires a reading that the FCC does not have the power to revoke CUA’s certificates granted under § 214.

The Ninth Circuit rejected the analogy between the Communications Act and the ICA cited in Seatrain. First, Title II and Title II “are very different” because the Act recognizes that “broadcasters are not common carriers and are not to be dealt with as such.” FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 474 (1940). Second, broadcast licenses are issued for fixed, renewable terms of up to eight years, and as such, there’s an expectation that the license will endure the length of that term. The Ninth Circuit opined that the use of a fixed term is “affirmatively inconsistent” with an implied power to revoke a license at any time, which makes it reasonable for there to be an express provision granting the power of revocation. By contrast, Title II does not have a temporal duration of common carrier certificates, and “weighs in favor of an implied power of revocation.” The Ninth Circuit continues to provide additional arguments to distinguish the Communications Act from the ICA.

Examining other relevant provisions

In deciding that the FCC has authority to revoke a § 214 certificate based upon national security grounds, the Ninth Circuit also noted that the FCC should consider the national defense and consult the Departments of Defense and State. The statute directs the FCC to determine “the present or future public convenience and necessity [may] require” the requested authorization. It would be a “strange reading” to conclude that the FCC “may never consider subsequent changes in such circumstances as that “future” plays out.” Therefore, a “sclerotic” view of the agency’s authority is inconsistent with the statute’s purpose.

Dissent: Judge Bea dissented. He emphasized that federal agencies do not have any power unless it is enumerated to them, and the text of the statute does not include a revocation power. The majority’s basis for the FCC’s revocation “in some extra-statutory notion.” He distinguished Haig v. Agee by saying that the Supreme Court there read into the statute revocation power for reasons not applicable to this case (i.e., congressional acquiescence in Executive policies of refusing passports to applicants).

Takeaway: The removal of Chevron from judicial deference to administrative agencies has certainly sent shock waves through the courts and has influenced administrative and judicial review proceedings.

This opinion is a good example of an appellate court’s independent judgment analysis as applied to the Communications Act and the interplay between Title II and Title III. Notable is the Ninth Circuit’s reliance on the FCC’s ancillary authority in § 154(i) as a potential source for the revocation power in national security contexts. As FCC experts know, the Act’s “necessary and proper” clause has rarely succeeded in providing the FCC with the ability to act without an underlying enumerated provision providing some power.

Note: The first time the Ninth Circuit mentions China Unicom, it does so as China Unicorn. Very likely an unintentional (and harmless) typo, perhaps an auto-correct, but it gave a laugh nonetheless! Hah.