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As Trump’s FCC Chief, Pai Was Tough on China. Now He Wants to Ease Rules

(Bloomberg) -- As chairman of the Federal Communications Commission, Ajit Pai played a leading role in scrutinizing Chinese phone carriers operating in the US, even moving to eject several on security grounds.

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Now working in private equity, Pai, who left the FCC as the Biden administration came in, is working to water down an FCC proposal to boost communications security by more closely tracking foreign investors.

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The change would place firms “in a difficult position vis-a-vis their investors,” which may include sovereign wealth funds, critics including Pai, a partner at Searchlight Capital Partners, said in meetings at the FCC last week. Efforts to avert the new rules continued with follow-up calls and letters, according to filings released Monday by the FCC.

The regulatory agency has proposed tightening the threshold for requiring operators of international telecommunications services in the US to identify foreign investors to 5% ownership from 10%. The provision is part of a broader rule that’s gained the backing of Justice Department security experts and is set for a vote on Thursday at the FCC.

In meetings April 10 and 11 with the three current FCC commissioners to argue against the proposal, Pai, a Republican, was joined by other investment executives, including Jonathan Adelstein, a Democrat who served as FCC commissioner from 2002 to 2009. On April 13, Adelstein and lawyers for Pai’s Searchlight met with FCC Chairwoman Jessica Rosenworcel, a Democrat, according to a disclosure filing. With that, the petitioners had gained the ear of all four members of the commission, which is missing one member due to political gridlock.

Adelstein is now head of global policy and public investment for DigitalBridge Group Inc., a Boca Raton, Florida-based network infrastructure company with shareholders including Wafra Inc., an investment firm controlled by Kuwait’s government.

The FCC and DigitalBridge declined to comment, and Searchlight didn’t respond to requests for comment.

Rosenworcel, in a March 29 statement, said the proposed rule on foreign investors would help the FCC “stay ahead of evolving security threats.” The measure would require holders of communications licenses to undergo a periodic review and renewal process, including national security vetting.

Pai and Adelstein said keeping the 10% threshold wouldn’t harm national security because investors below that limit don’t control day-to-day operations.

“The proposed rules miss the mark by failing to consider the negative impact on the ability of investment management firms to attract foreign capital,” Pai, Adelstein and other signers said in an April 13 letter filed with the FCC. “By undercutting the willingness of this key capital source to invest with our firms, the commission’s draft proposal would inhibit critical investments in the US telecommunications sector.”

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