Commission Action and Overview
On June 30, 2026, the Federal Communications Commission adopted a Memorandum Opinion and Order (FCC 26-44), released on July 7, 2026, denying the application of Digitalsystem Technology Inc. for international Section 214 authority under File No. ITC-214-20240326-00054.
Digitalsystem had applied to provide global facilities-based and resale international telecommunications services between the United States and foreign destinations pursuant to Section 214 of the Communications Act of 1934, as amended, and Section 63.18 of the Commission's rules.
The Commission concluded that granting the authorization would pose substantial and significant risks to U.S. national security and law enforcement interests that cannot be addressed through a mitigation agreement.
Ownership and Foreign Jurisdiction Concerns
Digitalsystem is a California corporation owned 70 percent by Hui Xie, a citizen of the People's Republic of China, and 30 percent by Yi Zhou, a U.S. citizen. Hui Xie also serves as Chief Executive Officer.
The Commission concurred with findings by the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (the Committee) that Digitalsystem is subject to the jurisdiction and control of the Chinese government.
Under Chinese laws—including the 2015 National Security Law, the 2017 National Intelligence Law, the 2017 Cybersecurity Law, and the 2014 Counter-Espionage Law—citizens and commercial organizations can be compelled to cooperate with and support state intelligence activities without independent judicial oversight or legal recourse.
- Hui Xie maintains 70 percent controlling equity and voting interest in Digitalsystem.
- Chinese intelligence laws obligate citizens to support and assist national intelligence work abroad.
- The applicant meets the regulatory definitions under 47 CFR § 1.70001 for being owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.
Affiliate Relationships and Operational Vulnerabilities
The review highlighted national security risks stemming from Digitalsystem's operational relationships with a Hong Kong affiliate and other telecommunications entities subject to Chinese jurisdiction.
The Commission determined that granting facilities-based and resale authority would enable foreign threat actors to exploit vulnerabilities to collect or exfiltrate sensitive communications content and customer records (including personally identifiable information, billing data, and call detail records), disrupt communications, or misroute U.S. internet traffic.
- Shared infrastructure, personnel, and operational ties with a Hong Kong affiliate subject to mainland Chinese national security laws.
- Commercial and testing relationships with Chinese state-connected telecommunications entities.
- Planned handling and potential foreign routing of sensitive U.S. customer data and lawful intercept infrastructure.
Inadequacy of Proposed Mitigation
On April 2, 2026, the National Telecommunications and Information Administration (NTIA), on behalf of the Committee, recommended that the FCC deny the application. Digitalsystem filed an opposition on May 7, 2026, offering commitments such as appointing an independent Chief Information Security Officer (CISO), restricting data storage, and implementing lawful intercept capabilities under the Communications Assistance for Law Enforcement Act (CALEA).
The FCC rejected the proposed mitigation measures, finding that Digitalsystem provided conflicting, incomplete, and misleading responses throughout the review process regarding its ownership access, personnel locations, and lawful intercept capabilities. The Commission determined that the necessary foundation of trust required for an enforceable national security mitigation agreement was absent.
- Applicant provided inconsistent statements regarding existing CALEA compliance and lawful process points of contact.
- Digitalsystem failed to provide a full accounting of foreign individuals and vendors with access to U.S. systems.
- The FCC deferred to the Executive Branch assessment that risks could not be mitigated, ordering the immediate denial of File No. ITC-214-20240326-00054.