National security concerns have prompted a US government investigation into the proposed takeover of an internet infrastructure company by Nippon Telegraph and Telephone of Japan.
The investigation, which has forced the telecoms group to delay completion of its $5.5bn takeover of Verio, a US hosting company, underlines the efforts being made by the American authorities to maintain control over law enforcement in the internet age.
Takeovers in the communications industry by non-US companies have always been sensitive for authorities such as the FBI. Such concerns are expected to mount as the in ternet makes surveillance more arduous and the number of corporate transactions increases.
The FBI is understood to have called for the inquiry into the Verio acquisition, concerned that it would not be able to carry out adequate surveillance at a company owned by a group operating outside its jurisdiction.
Law enforcement agencies can access any telecoms network to tap wires or garner information for criminal proceedings. The FBI, which has neither commented on nor confirmed any investigation, is understood to be concerned about its ability to carry out such undercover inquiries.
Its fears have been taken on board by the little-known com mittee on foreign investment in the US, a multi-agency group headed by the treasury department. The committee has up to 45 days to clear the deal under a special amendment of the Defense Production Act of 1950 which allows the president to ban any foreign takeover "that is determined to threaten the national security of the United States".
NTT confirmed the US concerns over law enforcement but added that it "believes the proposed transaction does not raise national security concerns". It has delayed its tender offer for Verio until the middle of July.
A spokesman for NTT said: "The FBI and the department of justice asked us to make a commitment to cooperate in securing public safety and law enforcement. We naturally agreed to observe US laws and to follow industry practices in the US, but simultaneously we stated that we do not believe that we should be subject to any more stringent requirements than those imposed on any other telecommunications company."
28There has been speculation that talks between NTT, the justice department and the FBI broke down over the firm's refusal to accept what it saw as onerous demands on an internet company in a highly competitive area.
NTT, which is 53% owned by the Japanese government, is also at the centre of a trade dispute between Japan and the US over telecom fees.
