[Federal Register Volume 60, Number 50 (Wednesday, March 15, 1995)]
[Rules and Regulations]
[Pages 13915-13918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6488]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[GEN Docket No. 90-314, ET Docket No. 92-100, FCC 95-92]
Personal Communications Service
AGENCY: Federal Communications Commission.
ACTION: Final rule; petition for reconsideration.
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SUMMARY: On March 3, 1995, the Commission released a Memorandum Opinion
and Order revising certain sections of its Rules governing the Personal
Communications Services (PCS). The action in the instant Order responds
to petitions for reconsideration filed by Morgan Stanley Partnerships
on September 6 and October 7, 1994 in the Commission's broadband and
[[Page 13916]] narrowband PCS proceedings. The Order refines and
clarifies the Commission's Rules concerning the ownership attribution
of licenses in view of the Commission's decisions to use a multiplier
when assessing indirect ownership interests. The rule amendments are
intended to encourage investment in PCS, particularly by institutional
investors, and promote the rapid deployment of such new services in the
public interest.
EFFECTIVE DATE: March 15, 1995.
FOR FURTHER INFORMATION CONTACT:
Jackie Chorney, Wireless Telecommunications Bureau, (202) 418-0600.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Memorandum Opinion and Order in GEN Docket No. 90-314, ET Docket No.
92-100m, FCC 95-92, adopted March 2, 1995, and released March 3, 1995.
The complete text of this Order is available for inspection and copying
during normal business hours in the FCC Dockets Branch (Room 230), 1919
M Street, N.W., Washington, D.C., and also may be purchased from the
Commission's copy contractor, International Transcription Service, at
(202) 857-3800, 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.
Synopsis of Order
1. The Commission's PCS proceedings are designed to promote four
primary goals: competitive delivery, a diverse array of services, rapid
deployment, and wide-area coverage. The Commission notes that the
ability of PCS entrants to attract capital is essential to achieving
these goals. In essence, Morgan Stanley Partnerships argues in its
petitions for reconsideration that the Commission's PCS attribution
rules do not promote this ability sufficiently. The Commission states
that while promoting PCS investment is an important public interest
component of its PCS policies, its attribution rules are designed
principally to operate in conjunction with ownership limits to maintain
a competitive PCS industry. The Commission expresses that the real
question, therefore, is whether treating institutional investors
differently under its PCS attribution rules will improve investment
incentives without undercutting those rules' primary goal of serving as
anticompetitive safeguards. The Commission answers that question
affirmatively.
2. The Commission states that it has long recognized a distinction
between institutional investors and other investors, and that this
results, in part, because the term ``institutional investors''
identifies a category of investors that may be defined with some
precision. The Commission agrees with Morgan Stanley Partnerships that
institutional investors' market activities generally do not raise the
type of ``control'' issues that led the Commission to adopt ``bright
line'' PCS attribution rules. Indeed, the Commission observes that it
recently amended its rules in this regard to further clarify the
definition of institutional investor under the PCS rules and to promote
such investors' opportunities to serve as an important source of
funding for designated entity PCS companies. The Commission finds that
modifying the narrowband and broadband PCS attribution rules in light
of the request of Morgan Stanley Partnerships is consistent with the
Commission's traditional policy and recent action regarding
institutional investors. Moreover, the Commission believes that these
modifications will serve as an important means for encouraging
increased passive investment in PCS. Accordingly, the Commission states
that it is amending its PCS rules to: (1) exempt from attribution
insulated limited partnership interests held by institutional
investors, subject to those investors certifying to the Commission that
they are not materially involved directly or indirectly in the
management or operation of the carrier activities of the partnership;
and (2) increase from five to ten percent the level at which
institutional investors' PCS license ownership interests will be
attributed. Consistent with this change, the Commission is clarifying
that for purposes of the reporting requirements of section 24.813 of
its rules, institutional investors are not considered attributable
investors in an applicant unless they hold an ownership interest of 10
percent or more in the applicant. The Commission is amending section
24.813(a)(2) to require applicants to report ownership interests held
by institutional investors only if such ownership interests are 10
percent or more.
3. The Commission declines, however, to adopt the single majority
shareholder exception requested by Morgan Stanley. The Commission
believes that such an exception is unnecessary to address the issues
raised by Morgan Stanley regarding the application of the multiplier to
indirect institutional investments and to enable PCS applicants to
attract capital from institutional investors given the above-described
modifications to its attribution rules.
4. In addition, the Commission concludes that institutional
investors who held limited partnership interests prior to the adoption
date of this order shall be granted one year from that date to amend
their limited partnership agreements to comply with the insulation
rules. During this transition period, affected licensees shall certify
to the Commission that the limited partners are not materially
involved, directly or indirectly, in the management or operation of a
PCS licensee.
5. The Commission notes that it decided previously not to apply the
multiplier rule to nationwide narrowband PCS licenses granted under its
pioneer preference rules prior to August 16, 1994, or to nationwide
narrowband PCS licenses auctioned before August 16, 1994 (the date on
which it adopted the narrowband PCS multiplier rule). The Commission
continues to believe that it would not be equitable to apply the
multiplier rule to those licensees. In keeping with that rationale,
however, the Commission clarifies that this exemption will expire with
respect to a particular interest in a license if in the future that
exempt interest is transferred or assigned to another entity.
Ordering Clauses
6. It is Further Ordered That the petitions for reconsideration
filed by Morgan Stanley on September 6 and October 7, 1994, in our
broadband and narrowband PCS proceedings, respectively, Are Granted to
the extent discussed above.
7. Accordingly, It is Ordered that Part 24 of the Commission's
Rules Is Amended as specified below, And Will Become Effective
immediately upon publication in the Federal Register.
8. This action is taken pursuant to sections 4(i), 7(a), 302,
303(c), 303(f), 303(g), and 303(r) of the Communications Act of 1934,
as amended, 47 U.S.C. Sections 154(i), 157(a), 302, 303(c), 303(f),
303(g), and 303(r).
List of Subjects in 47 CFR Part 24
Communication common carriers, Radio, Reporting and recordkeeping
requirements.
47 CFR Part is amended as follows:
PART 24--PERSONNEL COMMUNICATIONS SERVICE
1. The authority citation for Part 24 continues to read as follows:
Authority: 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless
otherwise noted.
[[Page 13917]] 2. Section 24.101 is revised to read as follows:
Sec. 24.101 Multiiple ownership restrictions.
(a) Narrowband PCS licensees shall not have an ownership interest
in more than three of the 26 channels listed in Sec. 24.129 in any
geographic area. For purposes of this restriction, a narrowband PCS
licensee is:
(1) Any institutional investor, as defined in Sec. 24.720(h), with
an ownership interest of ten or more percent in a narrowband PCS
license; and
(2) Any other person or entity with an ownership interest of five
or more percent in a narrowband PCS license.
(b) In cases where a party had indirect ownership, through an
interest in an interving entity (or entities) that has ownership in the
narrowband license, that indirect ownership shall be attributable if
the percentages of ownership at each level, multiplied together, equal
five or more percent ownership of the narrowband PCS license, except
that if the ownership percentage for an interest in any link in the
chain exceeds 50 percent or represents actual control, it shall be
treated as if it were a 100 percent interest.
Example: Party X has a non-controlling ownership interest of 25
percent in Company Y, which in turn has a non-controlling ownership
interest of 10 percent in Company Z, the narrowband PCS licensee.
Party X's effective ownership interest in Company Z is Party X's
ownership interest in Company Y (25 percent) times Company Y's
ownership interest in Company Z (10 percent). Therefore, Party X's
effective ownership interest in Company Z is 2.5 percent, and is not
attributable.
(c) Notwithstanding paragraph (b) of this section, the following
interests shall not constitute attributable ownership interests for
purposes of paragraph (a) of this section:
(1) A limited partnership interest held by an institutional
investor (as defined Sec. 24.720(h)) where the limited partner is not
materially involved, directly or indirectly, in the management or
operation of the PCS holdings of the partnership, and the licensee so
certifies. The criteria which would assure adequate insulation for the
purposes of this certification require:
(i) Prohibiting limited partners from acting as employees of the
limited partnership if responsibilities relate to the carrier
activities of the licensee;
(ii) Barring the limited partners from serving as independent
contractors;
(iii) Restricting communication among limited partners and the
general partner regarding day-to-day activities of the licensee;
(iv) Empowering the general partner to veto admissions of new
general partners;
(v) Restricting the circumstances in which the limited partners can
remove the general partner;
(vi) Prohibiting the limited partners from providing services to
the partnership relating to the PCS holdings of the licensee; and
(vii) Stating that the limited partners may not become involved in
the management or operation of the licensee. See 47 CFR 73.3555 Note
2(g)(2); Memorandum of Opinion and Order in MM Docket 83-46, FCC 85-252
(released June 24, 1985), as modified on reconsideration in the
Memorandum of Opinion and Order in MM Docket No. 83-46, FCC 86-410
(released November 28, 1986).
(2) Institutional investors who held limited partnership interests
prior to March 2, 1995 shall be granted one year from that date to
amend their limited partnership agreements to comply with the
insulation rules and so certify to the Commission. During this
transition period, the licensee in which an institutional investor
holds an interest shall also certify to the Commission that the
institutional investor limited partner(s) are not materially involved,
directly or indirectly, in the management or operation of the licensee.
3. In Sec. 24.204, paragraph (d)(2)(viii) is redesignated as
paragraph (d)(2)(viii)(A) and new paragraph (d)(20(viii)(B) is added to
read as follows:
Sec. 24.204 Cellular eligibility.
* * * * *
(d) * * *
(2) * * *
(viii) * * *
(B) Notwithstanding paragraph (d)(2)(viii)(A) of this section, the
following interests shall not constitute attributable ownership
interests for purposes of Sec. 24.229(c):
(1) A limited partnership interest held by an institutional
investor (as defined Section 24.720(h)) where the limited partner is
not materially involved, directly or indirectly, in the management or
operation of the PCS holdings of the partnership, and the licensee so
certifies. The criteria which would assure adequate insulation for the
purposes of this certification require:
(i) Prohibiting limited partners from acting as employees of the
limited partnership if responsibilities relate to the carrier
activities of the licensee;
(ii) Barring the limited partners from serving as independent
contractors;
(iii) Restricting communication among limited partners and the
general partner regarding day-to-day activities of the licensee;
(iv) Empowering the general partner to veto admissions of new
general partners;
(v) Restricting the circumstances in which the limited partners can
remove the general partner;
(vi) Prohibiting the limited partners from providing services to
the partnership relating to the PCS holdings of the licensee; and
(vii) Stating that the limited partners may not become involved in
the management or operation of the licensee. See 47 CFR 73.3555 Note
2(g)(2); Memorandum of Opinion and Order in MM Docket 83-46, FCC 85-252
(released June 24, 1985), as modified on reconsideration in the
Memorandum of Opinion and Order in MM Docket No. 83-46, FCC 86-410
(released November 28, 1986).
(2) Institutional investors who held limited partnership interests
prior to March 2, 1995 shall be granted one year from that date to
amend their limited partnership agreements to comply with the
insulation rules and so certify to the Commission. During this
transition period, the licensee in which an institutional investor
holds an interest shall also certify to the Commission that the
institutional investor limited partner(s) are not materially involved,
directly or indirectly, in the management or operation of the licensee.
* * * * *
4. Section 24.229 is amended by revising paragraph (c) to read as
follows:
Sec. 24.229 Frequencies.
* * * * *
(c) PCS licenses shall not have an ownership interest in frequency
blocks that total more than 40 MHz and serve the same geographic area.
For purposes of this section, PCS licensees are:
(1) Any institutional investor, as defined in Section 24.720(h),
with an ownership interest of 10 or more percent in a broadband PCS
license; and
(2) Any other entities having an ownership interest of 5 or more
percent or other attributable ownership interest, as defined in Section
24.204(d), in a PCS license.
* * * * *
5. Section 24.813 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 24.813 General application requirements.
(a) * * *
(2) A list of any party which holds a five percent or more interest
(or a ten percent or more interest for institutional investors as
defined in Sec. 24.720(h)) in [[Page 13918]] the applicant, or any
entity in which a five percent or more interest (or a ten percent or
more interest for institutional investors as defined in Sec. 24.720(h))
is held by another party which holds a five percent or more interest
(or a ten percent or more interest for institutional investors as
defined in Section 24.720(h)) in the applicant. (e.g., If company A
owns 5% of Company B (the applicant) and 5% of Company C then Companies
A and C must be listed on Company B's application.
* * * * *
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-6488 Filed 3-14-95; 8:45 am]
BILLING CODE 6712-01-M
