[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Rules and Regulations]
[Pages 40659-40664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20460]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90
[PR Docket No. 93-61; FCC 98-157]
Vehicle Monitoring Systems
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In the Second Report and Order, the Commission adopts the
general competitive bidding rules and procedures for the auction of
multilateration Location and Monitoring
[[Page 40660]]
Service (LMS) licenses, provides small business definitions and adopts
bidding credits for eligible small businesses. The effect will be to
promote and facilitate the participation of small businesses in the
Commission's auctions and in the provision of spectrum-based services.
The Second Report and Order also adds rules to allow LMS licensees to
partition their geographic licenses and disaggregate portions of their
spectrum.
DATES: Effective September 28, 1998, except for Sec. 90.365(d) which
will become effective January 19, 1999. Public and agency comments
concerning the information collections contained in the Second Report
and Order are due September 28, 1998.
ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room
222, Washington, D.C. 20554. For comments or inquiries regarding
information collections, direct all correspondence to Les Smith,
Federal Communications Commissions, Room 234, 1919 M St., N.W.,
Washington, DC 20554 or via the Internet at lessmith@fcc.gov.
FOR FURTHER INFORMATION CONTACT: Ken Burnley or Mark Bollinger,
Auctions and Industry Analysis Division, Wireless Telecommunications
Bureau, at (202) 418-0660.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and
Order in PR Docket No. 93-61, FCC 98-157, which was adopted on July 9,
1998 and released on July 14, 1998. A copy of the complete item is
available for inspection and copying during normal business hours in
the FCC Reference Center, Room 239, 1919 M Street, N.W., Washington,
D.C. 20554. The complete text may be purchased from the Commission's
copy contractor, International Transcription Service, Inc., 1231 20th
Street, N.W., Washington, D.C. 20036, (202) 857-3800. The complete
Second Report and Order is available on the Commission's Internet home
page (http://www.fcc.gov).
SUMMARY OF ACTION:
I. Introduction
1. The Federal Communications Commission (Commission) has adopted a
Second Report and Order stating rules and procedures governing
competitive bidding for multilateration Location and Monitoring Service
(LMS) frequencies.
A. Competitive Bidding Design and Procedures
2. In Amendment of Part 90 of the Commission's Rules to Adopt
Regulations for Automatic Vehicle Monitoring Systems, Memorandum
Opinion and Order and Further Notice of Proposed Rule Making, PR Docket
No. 93-61, 62 FR 52078, October 6, 1997 (``LMS Further Notice''), the
Commission proposed to use the general competitive bidding rules found
in subpart Q of part 1 of the Commission's rules as the auction rules
for LMS.
3. The Commission adopts the proposal to follow the competitive
bidding procedures contained in Subpart Q of Part 1 of the Commission's
Rules, including those adopted in Amendment of Part 1 of the
Commission's Rules--Competitive Bidding Procedures, WT Docket No. 97-
82, Allocation of Spectrum Below 5 GHz Transferred from Federal
Government Use, ET Docket No. 94-32, Third Report and Order and Second
Further Notice of Proposed Rule Making, 63 FR 2315, January 15, 1998
(``Part 1 Third Report and Order''). Consistent with this, matters such
as the appropriate competitive bidding design for the auction of LMS
licenses, as well as minimum opening bids and reserve prices, will be
determined by the Wireless Telecommunications Bureau (``Bureau'')
pursuant to its delegated authority.
B. Treatment of Designated Entities
4. In the LMS Further Notice, the Commission acknowledged that it
has consistently established ``small business'' definitions on a
service-by-service basis, and proposed to establish definitions for the
multilateration LMS. For purposes of LMS, the Commission defines a
``small business'' as an entity with average annual gross revenues for
the preceding three years not to exceed $15 million, and a ``very small
business'' is an entity with average annual gross revenues for the
preceding three years not to exceed $3 million. The bidding credits for
these small business definitions will be consistent with levels adopted
in the Part 1 proceeding. Accordingly, small businesses will receive a
25 percent bidding credit, and very small businesses will receive a 35
percent bidding credit. Bidding credits for small businesses are not
cumulative.
5. The Commission adopts, with a slight modification, our tentative
conclusion to attribute the gross revenues of the applicant, its
controlling principals and their affiliates. Specifically, the rule
refers to ``controlling interests'' rather than ``controlling
principals,'' and provides a definition of ``controlling interest'' to
clarify the application of the attribution rule in determining whether
an entity qualifies to bid as a small business. In calculating gross
revenues for purposes of small business eligibility, applicants will be
required to count the gross revenues of the controlling interests of
the applicant and their affiliates. A ``controlling interest'' includes
individuals or entities with de jure and de facto control of the
applicant. De jure control is 50.1% of the voting stock of a
corporation or, in the case of a partnership, the general partners. De
facto control is determined on a case-by-case basis. The ``controlling
interest'' definition also provides specific guidance on calculation of
various types of ownership interests.
6. When an applicant cannot identify controlling interests under
the definition, the revenues of all interest holders in the applicant
and their affiliates will be counted. For example, if a company is
owned by four entities, each of which has twenty-five percent voting
equity and no shareholders' agreement or voting trust gives any one of
them control of the company, the revenues of all four entities must be
counted. This approach is consistent with our treatment of a general
partnership--all general partners are considered to have a controlling
interest. This rule looks to substance over form in assessing
eligibility for small business status and will provide flexibility that
will enable legitimate small businesses to attract passive financing in
a highly competitive and evolving telecommunications marketplace. The
Commission emphasizes that bidders will be subject to the ownership
disclosure requirements set forth in 47 CFR 1.2112.
7. The Commission extends the amount of time for all LMS auction
winners to satisfy their construction requirements. Multilateration LMS
Economic Area (EA) licensees will be required to construct and place in
operation a sufficient number of base stations that utilize
multilateration technology to provide multilateration service to one-
third of the EA's population within five years of initial license
grant, and two thirds of the population within ten years. In
demonstrating compliance with the construction and coverage
requirements, licensees may individually determine an appropriate field
strength for reliable service, taking into account the technologies
employed in their system design and other relevant technical factors.
At the five- and ten-year benchmarks, licensees will be required to
file with the Commission a map and other supporting documentation
showing compliance with the coverage requirements.
[[Page 40661]]
C. Partitioning and Disaggregation and Unjust Enrichment Provisions
8. The Commission has previously adopted or proposed to adopt
partitioning and disaggregation rules for many of the Commercial Mobile
Radio Services (CMRS), and now adopts rules to allow multilateration
LMS licensees to partition their geographic license areas and
disaggregate portions of their spectrum in the same general manner as
in other CMRS services. Multilateration LMS licensees may partition or
disaggregate to any party eligible to be a multilateration LMS
licensee. Further, licensees may partition along any service area
defined by the parties. These decisions will permit marketplace forces
to determine the most suitable service areas, and will further the goal
of regulatory parity among CMRS services. Partitioning and
disaggregation will allow auction winners to customize their LMS
systems in a manner that will best address their business plans and
will help remove entry barriers for small businesses.
9. To ensure that partitioning and disaggregation do not result in
circumvention of our LMS construction requirements, the Commission
adopts the dual construction requirements for partitioning and the
construction certification procedure for disaggregation used in the
broadband Personal Communications Service (PCS). Under the first option
for partitioning, the partitionee must certify that it will meet the
same coverage requirements as the original licensee for its partitioned
market. If the partitionee fails to meet its coverage requirement, the
license for the partitioned area will automatically cancel without
further Commission action. Under the second option, the original
licensee must certify that it has already met or will meet its coverage
requirement. Further, parties seeking Commission approval of an LMS
disaggregation agreement must include a certification as to which party
will be responsible for meeting the construction requirements.
10. In cases of partitioning, the Commission requires sufficient
information to maintain our licensing records. Therefore, consistent
with our treatment of the Wireless Communication Service (WCS) and the
800 MHz and 900 MHz Specialized Mobile Radio (SMR) services,
partitioning applicants will be required to submit, as separate
attachments to the partial assignment application, a description of the
partitioned service area and a calculation of the population of the
partitioned service area and licensed market. The partitioned service
area must be defined by coordinate points at every three degrees along
the partitioned service area agreed to by both parties, unless county
lines are followed. These geographical coordinates must be specified in
degrees, minutes and seconds to the nearest second of latitude and
longitude, and must be based upon the 1927 North American Datum
(NAD27). Applicants also may supply geographical coordinates based on
1983 North American Datum (NAD83) in addition to those required based
on NAD27. This coordinate data should be supplied as an attachment to
the partial assignment application, and maps need not be supplied. In
cases where county lines are being utilized, applicants need only list
the counties that make up the newly partitioned area.
11. Consistent with our rules for broadband PCS, WCS and the 800
MHz and 900 MHz SMR services, disaggregating parties may negotiate
channelization plans among themselves as a part of their disaggregation
agreements. In addition, LMS licensees shall be permitted to
disaggregate spectrum without limitation on the overall size of the
disaggregation as long as such disaggregation is otherwise consistent
with our rules.
12. Also consistent with the rules for broadband PCS, WCS and the
800 MHz and 900 MHz SMR services, LMS licensees may use combined
partitioning and disaggregation. This will allow LMS licensees the
flexibility to design the types of agreements they desire, encourage
new market entrants and ensure quality service to the public. In the
event that there is a conflict in the application of the partitioning
and disaggregation rules, the partitioning rules shall prevail.
13. The Commission adopts its proposal to prevent possible unjust
enrichment through partitioning or disaggregation. Accordingly, the
Part 1 unjust enrichment provisions will apply for LMS. These rules are
similar to unjust enrichment rules adopted for the 800 MHz SMR auction
for determining the actual proportion of bidding credit to be refunded
and reduce the amount of unjust enrichment payments due on transfer
based upon the amount of time the initial license has been held. In
addition, when a combination of partitioning and disaggregation is
proposed, these pro rata calculations will be based on both the
population of the partitioned area and the amount of spectrum
disaggregated.
II. Regulatory Flexibility Act
14. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.
603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated
in the Memorandum Opinion and Order and Further Notice of Proposed Rule
Making. See Amendment of Part 90 of the Commission's Rules to Adopt
Regulations for Automatic Vehicle Monitoring Systems, PR Docket No. 93-
61, Memorandum Opinion and Order and Further Notice of Proposed Rule
Making, 62 FR 52078, October 6 , 1997 (``Further Notice''). The
Commission sought written public comment on the proposals in the
Further Notice, including comment on the IRFA. The present Final
Regulatory Flexibility Analysis (FRFA) conforms to the RFA. See 5
U.S.C. 604.
A. Need for, and Objectives of, the Second Report and Order in PR
Docket 93-61
15. The adopted provisions are based on the competitive bidding
authority of Section 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. 309(j), which authorized the Commission to use
auctions to select from among mutually exclusive initial applications
in certain services, including multilateration LMS.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
16. There were no comments filed directly in response to the IRFA;
however, the Commission received 2 comments in response to the Further
Notice.
C. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
17. The applicable definition under SBA rules of a small entity is
the definition under the rules applicable to radiotelephone (wireless)
companies. This provides that a small entity is a radiotelephone
company employing no more than 1,500 persons. According to the Bureau
of the Census, only twelve radiotelephone firms out of a total of 1,178
such firms which operated during 1992 had 1,000 or more employees. 1992
Census, Series UC92-S-1, at Table 5, SIC code 4812. Therefore, using
such data, even if all twelve of these firms were LMS companies, nearly
all such carriers were small businesses under the SBA's definition.
18. In the Second Report and Order, the Commission has adopted more
refined definitions for small business categories. The definition of a
``small business'' is an entity with average annual gross revenues for
the preceding three years not to exceed $15 million. The definition of
a ``very small
[[Page 40662]]
business'' is an entity with average annual gross revenues for the
preceding three years not to exceed $3 million. The Commission is
seeking SBA approval for these new LMS size standards. See also Second
Report and Order, n. 47.
19. As noted in the Second Report and Order, there are 528 licenses
to be awarded in the upcoming auction. New entrants could obtain
multilateration LMS licenses through the competitive bidding procedure,
and take the opportunity to partition and/or disaggregate a license or
obtain an additional license through partitioning or disaggregation.
Additionally, entities that are neither incumbent licensees nor
geographic area licensees could enter the market by obtaining a
multilateration LMS license through partitioning or disaggregation.
20. The Commission cannot estimate how many licensees or potential
licensees could take the opportunity to partition and/or disaggregate a
license or obtain a license through partitioning and/or disaggregation,
because it has not yet determined the size or number of multilateration
LMS licenses that will be granted in the future. Therefore, the number
of small entities that will be affected is unknown. Given the fact that
no reliable estimate of the total number of future multilateration LMS
licensees can be made, the Commission assumes for purposes of this FRFA
that all of the licenses will be awarded to small businesses.
D. Summary of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements.
21. The rules and provisions adopted in the Second Report and Order
include the possibility of new reporting and recordkeeping requirements
for a number of small business entities:
22. Competitive Bidding Applications. LMS license applicants will
be subject to reporting and recordkeeping requirements to comply with
the competitive bidding rules. Specifically, applicants will apply for
LMS licenses by filing a short-form application (FCC Form 175), and
will file a long-form application (FCC Form 601) at the conclusion of
the auction. Additionally, entities seeking treatment as small
businesses will need to submit information pertaining to the gross
revenues of the small business applicant and its affiliates and certain
investors in the applicant.
23. Construction Requirements. The proposals in the Second Report
and Order include reporting and recordkeeping requirements for new LMS
licensees to establish compliance with the coverage requirements. See
Second Report and Order, para. 30.
24. Geographic Partitioning and Spectrum Disaggregation. The
proposals in the Second Report and Order include reporting and
recordkeeping requirements for small businesses seeking licenses
through the proposed partitioning and disaggregation rules. The
information requirements would be used to determine whether the
licensee is a qualifying entity to obtain partitioned or disaggregated
spectrum. This information will be a one-time filing by any applicant
requesting such a license.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
25. The Second Report and Order adopts certain provisions for
smaller entities designed to ensure that such entities have the
opportunity to participate in the competitive bidding process and in
the provision of multilateration LMS services. The Commission
anticipates that most LMS licensees will fit the definition of small
business or very small business.
26. Small Business Definitions and Bidding Credits. The Commission
adopts two small business categories for the LMS auction: (1) a ``small
business'' category, for businesses with average gross revenues of over
$3 million but not to exceed $10 million; and (2) a ``very small
business'' category, for businesses with average gross revenues not to
exceed $3 million. These adopted categories will be based on the gross
revenues of the business for the three years preceding the filing of
the entity's application. The Commission will rely solely on gross
revenues, and not the number of employees, for the purpose of
determining an entity's eligibility for small incentives.
27. Attribution of Gross Revenues and Affiliates. The Commission
adopted a ``controlling interest'' standard as the general attribution
rule for all future auctions. The Commission believes that these
definitions are consistent with its proposals in the Part 1 Third
Report and Order. 63 FR at 2315.
28. Partitioning and Disaggregation. With respect to partitioning
and disaggregation, the Commission concludes that unjust enrichment
provisions should apply when a licensee has benefitted from the small
business provisions in the auction rules and applies to partition or
disaggregate a portion of the geographic license area to another entity
that would not qualify for such benefits.
F. Report to Congress
29. The Commission shall send a copy of the Second Report and
Order, including the FRFA, in a report to Congress pursuant to the
Small Business Regulatory Enforcement Fairness Act of 1996. See 5
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of
the Second Report and Order, including FRFA, to the Chief Counsel for
advocacy of the Small Business Administration.
III. Ordering Clauses
30. Accordingly, it is ordered that part 90 of the Commission's
Rules is amended and will become effective September 28, 1998. It is
further ordered that 47 CFR 90.365(d) of the Commission's Rules is
amended and will become effective January 19, 1999.
31. Authority for issuance of this Second Report and Order is
contained in Sections 4(i), 257, 303(r), and 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 257, 303(r),
and 309(j).
32. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Second Report and Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
Paperwork Reduction Act Analysis
33. The Second Report and Order contains an information collection.
The Federal Communications Commissions, as part of its continuing
effort to reduce paperwork burden invites the general public and other
Federal agencies to take this opportunity to comment on the following
information collection, as required by the Paperwork Reduction Act of
1995, Public Law 104-13. An agency may not conduct or sponsor a
collection of information unless it displays a currently valid control
number. No person shall be subject to any penalty for failing to comply
with a collection of information subject to the Paperwork Reduction Act
(PRA) that does not display a valid control number. Comments are
requested concerning (a) whether the collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimate; (c) ways
to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology.
[[Page 40663]]
Supplementary information:
OMB Approval Number: 3060-XXXX.
Title: Construction requirements.
Form No.: N/A
Type of Review: New collection for construction period buildout
requirements.
Respondents: Business and other for-profit entities, individuals or
households, State, Federal or Tribal Governments, Not-for-profit
entities.
Number of Respondents: 528.
Estimated Time for Response: Estimated total time for response
would be 52 hours per respondent for analysis of license records,
conducting the appropriate engineering surveys and studies, and
preparation of maps displaying the service area contour of the
licensee.
Frequency of Response: On occasion.
Total Annual Burden: 27,456 hours. 52 hours by 528 respondents.
Needs and Uses: Engineering surveys and prepared maps displaying
the service area contour of the licensee. Surveys and maps will be used
to evaluate licensee's service area boundary and coverage. Licensee's
boundary and coverage will then be compared against the construction
buildout requirements for the service.
DATES: Persons wishing to comment on this information collection should
submit comments by September 28, 1998.
ADDRESSES: Direct all comments to Les Smith, Federal Communications
Commissions, Room 234, 1919 M St., N.W., Washington, DC 20554 or via
the Internet at lessmith@fcc.gov.
FOR FURTHER INFORMATION CONTACT: For additional information or copies
of the information collections contact Les Smith at (202) 418-0217 or
via the Internet at lessmith@fcc.gov. For all other questions contact
Ken Burnley, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, at (202) 418-0660.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Chapter I of Title 47 of the Code of Federal Regulations, part 90,
is amended as follows:
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
1. The authority citation for part 90 continues to read as follows:
Authority: Secs. 4, 251-2, 303, 309, and 332, 48 Stat. 1066,
1082, as amended; 47 U.S.C. 154, 251-2, 303, 309 and 332, unless
otherwise noted.
2. Section 90.155 is amended by revising paragraph (d) to read as
follows:
Sec. 90.155 Time in which station must be placed in operation.
* * * * *
(d) Multilateration LMS EA-licensees, authorized in accordance with
Sec. 90.353, must construct and place in operation a sufficient number
of base stations that utilize multilateration technology (see paragraph
(e) of this section) to provide multilateration location service to
one-third of the EA's population within five years of initial license
grant, and two-thirds of the population within ten years. In
demonstrating compliance with the construction and coverage
requirements, the Commission will allow licensees to individually
determine an appropriate field strength for reliable service, taking
into account the technologies employed in their system design and other
relevant technical factors. At the five and ten year benchmarks,
licensees will be required to file a map and other supporting
documentation showing compliance with the coverage requirements.
* * * * *
3. Section 90.365 is added to subpart M to read as follows:
Sec. 90.365 Partitioned licenses and disaggregated spectrum.
(a) Eligibility--(1) Parties seeking approval for partitioning and
disaggregation shall request an authorization for partial assignment of
a license pursuant to Sec. 90.153.
(2) Multilateration LMS licensees may apply to partition their
licensed geographic service area or disaggregate their licensed
spectrum at any time following the grant of their licenses.
Multilateration LMS licensees may partition or disaggregate to any
party that is also eligible to be a multilateration LMS licensee.
Partitioning is permitted along any service area defined by the
parties, and spectrum may be disaggregated in any amount. The
Commission will also consider requests for partial assignment of
licenses that propose combinations of partitioning and disaggregation.
(b) Technical Requirements--In the case of partitioning, requests
for authorization for partial assignment of a license must include, as
attachments, a description of the partitioned service area, and a
calculation of the population of the partitioned service area and the
licensed geographic service area. The partitioned service area shall be
defined by coordinate points at every three degrees along the
partitioned service area unless county lines are followed. The
geographic coordinates must be specified in degrees, minutes, and
seconds to the nearest second of latitude and longitude and must be
based upon the 1927 North American Datum (NAD27). Applicants may supply
geographical coordinates based on 1983 North American Datum (NAD83) in
addition to those required based on NAD27. In the case where county
lines are utilized, applicants need only list the specific area(s)
(through use of county names) that constitute the partitioned area.
(c) License term. The license term for a partitioned license area,
and for disaggregated spectrum shall be the remainder of the original
licensee's license term.
(d) Construction requirements--(1) Requirements for partitioning.
(i) Parties seeking authority to partition must meet one of the
following construction requirements:
(A) The partitionee may certify that it will satisfy the applicable
construction requirements for the partitioned license area; or
(B) The original licensee may certify that it has or will meet the
construction requirement for the entire license area.
(ii) Applications requesting authority to partition must include a
certification by each party as to which of the above construction
options they select.
(iii) Failure by any partitionee to meet its respective
construction requirements will result in the automatic cancellation of
the partitioned or disaggregated license without further Commission
action.
(2) Requirements for disaggregation. Parties seeking authority to
disaggregate must submit with their partial assignment application a
certification signed by both parties stating which of the parties will
be responsible for meeting the construction requirement for the
licensed market. Parties may agree to share responsibility for meeting
the construction requirements. Parties that accept responsibility for
meeting the construction requirements and later fail to do so will be
subject to license forfeiture without further Commission action.
4. Add a new subpart X to read as follows:
Subpart X--Competitive Bidding Procedures for Location and
Monitoring Service
Sec.
90.1101 Location and Monitoring Service subject to competitive
bidding.
90.1103 Designated entities.
[[Page 40664]]
Subpart X--Competitive Bidding Procedures for Location and
Monitoring Service
Sec. 90.1101 Location and Monitoring Service subject to competitive
bidding.
Mutually exclusive initial applications for multilateration
Location and Monitoring Service licenses are subject to competitive
bidding procedures. The procedures set forth in part 1, subpart Q of
this chapter will apply unless otherwise provided in this part.
Sec. 90.1103 Designated entities.
(a) This section addresses certain issues concerning designated
entities in the Location and Monitoring Service (LMS) subject to
competitive bidding. Issues that are not addressed in this section are
governed by the designated entity provisions in part 1, subpart Q of
this chapter.
(b) Eligibility for small business provisions.
(1) A small business is an entity that, together with its
affiliates and controlling interests, has average gross revenues not to
exceed $15 million for the preceding three years.
(2) A very small business is an entity that, together with its
affiliates and controlling interests, has average gross revenues not to
exceed $3 million for the preceding three years.
(3) For purposes of determining whether an entity meets either of
the definitions set forth in paragraph (b)(1) or (b)(2) of this
section, the gross revenues of the entity, its affiliates, and
controlling interests shall be considered on a cumulative basis and
aggregated.
(4) Where an applicant (or licensee) cannot identify controlling
interests under the standards set forth in this section, the gross
revenues of all interest holders in the applicant, and their
affiliates, will be attributable.
(5) A consortium of small businesses (or a consortium of very small
businesses) is a conglomerate organization formed as a joint venture
between or among mutually independent business firms, each of which
individually satisfies the definition in paragraph (b)(1) of this
section (or each of which individually satisfies the definition in
paragraph (b)(2) of this section). Where an applicant or licensee is a
consortium of small businesses (or very small businesses), the gross
revenues of each small business (or very small business) shall not be
aggregated.
(c) Controlling interest. (1) For purposes of this section,
controlling interest includes individuals or entities with de jure and
de facto control of the applicant. De jure control is greater than 50
percent of the voting stock of a corporation, or in the case of a
partnership, the general partner. De facto control is determined on a
case-by-case basis. An entity must disclose its equity interest and
demonstrate at least the following indicia of control to establish that
it retains de facto control of the applicant:
(i) the entity constitutes or appoints more than 50 percent of the
board of directors or management committee;
(ii) the entity has authority to appoint, promote, demote, and fire
senior executives that control the day-to-day activities of the
licensee; and
(iii) the entity plays an integral role in management decisions.
(2) Calculation of certain interests.
(i) Ownership interests shall be calculated on a fully diluted
basis; all agreements such as warrants, stock options and convertible
debentures will generally be treated as if the rights thereunder
already have been fully exercised.
(ii) Partnership and other ownership interests and any stock
interest equity, or outstanding stock, or outstanding voting stock
shall be attributed as specified below.
(iii) Stock interests held in trust shall be attributed to any
person who holds or shares the power to vote such stock, to any person
who has the sole power to sell such stock, and, to any person who has
the right to revoke the trust at will or to replace the trustee at
will. If the trustee has a familial, personal, or extra-trust business
relationship to the grantor or the beneficiary, the grantor or
beneficiary, as appropriate, will be attributed with the stock
interests held in trust.
(iv) Non-voting stock shall be attributed as an interest in the
issuing entity.
(v) Limited partnership interests shall be attributed to limited
partners and shall be calculated according to both the percentage of
equity paid in and the percentage of distribution of profits and
losses.
(vi) Officers and directors of an entity shall be considered to
have an attributable interest in the entity. The officers and directors
of an entity that controls a licensee or applicant shall be considered
to have an attributable interest in the licensee or applicant.
(vii) Ownership interests that are held indirectly by any party
through one or more intervening corporations will be determined by
successive multiplication of the ownership percentages for each link in
the vertical ownership chain and application of the relevant
attribution benchmark to the resulting product, 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.
(viii) Any person who manages the operations of an applicant or
licensee pursuant to a management agreement shall be considered to have
an attributable interest in such applicant or licensee if such person,
or its affiliate pursuant to Sec. 1.2110(b)(4) of this chapter, has
authority to make decisions or otherwise engage in practices or
activities that determine, or significantly influence,
(A) The nature or types of services offered by such an applicant or
licensee;
(B) The terms upon which such services are offered; or
(C) The prices charged for such services.
(ix) Any licensee or its affiliate who enters into a joint
marketing arrangement with an applicant or licensee, or its affiliate,
shall be considered to have an attributable interest, if such applicant
or licensee, or its affiliate, has authority to make decisions or
otherwise engage in practices or activities that determine, or
significantly influence,
(A) The nature or types of services offered by such an applicant or
licensee;
(B) The terms upon which such services are offered; or
(C) The prices charged for such services.
(d) A winning bidder that qualifies as a small business or a
consortium of small businesses as defined in paragraph (b)(1) or (b)(5)
of this section may use the bidding credit specified in
Sec. 1.2110(e)(2)(ii) of this chapter. A winning bidder that qualifies
as a very small business or a consortium of very small businesses as
defined in paragraph (b)(2) or (b)(5) of this section may use the
bidding credit specified in Sec. 1.2110(e)(2)(i) of this chapter.
[FR Doc. 98-20460 Filed 7-29-98; 8:45 am]
BILLING CODE 6712-01-P
