[Federal Register Volume 59, Number 161 (Monday, August 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20559]
[[Page Unknown]]
[Federal Register: August 22, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[PP Docket No. 93-253; FCC 94-217]
Implementation of Section 309(j) of the Communications Act--
Competitive Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission, on its own motion, reconsiders several aspects
of the competitive bidding rules adopted for personal communications
services in the 2 GHz band (``broadband PCS''). The amendments adopted:
exempt entities owned and controlled by Indian tribes or Alaska
Regional or Village Corporations organized pursuant to the Alaska
Native Claims Settlement Act from the affiliation rules for purposes of
eligibility to apply for licenses in frequency blocks C and F
(``entrepreneurs' blocks''); and modify the rules governing the
attribution of gross revenues, total assets and personal net worth of
investors in corporate applicants in the entrepreneurs' blocks to
permit non-attributable investors to own up to 15 percent of a
corporate applicant's voting stock. The Commission's action furthers
the congressional policies of ensuring that all classes of designated
entities are provided opportunities for meaningful participation in
broadband PCS spectrum auctions. It also introduces additional
flexibility into the attribution rules to attract investment to all
types of corporations controlled by entrepreneurs' block eligibles and
to increase the level of participation by smaller corporate applicants
which have not made a public offering of their stock.
EFFECTIVE DATE: September 21, 1994.
FOR FURTHER INFORMATION CONTACT:
Peter A. Tenhula, Attorney, Office of General Counsel, (202) 418-1720.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
on Reconsideration in PP Docket No. 93-253, adopted August 15, 1994 and
released August 15, 1994. The full text of Commission decisions are
available for inspection and copying during normal business hours in
the FCC Docket Branch (Room 230), 1919 M Street NW., Washington, D.C.
The complete text of this decision may also be purchased from the
Commission's copy contractor, International Transcription Service,
Inc., (202) 857-3800, 2100 M Street NW., Washington, D.C. 20037.
Summary of Order on Reconsideration
1. On June 29, 1994, the Commission adopted its Fifth Report and
Order in the Implementation of Section 309(j) of the Communications
Act--Competitive Bidding (``Fifth Report and Order''), 59 FR 37566
(July 22, 1994), where we established competitive bidding rules for
broadband PCS. By this Order, we reconsider two aspects of our rules.
2. In the Fifth Report and Order, the Commission adopted rules
providing that gross revenues, assets and personal net worth of
affiliates of a broadband PCS applicant are attributed to the applicant
and counted toward certain eligibility criteria. These affiliation
requirements are intended to prevent entities that, for all practical
purposes, do not meet the Commission's size standards from receiving
benefits targeted to smaller entities. These safeguards ensure,
pursuant to Section 309(j)(3) of the Communications Act, that bona fide
designated entities are provided with meaningful economic opportunities
to participate in the provision of spectrum-based services. Generally,
affiliation arises when the applicant (or an attributable investor in
the applicant) controls or has power to control another entity or if
the applicant (or an attributable investor in the applicant) is under
the control of the other entity. In developing its affiliation rules,
the Commission borrowed from rules that are used by SBA to make size
determinations, including guidelines used to establish when a firm
should be deemed an affiliate of an applicant and other safeguards
designed to ensure that only qualified entities are eligible for
special benefits under the SBA's ``section 8(a)'' program. The
Commission failed, however, to adopt an exemption in the SBA's rules
that excluded from affiliation coverage entities owned and controlled
by Indian tribes or Alaska Regional or Village Corporations. See 13 CFR
121.401(b), 121.1102(a), 124.112(c). SBA is required by statute
generally to determine the size of a small business concern owned by an
Indian tribe (or a wholly owned business entity of such tribe)
``without regard to its affiliation with the tribe, any entity of
tribal government, or any other business enterprise owned by the
tribe.''\1\ The SBA has incorporated these and other statutory
provisions into its regulations.\2\
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\1\15 U.S.C. 636(j)(10)(J)(ii). The term ``Indian tribe''
defined in 25 U.S.C. 450b(e) includes ``any Indian tribe, band
nation, or other organized groups or community, including any Alaska
Native village or regional or village corporation as defined in or
established pursuant to the Alaska Native Claims Settlement Act [43
U.S.C. 1601 et seq.] which is recognized as eligible for the special
programs and services provided by the United States to Indians
because of their status as Indians.'' See also 15 U.S.C. 632(d)
(defining ``Qualified Indian tribe'' for purposes of the Small
Business Act; 25 CFR Part 83 (Department of the Interior procedures
for establishing that an American Indian group exists as an Indian
tribe).
\2\See Small Business Size Standards, 54 FR 52634, 52635 (Dec.
21, 1989) (amending 13 CFR 121.401(b)); Small Business Size
Regulations; Minority Small Business and Capital Ownership
Development, 59 FR 12811 (March 18, 1994) (amending 13 CFR
121.1102(a), 124.112(c)).
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3. We have reexamined our eligibility and affiliation rules and
will make an amendment to these rules that is more consistent with the
other Federal laws, policies and regulations so as not to preclude the
eligibility of entities owned and controlled by Indian tribes and
Alaska Native Corporations for entrepreneurs' block licenses and for
the benefits accorded businesses owned by members of minority groups.
We believe that adoption of an affiliation exemption for Indian tribes
and Alaska Native Corporations for purposes of eligibility in the
entrepreneurs' blocks is consistent with these other Federal
policies\3\ and complies with the congressional mandate in the auction
law.\4\ Specifically, this exemption will ensure that the congressional
policies of ensuring that minority-owned businesses have the
opportunity to participate in spectrum-based services will apply to a
class of designated entities, Indian tribes and Alaska Native
Corporations, that Congress has determined to be economically
disadvantaged. Without the exemption we adopt herein, the Commission
would not be able to ensure that all classes of designated entities are
provided meaningful opportunities to participate in broadband PCS
spectrum auctions.
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\3\C.f. LaRose versus FCC, 494 F.2d 1145, 1146 n.2 (D.C. Cir.
1974).
\4\See 47 U.S.C. 309(j)(4)(D), (3)(B).
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4. We note that Section 7(j)(10)(J) of the Small Business Act gives
the SBA the discretion to consider tribal and other affiliations if it
determines that one or more such tribally owned businesses have
obtained, or are likely to obtain, a substantial unfair competitive
advantage within an industry category.\5\ We do not believe it is
necessary to make such a determination for broadband PCS auctions.\6\
The limited potential number of broadband PCS applicants that may
benefit from this affiliation exemption will not present any unfair
advantage to other eligible applicants that have had gross revenues up
to $125 million and assets of up to $500 million. In addition, this
exemption from the affiliation rules applies only to applicants for
entrepreneurs' block licenses owned and controlled by Indian tribes and
Alaska Native Corporations, not independent entities composed of
individual Native Americans or other entities composed of individual
Native Americans or other entities owned by members of this minority
group. Thus, such entities will not have any unfair advantage over
other minorities in the entrepreneurs' blocks.
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\5\15 U.S.C. 636(j)(10)(J)(ii)(II).
\6\We will retain the discretion, on a service-specific basis,
to determine whether providing this exemption from similar
affiliation rules applicable to other auctionable services would
give these entities a substantial unfair competitive advantage.
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5. For purposes of determining eligibility to bid in the
entrepreneurs' blocks, we also attribute to the applicant (in addition
to ``affiliates'' as discussed above) the gross revenues, assets and
net worth of non-passive investors in the applicant. The attribution
and affiliation rules are designed to prevent ineligible parties from
exerting control or undue influence over firms eligible to apply for
entrepreneurs' block licenses and to ensure that only bona fide
applicants receive broadband PCS licenses. At the same time, we
recognized that passive investment in entrepreneurs' block applicants
would be critical to the successful development of these smaller
companies. To balance these competing considerations, we decided not to
attribute investors in corporate applicants that own a 25 percent or
less passive equity interest. Passive equity in a corporate applicant
was defined to include non-voting stock and no more than 5 percent of
the voting stock. An exception was created, however for evaluating a
publicly-traded corporation's financial eligibility in the
entrepreneurs' blocks: an investor's ownership of no more than 15
percent of the voting stock in a publicly-traded corporate applicant
would be considered passive equity.
6. We now believe that investors in all corporate applicants,
including those that are not publicly traded, should be able to include
in their 25 percent passive equity investment up to 15 percent of the
applicant's voting stock. Both publicly traded and non-publicly traded
applicants would have difficulty attracting substantial investment if
each individual investor could own no more than 5 percent of the voting
stock. Investors that are prepared to devote considerable funds to an
entrepreneurs' block applicant should reasonably expect to exercise
some ability to protect their investment through a modest level of
voting stock ownership. The 15 percent voting stock limit would, in
this respect, not rise to the level of a controlling interest, but,
from the investor's perspective, could diminish the substantial risks
associated with committing funds to a PCS applicant and enhance the
potential rewards for providing start-up capital to these new ventures.
Final Regulatory Flexibility Analysis
The Commission prepared a Final Regulatory Flexibility Analysis for
the Fifth Report and Order. None of the rules adopted in this Order on
Reconsideration modify that analysis.
List of Subjects in 47 CFR Part 24
Radio.
Amendatory Text
47 CFR part 24 is amended as follows:
PART 24--PERSONAL COMMUNICATIONS SERVICES
1. The authority citation for Part 24 continues to read as follows:
Authority: Secs. 4, 301, 302, 303, 309, and 332, 48 Stat. 1066,
1082, as amended; 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless
otherwise noted.
2. Section 24.709 is amended by removing paragraph (b)(4)(iii) and
revising paragraph (e) to read as follows:
Sec. 24.709 Eligibility for licenses for frequency Blocks C and F.
* * * * *
(e) Definitions. The terms affiliate, business owned by members of
minority groups and women, consortium of small businesses, control
group, gross revenues, members of minority groups, passive equity,
personal net worth, and total assets used in this section are defined
in Sec. 24.720.
3. Section 24.711 is amended by revising paragraph (a)(4) to read
as follows:
Sec. 24.711 Installment payments for licenses for frequency Blocks C
and F.
(a) * * *
(4) For purposes of determining whether an applicants has $75
million or less in gross revenues, gross revenues shall be attributed
to the applicant and aggregated as provided in Sec. 24.709(b).
* * * * *
4. Section 24.720 is amended by revising paragraphs (b)(2) and (j),
by adding a new paragraph (l) (11) and by removing paragraph (m) to
read as follows:
Sec. 24.720 Definitions.
* * * * *
(b) * * *
(2) For purposes of determining whether an entity meets the $40
million gross revenues and $40 million personal net worth standards in
paragraph (b)(1) of this section, gross revenues and personal net worth
shall be attributed to the entity and aggregated as provided in
Sec. 24.709(b).
* * * * *
(j) Passive Equity. Passive equity shall mean:
(1) For corporations, non-voting stock or stock that includes not
more than fifteen percent of the voting equity;
(2) For partnerships, joint ventures and other non-corporate
entities, limited partnership interests and similar interests that do
not afford the power to exercise control of the entity.
* * * * *
(l) * * *
(11) Exclusion from affiliation coverage. For purposes of
Sec. 24.709, Indian tribes or Alaska Regional or Village Corporations
organized pursuant to the Alaska Native Claims Settlement Act (43
U.S.C. 1601, et seq.), or entities owned and controlled by such tribes
or corporations, are not considered affiliates of an applicant owned
and controlled by such tribes or corporations.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 94-20559 Filed 8-19-94; 8:45 am]
BILLING CODE 6712-01-M
