[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Rules and Regulations]
[Pages 48912-48923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23407]
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[[Page 48913]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90
[PR Docket No. 89-553, PP Docket No. 93-253, GN Docket No. 93-252; FCC
95-395]
SMR Systems in the 900 MHz Frequency Band
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission adopted a Second Order on Reconsideration and
Seventh Report and Order, implementing final auction rules for the 900
MHz Specialized Mobile Radio (SMR) service. The Second Order on
Reconsideration addresses reconsideration petitions concerning the
service rule adopted in the Second Report and Order and Second Further
Notice of Proposed Rule Making. The Seventh Report and Order sets forth
the rules and procedures governing the 900 MHz SMR auction, including
reduced down payments, bidding credits and installment payment plans
for small businesses and partitioning for rural telephone companies.
The intended effect of this action is to facilitate the development of
SMR services and to promote competition in the wireless marketplace.
EFFECTIVE DATE: October 23, 1995.
FOR FURTHER INFORMATION CONTACT: Amy Zoslov (202) 418-0660. Wireless
Telecommunications Bureau or Diane Law (202) 418-0660. Wireless
Telecommunications Bureau.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Order on
Reconsideration and the Seventh Report and Order, released September
14, 1995. The complete text of this Second Order on Reconsideration and
Seventh Report and Order is available for inspection and copying during
normal business hours in the FCC Dockets Branch, Room 239, 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 the Second Order on Reconsideration and Seventh Report and
Order
Adopted: September 14, 1995
Released: September 14, 1995
I. Background
When the Commission established the 900 MHz SMR service in 1986, it
elected to use a two-phase licensing process. In Phase I, licenses were
assigned in 46 ``Designated Filing Areas'' (DFAs) comprised of the top
50 markets. Phase II licensing, for facilities outside the DFAs, was
frozen after 1986, when the Commission opened its filing window for the
DFAs. In 1989, the Commission adopted a Notice of Proposed Rule Making
in PR Docket 89-533, 55 FR 744 (Jan. 9, 1990), proposing to begin Phase
II licensing of 900 MHz SMR facilities nationwide. In 1993, the
Commission adopted a First Report & Order and Further Notice of
Proposed Rule Making in PR Docket 89-553, 58 FR 12176 (March 3, 1993),
modifying its Phase II proposal and seeking comment on whether to
license the 900 MHz SMR band to a combination of nationwide, regional,
and local systems. Shortly thereafter, Congress amended the
Communications Act to reclassify most SMR licensees as Commercial
Mobile Radio Service (CMRS) providers and establish the authority to
use competitive bidding to select from among mutually exclusive
applicants for certain licensed services. The Commission deferred
further consideration of Phase II and incorporated the 900 MHz docket
into its CMRS proceeding.
In the CMRS Third Report & Order, PR Docket 89-553, 59 FR 59945
(Nov. 21, 1994), the Commission further revised its Phase II proposals
and established the broad outlines for the completion of licensing in
the 900 MHz SMR band. The Commission left the adoption of specific
auction and service rules for the Phase II Order which the Commission
adopted in the Second Report and Order and Second Further Notice, PR
Docket 89-553, GN Docket No. 93-252, PP Docket No. 93-253, FCC 95-159,
60 FR 21987 and 60 FR 22023 (May 4, 1995), (Second R&O & Second Further
Notice). In that proceeding, the Commission adopted final service
rules, established technical and operational rules for the new MTA
licensees, defined the rights of incumbent SMR licensees already
operating in the 900 MHz band, and requested comment on proposed
auction rules. The 900 MHz SMR band will be divided into 20 ten-channel
blocks in each of 51 service areas based on Major Trading Areas (MTAs),
which match the blocks previously licensed for the DFAs. Each MTA
license will give the licensee the right to operate throughout the MTA
on the designated channels except where a co-channel incumbent licensee
already is operating. MTA licensees will be allowed to aggregate
multiple blocks within an MTA and to aggregate blocks geographically in
multiple MTAs. The Commission also addressed issues raised on
reconsideration of the CMRS Third Report & Order pertaining
specifically to the 900 MHz SMR service. The Commission set forth
proposals for new licensing rules and auction procedures for the
service, including provisions for designated entities. The Commission
later issued a Public Notice requesting further comment on the impact
of the Supreme Court's subsequent decision in Adarand Constructors, Inc
v. Pena, 115 S.Ct. 2097 (1995), on the proposed treatment of designed
entities.
In this Second Order on Reconsideration & Seventh Report & Order
the Commission affirms the coverage requirements for MTA licensees and
the interference protections and loading requirements for incumbents,
and clarifies secondary site licensing, finders' preference and foreign
ownership waiver policies. The Order also adopts auction rules,
including a tiered bidding credit and enhanced installment payment
plans for small businesses and partitioning for rural telephone
companies.
II. Second Order on Reconsideration
A. Service Rules
Coverage Requirements
As decided in the Second R&O & Second Further Notice, MTA licensees
in this service will be required to meet coverage requirements of \1/3\
of the population in the service area within three years of the initial
license grant and \2/3\ of the population within five years.
Alternatively, a licensee may make a showing at five years that it is
providing ``substantial service.'' The Commission denies
reconsideration of these benchmarks, and reiterates that MTA licensees
must satisfy these requirements regardless of the area or percentage of
the MTA population that is served by incumbent licensees. MTA licensees
may consider options such as resale or management agreements to fulfill
the coverage requirements.
Treatment of Incumbents
To ensure that incumbent licensees receive protection from
interference by MTA licensees, Second R&O & Second Further Notice
provides that MTA licensees either must maintain a minimum 113
kilometer (70 mile) geographic separation or comply with the
Commission's short-spacing rules with respect to all incumbent
facilities in their service area or in adjacent MTAs. The Commission
affirms its intention to allow MTA licensees to use short-spacing rules
to comply with interference protection standards, and does not believe
it will result in a plethora of interference disputes at the
Commission. The Commission also
[[Page 48914]]
affirms its adoption of the 40 dBu signal strength contour as the
protected service area in which incumbents may modify or add
facilities, and reject petitioners' requests to use the 22 dBu contour
instead.
The Commission will allow incumbents to have their licenses
reissued if they are not the successful bidder for the MTA in which
they are currently operating. This procedure, which would be granted
post-auction upon the request of the incumbent, would essentially
convert their current site licenses to a single ``partitioned''
license, authorizing operations throughout the contiguous and
overlapping 40 dBu signal strength contours of the multiple sites. All
incumbents with reissued ``partitioned'' licenses will have to make a
one-time filing of specific information for each of their external base
sites that will assist the staff in updating the Commission's database
after the close of the 900 MHz SMR auction. Incumbents cannot expand
their 40 dBu signal strength contour, so they may make additions or
modifications to their facilities without notifying the Commission. If
incumbents seek to gain additional geographic coverage beyond the 40
dBu protected contour, they must apply for the MTA license.
Secondary Site Licensing/Finders' Preference
As decided in the Second R&O & Second Further Notice, no secondary
site licenses will be granted once an MTA licensee has been selected.
The Commission states that it is important to assure potential MTA
bidders that the spectrum upon which they are bidding will not become
subsequently encumbered with secondary sites. The Commission clarifies
that all pending finders' preference requests for 900 MHz SMR licenses
will be processed, but eliminates future finders' preferences for the
900 MHz SMR service. As provided by the rules, any stations licensed to
incumbents that are not constructed or placed in operation will revert
automatically to the MTA licensee for that channel block.
Loading Requirements
The Commission denies further reconsideration of its decisions in
the CMRS Third Report & Order and the Second R&O & Second Further
Notice with respect to loading requirements in the 900 MHz service, as
petitioners have raised no new arguments that would merit
reconsideration. Consequently, incumbent 900 MHz SMR licensees will
continue to be subject to loading requirements, although they are
eliminated for MTA licensees. However, temporary relief of the loading
rules may be available if the incumbent's unique circumstances warrant
a waiver of the rules.
Discontinuance of Operation
The Commission clarifies that the amended rule regarding
discontinuance of operation (Section 90.631(f)), which provides that
stations taken out of service for 90 consecutive days are considered
permanently discontinued, applies only to stations that were taken out
of service after June 5, 1995 (the effective date of the rule). The
former rule provided that stations taken out of service for 12 months
were considered permanently discontinued. Consequently, stations that
were taken out of service prior to June 5, 1995, are entitled to stay
out of service for the remainder of the original 12 months provided in
the former rule, before they will be considered permanently
discontinued. Those stations taken out of service on or after June 5,
1995, will be considered permanently discontinued after 90 days. With
regard to wide-area SMR licensees that are replacing high power analog
sites with low power digital sites, however, the Commission will deem
all the base stations ``in operation'' if the system meets the
standards and conditions set out in Fleet Call, Inc., Memorandum
Opinion and Order, 6 FCC Rcd 1533 (1991), recon. dismissed, 6 FCC Rcd
6989 (1991). In Fleet Call, the Commission found that conversion from
Fleet Call's existing base stations with aggregate loading from single
high-power sites to multiple low-power sites on an integrated basis in
six major markets would increase spectrum efficiency without posing a
risk of spectrum warehousing.
Foreign Ownership Waivers
In Section 332(c)(6) of the Communications Act, Congress
reclassified certain categories of private land mobile radio providers
(PLMRS) as commercial mobile radio service (CMRS) providers, and
provided for their treatment as common carriers. As a result,
reclassified providers are subject to the Section 310(b) foreign
ownership restrictions. Congress provided for limited grandfathering of
existing foreign interests in such licensees through a waiver petition
process whereby any reclassified PLMRS licensee could petition the
Commission by February 10, 1994 for waiver of the application of
Section 310(b) to any foreign ownership that lawfully existed as of May
24, 1993. In the Second R&O & Second Further Notice, the Commission
decided to grandfather any timely-filed petitions for waiver of the
foreign ownership restrictions filed by an incumbent in the event the
incumbent wins the MTA license. In the Foreign Ownership Order, GN
Docket 93-252, 60 FR 40177 (Aug. 7, 1995), the Wireless
Telecommunications Bureau noted that the waivers apply to additional
licenses granted to petitioners in the same service after May 24, 1993
and prior to August 10, 1996, provided the same ownership structure is
maintained. Thus, such entities may acquire other SMR licenses,
including MTA licenses in which it is not the incumbent.
III. Seventh Report and Order
A. Auction Rules
A total of 1,020 MTA licenses (51 MTAs times 20 licenses in each
MTA) will be awarded in the 900 MHz SMR service. The Commission will
use a single simultaneous multiple round auction to award these
licenses, because the licenses are interdependent, and licensees likely
will aggregate and/or substitute across spectrum blocks and geographic
areas. Both incumbents and new entrants are eligible to bid for all MTA
licenses, but winning bidders will be subject to the CMRS spectrum cap
in 47 CFR 20.6. All applicants for MTA licenses are treated as initial
applicants for Public Notice, application processing, and auction
purposes. The Wireless Telecommunications Bureau will announce the time
and place of the auction and provide additional information to bidders
by future Public Notice.
Applicants will apply for the 900 MHz SMR auction by filing a
short-form application (FCC Form 175 and paying an upfront payment. The
Commission adopts the standard upfront payment formula of $0.02 per
pop-MHz, based on the number of 10-channel blocks in each MTA
identified on the applicant's Form 175 and the total MTA population.
The Wireless Telecommunications Bureau will announce, by Public Notice,
the population calculation of each MTA, using a formula that takes into
account incumbents within the MTA, and the upfront payment amount of
each MTA. The Commission also adopts the Milgrom-Wilson activity rule
used in previous multiple-round simultaneous auctions, which requires
bidders to declare their maximum eligibility in terms of MHz-pops and
limits them to bidding on licenses encompassing no more than the MHz-
pops covered by their upfront payment. Failure to maintain the
requisite activity level will result in a reduction in the amount of
[[Page 48915]]
MHz-pops upon which a bidder will be eligible to bid in the next round
of bidding, unless an activity rule waiver is used. The Commission will
provide bidders with five activity rule waivers which may be used in
any round, but retains the discretion to issue additional waivers
during the course of the auction.
Each applicant will be required to specify on its Form 175 its
classification, status as a designated entity (if applicable), markets
and frequency blocks applied for, and persons authorized to place or
withdraw bids. In the Order, the Commission modified the tables in 47
CFR 90.617 and 90.619 to assign block letters to the former frequency
block numbers. Applicants must identify any arrangements or agreements
with other parties relating to the licenses that are being auctioned,
and certify that there are no arrangements other than those specified.
Applicants may correct minor defects in their short-form applications,
prior to the auction, but may not make any major modifications to their
applications, including license area changes, cognizable ownership
changes or changes in the identification of parties to bidding
consortia, until after the auction. Applicants may modify their short-
form applications to reflect formation of consortia or changes in
ownership at any time before or during an auction, provided such
changes do not result in a change in control of the applicant, and
provided that the parties forming consortia or entering into ownership
agreements have not applied for licenses in any of the same geographic
license areas. In instances where only a single applicant has applied
for a particular MTA channel block, the Commission will cancel the
auction for that block and establish a deadline for filing of the
applicant's long-form application. In all instances where mutually
exclusive applications are filed, the MTA channel block will be
included in the auction.
Bidding Issues
Bidders will be able to submit bids on site, via personal computers
using remote bidding software, or via telephone, but the Commission
reserves the right to have only remote bidding--by personal computers
and by telephone--for the 900 MHz SMR auction. The timing and duration
of auction rounds would be determined by the Wireless
Telecommunications Bureau and announced by Public Notice. As in prior
auctions, the Commission expects to start the auction with relatively
large bid increments and reduce increments as bidding activity falls.
The Commission will use a simultaneous stopping rule for this auction
to afford bidders flexibility to pursue back-up strategies to ensure
that bidders will not hold back bids until the final round. During the
auction, the Commission retains the discretion to declare that the
auction will end after a specified number of additional rounds.
The Commission will specify bid increments, i.e., the amount or
percentage by which the bid must be raised above the previous round's
high bid in order to be accepted as a valid bid in the current bidding
round. The application of a minimum bid increment helps to ensure that
the auction closes within a reasonable period of time and is expressed
in both a percentage and fixed dollar amount. The Commission may impose
a minimum bid increment of five percent or $0.02 per pop-MHz, whichever
is greater, but also retains the discretion to set, and by announcement
before or during the auction, vary the minimum bid increments for
licenses over the course of an auction. Where a tie bid occurs, the
Commission will determine the high bidder by the order in which the
Commission receives the bids.
Withdrawal and Default
The Commission will use the bid withdrawal and default rules for
this auction similar to those used in prior auctions. Under these
rules, any bidder that withdraws a high bid during an auction before
the Commission declares bidding closed must reimburse the Commission
for the difference between the amount of the ultimate winning bid and
the withdrawn bid if the winning bid is lower than the withdrawn bid.
An auction winner defaulting after the close of the auction will also
have to pay the lesser of three percent of the subsequent winning bid
or three percent of the amount of the defaulting bid. In the event that
an auction winner defaults, is disqualified, or if the license is
revoked or terminated, the Commission will re-auction the license,
except that the Commission may offer the license to the second highest
bidder if the default occurs within five days after the auction closes.
Down Payment and Final Payment
At the conclusion of the auction, winning bidders must supplement
their upfront payments and file their long-form applications (FCC Form
600). The upfront payment must be supplemented in an amount sufficient
to bring the winning bidder's deposit up to 20 percent of its winning
bid within five days after the close of the auction. Small businesses
eligible for installment payments, however, must bring their deposits
up to five percent of the winning bid within five days after the close
of the auction. Once each applicant has filed its long form and
submitted its down payment, the Wireless Telecommunications Bureau will
issue a Public Notice announcing the application's acceptance for
filing and open a 30-day window for filing petitions to deny. Excluding
designated entities eligible for installment payments, payment of the
remaining balance due on the license must be paid within five business
days following a Pubic Notice announcing that the Commission is
prepared to award the license.
Rules Prohibiting Collusion and Transfer Requirements
The 900 MHz SMR auction will be subject to the same regulatory
safeguards as prior auctions to prevent applicants from colluding
during the auction or obtaining unjust enrichment from subsequent
transfer of the license. To prevent collusion, bidders who have applied
for licenses in the same MTA on their short-form applications may not
cooperate, collaborate, discuss, or disclose the substance of their
bids or strategies with other bidders during the auction except
pursuant to a consortium or arrangement identified in the short-form
application. Bidders must also attach an exhibit to the Form 600
explaining the terms, conditions, and parties involved in any bidding
arrangement. With respect to transfers, licensees transferring their
licenses within three years of the initial license grant must disclose
to the Commission all contracts and other documentation associated with
the transfer.
B. Designated Entities
Background
Section 309(j)(3)(B) of the Communications Act provides that in
establishing eligibility criteria and bidding methodologies the
Commission shall ``promot[e] economic opportunity and competition and
ensur[e] that new and innovative technologies are readily accessible to
the American people by avoiding excessive concentration of licenses and
by disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women,'' collectively referred to as
``designated entities.'' For broadband PCS, the Commission adopted
special provisions for businesses owned by members of minority groups
or women--bidding credits, installment
[[Page 48916]]
payments and a separate entrepreneur's block--and analyzed their
constitutionality using the ``intermediate scrutiny'' standard of
review articulated in Metro Broadcasting v. FCC, 497 U.S. 547, 564-65
(1990), because, as in Metro, the proposed provisions involved
Congressionally-mandated benign race- and gender-conscious measures.
After the release of the broadband PCS rules, the Supreme Court
decided Adarand Constructors v. Pena, 115 S. Ct. 2097 (1995), which
overruled Metro Broadcasting ``to the extent that Metro Broadcasting is
inconsistent with the holding in Adarand that all racial
classifications must be analyzed under strict scrutiny. In the
Competitive Bidding Further Notice of Proposed Rulemaking, PP Docket
No. 93-253, 60 FR 37786 (July 21, 1995), the Commission modified the
designated entities provisions in the entrepreneur's block auction so
as to render them race- and gender-neutral, because of the substantial
delay that would be incurred in supplementing the record to meet a
``strict scrutiny'' standard, and to avoid the substantial likelihood
that the auction would be stayed based on the holding in Adarand.
Eligibility
In the 900 MHz SMR service, as in other auctionable services, the
Commission remains committed to meeting the statutory objectives of
promoting economic opportunity and competition, of avoiding excessive
concentration of licenses, and of ensuring access to new and innovative
technologies by disseminating licenses among a wide variety of
applicants, including small businesses, rural telephone companies, and
businesses owned by members of minority groups and women. Because of
the large number of available licenses and the presence of incumbents
throughout the 900 MHz SMR band, the Commission will not create an
entrepreneur's block in this service. Nevertheless, the Commission
adopts several provisions for bidding in the 900 MHz auction by small
businesses which will foster the Commission's statutory goals. Taking
commenters' suggestions into account, the Commission defines two
categories of small businesses: (1) An entity that, together with
affiliates, has average gross revenues for the three preceding years of
$3 million or less; and (2) an entity that, together with affiliates,
has average gross revenues for the three preceding years of $15 million
or less. The Commission will define any investor in the applicant with
a 20 percent or greater interest to be attributable for purposes of
determining small business status. The 20 percent attribution threshold
is derived from the measure of SMR attribution for purposes of applying
the CMRS spectrum cap. The Commission also adopts the multiplier
governing the CMRS spectrum cap, set out in 47 CFR 20.6(d)(6).
Bidding Credits, Installment Payments and Reduced Down Payments
Under this ``tiered'' approach, small businesses falling under the
$3 million benchmark are eligible for a 15 percent bidding credit on
any MTA license; those falling under the $15 million benchmark are
eligible for a 10 percent bidding credit. Bidding credits for small
businesses are not cumulative. Thus a $3 million small business will be
eligible for only a 15 percent bidding credit, not a 25 percent credit.
All small businesses may make a reduced down payment (five percent of
the winning bid following the close of the auction, with the balance of
the down payment paid five days after a Public Notice announcing that
the Commission is prepared to grant the license), and are entitled to
pay the bid balance in quarterly installments over the remaining
license term. Small businesses falling under the $3 million benchmark
will be able to make interest-only payments (U.S. Treasury note rate)
for the first five years of the license term; small businesses falling
under the $15 million benchmark will be able to make interest-only
payments (U.S. Treasury note rate plus 2.5 percent) for the first two
years of the license term. The Commission believes that broadening the
scope of opportunities for small businesses, particularly on a tiered
basis, will result in substantial participation by women and
minorities, and that the expected capital outlay for the 900 MHz
service will not present the same type of obstacles for those entities
as a more costly spectrum-based service like PCS. For this reason, the
Commission does not adopt reduced upfront payments for small businesses
in the 900 MHz service.
Transfer Restrictions and Unjust Enrichment Provisions
Small businesses entitled to special provisions in the 900 MHz SMR
service seeking to transfer their licenses, as a condition to approval
of the transfer, must remit to the government a payment equal to a
portion of the total value of the benefit conferred by the government.
Thus, a small business that received bidding credits seeking transfer
or assignment of a license to an entity that is not a small business or
does not qualify as a smaller business under the definitions in 47 CFR
Sec. 90.814(b)(1), will be required to reimburse the government for the
amount of the bidding credit, plus interest at the rate imposed for
installment financing at the time the license was awarded, before
transfer will be permitted. The amount of this payment will be reduced
over time as follows: a transfer in the first two years of the license
term will result in a reimbursement of 100 percent of the value of the
bidding credit: in year three of the license term the payment will be
75 percent; in year four the payment will be 50 percent and in year
five the payment will be 25 percent, after which there will be no
payment. If a small business under the $3 million definition seeks to
transfer or assign a license to a small business under the $15 million
definition, for the purposes of determining the amount of payment, the
value of the bidding credit is five percent, the difference between the
10 and 15 percent bidding credits. The five percent difference will be
subject to the same percentage reductions over time as specified above.
These payments will have to be paid to the U.S. Treasury as a condition
of approval of the assignment or transfer.
If a licensee that was awarded installment payments seeks to assign
or transfer control of its license to an entity that does not meet
either of the definitions set forth in Section 90.814(b)(1) during the
term of the license, the Commission will require payment of the
remaining principal and any interest accrued through the date of
assignment as a condition of the license assignment or transfer.
Moreover, if a small business under the $3 million definition seeks to
assign or transfer control of a license to a small business under the
$15 million definition (that does not qualify for as favorable an
installment payment plan), the installment payment plan for which the
acquiring entity qualifies will become effective immediately upon
transfer. A licensee may not switch to a more favorable payment plan.
If an investor subsequently purchases an ``attributable'' interest in
the business during the first five years of the license term and, as a
result, the gross revenues or total assets of the business exceed the
applicable financial cap, thereby requiring the applicant to forfeit
eligibility for an installment payment scheme, unjust enrichment
provisions also will apply.
Partitioning for Rural Telcos
Rural telephone companies (rural telcos) are permitted to acquire
partitioned 900 MHz SMR licenses in
[[Page 48917]]
either of two ways: (1) They may form bidding consortia to participate
in auctions, and then partition the licenses won among consortia
participants; and (2) they may acquire partitioned 900 MHz SMR licenses
from other licensees through private negotiation and agreement either
before or after the auction. Each member of a consortium will be
required to file a long-form application, following the auction, for
its respective mutually agreed-upon geographic area. Partitioned areas
must conform to established geopolitical boundaries (such as county
lines). With respect to rural telcos, each area must include all
portions of the wireline service area of the rural telco applicant that
lies within the MTA service area. Rural telcos are defined as local
exchange carriers having 100,000 or fewer access lines, including all
affiliates. If a rural telco receives a partitioned license post-
auction from another MTA licensee, the partitioned area must be
reasonably related to the rural telco's wireline service area that lies
within the MTA service area. The Commission will presume as
``reasonably related'' a partitioned area that contains no more than
twice the population of that portion of a rural telco's wireline
service area that lies within the MTA service area.
C. Other Matters
Although the Commission did not request comment on this issue, the
National Paging and Personal Communications Association (NPPCA)
suggests that the Commission establish a Telecommunications Development
Fund (TDF) to assist small businesses in accessing capital for build-
out purposes. While the Commission fully supports the goal of ensuring
the participation of small businesses in the provision of SMR services,
the proposal raised by NPPCA is beyond the scope of this proceeding. As
such, it is not addressed in this proceeding.
IV. Procedural Matters and Ordering Clauses
Final Regulatory Flexibility Analysis
Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.
Sec. 603, the Commission incorporated an Initial Regulatory Flexibility
Analysis (IRFA) into the Further Notice of Proposed Rule Making.
Written public comments on the IRFA were requested. The Commission's
final regulatory flexibility analysis for this Seventh Report and Order
in PP Docket No. 93-253 is as follows:
A. Need for and purpose of the action. This rule making proceeding
was initiated to secure comment on proposals for establishing a
flexible regulatory scheme for the 900 MHz Specialized Mobile Radio
(SMR) service that would promote efficient licensing and enhance the
service's competitive potential in the commercial mobile radio
marketplace. The proposals adopted herein are also designed to
implement Congress's goal of giving small businesses, rural telephone
companies, and businesses owned by members of minority groups and women
the opportunity to participate in the provision of spectrum-based
services in accordance with 47 U.S.C. 309(j)(4)(D).
B. Issues raised in by the public in response to the initial
analysis. No comments were submitted specifically in response to the
Initial Regulatory Flexibility Analysis.
C. Significant alternatives considered. The Second Further Notice
of Proposed Rule Making in this proceeding offered numerous proposals.
All significant alternatives have been addressed in the Seventh Report
and Order. The majority of commenters supported the major tenets of the
proposed rules and some commenters suggested changes to some of the
Commission's proposals. Any regulatory burdens we have adopted for
applicants (for example, small businesses) in the 900 MHz SMR
applicants are necessary to carry out the Commission's duties under the
Communications Act of 1934, as amended, and the Omnibus Budget
Reconciliation Act of 1993. The Final Regulatory Flexibility Analysis,
as required by Section 604 of the Regulatory Flexibility Act is set
forth in Appendix B.
Ordering Clauses
Accordingly, it is ordered That, pursuant to the authority of
Sections 4(i) 303(r), 309(j), and 332 of the Communications Act of
2934, as amended, 47 U.S.C. 154(i), 303(r), 309(j), and 332, this
Second Order on Reconsideration and Seventh Report and Order is adopted
and Part 90 of the Commission's Rules is amended as set forth below.
It is further ordered that the rule amendments set forth below will
become effective October 23, 1995.
It is further ordered, that the Petitions for Reconsideration filed
by Advanced Mobilecomm, Inc., American Mobile Telecommunications
Association, Celsmer, DW Communications, Inc., Geotek Communications,
Inc., Nextel, Personal Communications Industry Association, RAM Mobile
Data Limited Partnership, and Southern California Edison Company are
granted to the extent discussed herein, and denied in all other
respects.
List of Subjects in 47 CFR Part 90
Radio.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Amendatory Text
Part 90 of Chapter I of Title 47 of the Code of Federal Regulations
is amended as follows:
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
1. The authority citation for Part 90 is revised as follows:
Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as
amended; 47 U.S.C. Secs. 154, 303, 309 and 332, unless otherwise
noted.
2. Section 90.7 is amended by adding a definition for ``900 MHz SMR
MTA-based license or MTA license'' in alphabetical order to read as
follows:
Sec. 90.7 Definitions.
* * * * *
900 MHz SMR MTA-based license or MTA license. A license authorizing
the right to use a specified block of 900 MHz SMR spectrum within one
of the 47 Major Trading Areas (``MTAs''), as embodied in Rand McNally's
Trading Areas System MTA Diskette and geographically represented in the
map contained in Rand McNally's Commercial Atlas & Marketing Guide (the
``MTA Map''), with the following exceptions and additions:
(1) Alaska is separated from the Seattle MTA and is licensed
separately.
(2) Guam and the Northern Mariana Islands are licensed as a single
MTA-like area.
(3) Puerto Rico and the United States Virgin Islands are licensed
as a single MTA-like area.
(4) American Samoa is licensed as a single MTA-like area.
The MTA map is available for public inspection in the Office of
Engineering and Technology's Technical Information Center, room 7317,
2025 M Street NW., Washington, DC.
* * * * *
2. Section 90.173 is amended by revising paragraph (k) to read as
follows:
Sec. 90.173 Policies governing the assignment of frequencies.
* * * * *
(k) Notwithstanding any other provisions of this part, any eligible
person may seek a dispositive preference for a channel assignment on an
exclusive basis in the 220-222 MHz,
[[Page 48918]]
470-512 MHz, and 800 MHz bands by submitting information that leads to
the recovery of channels in these bands. Recovery of such channels must
result from information provided regarding the failure of existing
licensees to comply with the provisions of Secs. 90.155, 90.157,
90.629, 90.631 (e) or (f), or 90.633 (c) or (d). Any recovered channels
in the 900 MHz SMR service will revert automatically to the MTA
licensee.
* * * * *
3. Section 90.617(d) is amended by revising Table 4B to read as
follows:
Sec. 90.617 Frequencies in the 809.750-824/854.750-869 MHz, and 896-
901/935-940 MHz bands available for trunked or conventional system use
in non-border areas.
* * * * *
(d) * * *
Table 4B--SMR Category 896-901/935-940 MHz Band-Channels (200 Channels)
------------------------------------------------------------------------
Block Channel Nos.
------------------------------------------------------------------------
A................................ 1-2-3-4-5-6-7-8-9-10
B................................ 21-22-23-24-25-26-27-28-29-30
C................................ 41-42-43-44-45-46-47-48-49-50
D................................ 61-62-63-64-65-66-67-68-69-70
E................................ 81-82-83-84-85-86-87-88-89-90
F................................ 101-102-103-104-105-106-107-108-109-1
10
G................................ 121-122-123-124-125-126-127-128-129-1
30
H................................ 141-142-143-144-145-146-147-148-149-1
50
I................................ 161-162-163-164-165-166-167-168-169-1
70
J................................ 181-182-183-184-185-186-187-188-189-1
90
K................................ 201-202-203-204-205-206-207-208-209-2
10
L................................ 221-222-223-224-225-226-227-228-229-2
30
M................................ 241-242-243-244-245-246-247-248-249-2
50
N................................ 261-262-263-264-265-266-267-268-269-2
70
O................................ 281-282-283-284-285-286-287-288-289-2
90
P................................ 301-302-303-304-305-306-307-308-309-3
10
Q................................ 321-322-323-324-325-326-327-328-329-3
30
R................................ 341-342-343-344-345-346-347-348-349-3
50
S................................ 361-362-363-364-365-366-367-368-369-3
70
T................................ 381-382-383-384-385-386-387-388-389-3
90
------------------------------------------------------------------------
* * * * *
4. Section 90.619(a)(5) is amended by revising Table 4B to read as
follows:
Sec. 90.619 Frequencies available for use in the U.S./Mexico and U.S./
Canada border areas.
(a) * * *
(5) * * *
Table 4B--United States-Mexico Border Area, SMR Category 896-901/935-940
MHZ Band (200 Channels)
------------------------------------------------------------------------
Block Channel Nos.
------------------------------------------------------------------------
Channels numbered above 200 may be used only subject to the power flux
density limits at or beyond the Mexican border stated in paragraph
(a)(2) of this section.
A................................ 1-2-3-4-5-6-7-8-9-10
B................................ 21-22-23-24-25-26-27-28-29-30
C................................ 41-42-43-44-45-46-47-48-49-50
D................................ 61-62-63-64-65-66-67-68-69-70
E................................ 81-82-83-84-85-86-87-88-89-90
F................................ 101-102-103-014-105-106-107-108-109-1
10
G................................ 121-122-123-124-125-126-127-128-129-1
30
H................................ 141-142-143-144-145-146-147-148-149-1
50
I................................ 161-162-163-164-165-166-167-168-169-1
70
J................................ 181-182-183-184-185-186-187-188-189-1
90
K................................ 201-202-203-204-205-206-207-208-209-2
10
L................................ 221-222-223-224-225-226-227-228-229-2
30
M................................ 241-242-243-244-245-246-247-248-249-2
50
N................................ 261-262-263-264-265-266-267-268-269-2
70
O................................ 281-282-283-284-285-286-287-288-289-2
90
P................................ 301-302-303-304-305-306-307-308-309-3
10
Q................................ 321-322-323-324-325-326-327-328-329-3
30
R................................ 341-342-343-344-345-346-347-348-349-3
50
S................................ 361-362-363-364-635-366-367-368-369-3
70
T................................ 381-382-383-384-385-386-387-388-389-3
90
------------------------------------------------------------------------
* * * * *
5. Section 90.631 is amended by revising paragraph (f) to read as
follows:
Sec. 90.631 Trunked systems loading, construction and authorization
requirements.
* * * * *
(f) If a station is not placed in permanent operation, in
accordance with the technical parameters of the station authorization,
within one year, except as provided in Sec. 90.629, its license cancels
automatically and must be returned to the Commission. For purposes of
this section, a base station is not considered to be placed in
operation unless at least two associated mobile stations, or one
control station and one mobile station, are also placed in operation.
An SMR licensee with facilities that have discontinued operations for
90 continuous days after the effective date of this rule is presumed to
have permanently discontinued operations, unless the licensee notifies
the FCC otherwise prior to the end of the 90 day period and provides a
date on which operation will resume, which date must not be in excess
of 30 additional days.
* * * * *
6. Section 90.665 (c) and (d) are revised to read as follows:
Sec. 90.665 Authorization, construction and implementation of MTA
licenses.
* * * * *
(c) Each MTA licensee in the 896-901/935-940 MHz band must, three
years from the date of license grant, construct and place into
operation a sufficient number of base stations to provide coverage to
at least one-third of the population of the MTA. Further, each MTA
licensee must provide coverage to at least two-thirds of the population
of the MTA five years from the date of license grant or, alternatively,
demonstrate through a showing to the Commission that it is providing
substantial service. The MTA licensee must meet the population coverage
benchmarks regardless of the extent to which incumbent licensees are
present within the MTA block.
(d) MTA licensees who fail to meet the coverage requirements
imposed at either the third or fifth years of their license term, or to
make a convincing showing of substantial service, will forfeit the
portion of the MTA license that exceeds licensed facilities constructed
and operating on the date of the MTA license grant.
7. Section 90.667 is revised to read as follows:
Sec. 90.667 Grandfathering provisions for incumbent licensees.
(a) These provisions apply to all 900 MHz SMR licensees who
obtained licenses or filed applications for secondary sites on or
before August 9, 1994 (``incumbent licensees''), as well as to all 900
MHz SMR licensees who obtained authorizations pursuant to
Sec. 90.173(k). An incumbent licensee's service area shall be defined
by its originally-licensed 40 dBu field strength contour. Incumbent
licensees are permitted to add new or modify transmit sites in this
existing service area without prior notification to the Commission so
long as their original 40
[[Page 48919]]
dBu field strength contour is not expanded.
(b) Incumbent licensees operating at multiple sites may, after
grant of MTA licenses has been completed, exchange multiple site
licenses for a single license, authorizing operations throughout the
contiguous and overlapping 40 dBu field strength contours of the
multiple sites. Incumbents exercising this license exchange option must
submit specific information for each of their external base sites after
the close of the 900 MHz SMR auction.
(c) Applications in the 900 MHz SMR service for secondary sites
filed after August 9, 1994 shall be authorized on a secondary, non-
interference basis to MTA licensee operations. No secondary sites shall
be granted on this basis in an MTA once the MTA licensee has been
selected.
6. A new subpart U consisting of Secs. 90.801 through 90.815 is
added to Part 90 to read as follows:
Subpart U--Competitive Bidding Procedures for 900 MHz Specialized
Mobile Radio Service
Sec.
90.801 900 MHz SMR subject to competitive bidding.
90.802 Competitive bidding design for 900 MHz SMR licensing.
90.803 Competitive bidding mechanisms.
90.804 Aggregation of 900 MHz SMR licenses.
90.805 Withdrawal, default and disqualification payments.
90.806 Bidding application (FCC Form 175 and 175-S Short-form).
90.807 Submission of upfront payments and down payments.
90.808 Long-form applications.
90.809 License grant, denial, default, and disqualification.
90.810 Bidding credits for small businesses.
90.811 Reduced down payment for licenses won by small businesses.
90.812 Installment payments for licenses won by small businesses.
90.813 Procedures for partitioned licenses.
90.814 Definitions.
90.815 Eligibility for small business status.
Sec. 90.801 900 MHz SMR subject to competitive bidding.
Mutually exclusive initial applications to provide 900 MHz SMR
service are subject to competitive bidding procedures. The general
competitive bidding procedures found in Part 1, Subpart Q of this
chapter will apply unless otherwise provided in this part.
Sec. 90.802 Competitive bidding design for 900 MHz SMR licensing.
The Commission will employ a simultaneous multiple round auction
design when choosing from among mutually exclusive initial applications
to provide 900 MHz SMR service, unless otherwise specified by the
Wireless Telecommunications Bureau before the auction.
Sec. 90.803 Competitive bidding mechanisms.
(a) Sequencing. The Wireless Telecommunications Bureau will
establish and may vary the sequence in which 900 MHz SMR licenses will
be auctioned.
(b) Grouping. All 900 MHz SMR licenses for each of the MTAs will be
auctioned simultaneously, unless the Wireless Telecommunications Bureau
announces, by Public Notice prior to the auction, an alternative
auction scheme.
(c) Minimum bid increments. The Wireless Telecommunications Bureau
will, by announcement before or during an auction, require minimum bid
increments in dollar or percentage terms.
(d) Stopping rules. The Wireless Telecommunications Bureau will
establish stopping rules before or during multiple round auctions in
order to terminate an auction within a reasonable time.
(e) Acitvity rules. The Wireless Telecommunications Bureau will
establish activity rules which require a minimum amount of bidding
activity. In the event that the Commission establishes an activity rule
in connection with a simultaneous multiple round auction, each bidder
will be entitled to request and will be automatically granted a certain
number of waivers of such rule during the auction.
Sec. 90.804 Aggregation of 900 MHz SMR licenses.
The Commission will license each 10-channel block in the 900 MHz
SMR spectrum separately. Applicants may aggregate across spectrum
blocks within the limitation specified in Sec. 20.6(b) of this chapter.
Sec. 90.805 Withdrawal, default and disqualification payments.
(a) During the course of an auction conducted pursuant to
Sec. 90.802, the Wireless Telecommunications Bureau will impose
payments on bidders who withdraw high bids during the course of an
auction, who default on payments due after an auction closes, or who
are disqualified.
(b) Bid withdrawal prior to close of auction. A bidder who
withdraws a high bid during the course of an auction will be subject to
a payment equal to the difference between the amount bid and the amount
of the winning bid the next time the license is offered by the
Commission. No withdrawal payment would be assessed if the subsequent
winning bid exceeds the withdrawn bid. This payment amount will be
deducted from any upfront payments or down payments that the
withdrawing bidder has deposited with the Commission.
(c) Default or disqualification after close of auction. If a high
bidder defaults or is disqualified after the close of such an auction,
the defaulting bidder will be subject to the payment in paragraph (b)
of this section plus an additional payment equal to three (3) percent
of the subsequent winning bid. If the subsequent winning bid exceeds
the defaulting bidder's bid amount, the 3 percent payment will be
calculated based on the defaulting bidder's bid amount. These amounts
will be deducted from any upfront payments or down payments that the
defaulting or disqualified bidder has deposited with the Commission. If
the default occurs within five business days after the bidding has
closed, the Commission retains the discretion to offer the license to
the second highest bidder at its final bid level, of it that bidder
declines the offer, to offer the license to other bidders (in
descending order of their bid amounts) at the final bid levels.
Sec. 90.806 Bidding application (FCC Form 175 and 175-S Short-form).
All applicants to participate in competitive bidding for 900 MHz
SMR licenses must submit applications on FCC Forms 175 and 175-S
pursuant to the provisions of Sec. 1.2105 of this chapter. The Wireless
Telecommunications Bureau will issue a Public Notice announcing the
availability of 900 MHz SMR licenses and, in the event that mutually
exclusive applications are filed, the date of the auction for those
licenses. This Public Notice also will specify the date on or before
which applicants intending to participate in a 900 MHz SMR auction must
file their applications in order to be eligible for that auction, and
it will contain information necessary for completion of the application
as well as other important information such as the materials which must
accompany the Forms, any filing fee that must accompany the application
or any upfront payment that will need to be submitted, and the location
where the application must be filed. In addition to identifying its
status as a small business or rural telephone company, each applicant
must indicate whether it is a minority-owned entity, as defined in
Sec. 90.814(g) and/or a women-owned entity.
[[Page 48920]]
Sec. 90.807 Submission of upfront payments and down payments.
(a) Each bidder in the 900 MHz SMR auction will be required to
submit an upfront payment of $0.02 per MHz per pop, for the maximum
number of licenses (in terms of MHz-pops) on which it intends to bid
pursuant to Sec. 1.2106 of this chapter and procedures specified by
Public Notice.
(b) Each winning bidder in the 900 MHz SMR auction shall make a
down payment to the Commission in an amount sufficient to bring its
total deposits up to 20 percent of its winning bid within five business
days after the auction closes, and the remaining balance due on the
license shall be paid within five business days after Public Notice
announcing that the Commission is prepared to award the license. The
grant of the application required by Sec. 90.808 is conditional upon
receipt of full payment, except for small businesses that are winning
bidders, which are governed by Sec. 90.811. The Commission generally
will grant the license within ten (10) business days after the receipt
of the remaining balance due on the license.
Sec. 90.808 Long-form applications.
Each winning bidder will be required to submit a long-form
application on FCC Form 600 within ten (10) business days after being
notified by Public Notice that it is the winning bidder. Applications
on FCC Form 600 shall be submitted pursuant to the procedures set forth
in 90.119 and any associated Public Notices. Only auction winners (and
rural telephone companies and incumbent 900 MHz SMR licensees seeking
partitioned licenses pursuant to agreements with auction winners under
Sec. 90.813) will be eligible to file applications on FCC Form 600 for
initial 900 MHz SMR licenses in the event of mutual exclusivity between
applicants filing Form 175.
Sec. 90.809 License grant, denial, default, and disqualification.
(a) A bidder who withdraws its bid subsequent to the close of
bidding, defaults on a payment due, or is disqualified, will be subject
to the payments specified in Sec. 90.805 or Sec. 1.2109 of this
chapter, as applicable.
(b) MTA licenses pursued through competitive bidding procedures
will be granted pursuant to the requirements specified in Sec. 90.166.
Sec. 90.810 Bidding credits for small businesses.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses, (as defined in Sec. 90.814(b)(1)(i) may
use a bidding credit of 15 percent to lower the cost of its winning bid
on any of the blocks identified in Sec. 90.617(d), Table 4B. A winning
bidder that qualifies as a small business or a consortium of small
businesses, (as defined in Sec. 90.814(b)(1)(ii) may use a bidding
credit of 10 percent to lower the cost of its winning bid on any of the
blocks identified in Sec. 90.617(d), Table 4B.
(b) Unjust Enrichment. (1) A small business seeking transfer or
assignment of a license to an entity that is not a small business under
the definitions in Sec. 90.814(b)(1) will be required to reimburse the
government for the amount of the bidding credit, plus interest at the
rate imposed for installment financing at the time the license was
awarded, before transfer will be permitted. The amount of this payment
will be reduced over time as follows: a transfer in the first two years
of the license term will result in a forfeiture of 100 percent of the
value of the bidding credit: in year three of the license term the
payment will be 75 percent; in year four the payment will be 50 percent
and in year five the payment will be 25 percent, after which there will
be no assessment. If a small business as defined in
Sec. 90.814(b)(1)(i) seeks to transfer or assign a license to a small
business as defined in Sec. 90.814(b)(1)(ii), the value of the bidding
credit to be repaid is five percent, the difference between the 10 and
15 percent bidding credits. The five percent difference will be subject
to the percentage reductions over time specified above. These payments
must be paid back to the U.S. Treasury as a condition of approval of
the assignment or transfer.
(2) If a small business that utilizes a bidding credit under this
section seeks to assign or transfer control of its license to a small
business meeting the eligibility standards for lower bidding credits or
seeks to make any other change in ownership that would result in the
licensee qualifying for a lower bidding credit under this section, the
licensee must seek Commission approval and reimburse the government for
the difference between the amount of the bidding credit obtained by the
licensee and the bidding credit for which the assignee, transferee or
licensee is eligible under this section as a condition of the approval
of such assignment, transfer or other ownership change.
Sec. 90.811 Reduced down payment for licenses won by small businesses.
Each winning bidder that qualifies as a small business shall make a
down payment equal to ten percent of its winning bid (less applicable
bidding credits); a winning bidder shall bring its total amount on
deposit with the Commission (including upfront payment) to five percent
of its net winning bid within five (5) business days after the auction
closes, and the remainder of the down payment (five percent) shall be
paid within five (5) business days following Public Notice that the
Commission is prepared to award the license. The Commission generally
will grant the license within ten (10) business days after receipt of
the remainder of the down payment.
Sec. 90.812 Installment payments for licenses won by small businesses.
(a) Each licensee that qualifies as a small business may pay the
remaining 90 percent of the net auction price for the license in
quarterly installment payments pursuant to Sec. 1.2110(e) of this
chapter. Licensees who qualify for installment payments are entitled to
pay their winning bid amount in installments over the term of the
license, with interest charges to be fixed at the time of licensing at
a rate equal to the rate for ten-year U.S. Treasury obligations plus
2.5 percent. Payments shall include both principal and interest
amortized over the term of the license. An MTA license issued to an
eligible small business that elects installment payments will be
conditioned on the full and timely performance of the license holder's
quarterly payments. The additional following terms apply:
(1) An eligible licensee qualifying as a small business under
Sec. 90.814(b)(1)(i) may make interest-only payments for five years.
Interest will accrue at the Treasury note rate. Payments of interest
and principal shall be amortized over the remaining five years of the
license term.
(2) An eligible licensee qualifying as a small business under
Sec. 90.814(b)(1)(ii) may make interest-only payments for the first two
years of the license term. Interest will accrue at the Treasury note
rate plus an additional 2.5 percent. Payments of interest and principal
shall be amortized over the remaining eight years of the license term.
(b) Unjust Enrichment. (1) If a licensee that utilizes installment
financing under this section seeks to assign or transfer control of its
license to an entity not meeting the eligibility standards for
installment payments, the licensee must make full payment of the
remaining unpaid principal and any unpaid interest accrued through the
date of assignment or transfer as a condition of approval.
[[Page 48921]]
(2) If a licensee that utilizes installment financing under this
section seeks to make any change in ownership structure that would
result in the licensee losing eligibility for installment payments, the
licensee shall first seek Commission approval and must make full
payment of the remaining unpaid principal and any unpaid interest
accrued through the date of such change as a condition of approval.
(3) if a licensee that utilizes installment financing under this
section seeks to assign or transfer control of a license to an entity
that does not qualify for as favorable an installment payment plan, the
installment payment plan for which the acquiring entity qualifies will
become effective immediately upon transfer.
Sec. 90.813 Procedures for partitioned licenses.
(a) Notwithstanding Sec. 90.661, a rural telephone company, as
defined in Sec. 90.814, may be granted a 900 MHz SMR license that is
geographically partitioned from a separately licensed MTA, so long as
the MTA applicant or licensee has voluntarily agreed (in writing) to
partition a portion of the license to the entity.
(b) If partitioned licenses are being applied for in conjunction
with a license(s) to be awarded through competitive procedures--
(1) The applicable procedures for filing short-form applications
and for submitting upfront payments and down payments contained in this
part and Part 1 of this chapter shall be followed by the applicant, who
must disclose as part of its short-form application all parties to
agreement(s) with or among other entities to partition the license
pursuant to this section, if won at auction (see 47 CFR
1.2105(a)(2)(viii));
(2) Each rural telephone company that is a party to an agreement to
partition the license shall file a long-form application for its
respective, mutually agreed-upon geographic area together with the
application for the remainder of the MTA filed by the auction winner.
(c) If the partitioned license is being applied for as a partial
assignment of the MTA license following grant of the initial license,
request for authorization for partial assignment of a license shall be
made pursuant to Sec. 90.153.
(d) Each application for a partitioned area (long-form initial
application or partial assignment application) shall contain a
partitioning plan that must propose to establish a partitioned area to
be licensed that meets the following criteria:
(1) Conforms to established geopolitical boundaries (such as county
lines);
(2) Includes the wireline service area of the rural telephone
company applicant; and
(3) Is reasonably related to the rural telephone company's wireline
service area.
Note to paragraph (d): A partitioned service area will be
presumed to be reasonably related to the rural telephone company's
wireline service area if the partitioned service area contains no
more than twice the population overlap between the rural telephone
company's wireline service area and the partitioned area.
(e) Each licensee in each partitioned area will be responsible for
meeting the construction requirements in its area (see Sec. 90.665).
Sec. 90.814 Definitions.
(a) Scope. The definitions in this section apply to Secs. 90.810
through 90.813, unless otherwise specified in those sections.
(b) Small Business: Consortium of Small Business:
(1) A small business is an entity that either:
(i) together with its affiliates, persons or entities that hold
attributable interests in such entity, and their affiliates, has
average gross revenues that are not more than $3 million for the
preceding three years; or
(ii) together with its affiliates, persons or entities that hold
attributable interests in such entity, and their affiliates, has
average gross revenues that are not more than $15 million for the
preceding three years.
(2) For purposes of determining whether an entity meets either the
$3 million or $15 million average annual gross revenues size standard
set forth in paragraph (b)(1) of this section, the gross revenues of
the entity, its affiliates, persons or entities holding interests in
the entity and their affiliates shall be considered on a cumulative
basis and aggregated, subject to the exceptions set forth in
Sec. 90.814(g).
(3) A small business consortium is a conglomerate organization
formed as a joint venture between or among mutually-independent
business firms, each of which individually satisfies either definition
of a small business in paragraphs (b)(1) and (b)(2) of this section. In
a consortium of small businesses, each individual member must establish
its eligibility as a small business, as defined in this section.
(c) Rural Telephone Company. A rural telephone company is a local
exchange carrier having 100,000 or fewer access lines, including all
affiliates.
(d) Gross Revenues. For applications filed after December 31, 1994,
gross revenues shall be evidenced by audited financial statements for
the preceding relevant number of calendar or fiscal years. If an entity
was not in existence for all or part of the relevant period, gross
revenues shall be evidenced by the audited financial statements of the
entity's predecessor-in-interest or, if there is no identifiable
predecessor-in-interest, unaudited financial statements certified by
the applicant as accurate.
(e) Businesses Owned by Members of Minority Groups and/or Women. A
business owned by members of minority groups and/or women in which
minorities and/or women who are U.S. citizens control the applicant,
have at least 50.1 percent equity ownership and, in the case of a
corporate applicant, a 50.1 percent voting interest. For applicants
that are partnerships, every general partner either must be a minority
and/or woman (or minorities and/or women) who are U.S. citizens and who
individually or together own at least 50.1 percent of the partnership
equity, or an entity that is 100 percent owned and controlled by
minorities and/or women who are U.S. citizens. The interests of
minorities and women are to be calculated on a fully-diluted basis;
agreements such as stock options and convertible debentures shall be
considered to have a present effect on the power to control an entity
and shall be treated as if the rights thereunder already have been
fully exercised. However, upon a demonstration that options or
conversion rights held by non-controlling principals will not deprive
the minority and female principals of a substantial financial stake in
the venture or impair their rights to control the designated entity, a
designated entity may seek a waiver of the requirement that the equity
of the minority and female principals must be calculated on a fully-
diluted basis.
(f) Members of Minority Groups. Members of minority groups includes
Blacks, Hispanics, American Indians, Alaskan Natives, Asians, and
Pacific Islanders.
(g) Attributable Interests. Partnership and other ownership
interests and any stock interest amounting to 20 percent or more of the
equity, or outstanding stock, or outstanding voting stock of a licensee
or applicant will be attributable.
(1) Multiplier. 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
[[Page 48922]]
application of the relevant attribution benchmark to the resulting
product, except that if the ownership percentage for an interest in any
line in the chain exceeds 50 percent or represents actual control, it
shall be treated as if it were a 100 percent interest.
(h) Affiliate. (1) Basis for Affiliation. An individual or entity
is an affiliate of an applicant or of a person holding an attributable
interest in an applicant (both referred to herein as ``the applicant'')
if such individual or entity:
(i) Directly or indirectly controls or has the power to control the
applicant, or
(ii) Is directly or indirectly controlled by the applicant, or
(iii) Is directly or indirectly controlled by a third party or
parties that also controls or has the power to control the applicant,
or
(iv) Has an ``identity of interest'' with the applicant.
(2) Nature of control in determining affiliation. (i) Every
business concern is considered to have one or more parties who directly
or indirectly control or have the power to control it. Control may be
affirmative or negative and it is immaterial whether it is exercised so
long as the power to control exists.
Example for paragraph (h)(2)(i). An applicant owning 50 percent
of the voting stock of another concern would have negative power to
control such concern since such party can block any action of the
other stockholders. Also, the bylaws of a corporation may permit a
stockholder with less than 50 percent of the voting to block any
actions taken by the other stockholders in the other entity.
Affiliation exists when the applicant has the power to control a
concern while at the same time another person, or persons, are in
control of the concern at the will of the party or parties with the
power of control.
(ii) Control can arise through stock ownership; occupancy of
director, officer or key employee positions; contractual or other
business relations; or combinations of these and other factors. A key
employee is an employee who, because of his/her position in the
concern, has a critical influence in or substantive control over the
operations or management of the concern.
(iii) Control can arise through management positions where a
concern's voting stock is so widely distributed that no effective
control can be established.
Example for paragraph (h)(2)(iii). In a corporation where the
officers and directors own various size blocks totaling 40 percent
of the corporation's voting stock, but no officer or director has a
block sufficient to give him or her control or the power to control
and the remaining 60 percent is widely distributed with no
individual stockholder having a stock interest greater than 10
percent, management has the power to control. If persons with such
management control of the other entity are persons with attributable
interests in the applicant, the other entity will be deemed an
affiliate of the applicant.
(3) Identity of interest between and among persons. Affiliation can
arise between or among two or more persons with an identity of
interest, such as members of the same family or persons with common
investments. In determining if the applicant controls or is controlled
by a concern, persons with an identity of interest will be treated as
though they were one person.
Example 1 for paragraph (h)(3) introductory text. Two
shareholders in Corporation Y each have attributable interests in
the same SMR application. While neither shareholder has enough
shares to individually control Corporation Y, together they have the
power to control Corporation Y. The two shareholders with these
common investments (or identity or interest) are treated as though
they are one person and Corporation Y would be deemed an affiliate
of the applicant.
Example 2 for paragraph (h)(3) introductory text. One
shareholder in Corporation Y, shareholder A, has an attributable
interest in a SMR application. Another shareholder in Corporation Y,
shareholder B, has a nonattributable interest in the same SMR
application. While neither shareholder has enough shares to
individually control Corporation Y, together they have the power to
control Corporation Y. Through the common investment of shareholders
A and B in the SMR application, Corporation Y would still be deemed
an affiliate of the applicant.
(i) Spousal Affiliation. Both spouses are deemed to own or control
or have the power to control interests owned or controlled by either of
them, unless they are subject to a legal separation recognized by a
court of competent jurisdiction in the United States.
(ii) Kinship Affiliation. Immediate family members will be presumed
to own or control or have the power to control interests owned or
controlled by other immediate family members. In this context
``immediate family member'' means father, mother, husband, wife, son,
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father, or -mother, step-
brother, or -sister, step-son, or -daughter, half brother or sister.
This presumption may be rebutted by showing that
(A) The family members are estranged,
(B) The family ties are remote, or
(C) The family members are not closely involved with each other in
business matters.
Example for paragraph (h)(3)(ii). A owns a controlling interest
in Corporation X. A's sister-in-law, B, has an attributable interest
in an SMR application. Because A and B have a presumptive kinship
affiliation, A's interest in Corporation X is attributable to B, and
thus to the applicant, unless B rebuts the presumption with the
necessary showing.
(4) Affiliation through stock ownership.
(i) An applicant is presumed to control or have the power to
control a concern if he or she owns or controls or has the power to
control 50 percent or more of its voting stock.
(ii) An applicant is presumed to control or have the power to
control a concern even though he or she owns, controls or has the power
to control less than 50 percent of the concern's voting stock, if the
block of stock he or she owns, controls or has the power to control is
large as compared with any other outstanding block of stock.
(iii) If two or more persons each owns, controls or has the power
to control less than 50 percent of the voting stock of a concern, such
minority holdings are equal or approximately equal in size, and the
aggregate of these minority holdings is large as compared with any
other stock holding, the presumption arises that each one of these
persons individually controls or has the power to control the concern;
however, such presumption may be rebutted by a showing that such
control or power to control, in fact, does not exist.
(5) Affiliation arising under stock options, convertible
debentures, and agreements to merge. Stock options, convertible
debentures, and agreements to merge (including agreements in principle)
are generally considered to have a present effect on the power to
control the concern. Therefore, in making a size determination, such
options, debentures, and agreements will generally be treated as though
the rights held thereunder had been exercised. However, neither an
affiliate nor an applicant can use such options and debentures to
appear to terminate its control over another concern before it actually
does so.
Example 1 for paragraph (h)(5). If company B holds an option to
purchase a controlling interest in company A, who holds an
attributable interest in an SMR application, the situation is
treated as though company B had exercised its rights and had become
owner of a controlling interest in company A. The gross revenues of
Company B must be taken into account in determining the size of the
applicant.
Example 2 for paragraph (h)(5).If a large company, BigCo, holds
70% (70 to 100 outstanding shares) of the voting stock of company A,
who holds an attributable interest in an SMR application, and gives
a
[[Page 48923]]
third party, SmallCo, an option to purchase 50 of the 70 shares owned
by BigCo, BigCo will be deemed to be an affiliate of company, and
thus the applicant, until SmallCo actually exercises its options to
purchase such shares. In order to prevent BigCo from circumventing
the intent of the rule which requires such options to be considered
on a fully diluted basis, the option is not considered to have
present in this case.
Example 3 for paragraph (h)(5). If company A has entered into an
agreement to merge with company B in the future, the situation is
treated as though the merger has taken place.
(6) Affiliation under voting trusts.
(i) Stock interests held in trust shall be deemed controlled by 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.
(ii) If a trustee has a familial, personal or extra-trust business
relationship to the grantor or the beneficiary, the stock interests
held in trust will be deemed controlled by the grantor or beneficiary,
as appropriate.
(iii) If the primary purpose of a voting trust, or similar
agreement, is to separate voting power from beneficial ownership of
voting stock for the purpose of shifting control of or the power to
control a concern in order that such concern or another concern may
meet the Commission's size standards, such voting trust shall not be
considered valid for this purpose regardless of whether it is or is not
recognized within the appropriate jurisdiction.
(7) Affiliation through common management. Affiliation generally
arises where officers, directors, or key employees serve as the
majority or otherwise as the controlling element of the board of
directors and/or the management of another entity.
(8) Affiliation through common facilities. Affiliation generally
arises where one concern shares office space and/or employees and/or
other facilities with another concern, particularly where such concerns
are in the same or related industry or field of operations, or where
such concerns were formerly affiliated, and through theses sharing
arrangements one concern has control, or potential control, of the
other concern.
(9) Affiliation through contractual relationships. Affiliation
generally arises where one concern is dependent upon another concern
for contracts and business to such a degree that one concern has
control, or potential control, of the other concern.
(10) Affiliation under joint venture arrangements.
(i) A joint venture for size determination purposes is an
association of concerns and/or individuals, with interests in any
degree or proportion, formed by contract, express of implied, to engage
in and carry out a single, specific business venture for joint profit
for which purpose they combine their efforts, property, money, skill
and knowledge, but not on a continuing or permanent basis for
conducting business generally. The determination whether an entity is a
joint venture is based upon the facts of the business operation,
regardless of how the business operation may be designated by the
parties involved. An agreement to share profits/losses proportionate to
each party's contribution to the business operation is a significant
factor in determining whether the business operation is a joint
venture.
(ii) The parties to a joint venture are considered to be affiliated
with each other.
Sec. 90.815 Eligibility for small business status.
(a) Short-Form Applications: Certifications and Disclosure. Each
applicant for an MTA license which qualifies as a small business or
consortium of small businesses shall append the following information
as an exhibit to its short-form application (Form 175):
(1) The identity of the applicant's affiliates, persons or entities
that hold attributable interests in such entity, and their affiliates,
and, if a consortium of small businesses, the members in the joint
venture; and
(2) The applicant's gross revenues, computed in accordance with
Sec. 90.814.
(b) Long Form Applications: Certifications and Disclosure. In
addition to the requirements in subpart U of this part, each applicant
submitting a long-form application for license(s) and qualifying as a
small business shall, in an exhibit to its long-form application:
(1) Disclose separately and in the aggregate the gross revenues,
computed in accordance with Sec. 90.814, for each of the following: the
applicant; the applicant's affiliates, the applicant's attributable
investors, affiliates of its attributable investors, and, if a
consortium of small businesses, the members of the joint venture;
(2) List and summarize all agreements or other instruments (with
appropriate references to specific provisions in the text of such
agreements and instruments) that support the applicant's eligibility as
a small business under Secs. 90.810 through 90.812, including the
establishment of de facto and de jure control; such agreements and
instruments include articles of incorporation and bylaws, shareholder
agreements, voting or other trust agreements, franchise agreements, and
any other relevant agreements (including letters of intent), oral or
written; and
(3) List and summarize any investor protection agreements,
including rights of first refusal, supermajority clauses, options, veto
rights, and rights to hire and fire employees and to appoint members to
boards of directors or management committees.
(c) Records Maintenance. All winning bidders qualifying as small
businesses, shall maintain at their principal place of business an
updated file of ownership, revenue and asset information, including any
documents necessary to establish eligibility as a small business and/or
consortium of small businesses under Sec. 90.814. Licensees (and their
successors in interest) shall maintain such files for the term of the
license.
(d) Audits. (1) Applicants and licensees claiming eligibility as a
small business or consortium of small businesses under Secs. 90.810
through 90.812 shall be subject to audits by the Commission, using in-
house and contract resources. Selection for audit may be random, on
information, or on the basis of other factors.
(2) Consent to such audits is part of the certification included in
the short-form application (Form 175). Such consent shall include
consent to the audit of the applicant's or licensee's books, documents
and other material (including accounting procedures and practices)
regardless of form or type, sufficient to confirm that such applicant's
or licensee's representations are, and remain, accurate. Such consent
shall include inspection at all reasonable times of the facilities, or
parts thereof, engaged in providing and transacting business, or
keeping records regarding licensed 900 MHz SMR service and shall also
include consent to the interview of principals, employees, customers
and suppliers of the applicant or licensee.
(e) Definitions. The terms affiliate, business owned by members of
minority groups and/or women, consortium of small businesses, gross
revenues, members of minority groups, nonattributable equity, small
business and total assets used in this section are defined in
Sec. 90.814.
[FR Doc. 95-23407 Filed 9-20-95; 8:45 am]
BILLING CODE 6712-01-M
