Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | FCC File No. 0000137330      |
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| PVT NETWORKS, INC.               | ) |                              |
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| Request for Waiver of Sections   | * |                              |
| 1.2110(b) and 101.1209(e) of the |   |                              |
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**ORDER ON RECONSIDERATION**

**Adopted: July 3, 2001 Released: July 5, 2001**

By the Chief, Public Safety and Private Wireless Division, Wireless
Telecommunications Bureau:

# Introduction

1.  We have before us a petition for reconsideration filed by PVT
    Networks, Inc. (PVTN) on October 27, 2000.[^1] PVTN seeks
    reconsideration of the *Farm Attribution Order* released by the
    Public Safety and Private Wireless Division (Division) on September
    27, 2000.[^2] The Division determined that PVTN was not qualified as
    a "very small business" for purposes of Auction No. 30, the auction
    of licenses for fixed point-to-point microwave services in the 38.6
    to 40.0 GHz band (39 GHz band).[^3] For the reasons set forth below,
    we conclude, based upon the additional information PVTN provides in
    its Petition, that Mr. Mayberry is not an affiliate of PVTN.
    Therefore, we grant PVTN's Petition and conclude that PVTN is
    qualified as a "very small business" for purposes of Auction No. 30
    and may receive a thirty-five percent bidding credit.

# background

## Auction No. 30

2.  On November 23, 1999, the Commission issued a public notice
    announcing the start of Auction No. 30 on April 11, 2000. According
    to the public notice, short-form applications, FCC Form 175s, were
    required to be filed by March 13, 2000, at which time applicants
    were required to indicate whether they were filing as a "designated
    entity"(DE).[^4] Under certain circumstances, a DE may be eligible
    to receive bidding credits.

3.  On January 21, 2000, the Commission issued a public notice
    announcing the procedures and minimum opening bids for Auction No.
    30.[^5] Among those procedures were the eligibility criteria for
    bidding credits, which were available to "small businesses" and
    "very small businesses."[^6] According to the public notice, a "very
    small business," an entity with average gross revenues of not more
    than \$15,000,000 for the preceding three years, would receive a
    thirty-five percent discount on its winning bid, while a "small
    business," an entity with average gross revenues of not more than
    \$40,000,000 for the preceding three years, would receive a
    twenty-five percent discount.[^7]

4.  On March 13, 2000, PVTN filed its FCC Form 175 and indicated that it
    was filing as a "very small business."[^8] Specifically, it stated
    that PVTN's average gross revenues for the preceding three years was
    \$7,457,696, while that of its parent, Peñasco Valley Telephone
    Cooperative (PVT), was \$7,367,018, for combined average gross
    revenues of PVTN, its affiliates, and their attributable interests
    of \$14,824,714. Although PVTN disclosed the revenues of Mayberry
    Farm, owned by Robert Mayberry, a director and Secretary-Treasurer
    of PVT and PVTN, PVTN did not include the revenues of Mayberry Farm,
    a personal farm incorporated under the name Mayberry, Inc., in its
    calculation of the combined average gross revenues of PVTN. PVTN did
    not include those revenues on the basis that Mayberry Farm provides
    personal income to Mr. Mayberry and has no business relationship to
    PVTN; and therefore, according to PVTN, Mayberry Farm should not be
    treated as an affiliate of PVTN.[^9] In the event the Commission
    concluded that Mayberry Farm was an affiliate of PVTN, PVTN
    requested a "limited waiver of Rule Section 101.1209(e) to the
    extent that it would permit the applicant to exclude the gross
    revenues of Mayberry Farm and retain very small business status for
    purposes of Auction No. 30."[^10] In support of its waiver request,
    PVTN stated that although Mr. Mayberry is a director of both PVT and
    PVTN, neither Mr. Mayberry nor any member of his family owns or
    invests in PVT or PVTN.[^11] Moreover, PVTN states, Mr. Mayberry's
    participation in the affairs of PVTN and PVT is in the nature of
    community service.[^12] Mayberry Farm's average gross revenues for
    the preceding three years were \$719,106.[^13]

5.  On May 8, 2000, Auction No. 30 closed.[^14] PVTN was the high bidder
    for ten licenses in two Basic Trading Areas in southeastern New
    Mexico and west Texas.[^15] PVTN's gross bid for these licenses was
    \$87,600.[^16] PVTN calculated that its bid, less the thirty-five
    percent bidding credit for very small businesses, was \$56,940.[^17]

6.  On May 23, 2000, PVTN submitted its long-form application, FCC
    Form 601. In this application, PVTN stated that it:

    believes that the personal farm business of Robert Mayberry is not
    an affiliate of the Applicant. The information provided . . .
    regarding Mayberry farm has been included below and in Applicant's
    short-form application out of an abundance of caution. . . .
    Mayberry, Inc. is a personal farm business which is owned by Robert
    Mayberry, who is Secretary-Treasurer and a Director of the
    Applicant. Mr. Mayberry's farm operation has no business
    relationship with the Applicant or any of the Applicant's
    affiliates.[^18]

    PVTN attached a waiver request to FCC Form 601 requesting that the
    Commission grant a limited waiver of Section 101.1209(e) of the
    Commission's Rules to the extent that it would permit PVTN to
    exclude the gross revenues of Mayberry Farm and retain its very
    small business status for the purposes of Auction No. 30.[^19]

## Farm Attribution Order and Petition for Reconsideration

7.  On September 27, 2000, the Division released the *Farm Attribution
    Order* in which we determined that Mayberry Farm was an affiliate of
    PVTN and denied PVTN's waiver request. We stated:

    We believe that the facts clearly establish that, as a board member
    and officer of both the applicant, PVT\[N\], and the applicant's
    real party in interest, PVT\[ \], Mayberry is an affiliate of the
    applicant. Further, we believe that Mayberry's ownership of the farm
    is sufficient to establish the indicia of control necessary to
    demonstrate Mayberry's attributable interest in Mayberry Farm and
    consequently, Mayberry Farm's affiliation with the applicant, PVT\[
    \]. Accordingly, we believe that the income of Mayberry Farm should
    be included in PVT\[N\]'s gross revenues under Section 101.1209(e)
    of the Commission's Rules.[^20]

    We further stated that "\[u\]nder the Commission's Rules, the
    indicia of control may be inferred by virtue of one's stock
    ownership or position as a manager, officer, or key employee.
    Mayberry also holds a 'subscriber' ownership interest in PVT\[ \],
    which may also be \[a\] sufficient basis to establish
    affiliation."[^21]

8.  In denying PVTN's waiver request we stated "\[a\]lthough our
    decision to deny PVT\[N\]'s request means that it will not be able
    to use a thirty-five percent bidding credit to lower the cost of its
    winning bid, it does not foreclose PVT\[N\]'s opportunity to use a
    twenty-five percent bidding credit as a small business."[^22] We
    therefore concluded that PVTN had not shown how the purpose of
    Sections 1.2110(b) and 101.1209(e) of the Commission's Rules, which
    is intended to promote small business participation in spectrum
    auctions, would be frustrated.[^23] We further found that PVTN did
    not present any unique or unusual circumstances that would justify a
    waiver.[^24]

9.  As a consequence of the *Farm Attribution Order*, PVTN qualified as
    a "small business" for purposes of Auction No. 30. Instead of paying
    \$56,940 for the licenses it won, presuming it was a "very small
    business," PVTN was required to pay \$65,700, an increase of
    \$8,760.[^25]

10. On October 27, 2000, PVTN filed its Petition. PVTN maintains that
    Mayberry Farm is not an affiliate of PVTN and further argues that if
    Mayberry Farm is found to be an affiliate of PVTN, then the Division
    should grant a waiver based on public interest considerations.[^26]
    PVTN states that to determine that Mayberry Farm is an affiliate of
    PVTN, the Division "appears to have found that Mr. Mayberry
    exercises *de facto* control over PVTN."[^27] PVTN argues, however,
    that Mr. Mayberry does not exercise *de facto* control over PVTN and
    states that "\[w\]hile holding certain officer or director positions
    with a company can be a circumstance to consider in evaluating *de
    facto* control, having officer/director status by itself has not
    justified a finding of control."[^28] In this instance, PVTN
    maintains, Mr. Mayberry's involvement is insignificant.[^29] PVTN
    insists that Mr. John C. Metts, the Chief Executive Officer/General
    Manager of PVTN actually controls PVTN.[^30]

11. PVTN argues in the alternative that we should waive Sections
    1.2110(b) and 101.1209(e) of the Commission's Rules because the main
    purpose "underlying the affiliation rules is to prevent larger
    commercial firms from spinning off a 'front' company to compete
    against legitimate small businesses."[^31] According to PVTN, "it is
    clear that neither PVTN nor its parent company, a not-for-profit
    rural telephone cooperative, is a large commercial firm."[^32]

# discussion

12. Under Section 101.1209(b)(1)(ii) of the Commission's Rules, an
    entity may qualify as a "very small business" if the entity together
    with "its affiliates and 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."[^33] According to Section 101.1209(e) of the Commission's
    Rules:

    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) \[d\]irectly or indirectly controls or has the power to
    control the applicant, or (ii) \[i\]s directly or indirectly
    controlled by the applicant, or (iii) \[i\]s directly or indirectly
    controlled by a third party or parties that also controls or has the
    power to control the applicant; or (iv) \[h\]as an 'identity of
    interest' with the applicant.[^34]

    In this case, the pertinent question is whether Mr. Mayberry
    controls PVT and PVTN. "Control" includes both *de jure* and *de
    facto* control.[^35] Typically, *de jure* control is evidenced by
    ownership of 50.1 percent of an entity's voting stock.[^36] *De
    facto* control is determined on a case-by-case basis.[^37] Because
    *de facto* control is determined on a case-by-case basis, we
    consider the six factors enumerated in *Intermountain
    Microwave*[^38] to determine whether Mr. Mayberry has *de facto*
    control over PVTN. The six *Intermountain Microwave* factors
    are: (1) Who controls daily operations?; (2) Who is in charge of
    employment, supervision, and dismissal of personnel?; (3) Does the
    licensee have unfettered use of all facilities and equipment?; (4)
    Who is in charge of payment of financing obligations, including
    expenses arising out of operating?; (5) Who receives monies and
    profits from the operation of the facilities?; and (6) Who
    determines and carries out the policy decisions, including preparing
    and filing applications with the Commission?[^39] An applicant's
    "representations as to its intention and related contractual
    provision are relevant, but the weight to be ascribed to these
    representations must be evaluated in light of the entire
    record."[^40]

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13. In this case, based upon the additional information PVTN provides in
    its reconsideration petition, we conclude that Mr. Mayberry, as an
    individual, does not exercise *de facto* control over PVTN.
    Initially, we note that under the attribution rules that apply to
    PVTN's application, Mr. Mayberry's status as an officer and director
    by themselves do not necessarily mean that Mr. Mayberry has *de
    facto* control over PVTN for purposes of Auction No. 30. In this
    regard, we note that in *DCR PCS*,[^41] the Wireless
    Telecommunications Bureau (Bureau) determined that an officer,
    director, and member of DCR PCS' control group did not control DCR
    PCS because he was unable to override the authority of the other two
    members of the control group.[^42] Also in *DCR PCS*, the Bureau
    found that Westinghouse, a shareholder, which was one of four
    members of the auction committee and which had power to veto a
    change of control of DCR PCS, did not possess *de facto* control
    over DCR PCS, and therefore, was not an affiliate.[^43] The
    affiliation rules used in *DCR PCS* are substantively the same as
    the affiliation rules applied in Auction No. 30.[^44] Accordingly,
    we conclude that for purposes of Auction No. 30, Mr. Mayberry's
    status as an officer and director alone does not indicate Mr.
    Mayberry controls PVTN.[^45]

14. Using the *Intermountain Microwave* factors, we conclude that Mr.
    Mayberry as an individual does not control PVTN. Mr. Mayberry is not
    directly involved in PVTN's day-to-day operations. Mr. Mayberry only
    devotes a few hours a month to PVT business.[^46] He does not have
    an office at PVTN, and his participation is limited to attending
    meetings of the board of directors.[^47] Mr. Metts is responsible
    for supervising, hiring, and firing employees.[^48] There is no
    evidence in the record that Mr. Mayberry has any special access to
    PVTN's facilities and equipment. Mr. Mayberry's role concerning
    financing obligations appears to be limited to his role as one of
    nine directors of PVTN. The receipt of monies and profits factor
    supports the conclusion that Mr. Mayberry does not control PVTN
    because he does not receive any compensation for his services.[^49]
    Finally, while Mr. Mayberry has a role in determining and carrying
    out policy decisions as a director of PVTN, he is only one of nine
    directors.[^50] Mr. Metts represents that he does not seek separate
    approval from Mr. Mayberry in setting PVTN's policies.[^51] We find,
    therefore, that Mr. Mayberry's role is similar to the director in
    *DCR PCS* who did not have *de facto* control because he could not
    override the authority of the other two members of the control
    group.[^52] In analyzing all of the *Intermountain Microwave*
    factors, we conclude that Mr. Mayberry does not exercise *de facto*
    control over PVT and PVTN.[^53]

15. Given that Mr. Mayberry does not exercise *de facto* control over
    PVTN, he is not considered an affiliate of PVT and PVTN, and the
    gross revenues of the Mayberry Farm should be excluded in
    calculating the combined average gross revenue of PVTN. We will
    therefore dismiss as moot PVTN's alternative request for waiver.
    Since PVTN's combined average gross revenue excluding the revenues
    of Mayberry Farm is under \$15,000,000, it qualifies as a very small
    business for purposes of Auction No. 30. [^54]

# conclusion

16. After reviewing the record in this proceeding and applying the
    *Intermountain Microwave* analysis, we find that Mr. Mayberry does
    not have *de facto* control over PVTN, and therefore, is not an
    affiliate of PVTN. Because Mr. Mayberry is not an affiliate of PVTN,
    Mayberry Farm is not an affiliate of PVTN. Hence, we agree with PVTN
    that it qualifies as a "very small business" for purposes of Auction
    No. 30. We therefore find that it is unnecessary to reconsider
    PVTN'S request to waive Sections 1.2110(b) and 101.1209(e) of the
    Commission's Rules.

# Ordering clauses

17. ACCORDINGLY, IT IS ORDERED that pursuant to Section 4(i) and 405 of
    the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
    405, and Section 1.106 of the Commission's Rules, 47 C.F.R. § 1.106,
    IT IS ORDERED that the Petition for Reconsideration filed on October
    27, 2000 by PVT Networks, Inc., IS GRANTED, to the extent that PVT
    Networks, Inc. qualifies as a "very small business" for purposes of
    Auction No. 30.

18. IT IS FURTHER ORDERED that pursuant to Section 4(i) and 405 of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), 405,
    and 1.925 and 1.106 of the Commission's Rules, 47 C.F.R. 1.106, IT
    IS ORDERED that the request for a wavier of Sections 1.2110(b) and
    101.1209(e) of the Commission's Rules, 47 C.F.R. §§ 1.2110(b) and
    101.1209(e) filed on October 27, 2000 by PVT Networks, Inc. IS
    DISMISSED AS MOOT.

19. IT IS FURTHER ORDERED that PVT Networks, Inc. is entitled to be
    reimbursed \$8,760.

20. This action is taken under delegated authority pursuant to Section
    0.131 and 0.331 of the Commission's Rules, 47 C.F.R. §§ 0,131,
    0.331.

> FEDERAL COMMUNICATIONS COMMISSION
>
> D'wana R. Terry
>
> Chief, Public Safety and Private Wireless Division
>
> Wireless Telecommunications Bureau

[^1]: PVT Networks, Inc., Petition for Reconsideration (filed Oct. 27,
    2000) (Petition).

[^2]: PVT Networks, Inc., *Order,* 15 FCC Rcd 19105 (WTB PSPWD 2000)
    (*Farm Attribution Order*).

[^3]: Auction of Licenses for Fixed Point-to-Point Microwave Services in
    the 38.6-40.0 GHz (39 GHz) Band Scheduled for April 11, 2000,
    *Public Notice*, DA 99-2624, Report No. AUC-99-30-A (rel. Nov. 23,
    1999).

[^4]: 47 C.F.R. § 1.2110(a).

[^5]: Auction of Licenses for Fixed Point-to Point Microwave Services in
    the 38.6 to 40.0 (39 (GHz) Band Minimum Opening Bids and Other
    Procedural Issues, *Public Notice*, DA 00-112, Report No.
    AUC-99-30-B (rel. Jan. 21, 2000).

[^6]: *See id*. at 14.

[^7]: *Id*. at 15; 47 C.F.R. § 101.1208(a).

[^8]: PVT Networks, Inc. FCC Form 175 (filed Mar. 13, 2000).

[^9]: *Id*. at Exhibit C.

[^10]: *Id*.

[^11]: *Id*.

[^12]: *Id*.

[^13]: *Id.*

[^14]: 39 GHz Band Auction Closes Winning Bidders of 2,173 Licenses
    Announced, *Public Notice*, DA 00-1035, Report No. AUC-30-E (Auction
    No. 30) (rel. May 10, 2000).

[^15]: Petition at 5.

[^16]: *Id.*

[^17]: *Id.*

[^18]: PVT Networks, Inc. FCC Form 601, Exhibit A (filed May 23, 2000)
    (PVTN Form 601).

[^19]: *Id*. at Exhibit F.

[^20]: *Farm Attribution Order*, 15 FCC Rcd at 19107 ¶ 7.

[^21]: *Id*. at n.21.

[^22]: *Id*., 15 FCC Rcd at 19108 ¶ 10.

[^23]: *Id.*

[^24]: *Id.*

[^25]: Petition at 3.

[^26]: *Id*. at 1.

[^27]: *Id.* at 3.

[^28]: *Id.* at 5-6.

[^29]: *Id*. at 6.

[^30]: *Id.* at 7.

[^31]: *Id.* at 9-10.

[^32]: *Id*. at 10.

[^33]: 47 C.F.R. § 101.1209(b)(1)(ii) (2000).

[^34]: 47 C.F.R. § 101.1209(e) (2000).

[^35]: ^35^ Amendment of the Commission's Rules Regarding the37.0-38.6
    GHz and 38.6-40.0 GHz Bands Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding, 37.0-38.6 GHz and
    38.6-40.0 GHz, WT Docket No. 97-82, *Second Report and Order and
    Second Notice of Proposed Rulemaking,* 12 FCC Rcd 18600, 18662 ¶ 151
    (1997).

[^36]: *Id*., 12 FCC Rcd at 18663 ¶ 151.

[^37]: *Id.*

[^38]: Nonbroadcast and General Action Report No. 1142, "Applications
    for Microwave Transfers to Teleprompter Approved with Warning,"
    *Public Notice* (by the Commission *en banc*), 12 FCC 2d 559 (1963),
    24 Rad. Reg. (P&F) 983 (1963) ("*Intermountain Microwave*").

[^39]: ^39^ Application of Baker Creek Communications, LP For Authority
    to Construct and Operate Local Multipoint Distribution Services in
    Multiple Basic Trading Areas, *Memorandum Opinion and Order*, 13 FCC
    Rcd 18709, 18713-14 ¶ 7 (WTB 1998) (citing Telephone and Data
    Systems v. FCC, 19 F. 3d 42, 48 (D.C. Cir. 1994)).

[^40]: ^40^ *Id.*, 13 FCC Rcd at 18714 ¶ 8 (1998) (citations omitted).

[^41]: ^41^ Application of DCR PCS, Inc. Applications for Broadband PCS
    C Block Licenses, *Order*, 11 FCC Rcd 16849 (WTB 1996) (*DCR PCS*).

[^42]: ^42^ *Id.*, 11 FCC Rcd at 16859 ¶ 29.

[^43]: ^43^ *Id*., 11 FCC Rcd at 16861 ¶ 32.

[^44]: ^44^ *See* 47 C.F.R. § 24.720(l) (1996).

[^45]: ^45^ We note that subsequent to Auction No. 30, the Commission
    revised its attribution rules and that under those new rules,
    officers and directors will be considered to have *de facto* control
    over an applicant. *See* Amendment of Part 1 of the Commission's
    Rules, Competitive Bidding Rules, WT Docket No. 97-82, *Order on
    Reconsideration of the Third Report and Order, Fifth Report and
    Order, and Fourth Further Notice of Proposed Rule Making*, 15 FCC
    Rcd 15293, 15325 ¶ 63 (2000). In that order, the Commission said
    that "\[e\]ligibility for small business preferences, however, will
    be determined based on the attribution rules in effect at the time
    of an applicant\'s short-form filing." *Id.*, 15 FCC Rcd at 15327 ¶
    67. In this case, the pertinent attribution rule is 47 C.F.R. §
    101.1209(e) because that rule was in effect when PVTN filed its
    short-form application on March 13, 2000.

[^46]: ^46^ Petition, Declaration of John C. Metts, ¶ 7.

[^47]: ^47^ *Id*. ¶ 5.

[^48]: ^48^ *Id.* ¶ 6.

[^49]: ^49^ *Id.* ¶ 7.

[^50]: ^50^ *Id.* ¶ 4.

[^51]: ^51^ *Id.*

[^52]: ^52^ *DCR PCS*, 11 FCC Rcd at 16859 ¶ 29.

[^53]: ^53^ We do not necessarily accept Mr. Metts' claim that he
    exercises *de facto* control over PVTN. *See* Petition, Declaration
    of John C. Metts, ¶ 3. We note that Mr. Metts describes his role in
    part as "implementing the policies of the Board" (*Id.* ¶ 6), which
    suggests that the Board controls his actions. For purposes of this
    order, our sole conclusion is that Mr. Mayberry as an individual
    does not control PVTN.

[^54]: Therefore PVTN made an overpayment of \$8,640, which represents
    the difference in its net bid between the \$65,700 it paid for its
    licenses as a "small business" and \$56,940, which represents the
    amount PVTN was required to pay as a "very small business." To
    request a refund, see and follow the procedures specified in Auction
    of Licenses for Fixed Point-to-Point Microwave Services in the 38.6
    to 40.0 GHz (39 GHz) Band Minimum Opening Bids and Other Procedural
    Issues, *Public Notice*, DA 00-112, Report No. AUC-99-30-B (rel.
    Jan. 21, 2000).