[Federal Register Volume 65, Number 221 (Wednesday, November 15, 2000)]
[Rules and Regulations]
[Pages 68924-68927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29094]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WT Docket No. 97-82; FCC 00-274]


Competitive Bidding Procedures; Correction

AGENCY: Federal Communications Commission.

ACTION: Correcting amendments.

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SUMMARY: This document contains corrections to the final regulations 
which were published in the Federal Register of Tuesday, August 29, 
2000, (65 FR 52323). The regulations related to the competitive bidding 
rules for all, auctionable services in section 1.2110 of the 
Commission's rules.

DATES: Effective November 15, 2000.

FOR FURTHER INFORMATION CONTACT: Leora Hochstein, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, at (202) 418-
0660.

SUPPLEMENTARY INFORMATION: In the Federal Register of August 29, 2000 
(65 FR 52323), the Commission published a summary of its Order on 
Reconsideration of the Third Report and Order, Fifth Report and Order 
(Order on Reconsideration, Fifth Report and Order) in WT Docket No. 97-
82. That document clarified and amended the Commission's competitive 
bidding rules in an ongoing effort to establish a uniform and 
streamlined set of general competitive bidding rules for all 
auctionable services and to reduce the burden on both the Commission 
and the public of conducting service-specific auction rule makings.

Need for Correction

    As published, the final regulations contain errors which may prove 
to be misleading and need to be clarified.

List of Subjects in 47 CFR Part 1

    Communications common carriers, Reporting and recordkeeping 
requirements.
    Accordingly, 47 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--PRACTICE AND PROCEDURE

    1. The authority citation for part 1 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 
and 325(e).


    2. In Sec. 1.2110 revise paragraph (c) to read as follows:


Sec. 1.2110  Designated entities.

    (c) Definitions.--(1) Small businesses. The Commission will 
establish the definition of a small business on a service-specific 
basis, taking into consideration the characteristics and capital 
requirements of the particular service.
    (2) Controlling interests. (i) For purposes of this section, 
controlling interest includes individuals or entities with either de 
jure or de facto control of the applicant. De jure control is evidenced 
by holdings of greater than 50 percent of the voting stock of a 
corporation, or in the case of a partnership, general partnership 
interests. De facto control is determined on a case-by-case basis. An 
entity must disclose its equity interest and demonstrate at least the 
following indicia of control to establish that it retains de facto 
control of the applicant:

[[Page 68925]]

    (A) The entity constitutes or appoints more than 50 percent of the 
board of directors or management committee;
    (B) The entity has authority to appoint, promote, demote, and fire 
senior executives that control the day-to-day activities of the 
licensee; and
    (C) The entity plays an integral role in management decisions.
    (ii) Calculation of certain interests.
    (A) Ownership interests shall be calculated on a fully diluted 
basis; all agreements such as warrants, stock options and convertible 
debentures will generally be treated as if the rights thereunder 
already have been fully exercised.
    (B) Partnership and other ownership interests and any stock 
interest equity, or outstanding stock, or outstanding voting stock 
shall be attributed as specified.
    (C) Stock interests held in trust shall be attributed to any person 
who holds or shares the power to vote such stock, to any person who has 
the sole power to sell such stock, and to any person who has the right 
to revoke the trust at will or to replace the trustee at will. If the 
trustee has a familial, personal, or extra-trust business relationship 
to the grantor or the beneficiary, the grantor or beneficiary, as 
appropriate, will be attributed with the stock interests held in trust.
    (D) Non-voting stock shall be attributed as an interest in the 
issuing entity.
    (E) Limited partnership interests shall be attributed to limited 
partners and shall be calculated according to both the percentage of 
equity paid in and the percentage of distribution of profits and 
losses.
    (F) Officers and directors of an entity shall be considered to have 
a controlling interest in the entity. The officers and directors of an 
entity that controls a licensee or applicant shall be considered to 
have a controlling interest in the licensee or applicant.
    (G) Ownership interests that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that if the 
ownership percentage for an interest in any link in the chain exceeds 
50 percent or represents actual control, it shall be treated as if it 
were a 100 percent interest.
    (H) Any person who manages the operations of an applicant or 
licensee pursuant to a management agreement shall be considered to have 
a controlling interest in such applicant or licensee if such person, or 
its affiliate, has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence:
    (1) The nature or types of services offered by such an applicant or 
licensee;
    (2) The terms upon which such services are offered; or
    (3) The prices charged for such services.
    (I) Any licensee or its affiliate who enters into a joint marketing 
arrangement with an applicant or licensee, or its affiliate, shall be 
considered to have a controlling interest, if such applicant or 
licensee, or its affiliate, has authority to make decisions or 
otherwise engage in practices or activities that determine, or 
significantly influence:
    (1) The nature or types of services offered by such an applicant or 
licensee;
    (2) The terms upon which such services are offered; or
    (3) The prices charged for such services.
    (3) Businesses owned by members of minority groups and/or women. 
Unless otherwise provided in rules governing specific services, a 
business owned by members of minority groups and/or women is one in 
which minorities and/or women who are U.S. citizens control the 
applicant, have at least greater than 50 percent equity ownership and, 
in the case of a corporate applicant, have a greater than 50 percent 
voting interest. For applicants that are partnerships, every general 
partner must be either a minority and/or woman (or minorities and/or 
women) who are U.S. citizens and who individually or together own at 
least 50 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. The term minority includes 
individuals of Black or African American, Hispanic or Latino, American 
Indian or Alaskan Native, Asian, and Native Hawaiian or Pacific 
Islander extraction.
    (4) Rural telephone companies. A rural telephone company is any 
local exchange carrier operating entity to the extent that such 
entity--
    (i) Provides common carrier service to any local exchange carrier 
study area that does not include either:
    (A) Any incorporated place of 10,000 inhabitants or more, or any 
part thereof, based on the most recently available population 
statistics of the Bureau of the Census, or
    (B) Any territory, incorporated or unincorporated, included in an 
urbanized area, as defined by the Bureau of the Census as of August 10, 
1993;
    (ii) Provides telephone exchange service, including exchange 
access, to fewer than 50,000 access lines;
    (iii) Provides telephone exchange service to any local exchange 
carrier study area with fewer than 100,000 access lines; or
    (iv) Has less than 15 percent of its access lines in communities of 
more than 50,000 on the date of enactment of the Telecommunications Act 
of 1996.
    (5) Affiliate. (i) An individual or entity is an affiliate of an 
applicant or of a person holding an attributable interest in an 
applicant if such individual or entity--
    (A) Directly or indirectly controls or has the power to control the 
applicant, or
    (B) Is directly or indirectly controlled by the applicant, or
    (C) Is directly or indirectly controlled by a third party or 
parties that also controls or has the power to control the applicant, 
or
    (D) Has an ``identity of interest'' with the applicant.
    (ii) Nature of control in determining affiliation.
    (A) 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.  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 stock 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 to control.


[[Page 68926]]


    (B) 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.
    (C) Control can arise through management positions where a 
concern's voting stock is so widely distributed that no effective 
control can be established.

    Example.  In a corporation where the officers and directors own 
various size blocks of stock 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.

    (iii) 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 has the power 
to control a concern, persons with an identity of interest will be 
treated as though they were one person.

    Example.  Two shareholders in Corporation Y each have 
attributable interests in the same PCS 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 in interest) 
are treated as though they are one person and Corporation Y would be 
deemed an affiliate of the applicant.

    (A) 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. In calculating 
their net worth, investors who are legally separated must include their 
share of interests in property held jointly with a spouse.
    (B) 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 the family members are 
estranged, the family ties are remote, or the family members are not 
closely involved with each other in business matters.

    Example.  A owns a controlling interest in Corporation X. A's 
sister-in-law, B, has an attributable interest in a PCS application. 
Because A and B have a presumptive kinship affiliation, A's interest 
in Corporation Y is attributable to B, and thus to the applicant, 
unless B rebuts the presumption with the necessary showing.

    (iv) Affiliation through stock ownership. (A) 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.
    (B) 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.
    (C) 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.
    (v) 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 are generally treated as though the 
rights held thereunder had been exercised. However, an affiliate cannot 
use such options and debentures to appear to terminate its control over 
another concern before it actually does so.

    Example 1.  If company B holds an option to purchase a 
controlling interest in company A, who holds an attributable 
interest in a PCS application, the situation is treated as though 
company B had exercised its rights and had come 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.  If a large company, BigCo, holds 70% (70 of 100 
outstanding shares) of the voting stock of company A, who holds an 
attributable interest in a PCS application, and gives a 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 A, and thus the 
applicant, until SmallCo actually exercises its option 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 effect 
in this case.
    Example 3.  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.

    (vi) Affiliation under voting trusts. (A) 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.
    (B) 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.
    (C) 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.
    (vii) 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.
    (viii) 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 these sharing 
arrangements one concern has control, or potential control, of the 
other concern.
    (ix) Affiliation through contractual relationships. Affiliation 
generally

[[Page 68927]]

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.
    (x) Affiliation under joint venture arrangements. (A) 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 or 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.
    (B) The parties to a joint venture are considered to be affiliated 
with each other. Nothing in this subsection shall be construed to 
define a small business consortium, for purposes of determining status 
as a designated entity, as a joint venture under attribution standards 
provided in this section.
    (xi) Exclusion from affiliation coverage. For purposes of this 
section, Indian tribes or Alaska Regional or Village Corporations 
organized pursuant to the Alaska Native Claims Settlement Act (43 
U.S.C. 1601 et seq.), or entities owned and controlled by such tribes 
or corporations, are not considered affiliates of an applicant (or 
licensee) that is owned and controlled by such tribes, corporations or 
entities, and that otherwise complies with the requirements of this 
section, except that gross revenues derived from gaming activities 
conducted by affiliate entities pursuant to the Indian Gaming 
Regulatory Act (25 U.S.C. 2701 et seq.) will be counted in determining 
such applicant's (or licensee's) compliance with the financial 
requirements of this section, unless such applicant establishes that it 
will not receive a substantial unfair competitive advantage because 
significant legal constraints restrict the applicant's ability to 
access such gross revenues.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 00-29094 Filed 11-14-00; 8:45 am]
BILLING CODE 6712-01-P