3572 Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Notices

Dated: January 22, 1998.

Floyd Fithian,

Secretary, Farm Credit Administration Board.

[FR Doc. 98–1774 Filed 1–21–98; 2:17 pm]

BILLING CODE 6705–01–P

FEDERAL COMMUNICATIONS

COMMISSION

[DA 98–37]

Wireless Telecommunications Bureau

Responds to Questions About the

Local Multipoint Distribution Service

Auction

Released: January 9, 1998.

Over the past weeks, the Wireless

Telecommunications Bureau (‘‘Bureau’’)

has received numerous inquiries

concerning the auction rules and

eligibility requirements for the Local

Multipoint Distribution Service

(‘‘LMDS’’) auction scheduled to

commence on February 18, 1998. In this

Public Notice, the staff provides

guidance on a range of issues involving

the rules for the LMDS auction.

The service and auction rules

pertaining to LMDS are found in parts

1 and 101 of the Commission’s rules

(Title 47 of the Code of Federal

Regulations). The Commission’s rules

governing eligibility for bidding credits

were established to ensure that small

businesses, rural telephone companies,

and businesses owned by members of

minority groups and/or women

(collectively referred to as ‘‘designated

entities’’ or ‘‘DEs’’) are provided

meaningful opportunities to compete in

the provision of LMDS. These rules are

primarily addressed in the LMDS

Second Report and Order, the LMDS

Order on Reconsideration, and the

LMDS Second Order on

Reconsideration. Additional auction

information is provided to potential

bidders in a comprehensive Bidder

Information Package. This package

contains guidelines regarding preauction procedures, the auction event,

and post-auction procedures. (Interested

parties can order an LMDS Bidder

Information Package by calling (888)

225–5322, Option #2. Applicants are

entitled to one free LMDS Bidder

Information Package; additional copies

cost $16 each.) The Bureau will release

a public notice setting forth minimum

opening bids for the LMDS auction prior

to the FCC Form 175 short form filing

deadline.

Many of the inquiries the Bureau has

received are based on the inquiring

parties’ specific circumstances. The

Bureau has recast the most frequently

asked questions in more general terms

in order to provide guidance to a larger

group of interested parties. Potential

applicants should understand that the

advice and rule interpretations provided

in this Public Notice constitute informal

staff opinion, not official Commission

decisions or rulings.

I. General Ownership Issues

Q: When disclosing ownership

information on the FCC Form 175,

should applicants report all entities that

hold a five percent or greater voting

(control) interest or other economic

interest?

A: In previous services (e.g.,

broadband PCS), the Commission

specifically required that applicants

report all entities that held interests in

the applicant of five percent or more

that also held or were applying for

CMRS or PMRS licenses. For LMDS,

applicants must comply with the

general reporting rule set forth in Part 1

of the Commission’s rules, which is less

specific about which entities must be

identified. By identifying on

Attachment A to their FCC Forms 175

all entities holding five percent or

greater interests in the applicant that

also hold or are applying for CMRS or

PMRS licenses, applicants will assist

themselves in identifying entities with

which they must avoid contact pursuant

to the anti-collusion rule. Applicants

should be aware that at the long-form

application stage, they will be subject to

the reporting requirements contained in

the newly adopted Part 1 ownership

disclosure rule.

Q: Can new non-controlling investors

be added after the FCC Form 175 is filed

and throughout the auction?

A: New non-controlling investors can

be added after the FCC Form 175 is filed

and throughout the duration of the

auction, provided their addition does

not result in a change of control of the

applicant. An applicant should amend

its FCC Form 175 within 10 business

days of any change, and should provide

notice of the change by letter addressed

to Kathleen O’Brien Ham, Chief,

Auctions and Industry Analysis

Division, Wireless Telecommunications

Bureau, 2025 M Street, N.W., Suite

5202, Washington, D.C. 20554, with a

copy filed with the Office of the

Secretary, 1919 M Street, N.W.,

Washington, D.C. 20554.

Q: When an applicant is a consortium,

can only one member of the consortium

conduct bidding during the auction?

What if a member of a consortium

decides to withdraw during the auction?

A: A consortium is defined as ‘‘a

conglomerate organization formed as a

joint venture between or among

mutually independent business firms,

each of which individually satisfies the

definition of a very small business,

small business or entrepreneur.’’ Where

an applicant is a consortium, the gross

revenues of its members are not

aggregated. The definition of consortium

does not prohibit one member from

placing the bids for the consortium as a

whole.

Because each member of a consortium

must individually satisfy the definition

of a very small business, small business,

or entrepreneur at the FCC Form 175

filing deadline, members may withdraw

during the course of the auction, or

afterward, without endangering the

treatment of the consortium. The

withdrawal of a member would merely

change the composition of the

consortium, and should be reflected in

a filing with the Commission. On the

other hand, adding a new member to a

consortium after the FCC Form 175

filing deadline will not be permitted

because the filing deadline is the cut-off

date for determinations of whether

applicants meet the definitions of very

small business, small business, or

entrepreneur.

II. Foreign Ownership Issues

Q: How much foreign ownership of a

licensee is permissible? Can LMDS

applicants seek more than 25 percent

indirect foreign ownership?

A: Section 310(a) of the

Communications Act of 1934, as

amended (‘‘Communications Act’’),

prohibits granting any wireless license

to a foreign government or a

representative thereof. Section 310(b) of

the Communications Act imposes

restrictions on the foreign ownership of

common carrier, broadcast, and

aeronautical licensees. Under this

section, the Commission may not grant

a common carrier wireless license to an

alien, the representative of an alien, any

corporation organized under the laws of

any foreign government, or any

corporation of which more than 20

percent is owned by foreign entities.

Section 310(b)(4) imposes additional

restrictions on the foreign ownership of

the parent corporation of a common

carrier licensee, specifically that no

common carrier license shall be granted

to or held by ‘‘any corporation directly

or indirectly controlled by any other

corporation of which more than onefourth of the capital stock is owned of

record or voted by aliens * * * or by

any corporation organized under the

laws of a foreign country . . . if the

Commission finds that the public

interest will be served by the refusal or

revocation of such license.’’ Under the

Foreign Participation Order, the

Commission recently liberalized its
Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Notices 3573

rules for determining when refusal or

revocation would serve the public

interest. The final rules set forth in the

Foreign Participation Order will not

become effective before February 9,

1998. Any applicant that is controlled

by a corporation with more than 25

percent foreign ownership, or which

seeks to exceed that limit, must inform

the Commission in a separate petition

for declaratory ruling. The Commission

will accept petitions for declaratory

ruling immediately, but will not

necessarily rule on them prior to the

auction start date. Because applicants

must certify on their short form

applications that they are in compliance

with the foreign ownership provisions

of Section 310 of the Communications

Act, applicants filing petitions for

declaratory rulings must reference their

pending petitions in their short form

applications. Applicants seeking foreign

investment should familiarize

themselves with the Foreign

Participation Order, particularly Section

III.D. That order is available from the

Commission’s web site at <http://

www.fcc.gov/ib/wto.html>.

III. Bidding Credits and Eligibility

Issues

Q: What constitutes gross revenues as

described in 47 CFR 101.1112?

A: Gross revenues include all income

received by an entity, whether earned or

passive, before any deductions are made

for the costs of doing business, as

evidenced by audited financial

statements for the preceding three years.

If an entity was not in existence for the

entire preceding three years, gross

revenues shall be evidenced by 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. The

Commission will evaluate applicants’

gross revenues as they are reflected in

financial statements prepared in

accordance with generally accepted

accounting principles.

Q: Now that the auction has been

rescheduled for February 18, 1998, will

the Commission require applicants to

provide audited financial statements for

1997?

A: Applicants must furnish evidence

of their gross revenues based upon their

most recently-completed audited

financial statements. Thus, if audited

financial statements for calendar year

1997 have not been fully prepared by

the FCC Form 175 filing deadline of

January 20, 1998, audited statements for

the years 1994, 1995, and 1996 will

suffice.

Q: Are the gross revenues of an

applicant’s affiliates counted in

determining that applicant’s eligibility

for a bidding credit?

A: Yes. An applicant must aggregate

the gross revenues of all affiliates, as

defined in 47 CFR 101.1112(h), in order

to determine its bidding credit

eligibility.

Q: When determining eligibility for

bidding credits, will the gross revenues

of individuals who are affiliates be

included in determining the bidder’s

gross revenues? Is there a conceivable

instance when an individual’s gross

revenues will affect an applicant’s

eligibility for a bidding credit?

A: This issue has been raised on

reconsideration in another proceeding

and the Bureau refrains from directly

addressing it at this point. However, the

Bureau notes that for LMDS, the

Commission did not adopt a rule that

attributes personal net worth for

purposes of determining eligibility.

Personal net worth has been defined as

‘‘the market value of all assets (real and

personal, tangible and intangible)

owned by an individual, less all

liabilities (including personal

guarantees) owed by the individual in

his individual capacity or as a joint

obligor.’’ In other services (i.e.,

broadband PCS), the Commission

eliminated a personal net worth test,

concluding that ‘‘the affiliation rules

make the personal net worth rules

largely unnecessary since most wealthy

individuals are likely to have their

wealth closely tied to ownership of

another business.’’

Q: Is there a minimum equity

requirement for controlling small

business principals?

A: No. However, the Bureau cautions

that the absence of equity in the hands

of controlling small business principals

could raise questions about whether the

applicant itself qualifies as a bona fide

small business. For instance, if a single

party holds de jure control, as

evidenced by ownership of 50.1 percent

of the voting stock, this party must also

hold de facto control in order to be

considered a controlling principal. If no

single party has de jure control of the

applicant, de facto control factors will

determine who controls the applicant.

By way of comparison, in broadband

PCS, controlling principals were

required to hold at least 15 percent of

the applicant’s total equity under one

particular business structure.

Q: Does the bidding credit schedule

adopted in the Commission’s Part 1

Proceeding apply to LMDS?

A: No. LMDS has a specific bidding

credit rule that is not affected by the

Part 1 rule changes.

IV. Anti-Collusion Rule Issues

Q: What conduct constitutes a

violation of the Commission’s anticollusion rule?

A: After the deadline for submission

of the FCC Form 175, applicants may

not discuss the substance of their bids

or bidding strategies with other bidders

that have applied to bid in the same

geographic license areas, with the

exception of those with which they have

entered into agreements identified on

the FCC Form 175. The term

‘‘applicant’’ includes the entity that

submits an application for auction

participation, owners of five percent or

more of that entity, and all officers and

directors of that entity. (But see part 1

at ¶ 164 (which changes the attribution

level of the anti-collusion rule to 10

percent; however, this rule does not

apply to the LMDS auction. The new

part 1 rules, with the exception of rules

pertaining to post-auction payment and

long-form application obligations, will

apply only to auctions commencing

after the new rules’ effective date)). The

rule also prohibits the transfer of

indirect information which affects, or

could affect, bids or bidding strategy.

All bidding arrangements must be

disclosed on an applicant’s short form

application. Auction applicants who

have applied for licenses in the same

geographic areas, and who are also

licensees or applicants for licenses in

the same or competing services, must

affirmatively avoid all communications

with each other that affect, or have the

potential to affect, their bids or bidding

strategy. This does not mean that all

business negotiations between bidders

for the same markets are prohibited;

however, the Bureau recommends that

bidders for the same markets exercise

caution when engaging in such

discussions.

Q: Do public statements such as ‘‘we

want to win 10 million pops’’ or ‘‘we

want to win top markets’’ or ‘‘we have

$5 million to spend’’ constitute

disclosures of bids or bidding strategy?

A: Public statements can give rise to

collusion concerns. This has occurred in

the antitrust context, where certain

public statements can support other

evidence which tends to indicate the

existence of a conspiracy. The Bureau

therefore urges bidders for common

markets to exercise caution when

making public statements about their

bids or bidding strategies.

Q: If an applicant files an FCC Form

175 prior to the filing deadline of

January 20, 1998, may this applicant

speak with other potential applicants

during the time between its filing and

the deadline? In other words, at what
3574 Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Notices

point are two parties considered to be

competing for the same market?

A: An FCC Form 175 is considered

officially filed upon the filing deadline,

regardless of whether it was actually

filed one day or one month prior to the

deadline. Changes to electronically filed

applications can be made any time prior

to the filing deadline on January 20,

1998, and applicants cannot view each

others’ electronically filed applications

prior to that deadline. Thus, parties are

not considered to be competing for the

same market until the window for

submitting applications closes at 5:30

p.m., ET, on January 20, 1998.

Q: Can an individual act as the

authorized bidder and place bids for

two or more applicants who are

competing for one or more of the same

markets? What if different individuals

who are employed by the same

organization place bids for applicants in

competing markets?

A: A violation of the anti-collusion

rule could occur if an individual acts as

the authorized bidder for two or more

competing applicants, and conveys

information concerning the substance of

bids or bidding strategies between the

bidders he/she is authorized to

represent in the auction. Also, if the

authorized bidders are different

individuals employed by the same

organization, a violation could similarly

occur. In such instances, the Bureau

strongly encourages applicants to certify

on their application that precautionary

steps (e.g., establishing a ‘‘Chinese

wall’’) have been taken to prevent

communication between authorized

bidders and that applicants and their

bidding agents will comply with the

anti-collusion rule.

V. Technical Issues

Q: In bands where Mobile Satellite

Service (‘‘MSS’’) feeder links are

permitted, is uplink transmission

(subscriber end) allowed if there is no

MSS licensee operating?

A: No. The interference analyses

conducted indicated that subscribers’

transceivers potentially are major

interferers to MSS feeder link earth

station satellite receivers because of the

elevation angles many will be

employing. The satellites to be deployed

in these MSS systems will be orbiting in

different planes over the United States.

Therefore, there is the potential for them

to become aligned with the beam of a

subscriber transceiver at any location in

the United States. To review those

analyses, see the Report of the LMDS/

FSS 28 GHz Band Negotiated

Rulemaking Committee, CC Docket No.

92–297 (September 23, 1994).

Q: What are the deadlines for 31 GHz

incumbents to vacate the 31 GHz middle

band?

A: Incumbent 31 GHz licensees were

provided 75 days after the effective date

of the LMDS service rules to request

modification of their licenses to relocate

to the outer two 75 megahertz blocks of

the 31 GHz band. Failure to do so means

that such incumbent operations become

secondary to LMDS operations in the

middle band. This means that LMDS

operators are not required to protect

these incumbent operations from

interference, nor are the incumbent

operations permitted to cause

interference to LMDS systems. Of

course, these incumbents can relocate to

other bands or other transmission media

at any time.

VI. Miscellaneous

Q: Will the Commission inform

applicants of the minimum opening bid

for each BTA license prior to the FCC

Form 175 filing deadline of January 20,

1998?

A: Yes. The Bureau released a Public

Notice on October 17, 1997, seeking

comment on minimum opening bid

proposals. Comments were due on

November 5, 1997, with reply comments

due on November 10, 1997. A

subsequent Public Notice extended the

reply comment deadline to December 1,

1997. Prior to January 20, 1998, the

Bureau will release a public notice

setting forth a minimum opening bid for

each license.

Q: What is the Commission’s

calculation to convert ILEC access lines

to pops for purposes of the 10 percent

in-region calculation?

A: The Commission has not

developed a calculation to convert

access lines to pops. The ILEC should

determine the geographic area that it

serves and then use census data for

determining the population of that area.

Q: What are the consequences if an

applicant fails to complete properly the

FCC Form 175?

A: An applicant is solely responsible

for the true, accurate, and complete

submission of its FCC Form 175, and

incomplete or inaccurate FCC Forms

175 may be rejected or required to be

refiled. The Commission checks FCC

Forms 175 for deficiencies that would

affect their initial acceptability, and will

act to apprise applicants of deficiencies

after initial review. Applicants are then

given an opportunity to cure such

deficiencies. Once a corrected

application is resubmitted, however, no

major amendments can occur. This

would include, for example, changes to

bidding credits.

Q: Does the must-carry rule apply to

LMDS for license holders who wish to

provide television service?

A: No. According to the

Communications Act, the must-carry

rule applies only to cable operators.

Cable operators are defined as persons

who provide cable service to

subscribers, and cable service is defined

as one-way transmission of video or

other programming by means of a set of

closed transmission paths. As a two-way

wireless service, LMDS is not subject to

must-carry requirements.

Q: Will the bidding software be

supported by Windows 95?

A: While the auction software has

been known to work with Windows 95,

Microsoft has not yet affirmed

supportability. Until Microsoft makes

that determination, use of the auction

software with Windows 95 is solely at

the bidder’s own risk.

Q: Will the Commission provide

applicants a list of proposed and

licensed MSS feeder link earth station

sites?

A: Yes. The list is attached to this

Public Notice as Attachment A.

Q: Is the Commission considering the

authorization of any other two-way

video services in the near future?

A: Yes. Bidders should be aware that

the Commission’s Mass Media Bureau is

conducting a proceeding in which

additional spectrum for the Multipoint

Distribution Service (‘‘MDS’’) is being

discussed. Comments in that proceeding

were due December 9, 1997, and reply

comments are due January 8, 1998.

Bidders should also be aware that the

39 GHz band has the potential for pointto-multipoint service.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

[FR Doc. 98–1608 Filed 1–22–98; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

Public Information Collection(s)

Approved by Office of Management

and Budget

January 16, 1998.

The Federal Communications

Commission (FCC) has received Office

of Management and Budget (OMB)

approval for the following public

information collection(s) pursuant to the

Paperwork Reduction Act of 1995, Pub.

L. 96–511. An agency may not conduct

or sponsor a collection of information

unless it displays a currently valid

control number. Not withstanding any

other provisions of law, no person shall