[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Rules and Regulations]
[Pages 40659-40664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20460]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 90

[PR Docket No. 93-61; FCC 98-157]


Vehicle Monitoring Systems

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In the Second Report and Order, the Commission adopts the 
general competitive bidding rules and procedures for the auction of 
multilateration Location and Monitoring

[[Page 40660]]

Service (LMS) licenses, provides small business definitions and adopts 
bidding credits for eligible small businesses. The effect will be to 
promote and facilitate the participation of small businesses in the 
Commission's auctions and in the provision of spectrum-based services. 
The Second Report and Order also adds rules to allow LMS licensees to 
partition their geographic licenses and disaggregate portions of their 
spectrum.

DATES: Effective September 28, 1998, except for Sec. 90.365(d) which 
will become effective January 19, 1999. Public and agency comments 
concerning the information collections contained in the Second Report 
and Order are due September 28, 1998.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room 
222, Washington, D.C. 20554. For comments or inquiries regarding 
information collections, direct all correspondence to Les Smith, 
Federal Communications Commissions, Room 234, 1919 M St., N.W., 
Washington, DC 20554 or via the Internet at <a href="/cdn-cgi/l/email-protection#0d61687e7e606479654d6b6e6e236a627b"><span class="__cf_email__" data-cfemail="acc0c9dfdfc1c5d8c4eccacfcf82cbc3da">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Ken Burnley or Mark Bollinger, 
Auctions and Industry Analysis Division, Wireless Telecommunications 
Bureau, at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and 
Order in PR Docket No. 93-61, FCC 98-157, which was adopted on July 9, 
1998 and released on July 14, 1998. A copy of the complete item is 
available for inspection and copying during normal business hours in 
the FCC Reference Center, Room 239, 1919 M Street, N.W., Washington, 
D.C. 20554. The complete text may be purchased from the Commission's 
copy contractor, International Transcription Service, Inc., 1231 20th 
Street, N.W., Washington, D.C. 20036, (202) 857-3800. The complete 
Second Report and Order is available on the Commission's Internet home 
page (http://www.fcc.gov).

SUMMARY OF ACTION:

I. Introduction

    1. The Federal Communications Commission (Commission) has adopted a 
Second Report and Order stating rules and procedures governing 
competitive bidding for multilateration Location and Monitoring Service 
(LMS) frequencies.

A. Competitive Bidding Design and Procedures

    2. In Amendment of Part 90 of the Commission's Rules to Adopt 
Regulations for Automatic Vehicle Monitoring Systems, Memorandum 
Opinion and Order and Further Notice of Proposed Rule Making, PR Docket 
No. 93-61, 62 FR 52078, October 6, 1997 (``LMS Further Notice''), the 
Commission proposed to use the general competitive bidding rules found 
in subpart Q of part 1 of the Commission's rules as the auction rules 
for LMS.
    3. The Commission adopts the proposal to follow the competitive 
bidding procedures contained in Subpart Q of Part 1 of the Commission's 
Rules, including those adopted in Amendment of Part 1 of the 
Commission's Rules--Competitive Bidding Procedures, WT Docket No. 97-
82, Allocation of Spectrum Below 5 GHz Transferred from Federal 
Government Use, ET Docket No. 94-32, Third Report and Order and Second 
Further Notice of Proposed Rule Making, 63 FR 2315, January 15, 1998 
(``Part 1 Third Report and Order''). Consistent with this, matters such 
as the appropriate competitive bidding design for the auction of LMS 
licenses, as well as minimum opening bids and reserve prices, will be 
determined by the Wireless Telecommunications Bureau (``Bureau'') 
pursuant to its delegated authority.

B. Treatment of Designated Entities

    4. In the LMS Further Notice, the Commission acknowledged that it 
has consistently established ``small business'' definitions on a 
service-by-service basis, and proposed to establish definitions for the 
multilateration LMS. For purposes of LMS, the Commission defines a 
``small business'' as an entity with average annual gross revenues for 
the preceding three years not to exceed $15 million, and a ``very small 
business'' is an entity with average annual gross revenues for the 
preceding three years not to exceed $3 million. The bidding credits for 
these small business definitions will be consistent with levels adopted 
in the Part 1 proceeding. Accordingly, small businesses will receive a 
25 percent bidding credit, and very small businesses will receive a 35 
percent bidding credit. Bidding credits for small businesses are not 
cumulative.
    5. The Commission adopts, with a slight modification, our tentative 
conclusion to attribute the gross revenues of the applicant, its 
controlling principals and their affiliates. Specifically, the rule 
refers to ``controlling interests'' rather than ``controlling 
principals,'' and provides a definition of ``controlling interest'' to 
clarify the application of the attribution rule in determining whether 
an entity qualifies to bid as a small business. In calculating gross 
revenues for purposes of small business eligibility, applicants will be 
required to count the gross revenues of the controlling interests of 
the applicant and their affiliates. A ``controlling interest'' includes 
individuals or entities with de jure and de facto control of the 
applicant. De jure control is 50.1% of the voting stock of a 
corporation or, in the case of a partnership, the general partners. De 
facto control is determined on a case-by-case basis. The ``controlling 
interest'' definition also provides specific guidance on calculation of 
various types of ownership interests.
    6. When an applicant cannot identify controlling interests under 
the definition, the revenues of all interest holders in the applicant 
and their affiliates will be counted. For example, if a company is 
owned by four entities, each of which has twenty-five percent voting 
equity and no shareholders' agreement or voting trust gives any one of 
them control of the company, the revenues of all four entities must be 
counted. This approach is consistent with our treatment of a general 
partnership--all general partners are considered to have a controlling 
interest. This rule looks to substance over form in assessing 
eligibility for small business status and will provide flexibility that 
will enable legitimate small businesses to attract passive financing in 
a highly competitive and evolving telecommunications marketplace. The 
Commission emphasizes that bidders will be subject to the ownership 
disclosure requirements set forth in 47 CFR 1.2112.
    7. The Commission extends the amount of time for all LMS auction 
winners to satisfy their construction requirements. Multilateration LMS 
Economic Area (EA) licensees will be required to construct and place in 
operation a sufficient number of base stations that utilize 
multilateration technology to provide multilateration service to one-
third of the EA's population within five years of initial license 
grant, and two thirds of the population within ten years. In 
demonstrating compliance with the construction and coverage 
requirements, licensees may individually determine an appropriate field 
strength for reliable service, taking into account the technologies 
employed in their system design and other relevant technical factors. 
At the five- and ten-year benchmarks, licensees will be required to 
file with the Commission a map and other supporting documentation 
showing compliance with the coverage requirements.

[[Page 40661]]

C. Partitioning and Disaggregation and Unjust Enrichment Provisions

    8. The Commission has previously adopted or proposed to adopt 
partitioning and disaggregation rules for many of the Commercial Mobile 
Radio Services (CMRS), and now adopts rules to allow multilateration 
LMS licensees to partition their geographic license areas and 
disaggregate portions of their spectrum in the same general manner as 
in other CMRS services. Multilateration LMS licensees may partition or 
disaggregate to any party eligible to be a multilateration LMS 
licensee. Further, licensees may partition along any service area 
defined by the parties. These decisions will permit marketplace forces 
to determine the most suitable service areas, and will further the goal 
of regulatory parity among CMRS services. Partitioning and 
disaggregation will allow auction winners to customize their LMS 
systems in a manner that will best address their business plans and 
will help remove entry barriers for small businesses.
    9. To ensure that partitioning and disaggregation do not result in 
circumvention of our LMS construction requirements, the Commission 
adopts the dual construction requirements for partitioning and the 
construction certification procedure for disaggregation used in the 
broadband Personal Communications Service (PCS). Under the first option 
for partitioning, the partitionee must certify that it will meet the 
same coverage requirements as the original licensee for its partitioned 
market. If the partitionee fails to meet its coverage requirement, the 
license for the partitioned area will automatically cancel without 
further Commission action. Under the second option, the original 
licensee must certify that it has already met or will meet its coverage 
requirement. Further, parties seeking Commission approval of an LMS 
disaggregation agreement must include a certification as to which party 
will be responsible for meeting the construction requirements.
    10. In cases of partitioning, the Commission requires sufficient 
information to maintain our licensing records. Therefore, consistent 
with our treatment of the Wireless Communication Service (WCS) and the 
800 MHz and 900 MHz Specialized Mobile Radio (SMR) services, 
partitioning applicants will be required to submit, as separate 
attachments to the partial assignment application, a description of the 
partitioned service area and a calculation of the population of the 
partitioned service area and licensed market. The partitioned service 
area must be defined by coordinate points at every three degrees along 
the partitioned service area agreed to by both parties, unless county 
lines are followed. These geographical coordinates must be specified in 
degrees, minutes and seconds to the nearest second of latitude and 
longitude, and must be based upon the 1927 North American Datum 
(NAD27). Applicants also may supply geographical coordinates based on 
1983 North American Datum (NAD83) in addition to those required based 
on NAD27. This coordinate data should be supplied as an attachment to 
the partial assignment application, and maps need not be supplied. In 
cases where county lines are being utilized, applicants need only list 
the counties that make up the newly partitioned area.
    11. Consistent with our rules for broadband PCS, WCS and the 800 
MHz and 900 MHz SMR services, disaggregating parties may negotiate 
channelization plans among themselves as a part of their disaggregation 
agreements. In addition, LMS licensees shall be permitted to 
disaggregate spectrum without limitation on the overall size of the 
disaggregation as long as such disaggregation is otherwise consistent 
with our rules.
    12. Also consistent with the rules for broadband PCS, WCS and the 
800 MHz and 900 MHz SMR services, LMS licensees may use combined 
partitioning and disaggregation. This will allow LMS licensees the 
flexibility to design the types of agreements they desire, encourage 
new market entrants and ensure quality service to the public. In the 
event that there is a conflict in the application of the partitioning 
and disaggregation rules, the partitioning rules shall prevail.
    13. The Commission adopts its proposal to prevent possible unjust 
enrichment through partitioning or disaggregation. Accordingly, the 
Part 1 unjust enrichment provisions will apply for LMS. These rules are 
similar to unjust enrichment rules adopted for the 800 MHz SMR auction 
for determining the actual proportion of bidding credit to be refunded 
and reduce the amount of unjust enrichment payments due on transfer 
based upon the amount of time the initial license has been held. In 
addition, when a combination of partitioning and disaggregation is 
proposed, these pro rata calculations will be based on both the 
population of the partitioned area and the amount of spectrum 
disaggregated.

II. Regulatory Flexibility Act

    14. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated 
in the Memorandum Opinion and Order and Further Notice of Proposed Rule 
Making. See Amendment of Part 90 of the Commission's Rules to Adopt 
Regulations for Automatic Vehicle Monitoring Systems, PR Docket No. 93-
61, Memorandum Opinion and Order and Further Notice of Proposed Rule 
Making, 62 FR 52078, October 6 , 1997 (``Further Notice''). The 
Commission sought written public comment on the proposals in the 
Further Notice, including comment on the IRFA. The present Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA. See 5 
U.S.C. 604.

A. Need for, and Objectives of, the Second Report and Order in PR 
Docket 93-61

    15. The adopted provisions are based on the competitive bidding 
authority of Section 309(j) of the Communications Act of 1934, as 
amended, 47 U.S.C. 309(j), which authorized the Commission to use 
auctions to select from among mutually exclusive initial applications 
in certain services, including multilateration LMS.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    16. There were no comments filed directly in response to the IRFA; 
however, the Commission received 2 comments in response to the Further 
Notice.

C. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    17. The applicable definition under SBA rules of a small entity is 
the definition under the rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to the Bureau 
of the Census, only twelve radiotelephone firms out of a total of 1,178 
such firms which operated during 1992 had 1,000 or more employees. 1992 
Census, Series UC92-S-1, at Table 5, SIC code 4812. Therefore, using 
such data, even if all twelve of these firms were LMS companies, nearly 
all such carriers were small businesses under the SBA's definition.
    18. In the Second Report and Order, the Commission has adopted more 
refined definitions for small business categories. The definition of a 
``small business'' is an entity with average annual gross revenues for 
the preceding three years not to exceed $15 million. The definition of 
a ``very small

[[Page 40662]]

business'' is an entity with average annual gross revenues for the 
preceding three years not to exceed $3 million. The Commission is 
seeking SBA approval for these new LMS size standards. See also Second 
Report and Order, n. 47.
    19. As noted in the Second Report and Order, there are 528 licenses 
to be awarded in the upcoming auction. New entrants could obtain 
multilateration LMS licenses through the competitive bidding procedure, 
and take the opportunity to partition and/or disaggregate a license or 
obtain an additional license through partitioning or disaggregation. 
Additionally, entities that are neither incumbent licensees nor 
geographic area licensees could enter the market by obtaining a 
multilateration LMS license through partitioning or disaggregation.
    20. The Commission cannot estimate how many licensees or potential 
licensees could take the opportunity to partition and/or disaggregate a 
license or obtain a license through partitioning and/or disaggregation, 
because it has not yet determined the size or number of multilateration 
LMS licenses that will be granted in the future. Therefore, the number 
of small entities that will be affected is unknown. Given the fact that 
no reliable estimate of the total number of future multilateration LMS 
licensees can be made, the Commission assumes for purposes of this FRFA 
that all of the licenses will be awarded to small businesses.

D. Summary of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements.

    21. The rules and provisions adopted in the Second Report and Order 
include the possibility of new reporting and recordkeeping requirements 
for a number of small business entities:
    22. Competitive Bidding Applications. LMS license applicants will 
be subject to reporting and recordkeeping requirements to comply with 
the competitive bidding rules. Specifically, applicants will apply for 
LMS licenses by filing a short-form application (FCC Form 175), and 
will file a long-form application (FCC Form 601) at the conclusion of 
the auction. Additionally, entities seeking treatment as small 
businesses will need to submit information pertaining to the gross 
revenues of the small business applicant and its affiliates and certain 
investors in the applicant.
    23. Construction Requirements. The proposals in the Second Report 
and Order include reporting and recordkeeping requirements for new LMS 
licensees to establish compliance with the coverage requirements. See 
Second Report and Order, para. 30.
    24. Geographic Partitioning and Spectrum Disaggregation. The 
proposals in the Second Report and Order include reporting and 
recordkeeping requirements for small businesses seeking licenses 
through the proposed partitioning and disaggregation rules. The 
information requirements would be used to determine whether the 
licensee is a qualifying entity to obtain partitioned or disaggregated 
spectrum. This information will be a one-time filing by any applicant 
requesting such a license.

E. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    25. The Second Report and Order adopts certain provisions for 
smaller entities designed to ensure that such entities have the 
opportunity to participate in the competitive bidding process and in 
the provision of multilateration LMS services. The Commission 
anticipates that most LMS licensees will fit the definition of small 
business or very small business.
    26. Small Business Definitions and Bidding Credits. The Commission 
adopts two small business categories for the LMS auction: (1) a ``small 
business'' category, for businesses with average gross revenues of over 
$3 million but not to exceed $10 million; and (2) a ``very small 
business'' category, for businesses with average gross revenues not to 
exceed $3 million. These adopted categories will be based on the gross 
revenues of the business for the three years preceding the filing of 
the entity's application. The Commission will rely solely on gross 
revenues, and not the number of employees, for the purpose of 
determining an entity's eligibility for small incentives.
    27. Attribution of Gross Revenues and Affiliates. The Commission 
adopted a ``controlling interest'' standard as the general attribution 
rule for all future auctions. The Commission believes that these 
definitions are consistent with its proposals in the Part 1 Third 
Report and Order. 63 FR at 2315.
    28. Partitioning and Disaggregation. With respect to partitioning 
and disaggregation, the Commission concludes that unjust enrichment 
provisions should apply when a licensee has benefitted from the small 
business provisions in the auction rules and applies to partition or 
disaggregate a portion of the geographic license area to another entity 
that would not qualify for such benefits.

F. Report to Congress

    29. The Commission shall send a copy of the Second Report and 
Order, including the FRFA, in a report to Congress pursuant to the 
Small Business Regulatory Enforcement Fairness Act of 1996. See 5 
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of 
the Second Report and Order, including FRFA, to the Chief Counsel for 
advocacy of the Small Business Administration.

III. Ordering Clauses

    30. Accordingly, it is ordered that part 90 of the Commission's 
Rules is amended and will become effective September 28, 1998. It is 
further ordered that 47 CFR 90.365(d) of the Commission's Rules is 
amended and will become effective January 19, 1999.
    31. Authority for issuance of this Second Report and Order is 
contained in Sections 4(i), 257, 303(r), and 309(j) of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 257, 303(r), 
and 309(j).
    32. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this 
Second Report and Order, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Paperwork Reduction Act Analysis

    33. The Second Report and Order contains an information collection. 
The Federal Communications Commissions, as part of its continuing 
effort to reduce paperwork burden invites the general public and other 
Federal agencies to take this opportunity to comment on the following 
information collection, as required by the Paperwork Reduction Act of 
1995, Public Law 104-13. An agency may not conduct or sponsor a 
collection of information unless it displays a currently valid control 
number. No person shall be subject to any penalty for failing to comply 
with a collection of information subject to the Paperwork Reduction Act 
(PRA) that does not display a valid control number. Comments are 
requested concerning (a) whether the collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimate; (c) ways 
to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.

[[Page 40663]]

    Supplementary information:
    OMB Approval Number: 3060-XXXX.
    Title: Construction requirements.
    Form No.: N/A
    Type of Review: New collection for construction period buildout 
requirements.
    Respondents: Business and other for-profit entities, individuals or 
households, State, Federal or Tribal Governments, Not-for-profit 
entities.
    Number of Respondents: 528.
    Estimated Time for Response: Estimated total time for response 
would be 52 hours per respondent for analysis of license records, 
conducting the appropriate engineering surveys and studies, and 
preparation of maps displaying the service area contour of the 
licensee.
    Frequency of Response: On occasion.
    Total Annual Burden: 27,456 hours. 52 hours by 528 respondents.
    Needs and Uses: Engineering surveys and prepared maps displaying 
the service area contour of the licensee. Surveys and maps will be used 
to evaluate licensee's service area boundary and coverage. Licensee's 
boundary and coverage will then be compared against the construction 
buildout requirements for the service.

DATES: Persons wishing to comment on this information collection should 
submit comments by September 28, 1998.

ADDRESSES: Direct all comments to Les Smith, Federal Communications 
Commissions, Room 234, 1919 M St., N.W., Washington, DC 20554 or via 
the Internet at <a href="/cdn-cgi/l/email-protection#117d7462627c786579517772723f767e67"><span class="__cf_email__" data-cfemail="f19d9482829c988599b1979292df969e87">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: For additional information or copies 
of the information collections contact Les Smith at (202) 418-0217 or 
via the Internet at <a href="/cdn-cgi/l/email-protection#214d4452524c485549614742420f464e57"><span class="__cf_email__" data-cfemail="92fef7e1e1fffbe6fad2f4f1f1bcf5fde4">[email protected]</span></a>. For all other questions contact 
Ken Burnley, Auctions and Industry Analysis Division, Wireless 
Telecommunications Bureau, at (202) 418-0660.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    Chapter I of Title 47 of the Code of Federal Regulations, part 90, 
is amended as follows:

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

    1. The authority citation for part 90 continues to read as follows:

    Authority: Secs. 4, 251-2, 303, 309, and 332, 48 Stat. 1066, 
1082, as amended; 47 U.S.C. 154, 251-2, 303, 309 and 332, unless 
otherwise noted.

    2. Section 90.155 is amended by revising paragraph (d) to read as 
follows:


Sec. 90.155  Time in which station must be placed in operation.

* * * * *
    (d) Multilateration LMS EA-licensees, authorized in accordance with 
Sec. 90.353, must construct and place in operation a sufficient number 
of base stations that utilize multilateration technology (see paragraph 
(e) of this section) to provide multilateration location service to 
one-third of the EA's population within five years of initial license 
grant, and two-thirds of the population within ten years. In 
demonstrating compliance with the construction and coverage 
requirements, the Commission will allow licensees to individually 
determine an appropriate field strength for reliable service, taking 
into account the technologies employed in their system design and other 
relevant technical factors. At the five and ten year benchmarks, 
licensees will be required to file a map and other supporting 
documentation showing compliance with the coverage requirements.
* * * * *
    3. Section 90.365 is added to subpart M to read as follows:


Sec. 90.365  Partitioned licenses and disaggregated spectrum.

    (a) Eligibility--(1) Parties seeking approval for partitioning and 
disaggregation shall request an authorization for partial assignment of 
a license pursuant to Sec. 90.153.
    (2) Multilateration LMS licensees may apply to partition their 
licensed geographic service area or disaggregate their licensed 
spectrum at any time following the grant of their licenses. 
Multilateration LMS licensees may partition or disaggregate to any 
party that is also eligible to be a multilateration LMS licensee. 
Partitioning is permitted along any service area defined by the 
parties, and spectrum may be disaggregated in any amount. The 
Commission will also consider requests for partial assignment of 
licenses that propose combinations of partitioning and disaggregation.
    (b) Technical Requirements--In the case of partitioning, requests 
for authorization for partial assignment of a license must include, as 
attachments, a description of the partitioned service area, and a 
calculation of the population of the partitioned service area and the 
licensed geographic service area. The partitioned service area shall be 
defined by coordinate points at every three degrees along the 
partitioned service area unless county lines are followed. The 
geographic coordinates must be specified in degrees, minutes, and 
seconds to the nearest second of latitude and longitude and must be 
based upon the 1927 North American Datum (NAD27). Applicants may supply 
geographical coordinates based on 1983 North American Datum (NAD83) in 
addition to those required based on NAD27. In the case where county 
lines are utilized, applicants need only list the specific area(s) 
(through use of county names) that constitute the partitioned area.
    (c) License term. The license term for a partitioned license area, 
and for disaggregated spectrum shall be the remainder of the original 
licensee's license term.
    (d) Construction requirements--(1) Requirements for partitioning.
    (i) Parties seeking authority to partition must meet one of the 
following construction requirements:
    (A) The partitionee may certify that it will satisfy the applicable 
construction requirements for the partitioned license area; or
    (B) The original licensee may certify that it has or will meet the 
construction requirement for the entire license area.
    (ii) Applications requesting authority to partition must include a 
certification by each party as to which of the above construction 
options they select.
    (iii) Failure by any partitionee to meet its respective 
construction requirements will result in the automatic cancellation of 
the partitioned or disaggregated license without further Commission 
action.
    (2) Requirements for disaggregation. Parties seeking authority to 
disaggregate must submit with their partial assignment application a 
certification signed by both parties stating which of the parties will 
be responsible for meeting the construction requirement for the 
licensed market. Parties may agree to share responsibility for meeting 
the construction requirements. Parties that accept responsibility for 
meeting the construction requirements and later fail to do so will be 
subject to license forfeiture without further Commission action.
    4. Add a new subpart X to read as follows:

Subpart X--Competitive Bidding Procedures for Location and 
Monitoring Service

Sec.
90.1101  Location and Monitoring Service subject to competitive 
bidding.
90.1103  Designated entities.

[[Page 40664]]

Subpart X--Competitive Bidding Procedures for Location and 
Monitoring Service


Sec. 90.1101  Location and Monitoring Service subject to competitive 
bidding.

    Mutually exclusive initial applications for multilateration 
Location and Monitoring Service licenses are subject to competitive 
bidding procedures. The procedures set forth in part 1, subpart Q of 
this chapter will apply unless otherwise provided in this part.


Sec. 90.1103  Designated entities.

    (a) This section addresses certain issues concerning designated 
entities in the Location and Monitoring Service (LMS) subject to 
competitive bidding. Issues that are not addressed in this section are 
governed by the designated entity provisions in part 1, subpart Q of 
this chapter.
    (b) Eligibility for small business provisions.
    (1) A small business is an entity that, together with its 
affiliates and controlling interests, has average gross revenues not to 
exceed $15 million for the preceding three years.
    (2) A very small business is an entity that, together with its 
affiliates and controlling interests, has average gross revenues not to 
exceed $3 million for the preceding three years.
    (3) For purposes of determining whether an entity meets either of 
the definitions set forth in paragraph (b)(1) or (b)(2) of this 
section, the gross revenues of the entity, its affiliates, and 
controlling interests shall be considered on a cumulative basis and 
aggregated.
    (4) Where an applicant (or licensee) cannot identify controlling 
interests under the standards set forth in this section, the gross 
revenues of all interest holders in the applicant, and their 
affiliates, will be attributable.
    (5) A consortium of small businesses (or a consortium of very small 
businesses) is a conglomerate organization formed as a joint venture 
between or among mutually independent business firms, each of which 
individually satisfies the definition in paragraph (b)(1) of this 
section (or each of which individually satisfies the definition in 
paragraph (b)(2) of this section). Where an applicant or licensee is a 
consortium of small businesses (or very small businesses), the gross 
revenues of each small business (or very small business) shall not be 
aggregated.
    (c) Controlling interest. (1) For purposes of this section, 
controlling interest includes individuals or entities with de jure and 
de facto control of the applicant. De jure control is greater than 50 
percent of the voting stock of a corporation, or in the case of a 
partnership, the general partner. 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:
    (i) the entity constitutes or appoints more than 50 percent of the 
board of directors or management committee;
    (ii) the entity has authority to appoint, promote, demote, and fire 
senior executives that control the day-to-day activities of the 
licensee; and
    (iii) the entity plays an integral role in management decisions.
    (2) Calculation of certain interests.
    (i) 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.
    (ii) Partnership and other ownership interests and any stock 
interest equity, or outstanding stock, or outstanding voting stock 
shall be attributed as specified below.
    (iii) 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.
    (iv) Non-voting stock shall be attributed as an interest in the 
issuing entity.
    (v) 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.
    (vi) Officers and directors of an entity shall be considered to 
have an attributable interest in the entity. The officers and directors 
of an entity that controls a licensee or applicant shall be considered 
to have an attributable interest in the licensee or applicant.
    (vii) 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.
    (viii) Any person who manages the operations of an applicant or 
licensee pursuant to a management agreement shall be considered to have 
an attributable interest in such applicant or licensee if such person, 
or its affiliate pursuant to Sec. 1.2110(b)(4) of this chapter, has 
authority to make decisions or otherwise engage in practices or 
activities that determine, or significantly influence,
    (A) The nature or types of services offered by such an applicant or 
licensee;
    (B) The terms upon which such services are offered; or
    (C) The prices charged for such services.
    (ix) 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 an attributable 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,
    (A) The nature or types of services offered by such an applicant or 
licensee;
    (B) The terms upon which such services are offered; or
    (C) The prices charged for such services.
    (d) A winning bidder that qualifies as a small business or a 
consortium of small businesses as defined in paragraph (b)(1) or (b)(5) 
of this section may use the bidding credit specified in 
Sec. 1.2110(e)(2)(ii) of this chapter. A winning bidder that qualifies 
as a very small business or a consortium of very small businesses as 
defined in paragraph (b)(2) or (b)(5) of this section may use the 
bidding credit specified in Sec. 1.2110(e)(2)(i) of this chapter.

[FR Doc. 98-20460 Filed 7-29-98; 8:45 am]
BILLING CODE 6712-01-P


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