[Federal Register Volume 70, Number 189 (Friday, September 30, 2005)]
[Rules and Regulations]
[Pages 57183-57188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19519]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WT Docket No. 97-82; FCC 04-295]


Competitive Bidding Procedures

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In the Second Order on Reconsideration of the Fifth Report and 
Order the Commission grants two petitions for reconsideration filed in 
response to the Commission's Part 1 Order on Reconsideration of the 
Fifth Report and Order, 68 FR 42984 (July 21, 2003) (Part 1 
Reconsideration Order). The Commission revises one element of the 
exemption from part 1 attribution rules for certain rural telephone 
cooperatives that participate in the Commission's spectrum auction 
program. The revised rule permits a rural telephone cooperative 
applicant or its controlling interest to demonstrate that either it is 
eligible for tax-exempt status under the Internal Revenue Code or it 
adheres to the cooperative principles enumerated in a previous decision 
of the United States Tax Court.

DATES: Effective December 9, 2005.

FOR FURTHER INFORMATION CONTACT: William Huber, Auctions and Spectrum 
Access Division, Wireless Telecommunications Bureau, (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of the Second Order on 
Reconsideration of the Fifth Report and Order adopted December 22, 2004 
and released on January 31, 2005. The complete text of the Second Order 
on Reconsideration of the Fifth Report and Order, is available for 
public inspection and copying during regular business hours at the FCC 
Reference Information Center, Portals II, 445 12th Street, SW., Room 
CY-A257, Washington, DC 20554. The Second Order on Reconsideration of 
the Fifth Report and Order and related Commission documents may also be 
purchased from the Commission's duplicating contractor, Best Copy and 
Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC, 20554, telephone 202-488-5300, facsimile 202-488-5563, 
or you may contact BCPI at its Web site: http://www.BCPIWEB.com. When 
ordering documents from BCPI, please make sure you provide the 
appropriate FCC document number (for example, FCC 04-295 for the Second 
Order on Reconsideration of the Fifth Report and Order) and related 
documents are also available on the Internet at the Commission's Web 
site: http://wireless.fcc.gov/auctions/.

I. Overview

    1. In the Second Order on Reconsideration of the Part 1 Fifth 
Report and Order, the Commission grants two petitions for 
reconsideration of the Commission's Part 1 Reconsideration Order. The 
petitioners seek to modify one of the elements of the three-part test 
that rural telephone cooperatives must satisfy to receive a limited 
exemption from the attribution rules that are part of the Commission's 
part 1 competitive bidding rules. In particular, petitioners seek to 
refine a portion of the rule that defines the category of eligible 
rural telephone cooperatives so as not to limit the flexibility of 
rural telephone cooperatives to provide new telecommunications and 
other advanced communications services to consumers in rural areas. In 
this decision, the Commission revises the third element of the 
exemption to permit a rural telephone cooperative applicant (or its 
controlling interest) to demonstrate that either it is eligible for 
tax-exempt status pursuant to section 501(c)(12) of the Internal 
Revenue Code or it adheres to the cooperative principles enumerated in 
Puget Sound Plywood, Inc. v. Commissioner of Internal Revenue (Puget 
Sound), 44 T.C. 305 (1965). The Commission also clarifies how the first 
element of this rule applies in cases where a rural telephone 
cooperative applicant is organized in a jurisdiction

[[Page 57184]]

that lacks a specific statute governing organization as a cooperative.

II. Background

A. Section 1.2110 Controlling Interest Standard

    2. In the Part 1 Fifth Report and Order, 65 FR 52323 (August 29, 
2000), the Commission adopted as part of its attribution rule for 
competitive bidding a controlling interest standard, Sec.  
1.2110(c)(2), to be used to determine which applicants are eligible for 
small business status. Applicants that qualify as small businesses may 
apply for bidding credits if they are available in a particular 
service. Through the attribution rule, including the controlling 
interest standard, the Commission ensures that only those entities 
truly meriting small business status qualify for the small business 
provisions.
    3. Section 1.2110(c) also provides specific guidance on attribution 
of interests and gross revenues in certain circumstances. For example, 
Sec.  1.2110(c)(2)(ii)(F) provides that the officers and directors of 
any applicant will be considered to have a controlling interest in the 
applicant. Because the gross revenues of all affiliates of the 
applicant and affiliates of the applicant's controlling interests are 
attributed to the applicant in calculating an applicant's gross 
revenues, the gross revenues of other entities controlled by such 
officers and directors must be included.

B. Exemption From Part 1 Attribution for Officers and Directors of 
Rural Telephone Cooperatives

    4. Following the adoption of the Part 1 Fifth Report and Order, 
certain rural telephone cooperative interests petitioned for 
reconsideration, seeking an exemption for rural telephone cooperatives 
from the requirement that the gross revenues of entities controlled by 
an applicant's officers and directors are attributed to the applicant. 
The petitioners argued that the typical structure and operation of a 
rural telephone cooperative makes it unlikely that affiliates of 
officers and directors of a rural telephone cooperative could exercise 
control over the cooperative.
    5. Acknowledging the unique characteristics of rural telephone 
cooperatives, as compared with traditional business forms, the 
Commission in its Part 1 Reconsideration Order, adopted a narrow 
exemption from the attribution rule for the officers and directors of a 
rural telephone cooperatives pursuant to which the gross revenues of 
the affiliates of the cooperative's officers and directors are not 
attributed to the applicant. Specifically, the gross revenues of the 
affiliates of a cooperative's officers and directors will not be 
attributed if either the applicant or a controlling interest, as the 
case may be, meets all of the following conditions: (1) The applicant 
(or the controlling interest) is validly organized as a cooperative 
pursuant to state law; (2) the applicant (or the controlling interest) 
is a ``rural telephone company'' as defined by section 153(37) of the 
Communications Act, as amended; and (3) the applicant (or the 
controlling interest) is eligible for tax-exempt status under section 
501(c)(12) of the Internal Revenue Code. In the Part 1 Reconsideration 
Order, the Commission noted that the exemption will not apply if the 
gross revenues or other financial and management resources of the 
affiliates of the applicant's officers and directors (or the 
controlling interests' officers and directors) are available to the 
applicant. Also, the Commission noted that if an officer or director of 
a rural telephone cooperative is considered a controlling interest of 
the applicant under another subsection of the controlling interest 
attribution rule, this exemption does not apply. Through these measures 
the Commission has sought to prevent sham small businesses from 
obtaining bidding credits while ensuring that bidding credits are 
received by rural telephone cooperatives that are bona fide small 
businesses.
    6. Consistent with the policy objectives underlying that decision, 
the Commission also granted three pending waiver requests filed by 
rural telephone cooperative applicants in Auction No. 44. Specifically, 
three winning bidders that are rural telephone cooperatives (or wholly-
owned by rural telephone cooperatives) and which had filed 
substantively identical requests for waiver of Sec.  
1.2110(c)(2)(ii)(F) were granted waivers conditioned upon the 
submission of information demonstrating each applicant's compliance 
with rule adopted in the Part 1 Reconsideration Order. Certain winning 
bidders in Auction No. 49 also requested similar relief.

III. Discussion

A. Proposed Change to Exemption's Tax-Exempt Element

    7. After adoption of the rural telephone cooperative exemption, the 
Commission received two petitions for reconsideration of the Part 1 
Reconsideration Order asking the Commission to modify the eligibility 
requirements for the exemption by changing one part of the three-part 
eligibility standard. Specifically, petitioners ask the Commission to 
eliminate the prerequisite that the rural telephone cooperative 
applicant (or its controlling interest) be eligible for tax-exempt 
status under section 501(c)(12) of the Internal Revenue Code. 
Petitioners suggest that the Commission should instead employ a test 
based on a showing that the cooperative operates consistent with the 
cooperative principles enumerated in Puget Sound. For the reasons 
discussed below, the Commission revises the eligibility criteria in 
Sec.  1.2110(b)(3)(iii)(A) to provide an alternative eligibility 
showing pursuant to which a rural telephone cooperative seeking to 
exempt from attribution gross revenues (or, where applicable, total 
assets) attributable through its officers or directors may show that it 
operates pursuant to the cooperative principles described in Puget 
Sound.
1. Section 501(c)(12) Tax-Exempt Status Criterion
    8. The Commission included the tax-exemption criterion in the rule 
as a means of ensuring that only bona fide rural telephone cooperatives 
would be eligible to receive the benefits of this exemption. Parties 
participating in earlier stages of this proceeding had advised the 
Commission that rural telephone cooperatives were typically 
characterized by their tax-exempt status. Section 501(c)(12) of the 
Internal Revenue Code exempts a telephone cooperative from federal 
income tax only if 85 percent or more of the cooperative's income 
consists of amounts collected from members for the sole purpose of 
meeting losses and expenses. The Commission crafted this exemption 
based, in part, on the Commission's belief that a cooperative's tax 
status provided a bright-line rule for which compliance would create no 
additional burdens on cooperatives beyond their current obligations to 
comply with the tax code.
    9. Petitioners maintain that compliance with the tax code's 85 
percent member revenue test is an overly narrow standard for weeding 
out shams.
    10. Petitioners argue that a rural telephone cooperative's tax 
status is irrelevant to whether or not the entity is controlled by an 
outside interest or has access to the resources of outside interests.
    11. The Commission agrees that the tax-status of a rural telephone 
cooperative is independent of whether it is a bona fide cooperative.

[[Page 57185]]

2. Puget Sound Cooperative Principles
    12. RCC suggests that the Commission should instead use the Puget 
Sound principles as an element of the eligibility standard for the part 
1 attribution exemption. In Puget Sound, the Tax Court identified three 
basic principles of a cooperative: (1) Subordination of capital, both 
as regards control over the cooperative undertaking, and as regards the 
ownership of the cooperative's pecuniary benefits; (2) democratic 
control by the members; and (3) the vesting in and the allocation among 
the members of the excess of the operating revenues over the costs 
incurred in generating those revenues, and that this occur in 
proportion to the members' active participation in the cooperative 
endeavor. The IRS has regarded the Puget Sound principles as 
``fundamental to cooperative operation'' and has subsequently 
incorporated these principles into analysis of the tax treatment of 
rural telephone cooperatives.
    13. The Commission finds these principles of cooperative 
organization and operation are useful criteria for determining whether 
a rural telephone cooperative is a bona fide cooperative. The 
Commission believes that this change will ensure that the benefits of 
this exemption are limited to bona fide rural telephone cooperatives 
while providing such entities with the flexibility to further the 
public interest in expanding telecommunications and other advanced 
services to the public in rural areas. This revision may enhance the 
ability of rural telephone cooperatives to participate in spectrum 
auctions, which, in turn, will promote the deployment of advanced 
telecommunications services in rural areas as Congress mandated in 
section 309(j). Therefore, the Commission amends Sec. Sec.  
1.2110(b)(3)(iii)(A)(3) and 1.2112(b)(2)(iv) to require that an 
applicant (or its controlling interest) that seeks to exempt the gross 
revenues (or, if applicable for purposes of determining entrepreneur 
eligibility pursuant to Sec. Sec.  1.2110(b)(1)(ii) and 24.709, the 
total assets) of its officers or directors from attribution under Sec.  
1.2110(c) of the rules must demonstrate either that it is eligible for 
tax-exempt status under the Internal Revenue Code or that it operates 
pursuant to the cooperative principles set forth in Puget Sound.
    14. Consistent with the Commission's approach in the Part 1 
Reconsideration Order and the Commission's decision here, the 
Commission grant three pending waiver requests filed by rural telephone 
cooperative applicants in Auction No. 49.

B. Showing of Cooperative Organization in the Absence of State 
Certification

    15. Among the eligibility criteria for the exemption to the 
Commission's attribution rules for rural telephone cooperatives is the 
requirement that the applicant for the exemption (or its controlling 
interest) be validly organized as a cooperative pursuant to state law. 
Petitioners point out that the Puget Sound cooperative principles are 
not duplicative of this first element of the three-part qualification 
test because the validity of a cooperative as a legal entity is 
independent of the structural factors that make it highly unlikely that 
rural telephone cooperatives could engage in the kinds of sham 
transaction that the attribution rule is designed to protect against.
    16. Upon further review, the Commission clarifies how the 
Commission intends to apply this first element of Sec.  
1.2110(b)(3)(iii)(A) where there is no state incorporation statute 
specifically for cooperatives. In these circumstances, the applicant 
(or the controlling interest) must at the auction short-form 
application stage certify that it is validly organized under the most 
closely applicable organizing statute, and that such organization is 
reflected in its articles of incorporation, by-laws, and/or other 
relevant organic documents. Copies of all such relevant documents must 
be submitted to the Commission by winning bidders relying on this 
exemption in connection with its long-form license application in order 
to receive a license. The Commission believes that this clarification 
will provide flexibility for bona fide cooperatives to demonstrate 
their status in the absence of the possibility of state certification.

IV. Procedural Matters

A. Regulatory Flexibility Analysis

    17. As required by the Regulatory Flexibility Act, 5 U.S.C. 604, 
the Commission has prepared a Supplemental Final Regulatory Flexibility 
Analysis for this Second Part 1 Reconsideration Order.

B. Paperwork Reduction Act Analysis

    18. The Second Order on Reconsideration of the Part 1 Fifth Report 
and Order contains new or modified information collection(s) subject to 
the Paperwork Reduction Act of 1995 (PRA), Pub. Law 104-13. It will be 
submitted to the Office of Management and Budget (OMB) for review under 
section 3507(d) of the PRA. OMB, the general public and other Federal 
agencies are invited to comment on the new or modified collection(s) 
contained in the proceeding.

V. Supplemental Final Regulatory Flexibility Analysis (Second Order on 
Reconsideration of the Part 1 Fifth Report and Order)

    19. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), a Final Regulatory Flexibility Analysis (FRFA) was 
incorporated into the report and order section of the Part 1 Fifth 
Report and Order in WT Docket No. 97-82. In addition, a Supplemental 
FRFA was incorporated into the Part 1 Reconsideration Order. The 
Commission received two petitions for reconsideration in response to 
the Part 1 Reconsideration Order. This present second supplemental FRFA 
conforms to the RFA.

A. Need for, and Objectives of, the Second Order on Reconsideration of 
the Part 1 Fifth Report and Order

    20. In May 2003, the Commission released its Part 1 Reconsideration 
Order, which addressed petitions received in response to the Part 1 
Fifth Report and Order regarding the amendment of general competitive 
bidding rules for all auctionable services. Most pertinent for purposes 
of this Second Order on Reconsideration of the Part 1 Fifth Report and 
Order, the Commission in the Part 1 Reconsideration Order adopted a 
limited exemption from its general attribution rules for rural 
telephone cooperatives that meet specific conditions.
    21. Based on the petitions and comments received in response to the 
Part 1 Fifth Report and Order, the Commission in its Part 1 
Reconsideration Order adopted a narrow exemption for the officers and 
directors of a rural telephone cooperative so that the gross revenues 
of the affiliates of a rural telephone cooperative's officers and 
directors need not be attributed to the applicant. Specifically, the 
exemption provided that the gross revenues of the affiliates of an 
applicant's officers and directors would not be attributed if either 
the applicant or a controlling interest, as the case may be, meets all 
of the following conditions: (1) The applicant (or the controlling 
interest) is validly organized as a cooperative pursuant to state law; 
(2) the applicant (or the controlling interest) is a ``rural telephone 
cooperative'' as defined by the Communications Act; and (3) the 
applicant (or the controlling interest) is eligible for tax-exempt 
status under the

[[Page 57186]]

Internal Revenue Code. However, the exemption would not apply if the 
gross revenues or other financial and management resources of the 
affiliates of the applicant's officers and directors (or the 
controlling interest's officers and directors) are available to the 
applicant.
    22. The Commission received two petitions for reconsideration of 
the Part 1 Reconsideration Order. Petitioners request reconsideration 
of the tax-exempt criteria that the Commission uses to determine 
eligibility for the attribution rule exemption. Specifically, 
petitioners seek removal of the requirement that rural telephone 
cooperatives have tax-exempt status pursuant to section 501(c)(12) of 
the Internal Revenue Code. Petitioners suggest that this prerequisite 
be replaced by the requirement that the rural telephone cooperative 
applicant (or its controlling interest) adheres to the cooperative 
principles articulated by the U.S. Tax Court in Puget Sound. In the 
Second Order on Reconsideration of the Part 1 Fifth Report and Order 
the Commission resolves the petitions for reconsideration filed in 
response to the Part 1 Reconsideration Order.
    23. Based upon the petitions for reconsideration, we will permit a 
rural telephone cooperative applicant (or its controlling interest) to 
demonstrate that the rural telephone cooperatives in question is 
eligible for tax-exempt status pursuant to section 501(c)(12) of the 
Internal Revenue Code or that it (or its controlling interest) adheres 
to the cooperative principles articulated in Puget Sound. The purpose 
of the exemption for rural telephone cooperatives, which is to identify 
the bona fide small businesses among rural telephone cooperatives and 
prevent sham small businesses rural telephone cooperatives from 
obtaining designated entity preferences. The Commission has determined 
that a requirement that rural telephone cooperative be section 
501(c)(12) tax-exempt organizations may inadvertently exclude bona fide 
rural telephone cooperatives in some cases and may therefore undercut 
the purpose of the exemption.
    24. Also, on its own motion, the Commission has decided that if the 
applicant is organized in a state that does not have rules or 
regulations specific to organizing an entity as a cooperative, the 
applicant may use its by-laws or other relevant documents to 
demonstrate that it is a cooperative. This new provision provides a 
means by which applicants can demonstrate organization as a bona fide 
cooperative even if organized in a state that does not designate 
specific conditions for cooperative organization.

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

    25. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small organization,'' ``small business'' and ``small governmental 
jurisdiction.'' The term ``small business'' has the same meaning as the 
term ``small business concern'' under the Small Business Act. A small 
business concern is one which: (1) Is independently owned and operated; 
(2) is not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA.
    26. The rule modifications and clarifications adopted in the Part 1 
Reconsideration Order are of general applicability to all services and 
do not apply on a service-specific basis. Therefore, this SFRFA 
provides a general analysis of the impact of the revised part 1 rule on 
small businesses rather than a service by service analysis. 
Accordingly, the revised rules will apply to all entities that apply to 
participate in Commission auctions, including both small and large 
entities. The number of entities that may apply to participate in 
future Commission auctions is unknown. The number of small businesses 
that have participated in prior auctions has varied. In all of our 
auctions held to date, 1899 out of a total of 2432 qualified bidders 
have either claimed eligibility for small business bidding credits or 
self-reported status as a small business as that term has been defined 
under rules adopted by the Commission for specific services. (These 
figures do not generally include applicants for auctions of broadcast 
licenses where sized-based bidding preferences have not been 
available).

C. Description of the Projected Reporting, Record-keeping, and Other 
Compliance Requirements

    27. All license applicants that are rural telephone cooperative 
seeking an exemption from the attribution rules that are part of the 
Commission's general competitive bidding rules found in part 1 of the 
Commission's rules are subject to the reporting and record-keeping 
requirements associated with qualifying for the exemption. These 
requirements apply in the same way to both large and small entities. 
Furthermore, applicants are required to apply for spectrum auctions by 
filing a short-form application (FCC Form 175) prior to the auction. 
Applicants are also required to file a long-form application (FCC Form 
601) at the conclusion of the auction. Specifically, entities seeking 
status as a small business must disclose on their FCC Form 175s, FCC 
Form 601s, and on their application for assignment or transfer of 
control (FCC Form 603), separately and in the aggregate, the gross 
revenues of the applicant (or licensee), its affiliates, its 
controlling interests and affiliates of the applicant's controlling 
interests for each of the previous three years.
    28. As a result of the actions taken in the, rural telephone 
cooperative auction applicants, or those controlled by rural telephone 
cooperatives, seeking an exemption from the requirement that the gross 
revenues of entities controlled by an applicant's officers and 
directors are attributed to the applicant must establish eligibility 
for this exemption based upon the factors listed above, which have been 
modified, in part, by the Second Order on Reconsideration of the Part 1 
Fifth Report and Order.

D. Steps Taken to Minimize the Economic Impact on Small Entities, and 
Significant Alternatives Considered

    29. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule or any part thereof for small 
entities. The Commission has considered the economic impact on small 
entities of the following modifications and clarifications adopted in 
the Second Order on Reconsideration of the Part 1 Fifth Report and 
Order and has taken steps to minimize the burdens on small entities.
    30. Application of attribution rule to rural telephone 
cooperatives. Based on the petitions and comments received in response 
to the Second Order on Reconsideration of the Part 1 Fifth Report and 
Order the Commission modifies a narrow exemption for the officers and 
directors of a rural telephone cooperative that it adopted so that the 
rural telephone cooperative does not have to be tax-exempt entity 
pursuant to section 501(c)(12) of the Internal Revenue Code in order to 
qualify for the exemption from the

[[Page 57187]]

attribution rules for the Commission part 1 competitive bidding rule. 
Specifically, the gross revenues of the affiliates of an applicant's 
officers and directors will not be attributed if either the applicant 
or a controlling interest, as the case may be, meets all of the 
following conditions: (1) The applicant (or the controlling interest) 
is validly organized as a cooperative pursuant to state law or, where 
there is no state law, the applicant must certify that it is organized 
according to commonly accepted cooperative principles as demonstrated 
by its by-laws, charter, or any other relevant document(s); (2) the 
applicant (or the controlling interest) is a ``rural telephone 
company'' as defined by the Communications Act; and (3) the applicant 
(or the controlling interest) demonstrates either that it is eligible 
for tax-exempt status under the Internal Revenue Code or that it 
adheres to the cooperative principles articulated in Puget Sound. 
However, the exemption will not apply if the gross revenues or other 
financial and management resources of the affiliates of the applicant's 
officers and directors (or the controlling interest's officers and 
directors) are available to the applicant.
    31. The Commission believes that this action will increase the 
number of rural telephone cooperatives that are eligible for small 
business status (and the corresponding bidding credits). Such a result 
will enhance the ability of rural telephone cooperatives to participate 
in spectrum auctions. This, in turn, will promote the deployment of 
advanced telecommunications services in rural areas as Congress 
mandated in section 309(j).

E. Report to Congress

    32. The Commission will send a copy of the Second Order on 
Reconsideration of the Fifth Report and Order, including this SFRFA, in 
a report to be sent to Congress pursuant to the Congressional Review 
Act. In addition, the Commission will send a copy of the Second Order 
on Reconsideration of the Fifth Report and Order, including this SFRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration. 
A copy of the Second Order on Reconsideration of the Third Report and 
Order and SFRFA (or summaries thereof) will also be published in the 
Federal Register.

VI. Ordering Clauses

    33. Accordingly, it is ordered that, pursuant to the authority 
granted in sections 4(i), 303(r) and 309(j) of the Communications Act 
of 1934, as amended, 47 U.S.C. 154(i), 303(r) and 309(j), the petitions 
for reconsideration of the Part 1 Reconsideration Order filed by a 
group comprising National Telecommunications Cooperative Association, 
the Rural Telecommunications Group, the law firm of Blooston, 
Mordkofsky, Dickens, Duffy & Prendergast, and the law firm of Kraskin, 
Lesse & Cosson, and a group comprising Cable & Communications 
Corporation, Northeast Nebraska Telephone Company, and Poka Lambro 
Telecommunications, Ltd. ARE, to the extent they are addressed herein, 
granted.
    34. It is further ordered that pursuant to the authority granted in 
sections 4(i), 5(b), 5(c)(1), 303(r), and 309(j) of the Communications 
Act of 1934, as amended, 47 U.S.C. 154(i), 155(b), 155(c)(1), 303(r), 
and 309(j), the Second Order on Reconsideration of the Part 1 Fifth 
Report and Order, is hereby adopted and part 1, subpart Q of the 
Commission's rules is amended as set forth in Appendix A of the Second 
Order on Reconsideration of the Part 1 Fifth Report and Order, 
effective 60 days after publication in the Federal Register. The 
information collection contained in these rules will become effective 
70 days after publication in the Federal Register, following Office of 
Management and Budget approval, unless a notice published in the 
Federal Register stating otherwise.
    35. It is further ordered that the requests of Adams Telecom, Inc., 
Cable and Communications Corporation, Grand River Communications, Inc., 
Northeast Nebraska Telephone Company, Poka Lambro Telecommunications, 
Ltd., S.E.I. Data, Inc., and WCTA Wireless, Inc. for waiver of Sec.  
1.2110(c)(2)(ii)(F) as presented in their Applications to Participate 
in an FCC Auction (FCC Form 175) for Auction No. 49 are granted, 
conditioned upon the submission to the Commission of information 
demonstrating compliance with 47 CFR 1.2112(b)(2)(iv), as revised 
herein, and petitioners Cable and Communications Corporation, Northeast 
Nebraska Telephone Company, and Poka Lambro Telecommunications, Ltd. 
will also be permitted to qualify for this exemption by submitting to 
the Commission information demonstrating the applicant's compliance 
with 47 CFR 1.2112(b)(2)(vi), as revised herein.
    36. It is further ordered that, pursuant to 47 U.S.C. 155(c) and 47 
CFR 0.331, the Chief of the Wireless Telecommunications Bureau is 
granted delegated authority to prescribe and set forth procedures for 
the implementation of the provisions adopted herein.

List of Subjects in 47 CFR Part 1

    Communications common carriers.

    Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
Part 1 of Title 47 of the Code of Federal Regulations is amended to 
read as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 225, and 303(r).

0
2. Amend Sec.  1.2110 by revising paragraph (b)(3)(iii)(A) to read as 
follows:


Sec.  1.2110  Designated entities

* * * * *
    (b) * * *
    (3) * * *
    (iii) * * *
    (A)(1) An applicant will be exempt from Sec.  1.2110(c)(2)(ii)(F) 
for the purpose of attribution in Sec.  1.2110(b)(1), if the applicant 
or a controlling interest in the applicant, as the case may be, meets 
all of the following conditions:
    (i) The applicant (or the controlling interest) is organized as a 
cooperative pursuant to state law;
    (ii) The applicant (or the controlling interest) is a ``rural 
telephone company'' as defined by the Communications Act; and
    (iii) The applicant (or the controlling interest) demonstrates 
either that it is eligible for tax-exempt status under the Internal 
Revenue Code or that it adheres to the cooperative principles 
articulated in Puget Sound Plywood, Inc. v. Commissioner of Internal 
Revenue, 44 T.C. 305 (1965).
    (2) If the condition in paragraph (b)(3)(iii)(A)(1)(i) above cannot 
be met because the relevant jurisdiction has not enacted an organic 
statute that specifies requirements for organization as a cooperative, 
the applicant must show that it is validly organized and its articles 
of incorporation, by-laws, and/or other relevant organic documents 
provide that it operates pursuant to cooperative principles.
* * * * *
    3. Amend Sec.  1.2112 by revising paragraph (b)(2)(vi) to read as 
follows:


Sec.  1.2112  Ownership disclosure requirements for applications.

* * * * *
    (b) * * *
    (2) * * *

[[Page 57188]]

    (vi) List and summarize, if seeking the exemption for rural 
telephone cooperatives pursuant to Sec.  1.2110, all documentation to 
establish eligibility pursuant to the factors listed under Sec.  
1.2110(b)(3)(iii)(A).

[FR Doc. 05-19519 Filed 9-29-05; 8:45 am]
BILLING CODE 6712-01-P