[Federal Register Volume 60, Number 50 (Wednesday, March 15, 1995)]
[Rules and Regulations]
[Pages 13915-13918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6488]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[GEN Docket No. 90-314, ET Docket No. 92-100, FCC 95-92]


Personal Communications Service

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: On March 3, 1995, the Commission released a Memorandum Opinion 
and Order revising certain sections of its Rules governing the Personal 
Communications Services (PCS). The action in the instant Order responds 
to petitions for reconsideration filed by Morgan Stanley Partnerships 
on September 6 and October 7, 1994 in the Commission's broadband and 
[[Page 13916]] narrowband PCS proceedings. The Order refines and 
clarifies the Commission's Rules concerning the ownership attribution 
of licenses in view of the Commission's decisions to use a multiplier 
when assessing indirect ownership interests. The rule amendments are 
intended to encourage investment in PCS, particularly by institutional 
investors, and promote the rapid deployment of such new services in the 
public interest.

EFFECTIVE DATE: March 15, 1995.

FOR FURTHER INFORMATION CONTACT:
Jackie Chorney, Wireless Telecommunications Bureau, (202) 418-0600.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Memorandum Opinion and Order in GEN Docket No. 90-314, ET Docket No. 
92-100m, FCC 95-92, adopted March 2, 1995, and released March 3, 1995. 
The complete text of this Order is available for inspection and copying 
during normal business hours in the FCC Dockets Branch (Room 230), 1919 
M Street, N.W., Washington, D.C., and also may be purchased from the 
Commission's copy contractor, International Transcription Service, at 
(202) 857-3800, 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

Synopsis of Order

    1. The Commission's PCS proceedings are designed to promote four 
primary goals: competitive delivery, a diverse array of services, rapid 
deployment, and wide-area coverage. The Commission notes that the 
ability of PCS entrants to attract capital is essential to achieving 
these goals. In essence, Morgan Stanley Partnerships argues in its 
petitions for reconsideration that the Commission's PCS attribution 
rules do not promote this ability sufficiently. The Commission states 
that while promoting PCS investment is an important public interest 
component of its PCS policies, its attribution rules are designed 
principally to operate in conjunction with ownership limits to maintain 
a competitive PCS industry. The Commission expresses that the real 
question, therefore, is whether treating institutional investors 
differently under its PCS attribution rules will improve investment 
incentives without undercutting those rules' primary goal of serving as 
anticompetitive safeguards. The Commission answers that question 
affirmatively.
    2. The Commission states that it has long recognized a distinction 
between institutional investors and other investors, and that this 
results, in part, because the term ``institutional investors'' 
identifies a category of investors that may be defined with some 
precision. The Commission agrees with Morgan Stanley Partnerships that 
institutional investors' market activities generally do not raise the 
type of ``control'' issues that led the Commission to adopt ``bright 
line'' PCS attribution rules. Indeed, the Commission observes that it 
recently amended its rules in this regard to further clarify the 
definition of institutional investor under the PCS rules and to promote 
such investors' opportunities to serve as an important source of 
funding for designated entity PCS companies. The Commission finds that 
modifying the narrowband and broadband PCS attribution rules in light 
of the request of Morgan Stanley Partnerships is consistent with the 
Commission's traditional policy and recent action regarding 
institutional investors. Moreover, the Commission believes that these 
modifications will serve as an important means for encouraging 
increased passive investment in PCS. Accordingly, the Commission states 
that it is amending its PCS rules to: (1) exempt from attribution 
insulated limited partnership interests held by institutional 
investors, subject to those investors certifying to the Commission that 
they are not materially involved directly or indirectly in the 
management or operation of the carrier activities of the partnership; 
and (2) increase from five to ten percent the level at which 
institutional investors' PCS license ownership interests will be 
attributed. Consistent with this change, the Commission is clarifying 
that for purposes of the reporting requirements of section 24.813 of 
its rules, institutional investors are not considered attributable 
investors in an applicant unless they hold an ownership interest of 10 
percent or more in the applicant. The Commission is amending section 
24.813(a)(2) to require applicants to report ownership interests held 
by institutional investors only if such ownership interests are 10 
percent or more.
    3. The Commission declines, however, to adopt the single majority 
shareholder exception requested by Morgan Stanley. The Commission 
believes that such an exception is unnecessary to address the issues 
raised by Morgan Stanley regarding the application of the multiplier to 
indirect institutional investments and to enable PCS applicants to 
attract capital from institutional investors given the above-described 
modifications to its attribution rules.
    4. In addition, the Commission concludes that institutional 
investors who held limited partnership interests prior to the adoption 
date of this order shall be granted one year from that date to amend 
their limited partnership agreements to comply with the insulation 
rules. During this transition period, affected licensees shall certify 
to the Commission that the limited partners are not materially 
involved, directly or indirectly, in the management or operation of a 
PCS licensee.
    5. The Commission notes that it decided previously not to apply the 
multiplier rule to nationwide narrowband PCS licenses granted under its 
pioneer preference rules prior to August 16, 1994, or to nationwide 
narrowband PCS licenses auctioned before August 16, 1994 (the date on 
which it adopted the narrowband PCS multiplier rule). The Commission 
continues to believe that it would not be equitable to apply the 
multiplier rule to those licensees. In keeping with that rationale, 
however, the Commission clarifies that this exemption will expire with 
respect to a particular interest in a license if in the future that 
exempt interest is transferred or assigned to another entity.

Ordering Clauses

    6. It is Further Ordered That the petitions for reconsideration 
filed by Morgan Stanley on September 6 and October 7, 1994, in our 
broadband and narrowband PCS proceedings, respectively, Are Granted to 
the extent discussed above.
    7. Accordingly, It is Ordered that Part 24 of the Commission's 
Rules Is Amended as specified below, And Will Become Effective 
immediately upon publication in the Federal Register.
    8. This action is taken pursuant to sections 4(i), 7(a), 302, 
303(c), 303(f), 303(g), and 303(r) of the Communications Act of 1934, 
as amended, 47 U.S.C. Sections 154(i), 157(a), 302, 303(c), 303(f), 
303(g), and 303(r).
List of Subjects in 47 CFR Part 24

    Communication common carriers, Radio, Reporting and recordkeeping 
requirements.
    47 CFR Part is amended as follows:

PART 24--PERSONNEL COMMUNICATIONS SERVICE

    1. The authority citation for Part 24 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless 
otherwise noted.

    [[Page 13917]] 2. Section 24.101 is revised to read as follows:


Sec. 24.101  Multiiple ownership restrictions.

    (a) Narrowband PCS licensees shall not have an ownership interest 
in more than three of the 26 channels listed in Sec. 24.129 in any 
geographic area. For purposes of this restriction, a narrowband PCS 
licensee is:
    (1) Any institutional investor, as defined in Sec. 24.720(h), with 
an ownership interest of ten or more percent in a narrowband PCS 
license; and
    (2) Any other person or entity with an ownership interest of five 
or more percent in a narrowband PCS license.
    (b) In cases where a party had indirect ownership, through an 
interest in an interving entity (or entities) that has ownership in the 
narrowband license, that indirect ownership shall be attributable if 
the percentages of ownership at each level, multiplied together, equal 
five or more percent ownership of the narrowband PCS license, 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.

    Example: Party X has a non-controlling ownership interest of 25 
percent in Company Y, which in turn has a non-controlling ownership 
interest of 10 percent in Company Z, the narrowband PCS licensee. 
Party X's effective ownership interest in Company Z is Party X's 
ownership interest in Company Y (25 percent) times Company Y's 
ownership interest in Company Z (10 percent). Therefore, Party X's 
effective ownership interest in Company Z is 2.5 percent, and is not 
attributable.

    (c) Notwithstanding paragraph (b) of this section, the following 
interests shall not constitute attributable ownership interests for 
purposes of paragraph (a) of this section:
    (1) A limited partnership interest held by an institutional 
investor (as defined Sec. 24.720(h)) where the limited partner is not 
materially involved, directly or indirectly, in the management or 
operation of the PCS holdings of the partnership, and the licensee so 
certifies. The criteria which would assure adequate insulation for the 
purposes of this certification require:
    (i) Prohibiting limited partners from acting as employees of the 
limited partnership if responsibilities relate to the carrier 
activities of the licensee;
    (ii) Barring the limited partners from serving as independent 
contractors;
    (iii) Restricting communication among limited partners and the 
general partner regarding day-to-day activities of the licensee;
    (iv) Empowering the general partner to veto admissions of new 
general partners;
    (v) Restricting the circumstances in which the limited partners can 
remove the general partner;
    (vi) Prohibiting the limited partners from providing services to 
the partnership relating to the PCS holdings of the licensee; and
    (vii) Stating that the limited partners may not become involved in 
the management or operation of the licensee. See 47 CFR 73.3555 Note 
2(g)(2); Memorandum of Opinion and Order in MM Docket 83-46, FCC 85-252 
(released June 24, 1985), as modified on reconsideration in the 
Memorandum of Opinion and Order in MM Docket No. 83-46, FCC 86-410 
(released November 28, 1986).
    (2) Institutional investors who held limited partnership interests 
prior to March 2, 1995 shall be granted one year from that date to 
amend their limited partnership agreements to comply with the 
insulation rules and so certify to the Commission. During this 
transition period, the licensee in which an institutional investor 
holds an interest shall also certify to the Commission that the 
institutional investor limited partner(s) are not materially involved, 
directly or indirectly, in the management or operation of the licensee.
    3. In Sec. 24.204, paragraph (d)(2)(viii) is redesignated as 
paragraph (d)(2)(viii)(A) and new paragraph (d)(20(viii)(B) is added to 
read as follows:


Sec. 24.204  Cellular eligibility.

* * * * *
    (d) * * *
    (2) * * *
    (viii) * * *
    (B) Notwithstanding paragraph (d)(2)(viii)(A) of this section, the 
following interests shall not constitute attributable ownership 
interests for purposes of Sec. 24.229(c):
    (1) A limited partnership interest held by an institutional 
investor (as defined Section 24.720(h)) where the limited partner is 
not materially involved, directly or indirectly, in the management or 
operation of the PCS holdings of the partnership, and the licensee so 
certifies. The criteria which would assure adequate insulation for the 
purposes of this certification require:
    (i) Prohibiting limited partners from acting as employees of the 
limited partnership if responsibilities relate to the carrier 
activities of the licensee;
    (ii) Barring the limited partners from serving as independent 
contractors;
    (iii) Restricting communication among limited partners and the 
general partner regarding day-to-day activities of the licensee;
    (iv) Empowering the general partner to veto admissions of new 
general partners;
    (v) Restricting the circumstances in which the limited partners can 
remove the general partner;
    (vi) Prohibiting the limited partners from providing services to 
the partnership relating to the PCS holdings of the licensee; and
    (vii) Stating that the limited partners may not become involved in 
the management or operation of the licensee. See 47 CFR 73.3555 Note 
2(g)(2); Memorandum of Opinion and Order in MM Docket 83-46, FCC 85-252 
(released June 24, 1985), as modified on reconsideration in the 
Memorandum of Opinion and Order in MM Docket No. 83-46, FCC 86-410 
(released November 28, 1986).
    (2) Institutional investors who held limited partnership interests 
prior to March 2, 1995 shall be granted one year from that date to 
amend their limited partnership agreements to comply with the 
insulation rules and so certify to the Commission. During this 
transition period, the licensee in which an institutional investor 
holds an interest shall also certify to the Commission that the 
institutional investor limited partner(s) are not materially involved, 
directly or indirectly, in the management or operation of the licensee.
* * * * *
    4. Section 24.229 is amended by revising paragraph (c) to read as 
follows:


Sec. 24.229  Frequencies.

* * * * *
    (c) PCS licenses shall not have an ownership interest in frequency 
blocks that total more than 40 MHz and serve the same geographic area. 
For purposes of this section, PCS licensees are:
    (1) Any institutional investor, as defined in Section 24.720(h), 
with an ownership interest of 10 or more percent in a broadband PCS 
license; and
    (2) Any other entities having an ownership interest of 5 or more 
percent or other attributable ownership interest, as defined in Section 
24.204(d), in a PCS license.
* * * * *
    5. Section 24.813 is amended by revising paragraph (a)(2) to read 
as follows:


Sec. 24.813  General application requirements.

    (a) * * *
    (2) A list of any party which holds a five percent or more interest 
(or a ten percent or more interest for institutional investors as 
defined in Sec. 24.720(h)) in [[Page 13918]] the applicant, or any 
entity in which a five percent or more interest (or a ten percent or 
more interest for institutional investors as defined in Sec. 24.720(h)) 
is held by another party which holds a five percent or more interest 
(or a ten percent or more interest for institutional investors as 
defined in Section 24.720(h)) in the applicant. (e.g., If company A 
owns 5% of Company B (the applicant) and 5% of Company C then Companies 
A and C must be listed on Company B's application.
* * * * *
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-6488 Filed 3-14-95; 8:45 am]
BILLING CODE 6712-01-M