[Federal Register Volume 63, Number 204 (Thursday, October 22, 1998)]
[Rules and Regulations]
[Pages 56573-56578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28132]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 26

[ET Docket No. 94-32; FCC 98-213]


Allocation of Spectrum Below 5 GHz Transferred From Federal 
Government Use 4660-4685 MHz

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Fourth Report and Order in the matter of Allocation of 
Spectrum Below 5 GHz Transferred from Federal Government Use 4660-4685 
MHz, the Commission adopts its proposals to replace service-specific 
auction rules for the General Wireless Communications Service (GWCS) 
with the streamlined auction rules. (See Proposed Rules, 63 FR 770, 
January 7, 1998.) With regard to auction provisions for designated 
entities, we simplify the definition of ``small business,'' eliminate 
installment payments, and increase the bidding credit. These actions 
will enable the Commission to run a more efficient GWCS auction.

DATE: December 21, 1998.

FOR FURTHER INFORMATION CONTACT: Kathryn Garland, Bob Reagle, or Arthur 
Lechtman, Auctions and Industry Analysis Division, Wireless 
Telecommunications Bureau, at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This Order was released on September 24, 
1998, and is available in its entirety, including all appendices, for 
inspection and copying during normal business hours in the FCC 
Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C., and 
also may be purchased from the Commission's copy contractor, 
International Transcription Services, (202) 857-3800, fax (202) 857-
3805, 1231 20th Street, N.W., Washington, D.C. 20036. It is also 
available on the Commission's website at http://www.fcc.gov.

Introduction

    1. The rules the Commission adopts herein will apply to the auction 
of GWCS and potentially any auction of adjacent spectrum in the 4635-
4660 MHz band, after the rulemaking on that band is complete. The 
Commission notes that the Wireless Telecommunications Bureau 
(``Bureau'') is currently working on a notice of proposed rulemaking 
for the 4.6 GHz band, including the adjacent band at 4635-4660 MHz. 
That item is likely to consider changes in allocations, service rules, 
and auction rules affecting the entire 50 megahertz of spectrum, such 
as combining the 4635-4660 MHz and 4660-4685 MHz bands together and 
adopting common service and auction rules. Upon the completion of this 
rulemaking proceeding, the Commission may then be in a position to 
commence an auction of the 50 megahertz of spectrum in the 4635-4685 
MHz frequency band as a unit. The Commission postponed the GWCS auction 
on April 24, 1998. (See Wireless Telecommunications Bureau Announces 
Postponement of General Wireless Communications Service (GWCS) Auction, 
Public Notice, DA 98-792 (rel. April 24, 1998)).

Competitive Bidding Issues

A. Competitive Bidding Design

    2. Discussion. The Commission continues to believe that the 
simultaneous multiple-round auction

[[Page 56574]]

methodology will allow bidders to better express the value of the 
interdependency among licenses than if they are auctioned separately, 
and thus reaffirm the decision to use this methodology.
    3. However, the Commission will eliminate the reduced bid 
withdrawal payment rule and associated auction conduct procedures 
largely for administrative reasons. The only party to have expressed an 
interest in nationwide aggregations, In-Flight, did not file any 
comments in this proceeding. When the Commission adopted the Second 
Report and Order, it observed that the reduced bid withdrawal payment 
and modified auction activity rules were ``somewhat complex'' yet still 
``simpler and easier to administer than combinatorial bidding.'' Since 
then, the Commission has not yet devised a practical means of 
implementing combinatorial bidding, although the Commission has sought 
comment on the issue and secured the services of a private sector 
consultant to examine theoretical and applied combinatorial bidding 
approaches. The Balanced Budget Act of 1997 requires the Commission, 
for testing purposes, to design and conduct an auction in which a 
system of combinatorial bidding is used. Rather than implement untested 
and complex rules in the GWCS auction, especially in light of no 
apparent public interest in them, the Commission feels that the public 
interest will benefit from the use of the standard bid withdrawal rule 
that it adopted in the Part 1 Third Report and Order. Bidders who 
desire nationwide license aggregations may still pursue such a 
strategy, but reduced bid withdrawal payments will not be available to 
them in the event of withdrawal.

B. Application, Procedural, and Payment Issues

    4. Discussion. The Commission will adopt the Part 1 rules for GWCS. 
Thus, the Part 1 rules concerning short-form and long-form applications 
(including the anti-collusion rule), withdrawal and default payments, 
down payments, full payment, late payment fees, and unjust enrichment 
will now replace all analogous rules for GWCS. The Commission also will 
apply to GWCS the Part 1 rule allowing pre-license grant construction 
of systems. This decision eliminates the discrepancies between our 
current Part 1 rules and the older GWCS rules. Streamlining the rules 
increases the efficiency of the competitive bidding process and will 
provide more specific guidance to auction participants.
    5. Consistent with the Part 1 Third Report and Order, the 
Commission directs the Bureau to establish day-to-day auction conduct 
procedures for the GWCS auction. These procedures include upfront 
payment determination, activity requirements for each stage of the 
auction, activity rule waivers, criteria for determining reductions in 
eligibility, information regarding bid withdrawal and bid removal, 
stopping rules, and information relating to auction delay, suspension, 
or cancellation. The Commission notes that the Bureau recently sought 
comment on a proposed minimum opening bid for GWCS. The authority the 
Commission is delegating here is consistent with the authority that the 
Bureau has for all other auctionable services.

C. Petitions To Deny

    6. Discussion. The Commission will not truncate the petition to 
deny period for GWCS licenses to five days because the statutory 
deadline has passed. As noted above in paragraph 1, the Commission 
postponed the GWCS auction on April 24, 1998, until further notice. 
Thus, once the Commission announces the long-form applications that 
have been accepted for filing, the time period for filing petitions to 
deny will be specified by Public Notice.

Designated Entities

A. Small Business Definition

    7. Discussion. The Commission received no comments or replies 
specifically addressing the small business definition for GWCS. The 
Commission notes that the Small Business Administration recently 
approved this definition for GWCS. Therefore, the Commission will 
retain the $40 million size standard for small businesses, without any 
tiers. However, the Commission will use the Part 1 definitions of gross 
revenues and affiliate for determining the small business status of 
GWCS applicants.
    8. The Commission will simplify the GWCS size attribution rules and 
still enable small businesses to attract adequate financing. Consistent 
with our proposal in the Part 1 Third Report and Order, rather than an 
all-inclusive attribution rule with ``control group'' exceptions as 
used in broadband and narrowband PCS, the Commission will use a 
controlling interest threshold to determine whether an entity qualifies 
to bid as a small business. Thus, 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 its affiliates. The term ``controlling interest'' will include 
individuals or entities with both de jure and de facto control of the 
applicant. (See Ellis Thompson Corp., 76 Rad. Reg. 2d (P&F) 1125, 1127-
28 (1994) (``Ellis Thompson'') (in which the Commission identified 
factors used to determine control of a business. Specifically, the 
Commission identified the following indicia of control:

(1) use of facilities and equipment;
(2) control of day-to-day operations;
(3) control of policy decisions;
(4) personnel responsibilities;
(5) control of financial obligations; and
(6) receipt of monies and profits.

Ellis Thompson, 76 Rad. Reg. 2d (P&F). See also Intermountain 
Microwave, 24 Rad. Reg. (P&F) 983 (1963). The Commission believes that 
this controlling interest threshold will function effectively to ensure 
that only those entities truly meriting small business status are 
eligible for small business provisions. In particular, the Commission 
believes that the de jure and de facto concept of control used to 
determine controlling interest in an applicant and the application of 
our affiliation rules will effectively prevent larger firms from 
seeking status as a small business illegitimately. This approach is 
consistent with attribution rules the Commission has employed for the 
recent LMDS and 800 MHz SMR auction proceedings.
    9. The Commission will better encourage small business 
participation in the GWCS auction by adopting rules that provide for 
the greatest flexibility in business structuring. Therefore, in 
defining controlling interest, the Commission includes de facto as well 
as de jure control of the applicant. De jure control is 50.1 percent of 
the voting stock of a corporation or, in the case of a partnership, the 
general partners. De facto control includes the criteria set forth in 
Ellis Thompson. Thus, once principals or entities with a controlling 
interest are determined under these standards, only the revenues of 
those principals or entities and their affiliates will be counted for 
small business eligibility. When an applicant cannot identify 
controlling interests under these standards, 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 
25 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. Treating such a corporation in this way is 
similar to our treatment of

[[Page 56575]]

a general partnership--all general partners are considered to have a 
controlling interest. The rule that the Commission adopts here, the 
Commission believes, looks to substance over form in assessing 
eligibility for small business status.
    10. The Commission notes that our intent here is to provide 
flexibility that will enable legitimate small businesses to attract 
passive financing in a highly competitive and evolving 
telecommunications marketplace. The Commission believes that by 
structuring our standard in this manner it will invite only legitimate 
small businesses. While this rule will not specify a minimum amount of 
equity that a small business controlling interest must hold, the 
absence of equity will raise an issue as to whether de facto control 
exists. For purposes of calculating equity held in an applicant, the 
Commission provides for full dilution of certain stock interests, 
warrants, and convertible debentures. The Commission also provides a 
means of determining the level of control that is held through indirect 
ownership. 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. Finally, the Commission requires detailed 
reporting of all ownership interests as part of the general application 
requirement adopted in the Third Report and Order, and under the 
controlling interest standard the Commission will apply the 
comprehensive affiliation rule to all investors in a GWCS applicant. 
Under this standard, all auction applicants will be required to 
disclose the real party or parties in interest by including as an 
exhibit to their short-form applications detailed ownership 
information. Applicants must list controlling interests as well as all 
parties holding a 10 percent or greater interest in the applicant and 
any affiliates of these interest holders. Thus, passive interests that 
were otherwise non-attributable will be attributed if they are 
affiliates under this rule. Applicants claiming small business status 
must disclose on their short-form applications the names of each 
controlling interest and affiliate, as these terms are defined herein, 
and provide gross revenues calculations for each. On their long-form 
applications, such applicants will be required to disclose any 
additional gross revenues calculations, any agreements that support 
small business status, and any investor protection agreements. The 
Commission believes that this detailed reporting requirement, in 
combination with our comprehensive affiliation rules, permits us to 
determine the ``real party or parties in interest'' when parties apply 
to participate in an auction. Finally, the Commission reserves the 
right to conduct random audits of auction applicants and licensees in 
order to verify information provided regarding eligibility for small 
business provisions.

B. Installment Payments

    11. Discussion. The Commission hereby eliminates the use of 
installment payments for GWCS. After careful review of the comments in 
response to the Part 1 proceeding, the comments in response to the 
Installment Payment Public Notice, and our recent decisions in the 
broadband PCS C block, LMDS and 800 MHz SMR services, the Commission 
has determined that installment payments should not be used in the 
immediate future as a means of financing small business participation 
in our auction program. As the Commission indicated in the Second 
Report and Order in the Part 1 docket, the Commission must balance 
competing objectives in Section 309(j) that require, inter alia, that 
it promote the development and rapid deployment of new spectrum-based 
services and ensure that designated entities are given the opportunity 
to participate in the provision of such services. While the Commission 
is not ruling out the possibility that installment payments may return 
as a means of assisting designated entities for other auctionable 
services, their use will be suspended for the foreseeable future until 
the Commission resolves all attendant issues. The Commission has found, 
for example, that obligating licensees to pay for their licenses as a 
condition of receipt requires greater financial accountability from 
applicants. To balance the impact on small businesses of our decision 
to discontinue the use of installment payments, the Commission is 
adopting a higher bidding credit than that adopted in the Second Report 
and Order, as discussed in paragraph 12 below.

C. Bidding Credits

    12. Discussion. The Commission will offer a higher bidding credit 
than that adopted in the Second Report and Order for small businesses. 
Although no commenters addressed this issue, the Commission believes a 
greater bidding credit is appropriate in the absence of installment 
payments, as discussed in Section V(B) above. Consistent with the 
schedule of bidding credits adopted in the Part 1 Third Report and 
Order, the bidding credit for small business applicants in the GWCS 
auction will be 15 percent.

Conclusion

    13. Based on our auction experience, the Commission believes 
bidders in the GWCS auction will benefit from the use of the 
streamlined Part 1 rules. The Commission has adjusted its auction 
procedures for different services as it gained experience with the 
process, resulting in the adoption of different procedures for 
different auctionable services. Therefore, this Fourth Report and Order 
replaces the competitive bidding rules adopted for GWCS with Subpart Q 
of Part 1 of the Commission's rules (47 CFR 1.2101 et seq.) to reflect 
substantive amendments and modifications intended to simplify these 
regulations. The Commission believes that the rules it adopts today 
will benefit GWCS bidders and the GWCS auction process generally.

Ordering Clauses

    14. Accordingly, it is ordered that, pursuant to 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), this 
Fourth Report and Order is hereby adopted, and Part 26, Subparts A, E, 
and F of the Commission's rules are revised as set forth, and become 
effective December 21, 1998.
    15. It is further ordered that pursuant to 47 U.S.C. 155(c) and 47 
CFR 0.131(c) and 0.331, the Chief of the Wireless Telecommunications 
Bureau is granted delegated authority to prescribe and set forth 
procedures as set forth herein, including mechanisms relating to the 
day-to-day conduct of the GWCS auction.
    16. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this 
Fourth Report and Order, including the Final Regulatory Flexibility 
Analysis at Attachment, to the Chief Counsel for Advocacy of the Small 
Business Administration.

[[Page 56576]]

List of Subjects in 47 CFR Part 26

    Competitive bidding procedures, Radio.

Attachment

Final Regulatory Flexibility Analysis (Fourth Report and Order)

    As required by the Regulatory Flexibility Act (``RFA''), an 
Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated 
in the Second Further Notice of Proposed Rule Making in WT Docket 
No. 97-82 and ET Docket No. 94-32. The Commission sought written 
public comment on the proposals in the Second Further Notice of 
Proposed Rule Making, including comment on the IRFA. This Final 
Regulatory Flexibility Analysis (``FRFA'') in this Fourth Report and 
Order (Order) conforms to the RFA, as amended by the Contract With 
America Advancement Act of 1996 (``CWAAA''), Public Law No. 104-121, 
110 Stat. 847 (1996). The Commission received no public comments on 
the IRFA.
    A. Need for, and objectives of, this Order. The General Wireless 
Communications Service (``GWCS'') was created by the Commission on 
July 31, 1995 by transferring 25 MHz of spectrum in the 4660-4685 
MHz band from the federal government to private sector use. This 
Order replaces most of the auction rules adopted in 1995 for GWCS 
with the streamlined Part 1 rules. With regard to auction provisions 
for designated entities, the Commission simplifies the definition of 
``small business,'' eliminates installment payments, and increases 
the bidding credit. While retaining the $40 million definition of 
``small business,'' the Commission will use the Part 1 definitions 
of gross revenues and affiliate for determining the small business 
status of GWCS applicants. The Commission believes that these rule 
changes will further simplify and streamline the rules and 
regulations and increase the overall efficiency of the competitive 
bidding process for GWCS.
    B. Summary of significant issues raised by public comments in 
response to the IRFA. The Commission received no comments in 
response to the IRFA.
    C. Description and estimate of the number of small entities to 
which the proposed rules will apply. The Commission is required to 
provide a description of and, where feasible, an estimate of the 
number of small entities that may be affected by the rules here 
adopted. The RFA generally defines the term ``small entity'' as 
having the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' A small 
organization is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, there are 275,801 small organizations. ``Small 
governmental jurisdiction'' generally means ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than 50,000.'' As of 1992, 
there were 85,006 such jurisdictions in the United States.
    In addition, the term ``small business'' has the same meaning as 
the term ``small business concern'' under Section 3 of the Small 
Business Act. 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) meets any 
additional criteria established by the Small Business Administration 
(``SBA''). The Commission sought and obtained SBA approval of a 
refined definition of ``small business'' for GWCS. According to this 
definition, a small business is any entity, together with its 
affiliates and entities holding controlling interests in the entity, 
that has average annual gross revenues over the three preceding 
years that are not more than $40 million.
    The Commission will offer 875 geographic area licenses, based on 
Economic Areas, for GWCS. In estimating the number of small entities 
that may participate in the GWCS auction, the Commission anticipates 
that the makeup of current wireless services licensees is 
representative of future auction winning bidders.
    D. Description of reporting, recordkeeping, and other compliance 
requirements. The Order adopts no additional compliance requirements 
for auction participation. As noted previously in this docket, 
however, all GWCS license applicants will be subject to reporting 
and recordkeeping requirements to comply with the competitive 
bidding rules. Specifically, applicants will apply for the GWCS 
auction by filing a short-form application and will file a long-form 
application 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, its affiliates, and certain investors in the applicant.
    E. Steps taken to minimize significant economic impact on small 
entities, and significant alternatives considered. Among other 
goals, Section 309(j) of the Communications Act of 1934, as amended, 
47 U.S.C. Section 309(j), directs the Commission to disseminate 
licenses among a wide variety of applicants, including small 
businesses and other designated entities. At the same time, Section 
309(j) requires that the Commission ensure the development and rapid 
deployment of new technologies, products, and services for the 
benefit of the public, and recover for the public a portion of the 
value of the public spectrum resource made available for commercial 
use.
    The Commission received no comments with respect to the issue of 
eliminating installment payments for GWCS. The Commission has 
determined, consistent with its decision to suspend the use of 
installment payments for the immediate future, that installment 
payments should not be offered in the GWCS auction as a means of 
financing small businesses and other designated entities. The 
Commission notes that installment payments are not the only tool 
available to assist small businesses, and that section 3007 of the 
Balanced Budget Act requires that the Commission conduct certain 
future auctions in a manner that ensures that all proceeds from such 
bidding are deposited in the U.S. Treasury not later than September 
30, 2002.
    In assessing the public interest, the Commission must try to 
ensure that all the objectives of Section 309(j) are considered. In 
this Order, the Commission adopts the Part 1 uniform definitions of 
``gross revenues'' and ``affiliate'' for GWCS; eliminates the use of 
installment payments for GWCS; provides for a higher bidding credit, 
in lieu of installment payments, to encourage and facilitate the 
participation of designated entities in future auctions; and adopts 
the Part 1 unjust enrichment rule. With respect to the attribution 
rules for GWCS, the Commission adopts a ``controlling interest'' 
standard. Under this standard, determination of eligibility for 
small business provisions would be made by attributing the gross 
revenues only of principals of the applicant who exercise both ``de 
jure'' and ``de facto'' control, and their affiliates. The 
Commission believes the standard is sufficient to calculate size so 
that only those entities truly meriting small business status 
qualify for bidding credits. The Commission chooses not to impose a 
minimum equity requirement for the GWCS auction. The Commission 
wants rules that provide for the greatest flexibility in business 
structuring.
    By this Order, the Commission applies to GWCS the general 
auction rules contained in Part 1 of its rules. These rules include 
a uniform definition of major amendments to the short-form 
application; general ownership disclosure requirements; a provision 
to refund upfront payments before the end of an auction to bidders 
that lose eligibility; uniform default rules; a rule that permits 
auction winners who have submitted a timely down payment to submit 
final payments 10 business days after the applicable deadline, 
provided the appropriate late fee is paid; a rule that modifies the 
attributable investor threshold of the anti-collusion rule to 
include controlling interests and/or holders of a 10 percent or 
greater interest in the applicant and to permit an entity that has 
invested in an applicant that withdraws from an auction to invest in 
other applicants that have applied to bid in the same markets; and 
permits all auction winners to begin construction at their own risk 
upon issuance of a public notice announcing the auction winners.
    The Balanced Budget Act of 1997 provides for shortened periods 
for the filing of petitions to deny and for the grant of licenses. 
Under this provision, the Commission is permitted to grant any 
application for authorization assigned under competitive bidding not 
earlier than seven days following public notice that an application 
has been accepted for filing, and may specify a period of not less 
than five days for filing petitions to deny. The Commission received 
no comments on its proposal to truncate the petition to deny period 
for GWCS. After the Commission announces that long form applications 
have been accepted for filing, it will announce by Public Notice the 
length of the period for filing petitions to deny. Finally, 
consistent with the Part 1 Third Report and Order, the Commission 
directs the Wireless

[[Page 56577]]

Telecommunications Bureau to establish day-to-day auction conduct 
procedures for the GWCS auction. These procedures include upfront 
payment determination, activity requirements for each stage of the 
auction, activity rule waivers, criteria for determining reductions 
in eligibility, information regarding bid withdrawal and bid 
removal, stopping rules, and information relating to auction delay, 
suspension, or cancellation.
    The Commission believes that the objectives of section 309(j) 
are met by the rule changes in this Order. In addition, this Order 
serves the public interest by simplifying regulations, eliminating 
unnecessary rules, increasing the efficiency of the competitive 
bidding process, and providing more specific guidance to auction 
participants while also giving them more flexibility.
    The Commission will send a copy of the Order, including this 
FRFA, in a report to be sent 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 
Order, including the FRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. A copy of the Order and FRFA (or 
summaries thereof) will also be published in the Federal Register. 
See 5 U.S.C. 604(b).

Rule Changes

    Part 26 of Title 47 of the Code of Federal Regulations is amended 
to read as follows:

PART 26--GENERAL WIRELESS COMMUNICATIONS SERVICE

    1. The authority citation for Part 26 continues to read as follows:

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

    2. Amend Sec. 26.4 by adding the definitions of ``Affiliate'' and 
``Controlling interest'' and revise the definitions of ``Gross 
revenues,'' ``Rural telephone company,'' and ``Small business: 
consortium of small businesses,'' to read as follows.


Sec. 26.4  Terms and definitions.

    Affiliate. See Sec. 1.2110(b)(4) of this chapter.
* * * * *
    Controlling interest. (a) For purposes of this section, controlling 
interest includes individuals or entities with both 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:
    (1) The entity constitutes or appoints more than 50 percent of the 
board of directors or management committee;
    (2) The entity has authority to appoint, promote, demote, and fire 
senior executives that control the day-to-day activities of the 
licensee; and
    (3) The entity plays an integral role in management decisions.
    (b) Calculation of certain interests.
    (1) 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.
    (2) Partnership and other ownership interests and any stock 
interest equity, or outstanding stock, or outstanding voting stock 
shall be attributed as specified below.
    (3) 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.
    (4) Non-voting stock shall be attributed as an interest in the 
issuing entity.
    (5) 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.
    (6) 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.
    (7) 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.
    (8) 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), has authority to make 
decisions or otherwise engages in practices or activities that 
determine, or significantly influence:
    (i) The nature or types of services offered by such an applicant or 
licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (9) 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:
    (i) The nature or types of services offered by such an applicant or 
licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
* * * * *
    Gross Revenues. See Sec. 1.2110(m) of this chapter.
* * * * *
    Rural telephone companies. A rural telephone company is any local 
exchange carrier operating entity to the extent that such entity--
    (a) Provides common carrier service to any local exchange carrier 
study area that does not include either
    (1) Any incorporated place of 10,000 inhabitants or more, or any 
part thereof, based on the most recently available population 
statistics of the Bureau of the Census, or
    (2) Any territory, incorporated or unincorporated, included in an 
urbanized area, as defined by the Bureau of the Census as of August 10, 
1993;
    (b) Provides telephone exchange service, including exchange access, 
to fewer than 50,000 access lines;
    (c) Provides telephone exchange service to any local exchange 
carrier study area with fewer than 100,000 access lines; or
    (d) Has less than 15 percent of its access lines in communities of 
more than 50,000 on the date of enactment of the Telecommunications Act 
of 1996.
    Small business: consortium of small businesses.

[[Page 56578]]

    (a) A small business is an entity that, together with its 
affiliates and entities holding controlling interests in the entity, 
has average annual gross revenues that are not more than $40 million 
for the preceding three years.
    (b) A small business consortium is a conglomerate organization 
formed as a joint venture between or among mutually independent 
business firms, each of which individually satisfies the definition of 
a small business. Where an applicant (or licensee) is a consortium of 
small businesses, the gross revenues of each business shall not be 
aggregated.
    (c) Applicants without identifiable controlling interests. 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.
* * * * *
    3. Revise Sec. 26.203 to read as follows:


Sec. 26.203  Competitive bidding mechanisms.

    See Sec. 1.2104 of this chapter.
    4. Remove and reserve section 26.204.
    5. Revise Sec. 26.205 to read as follows:


Sec. 26.205  Bidding application (FCC form 175 and 175-S short-form).

    See Sec. 1.2105 of this chapter.
    6. Revise Sec. 26.206 to read as follows:


Sec. 26.206  Submission of upfront payments and down payments.

    See Sec. 1.2106 of this chapter.
    7. Revise Sec. 26.207 to read as follows:


Sec. 26.207  Long form applications.

    See Sec. 1.2107 of this chapter.
    8. Revise Sec. 26.208 to read as follows:


Sec. 26.208  License grant, denial, default, and disqualification.

    See Sec. 1.2109 of this chapter.
    9. Revise Sec. 26.210 to read as follows:


Sec. 26.210  Provisions for small businesses.

    (a) Bidding credits. A winning bidder that qualifies as a small 
business or a consortium of small businesses may use the bidding credit 
specified in Sec. 1.2110(e)(2)(iii) of this chapter.
    (b) Demonstrating small business qualifications. See Sec. 1.2110(i) 
of this chapter.
    (c) Audits.
    See Sec. 1.2110(l) of this chapter.
    (d) Unjust enrichment.
    See Sec. 1.2111 of this chapter.
    10. Amend Sec. 26.307 by revising paragraphs (a) to read as 
follows:


Sec. 26.307  General application requirements.

    (a) See Sec. 1.2112 of this chapter.
* * * * *


Sec. 26.313  [Removed]

    11. Remove and reserve section 26.313.
    12. Amend Sec. 26.317 by revising paragraph (b) to read as follows:


Sec. 26.317  Public notice period.

* * * * *
    (b) The Commission will not grant an application filed on Form 601 
filed either by a winning bidder or by an applicant whose Form 175 
application is not mutually exclusive with other applicants, until the 
expiration of a period of not less than seven (7) days following the 
issuance of a public notice listing the application, or any major 
amendments thereto, as acceptable for filing. See also Sec. 1.2108 of 
this chapter.
* * * * *
    13. Revise Sec. 26.320 to read as follows:


Sec. 26.320  Opposition to applications.

    See Sec. 1.2108 of this chapter.

[FR Doc. 98-28132 Filed 10-21-98; 8:45 am]
BILLING CODE 6712-01-P