Waiver of Audited Financial Statements and General Application Requirements for the Broadband Personal Communications Services

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[DA 96-705]

Waiver of Audited Financial Statements and General Application

Requirements for the Broadband Personal Communications Services

AGENCY: Federal Communications Commission.

ACTION: Final rule; waiver.

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SUMMARY: Several parties have filed requests for waiver of Sections

24.720 (f) and (g) of the Commission's rules with respect to the long-

form applications (FCC Form 600) to be filed for broadband Personal

Communications Service (PCS) C block licenses. The parties argued that

the requirement that gross revenues and total assets figures disclosed

on the long-form applications be evidenced by audited financial

statement is unduly burdensome. The Commission granted the waivers and

on our own motion extended the waiver to all broadband PCS C block

applicants subject to the requirements of Sections 24.720 (f) and (g)

of the rules. In

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addition, on our own motion, we waived certain ownership information

disclosure requirements of Section 24.813(a) (1), and (2) of the

Commission's rules for all successful broadband PCS C block bidders

filing long-form applications.

EFFECTIVE DATE: May 8, 1996.

FOR FURTHER INFORMATION CONTACT:

James Hedlund at 202-418-0660.

SUPPLEMENTARY INFORMATION: This Order, adopted May 8, 1996 and

released May 8, 1996, is available for inspection and copying during

normal business hours in the FCC Reference Center, Room 239, 1919 M

Street NW., Washington D.C. The complete text may be purchased from the

Commission's copy contractor, International Transcription Services,

Inc., 2100 M Street NW., Suite 140, Washington D.C. 20037 (202) 857-

3800.

Order

By the Chief, Wireless Telecommunications Bureau:

1. Several parties have filed requests for waiver of Sections

24.720 (f) and (g) of the Commission's rules with respect to the long-

form applications (FCC Form 600) to be filed for broadband Personal

Communications Service (PCS) C block licenses. See, e.g., Covington and

Burling Request for Waiver on behalf of unnamed investors in C block

applicants, filed January 26, 1996. The following applicants (many of

which are no longer active bidders in the C block auction) filed

requests for waiver of Section 24.720 (f) and (g) along with their

short-form applications (FCC Form 175) on November 6, 1995: Adilia M.

Aguilar; AirLink, L.L.C.; Airwave Telecommunications, Inc.; BC&D

Partners II, L.L.C.; CHPCS, Inc.; B&P PCS, Inc.; CDL Communications,

Inc.; Horsetooth Communications, Inc.; Glenn Ishihara; Global

Information Technologies, Inc.; James Communications Partners, GP;

Lubbock Radio Paging Service, Inc.; Mid-State Systems, Inc.; New Dakota

Investment Trust; Overland Company, Inc.; PCS Spectrum Partners, L.P.;

R&S PCS, Inc.; Reserve Telephone Company, Inc.; Shawn Capistrano; SPD

CableTel, Inc.; South Central Communications Corporation; Teltrust PCS

of the Intermountain States, Inc.; Teltrust PCS of Utah, Inc.; USA

Microcellular, Inc.; Virginia PCS Alliance Consortium; Whidbey

Telephone Company; William Ingram; Windkeeper Communications, Inc.; and

Wireless PCS, Inc. Generally, the parties argue that the requirement

that gross revenues and total assets figures disclosed on the long-form

applications be evidenced by audited financial statements is unduly

burdensome. Pursuant to delegated authority, we grant the waivers and

on our own motion extend this waiver to all broadband PCS C block

applicants subject to the requirements of Sections 24.720 (f) and (g)

of the Commission's rules. In addition, on our own motion, we waive

certain ownership information disclosure requirements of Sections

24.813(a) (1) and (2) of the Commission's rules for all successful

broadband PCS C block bidders filing long-form applications.

2. Section 24.709(c)(2)(i) of the Commission's rules provides that

each applicant submitting a long-form application shall in an exhibit:

(i) Disclose separately and in the aggregate the gross revenues

and total assets, computed in accordance with paragraphs (a) and (b)

of this section, for each of the following: the applicant; the

applicant's affiliates; the applicant's control group members; the

applicant's attributable investors; and affiliates of its

attributable investors.

Sections 24.720 (f) and (g) of the Commission's rules require that

gross revenues and total assets be evidenced by audited financial

statements under most circumstances:

(f) Gross Revenues. Gross revenues shall mean all income received

by an entity, whether earned or passive, before any deductions are made

for costs of doing business (e.g., cost of goods sold), as evidenced by

audited financial statements for the relevant number of calendar years

preceding January 1, 1994, or, if audited financial statements were not

prepared on a calendar-year basis, for the most completed fiscal years

preceding the filing of the applicant's short-form application (Form

175). For applications filed after December 31, 1995, gross revenues

shall be evidenced by audited financial statements for the preceding

relevant number of calendar or fiscal years. If an entity was not in

existence for all or part of the relevant period, gross revenues shall

be evidenced by the audited financial statements of the entity's

predecessor-in-interest or, if there is no identifiable predecessor-in-

interest, unaudited financial statements certified by the applicant as

accurate.

(g) Total assets. Total assets shall mean the book value (except

where generally accepted accounting principles (GAAP) require market

valuation) of the property owned by an entity, whether real or

personal, tangible or intangible, as evidenced by the most recent

audited financial statements.

3. Although these rules do not require applicants to file audited

financial statements with their long-form applications, they do require

gross revenues and total assets reported on the applications to be

supported by audited financial statements obtained by the applicants.

Several parties contend that for small businesses with limited

resources, obtaining audited financial statements would cause an

extreme financial hardship.

4. We agree that requiring broadband PCS C block applicants with

limited resources to obtain audited financial statements solely for the

purpose of supporting the long-form applications is excessively

burdensome. Thus, we waive the audited financial statements requirement

of Sections 24.720 (f) and (g) of the Commission's rules. With respect

to the filing of long-form applications, we believe that this waiver

will enable the Commission to continue to obtain timely financial data

while providing applicants with some degree of flexibility in their

financial reporting practices. We emphasize, however, that applicants

and their affiliates shall continue to be required to certify the

accuracy of all gross revenue and total assets figures submitted. We

also reserve the right to require licensees to provide audited

financial statements as required by Sections 24.720 (f) and (g) of the

Commission's rules at a later date.

5. Section 24.813(a) of the Commission's rules provides that

broadband PCS auction winners filing the long-form application shall

include in an exhibit, inter alia:

(1) A list of any business five percent or more of whose stock,

warrants, options or debt securities are owned by the applicant or

an officer, director, attributable stockholder or key management

personnel of the applicant. This list must include a description of

each such business's principal business and a description of each

such business's relationship to the applicant.

(2) A list of the party which holds a five percent or more

interest (or a ten percent interest or more interest for

institutional investors as defined in Sec. 24.720(h)) in the

applicant, or an entity in which a five percent or more interest (or

a ten percent interest 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 interest or more

interest for institutional investors as defined in Sec. 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).

6. The former Private Radio Bureau, acting on delegated authority,

waived some of the information disclosure requirements of Section

24.813(a)(1) and 24.813(a)(2) for the short-form applications (FCC Form

175s) filed for the auction of the broadband PCS A and

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B block licenses. The Wireless Telecommunications Bureau (``Bureau'')

later waived the same provisions for the long-form applications for the

auction of the broadband PCS A and B block licenses. These same

provisions also were waived for the short-form applications filed for

the auction of the broadband PCS C block licenses. We find that the

public interest would be served by waiving certain ownership

information disclosure requirements for the long-form applications

filed by the block winning bidders. Specifically, our rules require

applicants to list in their long-form applications all businesses in

which each attributable stockholder owns at least five percent. This

requirement necessitates reporting of interests in firms with no

relation to the licenses auctioned. For many companies, particularly

investment firms with diverse holdings, compliance with this

requirement is extremely burdensome, especially when calculating

indirect ownership interests in outside firms. We believe that, for

purposes of long-form application processing, requiring stockholders in

applicants to report all firms in which they hold an interest of five

percent or more is overly burdensome.

7. The purpose of the PCS ownership disclosure requirements is to

allow the Commission to determine who is the real party in interest, to

determine compliance with the anti-collusion rules, the applicable

spectrum caps, certain ownership restrictions such as the multiple and

cross ownership rules, and the alien ownership restrictions. All

applicants already must certify that they are in compliance with these

regulations, and the applicants themselves should be able to supply the

bulk of the information required by Section 24.813(a) without

significant burden.

8. Consequently, we waive the information disclosure requirement of

Sections 24.813(a)(1) and 24.813(a)(2) of the Commission's rules with

respect to other, outside ownership interests of attributable

stockholders of applicants, except that outside interests of five

percent or more in other land mobile services (i.e., Commercial Mobile

Radio Service licensees or applicants or Private Mobile Radio Service

licensees or applicants) shall be disclosed. Also, all direct or

indirect interests in the applicant that amount to five percent or more

must be reported. All indirect interests held in the applicant should

be computed in accordance with the multiplier approach set forth in 47

CFR Sec. 24.204(d)(viii). Institutional investors need only disclose

direct or indirect interests of ten percent or more in the applicant,

and need to report all outside business interests of five percent or

more in CMRS or PMRS businesses. We reserve the right to ask applicants

for any additional information required by Section 24.813 of the

Commission's rules at a later date. All other long-form reporting

requirements will continue to apply.

9. This Order is not subject to the general notice and comment

requirement of the Administrative Procedure Act, because it concerns

procedural rules, and we are relieving applicants of an administrative

burden as opposed to imposing a reporting burden on them. In addition,

good cause for the waiver is shown. The waiver will expedite the

Commission's ability to process broadband PCS C block applications,

thus expediting the delivery of service to the public.

10. Accordingly, it is ordered That the requirements of Sections

24.720(f) and 24.720(g) of the Commission's rules, 47 CFR

Secs. 24.720(f) and 24.720(g), are waived to the extent described here

with respect to long-form applications (FCC Form 600) for broadband PCS

C block licenses.

11. It is further ordered That the requirements of Sections

24.813(a)(1) and 24.813(a)(2), 47 CFR Secs. 24.813(a)(1) and

24.813(a)(2), are waived to the extent described here with respect to

long-form applications (FCC Form 600) for broadband PCS C block

licenses.

Federal Communications Commission.

Michele C. Farquhar,

Chief, Wireless Telecommunications Bureau.

[FR Doc. 96-12943 Filed 5-22-96; 8:45 am]

BILLING CODE 6712-01-M