Vehicle Monitoring Systems

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 90

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

Vehicle Monitoring Systems

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In the Second Report and Order, the Commission adopts the

general competitive bidding rules and procedures for the auction of

multilateration Location and Monitoring

[[Page 40660]]

Service (LMS) licenses, provides small business definitions and adopts

bidding credits for eligible small businesses. The effect will be to

promote and facilitate the participation of small businesses in the

Commission's auctions and in the provision of spectrum-based services.

The Second Report and Order also adds rules to allow LMS licensees to

partition their geographic licenses and disaggregate portions of their

spectrum.

DATES: Effective September 28, 1998, except for Sec. 90.365(d) which

will become effective January 19, 1999. Public and agency comments

concerning the information collections contained in the Second Report

and Order are due September 28, 1998.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room

222, Washington, D.C. 20554. For comments or inquiries regarding

information collections, direct all correspondence to Les Smith,

Federal Communications Commissions, Room 234, 1919 M St., N.W.,

Washington, DC 20554 or via the Internet at [email protected].

FOR FURTHER INFORMATION CONTACT: Ken Burnley or Mark Bollinger,

Auctions and Industry Analysis Division, Wireless Telecommunications

Bureau, at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and

Order in PR Docket No. 93-61, FCC 98-157, which was adopted on July 9,

1998 and released on July 14, 1998. A copy of the complete item is

available for inspection and copying during normal business hours in

the FCC Reference Center, Room 239, 1919 M Street, N.W., Washington,

D.C. 20554. The complete text may be purchased from the Commission's

copy contractor, International Transcription Service, Inc., 1231 20th

Street, N.W., Washington, D.C. 20036, (202) 857-3800. The complete

Second Report and Order is available on the Commission's Internet home

page (http://www.fcc.gov).

SUMMARY OF ACTION:

I. Introduction

1. The Federal Communications Commission (Commission) has adopted a

Second Report and Order stating rules and procedures governing

competitive bidding for multilateration Location and Monitoring Service

(LMS) frequencies.

A. Competitive Bidding Design and Procedures

2. In Amendment of Part 90 of the Commission's Rules to Adopt

Regulations for Automatic Vehicle Monitoring Systems, Memorandum

Opinion and Order and Further Notice of Proposed Rule Making, PR Docket

No. 93-61, 62 FR 52078, October 6, 1997 (``LMS Further Notice''), the

Commission proposed to use the general competitive bidding rules found

in subpart Q of part 1 of the Commission's rules as the auction rules

for LMS.

3. The Commission adopts the proposal to follow the competitive

bidding procedures contained in Subpart Q of Part 1 of the Commission's

Rules, including those adopted in Amendment of Part 1 of the

Commission's Rules--Competitive Bidding Procedures, WT Docket No. 97-

82, Allocation of Spectrum Below 5 GHz Transferred from Federal

Government Use, ET Docket No. 94-32, Third Report and Order and Second

Further Notice of Proposed Rule Making, 63 FR 2315, January 15, 1998

(``Part 1 Third Report and Order''). Consistent with this, matters such

as the appropriate competitive bidding design for the auction of LMS

licenses, as well as minimum opening bids and reserve prices, will be

determined by the Wireless Telecommunications Bureau (``Bureau'')

pursuant to its delegated authority.

B. Treatment of Designated Entities

4. In the LMS Further Notice, the Commission acknowledged that it

has consistently established ``small business'' definitions on a

service-by-service basis, and proposed to establish definitions for the

multilateration LMS. For purposes of LMS, the Commission defines a

``small business'' as an entity with average annual gross revenues for

the preceding three years not to exceed $15 million, and a ``very small

business'' is an entity with average annual gross revenues for the

preceding three years not to exceed $3 million. The bidding credits for

these small business definitions will be consistent with levels adopted

in the Part 1 proceeding. Accordingly, small businesses will receive a

25 percent bidding credit, and very small businesses will receive a 35

percent bidding credit. Bidding credits for small businesses are not

cumulative.

5. The Commission adopts, with a slight modification, our tentative

conclusion to attribute the gross revenues of the applicant, its

controlling principals and their affiliates. Specifically, the rule

refers to ``controlling interests'' rather than ``controlling

principals,'' and provides a definition of ``controlling interest'' to

clarify the application of the attribution rule in determining whether

an entity qualifies to bid as a small business. In calculating gross

revenues for purposes of small business eligibility, applicants will be

required to count the gross revenues of the controlling interests of

the applicant and their affiliates. A ``controlling interest'' includes

individuals or entities with de jure and de facto control of the

applicant. De jure control is 50.1% of the voting stock of a

corporation or, in the case of a partnership, the general partners. De

facto control is determined on a case-by-case basis. The ``controlling

interest'' definition also provides specific guidance on calculation of

various types of ownership interests.

6. When an applicant cannot identify controlling interests under

the definition, the revenues of all interest holders in the applicant

and their affiliates will be counted. For example, if a company is

owned by four entities, each of which has twenty-five percent voting

equity and no shareholders' agreement or voting trust gives any one of

them control of the company, the revenues of all four entities must be

counted. This approach is consistent with our treatment of a general

partnership--all general partners are considered to have a controlling

interest. This rule looks to substance over form in assessing

eligibility for small business status and will provide flexibility that

will enable legitimate small businesses to attract passive financing in

a highly competitive and evolving telecommunications marketplace. The

Commission emphasizes that bidders will be subject to the ownership

disclosure requirements set forth in 47 CFR 1.2112.

7. The Commission extends the amount of time for all LMS auction

winners to satisfy their construction requirements. Multilateration LMS

Economic Area (EA) licensees will be required to construct and place in

operation a sufficient number of base stations that utilize

multilateration technology to provide multilateration service to one-

third of the EA's population within five years of initial license

grant, and two thirds of the population within ten years. In

demonstrating compliance with the construction and coverage

requirements, licensees may individually determine an appropriate field

strength for reliable service, taking into account the technologies

employed in their system design and other relevant technical factors.

At the five- and ten-year benchmarks, licensees will be required to

file with the Commission a map and other supporting documentation

showing compliance with the coverage requirements.

[[Page 40661]]

C. Partitioning and Disaggregation and Unjust Enrichment Provisions

8. The Commission has previously adopted or proposed to adopt

partitioning and disaggregation rules for many of the Commercial Mobile

Radio Services (CMRS), and now adopts rules to allow multilateration

LMS licensees to partition their geographic license areas and

disaggregate portions of their spectrum in the same general manner as

in other CMRS services. Multilateration LMS licensees may partition or

disaggregate to any party eligible to be a multilateration LMS

licensee. Further, licensees may partition along any service area

defined by the parties. These decisions will permit marketplace forces

to determine the most suitable service areas, and will further the goal

of regulatory parity among CMRS services. Partitioning and

disaggregation will allow auction winners to customize their LMS

systems in a manner that will best address their business plans and

will help remove entry barriers for small businesses.

9. To ensure that partitioning and disaggregation do not result in

circumvention of our LMS construction requirements, the Commission

adopts the dual construction requirements for partitioning and the

construction certification procedure for disaggregation used in the

broadband Personal Communications Service (PCS). Under the first option

for partitioning, the partitionee must certify that it will meet the

same coverage requirements as the original licensee for its partitioned

market. If the partitionee fails to meet its coverage requirement, the

license for the partitioned area will automatically cancel without

further Commission action. Under the second option, the original

licensee must certify that it has already met or will meet its coverage

requirement. Further, parties seeking Commission approval of an LMS

disaggregation agreement must include a certification as to which party

will be responsible for meeting the construction requirements.

10. In cases of partitioning, the Commission requires sufficient

information to maintain our licensing records. Therefore, consistent

with our treatment of the Wireless Communication Service (WCS) and the

800 MHz and 900 MHz Specialized Mobile Radio (SMR) services,

partitioning applicants will be required to submit, as separate

attachments to the partial assignment application, a description of the

partitioned service area and a calculation of the population of the

partitioned service area and licensed market. The partitioned service

area must be defined by coordinate points at every three degrees along

the partitioned service area agreed to by both parties, unless county

lines are followed. These geographical coordinates must be specified in

degrees, minutes and seconds to the nearest second of latitude and

longitude, and must be based upon the 1927 North American Datum

(NAD27). Applicants also may supply geographical coordinates based on

1983 North American Datum (NAD83) in addition to those required based

on NAD27. This coordinate data should be supplied as an attachment to

the partial assignment application, and maps need not be supplied. In

cases where county lines are being utilized, applicants need only list

the counties that make up the newly partitioned area.

11. Consistent with our rules for broadband PCS, WCS and the 800

MHz and 900 MHz SMR services, disaggregating parties may negotiate

channelization plans among themselves as a part of their disaggregation

agreements. In addition, LMS licensees shall be permitted to

disaggregate spectrum without limitation on the overall size of the

disaggregation as long as such disaggregation is otherwise consistent

with our rules.

12. Also consistent with the rules for broadband PCS, WCS and the

800 MHz and 900 MHz SMR services, LMS licensees may use combined

partitioning and disaggregation. This will allow LMS licensees the

flexibility to design the types of agreements they desire, encourage

new market entrants and ensure quality service to the public. In the

event that there is a conflict in the application of the partitioning

and disaggregation rules, the partitioning rules shall prevail.

13. The Commission adopts its proposal to prevent possible unjust

enrichment through partitioning or disaggregation. Accordingly, the

Part 1 unjust enrichment provisions will apply for LMS. These rules are

similar to unjust enrichment rules adopted for the 800 MHz SMR auction

for determining the actual proportion of bidding credit to be refunded

and reduce the amount of unjust enrichment payments due on transfer

based upon the amount of time the initial license has been held. In

addition, when a combination of partitioning and disaggregation is

proposed, these pro rata calculations will be based on both the

population of the partitioned area and the amount of spectrum

disaggregated.

II. Regulatory Flexibility Act

14. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.

603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated

in the Memorandum Opinion and Order and Further Notice of Proposed Rule

Making. See Amendment of Part 90 of the Commission's Rules to Adopt

Regulations for Automatic Vehicle Monitoring Systems, PR Docket No. 93-

61, Memorandum Opinion and Order and Further Notice of Proposed Rule

Making, 62 FR 52078, October 6 , 1997 (``Further Notice''). The

Commission sought written public comment on the proposals in the

Further Notice, including comment on the IRFA. The present Final

Regulatory Flexibility Analysis (FRFA) conforms to the RFA. See 5

U.S.C. 604.

A. Need for, and Objectives of, the Second Report and Order in PR

Docket 93-61

15. The adopted provisions are based on the competitive bidding

authority of Section 309(j) of the Communications Act of 1934, as

amended, 47 U.S.C. 309(j), which authorized the Commission to use

auctions to select from among mutually exclusive initial applications

in certain services, including multilateration LMS.

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

to the IRFA

16. There were no comments filed directly in response to the IRFA;

however, the Commission received 2 comments in response to the Further

Notice.

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

Rules Will Apply

17. The applicable definition under SBA rules of a small entity is

the definition under the rules applicable to radiotelephone (wireless)

companies. This provides that a small entity is a radiotelephone

company employing no more than 1,500 persons. According to the Bureau

of the Census, only twelve radiotelephone firms out of a total of 1,178

such firms which operated during 1992 had 1,000 or more employees. 1992

Census, Series UC92-S-1, at Table 5, SIC code 4812. Therefore, using

such data, even if all twelve of these firms were LMS companies, nearly

all such carriers were small businesses under the SBA's definition.

18. In the Second Report and Order, the Commission has adopted more

refined definitions for small business categories. The definition of a

``small business'' is an entity with average annual gross revenues for

the preceding three years not to exceed $15 million. The definition of

a ``very small

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business'' is an entity with average annual gross revenues for the

preceding three years not to exceed $3 million. The Commission is

seeking SBA approval for these new LMS size standards. See also Second

Report and Order, n. 47.

19. As noted in the Second Report and Order, there are 528 licenses

to be awarded in the upcoming auction. New entrants could obtain

multilateration LMS licenses through the competitive bidding procedure,

and take the opportunity to partition and/or disaggregate a license or

obtain an additional license through partitioning or disaggregation.

Additionally, entities that are neither incumbent licensees nor

geographic area licensees could enter the market by obtaining a

multilateration LMS license through partitioning or disaggregation.

20. The Commission cannot estimate how many licensees or potential

licensees could take the opportunity to partition and/or disaggregate a

license or obtain a license through partitioning and/or disaggregation,

because it has not yet determined the size or number of multilateration

LMS licenses that will be granted in the future. Therefore, the number

of small entities that will be affected is unknown. Given the fact that

no reliable estimate of the total number of future multilateration LMS

licensees can be made, the Commission assumes for purposes of this FRFA

that all of the licenses will be awarded to small businesses.

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

Compliance Requirements.

21. The rules and provisions adopted in the Second Report and Order

include the possibility of new reporting and recordkeeping requirements

for a number of small business entities:

22. Competitive Bidding Applications. LMS license applicants will

be subject to reporting and recordkeeping requirements to comply with

the competitive bidding rules. Specifically, applicants will apply for

LMS licenses by filing a short-form application (FCC Form 175), and

will file a long-form application (FCC Form 601) at the conclusion of

the auction. Additionally, entities seeking treatment as small

businesses will need to submit information pertaining to the gross

revenues of the small business applicant and its affiliates and certain

investors in the applicant.

23. Construction Requirements. The proposals in the Second Report

and Order include reporting and recordkeeping requirements for new LMS

licensees to establish compliance with the coverage requirements. See

Second Report and Order, para. 30.

24. Geographic Partitioning and Spectrum Disaggregation. The

proposals in the Second Report and Order include reporting and

recordkeeping requirements for small businesses seeking licenses

through the proposed partitioning and disaggregation rules. The

information requirements would be used to determine whether the

licensee is a qualifying entity to obtain partitioned or disaggregated

spectrum. This information will be a one-time filing by any applicant

requesting such a license.

E. Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

25. The Second Report and Order adopts certain provisions for

smaller entities designed to ensure that such entities have the

opportunity to participate in the competitive bidding process and in

the provision of multilateration LMS services. The Commission

anticipates that most LMS licensees will fit the definition of small

business or very small business.

26. Small Business Definitions and Bidding Credits. The Commission

adopts two small business categories for the LMS auction: (1) a ``small

business'' category, for businesses with average gross revenues of over

$3 million but not to exceed $10 million; and (2) a ``very small

business'' category, for businesses with average gross revenues not to

exceed $3 million. These adopted categories will be based on the gross

revenues of the business for the three years preceding the filing of

the entity's application. The Commission will rely solely on gross

revenues, and not the number of employees, for the purpose of

determining an entity's eligibility for small incentives.

27. Attribution of Gross Revenues and Affiliates. The Commission

adopted a ``controlling interest'' standard as the general attribution

rule for all future auctions. The Commission believes that these

definitions are consistent with its proposals in the Part 1 Third

Report and Order. 63 FR at 2315.

28. Partitioning and Disaggregation. With respect to partitioning

and disaggregation, the Commission concludes that unjust enrichment

provisions should apply when a licensee has benefitted from the small

business provisions in the auction rules and applies to partition or

disaggregate a portion of the geographic license area to another entity

that would not qualify for such benefits.

F. Report to Congress

29. The Commission shall send a copy of the Second Report and

Order, including the FRFA, in a report to Congress pursuant to the

Small Business Regulatory Enforcement Fairness Act of 1996. See 5

U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of

the Second Report and Order, including FRFA, to the Chief Counsel for

advocacy of the Small Business Administration.

III. Ordering Clauses

30. Accordingly, it is ordered that part 90 of the Commission's

Rules is amended and will become effective September 28, 1998. It is

further ordered that 47 CFR 90.365(d) of the Commission's Rules is

amended and will become effective January 19, 1999.

31. Authority for issuance of this Second Report and Order is

contained in Sections 4(i), 257, 303(r), and 309(j) of the

Communications Act of 1934, as amended, 47 U.S.C. 154(i), 257, 303(r),

and 309(j).

32. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Second Report and Order, including the Final Regulatory Flexibility

Analysis, to the Chief Counsel for Advocacy of the Small Business

Administration.

Paperwork Reduction Act Analysis

33. The Second Report and Order contains an information collection.

The Federal Communications Commissions, as part of its continuing

effort to reduce paperwork burden invites the general public and other

Federal agencies to take this opportunity to comment on the following

information collection, as required by the Paperwork Reduction Act of

1995, Public Law 104-13. An agency may not conduct or sponsor a

collection of information unless it displays a currently valid control

number. No person shall be subject to any penalty for failing to comply

with a collection of information subject to the Paperwork Reduction Act

(PRA) that does not display a valid control number. Comments are

requested concerning (a) whether the collection of information is

necessary for the proper performance of the functions of the

Commission, including whether the information shall have practical

utility; (b) the accuracy of the Commission's burden estimate; (c) ways

to enhance the quality, utility, and clarity of the information

collected; and (d) ways to minimize the burden of the collection of

information on the respondents, including the use of automated

collection techniques or other forms of information technology.

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Supplementary information:

OMB Approval Number: 3060-XXXX.

Title: Construction requirements.

Form No.: N/A

Type of Review: New collection for construction period buildout

requirements.

Respondents: Business and other for-profit entities, individuals or

households, State, Federal or Tribal Governments, Not-for-profit

entities.

Number of Respondents: 528.

Estimated Time for Response: Estimated total time for response

would be 52 hours per respondent for analysis of license records,

conducting the appropriate engineering surveys and studies, and

preparation of maps displaying the service area contour of the

licensee.

Frequency of Response: On occasion.

Total Annual Burden: 27,456 hours. 52 hours by 528 respondents.

Needs and Uses: Engineering surveys and prepared maps displaying

the service area contour of the licensee. Surveys and maps will be used

to evaluate licensee's service area boundary and coverage. Licensee's

boundary and coverage will then be compared against the construction

buildout requirements for the service.

DATES: Persons wishing to comment on this information collection should

submit comments by September 28, 1998.

ADDRESSES: Direct all comments to Les Smith, Federal Communications

Commissions, Room 234, 1919 M St., N.W., Washington, DC 20554 or via

the Internet at [email protected].

FOR FURTHER INFORMATION CONTACT: For additional information or copies

of the information collections contact Les Smith at (202) 418-0217 or

via the Internet at [email protected]. For all other questions contact

Ken Burnley, Auctions and Industry Analysis Division, Wireless

Telecommunications Bureau, at (202) 418-0660.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Chapter I of Title 47 of the Code of Federal Regulations, part 90,

is amended as follows:

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

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

Authority: Secs. 4, 251-2, 303, 309, and 332, 48 Stat. 1066,

1082, as amended; 47 U.S.C. 154, 251-2, 303, 309 and 332, unless

otherwise noted.

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

follows:

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

* * * * *

(d) Multilateration LMS EA-licensees, authorized in accordance with

Sec. 90.353, must construct and place in operation a sufficient number

of base stations that utilize multilateration technology (see paragraph

(e) of this section) to provide multilateration location service to

one-third of the EA's population within five years of initial license

grant, and two-thirds of the population within ten years. In

demonstrating compliance with the construction and coverage

requirements, the Commission will allow licensees to individually

determine an appropriate field strength for reliable service, taking

into account the technologies employed in their system design and other

relevant technical factors. At the five and ten year benchmarks,

licensees will be required to file a map and other supporting

documentation showing compliance with the coverage requirements.

* * * * *

3. Section 90.365 is added to subpart M to read as follows:

Sec. 90.365 Partitioned licenses and disaggregated spectrum.

(a) Eligibility--(1) Parties seeking approval for partitioning and

disaggregation shall request an authorization for partial assignment of

a license pursuant to Sec. 90.153.

(2) Multilateration LMS licensees may apply to partition their

licensed geographic service area or disaggregate their licensed

spectrum at any time following the grant of their licenses.

Multilateration LMS licensees may partition or disaggregate to any

party that is also eligible to be a multilateration LMS licensee.

Partitioning is permitted along any service area defined by the

parties, and spectrum may be disaggregated in any amount. The

Commission will also consider requests for partial assignment of

licenses that propose combinations of partitioning and disaggregation.

(b) Technical Requirements--In the case of partitioning, requests

for authorization for partial assignment of a license must include, as

attachments, a description of the partitioned service area, and a

calculation of the population of the partitioned service area and the

licensed geographic service area. The partitioned service area shall be

defined by coordinate points at every three degrees along the

partitioned service area unless county lines are followed. The

geographic coordinates must be specified in degrees, minutes, and

seconds to the nearest second of latitude and longitude and must be

based upon the 1927 North American Datum (NAD27). Applicants may supply

geographical coordinates based on 1983 North American Datum (NAD83) in

addition to those required based on NAD27. In the case where county

lines are utilized, applicants need only list the specific area(s)

(through use of county names) that constitute the partitioned area.

(c) License term. The license term for a partitioned license area,

and for disaggregated spectrum shall be the remainder of the original

licensee's license term.

(d) Construction requirements--(1) Requirements for partitioning.

(i) Parties seeking authority to partition must meet one of the

following construction requirements:

(A) The partitionee may certify that it will satisfy the applicable

construction requirements for the partitioned license area; or

(B) The original licensee may certify that it has or will meet the

construction requirement for the entire license area.

(ii) Applications requesting authority to partition must include a

certification by each party as to which of the above construction

options they select.

(iii) Failure by any partitionee to meet its respective

construction requirements will result in the automatic cancellation of

the partitioned or disaggregated license without further Commission

action.

(2) Requirements for disaggregation. Parties seeking authority to

disaggregate must submit with their partial assignment application a

certification signed by both parties stating which of the parties will

be responsible for meeting the construction requirement for the

licensed market. Parties may agree to share responsibility for meeting

the construction requirements. Parties that accept responsibility for

meeting the construction requirements and later fail to do so will be

subject to license forfeiture without further Commission action.

4. Add a new subpart X to read as follows:

Subpart X--Competitive Bidding Procedures for Location and

Monitoring Service

Sec.

90.1101 Location and Monitoring Service subject to competitive

bidding.

90.1103 Designated entities.

[[Page 40664]]

Subpart X--Competitive Bidding Procedures for Location and

Monitoring Service

Sec. 90.1101 Location and Monitoring Service subject to competitive

bidding.

Mutually exclusive initial applications for multilateration

Location and Monitoring Service licenses are subject to competitive

bidding procedures. The procedures set forth in part 1, subpart Q of

this chapter will apply unless otherwise provided in this part.

Sec. 90.1103 Designated entities.

(a) This section addresses certain issues concerning designated

entities in the Location and Monitoring Service (LMS) subject to

competitive bidding. Issues that are not addressed in this section are

governed by the designated entity provisions in part 1, subpart Q of

this chapter.

(b) Eligibility for small business provisions.

(1) A small business is an entity that, together with its

affiliates and controlling interests, has average gross revenues not to

exceed $15 million for the preceding three years.

(2) A very small business is an entity that, together with its

affiliates and controlling interests, has average gross revenues not to

exceed $3 million for the preceding three years.

(3) For purposes of determining whether an entity meets either of

the definitions set forth in paragraph (b)(1) or (b)(2) of this

section, the gross revenues of the entity, its affiliates, and

controlling interests shall be considered on a cumulative basis and

aggregated.

(4) Where an applicant (or licensee) cannot identify controlling

interests under the standards set forth in this section, the gross

revenues of all interest holders in the applicant, and their

affiliates, will be attributable.

(5) A consortium of small businesses (or a consortium of very small

businesses) is a conglomerate organization formed as a joint venture

between or among mutually independent business firms, each of which

individually satisfies the definition in paragraph (b)(1) of this

section (or each of which individually satisfies the definition in

paragraph (b)(2) of this section). Where an applicant or licensee is a

consortium of small businesses (or very small businesses), the gross

revenues of each small business (or very small business) shall not be

aggregated.

(c) Controlling interest. (1) For purposes of this section,

controlling interest includes individuals or entities with de jure and

de facto control of the applicant. De jure control is greater than 50

percent of the voting stock of a corporation, or in the case of a

partnership, the general partner. De facto control is determined on a

case-by-case basis. An entity must disclose its equity interest and

demonstrate at least the following indicia of control to establish that

it retains de facto control of the applicant:

(i) the entity constitutes or appoints more than 50 percent of the

board of directors or management committee;

(ii) the entity has authority to appoint, promote, demote, and fire

senior executives that control the day-to-day activities of the

licensee; and

(iii) the entity plays an integral role in management decisions.

(2) Calculation of certain interests.

(i) Ownership interests shall be calculated on a fully diluted

basis; all agreements such as warrants, stock options and convertible

debentures will generally be treated as if the rights thereunder

already have been fully exercised.

(ii) Partnership and other ownership interests and any stock

interest equity, or outstanding stock, or outstanding voting stock

shall be attributed as specified below.

(iii) Stock interests held in trust shall be attributed to any

person who holds or shares the power to vote such stock, to any person

who has the sole power to sell such stock, and, to any person who has

the right to revoke the trust at will or to replace the trustee at

will. If the trustee has a familial, personal, or extra-trust business

relationship to the grantor or the beneficiary, the grantor or

beneficiary, as appropriate, will be attributed with the stock

interests held in trust.

(iv) Non-voting stock shall be attributed as an interest in the

issuing entity.

(v) Limited partnership interests shall be attributed to limited

partners and shall be calculated according to both the percentage of

equity paid in and the percentage of distribution of profits and

losses.

(vi) Officers and directors of an entity shall be considered to

have an attributable interest in the entity. The officers and directors

of an entity that controls a licensee or applicant shall be considered

to have an attributable interest in the licensee or applicant.

(vii) Ownership interests that are held indirectly by any party

through one or more intervening corporations will be determined by

successive multiplication of the ownership percentages for each link in

the vertical ownership chain and application of the relevant

attribution benchmark to the resulting product, except that if the

ownership percentage for an interest in any link in the chain exceeds

50 percent or represents actual control, it shall be treated as if it

were a 100 percent interest.

(viii) Any person who manages the operations of an applicant or

licensee pursuant to a management agreement shall be considered to have

an attributable interest in such applicant or licensee if such person,

or its affiliate pursuant to Sec. 1.2110(b)(4) of this chapter, has

authority to make decisions or otherwise engage in practices or

activities that determine, or significantly influence,

(A) The nature or types of services offered by such an applicant or

licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

(ix) Any licensee or its affiliate who enters into a joint

marketing arrangement with an applicant or licensee, or its affiliate,

shall be considered to have an attributable interest, if such applicant

or licensee, or its affiliate, has authority to make decisions or

otherwise engage in practices or activities that determine, or

significantly influence,

(A) The nature or types of services offered by such an applicant or

licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

(d) A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in paragraph (b)(1) or (b)(5)

of this section may use the bidding credit specified in

Sec. 1.2110(e)(2)(ii) of this chapter. A winning bidder that qualifies

as a very small business or a consortium of very small businesses as

defined in paragraph (b)(2) or (b)(5) of this section may use the

bidding credit specified in Sec. 1.2110(e)(2)(i) of this chapter.

[FR Doc. 98-20460 Filed 7-29-98; 8:45 am]

BILLING CODE 6712-01-P