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

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