$//La Star Cellular (New Orleans LA) cell. CP CC 90-257 FCC 94- 299//$ $/500.3135 real party in interest/$ FCC 94-299 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Applications of ) CC DOCKET NO. 90-257 ) LA STAR CELLULAR ) File No. 27161-CL-P-83 TELEPHONE COMPANY ) ) For construction permit for ) facilities operating on Block B ) in the Domestic Public ) Cellular Radio ) Telecommunications Service in ) the New Orleans, Louisiana MSA ) ) and ) ) NEW ORLEANS CGSA, INC. ) File No. 29010-CL-P-83 ) File No. 29181-CL-P-85 To amend its construction ) permit for facilities ) operating on Block B in the ) Domestic Public Cellular ) Radio Telecommunications ) Service, Call Sign KNK224, in ) the New Orleans, Louisiana MSA ) MEMORANDUM OPINION AND ORDER Adopted: November 18, 1994; Released: November 28, 1994 By the Commission: I. INTRODUCTION 1. This memorandum opinion and order reaffirms the dismissal of the application of La Star Cellular Telephone Company (La Star) to construct a cellular telephone system. We find that La Star is ineligible to operate a system on frequency Block B (the wireline block) in this market. We take this action pursuant to a decision by the United States Court of Appeals for the District of Columbia Circuit vacating and remanding for further proceedings our prior decision dismissing La Star's application. La Star Cellular Telephone Co., 7 FCC Rcd 3762 (1992), vacated and remanded sub nom. Telephone and Data Systems, Inc. v. FCC, 19 F.3d 655 (D.C. Cir. 1994). II. COMMISSION DECISION 2. In this proceeding, New Orleans CGSA, Inc. (NOCGSA), which holds a license to operate a cellular telephone system on frequency Block B in the New Orleans MSA, seeks to extend its geographic service area into St. Tammany Parish, Louisiana. La Star Cellular Telephone Company (La Star) filed a mutually exclusive application to operate a cellular system in St. Tammany Parish. 3. The Commission, affirming an initial decision by Administrative Law Judge Joseph Chachkin, dismissed La Star's application as unacceptable for filing. La Star Cellular Telephone Co., 6 FCC Rcd 6860 (I.D. 1991), aff'd, 7 FCC Rcd 3762 (1992). The Commission found that La Star is ineligible to file for frequency Block B (the wireline block) because it is not controlled by a wireline carrier with a presence in the cellular market as required by 47 C.F.R.  22.902(b). 4. La Star is a joint venture owned 51 percent by SJI Cellular, Inc. (SJI) and 49 percent by Star Cellular Telephone Co. (Star). SJI's parent company, SJI, Inc., also owns a telephone company serving a portion of the New Orleans MSA. SJI is therefore eligible to apply for frequency Block B in the New Orleans MSA. By contrast, neither Star's parent company, United States Cellular Company (USCC), nor USCC's parent, Telephone and Data Systems, Inc. (TDS), is eligible to apply in New Orleans. The Commission found that USCC, not SJI, controls La Star, making La Star ineligible. 5. In finding La Star ineligible, the Commission adopted in substance findings by the ALJ concerning the formation of La Star and the prosecution of its application. The Commission found that these circumstances demonstrated the dominant role played by USCC and previously by Maxcell Telecom Plus (Maxcell), USCC's predecessor-in-interest as the 49 percent owner of La Star. 6. These findings (7 FCC Rcd at 3762-64  4-19) indicated that Maxcell took the initiative in the formation of La Star and the preparation and prosecution of La Star's application, including appointing key personnel, acquiring cell sites, and handling financial responsibilities. SJI did not participate with respect to these matters. After the Common Carrier Bureau dismissed La Star's application as untimely, Maxcell, not SJI, was active in successfully appealing this action. See Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C. Cir. 1987). 7. The findings further indicated that after USCC acquired Maxcell's interest, USCC, like Maxcell, played the dominant role in prosecuting the application. Specifically, the findings disclosed that USCC was principally involved in preparing an October 26, 1987 amendment to La Star's application, in handling La Star's day-to-day affairs and finances, in preparing an application for interim operating authority, and in preparing tax returns. The findings indicated that SJI and USCC did not observe the formalities of the joint venture agreement and that SJI did not significantly involve itself in La Star's affairs until after the Commission designated an issue as to La Star's control. 8. The Commission rejected arguments on behalf of La Star that the above findings did not demonstrate SJI's failure to control La Star. 7 FCC Rcd at 3764-66  24-40. The Commission found that the record concerning Maxcell's involvement in La Star (which La Star did not dispute) was relevant and probative as to SJI's lack of control. The Commission also found that because La Star did not have an operating facility, evidence concerning the preparation and prosecution of its application was the most probative evidence as to La Star's control. 9. Additionally, the Commission rejected the principal argument on behalf of La Star that USCC's extensive involvement in La Star's affairs, coupled with SJI's lack of involvement, reflected a valid delegation of authority from SJI to USCC. The Commission found that SJI did not establish policy or supervise USCC. Rather, to all appearances, USCC acted on its own. 10. In view of the foregoing, the Commission concluded that SJI did not control La Star and that La Star was therefore not eligible to apply for a wireline authorization. III. COURT OF APPEALS 11. On March 29, 1994, the United States Court of Appeals for the District of Columbia Circuit vacated and remanded the Commission's decision. The court held that it was unable to determine whether the Commission's analysis was consistent with precedent. First, the court ruled that the Commission did not adequately explain why it did not analyze the facts of this case using the standards set forth in Intermountain Microwave, 24 RR 983 (1963). 12. In Public Notice, 1 FCC Rcd 3 (1986), the Commission stated that the Intermountain criteria would be used to evaluate the control of applicants for cellular authorizations. The six Intermountain factors are as follows: (1) Does the licensee have unfettered use of all facilities and equipment? (2) Who controls daily operations? (3) Who determines and carries out the policy decisions, including preparing and filing applications with the Commission? (4) Who is in charge of employment, supervision, and dismissal of personnel? (5) Who is in charge of the payment of financing obligations, including expenses arising out of operating?; and (6) Who receives moneys and profits from the operation of the facilities? 13. The Intermountain factors represent the normal incidents of responsibility for the operation and control of a common carrier facility. 24 RR at 984. As such, they generally provide useful guidelines for evaluating real-party-in-interest and transfer of control questions. For example, in the Public Notice cited above, the Commission explicitly adopted the Intermountain criteria as guidelines for questions arising from the use by cellular operators of management companies. We stress, however, that there is no exact formula for determining control and that questions of control turn on the specific circumstances of the case. See Data Transmission Co., 44 FCC 2d 935, 936 (1974). Thus, in applying the Intermountain criteria, we examine the totality of the circumstances. 14. Second, the court found that the Commission's analysis of the control issue in this case was inconsistent with that in Ellis Thompson Corp., 7 FCC Rcd 3932 (1992), which the Commission decided contemporaneously. 15. Following remand the parties were invited to comment on what further action should be taken. La Star Cellular Telephone Co., FCC 94I-040 (Apr. 20, 1994). IV. ISSUE ANALYSIS A. APPLICABILITY AND RELEVANCE OF INTERMOUNTAIN 16. Comments. The parties uniformly urge that the Intermountain criteria should be considered in this case. They argue, however, that the criteria are merely guidelines and not a precise formula. Thus, the commenters assert that the guidelines should be applied flexibly based on the particular facts of this case. La Star contends that the criteria should be applied in light of precedent that participation by a minority owner in the licensee's affairs does not support an inference of control. NOCGSA and PCC suggest that some of the Intermountain criteria may not be applicable in this case because La Star has no operating facility. NOCGSA and the Bureau submit that the control test must be applied as of the time the application was filed and at all times thereafter. 17. Discussion. Pursuant to the court's directive, we will apply Intermountain to this case. We note, however, that this case presents a special problem in applying the Intermountain criteria, since the issue here involves the interests in the applicant for purposes of threshold eligibility to file an application rather than control of an operating facility. See Cellular Communications Systems, 93 FCC 2d 683, 692  24-25 (1983). Accordingly, we have no record of actual conduct with respect to several aspects of the Intermountain factors that would indicates who could be expected to exercise control over the system in the future. 18. We find that, in this regard, the applicant's representations as to its intentions, and related contractual provisions, are relevant. See News International, PLC, 97 FCC 2d 349, 356  17 (1983). The probative value of these representations and provisions must, however, be evaluated in light of the record as a whole. Where the applicant's actual conduct has been shown to be inconsistent with its representations and agreements, crediting them would not be warranted. 19. With this in mind, we turn to our evaluation of the Intermountain factors. In this regard, the court's opinion did not question the factual findings on which our previous conclusions rested. Although, as TDS points out, the court vacated our decision, and thereby rendered it without effect, the court did not in any way disapprove our specific factual findings. Thus, we believe that the court gave us the discretion to reaffirm our previous findings if we continue to believe that they are supported by the record. See 47 U.S.C.  402(h). We find no reason to depart from our previous findings, and we reaffirm them. B. THE INTERMOUNTAIN FACTORS 1. Use of the Facilities 20. Comments. La Star and TDS observe that the applicant has no operating facilities at this time. They submit that, under terms of La Star's joint venture agreement, all facilities will be owned by La Star and operated under the control of SJI with SJI's president, John Brady, serving as general manager. NOCGSA responds that, in the absence of operating facilities, this factor is irrelevant to the present case. The Bureau maintains that La Star's representations and agreement should not be credited because other aspects of this record indicate that La Star has not acted consistently with the provisions of the joint venture agreement and cannot be expected to do so in the future. 21. Discussion. As indicated above, we consider La Star's representations and contractual provisions regarding its facilities as relevant to this case. Thus, the sole evidence as to this factor indicates that SJI will have unfettered use of all facilities and equipment. However, the weight to be given this evidence can only be determined after all circumstances bearing on its probative value have been examined. We will address this matter in our overall summary of the factors. 2. Day-to-Day Operations 22. Comments. As under the previous factor, La Star and TDS point out that there are no operating facilities and therefore no record of existing day-to-day operations. They reiterate that, under the joint venture agreement, day-to-day operations will be supervised by SJI, with Brady as general manager. NOCGSA and the Bureau reply that, although there is no record of any operating facility, the record reflects La Star's day-to-day activities in the preparation and prosecution of its application. They note that the Commission found that Maxcell and then USCC, rather than SJI, dominated these activities. 23. Discussion. We find that the sole evidence under this factor consists of representations that SJI will exercise control through its supervision of the day-to-day operations of the cellular telephone system. The weight to be given this evidence will be discussed in our overall summary. 3. Policy Decisions 24. Comments. La Star and TDS once again do not dispute the finding that during the period that Maxcell was La Star's minority owner, Maxcell, rather than SJI, dominated the preparation and prosecution of La Star's application. They reiterate the argument, previously rejected by the Commission, that USCC's extensive involvement in La Star's application reflected legitimate participation by a minority owner and not an inappropriate exercise of control. 25. NOCGSA and the Bureau contend that the record amply demonstrates that USCC, as well as Maxcell, dominated La Star's affairs in this regard. 26. Discussion. The record provides abundant evidence of the parties' actual conduct in the determination and carrying out of policy decisions in relation to the preparation and prosecution of La Star's application. As noted in our prior decision, the parties do not seriously challenge the finding that Maxcell controlled such matters during the period that Maxcell held a minority interest in La Star. 7 FCC Rcd at 3764-65  25, 30. (A finding that Maxcell controlled La Star itself renders La Star ineligible, since an applicant must be eligible from the time its application is filed. See Cellular Communications Systems, supra.) 27. As to the period in which USCC held a minority interest in La Star, we specifically considered and rejected the contention that USCC's extensive participation in determining La Star's policies as reflected in the prosecution of its application was pursuant to a valid delegation of authority from SJI. We found that (with one exception) the record reflected no meetings of La Star's management committee or other evidence that policy decisions were made in accordance with the provisions of La Star's joint venture agreement, which provided for control by SJI. 7 FCC Rcd at 3765  31. We also found no support for the contention that SJI had issued policy directives through La Star's attorney Arthur Belendiuk. We found that Belendiuk had been associated with Maxcell and not SJI, and that SJI had used other counsel in matters unrelated to this proceeding. Id. at 3765  32-33. While the record demonstrated extensive input by USCC and its personnel in matters handled by Belendiuk, the little involvement that SJI claimed proved to be insubstantial and lacking in credibility. Id. at 3765  34-36. We found that, to all appearances, Belendiuk acted as USCC's counsel and USCC supervised the prosecution of the application. As noted above, we find no reason to revisit these findings, which strongly support a conclusion that USCC effectively determined and carried out policy and controlled La Star. 4. Personnel Responsibilities 28. Comments. Consistent with their other claims regarding La Star's future operations, La Star and TDS assert that SJI, will supervise personnel matters, such as hiring and firing. They deny that USCC has hired any of La Star's key personnel. NOCGSA and the Bureau answer that SJI did not hire the key personnel associated with prosecuting La Star's application. Rather, they assert that the key hiring decisions were made by Maxcell. 29. Discussion. The claim that SJI will be in charge of personnel matters in La Star's future operations is contradicted by the parties' actual conduct to this point. Maxcell hired La Star's attorneys, economic consultants, and a local real estate agent. 7 FCC Rcd at 3763  8-9. By contrast, in matters unrelated to this proceeding, SJI did not use any of these individuals. Id. at 3763  11. Other work on the La Star application was done directly by Maxcell or USCC personnel. Id. at 3763-64  8, 15-17. We find that this evidence undermines the claim that SJI will be in charge of personnel matters in La Star's proposed operation. 5. Financial Obligations 30. Comments. La Star and TDS claim that pursuant to their joint venture agreement, SJI and USCC will pay pro rata shares of all expenses. They assert that USCC has never attempted to exert financial leverage against SJI. NOCGSA and the Bureau contend that SJI and USCC did not previously treat their financial obligations on a pro rata basis or in accordance with the joint venture agreement. 31. Discussion. The record discloses SJI's failure to be in charge of financial obligations in the preparation and prosecution of La Star's application. Maxcell's principal obtained the bank commitment used to finance La Star's proposal. 7 FCC Rcd at 3763  8. The bank involved had previous associations with Maxcell but not with SJI. Until the Commission designated a control issue, the joint venture agreement provided that Maxcell and then USCC would pay all expenses for the prosecution of the application and that SJI would not be liable until after grant of a construction permit. Id. at 3763  8, 3766  37. Accordingly, USCC personnel handled all aspects of La Star's finances, including paying expenses, recordkeeping, and handling tax returns. Id. at 3763-64  15-18, 3766  37. SJI received no documentation of La Star's expenses. To some degree USCC commingled La Star's business and its own. Id. at 3766  38. We find that this evidence undermines the claim that SJI has been or will be in charge of the payment of financing obligations to the degree indicated by the joint venture agreement. 6. Receipt of Monies and Profits 32. Comments. La Star and TDS claim that pursuant to their joint venture agreement, SJI will oversee billing and receipts and that it and USCC will receive a pro rata share of all profits. NOCGSA and the Bureau object that La Star did not previously conduct its financial affairs on a pro rata basis consistently with the joint venture agreement. In this regard, they submit that, because USCC was solely liable for financing the prosecution of the application, it has first claim against the profits of the proposed operation. 33. Discussion. We find that La Star's failure to conduct its finances on a pro rata basis and in accordance with its joint venture agreement diminishes the credibility of its claim that SJI will receive profits and monies on that basis in the future. C. OVERALL SUMMARY 34 We find that the record, when analyzed in light of the Intermountain criteria, continues to provide strong support for our conclusion that SJI, the wireline-eligible entity, does not control La Star and that La Star is therefore ineligible for this authorization. Because La Star does not have an operating facility, we do not have a record of actual conduct with respect to all of the Intermountain factors. However, the record of actual conduct relevant to factors 3-5 consistently reflects the domination of La Star's affairs, first by Maxcell and then by USCC, and the corresponding lack of involvement by SJI. We find that this evidence provides the most probative basis on which to reach conclusions as to the past and likely future control of La Star. See also 7 FCC Rcd at 3764-65  26-29. We thus conclude that it outweighs the contractual provisions and representations favoring the appropriate retention of control relied on by La Star under factors 1, 2, and 6. In sum, based on the record, we conclude that SJI does not control La Star and that its application was properly dismissed because La Star is not an eligible wireline applicant. V. ORDERS 35. ACCORDINGLY, IT IS ORDERED, That the application of La Star Cellular Telephone Company (File No. 27161-CL-P-83) IS DISMISSED with prejudice; and that the applications of New Orleans CGSA, Inc. (File Nos. 29010-CL-P-83, 29181-CL-P-85) ARE GRANTED. 36. IT IS FURTHER ORDERED, That this proceeding IS TERMINATED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary