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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) In-Flight Phone Corp. ) File No. CWD 96-6 ) Petition for Declaratory Ruling ) Concerning Section 310(b)(4) of ) the Communications Act of 1934, ) as amended ) DECLARATORY RULING AND ORDER Adopted: July 10, 1996 Released: July 10, 1996 By the Chief, Commercial Wireless Division, Wireless Telecommunications Bureau: I. INTRODUCTION 1. On August 22, 1995, In-Flight Phone Corp. (In-Flight) asked the Commission to rule that 42 percent foreign ownership in its parent company, In-Flight Holdings, Inc. (IFP), would be consistent with the public interest under Section 310(b)(4) of the Communications Act of 1934. On September 29, 1995, In-Flight amended its petition reaffirming its original request and further asking the Commission to rule that 60 percent foreign ownership of IFP's voting interests would be consistent with the public interest under Section 310(b)(4). For the reasons discussed below, we grant In-Flight's petition and amendment. II. BACKGROUND 2. Section 310(b)(4) allows the Commission to deny a common carrier license to a corporation controlled by another corporation having more than 25 percent of its capital stock owned or voted by foreign interests if the "public interest will be served by the refusal or revocation of such license." In-Flight is a common carrier air-to-ground radio licensee and is thus subject to Section 310(b)(4). Its parent, IFP, is controlled by MCI Telecommunications Corp. (MCIT) which holds a 72.969 percent interest in IFP. MCIT, in turn, is a wholly-owned subsidiary of MCI Communications Corp. (MCI). MCI is 20 percent owned by British Telecommunications, plc (BT), a foreign carrier. Under the Commission's attribution rules, increases in the foreign ownership interests of MCI are attributable to its subsidiaries, including IFP. The International Bureau recently approved a 7 percent increase in MCI's foreign ownership (from 28 to 35 percent). Consequently, In-Flight now seeks a corresponding 7 pe rcent increase in the permissible foreign ownership of IFP. 3. In July 1994, the Commission approved BT's 20 percent ownership interest in MCI. The Commission also approved MCI's concurrent request for a ruling that 28 percent aggregate foreign ownership of MCI is consistent with the public interest under Section 310(b)(4). In February 1995, In-Flight sought authorization for MCIT's assumption of control of IFP. Because MCI's foreign ownership is attributable to its subsidiaries, MCIT's control of IFP meant that MCI's 28 percent foreign ownership was attributable to IFP. This, combined with IFP's minority shareholders' existing foreign ownership interests, caused IFP's attributable foreign ownership to equal 32.447 percent. As a result, In-Flight petitioned for a declaratory ruling allowing it to increase its aggregate foreign ownership up to 35 percent. 4. On June 9, 1995, this Division and the Telecommunications Division, International Bureau, jointly approved IFP's petition for a 35 percent foreign ownership interest. We held that In-Flight's increase in foreign ownership did not raise the traditional issues present in Section 310(b)(4) because, 1) of the proposed 35 percent foreign ownership interest the 28 percent attributed by MCI had previously been approved by the Commission, and 2) the non- MCI foreign ownership interest was a small percentage of IFP's equity which was dispersed among several investors who would not have effective control over IFP. 5. On August 4, 1995, the International Bureau ruled that MCI's foreign ownership could increase an additional 7 percent, for a total foreign investment of 35 percent. The International Bureau held that this increase in foreign ownership was consistent with the public interest under Section 310(b)(4) because the increased foreign investment would be passive and no foreign investor (other than BT at 20 percent) would own more than a one percent interest in MCI. 6. On August 22, 1995, In-Flight filed the instant petition requesting that the Commission declare that a corresponding 7 percent increase in IFP's foreign ownership, for a total of 42 percent, is consistent with the public interest under Section 310(b)(4). On September 29, 1995, In-Flight amended its petition to further request that the Commission find that an attributable foreign voting interest in IFP of up to 60 percent would be consistent with the public interest. In-Flight states that its amendment reflects the Commission's recent revision of its policy on foreign voting and ownership interests of common carrier and broadcast licensees. 7. The Commission placed In-Flight's petition and amendment on public notice. No comments were filed in response to the public notice. III. DISCUSSION A. Foreign Ownership Interests 8. In-Flight recognizes that the increase in MCI's ownership approved in the MCI Order will cause IFP's total foreign ownership to increase to 40.44 percent, and thus exceed the level authorized in the In-Flight Order. In-Flight argues, however, that the proposed increase in IFP's foreign ownership is consistent with the public interest because 1) the need for the proposed increase is primarily driven by a previously approved increase in MCI's foreign ownership and 2) the non-MCI foreign ownership interest in IFP remains relatively unchanged and these minority investors cannot control IFP. 9. We accept In-Flight's arguments. In the In-Flight Order we recognized that factors demonstrating that increases in MCI's foreign ownership are consistent with the public interest are likely to be equally applicable to the attendant increases in IFP's attributable foreign ownership. For example, additional passive investors incapable of asserting control over MCI would find it even more difficult to assert control over an indirectly and partially-owned subsidiary. Thus, we find that a 7 percent increase in IFP's foreign ownership interest is consistent with the public interest for the reasons stated in the MCI Order. Moreover, the non- MCI foreign ownership interest in IFP has not, under the circumstances of this case, significantly increased and these minority investors do not control IFP. Finally, we note that both the Wireless Telecommunications Bureau and International Bureau have previously allowed 60 percent and 92 percent foreign interests in a parent corporation of a non-broadcast radio licensee. As such, we conclude that allowing up to 42 percent foreign ownership in IFP is consistent with the public interest. B. Foreign Voting Interests 10. In-Flight next requests that the Commission declare that a 60 percent foreign voting interest in IFP is consistent with the public interest. In-Flight argues that MCI's actual control over IFP will cause its foreign voting interest of 35 percent to "flow down" to IFP. When this amount of voting interest is added to the minority voting interests in IFP, the total attributable foreign voting interest in IFP equals 58.721. In-Flight requests a 60 percent foreign voting interest level in order to provide a small cushion for minor changes in its ownership structure that could increase IFP's attributable voting interests. 11. We agree with In-Flight that IFP's 60 percent foreign voting interest is consistent with the public interest because the facts before us do not suggest that In-Flight will be controlled by foreign interests. MCI will control IFP's Board of Directors. Further, more than one half of the 60 percent foreign voting interest attributable to IFP is simply the previously approved 35 percent foreign voting interest in MCI itself. Thus, 35 of the 60 percent foreign voting interest has already been approved. Moreover, In-Flight has shown that many of IFP's minority foreign voting interests are unrelated and thus would be unlikely to act in concert. As such, we conclude that allowing up to 60 percent foreign voting interests in IFP is consistent with the public interest. IV. CONCLUSION 12. A 42 percent foreign ownership interest and a 60 percent foreign voting interest in IFP are consistent with the public interest under Section 310(b)(4). Accordingly, we grant In- Flight's petition for declaratory ruling and the amendment to the petition. V. ORDERING CLAUSE 13. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 5(c), 303(r), 310(b)(3), (4) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), 303(r), 310(b)(3), (4) and Sections 0.261 and 0.331 of the Commission's rules, 47 C.F.R.  0.261 and 0.331 that the Petition for Declaratory Ruling filed on August 22, 1995 and the Amendment to Petition for Declaratory Ruling filed on September 29, 1996 ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION David L. Furth Chief, Commercial Wireless Division Wireless Telecommunications Bureau