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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//Order, RVC Services, Gulf of Mexico Service Area, DA 96-854//$ $/ 0.331, Authority Delegated/$ FOR RECORD ONLY Before the DA 96-854 FEDERAL COMMUNICATIONS COMMISSION Washington D.C. 20554 In re Application of ) ) RVC SERVICES, INC., ) d/b/a COASTEL COMMUNICATIONS ) File No. 06641-CL-AL-1-95 COMPANY ) and ) BACHOW/COASTEL, L.L.C.) for Consent for Assignment of ) License of Station KNKA-412 (Market 306A) ) Gulf of Mexico Service Area ) ORDER Adopted: May 29, 1996; Released: May 29, 1996 By the Chief, Commercial Wireless Division: I. INTRODUCTION 1. In this Order we address, pursuant to our delegated authority under Section 0.331 of the Commission's rules, a Petition to Deny Application for Assignment of License filed by Billy J. Parrott (Parrott) on September 18, 1995. The petitioner, Parrott, the owner of RVC Services, Inc., a Nevada corporation, d/b/a Coastel Communications Company (Coastel), the licensee of the cellular radiotelephone station, contends that his petition to deny should be granted because: (1) he is a member of a minority group; (2) a foreign entity exerted de facto control over the trustee appointed to manage the cellular system after the loan secured by the licensee was in default; and (3) the trustee failed to accept the highest offer for sale of the cellular system. For the reasons discussed below, we deny the petition and grant the application jointly filed by Coastel and Bachow/Coastel L.L.C. (Bachow) for assignment from Coastel to Bachow of the license to operate cellular radiotelephone station KNKA 412 on frequency Block B in the Gulf of Mexico. II. BACKGROUND AND PLEADINGS 2. Coastel is the licensee of cellular station KNKA-412 (market 306A) serving the Gulf of Mexico Service Area. In January, 1989, Parrott borrowed $30 million from MEA in order to purchase Coastel. This short-term bridge loan was to have been paid off by Coastel within 60 to 90 days. Pursuant to the security agreement executed concurrently with the loan, MEA had the right to nominate a trustee to manage the cellular radiotelephone system if Coastel defaulted on the loan. Coastel subsequently defaulted on the loan, and has remained in default. Pursuant to a Trust Agreement executed by the parties, MMC was nominated trustee, subject to Commission approval. The Commission granted the application for the transfer of control of Coastel from Parrott to MMC on October 1, 1990. Parrott also executed an irrevocable proxy agreement, giving MMC the right to vote all the issued and outstanding shares of stock of Coastel and RVCTC. 3. Following the designation of MMC as Trustee, MEA provided additional funds for Coastel's working capital needs. MMC continued to operate the system and tried to find a buyer for the system. In 1995, MMC received an offer from Bachow to purchase the system for $16.5 million. The sale of the system to Bachow would be the final step in the completion of the voluntary workout of the loan default by Parrott. On August 3, 1995, Coastel and Bachow jointly filed an application for assignment of the license from Coastel to Bachow. 4. On September 18, 1995, Parrott filed a petition to deny the application. Oppositions to the petition were filed by Mobile Management Company (MMC), Mitsubishi Electric America, Inc. (MEA), Bachow, and Coastel. On October 16, 1995, Parrot filed a reply to the oppositions. A Request for Leave to File a Response to Reply to Oppositions was filed by MMC on October 26, 1995. A response to this pleading was filed by Parrott on November 6, 1995. Additionally, on December 7, 1995, Parrott filed a letter in this proceeding referencing another pending proceeding. Coastel filed a motion to strike the letter, and Parrott filed an Opposition to Coastel's motion. III. DISCUSSION A. Standing 5. Under Section 309(d)(1) of the Communications Act of 1934, as amended (Communications Act) and Section 22.130 of the Commission's rules, the petitioner must allege specific facts, supported by affidavit, sufficient to show that the petitioner is a party in interest and that a grant of the application would be prima facie inconsistent with the public interest. Parrott contends he has standing to file this petition because he is the sole shareholder of the issued and outstanding stock of Roanoke Valley Cellular Telephone Company, a Nevada corporation (RVCTC), which owns all the issued and outstanding stock of the cellular radiotelephone licensee, Coastel. Coastal argues that Parrott does not have standing to object to the assignment because he granted an irrevocable proxy to MMC, and that he has no equitable interest in Coastel because the market value of the system is less than the outstanding secured debt. Coastel observes that the sale of the system to Bachow for $16.5 million will not enable Parrott to realize any economic value for his equity interest. Coastel therefore argues that the petition must be dismissed for lack of standing. As discussed below, we conclude that Parrott has standing. 6. Discussion. It is undisputed that Parrott, the sole shareholder, has an equity interest in Coastel. Coastel's argument essentially is that a party must prove that the equity interest has economic value to have standing to file a petition to deny an application for assignment of the license. Coastel cites two cases to support this argument: Metromedia Company and MCI Communications. For the reasons set forth below, we find that these cases do not support Coastel's position, and we also find that Parrott has standing to file the petition to deny the assignment. 7. In Metromedia Company, petitions to deny an application for transfer of AWACS from Metromedia to Comcast Cellular Communications, Inc. were filed by United States Cellular Corporation (USCC) and its subsidiary, Vineland Cellular Telephone Company (Vineland), Midland Communications Corp. (Midland) and Howell Spear (Spear). USCC and Midland claimed standing based on anticipated economic harm due to a potential change in roaming rates; Midland also alleged specific instances of anti-competitive conduct by Comcast. Spear did not allege that he had standing to file the petition. The Mobile Services Division noted that standing is imparted when a petitioner is able to show that injury in fact will result from the challenged action, and that the interest in question lies within the zone of interests to be protected by the Commission. The Division held that neither USCC nor Spear had standing because (1) Spear had not alleged standing; and (2) USCC's allegation of economic harm was speculative. 8. Metromedia Company is distinguishable from the instant case. In Metromedia Company, the petitioner, USCC, did not have an equity interest in the licensee. USCC claimed standing based solely on the speculative impact of the transfer on future roaming rates. In the instant case, Parrott is the sole equity owner of the licensee, and is claiming that he would sustain damages due to the transfer because he would lose his equity interest, and any right to future profits or dividends. Parrott's claim is more than a speculative economic loss due to a possible change in rates; he is claiming that he will lose his entire equity interest in the licensee. 9. In MCI Communications, MCI Communications Corporation (MCI) and Southern Pacific Telecommunications Corporation (Southern) petitioned the Commission for consent to a transfer of control of Qwest Communications (Qwest) from MCI to Southern. Microwave Acquisition Company (MAC) filed a petition to deny the application on the grounds that the proposed agreement could endanger the existence of small long distance telephone carriers, and would substantially lessen competition. The Common Carrier Bureau (Bureau) noted that MAC and MCI had entered into a contract for the purchase of Qwest in 1992, which was never consummated. MAC contended that it was pursuing an action in state court against MCI and Southern seeking monetary damages and specific performance, and that it would suffer irreparable harm if Qwest was transferred to Southern. Based on this alleged injury, MAC claimed it had standing to petition the transfer. The Bureau held that MAC had failed to show an injury that was traceable to the challenged action and a substantial likelihood that the relief requested would redress the injury claimed. The Bureau noted that the injury claimed by MAC was due to the alleged breach of contract, not the application for transfer, and that grant of the relief sought by MAC would not redress this injury. The Bureau concluded that MAC did not have standing to file the petition, but nevertheless elected to treat the petition as an informal objection. 10. MCI Communications is distinguishable from the instant case because the petitioner in MCI Communications did not have an equity interest in Qwest. Standing was based solely on the alleged breach of contract by MCI. Parrott, on the other hand, is the sole shareholder of RVCTC which owns all the issued and outstanding stock of the licensee. To the extent that Coastel may be profitable in the future, Parrott has a claim to any future profits or dividends. This claim to future profits or dividends is the interest that Parrott will lose by the grant of the application. Under the test for standing in MCI Communications, Parrott's injury, the loss of future profits or dividends, will result from the transfer of Coastel, and there is a substantial likelihood that a denial of the application to transfer will redress the injury claimed. Therefore, we find that Parrott is a real party in interest and has standing to petition the application for transfer. B. Parrott's Reply and Coastel's Motion to Strike 11. Under Section 1.45(b) of the Commission's rules, a reply must be filed within five days after the time for filing oppositions has expired. Parrott's reply was filed on October 16, 1995, more than five days after October 3, 1995, and therefore was untimely and will not be considered. We deny as moot the Request for Leave to File a Response to Reply filed by MMC. Parrott filed a letter on December 7, 1995, referencing another pending proceeding and Coastel filed a motion to strike the letter on the grounds that it was not a pleading allowed under Section 1.45(c) of the Commission's rules. We agree with Coastel's position that the letter filed by Parrott on December 7, 1995 is not a pleading allowed under Section 1.45 of the Commission's rules, and therefore we grant the motion to strike. C. Parrott's Petition to Deny the Assignment 1. Section 309(j) of the Communications Act 12. Parrott argues that the assignment would not serve the public interest in that it would violate Section 309(j) of the Communications Act because Coastel is an African- American owned cellular licensee. Bachow and Coastel respond that the fact that Parrott is a member of a minority group does not change the nature of the review of this assignment. We agree. Section 309(j) applies only to the use of competitive bidding to grant an initial license or construction permit between mutually exclusive applications for electromagnetic spectrum, not to transfers and assignments of licenses. We do not find that this proposed assignment would violate Section 309(j). 2. Foreign De Facto Control of the Licensee 13. Parrott also argues that after the Commission approved the transfer of control of Coastel to MMC, MEA, a foreign controlled corporation, exerted de facto control over MMC in violation of Section 310(b) of the Communications Act. Specifically, Parrott cites MEA's practice of covering Coastel's monthly shortfall in cash flow by advancing funds only upon approval of the Trustee's actions as manager of the cellular system. MEA admits that until December 1991, it had the right under the Trust Agreement to approve monthly expenditures in excess of 110 percent of budgeted amounts. MEA contends that this provision in the Trust Agreement was never used to disapprove an expenditure, and was deleted in December 1991 at the Commission's request. 14. Coastel submits that when it was in need of funds it would send MEA requests along with a description of the use of the requested funds. Coastel argues that MMC exercised control of Coastel in compliance with the terms of the Trust Agreement, and the irrevocable proxy, and that Parrott's claim of alleged impropriety is lacking factual support. MMC contends that it has exercised sole control over Coastel and has operated and managed Coastel on an interim basis pursuant to the Trust Agreement. Bachow contends that neither Parrott's affidavit nor his petition provide factual support for his allegation that MEA exerted de facto control over Coastel in violation of Section 310(b) of the Act. 15. MEA agrees that MMC had exclusive control over Coastel. MEA further explains that the Trust Agreement extensively outlined MMC's responsibilities which included providing management services to develop and operate the cellular system, making all personnel decisions, management of all staff, day-to-day maintenance and recordkeeping, use of facilities, managing funds, marketing, and deciding on rates, services, and advertising. MEA argues that MMC had the unfettered use of all facilities and equipment, maintained control of the daily operations, hired and fired the employees, and was responsible for payment of Coastel's financial obligations. 16. In Ellis Thompson, the Commission listed the six factors (known as the Intermountain Microwave factors) for evaluating transfer of control questions for a common carrier facility. These factors are: (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? The Commission noted that the six factors are only guidelines, and that questions of control would turn on the specific circumstances of each case. MEA contends that it did not exercise control pursuant to these six factors. 17. We find that it is uncontradicted that under the Trust Agreement, MMC was given exclusive control over Coastel, including providing management services to develop and operate the cellular system, making personnel decisions, management of staff, day-to-day maintenance and recordkeeping, use of facilities, management of funds, marketing, and decisions relating to the rates, services, and advertising. We also find that it is uncontradicted that MMC had the unfettered use of all facilities and equipment, control of the daily operations, hired and fired the employees, and was responsible for payment of Coastel's financial obligations. Parrott has failed to offer evidence that any of the factors listed in Ellis Thompson would indicate that MEA was in control of Coastel. The only factual support offered by Parrott to support his contention is the provision in the Trust Agreement giving MEA the right to approve monthly expenditures in excess of 110 percent of budgeted amounts; but it is uncontradicted that this trust provision was never used to disapprove an expenditure, and was deleted at the Commission's request in 1991. Therefore, we find that Parrott has failed to show that MEA had de facto control of Coastel in violation of Section 310(b). 3. Commercially Reasonable Sale 18. Parrott additionally argues that the proposed assignment would effect a wrongful deprivation of his interest in Coastel because under the trust agreement MMC is authorized to sell Coastel only in a commercially reasonable manner and is required to preserve and maximize the value of the system. Parrott contends that the agreement to sell Coastel to Bachow for $16.5 million is not commercially reasonable, and that MMC failed to accept a higher offer from Parrott and Spectrum to pay MEA $18.5 million to regain control of the system. Parrott further contends that MMC engaged in self-dealing by agreeing to sell to Bachow because under the Trust Agreement MMC would receive a commission on the sale to Bachow, but not if Parrott settled its debt to MEA. Additionally, Parrott contends that it would not be in the public interest or consistent with administrative efficiency for the Commission to consent to the assignment before the imminent civil litigation concerning this matter has been resolved. 19. MMC contends that it has actively sought a buyer for Coastel since 1990, and that except for Bachow's offer, all firm offers were under $11 million. MMC states that Bachow's offer of $16.5 million is the best legitimate committed offer submitted for Coastel. MMC explains that under the Trust Agreement, Parrott is authorized only to negotiate with an investor proposing to purchase no more than 49 percent of the Coastel stock, or with a refinancer proposing to lend Coastel sufficient funds to discharge Coastel's debt to MEA. Thus, to the extent that Spectrum's offer was directed at only partially discharging MEA's debt, MMC had no authority to accept Parrott's alleged offer. MMC states that Parrott did not notify MMC of his negotiations with Spectrum until after MMC had already committed to a letter of intent with Bachow. MMC further contends that Spectrum's offer is neither set forth in detail in the petition, nor supported by affidavit, and therefore there is nothing in the record to support Parrott's allegation that Spectrum made a firm offer of $18.5 million to buy Coastel. 20. Bachow and Coastel argue that Parrott's allegations that MMC failed to comply with certain provisions of the Trust Agreement are irrelevant in the context of this application. Bachow states that issues arising from contractual disputes between the parties should not be addressed to the Commission. We agree with the arguments raised by Bachow and Coastel. We find that Parrott's alleged breach of contract claims or other civil claims are not relevant to this proceeding. Therefore, Parrott's request to delay action on this application due to the alleged imminent civil claims is denied. IV. CONCLUSION 21. We have reviewed the arguments of the parties, and we are unpersuaded that the petition should be granted, or that action on the application should be delayed. We do not find that any of the arguments Parrott set forth in his petition: that he is a member of a minority group; that MEA exerted de facto control over MMC; and that MMC failed to accept a higher offer for Coastel, have merit. Therefore, we deny the petition filed by Parrott to deny the application for assignment. Further, we find that the assignment to Bachow would serve the public interest, convenience, and necessity, pursuant to Section 310 (d) of the Communications Act, and we grant the assignment of the license from Coastel to Bachow. IV. ORDERING CLAUSES 22. Accordingly, IT IS ORDERED that the Request for Leave to File a Response to Reply filed by Mobile Management Company on October 26, 1995 IS DENIED, and the Motion to Strike filed by RVC Services, Inc., a Nevada corporation, d/b/a Coastel Communications Company on January 11, 1996 IS GRANTED. 23. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 303(r), and 309 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r), and 309, that the Petition to Deny Application for Assignment of License filed by Billy J. Parrott on September 18, 1995 IS DENIED and the application for assignment of the license to operate cellular radio station KNKA 412 on frequency Block B in the Gulf of Mexico filed jointly by RVC Services, Inc., a Nevada corporation, d/b/a Coastel Communications Company and Bachow/Coastel L.L.C. on August 3, 1995 IS GRANTED. 24. IT IS FURTHER ORDERED that this action is taken under delegated authority pursuant to Section 0.331 of the Commission's rules, 47 C.F.R.  0.331. FEDERAL COMMUNICATIONS COMMISSION _____________________________ David L. Furth Chief, Commercial Wireless Division Wireless Telecommunications Bureau