This Guide discusses the obligations of private wireless licensees under Section 310(d) of the Communications Act of 1934, as amended, 47 U.S.C. § 310(d). The Commission and its staff recently have concluded a number of investigations of private wireless licensees that have transferred control of or assigned their licenses without obtaining prior Commission consent, in violation of Section 310(d) of the Act. The evidence that the Commission has received in these proceedings, as well as discussions with licensees and their attorneys, suggest that many private wireless licensees may not be aware of their obligations under Section 310(d) of the Act to obtain Commission consent prior to consummating a transfer of control or assignment of license.1
- Who should read this Guide?
Any entity that holds or is eligible to hold licenses in the Private Wireless Services. These include: manufacturers, railroads, public utilities, motor carriers, security companies, or any other entity that uses licensed radio facilities or devices for internal, rather than commercial, purposes. Attorneys and other consultants who represent such entities in acquisition and merger transactions also should read this Guide. - What does Section 310(d) of the Communications Act require?
Section 310(d) of the Communications Act reads:
No construction permit or station license, or any rights thereunder, shall be transferred, assigned, or disposed of in any manner, voluntarily or involuntarily, directly or indirectly, or by transfer of control of any corporation holding such permit or license, to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served thereby.
47 U.S.C. § 310(d)
Under Section 310(d) of the Act, all licensees, including private wireless service licensees, must seek and obtain FCC consent before assigning or transferring control of FCC-issued licenses or permits. This means that prior to consummation of an assignment of license (such as in connection with a sale of assets) or a transfer of control of a license (i.e., as in a corporate merger or reorganization), the parties must file the appropriate application(s) with the Commission. The FCC must grant the application(s) before consummation of the transaction may take place. - I have heard that all I have to do is file the application; then I'm free to consummate the transaction. Is this correct?
No. The FCC must authorize the assignment or transfer of control of the FCC-issued licenses. Thus, for Private Radio Service licensees, simply filing the application is insufficient. The parties must wait for the FCC to grant the application prior to closing or consummating the transaction. In addition, simply notifying the Commission of the change in name and/or address of the licensee-entity after the transaction has been consummated is not sufficient. - What types of transactions are subject to this requirement?
Section 310(d) applies to all transactions involving the assignment of a license or the transfer of control of a licensee. - What constitutes an "assignment" and a "transfer of control."
An assignment of authorization is a transaction in which the license is assigned by one entity to another. For example, a transaction in which a private land mobile radio license switches from Company A to Company B would constitute an assignment of license.
A transfer of control is a transaction in which the licensee remains the same, but control of the licensee-entity is transferred from one person or entity or group of persons or entities to another. For example, if Company B holds private wireless licenses, a transaction in which Company A purchases the stock of Company B would constitute a transfer of control. In such a transaction, although Company B remains the license-holding entity, ownership of Company B has changed. - What is the difference between a "substantial" and a "pro forma" assignment or transfer of control?
For licenses in the Private Wireless Services, both "substantial" and "pro forma" assignments and transfers of control require prior FCC approval. A substantial assignment or transfer of control is (1) a transaction involving the assignment of an FCC license to an entity that is not controlled by the same parties as the assignor or a change in controlling ownership interest of the licensee-entity (known as "de jure" assignment or transfer of control), or (2) a change in actual operating control of the licensee (known as a "de facto" transfer of control). For example, a transaction where Company X acquires the assets and FCC licenses of Company Y would be deemed a substantial assignment of license because the license would be assigned by one entity to another. A transaction where Company A purchases 90 percent of the outstanding voting stock of Company B would be deemed a substantial transfer of control because there would be a change in a controlling ownership interest of the corporate-licensee even though the same licensee would continue to hold the license. In another example, A, a general partner in Licensee Partnership X, holds a controlling interest under the terms of the partnership agreement, even though he holds less than 50 percent of the total partnership interests. A sells his partnership interest to newcomer B or existing partner C. This constitutes a substantial assignment.
A pro forma transaction is one involving a non-substantial change in ownership of the license or the licensee entity. The following are examples of pro forma transactions:- An assignment or transfer of control from a wholly-owned subsidiary to a parent corporation or vice versa, or an assignment or transfer of control from one wholly-owned subsidiary to another, both of which are owned by the same parent corporation.
A, Inc., a wholly-owned subsidiary of B Corporation, is in direct control of Private Land Mobile Radio Station licenses. A, Inc. is merged into B Corporation such that the Private Land Mobile Radio Station facilities controlled by A, Inc., are now directly controlled by and in the name of B Corporation.
A, Inc., is merged into C, Inc., another wholly-owned subsidiary of B Corporation such that the Private Land Mobile Radio Station licenses controlled by A, Inc., would now be controlled by and in the name of C, Inc.
K Corporation, which directly controls several private wireless licenses, creates a new holding company subsidiary, L Holding, Inc. and transfers operational control of those FCC facilities to the new subsidiary. An individual or individuals (including partnerships) assigns the license(s) to a corporation owned or controlled by the same individuals or partnerships without any substantial change in the relative interests.
John Doe holds several Private Operational Fixed (Microwave) Radio Service licenses in his own right as an individual. He incorporates resulting in an assignment of the FCC-licensed facilities to John Doe, Inc., in which he holds 100 percent ownership interest.
XY Partnership holds Private Land Mobile Radio Station licenses. X and Y each own 50 percent interest in the partnership. XY Partnership incorporates and as a result becomes "XY Corporation." X and Y each hold a 50 percent voting interest in the new corporation.- A corporation reorganizes but has no substantial change in the beneficial ownership of the corporation.
For example, Manufacturer X, Inc., which holds several private wireless licenses, engages in a stock reorganization such that control of Manufacturer X is transferred from John Doe to John Doe 2000 Revocable Trust, John Doe, Trustee. A partner assigns or transfers an interest (including a non-controlling interest) in a partnership which results in the dissolution of the partnership agreement under state law.
A is a partner of AC Licensee Partnership. A sells a part of his interest to newcomer D or existing partner C, and the transfer of that interest causes the partnership to dissolve automatically under state law, requiring the formation of a new entity.
This list is merely illustrative. It is not an exhaustive list of the types of pro forma transactions that would require prior Commission approval under Section 310(d) of the Communications Act. Licensees considering non-substantial ownership changes should first consult the applicable Commission rules and precedent. Where questions remain, licensees contemplating such changes should consult with Commission staff prior to entering into such transactions.
- An assignment or transfer of control from a wholly-owned subsidiary to a parent corporation or vice versa, or an assignment or transfer of control from one wholly-owned subsidiary to another, both of which are owned by the same parent corporation.
- I have heard that Section 310(d) only applies to transactions where the name of the licensee has changed. Is this correct?
No. Section 310(d) applies to both substantial and pro forma assignments and transfers of control, regardless of whether the name of the licensee has changed. (Where there is a change in ownership or control of the licensee, rather than an assignment of the license, the name of the licensee often remains the same). - Do we still have to obtain Commission approval before consummating the transaction if it is a pro forma transaction?
Generally, you must obtain prior Commission approval whenever there is an assignment or transfer of control (substantial or pro forma). A limited exception exists under the Commission's forbearance policy. Under this policy, prior approval is not required if the licensee offers telecommunications for a fee to the public or to such classes of users as to be effectively available to the public. Forbearance does not apply to services such as public safety, private land mobile, and private point-to-point microwave. For licenses subject to forbearance, a licensee is permitted to inform the Commission after consummating a pro forma transaction involving those licenses. - Can I get Special Temporary Authority to close on my transaction pending action on the underlying assignment or transfer of control application?
The Commission's rules authorize grant of special temporary authority ("STA") in the following circumstances: (1) emergency situations; (2) to permit restoration or relocation of existing facilities to continue communications service; (3) to conduct tests to determine necessary data for preparing an application for regular authorization; (4) for a temporary, non-recurring service where a regular authorization is not appropriate; or (5) in other situations involving circumstances which are of such extraordinary nature that delay in the institution of temporary operation would seriously prejudice the public interest. A party requesting an STA must demonstrate that one of these circumstances applies in order to qualify for the STA. - We have just signed an asset purchase agreement with another company. We have no idea whether they hold any FCC licenses. How do we obtain this information?
First, ask the other party whether it holds any FCC licenses. Ask about particular operations. For example, is the other party a manufacturer? Does it own vehicles? Does it use dispatch radios in its vehicles? Does it employ security guards who carry radios? Does it use radios as part of its plant operations? If so, these radios could be licensed by the FCC under its Private Land Mobile Service rules.
Is the other entity a railroad? If so, does it use radio communications to operate switches and signals or communicate with crews?Is the other party a public utility? Does it use radio communications to communicate with crews in the field or control and monitor operations along its pipeline or electric transmission network? If so, these radio facilities could be licensed by the FCC under its Private Operational Fixed (microwave) Service rules.
Does the other party own any ships or aircraft that make international communications or travel to international ports? If so, these ships could be equipped with FCC radios licensed under the Commission's Marine (ships) or Aviation (aircraft) Service rules.Another way to find out is to check the FCC's databases. The Wireless Telecommunications Bureau's Universal Licensing System ("ULS"), which contains licensing information for the Bureau's radio services, is available at www.fcc.gov/wtb/uls. Please note that certain services have not yet been incorporated into ULS. For such services, during this interim period, you must search the "legacy" databases for these services by clicking on the "databases" heading on the Bureau's homepage (www.fcc.gov/wtb) and selecting "Search the Wireless Databases Online." The ULS homepage provides an up-to-date list of which radio services are currently licensed in ULS.Some private wireless licensees may hold other types of FCC-issued licenses for which prior FCC approval will be required. For example, if the company is a government contractor, such as a defense equipment manufacturer, it may hold licenses for non-common carrier satellite earth stations which are issued by the FCC's International Bureau or experimental licenses which are issued by the FCC's Office of Engineering & Technology. The FCC must approve assignments and transfers of control of these licenses before consummation as well. - What if we find that the other company does hold FCC licenses that are subject to the transaction? What questions should we ask about the status of those licenses?
You should make sure that the FCC licenses in question are assignable or transferable. For example, for some services, the FCC requires that the radio facility be constructed and operational in order to be assigned. See, e.g., Section 101.55 of the Commission's Rules, 47 C.F.R. § 101.55 (prohibiting voluntary substantial assignments or transfers of control of unauctioned microwave licenses prior to completion of construction). Accordingly, you should ask the licensee about the status of construction and operation of its FCC-licensed facilities.
The FCC will not assign or transfer a license that has been previously cancelled or allowed to expire by the licensee. Accordingly, you should verify that all of the licensee's FCC-issued facilities that are subject to the transaction are, in fact, licensed. In this regard, please note that the fact that a licensee has a cancelled check covering renewal application filing fees does not mean that the FCC has actually renewed the license. Check the FCC's database and ask the licensee for a copy of the current license for verification of the current status of the license.
Some private wireless licenses are not assignable or transferable. For example, ship and aircraft radio licenses cannot be assigned or transferred. Section 1.948 of the Commission's Rules, 47 C.F.R. § 1.948. In this case, the acquiring entity must obtain a new license. - What forms must we file to request FCC approval of an assignment or transfer of control?
In general, requests for FCC approval of assignments and transfers of control of private wireless licenses must be filed on FCC Form 603. As of the release date of this Fact Sheet, most requests for Private Land Mobile Radio Service licenses must be filed on FCC Form 600 (for assignment of license applications) and FCC Form 703 (for transfers of control). However, the Commission will begin using FCC Form 603 for all of these licenses in the near future. The Commission is in the process of converting Private Land Mobile Radio Services to ULS over a three-phased period. See Wireless Telecommunications Bureau Implements Phase I Of a Three-Phased Deployment of the Universal Licensing System for Land Mobile Radio Services on September 19, 2000, Public Notice, DA 00-1992 (WTB, Sept. 1, 2000) (ULS Public Notice). See also Wireless Telecommunications Bureau Announces Three-Phased Deployment of the Universal Licensing System for the Land Mobile Radio Services, Public Notice DA 00-1647 (WTB, July 25, 2000). Information regarding the specific effective dates for ULS conversion for specific land mobile services can be obtained by reading these Public Notices (and subsequent Commission announcements) as well as the Wireless Telecommunications Bureau's ULS web page. You should also refer to these Public Notices (and any additional Commission announcements) to determine when ULS implementation will become effective for your licenses. Once a service has been converted to ULS, the Commission will begin accepting assignment and transfer of control applications on the FCC Form 603. In addition, you should check the Commission's rules to determine whether you need to submit any corresponding forms, such as FCC Form 602 (providing ownership information). - The FCC recently issued a Public Notice announcing grant of our assignment applications. Are there any other requirements with which we must comply before the FCC will view the transaction as complete?
In general, under Section 1.948 of the Commission's Rules, 47 C.F.R. § 1.948, you must notify the Commission in writing of consummation of the transfer or assignment. Such notice must be provided to the Commission within 180 days of public notice of the Commission's grant of the assignment or transfer application, unless a request for an extension of time to consummate the transaction is filed prior to the expiration of the 180-day period. Notifications of consummation and requests for extension of time to consummate transactions must be filed on FCC Form 603. You may not submit notifications or requests for extension of time by letter only. This requirement applies to all assignments and transfers of licenses for private wireless services that have been converted to the ULS (i.e., Private Operational Fixed Services).
As noted above, the Commission is in the process of converting the Private Land Mobile Service to the ULS over a three-phase process. ULS Public Notice, supra. Prior to ULS, the Commission has not required the submission of consummation notifications or requests for extension of time to consummate for assignments and transfers of Private Land Mobile Radio Services. However, this notification requirement will become applicable to PLMRS licenses as the Commission converts this radio service to ULS. See ULS Public Notice, supra. - Reading this Fact Sheet has made us realize that we have, in fact, consummated at least one transaction without seeking and obtaining prior FCC approval. What should we do?
You should file the appropriate applications for assignment or transfer of control with the Commission as soon as possible. In addition, you should file a request for Special Temporary Authority ("STA") pending action on the application.
Your submissions should include an attachment providing full explanation of why you did not seek and obtain Commission approval prior to consummating the transfer or assignment. The fact that the transaction has already occurred does not make it a pro forma transaction. If you fail to obtain Commission approval prior to consummation of the transaction, the FCC may take enforcement action. To alleviate delays in processing, you may want to contact the Licensing and Technical Analysis Branch of the Public Safety & Private Wireless Division, Wireless Telecommunications Bureau, prior to or at the time of filing. - Will the FCC's Enforcement Bureau impose a forfeiture for our failure to seek prior FCC consent for assignment and transfer of control of FCC licenses?
Failure to seek FCC approval prior to an assignment or transfer of control is a violation of the Communications Act and the FCC's rules and, thus, subjects the parties to possible enforcement action, including monetary forfeitures. Under Section 1.80 of the Commission's Rules, 47 C.F.R. § 1.80, unauthorized substantial transfers of control carry a base forfeiture amount of $8,000 per violation, while unauthorized pro forma transfers of control carry a base forfeiture amount of $1,000 per violation. These amounts can be adjusted upward or downward based on the applicability of certain criteria.
The Commission strongly encourages parties that may have violated these provisions to disclose voluntarily their transgressions to the Commission as early as possible. Such voluntary disclosure is a factor that may be considered in determining appropriate enforcement action, if any. See Section 1.80 of the Commission's rules, 47 C.F.R. § 1.80. In addition, the Commission invites parties to discuss with the Enforcement Bureau the possibility of negotiated settlement of enforcement actions through consent decrees.
By the Chief, Investigations & Hearings Division, Enforcement Bureau, and the Chief, Public Safety & Private Wireless, Wireless Telecommunications Bureau.
For further information contact Wireless Telecommunications Bureau, Public Safety & Private Wireless Division at (202) 418-0680.
For further information contact Wireless Telecommunications Bureau, Public Safety & Private Wireless Division at (202) 418-0680.
Footnotes
- This fact sheet is intended for information purposes only. Nothing herein provides licensees with any additional rights. Parties contemplating assignmant or transfer of control transactions should consult Section 310(d) of the Communications Act and the Commission's Rules well in advance of filing applications and/or consummating transactions involving changes in ownership.
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