Sec. 90.814  Definitions.

    (a) Scope. The definitions in this section apply to Secs. 90.810 
through 90.813, unless otherwise specified in those sections.
    (b) Small business: Consortium of small business:
    (1) A small business is an entity that either:
    (i) together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has average 
gross revenues that are not more than $3 million for the preceding three 
years; or
    (ii) together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has average 
gross revenues that are not more than $15 million for the preceding 
three years.
    (2) For purposes of determining whether an entity meets either the 
$3 million or $15 million average annual gross revenues size standard 
set forth in paragraph (b)(1) of this section, the gross revenues of the 
entity, its affiliates, persons or entities holding interests in the 
entity and their affiliates shall be considered on a cumulative basis 
and aggregated, subject to the exceptions set forth in Sec. 90.814(g).
    (3) 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 either definition of a small 
business in paragraphs (b)(1) and (b)(2) of this section. In a 
consortium of small businesses, each individual member must establish 
its eligibility as a small business, as defined in this section.
    (c) Rural telephone company. A rural telephone company is a local 
exchange carrier having 100,000 or fewer access lines, including all 
affiliates.
    (d) Gross revenues. For applications filed after December 31, 1994, 
gross revenues shall be evidenced by audited financial statements for 
the preceding relevant number of calendar or fiscal years. If an entity 
was not in existence for all or part of the relevant period, gross 
revenues shall be evidenced by

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the audited financial statements of the entity's predecessor-in-interest 
or, if there is no identifiable predecessor-in-interest, unaudited 
financial statements certified by the applicant as accurate.
    (e) Businesses owned by members of minority groups and/or women. A 
business owned by members of minority groups and/or women in which 
minorities and/or women who are U.S. citizens control the applicant, 
have at least 50.1 percent equity ownership and, in the case of a 
corporate applicant, a 50.1 percent voting interest. For applicants that 
are partnerships, every general partner either must be a minority and/or 
woman (or minorities and/or women) who are U.S. citizens and who 
individually or together own at least 50.1 percent of the partnership 
equity, or an entity that is 100 percent owned and controlled by 
minorities and/or women who are U.S. citizens. The interests of 
minorities and women are to be calculated on a fully-diluted basis; 
agreements such as stock options and convertible debentures shall be 
considered to have a present effect on the power to control an entity 
and shall be treated as if the rights thereunder already have been fully 
exercised. However, upon a demonstration that options or conversion 
rights held by non-controlling principals will not deprive the minority 
and female principals of a substantial financial stake in the venture or 
impair their rights to control the designated entity, a designated 
entity may seek a waiver of the requirement that the equity of the 
minority and female principals must be calculated on a fully-diluted 
basis.
    (f) Members of minority groups. Members of minority groups includes 
Blacks, Hispanics, American Indians, Alaskan Natives, Asians, and 
Pacific Islanders.
    (g) Attributable interests. Partnership and other ownership 
interests and any stock interest amounting to 20 percent or more of the 
equity, or outstanding stock, or outstanding voting stock of a licensee 
or applicant will be attributable.
    (1) Multiplier. 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 line in the chain exceeds 50 percent 
or represents actual control, it shall be treated as if it were a 100 
percent interest.
    (2) [Reserved]
    (h) Affiliate. (1) Basis for affiliation. An individual or entity is 
an affiliate of an applicant or of a person holding an attributable 
interest in an applicant (both referred to herein as ``the applicant'') 
if such individual or entity:
    (i) Directly or indirectly controls or has the power to control the 
applicant, or
    (ii) Is directly or indirectly controlled by the applicant, or
    (iii) Is directly or indirectly controlled by a third party or 
parties that also controls or has the power to control the applicant, or
    (iv) Has an ``identity of interest'' with the applicant.
    (2) Nature of control in determining affiliation. (i) Every business 
concern is considered to have one or more parties who directly or 
indirectly control or have the power to control it. Control may be 
affirmative or negative and it is immaterial whether it is exercised so 
long as the power to control exists.

    Example for paragraph (h)(2)(i). An applicant owning 50 percent of 
the voting stock of another concern would have negative power to control 
such concern since such party can block any action of the other 
stockholders. Also, the bylaws of a corporation may permit a stockholder 
with less than 50 percent of the voting to block any actions taken by 
the other stockholders in the other entity. Affiliation exists when the 
applicant has the power to control a concern while at the same time 
another person, or persons, are in control of the concern at the will of 
the party or parties with the power of control.

    (ii) Control can arise through stock ownership; occupancy of 
director, officer or key employee positions; contractual or other 
business relations; or combinations of these and other factors. A key 
employee is an employee who, because of his/her position in the concern, 
has a critical influence in or substantive control over the operations 
or management of the concern.

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    (iii) Control can arise through management positions where a 
concern's voting stock is so widely distributed that no effective 
control can be established.

    Example for paragraph (h)(2)(iii). In a corporation where the 
officers and directors own various size blocks totaling 40 percent of 
the corporation's voting stock, but no officer or director has a block 
sufficient to give him or her control or the power to control and the 
remaining 60 percent is widely distributed with no individual 
stockholder having a stock interest greater than 10 percent, management 
has the power to control. If persons with such management control of the 
other entity are persons with attributable interests in the applicant, 
the other entity will be deemed an affiliate of the applicant.

    (3) Identity of interest between and among persons. Affiliation can 
arise between or among two or more persons with an identity of interest, 
such as members of the same family or persons with common investments. 
In determining if the applicant controls or is controlled by a concern, 
persons with an identity of interest will be treated as though they were 
one person.

    Example 1 for paragraph (h)(3) introductory text. Two shareholders 
in Corporation Y each have attributable interests in the same SMR 
application. While neither shareholder has enough shares to individually 
control Corporation Y, together they have the power to control 
Corporation Y. The two shareholders with these common investments (or 
identity or interest) are treated as though they are one person and 
Corporation Y would be deemed an affiliate of the applicant.
    Example 2 for paragraph (h)(3) introductory text. One shareholder in 
Corporation Y, shareholder A, has an attributable interest in a SMR 
application. Another shareholder in Corporation Y, shareholder B, has a 
nonattributable interest in the same SMR application. While neither 
shareholder has enough shares to individually control Corporation Y, 
together they have the power to control Corporation Y. Through the 
common investment of shareholders A and B in the SMR application, 
Corporation Y would still be deemed an affiliate of the applicant.

    (i) Spousal affiliation. Both spouses are deemed to own or control 
or have the power to control interests owned or controlled by either of 
them, unless they are subject to a legal separation recognized by a 
court of competent jurisdiction in the United States.
    (ii) Kinship affiliation. Immediate family members will be presumed 
to own or control or have the power to control interests owned or 
controlled by other immediate family members. In this context 
``immediate family member'' means father, mother, husband, wife, son, 
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father, or -mother, step-
brother, or -sister, step-son, or -daughter, half brother or sister. 
This presumption may be rebutted by showing that
    (A) The family members are estranged,
    (B) The family ties are remote, or
    (C) The family members are not closely involved with each other in 
business matters.

    Example for paragraph (h)(3)(ii). A owns a controlling interest in 
Corporation X. A's sister-in-law, B, has an attributable interest in an 
SMR application. Because A and B have a presumptive kinship affiliation, 
A's interest in Corporation X is attributable to B, and thus to the 
applicant, unless B rebuts the presumption with the necessary showing.

    (4) Affiliation through stock ownership. (i) An applicant is 
presumed to control or have the power to control a concern if he or she 
owns or controls or has the power to control 50 percent or more of its 
voting stock.
    (ii) An applicant is presumed to control or have the power to 
control a concern even though he or she owns, controls or has the power 
to control less than 50 percent of the concern's voting stock, if the 
block of stock he or she owns, controls or has the power to control is 
large as compared with any other outstanding block of stock.
    (iii) If two or more persons each owns, controls or has the power to 
control less than 50 percent of the voting stock of a concern, such 
minority holdings are equal or approximately equal in size, and the 
aggregate of these minority holdings is large as compared with any other 
stock holding, the presumption arises that each one of these persons 
individually controls or has the power to control the concern; however, 
such presumption may be rebutted by a showing that such control or power 
to control, in fact, does not exist.

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    (5) Affiliation arising under stock options, convertible debentures, 
and agreements to merge. Stock options, convertible debentures, and 
agreements to merge (including agreements in principle) are generally 
considered to have a present effect on the power to control the concern. 
Therefore, in making a size determination, such options, debentures, and 
agreements will generally be treated as though the rights held 
thereunder had been exercised. However, neither an affiliate nor an 
applicant can use such options and debentures to appear to terminate its 
control over another concern before it actually does so.

    Example 1 for paragraph (h)(5). If company B holds an option to 
purchase a controlling interest in company A, who holds an attributable 
interest in an SMR application, the situation is treated as though 
company B had exercised its rights and had become owner of a controlling 
interest in company A. The gross revenues of Company B must be taken 
into account in determining the size of the applicant.
    Example 2 for paragraph (h)(5). If a large company, BigCo, holds 70% 
(70 to 100 outstanding shares) of the voting stock of company A, who 
holds an attributable interest in an SMR application, and gives a third 
party, SmallCo, an option to purchase 50 of the 70 shares owned by 
BigCo, BigCo will be deemed to be an affiliate of company, and thus the 
applicant, until SmallCo actually exercises its options to purchase such 
shares. In order to prevent BigCo from circumventing the intent of the 
rule which requires such options to be considered on a fully diluted 
basis, the option is not considered to have present in this case.
    Example 3 for paragraph (h)(5). If company A has entered into an 
agreement to merge with company B in the future, the situation is 
treated as though the merger has taken place.

    (6) Affiliation under voting trusts. (i) Stock interests held in 
trust shall be deemed controlled by 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.
    (ii) If a trustee has a familial, personal or extra-trust business 
relationship to the grantor or the beneficiary, the stock interests held 
in trust will be deemed controlled by the grantor or beneficiary, as 
appropriate.
    (iii) If the primary purpose of a voting trust, or similar 
agreement, is to separate voting power from beneficial ownership of 
voting stock for the purpose of shifting control of or the power to 
control a concern in order that such concern or another concern may meet 
the Commission's size standards, such voting trust shall not be 
considered valid for this purpose regardless of whether it is or is not 
recognized within the appropriate jurisdiction.
    (7) Affiliation through common management. Affiliation generally 
arises where officers, directors, or key employees serve as the majority 
or otherwise as the controlling element of the board of directors and/or 
the management of another entity.
    (8) Affiliation through common facilities. Affiliation generally 
arises where one concern shares office space and/or employees and/or 
other facilities with another concern, particularly where such concerns 
are in the same or related industry or field of operations, or where 
such concerns were formerly affiliated, and through theses sharing 
arrangements one concern has control, or potential control, of the other 
concern.
    (9) Affiliation through contractual relationships. Affiliation 
generally arises where one concern is dependent upon another concern for 
contracts and business to such a degree that one concern has control, or 
potential control, of the other concern.
    (10) Affiliation under joint venture arrangements. (i) A joint 
venture for size determination purposes is an association of concerns 
and/or individuals, with interests in any degree or proportion, formed 
by contract, express of implied, to engage in and carry out a single, 
specific business venture for joint profit for which purpose they 
combine their efforts, property, money, skill and knowledge, but not on 
a continuing or permanent basis for conducting business generally. The 
determination whether an entity is a joint venture is based upon the 
facts of the business operation, regardless of how the business 
operation may be designated by the parties involved. An agreement to 
share profits/losses proportionate to each party's contribution to the 
business operation is a significant factor in

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determining whether the business operation is a joint venture.
    (ii) The parties to a joint venture are considered to be affiliated 
with each other.