[Federal Register Volume 59, Number 140 (Friday, July 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17931]


[[Page Unknown]]

[Federal Register: July 22, 1994]


_______________________________________________________________________

Part IV





Federal Communications Commission





_______________________________________________________________________



47 CFR Part 24



Competitive Bidding; Final Rule
FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[PP Docket No. 93-253, FCC 94-178]

 

Implementation of Section 309(j) of the Communications Act--
Competitive Bidding

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Fifth Report and Order, the Commission adopts rules 
governing competitive bidding to award initial licenses in the Personal 
Communications Services in the 2 GHz band (broadband PCS''). This 
action is taken to implement Section 309(j) of the Communications Act 
of 1934, as amended. The new rules will promote the development and 
rapid deployment of new technologies, products, and services for the 
benefit of the public, including those residing in rural areas. These 
rules also will promote economic opportunity and competition, and 
disseminate licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women. This action will result in 
recovery for the public of a portion of the value of the public 
spectrum made available for commercial use.

EFFECTIVE DATE: August 22, 1994.

FOR FURTHER INFORMATION CONTACT:
Sara Seidman, Office of General Counsel, (202) 418-1700, or Jonathan 
Cohen, Office of Plans and Policy, (202) 418-2030.

SUPPLEMENTARY INFORMATION: This Fifth Report and Order in PP Docket No. 
93-253, adopted June 29, 1994, and released July 15, 1994, is available 
for inspection and copying during normal business hours in the FCC 
Dockets Branch, Room 230, 1919 M Street NW., Washington, DC. The 
complete text may be purchased from the Commission's copy contractor, 
International Transcription Service, Inc., 2100 M Street, NW., Suite 
140, Washington, DC 20037, telephone (202) 857-3800.

Paperwork Reduction Act

    In the Fifth Report and Order in PP Docket No. 93-253, the 
Commission has amended 47 CFR Part 24 to add new Subparts H and I which 
contain rules and requirements governing the award of broadband PCS 
licenses through a system of competitive bidding. Applicants are 
required to file certain information so that the Commission can 
determine whether the applicants are legally, technically, and 
financially qualified to be licensed. Affected public are any member of 
the public who wants to become a licensee. Implementation of the rules 
contained in the Fifth Report and Order will impose reporting and 
recordkeeping requirements on the public. The Federal Communications 
Commission will submit an information collection request to OMB for 
review and clearance under the Paperwork Reduction Act of 1980, 44 
U.S.C. Section 3507. Persons wishing to comment on this information 
collection should contact Timothy Fain, Office of Management and 
Budget, Room 3225, New Executive Office Building, Washington, DC 20503, 
(202) 395-3561. For further information, contact Judy Boley, Federal 
Communications Commission, (202) 418-0210.

Fifth Report and Order

Adopted: June 29, 1994
Released: July 15, 1994

    By the Commission: Commissioners Quello, Barrett, Ness and Chong 
issuing separate statements.

Table of Contents

I. Introduction
II. Executive Summary
III. Auctionability of Broadband PCS
IV. Competitive Bidding Design
    A. General Competitive Bidding Rules
    B. Competitive Bidding Design for Broadband PCS Licenses
    1. Simultaneous Multiple Round Auctions
    2. Sequential Auctions
    3. Combinatorial Bidding
    C. Bidding Procedures
    1. Grouping of Licenses
    2. Bid Increments
    3. Stopping Rules for Multiple Round Auctions
    4. Duration of Bidding Rounds
    5. Activity Rules
V. Procedural, Payment and Penalty Issues
    A. Pre-Auction Application Procedures
    B. Upfront Payment
    C. Payment and Procedures for Licenses Awarded by Competitive 
Bidding
    1. Down Payment
    2. Bid Withdrawal and Default Penalties
    3. Re-Offering Licenses When Auction Winners Default
    4. Long-Form Application
    5. Processing and Procedural Rules
    D. Procedures in Alternative Auction Design
VI. Regulatory Safeguards
    A. Transfer Disclosure Requirements
    B. Performance Requirements
    C. Rules Prohibiting Collusion
VII. Treatment of Designated Entities
    A. Overview and Objectives
    B. Summary of Special Provisions for Designated Entities
    C. Summary of Eligibility Requirements and Definitions
    1. Entrepreneurs' Blocks and Small Business Eligibility
    2. Definition of Women and/or Minority-Owned Business
    D. The Entrepreneurs' Blocks
    E. Bidding Credits
    F. Installment Payments
    G. Tax Certificates
    H. Provisions for Rural Telephone Companies
    I. Upfront Payments
    J. Definitions and Eligibility
    1. Eligibility To Bid in the Entrepreneurs' Blocks
    a. Attribution Rules for the Entrepreneurs' Blocks
    b. Limit on Licenses Awarded in Entrepreneurs' Blocks
    2. Definition of Small Business
    3. Definition of Women and Minority-Owned Business
    4. Definition of Rural Telephone Company
    5. Definition of an Affiliate
VIII. Conclusion, Procedural Matters and Ordering Clauses
    A. Conclusion
    B. Final Regulatory Flexibility Analysis
    C. Ordering Clauses
Final Rules

I. Introduction

    1. In this Fifth Report and Order, we adopt rules to conduct 
auctions for the award of more than 2,000 licenses to provide personal 
communications services in the 2 GHz band, which we call ``broadband 
PCS.'' These broadband PCS auctions will constitute the largest auction 
of public assets in American history and are expected to recover 
billions of dollars for the United States Treasury. More importantly, 
the auctions will lead to the introduction of an array of new 
telecommunications products and services that are expected to fuel our 
nation's economic growth and revolutionize the way in which Americans 
communicate.
    2. We also adopt in this Order provisions to fulfill Congress's 
mandate that we ensure that small businesses, rural telephone companies 
and businesses owned by minorities and women are given the opportunity 
to participate in the provision of broadband PCS. These rules will 
provide unprecedented opportunities for these designated entities to 
become meaningfully involved in the provision of a new 
telecommunications service. This action seeks to ensure that licenses 
for broadband PCS are disseminated to a wide variety of applicants and 
to remedy the serious underrepresentation of minorities and women in 
the provision of telecommunications services. Further, by the actions 
we take today we seek to ensure that PCS is provided to all communities 
in this country, including rural areas.
    3. Broadband PCS will provide a variety of mobile services that 
will compete with existing cellular services. In addition, broadband 
PCS is expected to provide new mobile communications capabilities that 
are not currently available. These services will be provided by means 
of a new generation of communications devices that will include small, 
lightweight, multi-function portable phones, portable facsimile and 
other imaging devices, new types of multi-channel cordless phones, and 
advanced paging devices with two-way data capabilities.\1\ The 
introduction of broadband PCS should benefit consumers by raising the 
overall level of competition in many already competitive segments of 
the telecommunications industry and by providing competition in other 
segments for the first time. The broadband PCS industry should also 
generate thousands of jobs in this country and improve the 
international competitiveness of the American economy.
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    \1\We already have adopted rules for competitive bidding on 
licenses to be awarded to provide personal communications services 
in the 900 MHz band (narrowband PCS), which will be used primarily 
to provide advanced paging services, and for licenses to provide 
Interactive Video and Data Service (IVDS), which will be used to 
provide services such as home shopping and pay-per-view programming. 
See Third Report and Order in PP Docket No. 99-253, FCC 94-98, 59 FR 
26741, May 24, 1994 (narrowband PCS); and Fourth Report and Order in 
PP Docket No. 93-253, FCC 94-99, 59 FR 24947, May 13, 1994 (IVDS).
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    4. Auctions for broadband PCS licenses will be conducted pursuant 
to Section 309(j) of the Communications Act, 47 U.S.C. Sec. 309(j), 
which was enacted in August 1993. Section 309(j) granted the Commission 
express authority to employ competitive bidding procedures to award 
licenses to use the electromagnetic spectrum.\2\ Section 309(j)(1) 
permits auctions only where mutually exclusive applications for initial 
licenses are accepted for filing by the Commission and where the 
principal use of the spectrum is reasonably likely to involve the 
receipt by the licensee of compensation from subscribers in return for 
enabling those subscribers to receive or transmit communications 
signals. In the Second Report and Order in his proceeding, we concluded 
that PCS as a class of service satisfies the Section 309(j)(1) 
criteria. See Second Report and Order in PP Docket No. 93-253, 9 FCC 
Rcd 2348, 59 FR 22980, May 4, 1994 (Second Report and Order), at 54-
58. Accordingly, if mutually exclusive applications for a broadband PCS 
license are accepted for filing, we will award that license through 
competitive bidding.
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    \2\We adopted a Notice of Proposed Rule Making to implement 
Section 309(j) on September 23, 1993. Notice of Proposed Rule Making 
in PP Docket No. 93-253, 8 FCC Rcd 7635, 58 FR 53489, Oct. 15, 1993 
(hereinafter ``NPRM'' or ``Notice''). The Commission received 222 
comments, 169 reply comments and numerous ex parte presentations 
relating to this proceeding. Commenters may be referred to herein by 
abbreviations.
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    5. We also concluded in the Second Report and Order that we could 
design auction procedures to govern the award of broadband PCS licenses 
that would promote the objectives listed in Section 309(j)(3). More 
specifically, in the Second Report and Order, we determined that the 
use of competitive bidding to award broadband PCS licenses, as compared 
with other licensing methods, would speed the development and 
deployment of new services to the public and would encourage efficient 
use of the spectrum, as required by Section 309(j)(3) (A) and (D). In 
this regard, we noted that auctions would generally award licenses 
quickly to those parties who value them most highly and who are 
therefore most likely to introduce service rapidly to the public. Id. 
at 57. We also concluded that competitive bidding would recover for 
the public a portion of the value of the spectrum, as envisioned in 
Section 309(j)(3)(C). Id. We considered a variety of methods to 
implement Congress's remaining objectives, set forth in Section 
309(j)(3)(B), of ``promoting economic opportunity'' and ``avoiding 
excessive concentration of licenses'' by disseminating licenses ``among 
a wide variety of applicants.'' In the Second Report and Order, we 
adopted rules which provide the Commission with a menu of options to 
choose from to promote these objectives with respect to particular 
spectrum services to be auctioned, such as broadband PCS, in service-
specific rules.
    6. In our Broadband PCS Reconsideration Order, we established 
bandwidth assignments and area designations for broadband PCS. See 
Memorandum Opinion and Order in GEN Docket No. 90-314, FCC 94-144, 59 
FR 32830, June 24, 1994 (``Broadband PCS Reconsideration Order''); see 
also Second Report and Order in GEN Docket No. 90-314, FCC 93-451, 8 
FCC Rcd 7700, 58 FR 59174, Nov. 8, 1993. In that Order, we allocated 
120 MHz of spectrum for licensed broadband PCS. We divided the licensed 
broadband PCS spectrum into three 30 MHz blocks (blocks A, B and C) and 
three 10 MHz blocks (blocks D, E and F). We also designated two 
different service areas: 493 Basic Trading Areas (``BTAs'') and 51 
Major Trading Areas (``MTAs'').\3\ The licenses in frequency blocks A 
and B will be awarded on an MTA basis, and the licenses on frequency 
blocks C, D, E and F will be awarded on a BTA basis. A total of 2,074 
broadband PCS licenses will therefore be issued.\4\ The Broadband PCS 
Reconsideration Order sets forth eligibility rules for obtaining 
broadband PCS licenses, and establishes construction requirements to 
facilitate the provision of PCS services. See Broadband PCS 
Reconsideration Order at 102-132, 147-158. By these rules, we intend 
to promote competition in the wireless telecommunications market by as 
many different qualified providers as the spectrum can reasonably 
accommodate and to promote the rapid deployment of the infrastructure 
required to provide broadband PCS.
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    \3\The 493 BTAs and 51 MTAs used in our broadband PCS licensing 
rules have been adapted from the Rand McNally 1992 Commercial Atlas 
and Marketing Guide, 123rd Edition, at 38-39.
    \4\The Commission has granted pioneer's preference to three 
broadband PCS applicants, and stated that the parties awarded 
pioneer's preferences may apply for a 30 MHz MTA broadband PCS 
license without facing competing applications. See Third Report and 
Order in GEN Docket No. 90-314, 9 FCC Rcd 1337, 59 FR 9419, Feb. 28, 
1994. If the Commission grants licenses to the three pioneer's 
preference grantees, three fewer licenses will be awarded through 
competitive bidding.
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II. Executive Summary

    7. In this Fifth Report and Order, we set forth the specific 
auction procedures for broadband PCS licenses. We have decided to 
conduct three auctions: the first for the 99 available PCS licenses in 
MTA blocks A and B, the second for the 986 PCS licenses in BTA blocks C 
and F, and the third for the remaining 986 PCS licenses in BTA blocks D 
and E. That is, the first auction will award licenses for the 30 MHz 
blocks for large geographic areas. The second auction will award 
licenses for smaller geographic areas for the two blocks that, as 
explained below, we have reserved for bidding by relatively small 
companies. In these ``entrepreneurs' blocks,'' we have designed 
procedures to ensure that small businesses, rural telephone companies 
and businesses owned by women and minorities, which we collectively 
refer to as designated entities, have ``the opportunity to participate 
in the provision'' of PCS, as Congress directed in Section 
309(j)(4)(D). In the third auction we will award licenses for the 
remaining 10 MHz blocks.
    8. We intend to conduct each auction through simultaneous multiple 
round bidding with simultaneous stopping rules. Under that approach, no 
license awarded until the bidding closes on all licenses in the 
auction. We have determined that simultaneous multiple round bidding is 
appropriate where the value of the licenses is high compared to the 
cost of conducting the auction and the values of licenses are 
interdependent. See Second Report and Order at 106-111. We believe the 
former condition is met here because other government agencies project 
that the boardband PMS licenses will be auctioned for as much as $10.6 
billion. See id. at 177. The latter condition is also satisfied 
because the record demonstrates, for example, that a license for the 
Philadelphia MTA or the Richmond MTA will likely be valued more highly 
if it is held in conjunction with the license for the Washington-
Baltimore MTA. We are adopting a variety of rules governing bid 
increments and bidding activity to move the auctions toward completion 
in a reasonable period of time. We are also retaining the ability to 
use other approaches, including sequential auctions for the licenses, 
and to make other adjustments to the auction process as necessary.
    9. As mentioned above, we establish by this Order a number of rules 
to implement Congress's mandate in Section 309(j)(4)(D) that we ensure 
that designated entities are ``given the opportunity to participate in 
the provision of spectrum-based services'' such as broadband PCS. To 
accomplish this objective, Congress directed us to ``consider the use 
of tax certificates, bidding preferences, and other procedures.'' 47 
U.S.C. Sec. 309(j)(4)(D). We construe this congressional directive as a 
mandate that we take the steps that are necessary to ensure that 
designated entities have a realistic opportunity to obtain broadband 
PCS licenses. We apply that mandate in light of Metro Broadcasting, 
Inc. v. FCC, 497 U.S. 547, 564-565 (1990), which held that ``benign 
race-conscious measures mandated by Congress * * * are constitutionally 
permissible to the extent that they serve important governmental 
objectives within the power of Congress and are substantially related 
to achievement of those objectives.'' The rules we adopt also further 
Congress's objectives, set forth in Section 309(j)(3)(B), of 
``promoting economic opportunity and competition and ensuring that new 
and innovative technologies are readily accessible to the American 
people by avoiding excessive concentration of licenses and by 
disseminating licenses among a wide variety of applicants, including 
small business, rural telephone companies, and businesses owned by 
members of minority groups and women.'' Each of the steps adopted here 
is directly related to carrying out Congress's stated objective of 
promoting economic opportunity by disseminating broadband PCS licenses 
to a wide variety of applicants, including designated entities.
    10. The record clearly demonstrates that the primary impediment to 
participation by designated entities is lack of access to capital. This 
impediment arises for small businesses from the higher costs they face 
in raising capital and for businesses owned by minorities and women 
from lending discrimination as well. In this regard, it should be noted 
that although auctions have many beneficial aspects, they threaten to 
erect another barrier to participation by small businesses and 
businesses owned by minorities and women by raising the cost of entry 
into spectrum-based services.
    11. Congress has recognized that ``small business concerns, which 
represent higher degrees of risk in financial markets than do large 
businesses, are experiencing increased difficulties in obtaining 
credit.''\5\ Congress further found that women and minorities face 
particularly severe problems in raising capital.\6\ A study of mortgage 
lending conducted by the Federal Reserve Bank of Boston in 1992 
illustrates how problems arise. That study showed that in cases in 
which lenders exercised discretion in deciding whether to make a loan 
to a borrower who presented some problems (which includes most mortgage 
applicants), that discretion tended to be exercised in favor of whites. 
As a result, a minority applicant for a mortgage who was identical in 
all pertinent respects to a white applicant nevertheless was 60 percent 
more likely to be denied a mortgage loan.\7\ At the same time, 
discrimination was difficult to show in any particular case, although 
it emerged clearly when data concerning hundreds of mortgage 
applications were reviewed.
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    \5\Small Business Credit and Business Opportunity Enhancement 
Act of 1992, Section 331(a)(3), Pub. L. 102-366, Sept. 4, 1992.
    \6\Id. Sections 112(4) and 331(a)(4).
    \7\Mortgage Lending in Boston: Interpreting HMDA Data, Federal 
Reserve Bank of Boston, Working Paper 92-7 (October 1992).
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    12. The first measure we adopt to fulfill Congress's mandate that 
we ensure that designated entities have the opportunity to participate 
in providing broadband PCS is to reserve the 30 MHz licenses on block C 
and the 10 MHz licenses on block F, both of which are to be licensed in 
each of the 493 BTAs, for bidding by entities with annual gross 
revenues of less than $125 million and total assets of less than $500 
million. These limits will exclude many large telecommunications 
companies from bidding on these two blocks. We will not allow one 
entity to obtain more than 10 percent (i.e., 98) of the licenses on 
these two blocks. By excluding large companies from bidding in these 
two blocks and by limiting the total number of licenses that one entity 
can obtain in these blocks we create numerous opportunities for small 
entities to become PCS providers and thereby ensure that broadband PMS 
licenses will be disseminated ``among a wide variety of applicants,'' 
as required by Section 309(j)(3)(B).
    13. Reserving blocks C and F for bidding by relatively small 
companies will not, by itself, be sufficient to ensure that small 
businesses and businesses owned by members of minority groups and women 
have the opportunity to obtain broadband PCS licenses. Under the 
definition we apply or purposes of this Order, ``small businesses'' are 
those with gross revenues not exceeding $40 million, and those 
businesses will be at a disadvantage in competing against companies 
with gross revenues of as much as $125 million. In addition, businesses 
owned by members of minority groups and women face discrimination that 
poses additional obstacles for these firms. Accordingly, we take five 
related steps within the entrepreneurs' blocks to assist designated 
entities in attracting the capital necessary to obtain a broadband PCS 
license.
    14. First, we will structure our attribution rules to allow those 
extremely large companies that may not bid on blocks C and F to invest 
in entities that bid on those blocks. More specifically, we will allow 
the relatively small companies eligible to bid in these blocks to 
obtain investment representing up to 75 percent of their passive equity 
from larger companies so long as each investor holds no more than a 25 
percent passive equity interest. In addition, eligible businesses owned 
by minorities and women may choose to have a single investor, no matter 
how large, hold a passive equity interest up to 49.9 percent. These 
rules, and others that we establish in this Order, are designed to 
enhance access to capital by businesses owned by minorities and women.
    15. Second, to encourage large companies to invest in designated 
entities and to assist designated entities without large investors to 
overcome the additional hurdle presented by auctions, we will make 
bidding credits available to designated entities. More specifically, 
small businesses will receive a 10 percent bidding credit (or a 10 
percent discount on their winning bids). Businesses owned by minorities 
and women will receive a 15 percent bidding credit to compensate for 
the substantial problems they face in attracting capital. The credits 
will be cumulative, so that a business owned by minorities or women 
that also qualifies as a small business will receive a 25 percent 
bidding credit. Under these rules, it still will be more expensive for 
designated entities to participate in the provision of spectrum-based 
services than it was before Congress granted us authority to hold 
auctions, because they will have to purchase licenses. But by adopting 
bidding credits, which are explicitly authorized by Section 
309(j)(4)(D), the Commission seeks to promote economic opportunity and 
to counterbalance the tendency of auctions to concentrate license 
ownership in the hands of several very large companies.
    16. Third, we will allow most successful bidders within the 
entrepreneurs' blocks to pay for their licenses in installments for 
generally the same reasons--encouraging large companies to invest in 
designated entities, promoting economic opportunity by assisting 
designated entities in overcoming the additional hurdle presented by 
auctions, and ensuring that licenses are disseminated widely. In 
general, successful bidders will be permitted to defer payments of 
principal on their debt to the government for some period. Small 
businesses and businesses owned by minorities and women will be 
permitted to defer payments of principal for a longer period than other 
successful bidders in these blocks. Finally, businesses owned by 
minorities and women will be charged a lower interest rate.
    17. Fourth, we will extend our tax certificate policies to promote 
participation by minorities and women in the provision of broadband 
PCS. The holder of a tax certificate is permitted to defer payment of 
the capital gains tax that would otherwise be recognized upon the sale 
of an investment. Our extension of the tax certificate policy to 
broadband PCS will promote involvement by minorities and women in 
spectrum-based services in three ways. First, initial investors in such 
businesses will be eligible for tax certificates upon the sale of their 
investments. We expect that the availability of such favorable tax 
treatment will enable minority- and women-owned businesses to attract 
investors more easily. Second, holders of broadband PCS licenses will 
be able to obtain tax certificates upon the sale of the business to a 
company controlled by minorities and women. Third, a cellular operator 
that sells its interest in an overlapping cellular system to a 
minority- or woman-owned business to come into compliance with our PCS/
cellular cross-ownership rule will be eligible for a tax certificate. 
Both the second and third policy will further Congress' objective of 
ensuring that spectrum licenses are disseminated widely and, in 
particular, to designated entities.
    18. Finally, we will reduce the upfront payment for all bidders in 
the entrepreneurs' block. Bidders in the other blocks will pay $0.02 
per MHz per pop while winners in the entrepreneurs' blocks will receive 
a 25 percent discount and pay only $0.015 per MHz per pop as a pre-
auction payment.
    19. Congress was also concerned that rural areas not go unserved by 
PCS, and therefore directed us to ensure participation in auctions for 
spectrum-based services by rural telephone companies who have a history 
of service to rural areas and an established infrastructure on which to 
build a PCS business effectively. Thus, we establish partitioning rules 
in this Order that will allow them to use their existing wireline 
network to efficiently and expeditiously provide PCS in rural areas. In 
addition, most rural telephone companies will qualify to bid on the 
entrepreneurs' blocks, and hence will be eligible for installment 
payments. Those rural telephone companies that qualify as small or 
minority- or women-owned businesses will also be able to take advantage 
of the applicable bidding credits.
    20. The rules that we adopt today are designed to ensure that only 
bona fide designated entities qualify for the special provisions 
established to ensure their participation in broadband PCS. The rules 
are designed to enable designated entities to attract passive equity 
from non-designated entities, provided that designated entities 
maintain control and a substantial entity stake in the ventures at all 
times. The Commission will not tolerate ``fronts'' that are controlled 
by supposedly passive investors, and we will be vigilant in preventing 
abuse of the designated entity provisions. Our rules are also designed 
to prevent designated entities from assigning licenses obtained through 
the use of these special measures or who otherwise lose their 
designated entity status before the end of a required five-year holding 
period.
    21. The following sections of this Fifth Report and Order discuss 
in detail the actions we have outlined above.

III. Auctionability of Broadband PCS

    22. Section 309(j)(1) of the Communications Act, as amended, 47 
U.S.C. Sec. 309(j)(1), permits auctions only where mutually exclusive 
applications for initial licenses or construction permits are accepted 
for filing by the Commission and where the principal use of the 
spectrum will involve or is reasonably likely to involve the receipt by 
the licensee of compensation from subscribers in return for enabling 
those subscribers to receive or transmit communications signals. In the 
Second Report and Order, we concluded that PCS as a class of service 
would satisfy the section 309(j)(1) criteria for auctionability. See 
Second Report and Order at 54-58. Specifically, based on the record 
in this proceeding and in GEN Docket No. 90-314, we concluded that the 
principal use of broadband PCS spectrum satisfied these auction 
criteria. Id. at 56. Thus, if mutually exclusive applications for a 
broadband PCS license are accepted for filing, we will award that 
license through competitive bidding.\8\
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    \8\In the Second Report and Order, we addressed the only 
commenter who argued that the Commission should not find that the 
principal use of PCS is likely to be for the provision of service to 
subscribers for compensation. See Second Report and Order at  55-
56. The Commission rejected the argument of Millin Publications, a 
publisher of specialized information services that intends to 
utilize PCS frequencies on a non-subscription basis, that the 
Commission should refrain from making the principal use finding 
because PCS does not yet exist. We concluded that the overwhelming 
weight of the comments in this proceeding, as well as our experience 
with the PCS experiments that we have licensed, reflect that 
licensed PCS spectrum is likely to be used principally for the 
provision of service to subscribers for compensation. See id. at  
56. We find no basis in the record to depart from this conclusion.
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    23. As noted above, we concluded in the Second Report and Order 
that the criteria in Section 309(j)(3) will be satisfied by competitive 
bidding for broadband PCS licenses, and thus that broadband PCS should 
be subject to our competitive bidding procedures. We determined that 
the use of competitive bidding to award broadband PCS licenses, as 
compared with other licensing methods, will speed the development and 
deployment of new services to the public with minimal administrative or 
judicial delay, and will encourage efficient use of the spectrum as 
required by Section 309(j)(3) (A) and (D). We also concluded that 
competitive bidding would recover for the public a portion of the value 
of the spectrum, as envisioned in Section 309(j)(3)(C). Id. Finally, in 
accordance with Section 309(j)(3)(B), we adopted a set of open 
competitive bidding procedures and a menu of special provisions 
designed to increase opportunities for designated entities who might 
otherwise face entry barriers. Our views on this matter remain 
unchanged since adoption of the Second Report and Order. We therefore 
affirm in this Order the use of competitive bidding procedures to award 
broadband PCS licenses.

IV. Competitive Bidding Design

A. General Competitive Bidding Rules

    24. The Second Report and Order established the criteria to be used 
in selecting which auction design method to use for each particular 
auctionable service. Generally, we concluded that awarding licenses to 
those parties who value them most highly will foster Congress' policy 
objectives. In this regard, we noted that since a bidder's ability to 
introduce valuable new services and to deploy them quickly, 
intensively, and efficiently increases the value of a license to that 
bidder, an auction design that awards licenses to those bidders with 
the highest willingness to pay tends to promote the development and 
rapid deployment of new services and the efficient and intensive use of 
the spectrum. In articulating our auction design principles we further 
stated that: (1) Licenses with strong value interdependencies should be 
auctioned simultaneously; (2) multiple round auctions, by providing 
bidders with information regarding other bidders' valuations of 
licenses, generally will yield more efficient allocations of licenses 
and higher revenues, especially where there is substantial uncertainty 
as to value; and (3) because they are relatively expensive to implement 
and time-consuming, simultaneous and/or multiple round auctions become 
less cost-effective as the value of licenses decreases. See Second 
Report and Order at 69.
    25. Based on the foregoing, we concluded that where the licenses to 
be auctioned are interdependent and their value is expected to be high, 
simultaneous multiple round auctions would best achieve the 
Commission's goals for competitive bidding. See Second Report and Order 
at  109-111. We indicated that compared with other bidding 
mechanisms, simultaneous multiple round bidding will generate the most 
information about license values during the course of the auction and 
provide bidders with the most flexibility to pursue back-up strategies. 
Thus, we concluded that simultaneous multiple round bidding is most 
likely to award interdependent licenses to the bidders who value them 
the most. We also indicated that this method will facilitate efficient 
aggregation of licenses across spectrum bands, thereby resulting in 
vigorous competition among several strong service providers who will be 
able rapidly to introduce a wide variety of services highly valued by 
end users. Second Report and Order at  106. In addition, we concluded 
that because of the superior information and flexibility it provides, 
this method is likely to yield greater revenues than other auction 
designs. Thus, we found that the use of simultaneous multiple round 
auctions would generally be preferred. Id.
    26. However, because simultaneous multiple round bidding is likely 
to be more administratively complex and costly both for bidders and for 
the FCC than sequential or single round bidding, we indicated that we 
would use this auction design only where license values are 
interdependent and the expected value of the licenses to be auctioned 
is high relative to the costs of conducting a simultaneous multiple 
round auction. See Second Report and Order at 110-111.

B. Competitive Bidding Design for Broadband PCS Licenses

    27. In the Second Report and Order we considered several auction 
methods including simultaneous multiple round bidding, sequential 
bidding, and combinatorial bidding. We discuss each of these below. We 
have chosen to adopt simultaneous multiple round auctions as our 
auction methodology for broadband PCS licenses. We believe that for 
broadband licenses this method will best meet Congress' goals in 
authorizing competitive bidding in section 309(j) of the Communications 
Act.
1. Simultaneous Multiple Round Auctions
    28. There is considerable support in the record for the use of 
simultaneous multiple round auctions, in which two or more licenses are 
put up for bid at the same time, and there are multiple bidding rounds 
in which bidders have the opportunity to top the high bids from the 
previous round. Several comments and studies in the record by academic 
auction experts advocate simultaneous multiple round bidding for 
broadband PCS. See comments of PacTel Corporation, Attachment of R. 
Preston McAfee; comments of Pacific Bell and Nevada Bell, Attachment of 
Paul R. Milgrom and Robert B. Wilson; comments of NYNEX, Attachment by 
Robert G. Harris and Michael L. Katz. NTIA also recommends simultaneous 
multiple round bidding.\9\ Comments of NTIA at 14-16. Other experts 
recommend using some combination of sequential and simultaneous 
bidding. See comments of Bell Atlantic Personal Communications, Inc., 
Attachment by Barry Nalebuff and Jeremy Bulow; and comments of 
Telephone and Data Systems, Attachment by Robert J. Weber. Some 
commenters who originally expressed no opinion on the issue or 
supported other methods in their comments supported proposals for 
simultaneous bidding in their reply comments. See reply comments of 
AT&T, GTE Service Corp. and Community Service Telephone Co.
---------------------------------------------------------------------------

    \9\NTIA also supports all-or-nothing bids on groups of licenses, 
i.e., combinatorial bidding, in conjunction with simultaneous 
multiple round bidding.
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    29. The analysis in the Second Report and Order also supports 
simultaneous multiple round bidding for broadband PCS auctions. We 
concluded that multiple round bidding is generally superior to single 
round bidding, and that when licenses are interdependent, simultaneous 
bidding is generally superior to sequential bidding. As we noted in the 
Second Report and Order, multiple-round auctions have the advantage 
over single-round auctions insofar as they provide more information to 
bidders about the value that other bidders place on licenses, 
increasing the likelihood that the licenses are acquired by those who 
value them most highly and increasing the revenue likely to be gained 
from the auction. Multiple-round auctions are also more likely to be 
perceived as open and fair. The disadvantage of multiple round auctions 
is that they have higher administrative costs than single round 
auctions. Second Report and Order at 82-85.
    30. As noted in the Second Report and Order, simultaneous auctions 
are more likely than sequential auctions to award interdependent 
licenses efficiently because they provide more information about the 
value of interdependent licenses and allow the use of that information 
because all licenses remain available throughout the bidding process. 
Simultaneous auctions are also likely to raise more revenue than 
sequential auctions for two reasons. First, they increase the value of 
the licenses by facilitating efficient aggregation. Second, because 
they provide more information about the value of interdependent 
licenses they reduce the propensity of sophisticated bidders to bid 
cautiously in order to avoid the ``winner's curse''--the tendency for 
the winner to be the bidder who most overestimates the value of the 
item up for bid. Simultaneous auctions also eliminate the need to 
choose the order in which licenses will be auctioned. The advantage 
offered by simultaneous auctions depends on how much interdependence 
exists among licenses. Second Report and Order at 89-94. The 
disadvantages of simultaneous multiple round auctions appear to be that 
they may be difficult to implement and there is little experience in 
their use. Second Report and Order at 95.
    31. We agree with commenters who support simultaneous multiple 
round bidding for awarding broadband PCS licenses. Estimates of total 
PCS revenues by the Office of Management and Budget and the 
Congressional Budget Office indicate that the value of broadband PCS 
licenses will likely be sufficiently high to warrant the use of 
simultaneous auctions.\10\ We further believe that the values of most 
broadband PCS licenses will be significantly interdependent because of 
the desirability of aggregation across spectrum blocks and geographic 
regions and because there is a high degree of substitutability among 
licenses with the same amount of spectrum and covering the same 
geographic area. See Second Report and Order at 90-91. Compared with 
other bidding mechanisms, simultaneous multiple round bidding generates 
the most information about license values during the course of the 
auction and provides bidders with the most flexibility to pursue back-
up strategies, and is therefore most likely to award licenses to the 
bidders who value them the most. Simultaneous multiple round auctions 
will also facilitate efficient aggregation across spectrum bands, where 
permitted, thereby enhancing competition among wireless products and 
services.
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    \10\A study by the Congressional Budget Office estimated that an 
auction for PCS licenses on two 25 MHz nationwide blocks of spectrum 
could raise $1.3 billion to $5.7 billion in revenues. Congressional 
Budget Office, Auctioning Radio Spectrum Licenses, at 23 (March 
1992). The Office of Management and Budget estimated that auctioning 
broadband PCS licenses would generate $12.6 billion in revenues. 
Budget of the United States Government, Analytical Perspective, 
Fiscal Year 1995, at 220 (February 1994).
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    32. We recognize, however, that simultaneous multiple round bidding 
may involve a greater degree of complexity than other competitive 
bidding methods, and that it may present greater operational 
difficulties both for the FCC and for bidders, especially where many 
bidders are expected to participate. Therefore, we will use a sequence 
of simultaneous auctions. Licenses that are highly interdependent will 
be grouped together and auctioned simultaneously.
2. Sequential Auctions
    33. In a pure sequential auction, whether oral or electronic, 
licenses are put up for bid one at a time, so that bidding ends on one 
item before it begins on the next item. Sequential multiple round oral 
or electronic auctions generate valuable information about earlier 
auctioned licenses, which can assist bidders in valuing later auctioned 
licenses. If license values are interdependent, however, sequential 
oral or electronic auctions are less likely than simultaneous auctions 
to award interdependent licenses to the parties who value them most 
highly and to result in the efficient aggregation of licenses, because 
bidders for licenses that are auctioned early must bid with less 
information about the value of licenses to be auctioned later, and they 
will have less opportunity to pursue backup bidding strategies. For 
these reasons, we conclude that sequential multiple round auctions are 
less preferred in the award of broadband PCS licenses than simultaneous 
multiple round auctions. Nevertheless, if, as a result of our auction 
experience, we determine that the operational costs or complexities 
associated with simultaneous multiple round auctions outweigh their 
benefits, we may decide instead to employ pure sequential oral or 
electronic (multiple round) auctions or a sequence of single combined 
oral auctions in which bidding is combined for all licenses in a given 
band with the same bandwidth and the same geographic service area. If 
such a change becomes necessary, the auction method will be announced 
by Public Notice before each auction.
    34. If we should decide in the future to use sequential oral or 
sequential electronic bidding for relatively homogeneous licenses, we 
will employ a single combined auction design. Under this approach, the 
Commission will combine bidding for all licenses in the same band with 
the same amount of spectrum and same geographic service area.\11\ 
Licenses will be awarded market by market to the highest bidders until 
all the available licenses are exhausted, e.g., two relatively 
homogeneous licenses would be awarded to the two highest bidders. 
Because broadband PCS licenses may not be perfectly homogeneous (i.e., 
bidders may prefer one frequency over another within the same 
geographic region for purposes of efficient aggregation), winning 
bidders will be given the opportunity to choose among licenses for 
which bidding is combined in descending order of their bid amounts 
(i.e., the highest bidder will pick first).
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    \11\This approach was proposed by Bell Atlantic. See comments of 
Bell Atlantic Personal Communications Inc., Attachment by Barry 
Nalebuff and Jeremy Bulow at 4-5. Single combined auctions are used 
by the U.S. Department of the Treasury to sell U.S. securities.
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3. Combinatorial Bidding
    35. In general terms, combinatorial bidding allows bidders to bid 
for multiple licenses as all-or-nothing packages.\12\ Combinatorial 
bidding can be implemented with either simultaneous or sequential 
auction designs. Although we recognized in the Second Report and Order 
that there may be significant benefits associated with combinatorial 
bidding, especially in terms of efficient aggregation of licenses, we 
concluded that simultaneous multiple round auctions offer many of the 
same advantages without the same degree of administrative and 
operational complexity and without biasing auction outcomes in favor of 
combination bids. See Second Report and Order at  101-105. On 
balance, we believe that the advantages of combinatorial bidding appear 
unlikely to outweigh the disadvantages. While broadband PCS licenses 
are likely to be worth more to some bidders as a part of a package, we 
believe that simultaneous multiple round bidding will provide these 
bidders with ample opportunity to express the value of interdependent 
licenses. Moreover, we conclude that there will not be any extreme 
discontinuity in value if some licenses in a package are not obtained. 
We believe that the opportunity to acquire licenses in post-auction 
transactions and the ability to withdraw bids (upon payment of the bid 
withdrawal penalty) will limit the risks associated with failing to 
acquire all of the licenses in a desired package. Nevertheless, if, 
based on our experience with the initial simultaneous multiple round 
auctions and auction experiments, we determine that such auctions do 
not result in efficient aggregation of licenses, and if there are 
significant advances in the development of combinatorial auctions, we 
may, by public notice prior to a specific auction, choose to use 
combinatorial bidding techniques in conjunction with simultaneous 
multiple round auctions.
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    \12\In combinatorial bidding, if a bid for a group of licenses 
exceeds the sum of the highest bids for the individual licenses that 
comprise the package, then the package bid would win. In the Second 
Report and Order we also indicated that if we were to utilize 
combinatorial bidding we might institute a premium so that the 
combinatorial bid would win only if it exceeded the sum of the bids 
for individual licenses by a set amount. See Second Report and Order 
at  114. NTIA is the main advocate of combinatorial bidding. See 
comments of NTIA, and ex parte submission of NTIA in PP Docket No. 
93-253, February 28, 1994.
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C. Bidding Procedures

1. Grouping of Licenses
    36. In the Second Report and Order, the Commission concluded that 
highly interdependent licenses should be grouped together and put up 
for bid at the same time in a multiple round auction. See Second Report 
and Order at  106-107. This will facilitate awarding licenses to the 
bidders who value them most highly because it will provide bidders 
information about the prices of complementary and substitutable 
licenses while such licenses are still up for bid. The magnitude of the 
benefit of auctioning a group of licenses together in a simultaneous 
multiple round auction increases with the degree of interdependence 
among the licenses. On the other hand, the Second Report and Order also 
noted that the cost and complexity, both for the FCC and for bidders, 
of auctioning a very large number of interdependent licenses 
simultaneously may outweigh the informational and bidding flexibility 
advantages. See Second Report and Order at  107. Accordingly, although 
we believe that all broadband PCS licenses are interdependent, we will 
not auction them all simultaneously. Instead, we will divide the 
licenses into three groups by combining those licenses that are most 
closely related so that there will be limited interdependence across 
groups. Then we will sequentially conduct a separate simultaneous 
multiple round auction for each group. We formed the three groups in 
two conceptual steps. First, we separated the ``entrepreneurs''' blocks 
(C and F) from all other blocks.\13\ Then, we separated the large 
unrestricted blocks (A and B, with 30 MHz of spectrum and MTA 
geographic scope) from the small ones (D and E, with 10 MHz of spectrum 
and BTA geographic scope).
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    \13\As explained in more detail below, we establish economic 
eligibility criteria for bidders in blocks C and F.
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    37. In the first auction, the 99 available MTA licenses in blocks A 
and B will be put up for bid. In the second auction, the 986 BTA 
licenses in blocks C and F will be put up for bid. And in the last 
auction, the 986 BTA licenses in blocks D and E will be put up for bid. 
As explained below, we believe that this grouping strikes a proper 
balance among the competing concerns of awarding licenses to the 
parties who value them most highly, keeping the auction process simple 
and manageable, minimizing administrative delay, and fostering 
designated entity participation.
    38. Separating the entrepreneurs' blocks (C and F) from all other 
blocks entails little loss of efficiency because most firms are likely 
to be interested in licenses in either the entrepreneurs' blocks or the 
non-restricted blocks, but not both. Large firms cannot bid on 
entrepreneurs' licenses, although they may partner with firms that can. 
Small firms can bid on all blocks, but are likely to be most interested 
in the entrepreneurs' blocks because on these blocks they would not be 
placed in the position of bidding against large firms.
    39. In addition to reducing the complexity of the auctions, 
auctioning block C licenses after the block A and B licenses is likely 
to further another objective of auction design--fostering designated 
entity participation--by enabling designated entities to more easily 
attract partners. Many potential partners may be unwilling to commit 
themselves to a partnership arrangement with designated entities prior 
to the auction of licenses on the A and B blocks. So, designated 
entities that are unable to raise independent financing for at least 
the required upfront and down payments may have difficulty 
participating in an auction in which block C is put up for bid 
simultaneously with blocks A and B. If, however, block C is auctioned 
after blocks A and B, we expect that non-designated entities who are 
unsuccessful in acquiring MTA licenses on blocks A and B will want to 
become partners with or make investments in designated entities so as 
to gain an interest in 30 MHz licenses on block C. In addition, the 
auction on blocks A and B will produce price information that would be 
valuable to designated entities in their business planning.
    40. The efficiency loss associated with separating the large 
unrestricted blocks (A and B) from the small ones (D and E) depends on 
the degree of substitutability and complementarity between licenses in 
these two groups. Auctioning licenses on the D and E blocks separately 
from those on the A and B blocks may make it more difficult for bidders 
to pursue a back-up strategy of combining two 10 MHz licenses in the 
same geographic areas as an alternative to acquiring 30 MHz licenses in 
the A or B blocks. We believe, however, that this is not likely to be a 
widely used strategy, because the licenses are defined on a BTA basis 
while the licenses on the A and B blocks are defined on a MTA basis. It 
is also possible that some bidders may wish to combine a 10 MHz license 
with a 30 MHz license in the same geographic area. Although this 
approach would be easier to pursue if blocks A, B, D and E were 
auctioned together, we believe that in most cases the amount bidders 
would be willing to pay for a block A or B license would not be 
strongly affected by whether they were able to acquire a complementary 
block D or E license. So auctioning blocks D and E after blocks A and B 
would not significantly hinder combining 30 MHz and 10 MHz licenses. We 
conclude that the benefits of administrative simplicity from auctioning 
license on blocks A and B separately from those on blocks D and E are 
likely to outweigh the possible loss of efficiency.
2. Bid Increments
    41. In using simultaneous multiple round auctions to award 
broadband PCS licenses, it is important to specify minimum bid 
increments.\14\ The bid increment is the amount or percentage by which 
the bid must be raised above the previous round's high bid in order to 
be accepted as a valid bid in the current bidding round. The 
application of a minimum bid increment speeds the progress of the 
auction and, along with activity and stopping rules, helps to ensure 
that the auction comes to closure within a reasonable period of time. 
Establishing an appropriate minimum bid increment is especially 
important in a simultaneous auction with a simultaneous closing rule. 
In that case, all markets remain open until there is no bidding on any 
license, and a delay in closing one market will delay the closing of 
all markets.
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    \14\See Second Report and Order at 124-126. Commenters who 
addressed the issue supported minimum bid increments. See comments 
of Telephone and Data Systems, Inc. at 24; comments of PacTel 
Corporation, Attachment of R. Preston McAfee at 16, 18; comments of 
Pacific Bell and Nevada Bell, Attachment of Paul R. Milgrom and 
Robert B. Wilson at 19; reply comments of Telephone and Data 
Systems, Inc., Attachment of Robert J. Weber at 11; reply comments 
of PacTel Corporation, Attachment of R. Preston McAfee at 10; reply 
comments of Pacific Bell and Nevada Bell, Attachment of Paul Milgrom 
and Robert Wilson, Appendix at 8, 9.
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    42. Because we plan to use simultaneous multiple round auctions to 
award broadband PCS licenses, we believe that it is necessary to impose 
a minimum bid increment to ensure that the broadband PCS auctions 
conclude within a reasonable period of time. Commenters addressing the 
issue generally supported a minimum bid increment of 5 percent. PacTel, 
for example, argues that this amount will provide a reasonable 
compromise between the goal of completing the auction quickly and that 
of revealing information about the distribution of valuations among 
bidders.\15\ As we recognized in the Second Report and Order, it is 
important in establishing the amount of the minimum bid increment to 
express such increment as the greater of a percentage and fixed dollar 
amount. See Second Report and Order at 126. This will ensure a timely 
completion of the auction even if bidding begins at a very low dollar 
amount. Accordingly, we will impose a minimum bid increment of some 
percentage of the high bid from the previous round or a dollar amount 
per MHz per pop, whichever is greater, in broadband PCS auctions where 
multiple round bidding is used.\16\
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    \15\See comments of PacTel, Exhibit by R. Preston McAfee, 
Auction Design for Personal Communications Services at 16. Milgrom 
and Wilson also recommend a minimum bid increment of 5 percent 
(subject to a dollar minimum and maximum) for stage I of the 
auction, and smaller percentages for stages II and III. Reply 
comments of PacBell, Attachment of Paul Milgrom and Robert Wilson, 
Appendix at 8, 9.
    \16\``Pop'' refers to each member of the population of the 
license service area and ``MHz'' refers to the amount of spectrum, 
in megahertz, that the licensee is permitted to use. For example, 
for a 30 MHz license with a population of 10 million, if the minimum 
bid increment were the greater of 5 percent or $0.02 per MHz per 
pop, the minimum bid increment would be $6 million ($0.02 x 30 
MHz x 10,000,000) when the high bid from the previous round is less 
than $120 million. If the high bid from the previous round exceeds 
$120 million, the minimum bid would be 5 percent of the value of 
that bid (since 5 percent of a bid over $120 million is greater than 
$6 million).
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    43. PacTel also suggests, in the context of simultaneous auctions, 
that the Commission should vary the bid increment, reducing it as the 
number of active bidders declines.\17\ Similarly, PacBell suggests that 
the bid increment depend on the stage of the auction, with a 5 percent 
increment in stage I, 2 percent in stage II, and 1 percent in stage 
III.\18\ This would move the auction quickly at the beginning, when 
prices have limited informational content and there is little benefit 
to either bidders or the Commission of refined price movements, while 
allowing bidders to express small differences in valuations as the 
auction nears a close, increasing both efficiency and auction revenues. 
Small bid increments also reduce the chances of ties. Where a tie does 
occur, the high bidder will be determined by the order in which the 
bids were received by the Commission.\19\
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    \17\See comments of PacTel, Exhibit by R. Preston McAfee, 
Auction Design for Personal Communications Services, at 18.
    \18\See reply comments of PacBell, Appendix to Exhibit by Paul 
Milgrom and Robert Wilson, auction Rules and Procedures, at 8-9. For 
a discussion of auction stages in simultaneous multiple round 
auctions see the section on activity rules infra.
    \19\See Second Report and Order at 125.
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    44. Accordingly, we will start the auction with large bid 
increments, and reduce the increments as bidding activity falls. The 
minimum bid increment in stage I of the auction will be 5 percent of 
the high bid in the previous round or $.02 per MHz per pop, whichever 
is greater.\20\ We will reduce the minimum bid increment as we move 
through the auction stages, with a minimum bid increment of the greater 
of 2 percent or $.01 per MHz per pop in stage II, and the greater of 1 
percent or $.005 per MHz per pop in stage III.\21\ The Commission, 
however, retains the discretion in broadband PCS auctions to set and, 
by announcement before or during the auction, vary the minimum bid 
increments for individual licenses or groups of licenses over the 
course of an auction if the auction is not moving at an appropriate 
pace.
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    \20\$0.02 per MHz per pop would represent almost 6 percent of 
the value of a license based on an extrapolation from the $10.6 
billion estimated value of the 120 MHz of broadband PCS spectrum to 
be licensed. See Second Report and Order at 177.
    \21\In oral or electronic sequential auctions the auctioneer may 
within his or her sole discretion establish and vary the amount of 
the minimum bid increment in each round of bidding.
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    45. In addition, the Commission will establish a suggested minimum 
bid on each license. Bids below the suggested minimum bid will count as 
activity under the activity rule (see infra) only if no bids at or 
above the suggested minimum bid are received. Initial bids must be 
above the minimum bid increment of $.02 per MHz per pop, but may be 
below the suggested minimum bid. Once a bid has been received on a 
license, the suggested minimum bid is no longer applicable in 
subsequent rounds. The amount of the suggested minimum bid may vary by 
market size, with a larger minimum bid in larger markets, and will be 
announced by public notice prior to each auction. We will establish 
suggested minimum bids at no less than $.05 per MHz per pop and not 
more than $.20 per MHz per pop. The suggested minimum bid provides 
bidders an incentive to start bidding at a substantial fraction of the 
final prices of licenses, thus ensuring a rapid conclusion of the 
auction, while still allowing for bidding on licenses whose market 
values are below the suggested minimum bids.\22\
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    \22\If the Commission were to preclude bidding below a starting 
minimum bid, a bidder who is interested in only a single license for 
which the minimum bid is set above the market value would be forced 
to use an activity rule waiver or drop out of the auction under the 
activity rules adopted infra.
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3. Stopping Rules for Multiple Round Auctions
    46. We also noted in the Second Report and Order that with multiple 
round auctions a stopping rule must be established for determining when 
the auction is over.\23\ In simultaneous multiple round auctions, 
bidding may close separately on individual licenses, simultaneously on 
all licenses, or a hybrid approach may be used. Under an individual, 
license-by-license approach, bidding closes on each license after one 
round passes in which no new acceptable bids are submitted for that 
particular license. With a simultaneous stopping rule, bidding remains 
open on all licenses until there is no new acceptable bid on any 
license. This approach has the advantage of providing bidders full 
flexibility to bid for any license as more information becomes 
available during the course of the auction, but it may lead to very 
long auctions, unless an activity rule (see discussion infra) is 
imposed. A hybrid approach combines the first two stopping rules. For 
example, we may use a simultaneous stopping rule (along with an 
activity rule designed to expedite closure for licenses subject to the 
simultaneous stopping rule) for the higher value licenses. For lower 
value licenses, where the loss from eliminating some back-up strategies 
is less, we may use simpler license-by-license closings. In the Second 
Report and Order we recognize that such a hybrid approach might 
simplify and speed up the auction process without significantly 
sacrificing efficiency or expected revenue. Id.
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    \23\See Second Report and Order at 127. Commenters agreed on 
the importance of the appropriate stopping rule. PacTel proposes 
that bidding on an individual license close if there are no new bids 
on that license within a given round, or if there are fewer than two 
bids greater than a ``suggested minimum bid.'' Comments of PacTel, 
Attachment of R. Preston McAfee at 16-18. Pacific Bell recommends 
simultaneous closing of bidding on all licenses when there are no 
new acceptable bids on any license. Comments of PacBell, Attachment 
of Paul Milgrom and Robert Wilson at 19; reply comments of PacBell, 
Attachment of Paul Milgrom and Robert Wilson, Appendix at 5. Bell 
Atlantic Personal Communications, on the other hand, asserts that in 
simultaneous auctions, no stopping rule can prevent strategic 
delays. They provide no evidence for this, however, and do not 
discuss any closing rule in detail. In discussing the Milgrom-Wilson 
closing rule they fail to account for the Milgrom-Wilson activity 
rule, which will reduce the likelihood of delay, and the fail-safe 
closing mechanism proposed by Milgrom and Wilson. Reply comments of 
Bell Atlantic Personal Communications, Inc., Attachment of Barry J. 
Nalebuff and Jeremy I. Bulow at 12.
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    47. For broadband PCS we believe that a simultaneous stopping rule 
is preferable for all MTA licenses. MTA licenses are expected to have 
relatively high values and are fewer in number than BTA licenses, which 
will reduce the complexity of implementing a simultaneous stopping 
rule. Since we intend to impose an activity rule (as discussed below), 
we believe that allowing simultaneous closing for all licenses will 
afford bidders flexibility to pursue back-up strategies without running 
the risk that bidders will hold back their bidding until the final 
rounds. We also intend to use a simultaneous stopping rule for BTA 
licenses. However, because of the large number of BTA licenses, we 
retain the discretion either to use a hybrid stopping rule or to allow 
bidding to close individually for these licenses if as we gain 
experience with auctions we determine that simultaneous stopping rules 
are too complex to implement for very large numbers of licenses. The 
specific stopping rule for ending bidding on BTA licenses will be 
announced by Public Notice prior to auction.
    48. In addition, we will retain the discretion to declare at any 
point after 40 rounds in a simultaneous multiple round auction that the 
auction will end after some specified number of additional rounds.\24\ 
This gives the Commission a means to prevent bidders from continuing to 
bid on a few low value licenses solely to delay the closing for all 
licenses in an auction with a simultaneous closing rule. This will also 
ensure that the Commission can end the auction if it determines that 
the benefits from ending the auction, and hence issuing licenses more 
rapidly, exceeds the possible efficiency loss from cutting off bidding 
on a few low value licenses. If we exercise this option, we favor the 
use of three final rounds. Allowing more than one additional round 
provides some opportunity for counter-offers, thus reducing the risk 
that a license will not be awarded to the party that values it most 
highly.
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    \24\PacBell proposed that in case of inordinate delays in the 
auction the Commission should have the ability to conclude the 
auction at any time after 40 rounds by issuing a call for final bids 
on the following business day for each of those licenses for which 
the highest bid increased in at least 1 of the preceding 3 rounds. 
See reply comments of PacBell, Attachment of Paul Milgrom and Robert 
Wilson, Appendix at 5.
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    49. Moreover, if this fail-safe mechanism is used, we will accept 
bids in the final round(s) only for licenses on which the highest bid 
increased in at least one of the preceding three rounds. No new bids 
will be accepted for other licenses.\25\ There are two reasons not to 
take bids on licenses on which there has been no recent bidding. First, 
the fact that bidding on an individual license may close will provide 
an additional incentive to bid actively and thus speed the conclusion 
of the auction. If bids are accepted on all licenses in the final 
round(s) there is less cost to a bidder in holding back. Second, 
closing bidding on licenses for which activity has ceased ensures high 
bidders for those licenses that they will not lose a license without 
having an opportunity to make a counter-offer.\26\ This reduces the 
uncertainty associated with aggregating licenses that are worth more as 
a package than individually. If final bids are accepted on all 
licenses, a high bidder on an aggregation of licenses may unexpectedly 
lose a critical part of the aggregation and have no chance to regain it 
except in the post-auction market, where bargaining or other 
transaction costs may be high.
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    \25\See reply comments of PacBell, Appendix to attachment by 
Milgrom and Wilson at 5. See also Second Report and Order at 130, 
n. 106.
    \26\Either the auction will close only when bidding ceases on 
all licenses, so the high bidder will have an opportunity to respond 
to any new bids, or the Commission will call for final bids but not 
accept new bids on licenses on which there have been no new bids in 
the previous three rounds, so no other bidder will have the 
opportunity to outbid the high bidder in a final round.
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4. Duration of Bidding Rounds
    50. In simultaneous multiple round auctions for large numbers of 
interdependent high-value licenses, bidders may need a significant 
amount of time to evaluate back-up strategies and consult with their 
principals. For this reason, PacBell proposes one bidding round per day 
and PacTel proposes three business days per bidding round for broadband 
PCS.\27\ We will provide bidders with a single business day to submit 
bids, and conduct one round of bidding each business day.\28\ However, 
we reserve the discretion to vary, by public notice or announcement, 
the duration of bidding rounds or the interval at which bids are 
accepted (e.g., run two or more rounds per day rather than one), in 
order to move the auction toward closure more quickly. We are more 
likely to conduct more than one round per day early in an auction than 
towards the end of an auction. At early stages of an auction prices 
will be low and contain relatively little information, so bidders will 
need less time to deliberate. It is in the final stages of an auction, 
when the consequences of bidding decisions are greatest, that bidders 
need the most time to deliberate. We will indicate either by Public 
Notice prior to an auction, or by announcement during an auction any 
changes to the duration of and intervals between bidding rounds.
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    \27\Comments of PacBell, Attachment by Milgrom and Wilson at 19; 
comments of PacTel, Attachment by McAfee at 16.
    \28\With one round per day, the auction may take weeks to 
complete. This should not impose an excessive burden on bidders, 
however, because bids may be submitted by telephone or by a computer 
connected to a telephone line, so bidders need not have a 
representative in Washington throughout the auction.
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5. Activity Rules
    51. As discussed above, in order to ensure that simultaneous 
auctions with simultaneous stopping rules close within a reasonable 
period of time and to increase the information conveyed by bid prices 
during the auction, we believe that it is necessary to impose an 
activity rule to prevent bidders from waiting until the end of the 
auction before participating. Because simultaneous stopping rules 
generally keep all licenses open for bidding as long as anyone wishes 
to bid, they also create an incentive for bidders to hold back until 
prices approach equilibrium before making a bid. As noted above, this 
could lead to very long auctions. Delaying serious bidding until late 
in the auction also reduces the information content of prices during 
the course of an auction. Without an activity rule, bidders cannot know 
whether a low level of bidding on a license means that the license 
price is near its final level or if instead many serious bidders are 
holding back and may bid up the price later in the auction.\29\ An 
activity rule is less important when licenses close one-by-one because 
failure to participate in any given round may result in losing the 
opportunity to bid at all, if that round turns out to be the last.
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    \29\See ex parte presentation by Paul Milgrom on behalf of 
PacBell, June 21, 1994.
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    52. In the Second Report and Order we adopted the Milgrom-Wilson 
activity rule as our preferred activity rule where a simultaneous 
stopping rule is used. See Second Report and Order at 144-145. The 
Milgrom-Wilson approach encourages bidders to participate in early 
rounds by limiting their maximum participation to some multiple of 
their minimum participation level. Bidders are required to declare 
their maximum eligibility in terms of MHz-pops, and make an upfront 
payment equal to $0.02 per MHz-pop.\30\ (See discussion of upfront 
payments infra.) That is, in each round bidders will be limited to 
bidding on licenses encompassing no more than the number of MHz-pops 
covered by their upfront payment. Licenses on which a bidder is the 
high bidder from the previous round count against this bidding limit. 
Under this approach, bidders will have the flexibility to shift their 
bids among any licenses for which they have applied so long as, within 
each round, the total MHz-pops encompassed by those licenses does not 
exceed the total number of MHz-pops on which they are eligible to bid. 
Bidders will be able to secure the option to participate at whatever 
maximum level they deem appropriate by making a sufficient upfront 
payment. To preserve their maximum eligibility, however, bidders will 
be required to maintain activity during each round of the auction. A 
bidder is considered active on a license in the current round if the 
bidder has submitted an acceptable bid for that license in the current 
round, or has the high bid for that license from the previous round, in 
which case, the bidder does not need to bid on that license in the 
current round to be considered active on that license.
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    \30\The number of ``MHz-pops'' is calculated by multiplying the 
population of the license service area by the amount of spectrum 
authorized by the license. We use the terms ``per MHz-pop'' and 
``per MHz per pop'' interchangeably.
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    53. Under the Milgrom-Wilson proposal, the minimum activity level, 
measured as a fraction of the bidder's eligibility in the current 
round, will increase during the course of the auction.\31\ Milgrom and 
Wilson divide the auction into three stages. During the first stage of 
the auction, a bidder is required to be active on licenses encompassing 
one-third of the MHz-pops for which it is eligible. The ``penalty'' for 
falling below that activity level is a reduction in eligibility. At 
this stage, bidders will lose three MHz-pops in eligibility for each 
MHz-pop below the minimum required activity level.\32\ In the second 
stage, bidders are required to be active on two-thirds of the MHz-pops 
for which they are eligible. The penalty for falling below that 
activity level is a loss of 1.5 MHz-pops in eligibility for each MHz-
pop below the minimum required activity level. In the third stage, 
bidders are required to be active on licenses encompassing all of the 
MHz-pops for which they are eligible. The penalty for falling below 
that activity level is a loss of one MHz-pop in eligibility for each 
MHz-pop below the minimum required activity level. Thus in the final 
stage, each bidder retains eligibility (for the next round) equal to 
the MHz-pops for which it is an active bidder in the current round.
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    \31\Absent waivers (discussed infra), a bidder's eligibility (in 
terms of MHz-pops) in the current round is determined by the 
bidder's activity level and eligibility in the previous round. In 
the first round, however, eligibility is determined by the bidder's 
upfront payment and is equal to the upfront payment divided by $.02 
per MHz-pop.
    \32\An alternative way to state the rule for determining 
eligibility in stage I of an auction is that each bidder will be 
eligible to bid in the next round on three times the MHz-pops for 
which it is an active bidder in the current round, or the MHz-pops 
for which it is eligible in the current round, whichever is less.
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    54. The auction will start in stage I and move from stage I to 
stage II when, in each of three consecutive rounds of bidding, the high 
bid has increased on 10 percent or less of the spectrum (measured in 
terms of MHz-pops) being auctioned.\33\ The auction will move from 
stage II to stage III when the high bid has increased on 5 percent or 
less of the spectrum being auctioned (measured in terms of MHz-pops), 
in each of three consecutive rounds of bidding in stage II.\34\ In 
order to speed up an auction, the Commission may also announce, at any 
time after the initial 15 rounds, that the next stage of the auction 
(with a higher minimum participation level) will begin in the next 
bidding round.\35\ Moreover, if as the Commission gains experience with 
auctions that use activity rules it determines that such auctions tend 
to move too slowly, it may, by public notice prior to a specific 
auction, increase the activity levels at which that auction moves 
between stages. Conversely, if the Commission determines that auctions 
tend to move too quickly, depriving bidders of sufficient time to 
deliberate and pursue back-up strategies, it may decrease the activity 
levels at which an auction moves between stages.
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    \33\The transition rule may also be defined in terms of the 
``auction activity level''--the sum of the MHz-pops of those 
licenses whose highest bid increased in the current round, as a 
percentage of the total MHz-pops of all licenses in that auction. 
(Note that this definition differs slightly from that used by 
Milgrom and Wilson. See reply comments by PacBell, Appendix to 
attachment by Milgrom and Wilson at 1.) The auction moves from stage 
I to stage II when the auction activity level is less than or equal 
to 10 percent for three consecutive rounds in stage I. The auction 
moves from stage II to stage III when the auction activity level is 
less than or equal to 5 percent for three consecutive rounds in 
stage II. For example, if two nationwide 30 MHz blocks of spectrum 
are put up for bid and the national population is approximately 250 
million, a total of approximately 15,000 million MHz-pops would be 
available in the auction. If in stage I of the auction, the high bid 
increases on licenses encompassing less than 1,500 million MHz-pops 
for three consecutive rounds, the auction moves to stage II. This 
would be the case, for example, if in three consecutive rounds new 
bids were received on only a license for the New York MTA (26 
million pops) and a license for the Los Angeles MTA (19 million 
pops), since the two licenses encompass a total of 1,350 million 
MHz-pops. Once in stage II, if in each of three consecutive rounds 
new acceptable bids are received on licenses encompassing less than 
750 million MHz-pops, the auction would move to stage III.
    \34\Once an auction is in stage II, it cannot revert to stage I. 
Once an auction is in stage III, it remains there.
    \35\Moving to stage II prematurely might result in an auction 
moving too quickly to allow adequate time for consideration and may 
excessively limit the ability of bidders to pursue alternative 
backup strategies. See Second Report and Order at 142.
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    55. Finally, to avoid the consequences of clerical errors and to 
compensate for unusual circumstances that might delay a bidder's bid 
preparation or submission on a particular day, Milgrom and Wilson 
recommend permitting each bidder to request and automatically receive a 
waiver of the activity rule once every three rounds. We believe that 
some waiver procedure is a critical element of the Milgrom-Wilson 
activity rule, since the Commission would not wish to reduce a bidder's 
eligibility due to an accidental act or circumstances not under the 
bidder's control.
    56. We believe that the Milgrom-Wilson approach will best achieve 
the Commission's goals of affording bidders flexibility to pursue 
backup strategies, while at the same time ensuring that simultaneous 
auctions are concluded within a reasonable period of time. Accordingly, 
we plan to impose such an activity rule in conjunction with a 
simultaneous stopping rule to award higher value broadband PCS 
licenses. We intend, however, to use a simpler waiver procedure than 
that proposed by Milgrom and Wilson. We will permit bidders one 
automatic waiver from the activity rule during each stage of an 
auction. A waiver will permit a bidder to maintain its eligibility at 
the same level as in the round for which the waiver is submitted.\36\ A 
waiver may be submitted either in the round in which bidding falls 
below the minimum required level to maintain (for the next round) the 
same eligibility as in that round, or prior to submitting a bid in the 
next round. If an activity rule waiver is entered in a round in which 
no other bidding activity occurs, the auction will remain open.\37\ 
However, an activity rule waiver entered after a round in which no 
other bidding activity occurs will not reopen the auction. If, as we 
gain both experimental and actual auction experience, we determine that 
permitting one automatic waiver per auction stage is insufficient to 
prevent the inadvertent reduction in eligibility of serious bidders, we 
may, by public notice prior to a specific broadband auction, increase 
the number of automatic activity rule waivers, or instead allow one 
automatic waiver during a specified number of bidding rounds.
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    \36\An activity rule waiver cannot be used to correct an error 
in the amount bid.
    \37\If, however, we determine, based on evidence from 
experimental and actual auctions, that this is likely to excessively 
delay the close of an auction or result in other adverse strategic 
manipulation of an auction, we any announce by public notice prior 
to a specific broadband auction that submission of a waiver will not 
keep an auction open under any circumstances.
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    57. Furthermore, if, as we gain experience with auctions, we 
determine that the Milgrom-Wilson three stage activity rule is too 
complicated or costly to administer, we may alternatively impose a less 
complex activity rule. See Second Report and Order at  144. We will 
announce by Public Notice before each auction the activity rule that 
will be employed in that particular auction.

V. Procedural, Payment, and Penalty Issues

A. Pre-Auction Application Procedures

    58. In the Second Report and Order, the Commission established 
general competitive bidding rules and procedures which we noted may be 
modified on a service-specific basis. See 47 CFR Part 1, subpart Q. As 
discussed below, we will generally follow the procedural, payment and 
penalty rules established in the Second Report and Order with certain 
minor modifications designed to address the particular characteristics 
of the broadband PCS service. These rules are structured to ensure that 
bidders and licensees are qualified and will be able to construct 
systems quickly and other service to the public. By ensuring that 
bidders and license winners are serious, qualified applicants, these 
rules will minimize the need to re-auction licenses and prevent delays 
in the provision of broadband PCS service to the public. In addition, 
as we proposed in the Notice at  129, we adopt general procedural and 
processing rules based on Part 22 of the Commission's Rules.
    59. Section 309(j)(5) provides that no party may participate in an 
auction ``unless such bidder submits such information and assurances as 
the Commission may require to demonstrate that such bidder's 
application is acceptable for filing.'' 47 U.S.C. Sec. 309(j)(5). 
Moreover, ``[n]o license shall be granted to an applicant selected 
pursuant to this subsection unless the Commission determines that the 
applicant is qualified pursuant to [Section 309(a)] and Sections 308(b) 
and 310'' of the Communications Act. id. As the legislative history of 
Section 309(j) makes clear, the Commission may require that bidders' 
applications contain all information and documentation sufficient to 
demonstrate that the application is not in violation of Commission 
rules, and applications not meeting those requirements may be dismissed 
prior to the competitive bidding. See H.R. Rep. No. 111, 103d Cong., 
1st Sess. 258 (1993) (H.R. Rep. No. 103-111).
    60. In the MPRM, we proposed that all parties interested in 
participating in an auction for spectrum licenses would be required to 
file a short-form application (modeled on the Commission's 
``Transmittal Sheet for Cellular Applications''), and asked whether 
applicants should also be required to submit a long-form application 
prior to the auction, or whether the long-form application should be 
submitted subsequent to the auction. NPRM at  97. The comments 
generally agreed that we should require only a short-form application 
prior to competitive bidding, and that only winning bidders should be 
required to submit a long-form license application after the auction. 
Because we believed that such a procedure would fulfill the statutory 
requirements and objectives and adequately protect the public interest, 
we incorporated these requirements into the rules adopted in the Second 
Report and Order. See 47 CFR Secs. 1.2105 and 1.2107. We will extend 
the application of these rules to the competitive bidding process for 
broadband PCS.
    61. We will be guided by the following procedures in conducting 
broadband PCS auctions. The Commission will release an initial Public 
Notice announcing that it will accept applications for specific 
broadband PCS licenses. This initial Public Notice will specify the 
licenses and identify the time and place of an auction in the event 
that mutually exclusive applications are filed. The Public Notice also 
will specify the method of competitive bidding to be used, including 
applicable bid submission procedures, stopping rules and activity 
rules, as well as the deadline by which short-form applications must be 
filed, and the amounts and deadlines for submitting the upfront 
payment. See Second Report and Order at  164. We will not accept 
applications filed before or after the dates specified in Public 
Notices. Applications submitted before release of a Public Notice 
announcing the availability of particular license(s), or before the 
opening date of the filing window specified therein, will be returned 
as premature. Applications submitted after the deadline specified by 
Public Notice will be dismissed, with prejudice, as untimely. Soon 
after release of the initial Public Notice, an auction information 
package will be made available to prospective bidders.
    62. Bidders will be required to submit short-form applications on 
FCC Form 175 (and FCC Form 175-S, if applicable), together with any 
applicable filing fee\38\ by the date specified in the initial Public 
Notice.\39\ The short-form applications will require applicants to 
provide the information required by Section 1.2105(a)(2) of the 
Commission's Rules, 47 CFR Sec. 1.2105(a)(2). Specifically, each 
applicant will be required to specify on its Form 175 applications 
certain identifying information, including its status as a designated 
entity (if applicable), its classification (i.e., individual, 
corporation, partnership, trust or other), the markets and frequently 
blocks for which it is applying, and assuming that the licenses will be 
auctioned, the names of persons authorized to place or withdraw a bid 
on its behalf. In addition, applicants will be required to provide 
detailed ownership information (see Section 24.813(a) of the 
Commission's Rules) and identify all parties with whom they have 
entered into any consortium arrangements, joint ventures, partnerships 
or other agreements or understandings which relate to the competitive 
bidding process. Applicants will also be required to certify that they 
have not entered and will not enter into any explicit or implicit 
agreements, arrangements or understandings with any parties, other than 
those identified, regarding the amount of their bid, bidding strategies 
or the particular properties on which they will or will not bid. In 
addition, applicants for licenses in the entrepreneurs' blocks will be 
required, as part of their short-form applications, to certify that 
they are eligible to bid on and win licenses in those blocks. Among 
other things, this means that they are in compliance with our PCS-
cellular and PCS-PCS cross-ownership limitations. As we indicated in 
the Second Report and Order, if the Commission receives only one 
application that is acceptable for filing for a particular license, and 
thus there is no mutual exclusivity, the Commission by Public Notice 
will cancel the auction for this license and establish a date for the 
filing of a long-form application, the acceptance of which will trigger 
the procedures permitting petitions to deny. See Second Report and 
Order at  165.
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    \38\Because Section 8 of the Communications Act, 47 U.S.C. 
Sec. 158, does not currently afford the Commission authority to 
charge an application fee in connection with PCS applications, 
broadband PCS applicants will not be required to submit a fee with 
their short-form application. However, the Commission has requested 
that Congress amend Section 8 of the Communications Act to provide a 
specific application fee for PCS services. If the Commission 
receives application fee authority, the general rules governing 
submission of fees will apply. See 47 CFR Sec. 1.1101 et seq. These 
rules currently provide for dismissal of an application if the 
application fee is not paid, is insufficient, is in improper form, 
is returned for insufficient funds or is otherwise not in compliance 
with our fee rules. Whenever funds are remitted to the Commission, 
applicants also must file FCC Form 159.
    \39\Applicants should submit one paper original and one 
microfiche original of their application, as well as two microfiche 
copies.
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    63. A number of commenters in this proceeding objected to our 
original tentative conclusion that short-form applications should be 
judged by a letter-perfect standard. See NPRM at  100. Parties 
proposed that the Commission allow a brief period for correcting errors 
in short-form applications. See, e.g., comments of AT&T at 30-31, 
BellSouth at 36-37. As we stated in the Second Report and Order, we 
believe that the public interest would be better served by encouraging 
maximum bidder participation in auctions. See Second Report and Order 
at  167. Therefore, we will provide applicants with an opportunity to 
correct minor defects in their short-form applications (e.g., 
typographical errors, incorrect license designations, etc.) prior to 
the auction. Applicants will not be permitted until after the auction, 
however, to make any major modifications to their applications, 
including cognizable ownership changes or changes in the identification 
of parties to bidding consortia. In addition, applications that are not 
signed will be dismissed as unacceptable.
    64. After reviewing the short-form applications, the Commission 
will issue a second Public Notice listing all defective applications, 
and applicants whose applications contain minor defects will be given 
an opportunity to cure defective applications and resubmit a correction 
version.\40\ After reviewing the corrected applications, the Commission 
will release a third Public Notice announcing the names of all 
applicants whose applications have been accepted for filing. These 
applicants will be required to submit an upfront payment to the 
Commission, as discussed below.
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    \40\On the date set for submission of corrected applications 
that on their won discover minor errors in their applications also 
will be permitted to file corrected applications.
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B. Upfront Payment

    65. The comments in this proceeding generally supported the 
Commission's proposal to require prospective bidders to make 
substantial upfront payments prior to auction. See, e.g., comments of 
Comcast at 18, PacBell at 28, Nextel at 16, and AWCC at 31-32. 
Consistent with the weight of the comments, we concluded in the Second 
Report and Order that a substantial upfront payment prior to the 
beginning of an auction is necessary to ensure that only serious and 
qualified bidders participate. See Second Report and Order at  171. By 
requiring such a payment we also help to ensure that any bid withdrawal 
or default penalties are paid. These considerations apply to broadband 
PCS auctions. We will therefore require all broadband PCS auction 
participants to tender in advance to the Commission a substantial 
upfront payment as a condition of bidding.
    66. In the Notice, we proposed to require upfront payments based on 
a $0.02 per MHz per pop formula. Though some commenters favor a fixed 
upfront payment set by the Commission prior to the auction,\41\ most 
support the Commission's proposed $0.02 per MHz per pop formula, which 
would enable prospective bidders to tailor their upfront payment to 
their bidding strategies.\42\ Commenters suggest that there should be 
some fixed minimum on the amount of upfront payment made prior to 
auction (suggestions range from $2,500 to $100,000 for different 
services).\43\ Some commenters also favor setting a maximum upfront 
payment, pointing out that our proposed formula yields very high 
payments in the broadband PCS context.\44\
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    \41\See, e.g., comments of Edward M. Johnson at 2; and LuxCel 
Group, Inc. at 8.
    \42\See, e.g., comments of PacBell at 28; Telocator (now PCIA) 
at 13; CTIA at 30; and Rochester Telephone Corporation at 13.
    \43\See, e.g., comments of Telocator at 20-21; Cellular 
Communications, Inc. at 15; AT&T at 34; and BellSouth at 41.
    \44\See, e.g., comments of Southwestern Bell at 38-40 (arguing 
generally for a maximum deposit of $50 million for all markets) and 
AT&T at 34 (supporting a maximum upfront payment of $5 million, with 
a down payment following the auction).
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    67. We believe that the standard upfront payment formula of $0.02 
per pop per MHz for the largest combination of MHz-pops a bidder 
anticipates bidding on in any single round of bidding is appropriate 
for broadband PCS services.\45\ Using this formula will provide bidders 
with the flexibility to change their strategy during an auction and to 
bid on a larger number of smaller licenses or a smaller number of 
larger licenses, so long as the total MHz-pops combination does not 
exceed that amount covered by the upfront payment. For example, when we 
auction licenses covering the nation simultaneously, a bidder would not 
be required to file an upfront payment representing national coverage 
unless it intended to bid on licenses covering the entire nation in a 
single bidding round. The $0.02 per MHz per pop formula also works well 
with the Milgrom-Wilson activity rule that we plan to employ in 
broadband PCS auctions, as described in Section III above. In the 
initial Public Notice issued prior to each auction, we will announce 
population information corresponding to each license to enable bidders 
to calculate their upfront payments.
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    \45\As discussed in Section VII, infra, designated entities will 
be subject to a lesser upfront payment requirement of $0.015 per MHz 
per pop. Further, we retain the flexibility to consider using a 
simpler payment requirement if circumstances warrant.
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    68. As we indicated in the Second Report and Order, we will not set 
a maximum on upfront payments.\46\ We decline to do so because we wish 
to ensure that those bidding on large numbers of valuable broadband PCS 
licenses are bidding in good faith and are financially capable of 
constructing those systems quickly. We recognize that upfront payments 
for broadband PCS licenses may amount to millions of dollars, but we do 
not believe that it is unreasonable to expect prospective bidders to 
tender such sums given the expected overall value of some of these 
licenses and the expected financial requirements to construct the 
systems. Indeed, such a requirement is necessary to ensure the 
seriousness of bidders for these valuable licenses.
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    \46\See Second Report and Order at 179.
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    69. In the Second Report and Order, we accepted commenters' 
suggestions and established a general minimum upfront payment of $2,500 
to ensure that the use of our preferred formula would result in a 
substantial enough payment that bidders would be deterred from making 
frivolous bids.\47\ Such a minimum upfront payment is needed in 
connection with auctions where the $0.02 per MHz per pop formula would 
yield a comparatively small upfront payment (such as those for 
narrowband PCS licenses in BTAs). Because of the wider bandwidth of 
broadband PCS licenses, however, this minimum upfront payment will not 
be relevant in auctions for this service.\48\
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    \47\Id. at 180.
    \48\The smallest bandwidth that a broadband PCS licensee will be 
authorized to use is 10 MHz, so a $2,500 upfront payment would 
result for a license area with a population of only 12,500 persons. 
The least populous BTA in the United States (Williston, North 
Dakota) has a population of approximately 27,500, and the upfront 
payment for a 10 MHz license in that BTA would be approximately 
$5,500.
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    70. For broadband PCS auctions, we will follow the procedures for 
submission of upfront payments outlined in the Second Report and Order. 
Applicants whose short-form applications have been accepted for filing 
will be required to submit the full amount of their upfront payment to 
the Commission's lock-box bank by a date certain, which will be 
announced in a Public Notice and generally will be no later than 14 
days before the scheduled auction.\49\ After the Commission receives 
from its lock-box bank the names of all applicants who have submitted 
timely upfront payments, the Commission will issue a Public Notice 
announcing the names of all applicants that have been determined to be 
qualified to bid. An applicant who fails to submit a sufficient upfront 
payment to qualify it to bid on any license being auctioned will not be 
identified on this Public Notice as a qualified bidder, and it will be 
prohibited from bidding in the auction. That is, we will require that 
applicants for broadband PCS licenses submit a sufficient upfront 
payment to reflect the MHz-pops of the smallest license being put up 
for bid in a particular auction.\50\
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    \49\Upfront payments must be made by wire transfer or by 
cashier's check drawn in U.S. dollars from a financial institution 
whose deposits are insured by the Federal Deposit Insurance 
Corporation and must be made payable to the Federal Communications 
Commission.
    \50\For example, in our first broadband PCS auction (the 30 MHz 
MTA licenses on blocks A and B), the smallest upfront payment that 
may be submitted to qualify an applicant to bid will be calculated 
by multiplying the population of the least populous MTA (American 
Samoa: population 47,000) times 30 times two cents, or $28,200. It 
should be noted, however, that this minimal upfront payment will 
entitle the bidder to bid only on a license to serve American Samoa.
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    71. Although it would be simpler to require the submission of 
upfront payments at the same time short-form applications are filed, we 
agree with those commenters that argued that they should not be 
required to commit the large sums that will likely be involved in 
broadband PCS upfront payment for longer than is necessary. 
Accordingly, applicants will not be required to tender upfront payments 
with their short-form applications. Instead, as noted above, upfront 
payments will be due by a date specified by Public Notice, but 
generally no later than 14 days before a scheduled auction. This period 
should be sufficient to allow the Commission adequate time to process 
upfront payment data and release a Public Notice listing all qualified 
bidders, but not so long as to impose undue burdens upon bidders. The 
rules set forth in Section 1.2106 of the Commission's Rules concerning 
upfront payments will be applicable in broadband PCS auctions. Each 
qualified bidder will be issued a bidder identification number and 
further information and instructions regarding the auction procedures. 
During an auction, bidders will be required to provide their bidder 
identification numbers when submitting bids.

C. Payment and Procedures for Licenses Awarded by Competitive Bidding

1. Down Payment
    72. The Second Report and Order established a 20 percent down 
payment by winning bidders to discourage default between the auction 
and licensing and to ensure payment of the penalty if such default 
occurs. We concluded that a 20 percent down payment was appropriate to 
ensure that auction winners have the necessary financial capabilities 
to complete payment for the license and to pay for the costs of 
constructing a system, while at the same time not being so onerous as 
to hinder growth or diminish access. Most of the commenters addressing 
this issue generally support our proposal that winning bidders increase 
their deposits with the Commission up to an amount equalling 20 percent 
of their winning bid or bids. See, e.g., comments of BellSouth at 43-
44, PageNet at 35-36, and Telocator at 13. Some commenters feel that a 
20 percent down payment requirement would be too high. See comments of 
Sprint at 18 (prefers a 10 percent down payment).
    73. We believe that the reasoning that led us to conclude that 20 
percent is the appropriate down payment applies to broadband PCS 
auctions. We therefore will require that, with the exception of bidders 
eligible for installment payments in the entrepreneurs' blocks (see 
Section VII, infra), winning bidders in broadband PCS auctions 
supplement their upfront payments with a down payment sufficient to 
bring their total deposits up to 20 percent of their winning 
bid(s).\51\ Winning bidders will be required to submit the required 
down payment by cashier's check or wire transfer to our lock-box bank 
by a date to be specified by Public Notice, generally within five (5) 
business days following the close of bidding. All auction winners will 
generally be required to make full payment of the balance of their 
winning bids within five (5) business days following award of the 
license. Grant of the license will be conditioned on this payment.
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    \51\If the upfront payment already tendered by a winning bidder, 
after deducting any bid withdrawal and default penalties due, 
amounts to 20 percent or more of its winning bids, no additional 
deposit will be required. If the upfront payment amount on deposit 
is greater than 20 percent of the winning bid amount after deducting 
any bid withdrawal and default penalties due, the additional monies 
will be refunded. If a bidder has withdrawn a bid or defaulted but 
the amount of the penalty cannot yet be determined, the bidder will 
be required to make a deposit of 20 percent of the amount bid on 
such licenses. When it becomes possible to calculate and assess the 
penalty, any excess deposit will be refunded. Upfront payments will 
be applied to such deposits and to bid withdrawal and default 
penalties due before being applied toward the bidder's down payment 
on licenses the bidder has won and seeks to acquire.
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    74. An auction winner that is eligible to make payments through an 
installment plan (see Section VII, infra) will be subject to different 
payment requirements. Such an entity will be required to bring its 
deposits with the Commission up to only 5 percent of its winning bid 
after the bidding closes, and will pay an additional 5 percent of its 
winning bid to the Commission after a license is granted.
2. Bid Withdrawal and Default Penalties
    75. As we discussed in the Second Report and Order, it is 
critically important to the success of our system of competitive 
bidding that potential bidders understand that there will be a 
substantial penalty assessed if they withdraw a high bid, are found not 
to be qualified to hold licenses or default on payment of a balance 
due. There was substantial support in the comments for the notion that 
the Commission is authorized to and should order forfeiture of upfront 
and down payments if the auction winner later defaults or is 
disqualified. See, e.g., comments of CTIA at 29-30, AT&T at 35, n.43, 
PageNet at 35-36, Cook Inlet at 47, and BellSouth at 42-44. We 
concluded, however, that forfeiture of all amounts that a bidder may 
have on deposit with the Commission may, in some circumstances, be too 
severe a penalty and would not necessarily be rationally related to the 
harm caused by withdrawal, default or disqualification. See Second 
Report and Order at  197.
    76. This logic applies to broadband PCS auctions, so for these 
auctions we will employ the bid withdrawal, default and 
disqualification penalties adopted in the Second Report and Order, 
which are reflected in Sections 1.2104(g) and 1.2109 of the 
Commission's Rules. Any bidder who withdraws a high bid during an 
auction before the Commission declares bidding closed will be required 
to reimburse the Commission in the amount of the difference between its 
high bid and the amount of the winning bid the next time the license is 
offered by the Commission, if this subsequent winning bid is lower than 
the withdrawn bid.\52\ No withdrawal penalty will be assessed if the 
subsequent winning bid exceeds the withdrawn bid. After bidding closes, 
a defaulting auction winner (i.e., a winner who fails to remit the 
required down payment within the prescribed time, fails to pay for a 
license, or is otherwise disqualified) will be assessed an additional 
penalty of three percent of the subsequent winning bid or three percent 
of the amount of the defaulting bid, whichever is less. See 47 CFR 
Secs. 1.2104(g) and 1.2109. The additional three percent penalty is 
designed to encourage bidders who wish to withdraw their bids to do so 
before bidding ceases. We will hold deposits made by defaulting or 
disqualified auction winners until full payment of the penalty.\53\ We 
believe that these penalties will adequately discourage default and 
ensure that bidders have adequate financing and that they meet all 
eligibility and qualification requirements. As we explained in the 
Second Report and Order, we further believe that this approach is well 
within our authority under both Section 309(j)(4)(B) and Section 4(i) 
of the Communications Act, 47 U.S.C. Sec. 154(i), as it is clearly 
necessary to carry out the rapid deployment of new technologies through 
the use of auctions.\54\
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    \52\If a license is re-offered by auction, the ``winning bid'' 
refers to the high bid in the auction in which the license is re-
offered. If a license is re-offered in the same auction, the winning 
bid refers to the high bid amount, made subsequent to the 
withdrawal, in that auction. If the subsequent high bidder also 
withdraws its bid, that bidder will be required to pay a penalty 
equal to the difference between its withdrawn bid and the amount of 
the subsequent winning bid the next time the license is offered by 
the Commission. If a license which is the subject of withdrawal or 
default is not re-auctioned, but is instead offered to the highest 
losing bidders in the initial auction, the ``winning bid'' refers to 
the bid of the highest bidder who accepts the offer. Losing bidders 
would not be required to accept the offer, i.e., they may decline 
without penalty. We wish to encourage losing bidders in simultaneous 
multiple round auctions to bid on other licenses, and therefore we 
will not hold them to their losing bids on a license for which a 
bidder has withdrawn a bid or on which a bidder has defaulted.
    \53\In rare cases in which it would be inequitable to retain a 
down payment, we will entertain requests for waiver of this 
provision.
    \54\See Second Report and Order at  198.
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    77. In addition, if a default or disqualification involves gross 
misconduct, misrepresentation or bad faith by an applicant, the 
Commission may declare the applicant and its principals ineligible to 
bid in future auctions, and may take any other action that it deems 
necessary, including institution of proceedings to revoke any existing 
licenses held by the applicant. See Second Report and Order at 198.
3. Re-Offering Licenses When Auction Winners Default
    78. In the event that an auction winner defaults or is otherwise 
disqualified, the Commission must determine whether to hold a new 
auction or simply offer the license to the second-highest bidder. 
Parties commenting on this issue generally favored re-auctioning the 
license, pointing out that changing market and even technological 
developments since the initial auction may change the amounts that 
bidders are willing to pay for a license, especially if the intervening 
period is relatively long. They urge that any re-auction be open to new 
bidders, arguing that such a procedure would reduce the incentive of 
losing bidders to file unmeritorious petitions to deny against the 
auction winner. See, e.g., comments of BellSouth at 37, Utilities 
Telecommunications Council at 21.
    79. As we stated in the Second Report and Order, we believe that, 
as a general rule, when an auction winner defaults or is otherwise 
disqualified after having made the required down payment, the best 
course of action is to re-auction the license. See Second Report and 
Order at 204. Although we recognize that this may cause a brief delay 
in the initiation of service to the public, during the time between the 
original auction and the disqualification circumstances may have 
changed so significantly as to alter the value of the license to 
auction participants as well as to parties who did not participate. In 
this situation, awarding licenses to the parties that value them most 
highly can best be assured through a re-auction. However, if the 
default occurs within five (5) business days after the bidding has 
closed, the Commission retains the discretion to offer the license to 
the second highest bidder at its final bid level, or if that bidder 
declines the offer, to offer the license to other bidders (in 
descending order of their bid amounts) at the final bid levels.\55\
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    \55\If only a small number of relatively low-value licenses are 
to be re-auctioned and only a short time has passed since the 
initial auction, the Commission may choose to offer the license to 
the highest losing bidders because the cost of running another 
auction may exceed the benefits.
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    80. If a new auction becomes necessary because of default or 
disqualification more than five (5) business days after bidding has 
ended, the Commission will afford new parties an opportunity to file 
applications. One of our primary goals in conducting auctions is to 
assure that all serious interested bidders are in the pool of qualified 
bidders at any re-auction. We believe that allowing new applications 
will promote achievement of this goal, which outweighs the short delay 
that we recognize may result from allowing new applications in a re-
auction. Indeed, if we were not to allow new applicants in a re-
auction, interested parties might be forced into an after-market 
transaction to obtain the license, which would itself delay service to 
the public and may prevent the public from recovering a reasonable 
portion of the value of the spectrum resource.
4. Long-Form Application
    81. If the winning bidder makes the down payment in a timely 
manner, a long-form application filed on FCC Form 401 (as modified), or 
such other form as may be adopted for Commercial Mobile Radio Service 
use in GEN Docket No. 93-252, will be required to be filed by a date 
specified by Public Notice, generally within ten (10) business days 
after the close of bidding.\56\ After the Commission receives the 
winning bidder's down payment and the long-form application, we will 
review the long-form application to determine if it is acceptable for 
filing. In addition to the information required in the long-form 
application of all winning bidders, each winning bidder on licenses in 
frequency blocks C and F will be required to submit evidence of its 
eligibility to bid on licenses in these blocks, as well as evidence to 
support its claim to any special provisions made available to 
designated entities. This information may be included in an exhibit to 
FCC Form 401, and must include the gross revenues and total assets of 
the applicant and all attributable investors in the applicant, and a 
certification that the personal net worth of each individual investor 
does not exceed the eligibility limitation. This information will 
enable the Commission, and other interested parties, to ensure the 
validity of the applicant's certification of eligibility to bid in 
blocks C and F (submitted as part of its FCC Form 175) and its 
eligibility for any bidding credits, installment payment options, or 
other special provision. Upon acceptance for filing of the long-form 
application, the Commission will issue a Public Notice announcing this 
fact, triggering the filing window for petitions to deny. If the 
Commission denies all petitions to deny, and is otherwise satisfied 
that the applicant is qualified, the license(s) will be granted to the 
auction winner.
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    \56\Schedule B to FCC Form 401 will not be required to be 
submitted by broadband PCS applicants. However, applicants for 
broadband PCS licenses proposing to use any portion of broadband PCS 
spectrum to offer service on a private mobile radio service basis 
must overcome the presumption that PCS is a commercial mobile radio 
service. Regulatory Treatment of Mobile Services, Second Report and 
Order in GEN Docket No. 93-252, 9 FCC Rcd 1411, 1460-63, 59 FR 
18493, Apr. 19, 1994; 47 CFR Sec. 20.9(a)(11), (b). Applicants (or 
licensees) seeking to dedicate a portion of the spectrum for private 
mobile radio service will be required to attach as an exhibit to the 
Form 401 application a certification that it will offer PCS service 
on a private mobile radio basis. The certification must include a 
description of the proposed service sufficient to demonstrate that 
it is not within the definition of commercial mobile radio service 
in Section 20.3 of the Commission's Rules. Id.
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5. Processing and Procedural Rules
    82. In the Notice, we proposed to adopt general processing and 
procedural rules for broadband PCS based on Part 22 of the Commission's 
Rules. One commenter, AIDE, argues that the Commission's reference to 
proposed PCS rules is vague and legally insufficient for a Notice of 
Proposed Rule Making. Comments of AIDE at 16-17. AIDE also asserts that 
the adoption of PCS processing and procedural rules is beyond the scope 
of the Notice in this rule making proceeding. Id. We disagree. The 
Notice sought comment on specific rule sections contained in Part 22 of 
our Rules and asked commenters to indicate what modifications should be 
made to those rules to adapt them for PCS services. See Notice at 128. 
In addition, the Notice specifically requested comment on the general 
procedural, processing and petition to deny procedures that should be 
used for auctionable services. The Notice's proposal to adopt 
processing rules based on Part 22 of the Commission's Rules, with any 
appropriate modifications for PCS services, clearly indicated to 
commenters the terms of the proposed rules, as is required by 5 U.S.C. 
Sec. 553 and 47 CFR Sec. 1.413(c). Accordingly, we believe that the 
Notice's description of the proposed rules was sufficiently specific to 
alert interested parties to the substance of our proposal and to 
provide an adequate opportunity for comment on those proposals. 
Moreover, we conclude that these issues are well within the scope of 
the Notice.
    83. As we proposed, we adopt for broadband PCS a modified version 
of the application processing rules contained in Part 22 of the 
Commission's Rules. These rules, which will comprise Subpart I of Part 
24 of our Rules, will govern application filing and content 
requirements, waiver procedures for return of defective applications, 
regulations regarding modification of applications, and general 
application processing rules. We also adopt petition to deny procedures 
based on Section 22.30 of the Commission's Rules. In addition, as we 
proposed in the Notice, we adopt rules similar to Sections 22.927, 
22.928 and 22.929 of our existing rules (47 CFR Secs. 22.927, 22.928, 
22.929) to prevent the filing of speculative applications and pleadings 
(or threats of the same) designed to extract money from sincere 
broadband PCS applicants. In this regard, we limit the consideration 
that an applicant or petitioner is permitted to receive for agreeing to 
withdraw an application or a petition to deny to the legitimate and 
prudent expenses of the withdrawing applicant or petitioner.
    84. With regard to petitions to deny, we adopt expedited procedures 
consistent with the provisions of Section 309(i)(2) of the 
Communications Act to resolve substantial and material issues of fact 
concerning qualifications.\57\ This provision requires us to entertain 
petitions to deny the application of the auction winner if petitions to 
deny are otherwise provided for under the Communications Act or our 
Rules.
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    \57\The adoption of such procedures is necessary because Section 
309(j)(5) of the Communications Act forbids the granting of licenses 
through competitive bidding unless the Commission determines that 
the applicant is qualified.
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    85. As we indicated in the Second Report and Order, the Commission 
need not conduct a hearing before denying an application if it 
determines that an applicant is not qualified and no substantial issue 
of fact exists concerning that determination. See Second Report and 
Order at 202. In the event that the Commission identifies substantial 
and material issues of fact in need of resolution, Section 309(i)(2) of 
the Communications Act permits in any hearing the submission of all or 
part of evidence in written form and allows employees other than 
administrative law judges to preside over the taking of written 
evidence. We will incorporate these principles into our broadband PCS 
procedural rules.

D. Procedures in Alternative Auction Design

    86. If we decide to employ a sequential auction design (using 
either oral or electronic bid submission), the same general rules and 
procedures described above will be used with certain modifications to 
fit the oral or electronic auction format. In the case of oral 
auctions, bidders would be required to follow the procedures described 
above, including the submission of the standard upfront payment of 
$0.02 per MHz-pop prior to the auction. Applicants would submit a 
sufficient upfront payment to cover the total number of MHz-pops they 
desire to win. Once a bidder has won the maximum number of MHz-pops 
covered by its upfront payment, that bidder will be precluded from 
further bidding in the auction.\58\ Immediately after bidding closes on 
a license, the winning bidder (i.e., the high bidder on a license on 
which bidding has closed) will be asked to sign a bid confirmation 
form. No other license will be put up for bid until a bid confirmation 
form is signed by a high bidder on the previous license.\59\ Because we 
recognize that in an oral auction the chances of a bidder accidentally 
placing a high bid are greater than in other auction methods, and 
because the harm will be limited if the license is immediately re-
offered, we will not impose a penalty on a high bidder who withdraws a 
high bid by refusing to sign the bid confirmation form. Thus, in an 
sequential oral auction in which a high bidder declines to sign the bid 
confirmation form, the license will be immediately put up for bid 
again. If, however, a high bidder signs a bid confirmation form but 
subsequently fails to submit the 20 percent down payment or otherwise 
defaults, the standard default penalties (described supra) will 
apply.\60\
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    \58\This is similar to the procedure adopted in the Fourth 
Report and Order for the oral auctioning of IVDS licenses. See 
Fourth Report and Order in PP Docket No. 93-253, 9 FCC Rcd 2330, 59 
FR 24947, May 13, 1994.
    \59\If we use single combined bidding, described supra, no other 
licenses will be put up for bid until a bid confirmation form is 
signed for each license put up for bid together in a combined 
auction.
    \60\See 47 CFR Secs. 1.2104 and 1.2109.
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    87. If we decide to use sequential electronic bidding, bidders 
would again follow the general procedures described above including the 
submission of the standard upfront payment amount of $0.02 per MHz per 
pop prior to the auction. Applicants would submit a sufficient upfront 
payment to cover the total number of MHz-pops they desire to win. An 
applicant will not be eligible to bid on a license for which it has not 
applied or which contains more MHz-pops than the total MHz-pops covered 
by the bidder's upfront payment less any MHz-pops already won by that 
bidder. Once a bidder has won licenses representing the maximum number 
of MHz-pops reflected in its upfront payment, that bidder will be 
precluded from further bidding in the auction. Each bidder's 
eligibility will be computed and tracked by the auction software and 
bids placed by ineligible bidders will not be accepted. After the 
auctioneer declares bidding on a license closed and the high bidder has 
been notified, that bidder will be asked to confirm its high bid. If 
the high bidder in a sequential electronic auction declines to confirm 
its high bid, the license will be immediately re-auctioned and no 
penalty will be imposed. No other licenses will be put up for bid until 
a bid confirmation form is signed by a high bidder on the previous 
license.\61\ As with sequential oral auctions, if a high bidder signs a 
bid confirmation form but subsequently fails to submit the 20 percent 
down payment or otherwise defaults, the standard default penalties 
(described supra) will apply.
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    \61\See also n. 59, supra.
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VI. Regulatory Safeguards

A. Transfer Disclosure Requirements

    88. In Section 309(j), Congress directed the Commission to 
``require such transfer disclosures and anti-trafficking restrictions 
and payment schedules as may be necessary to prevent unjust enrichment 
as a result of the methods employed to issue licenses and permits.'' 47 
U.S.C. Sec. 309(j)(4)(E). In the Second Report and Order, the 
Commission adopted safeguards designed to ensure that the requirements 
of Section 309(j)(4)(E) are satisfied. See Second Report and Order at 
210-226 and 258-265.
    89. In the Second Report and Order (at 214), we stated our belief 
that it is important to monitor transfers of licenses awarded by 
competitive bidding in order to accumulate the data necessary to 
evaluate our auction designs and to judge whether ``licenses [have 
been] issued for bids that fall short of the true market value of the 
license.'' H.R. Rep. No. 103-111 at 257. Therefore, we imposed a 
transfer disclosure requirement on licenses obtained through the 
competitive bidding process, whether by a designated entity or not. See 
47 CFR Sec. 1.2111(a). We believe that the transfer disclosure 
requirements contained in Section 1.2111(a) of the Commission's Rules 
should apply to all broadband PCS licenses obtained through the 
competitive bidding process. Generally, licensees transferring their 
licenses within three years after the initial license grant will be 
required to file, together with their transfer applications, the 
associated contracts for sale, option agreements, management 
agreements, and all other documents disclosing the total consideration 
received in return for the transfer of its license. As we indicated in 
the Second Report and Order, we will give particular scrutiny to 
auction winners who have not yet begun commercial service and who seek 
approval for a transfer of control or assignment of their licenses 
within three years after the initial license grant, in order to 
determine if any unforeseen problems relating to unjust enrichment have 
arisen outside the designated entity context. See Second Report and 
Order at 214.\62\
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    \62\We note that these transfer disclosure provisions are in 
addition to the limitations on transfers that we have adopted in the 
Broadband PCS Reconsideration Order (with respect to spectrum 
disaggregation) or elsewhere in this Order (with respect to 
transfers of licenses in the entrepreneurs' block).
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B. Performance Requirements

    90. The Budget Act requires the Commission to ``include performance 
requirements, such as appropriate deadlines and penalties for 
performance failures, to ensure prompt delivery of service to rural 
areas, to prevent stockpiling or warehousing of spectrum by licensees 
or permittees, and to promote investment in and rapid deployment of new 
technologies and services.''\63\ In the Second Report and Order we 
decided that it was unnecessary and undesirable to impose additional 
performance requirements, beyond those already provided in the service 
rules, for all auctionable services. The broadband PCS service rules 
already contain specific performance requirements, such as the 
requirement to construct within a specified period of time. See, e.g., 
47 CFR Sec. 24.203. Failure to satisfy these construction requirements 
will result in forfeiture of the license. Accordingly, we do not see 
the need to adopt any additional performance requirements in this 
Report and Order.
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    \63\See Section 309(j)(4)(B) of the Communications Act, as 
amended.
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C. Rules Prohibiting Collusion

    91. In the Second Report and Order, we adopted a special rule 
prohibiting collusive conduct in the context of competitive bidding. 
See 47 CFR Sec. 1.2105(c). We referred to the Notice, wherein we 
indicated our belief that such a rule would serve the objectives of the 
Budget Act by preventing parties, especially the largest firms, from 
agreeing in advance to bidding strategies that divide the market 
according to their strategic interests and disadvantage other bidders. 
See Second Report and Order at 221. We believe that this rule is 
nowhere more necessary than with respect to broadband PCS auctions, 
where we expect bidder interest to be high and the incentives to 
collude to be great. Thus, Section 1.2105(c) will apply to broadband 
PCS auctions. This rule provides that from the time the short-form 
applications are filed until the winning bidder has made its required 
down payment, all bidders will be prohibited from cooperating, 
collaborating, discussing or disclosing in any manner the substance of 
their bids or bidding strategies with other bidders, unless such 
bidders are members of a bidding consortium or other joint bidding 
arrangement identified on the bidder's short-form application. In 
addition, as discussed in Section IV, supra, bidders will be required 
by Section 1.2105(a)(2) of the Commission's Rules to identify on their 
Form 175 applications all parties with whom they have entered into any 
consortium arrangements, joint ventures, partnerships or other 
agreements or understandings which relate to the competitive bidding 
process. Bidders will also be required to certify that they have not 
entered and will not enter into any explicit or implicit agreements, 
arrangements or understandings with any parties, other than those 
identified, regarding the amount of their bid, bidding strategies or 
the particular properties on which they will or will not bid.
    92. Winning bidders in broadband PCS auctions will also be subject 
to Section 1.2107 of the Commission's Rules, which among other things 
requires each winning bidder to attach as an exhibit to the Form 401 
long-form application a detailed explanation of the terms and 
conditions and parties involved in any bidding consortium, joint 
venture, partnership, or other agreement or arrangement they had 
entered into relating to the competitive bidding process prior to the 
close of bidding. All such arrangements must have been entered into 
prior to the filing of short-form applications. In addition, where 
specific instances of collusion in the competitive bidding process are 
alleged during the petition to deny process, the Commission may conduct 
an investigation or refer such complaints to the United States 
Department of Justice for investigation. Bidders who are found to have 
violated the antitrust laws or the Commission's rules in connection 
with participation in the auction process may be subject to forfeiture 
of their down payment or their full bid amount and revocation of their 
license(s), and they may be prohibited from participating in future 
auctions.

VII. Treatment of Designated Entities

A. Overview and Objectives

    93. Congress mandated that the Commission ``ensure that small 
businesses, rural telephone companies, and businesses owned by members 
of minority groups and women are given the opportunity to participate 
in the provision of spectrum-based services.'' 47 U.S.C. 
Sec. 309(j)(4)(D). To achieve this goal, the statute requires the 
Commission to ``consider the use of tax certificates, bidding 
preferences, and other procedures.'' Thus, while providing that we 
charge for licenses, Congress has ordered that the Commission design 
its auction procedures to ensure that designated entities have 
opportunities to obtain licenses and provide service. For that purpose, 
the law does not mandate the use of any particular procedure, but it 
specifically approves the use of ``tax certificates, bidding 
preferences, and other procedures.'' The use of any such procedure is, 
in our view, mandated where necessary to achieve Congress's objective 
of ensuring that designated entities have the opportunity to 
participate in broadband PCS.
    94. In addition to this mandate, the statute sets forth various 
congressional objectives. For example, it provides that in establishing 
eligibility criteria and bidding methodologies the Commission shall 
``promot[e] economic opportunity and competition and ensur[e] that new 
and innovative technologies are readily accessible to the American 
people by avoiding excessive concentration of licenses and by 
disseminating licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women.'' 47 U.S.C. Sec. 309(j)(3)(B); 
see also id. Sec. 309(j)(4)(C) (requiring the Commission when 
prescribing area designations and bandwidth assignments, to promote 
``economic opportunity for a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women).\64\ Further, Section 
309(j)(4)(A) provides that to promote the statute's objectives the 
Commission shall ``consider alternative payment schedules and methods 
of calculation, including lump sums or guaranteed installment payments, 
with or without royalty payments, or other schedules or methods * * * 
and combinations of such schedules and methods.''
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    \64\As noted in the Second Report and Order, the statute also 
requires the Commission to promote the purposes specified in Section 
1 of the Communications Act, which include, among other things, ``to 
make available, so far as possible, to all the people of the United 
States a rapid, efficient, Nation-wide, and world-wide wire and 
radio communication service with adequate facilities at reasonable 
charges.'' 47 U.S.C. Sec. 151; Second Report and Order at n. 3.
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    95. To satisfy these statutory mandates and objectives, we 
established in the Second Report and Order eligibility criteria and 
general rules that would govern the special measures for small 
businesses, rural telephone companies, and businesses owned by members 
of minority groups and women. We also identified several measures, 
including installment payments, spectrum set-asides, bidding credits 
and tax certificates, that we could choose from in establishing rules 
for auctionable spectrum-based services. We stated that we would decide 
whether and how to use these special provisions, or others, when we 
developed specific competitive bidding rules for particular services. 
In addition, we set forth rules designed to prevent unjust enrichment 
by designated entities who transfer ownership in licenses obtained 
through the use of these special measures or who otherwise lose their 
designated entity status.
    96. We intend in the new broadband personal communications service 
to meet fully the statutory mandate of Section 309(j)(4)(D), as well as 
the objectives of promoting economic opportunity and competition, of 
avoiding excessive concentration of licenses, and of ensuring access to 
new and innovative technologies by disseminating licenses among a wide 
variety of applicants, including small businesses, rural telephone 
companies, and businesses owned by members of minority groups and 
women. As explained more fully in this Order, in some respects it is 
necessary to do more to ensure that businesses owned by members of 
minority groups and women have a meaningful opportunity to participate 
in the provision of personal communications services than is necessary 
to ensure participation by other designated entities. In particular, we 
have concluded that steps such as adoption of bidding credits, tax 
certificates, alternate payment plans and relaxed attribution rules, 
must be taken to encourage investment in minority and women-owned 
businesses. These special provisions are tailored to address the major 
problem facing minorities and women desiring to offer PCS--lack of 
access to capital. Moreover, because broadband PCS licenses in many 
cases are expected to be auctioned for large sums of money in the 
competitive bidding process, and because buildout costs are likely to 
be high, it is necessary to do more to ensure that designated entities 
have the opportunity to participate in broadband PCS than is necessary 
in other, less costly spectrum-based services. In our view, these steps 
and the others we adopt are required to fulfill Congress' mandate that 
designated entities have the opportunity to participate in the 
provision of PCS. The measures we adopt today will also increase the 
likelihood that designated entities who win licenses in the auctions 
become strong competitors in the provision of broadband PCS service.
    97. In instructing the Commission to ensure the opportunity for 
designated entities to participate in auctions and spectrum-based 
services, Congress was well aware of the difficulties these groups 
encounter in accessing capital. Indeed, less than two years ago, 
Congress made specific findings in the Small Business Credit and 
Business Opportunity Enhancement Act of 1992, that ``small business 
concerns, which represent higher degrees of risk in financial markets 
than do large businesses, are experiencing increased difficulties in 
obtaining credit.''\65\ Because of these problems, Congress resolved to 
consider carefully legislation and regulations ``to ensure that small 
business concerns are not negatively impacted'' and to give priority to 
passage of ``legislation and regulations that enhance the viability of 
small business concerns.''\66\
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    \65\Small Business Credit and Business Opportunity Enhancement 
Act of 1992, Section 331(a)(3), Pub. Law 102-366, Sept. 4, 1992.
    \66\Id., Section 331(b) (2), (3).
---------------------------------------------------------------------------

    98. Congress also recognized that these funding problems are even 
more severe for minority and women-owned businesses, who face 
discrimination in the private lending market. For example, Congress 
explicitly found that businesses owned by minorities and women have 
particular difficulties in obtaining capital and that problems 
encountered by minorities in this regard are ``extraordinary.''\67\ A 
number of studies also amply support the existence of widespread 
discrimination against minorities in lending practices. In October 
1992, the year prior to passage of the auction law, the Federal Reserve 
Bank of Boston released an important and highly-publicized study 
demonstrating that a black or Hispanic applicant in the Boston area is 
roughly 60 percent more likely to be denied a mortgage loan than a 
similarly situated white applicant.\68\ The researchers measured every 
variable mentioned as important in numerous conversations with lenders, 
underwriters, and examiners and found that minority applicants are more 
likely to be denied mortgages even where they have the same obligation 
ratios, credit history, loan to value and property characteristics as 
white applicants. The lending discrimination that occurs, the study 
found, does not involve the application of specific rules, but instead 
occurs where discretionary decisions are made. Based on the Boston 
study, it is reasonable to expect that race would affect business loans 
that are based on more subjective criteria to an even greater extent 
than the mortgage loan process, which uses more standard rules.
---------------------------------------------------------------------------

    \67\Id., Sections 112(4), 331(a)(4).
    \68\Mortgage Lending in Boston: Interpreting HMDA Data, Federal 
Reserve Bank of Boston, Working Paper 92-7 (October 1992).
---------------------------------------------------------------------------

    99. Importantly, the Boston study also found that, because most 
loan applicants have some negative attributes, most loan denials will 
appear legitimate by some objective standard. Accordingly, the study 
stated, the lending discrimination that occurs is very difficult to 
document at the institution level, so legal remedies may be largely 
ineffective. Indeed, Congress had already attempted to address 
discriminatory lending practices through laws that bar discrimination 
in lending, such as the Equal Credit Opportunity Act, enacted in 1974 
and amended many times since then. Congress, therefore, could 
reasonably assume, based on the Boston study, and its legislative 
experience regarding discriminatory lending practices, that minority 
applicants for licenses issued in spectrum auctions would face 
substantial (albeit subtle) barriers to obtaining financing. Any legal 
remedies, even if effective, would, moreover, come too late to ensure 
that minorities are able to participate in spectrum auctions and obtain 
licenses.
    100. Similar evidence presented in testimony before the House 
Minority Enterprise Subcommittee on May 20, 1994 indicates that African 
American business borrowers have difficulty raising capital mainly 
because they have less equity to invest, they receive fewer loan 
dollars per dollar of equity investment, and they are less likely to 
have alternate loan sources, such as affluent family or friends. 
Assuming two hypothetical college educated, similarly-situated male 
entrepreneurs, one black, one white, the testimony indicated that the 
white candidate would have access to $1.85 in bank loans for each 
dollar of owner equity invested, while the black candidate would have 
access to only $1.16. According to the testimony, the problems 
associated with lower incomes and intergenerational wealth, as well as 
the discriminatory treatment minorities receive from financial 
institutions, make it much more likely that minorities will be shut out 
of capital intensive industries, such as telecommunications. This 
testimony also noted that African American representation in 
communications is so low that it was not possible to generate 
meaningful summary statistics on underrepresentation.\69\
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    \69\Testimony of Dr. Timothy Bates, Visiting Fellow, The Woodrow 
Wilson Center, before the U.S. House of Representatives Committee on 
Small Business, Subcommittee on Minority Enterprise, Finance, and 
Urban Development (House Minority Enterprise Subcommittee), May 20, 
1994.
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    101. The inability to access capital is also a major impediment to 
the successful participation of women in broadband PCS auctions. In 
enacting the Women's Business Ownership Act in 1988, Congress made 
findings that women, as a group, are subject to discrimination that 
adversely affects their ability to raise or secure capital.\70\ As AWRT 
documents, these discriminatory barriers still exist today. Indeed, 
AWRT reports that while venture capital is an important source of 
funding for telecommunications companies, women-owned companies 
received only approximately one percent of the $3 billion invested by 
institutional venture capitalists in 1993. Citing a 1992 National 
Women's Business Council report, AWRT further argues that even 
successful women-owned companies did not overcome these financing 
obstacles after they had reached a level of funding and profitability 
adequate for most other businesses.\71\
---------------------------------------------------------------------------

    \70\Pub. L. 100-533 (1988). In 1991, Congress enacted the 
Women's Business Development Act of 1991 to further assist the 
development of small businesses owned by women. See Pub. L. 102-191 
(1991).
    \71\See Letter of AWRT to the Honorable Kweisi Mfume, Chairman, 
House Minority Enterprise Subcommittee, June 1, 1994.
---------------------------------------------------------------------------

    102. A study prepared in 1993 by the National Foundation for Women 
Business Owners (NFWBO) further illustrates the barriers faced by 
women-owned businesses. For example, it finds that women-owned firms 
are 22 percent more likely to report problems dealing with their banks 
than are businesses at large. In addition, the NFWBO study finds that 
the largest single type of short-term financing used by women business 
owners is credit cards and that over half of women-owned firms use 
credit cards for such purposes, as compared to 18 percent of all small 
to medium-sized businesses, which generally use bank loans and vendor 
credit for short-term credit needs. With regard to long-term financing, 
the study states that a greater proportion of women-owned firms are 
turning, or are forced to turn, to private sources, and to a wider 
variety of sources, to fulfill their needs. Based on these findings, 
the NFWBO study concludes that removal of financial barriers would 
encourage stronger growth among women-owned businesses, resulting in 
much greater growth throughout the economy.\72\
---------------------------------------------------------------------------

    \72\See The National Foundation for Women Business Owners, 
Financing the Business, A Report on Financial Issues from the 1992 
Biennial Membership Survey of Women Business Owners, October 1993.
---------------------------------------------------------------------------

    103. If we are to meet the congressional goals of promoting 
economic opportunity and competition by disseminating licenses among a 
wide variety of providers, we must find ways to counteract these 
barriers to entry. Over the years, both Congress and the Commission 
have tried various methods to enhance access to the broadcast and cable 
industries by minorities and women. For example, in the late 1960s, the 
FCC began to promote nondiscriminatory employment policies by broadcast 
licensees. These equal employment opportunity efforts have taken the 
form of Commission rules and policies that require licensees not to 
discriminate, to report hiring and promotion statistics, and to 
implement affirmative action programs.\73\ The Commission also has 
adopted similar equal employment rules for licensees in the common 
carrier, public mobile, and international fixed public radio 
communication services,\74\ as well for cable operators.\75\ The cable 
EEO rules were recently revised as part of the implementation of the 
Cable Act of 1992, and they now apply to cable entities, satellite 
master antenna television operators serving 50 or more subscribers and 
any multichannel video programming distributor.\76\
---------------------------------------------------------------------------

    \73\47 CFR Sec. 73.2080 (broadcasters must ``establish, 
maintain, and carry out a positive continuing program of specific 
practices designed to ensure equal opportunity in every aspect of 
the station's employment policy and practice'').
    \74\47 CFR Secs. 21.307, 22.307, 23.55.
    \75\47 CFR Secs. 76.71-76.79.
    \76\See 47 U.S.C. Sec. 554. In addition, the Commission has 
proposed adopting EEO requirements for all CMRS licensees, including 
PCS licensees. Regulatory Treatment of Mobile Services, Further 
Notice of Proposed Rule Making, GN Docket 93-252, FCC 94-100, 59 FR 
28042, May 31, 1994.
---------------------------------------------------------------------------

    104. A decade after it first addressed discriminatory hiring 
practices, the Commission began to look into the serious 
underrepresentation of minorities among owners of broadcast stations. 
Recognizing that it could play an important role in alleviating this 
problem through the licensing process, the Commission adopted its tax 
certificate and distress sale policies in 1978 to encourage minority 
ownership of broadcast facilities.\77\ It noted that full minority 
participation in the ownership and management of broadcast facilities 
would result in a more diverse selection of programming and would 
inevitably enhance the diversity of control of a valuable resource, the 
electromagnetic spectrum.\78\
---------------------------------------------------------------------------

    \77\See Commission Policy Regarding the Advancement of Minority 
Ownership in Broadcasting, 92 FCC 2d 849 (1982) (1982 Policy 
Statement); see also Statement of Policy on Minority Ownership of 
Broadcasting Facilities, 68 FCC 2d 979 (1978) (1978 Policy 
Statement).
    \78\Because of the role of cable television systems in 
retransmitting broadcast signals, the Commission has also issued tax 
certificates in connection with sales of cable systems. See 
Statement of Policy on Minority Ownership of CATV Systems, FCC 82-
524, released December 22, 1982.
---------------------------------------------------------------------------

    105. In implementing these ownership policies, the Commission 
identified lack of access to capital as one of the principal barriers 
to minority entry. Thus, in 1981, the Commission created the Advisory 
Committee on Alternative Financing for Minority Opportunities in 
Telecommunications (the ``Rivera Committee'') to investigate financing 
methods and to give recommendations to the FCC on ways to encourage 
minority ownership of telecommunications facilities.\79\ The Rivera 
Committee confirmed that the shortage of capital is a principal problem 
facing minorities seeking ownership opportunities and further found 
that this shortage was due to minority inexperience in obtaining 
financial institution misconceptions about potential minority 
borrowers, and marketplace structural problems, such as high interest 
rates and low broadcast industry earnings growth. Among other things, 
the Rivera Committee suggested educational and outreach programs and 
expanding the tax certificate program to nonbroadcast properties such 
as common carrier and land mobile. In response to this recommendation, 
the FCC submitted draft legislation to Congress proposing to broaden 
the scope of the Commission's authority to issue tax certificates in 
connection with the sale or exchange of any type of telecommunications 
facilities.\80\ On March 24, 1983, The Minority Telecommunications 
Ownership Tax Act of 1983, H.R. 2331, which incorporated the 
Commission's proposals, was introduced in the House of 
Representatives.\81\
---------------------------------------------------------------------------

    \79\Strategies for Advancing Minority Ownership Opportunities in 
Telecommunications, The Final Report of the Advisory Committee on 
Alternative Financing for Minority Opportunities in 
Telecommunications to the Federal Communications Commission, May 
1982 (Rivera Committee Report).
    \80\See Federal Communications Draft Legislation Revising 
Section 1071 of the Internal Revenue Code of 1994 (January 17, 
1983).
    \81\The Minority Telecommunications Ownership Tax Act of 1983, 
H.R. 2331, 98th Congress, 1st Sess., March 24, 1983.
---------------------------------------------------------------------------

    106. Congress also took steps to address the problem of minority 
underrepresentation in communications. In 1982, it mandated the grant 
of a ``significant preference'' to minority applicants participating in 
lotteries for spectrum-based services. 47 U.S.C. Sec. 309(i)(3)(A). 
And, in 1988 and each fiscal year thereafter, Congress attached a 
provision to the FCC appropriations legislation, which precluded the 
Commission from spending any appropriated funds to examine or change 
its minority broadcast preference policies.\82\
---------------------------------------------------------------------------

    \82\See Continuing Appropriations Act for Fiscal Year 1988, Pub. 
L. 100-102, 101 Stat. 1329-31; Departments of Commerce, Justice, and 
State, the Judiciary, and Related Agencies Appropriations Act of 
1994, Pub. L. 103-121, 107 Stat. 1167.
---------------------------------------------------------------------------

    107. These efforts have met with limited success. The record shows 
that women and minorities have not gained substantial ownership 
representation in either the broadcast or non-broadcast 
telecommunications industries. For example, a 1993 report conducted by 
the National Telecommunications and Information Administration's (NTIA) 
Minority Telecommunications Development Program shows that, as of 
August 1993, only 2.7 percent of commercial broadcast stations were 
owned by minorities. Another study commissioned by the Commerce 
Department's Minority Business Development Agency in 1991 found that 
only one half of one percent of the telecommunications firms in the 
country were minority owned. The study also identified only 15 minority 
cable operators and 11 minority firms engaged in the delivery of 
cellular, specialized mobile radio, radio paging or messaging services 
in the United States.\83\ And, according to the last available U.S. 
Census, only 24 percent of the communications firms in the country were 
owned by women, and these women-owned firms generated only 
approximately 8.7 percent of the revenues earned by communications 
companies.\84\ When companies without paid employees are removed from 
the equation, firms with women owners represent only 14.5 percent of 
the communications companies in the country.\85\ One result of these 
low numbers is that there are very few minority or women-owned 
businesses that bring experience or infrastructure to PCS. They thus 
face an additional barrier relative to many existing service providers.
---------------------------------------------------------------------------

    \83\See Testimony of Larry Irving, Assistant Secretary for 
Communications and Information, U.S. Department of Commerce, before 
the House Minority Enterprise Subcommittee, May 20, 1994. In his 
testimony at this same hearing, FCC Chairman Reed Hundt cited some 
of these statistics and noted that in light of this serious 
underrepresentation, there remains ``a fundamental obligation for 
both Congress and the FCC to examine new and creative ways to ensure 
minority opportunity.'' Testimony of Reed E. Hundt, Chairman, 
Federal Communications Commission, before the House Minority 
Enterprise Subcommittee, May 20, 1994.
    \84\See Women-Owned Businesses, 1987 Economic Censuses, U.S. 
Department of Commerce, issued August 1990, at 7, 147. The census 
data includes partnerships, and subchapter S corporations. We have 
no statistics regarding women representation among owners of larger 
communications companies.
    \85\Id.
---------------------------------------------------------------------------

    108. Small businesses also have not become major participants in 
the telecommunications industry. For instance, one commenter asserts 
that ten large companies--six Regional Bell Operating Companies 
(RBOCs), AirTouch (formerly owned by Pacific Telesis), McCaw, GTE and 
Sprint--control nearly 86 percent of the cellular industry. This 
commenter further contends that nine of these ten companies control 95 
percent of the cellular licenses and population in the 50 BTAs that 
have one million or more people.\86\
---------------------------------------------------------------------------

    \86\Ex parte filing of DCR Communications, May 31, 1994.
---------------------------------------------------------------------------

    109. Congress directed the Commission to ensure that, together with 
other designated entities, rural telephone companies have the 
opportunity to participate in the provision of PCS. Rural areas, 
because of their more dispersed populations, tend to be less profitable 
to serve than more densely populated urban areas. Therefore, service to 
these areas may not be a priority for many PCS licensees. Rural 
telephone companies, however, are well positioned because of their 
existing infrastructure to serve these areas profitably. We, therefore, 
have adopted special provisions to encourage their participation, 
increasing the likelihood of rapid introduction of service to rural 
areas.
    110. In the new auction law, Congress directed the Commission to 
remedy this serious imbalance in the participation by certain groups, 
especially minorities and women. The record indicates that, in the 
absence of meaningful efforts to assist designated entities, there 
would be good reason to think that participation by these groups, 
particularly businesses owned by women and minorities, would continue 
to be severely limited. Indeed, the auction law itself envisions a 
process that requires payment of funds to acquire an initial license, 
unlike existing licensing methods such as comparative hearings or 
lotteries. It is therefore possible that participation by those with 
limited access to capital could be further diminished by operation of 
the statute, absent affirmative provisions to create competitive 
opportunity for designated entities. The measures we adopt in this 
Fifth Report and Order thus will carry out Congress's directive to 
provide meaningful opportunities for small entities, rural telephone 
companies, and businesses owned by women and minorities to provide 
broadband PCS services. The rules also are expressly designed to 
address the funding problems that face these groups and that are their 
principal barriers to entry.
    111. We also intend that designated entities who win licenses have 
the opportunity to become strong competitors in this service. While the 
new broadband PCS service presents tremendous opportunities for 
designated entities to participate in the provision of the next 
generation of innovative wireless mobile telecommunications services, 
it is expected to be a highly competitive service, and the estimated 
costs of acquiring a license and constructing facilities are 
substantial. In the Broadband PCS Reconsideration Order, which was 
adopted June 9, 1994, we took specific steps to assist designated 
entities to become viable competitors in the provision of broadband 
PCS. For example, we modified the PCS spectrum allocation plan by 
shifting all channels blocks to a contiguous lower segment of the 
``emerging technologies band'' in part to bolster the ability of 
designated entities to obtain more competitively viable licenses. In 
addition, we relaxed some of the ownership and attribution rules with 
respect to cellular operators' participation in PCS to foster 
investment in designated entity ventures,\87\ and we also relaxed the 
PCS/cellular cross-ownership rule for designated entities with cellular 
holdings to allow them to further expand their opportunities in 
broadband PCS.\88\ Further, we took steps that will result in lower 
capital costs for designated entities that obtain PCS licenses, 
including adoption of a band plan that will reduce the costs of 
clearing the PCS spectrum of incumbent microwave users as well as 
relaxing the construction requirements.
---------------------------------------------------------------------------

    \87\Broadband PCS Reconsideration Order at 127.
    \88\Id. at 125.
---------------------------------------------------------------------------

    112. The measures we establish today to encourage the entry of 
designated entities also are designed to promote strong, long-term bona 
fide competitors. For example, we have revised the definition of a 
small business set forth in the Second Report and Order to include 
entities with up to $40 million in gross revenues, and we will allow 
these small businesses to pool their resources and form consortia to 
bid in the entrepreneurs' blocks. We also adopt rules that allow 
entrepreneurial businesses, small businesses, and businesses owned by 
women and minorities to raise capital by attracting passive equity 
investors. At the same time, we have designed these rules to ensure 
that the special provisions adopted for such businesses accrue to the 
intended beneficiaries.

B. Summary of Special Provisions for Designated Entities

    113. As discussed more fully below, many commenters in this 
proceeding believe that the inability of designated entities to obtain 
adequate funding has a profoundly adverse effect on the potential for 
these businesses to bid successfully in auctions against very large, 
established businesses. Therefore, we take a number of steps in this 
Order to help address this imbalance.
     We establish two ``entrepreneurs' blocks'' (frequency 
blocks C and F) in which large companies (those with $125 million or 
more in annual gross revenues or $500 million or more in total assets) 
will be prohibited from bidding.
     Bidding credits will be granted both to small businesses 
and to businesses owned by women and minorities in the entrepreneurs' 
blocks to provide them with a better opportunity to compete 
successfully in broadband PCS auctions.
     Certain winning bidders in frequency blocks C and F will 
be permitted to pay the license price in installments, and the interest 
rate and moratorium on principal payments will be adjusted to assist 
small businesses and women and minority-owned businesses.
     We adopt a tax certificate program for minority and women-
owned businesses, which will provide additional assistance in their 
efforts to attract equity investors.
     Rural telephone companies will be allowed to obtain 
broadband PCS licenses that are geographically partitioned from larger 
PCS service areas to provide them more flexibility to serve rural 
subscribers.\89\
---------------------------------------------------------------------------

    \89\In a Further Notice of Proposed Rule Making in this docket, 
we will seek comment on whether a partitioning option for small 
businesses or businesses owned by women or minorities, as suggested 
by some of the commenters, may be appropriate. In that Further 
Notice, we also will seek comment or whether the Commission should 
impose a restriction on the assignment or transfer of control of 
partitioned licenses by rural telephone companies or other 
designated entities for some period of time.
---------------------------------------------------------------------------

     Bidders in the entrepreneurs' blocks will be required to 
pay an upfront payment of only $0.015 per MHz per pop, in contrast to 
the $0.02 per MHz per pop required in the other blocks.
    114. The following chart highlights the major provisions adopted 
for businesses bidding in the entrepreneurs' blocks.\90\
---------------------------------------------------------------------------

    \90\This table is not comprehensive and therefore it does not 
present all the provisions established for designated entities, 
especially those available outside the entrepreneurs' blocks.

----------------------------------------------------------------------------------------------------------------
                                            Bidding                                                             
                                            credits              Installment payments           Tax certificates
                                           (percent)                                              for investors 
----------------------------------------------------------------------------------------------------------------
Entrepreneurial Businesses ($40 MM-$125             0  Interest only for 1 year; rate equal to  No.             
 MM in revenue and less than $500 MM in                 10-year Treasury note plus 2.5%; (for                   
 total assets).                                         businesses with revenues greater than                   
                                                        $75 MM, available only in top 50                        
                                                        markets).                                               
Small Businesses (less than $40 MM                 10  Interest only for 2 years; rate equal    No.             
 revenues).                                             to 10-year Treasury note plus 2.5%.                     
Businesses Owned by Minorities and/or              15  Interest only for 3 years; rate equal    Yes.            
 Women ($40 MM-$125 MM in revenues).                    to 10-year Treasury note.                               
Small Businesses Owned by Minorities and/          25  Interest only for 5 years; rate equal    Yes.            
 or Women (less than $40 MM revenues).                  to 10-year Treasury note.                               
----------------------------------------------------------------------------------------------------------------

C. Summary of Eligibility Requirements and Definitions

1. Entrepreneurs' Blocks and Small Business Eligibility
    115. The following points summarize the principal rules regarding 
eligibility to bid in the entrepreneurs' blocks and to qualify as a 
small business. In addition, they summarize the attribution rules we 
will use to assess whether an applicant satisfies the various financial 
thresholds. More precise details are discussed in the subsections that 
follow.

Financial Caps

     Entrepreneurs' Blocks: To bid in the entrepreneurs' 
blocks, the applicant, including attributable investors and affiliates, 
must cumulatively have less than $125 million in gross revenues and 
less than $500 million in total assets. No individual attributable 
investor or affiliate may have $100 million or more in personal net 
worth.
     Small Business: To qualify for special measures accorded a 
small business, the applicant, including attributable investors and 
affiliates, must cumulatively have less than $40 million in gross 
revenues. No individual attributable investor or affiliate may have $40 
million or more in personal net worth.

Attribution Rules

     Control Group. The gross revenues, total assets and 
personal net worth of certain investors are not considered so long as 
the applicant has a `'control group'' consisting of one or more 
individuals or entities that control the applicant, hold at least 25 
percent of the equity and, for corporations, at least 50.1 percent of 
the voting stock.
     The gross revenues, total assets and personal net worth of 
each member of the control group are counted toward the financial caps.
     Other Investors. Where the applicant has a control group, 
the gross revenues, total assets and personal net worth of any other 
investor are not considered unless the investor holds 25 percent or 
more of the applicant's passive equity (which, for corporations, 
includes as much as 5 percent of the voting stock).
     Passive Equity. Passive equity is limited partnership or 
non-voting stock interests or voting stock interests of 5 percent or 
less of the issued and outstanding voting stock.
     Option for Minority or Woman-Owned Applicants. If the 
control group (considering entirely of women and/or minorities) owns at 
least 50.1 percent of the equity and, for corporations, at least 50.1 
percent of the voting stock, then the gross revenues, total assets and 
personal net worth of any other investor are not considered unless the 
investor holds more than 49.9 percent of the applicant's passive equity 
(which, for corporations, includes as much as 5 percent of the voting 
stock).
     Affiliates. The gross revenues, assets and personal net 
worth of outside interests held by the applicant (and the attributable 
investors in the applicant) are counted toward the financial caps if 
the applicant (or the attributable investors in the applicant) control 
or have power to control the outside interests or if the applicant (or 
the attributable investors in the applicant) is under the control of 
the outside interests. The financial interests of spouses are also 
attributed to each other.
2. Definition of Women and/or Minority-Owned Business
    116. The points below summarize the two structural options 
available to firms that wish to qualify for the special provisions 
adopted for businesses owned by minorities and women. These options 
will be discussed in more detail in the text that follows.

50.1% Equity Option

    If women and/or minority principals control the applicant and own 
at least:
     50.1 percent of the equity
     and 50.1 percent of the voting stock, in the case of 
corporations
     Then any other investor may hold:
     not more than 49.9 percent of the passive equity (which, 
for corporations, includes as much as 5 percent of the voting stock).

25% Equity Option

    If women and/or minority principals control the applicant and own 
at least:
     25 percent of the equity
     and 50.1 percent of the voting stock, in the case of 
corporations
     Then any other investor may hold:
     less than 25 percent of the passive equity (for 
corporations, any other investor also may hold not more than 5 percent 
of the voting stock).
    117. We also have imposed numerous strict requirements to deter 
shams and fronts and to prevent abuse of the incentives for designated 
entities. The Commission intends to enforce vigorously each of these 
requirements. All licensees in the entrepreneurs' blocks are prohibited 
from voluntarily assigning or transferring their licenses for three 
years after grant of the application and for the next two years may 
assign or transfer licenses only to other entities that satisfy the 
financial criteria to bid in the entrepreneurs' blocks. Furthermore, a 
business that seeks to acquire a license from an entity paying in 
installments during the license period will be required, as a condition 
of the grant, to pay according to the installment payment terms for 
which it qualifies, unless they are more favorable in which case the 
existing terms apply. If the purchaser is not qualified for any 
installment payment plan, we will require payment of the unpaid balance 
in full before the sale will be approved. We also adopt rules to ensure 
that the value of the bidding credit is returned to the government in 
the event of a transfer of control or assignment of the license to an 
entity not qualifying for bidding credits or not qualifying for as high 
a bidding credit as the seller. In addition, we impose a one-year 
holding period on licenses received through the benefit of a tax 
certificate. We will also random audits to ensure that designated 
entities de facto and de jure control. These steps and our eligibility 
and affiliation rules will help to ensure that the measures we adopt 
are utilized only by bona fide eligible entities and to deter winning 
bidders seeking only to make a quick profit on the sale of PCS 
licenses. Ultimately, we believe that we will best fulfill our 
statutory mandate by creating powerful incentives for bona fide 
designated entities to attract the capital necessary to compete both in 
auctions for broadband PCS and in the provision of service, and be 
requiring a strict holding period to ensure that the public receives 
the benefit of this diverse ownership.

D. The Entrepreneurs' Blocks

    118. As discussed above, because the auction process itself 
requires additional expenditures of capital to acquire licenses, this 
new licensing procedure in many respects holds the potential to erect 
an additional barrier to entry that had not existed even under the 
Act's previous licensing methods, comparative hearings and lotteries. 
As reflected in the House Committee Report, Congress was well aware of 
that possibility and wanted to ensure that competitive bidding should 
not exclude smaller entities from obtaining licenses.\91\ The inability 
of small businesses and businesses owned by women and minorities to 
obtain adequate private financing creates a serious imbalance between 
these companies and large businesses in their prospects for competing 
successfully in broadband PCS auctions.
---------------------------------------------------------------------------

    \91\See H.R. Rep. No. 103-111 at 255.
---------------------------------------------------------------------------

    119. In addition, commenters contend that, at the outset, a small 
PCS business and a large local exchange carrier would value a license 
very differently. DCR Communications, for example, argues that a local 
telephone company would have much lower costs of construction and 
operation through equipment volume discounts, existing billing, 
accounting, order entry and processing, and customer service systems. 
Furthermore, DCR contends, the telephone company might decide to use 
its PCS system simply as an adjunct to a cellular system it owns in a 
nearby market and market wireless handsets that operate in both 
frequencies. DCR concludes that the telephone company could justify 
paying the higher value for the license because it has more ready 
access to capital.\92\
---------------------------------------------------------------------------

    \92\Ex parte filing of DCR Communications, May 31, 1994.
---------------------------------------------------------------------------

    120. This concern is echoed by a number of commenters. NTIA agrees 
that capital formation is a major barrier to full participation by 
small and minority-owned firms, asserting that capital-constrained 
firms are likely to assign lower values to PCS licenses than other 
bidders and are therefore less likely to obtain licenses in an open 
bidding market.\93\ Another party, Impulse Telecommunications 
Corporation, states that ``giants'' can justify huge bids because they 
have billions of dollars of capital as well as an existing 
administrative, billing, operating and marketing infrastructure. In 
addition, Impulse asserts that PCS licenses are likely to hold 
strategic value for large long distance and local telephone companies, 
for such purposes as critical wireless access.\94\ Similarly, Tri-State 
Radio Company states that the allocation of substantial amounts of 
spectrum to services such as broadband PCS has generated extensive 
industry expectation and speculation. With the financial stakes so 
high, Tri-State argues that designated entities will have little 
ability to bid successfully against ``communications behemoths with 
almost unlimited financial resources.''\95\
---------------------------------------------------------------------------

    \93\NTIA Comments at 26.
    \94\Ex parte filing of Impulse Telecommunications Corporation, 
May 27, 1994.
    \95\Tri-State Comments at 11. See also comments of NAMTEC 
(designated entities should not have to compete against ``more 
entrenched parties''), National Rural Telecom Association (the only 
way small entities can have real opportunity is if they do not have 
to bid against ``extremely `deep pocket' applicants''), The Small 
Business PCS Association (it will not be possible for designated 
entities ``to compete in an auction against some of the largest 
companies and wealthiest individuals in the United States''), JMP 
(without preferences for designated entities, large 
telecommunications firms will ``monopolize'' the auctions), Minority 
PCS Coalition at 6, Telephone Association of Michigan at 9-10, Iowa 
Network at 9, AWRT at 8, Telephone Electronics at 7-8, Sloan at 2.
---------------------------------------------------------------------------

    121. We agree that small entities stand little chance of acquiring 
licenses in these broadband auctions if required to bid against 
existing large companies, particularly large telephone, cellular and 
cable television companies. If one or more of these big firms targets a 
market for strategic reasons, there is almost no likelihood that it 
could be outbid by a small business. In the Notice, we proposed that 
one means to address such problems would be to set aside specific 
spectrum blocks in broadband PCS that would be reserved for bidding 
purposes to the designated entities.\96\ In this Order, we have decided 
to adopt a modification of this proposal, which should greatly enhance 
the ability of all designated entities to enter auctions and bid 
successfully for broadband PCS licenses. Specifically, we establish two 
entrepreneurs' blocks, C and F, in which eligibility to bid is limited 
to entities that, together with their affiliates and certain investors, 
have gross revenues of less than $125 million in each of the last two 
years and total assets of less than $500 million. In addition, we will 
prohibit an applicant from bidding in these blocks if any one 
individual investor in the applicant has $100 million or greater in 
personal net worth. Together with a reduced upfront payment 
requirement, we believe this proposal will encourage smaller entities 
to enter the auctions for broadband PCS licenses and will ensure that 
``entrepreneurial'' businesses are granted nearly half of all the 
broadband PCS licenses being auctioned.
---------------------------------------------------------------------------

    \96\Notice at 121.
---------------------------------------------------------------------------

    122. NTIA strongly supports this measure, arguing that it ``would 
be the most direct mechanism for preserving opportunities for small 
companies in an auction environment.'' According to NTIA, reserving two 
entrepreneurs' blocks helps significantly in satisfying the 
congressional directive that competitive bidding not result in an 
increase in concentration in the telecommunications industries.\97\ 
Similarly, Columbia PCS contends that establishment of entrepreneurs' 
blocks ``provides a good balance between Congress's clear mandate to 
provide opportunities for designated entities and avoid undue 
concentration of PCS licenses on the one hand with the goal of 
capturing the value of allocated spectrum for the American public on 
the other.''\98\
---------------------------------------------------------------------------

    \97\Ex parte filing of NTIA, June 21, 1994.
    \98\Ex parte filing of Columbia PCS, June 2, 1994. Columbia PCS 
further states that this measure would spur investment in designated 
entities and increase their ability to compete against one another 
and others. Id.
---------------------------------------------------------------------------

    123. The $125 million gross revenue/$500 million asset caps have 
the effect of excluding the large companies that would easily be able 
to outbid designated entities and frustrate Congress's goal of 
disseminating licenses among a diversity of licensees. At the same 
time, this restriction does not exclude many firms that, while not 
large in comparison with other telecommunications companies, 
nevertheless are likely to have the financial ability to provide 
sustained competition for the PCS licensees on the MTA blocks. For 
example, the $125 million gross revenue figure corresponds roughly to 
the Commission's definition of a Tier 2, or medium-sized, local 
exchange carrier,\99\ and would include virtually all of the 
independently owned rural telephone companies. Limiting the personal 
net worth of any individual investor or affiliate of the applicant to 
$100 million will prevent a very wealthy individual from leveraging his 
or her personal assets to allow the applicant to circumvent the size 
limitations of the entrepreneurs' blocks.
---------------------------------------------------------------------------

    \99\Local exchange carriers are categorized as Tier 1 and Tier 2 
companies by applying the criterion that Sections 32.11(a) and 
32.11(e) of the Commission's Rules use to distinguish Class A and 
Class B companies, respectively. Class A companies are those 
companies having annual revenues from regulated telecommunications 
operations of $100 million or more; Class B companies are those 
companies having annual revenues from regulated telecommunications 
operations of less than $100 million. The initial classification of 
a company is determined by its lowest annual operating revenues for 
the five immediately preceding years. A company's classification is 
changed when its annual operating revenue exceeds or is under the 
$100 million mark in each of five consecutive years. The Commission 
imposes more relaxed regulatory requirements on Tier 2 LECs than on 
Tier 1 LECs. See Automated Reporting Requirements for Certain Class 
A and Tier 1 Telephone Companies, 2 FCC Rcd 5770, 5772, 52 FR 35918, 
Sept. 24, 1987; Commission Requirements for Cost Support Material to 
be Filed with 1994 Annual Access Tariffs and for Other Cost Support 
Material, 9 FCC Rcd 1060 n. 3 (Comm. Carr. Bur. 1994); Commission 
Requirements for Cost Support Material to be Filed with Access 
Tariffs on March 1, 1985, Public Notice, Mimeo No. 2133 (Comm. Carr. 
Bur. released Jan. 25, 1985).
---------------------------------------------------------------------------

    124. As noted previously, many commenters asked us to reserve 
spectrum blocks for bidding only by designated entities. The 
entrepreneurs' blocks plan adopted herein is similar in concept to the 
set-aside proposals set forth by the commenters. Therefore, in 
determining which of the blocks in each market should constitute the 
entrepreneurs' blocks, we paid close attention to the concerns of those 
who had advocated set-asides in the first instance. Although the 
broadband PCS band plan has changed since the Commission first proposed 
set-asides in the Notice and parties first submitted their proposals in 
this docket, the general concerns of these parties about the amount of 
spectrum and geographic territory necessary to compete effectively 
remain pertinent. Moreover, we adopted the revised broadband PCS band 
plan in advance of this Order, which afforded interested parties the 
opportunity to make additional presentations on designated entity 
incentives in light of the new band plan.
    125. A number of commenters approved of the Notice's proposal to 
set aside one 20 MHz BTA block and one 10 MHz BTA block. The Small 
Business PCS Association asserted, moreover, that implementation of the 
set-aside proposal would offer ``a major opportunity'' for small 
businesses, that a 20 MHz block is ``probably ideal'' for development 
by small entrepreneurs, and that even a 10 MHz block could sustain a 
viable PCS System.\100\ Telepoint makes similar assertions.
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    \100\The Small Business PCS Association stated that a small 
business operating in a single BTA service region could effectively 
compete with large companies operating in larger service areas. This 
is so, it contended, mainly because PCS providers with large service 
areas would not realize such great economies of scale as many have 
supposed and because small firms could counter such advantages by 
forming buying cooperatives. Comments of Small Business PCS 
Association at 2-3.
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    126. A considerable number of commenters, however, contended that 
the Commission's proposal to set aside a 20 MHz block and a 10 MHz 
block would be inadequate. Telephone Electronics and AWCC asserted, for 
instance, that a provider operating with only a 10 MHz or 20 MHz 
license could not offer a full range of PCS services with quality 
equivalent to the like offerings of a provider operating with a 20 MHz 
license. Unique and AWCC thus argued that PCS licensees in the set-
aside spectrum would consequently be unable to obtain commercial 
funding on terms as favorable to those available to operators with 30 
MHz licenses. Independent Cellular Network maintained that the 
competitive disadvantages of the proposed set-aside channels, due to 
their lesser bandwidth, could not be obviated through aggregation, 
because of the greater transaction costs that would be incurred above 
those associated with acquisition of a single 30 MHz license.
    127. We believe that designating frequency blocks C and F as 
entrepreneurs' blocks meets the concerns of most of the designated 
entity commenters. Frequency block C provides 30 MHz of spectrum and, 
thus, satisfies the concerns of those parties who believe they must 
have this amount of bandwidth to compete effectively. The MHz block F 
license, on the other hand, fulfills the needs of other designated 
entities who argued in favor of small blocks. Moreover, since the C and 
F blocks are adjacent, they can be aggregated efficiently by one or 
more licensees. This plan also makes available to eligible bidders in 
the entrepreneurs' blocks 986 licenses, or slightly under 50 percent of 
all broadband PCS licenses. Finally, it does not foreclose 
opportunities for other parties. Bidders ineligible for the 
entrepreneurs' blocks will have the opportunity to bid on 99 30 MHz MTA 
licenses throughout the country, as well as 986 10 MHz BTA licenses 
nationwide.
    128. Five-Year Holding and Limited Transfer Period. In establishing 
the entrepreneurs' blocks, we recognize the congressionally mandated 
objective will not be served if parties take advantage of bidding in 
these blocks and immediately assign or transfer control of the 
authorizations to other entities. Such a practice could unjustly enrich 
the auction winners and would undermine the congressional goal of 
giving designated entities the opportunity to provide spectrum-based 
services. Therefore, we will prohibit licensees in the entrepreneurs' 
blocks from voluntarily assigning or transferring control of their 
licenses for a period of three years from the date of the license 
grant.\101\ And, for the next two years of the license term, we will 
permit the licensee to assign or transfer control of its authorization 
only to an entity that satisfies the entrepreneurs' blocks entry 
criteria.\102\ During this five-year period, licensees will continue to 
be bound by the financial eligibility requirements, as set forth 
below.\103\ In addition, a transferee or assignee who receives a C or F 
block license during the five-year period will remain subject to the 
transfer restrictions for the balance of the holding period.\104\ The 
Commission will conduct random pre and post-auction audits to ensure 
that applicants receiving preferences are in compliance with the FCC's 
rules.
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    \101\We will consider exceptions to this three-year holding 
period rule on a case-by-case basis in the event of a judicial order 
decreeing bankruptcy or a judicial foreclosure if the licensee 
proposes to assign or transfer its authorization to an entity that 
meets the financial thresholds for bidding in the entrepreneurs' 
blocks. In addition, we note that a transfer is considered 
``involuntary'' if it is made pursuant to a court decree requiring 
the sale or transfer of the licensee's stock or assets. Paramount 
Pictures, Inc., 43 FCC 453 (1949); C.f. William Penn Broadcasting, 
16 FCC 2d 1050 (1969).
    \102\We note that a licensee assigning its authorization 
pursuant to this limited transfer period might be subject to the 
repayment provisions associated with installment payments and 
bidding credits. See infra 134, 141. We also clarify that rural 
telephone companies receiving partitioned licenses in the 
entrepreneurs' blocks are subject to this five-year holding and 
limited transfer period.
    \103\See infra 156-168. In addition, for purposes of the 
installment payment and bidding credit provisions set forth below, 
licensees will continue to be bound by the financial eligibility 
requirements throughout the term of the license.
    \104\For example, if a C-block authorization is assigned to an 
eligible business in year four of the license term, it will be 
required to hold that license until the original five-year period 
expires, subject to the same exceptions that applied to the original 
licensee.
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    129. Our goals are to create significant opportunities for 
entrepreneurs, small businesses, and businesses owned by minorities and 
women to compete in auctions for licenses and attract sufficient 
capital to build-out those licenses and provide service. We recognize 
the critical need to attract capital, which requires flexibility. We 
are very concerned, however, that such flexibility not undermine our 
more fundamental objective, which is to ensure that designated entities 
retain de facto and de jure control of their companies at all times. We 
believe that the five-year holding and limited transfer period, which 
we have adopted in this Order, will help to promote this objective. 
Some question remains, however, as to whether a longer holding period 
(e.g., seven years) would more fully meet this goal.

E. Bidding Credits

    130. In the Notice, we indicated that we might use spectrum set-
asides for designated entities in the broadband PCS service but did not 
expressly propose to use bidding credits. For two other services, IVDS 
and narrowband PCS, however, we did conclude recently that the use of 
bidding credits in auctions would be an effective tool to ensure that 
women and minority-owned businesses have opportunities to participate 
in the provision of those services.\105\ On further reflection, and 
based on the many comments in the record favoring this approach, we 
believe that bidding credits are necessary to ensure that women and 
minority-owned businesses and small businesses participate in broadband 
PCS. Accordingly, we adopt a bidding credit plan for winning bidders in 
the entrepreneurs' blocks that gives small businesses a 10 percent 
credit, women and minority-owned businesses a 15 percent credit, and 
small businesses owned by women and minorities an aggregate credit of 
25 percent.
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    \105\See Third Report and Order, FCC 94-98, 59 FR 26741, May 24, 
1994; Fourth Report and Order, 9 FCC Rcd 2330, 59 FR 24947, May 13, 
1994.
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    131. At the outset, we note that we are confining the bidding 
credit option to the entrepreneurs' blocks because, given the extremely 
capital intensive nature of broadband PCS, we do not think bidding 
credits in an uninsulated block would have a meaningful effect.\106\ 
Indeed, in ex parte presentations to the Commission, many commenters 
have indicated that, without spectrum set-asides for broadband PCS, 
bidding credits would not be sufficient to assist designated entities 
in outbidding very large entities who are likely to bid for licenses in 
this service. DCR Communications states, for example, that all of the 
existing large telecommunications carriers can justify must larger 
payments for licenses than could an individual entrepreneur, regardless 
of a bidder's credit. Therefore, it believes no entrepreneur will win a 
bid for any PCS market that is desirable to any of the large 
companies.\107\ Many other commenters echo this concern.\108\ Some 
state that, if bidding credits alone are used, extraordinarily large 
credits, even on the order of 50 percent or more, would be 
ineffective.\109\ As described above, in order to afford designated 
entities a realistic opportunity to obtain licenses in the broadband 
PCS service, we have taken measures to exclude very large businesses 
from bidding for licenses in the C and F blocks. These measures will 
enhance the value of the bidding credits for small businesses and 
businesses owned by minorities and women. In this context, we believe 
that bidding credits will have a significant effect on the ability of 
small businesses and businesses owned by women and minorities to 
participate successfully in auctions for licenses in these blocks.
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    \106\We also are concerned that allowing bidding credits in the 
MTA blocks would increase substantially the incentive for businesses 
to engage in shams and fronts.
    \107\Ex parte filing of DCR, May 31, 1994, at 4-5.
    \108\See ex parte filings of DigiVox Corporation, May 31, 1994, 
at 3 (the use of bidding credits to the exclusion of frequency set-
asides will not fulfill the objectives of Section 309(j)), 
Communications International Wireless Corp., May 27, 1994, at 1 
(bidding credits alone cannot level the playing field between 
designated entities and members of the Fortune 100 companies), CWCC, 
May 27, 1994, at 2 (bidding credits alone cannot level the playing 
field for designated entities).
    \109\Ex parte filings of AWCC, May 26, 1994 at 2, Columbia PCS, 
June 2, 1994 at 2.
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    132. As explained above, the capital access problems faced by small 
firms and women and minority-owned firms make special provisions like 
bidding credits appropriate for these designated entities in broadband 
PCS.\110\ In effect, the bidding credit will function as a discount on 
the bid price a firm will actually have to pay to obtain a license and, 
thus, will address directly the financing obstacles encountered by 
these entities. Moreover, as noted previously, women and minorities 
face discrimination in lending and other barriers to entry not 
encountered by other firms, including other designated entities. 
Therefore, as one of the measures designed to counter these increased 
capital formation difficulties, we will provide them with a slightly 
higher bidding credit than that granted to small businesses. Thus, 
women and minorities will receive a 15 percent payment discount that is 
applied against the amounts they bid on licenses. Absent such measures 
targeted specifically to women and minorities, it would be virtually 
impossible to assure that these groups achieve any meaningful measure 
of opportunity for actual participation in the provision of broadband 
PCS. Similarly, it is reasonable to assume that small firms owned by 
women and minorities suffer the problems endemic to both groups and 
that a cumulative bidding credit of 25 percent is therefore 
appropriate. We believe that these measures will help women and 
minorities to attract the capital necessary for obtaining a license and 
constructing and operating a broadband PCS system, consistent with the 
intent of Congress.
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    \110\Although we did not grant bidding credits to small 
businesses in the narrowband PCS or IVDS services, we believe that, 
given the exponentially greater expense likely to be incurred in 
acquiring broadband PCS licenses and construct the systems, bidding 
credits are a proper means to ensure that these firms have the 
opportunity to participate in this service. We note that for 
narrowband PCS and IVDS, the cost of license acquisition and 
implementation of service is anticipated to be considerably more 
modest.
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    133. The definition of a minority or women-owned firm and of a 
small business are set forth below.\111\ To receive a 10 percent 
bidding credit, a small business must satisfy a gross revenue test. As 
explained more fully below in the small business definition section, a 
consortium consisting entirely of small businesses also is eligible for 
a 10 percent bidding credit even if the combined gross revenues of the 
consortium exceed the small business gross revenues threshold. In 
addition, a small business that is owned by women and minorities must 
satisfy the definition of a business owned by minorities and women as 
well as the small business definition to receive a 25 percent bidding 
credit. Finally, a consortium of small firms owned by women and/or 
minorities is eligible for a 25 percent bidding credit, provided that 
each member of the consortium meets the definition of a small business 
and a minority and/or women-owned firm.
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    \111\See infra  172-192.
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    134. Unjust Enrichment Applicable to Bidding Credits. To ensure 
that bidding credits benefit the parties to whom they are directed, we 
adopt strict repayment penalties. If, within the original term, a 
licensee applies to assign or transfer control of a license to an 
entity that is not eligible for as a high a level of bidding credit, 
then the difference between the bidding credit obtained by the 
assigning party and the bidding credit for which the acquiring party 
would qualify must be paid to the U.S. Treasury as a condition of 
approval of the transfer. For example, an assignment of a license from 
a small minority-owned firm to a women-owned firm with revenues greater 
than $40 million would require repayment of 10 percent of the original 
bid price (25 percent less 15 percent) to the Treasury. A sale to an 
entity that would not qualify for bidding credits will entail full 
payment of the bidding credit as a condition of transfer. Small 
businesses also will be bound by the financial eligibility rules during 
the entire license term as set forth below. Thus, if after licensing an 
investor purchases an ``attributable'' interest in the business and, as 
a result, the gross revenues of the firm exceed the $40 million small 
business cap, this repayment provision will apply.\112\ These repayment 
provisions apply throughout the original term of the license to help 
promote the long-term holding of licenses by those parties receiving 
bidding credits.
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    \112\See infra  158-168, for a discussion of which investor 
interests are ``attributable'' for purposes of calculating the gross 
revenues caps.
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F. Installment Payments

    135. A significant barrier for most businesses small enough to 
qualify to bid in the entrepreneurs' blocks will be access to adequate 
private financing to ensure their ability to compete against larger 
firms in the PCS marketplace.\113\ In the Second Report and Order, we 
concluded that installment payments are an effective means to address 
the inability of small businesses to obtain financing and will enable 
these entities to compete more effectively for the auctioned spectrum. 
We also determined that small businesses eligible for installment 
payments would only be required to pay half of the down payment (10 
percent of the winning bid, as opposed to 20 percent) five days after 
the auction closes, with the remaining 10 percent payment deferred 
until five days after grant of the license. Finally, we indicated that 
installment payments should be made available to small businesses at an 
interest rate equal to the rate for U.S. Treasury obligations. See 
Second Report and Order at  236-240.
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    \113\See e.g., comments of SBA Chief Counsel of Advocacy at 6, 
20-21. NTIA at 27; SBAC Report at 2 (September 15, 1993).
---------------------------------------------------------------------------

    136. In light of the expected substantial capital required to 
acquire and construct broadband PCS licenses, we conclude that 
installment payments are an appropriate measure for most businesses 
that obtain broadband PCS licenses in the entrepreneurs' blocks. By 
allowing payment in installments, the government is in effect extending 
credit to licensees, thus reducing the amount of private financing 
needed prior to and after the auction. Such low cost government 
financing will promote long-term participation by these businesses, 
which, because of their smaller size, lack access to sufficient capital 
to compete effectively with larger PCS licensees. Under the rules we 
adopt today, installment payments are available to small entities that 
do not technically qualify as small businesses for purposes of other 
measures we have adopted, such as bidding credits. We believe, however, 
that, given the enormous costs of broadband PCS and the likelihood of 
very large participants in the other blocks, this option is fully 
consistent with the congressional intent in enacting Section 
309(j)(4)(A) to avoid a competitive bidding program that has the effect 
of favoring incumbent providers of other communications services, with 
established revenue streams, over smaller entities.\114\
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    \114\See H.R. Rep. No. 103-111 at 255 (Commission has the 
authority to design alternative payment schedules in order that the 
auction process does not inadvertently favor only those with ``deep 
pockets'' over new or small companies).
---------------------------------------------------------------------------

    137. Under the plan we adopt here, all licensees that satisfy the 
gross revenues, total assets and personal net worth criteria to bid in 
the entrepreneurs' blocks will be allowed to pay in installments for 
licenses granted in those blocks in the 50 largest BTAs. In the smaller 
BTAs, however, only businesses owned by women and minorities and those 
licensees with less than $75 million in gross revenues will be able to 
use installment payments.\115\ This distinction is based on the 
expected lower costs to acquire licenses and construct systems in the 
smaller BTAs. Thus, with the exception of companies owned by women or 
minorities, which face additional problems accessing capital, we do not 
think that a firm with gross revenues exceeding $75 million will 
require government financing to be competitive in the small BTAs.\116\
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    \115\We will apply the same $500 million total assets and $100 
million personal net worth standards for purposes of determining 
eligibility for installment payments in all BTAs. The attribution 
rules set forth with regard to eligibility to bid in the 
entrepreneurs' blocks also will apply in all BTAs. See infra  158-
168.
    \116\We note that a consortium of small businesses is eligible 
for installment payments in any market so long as each member of the 
consortium satisfies the definition of a small business, as set 
forth in Section VII.J.2, infra.
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    138. The installment payment option will enable qualified 
businesses to pay their winning bid over time. These businesses must 
make the applicable upfront payment in full before the auction, but are 
required to make a post-auction down payment equaling only ten percent 
of their winning bids, half of which will be due five business days 
after the auction closes. Payment of the other half of the down payment 
will be deferred until five business days after the license is granted. 
In general, the remaining 90 percent of the auction price will be paid 
in installments with interest charges to be fixed at the time of 
licensing at a rate equal to the rate for ten-year U.S. Treasury 
obligations plus 2.5 percent. Under this general rule, only payments of 
interest will be due for the first year with principal and interest 
payments amortized over the remaining nine years of the license. Timely 
payment of all installments will be a condition of the license grant 
and failure to make sure timely payment will be grounds for revocation 
of the license.\117\
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    \117\As described in the Second Report and Order, the Commission 
may, on a case-by-case basis, permit a three to six month grace 
period within which a licensee may seek a restructuring of the 
payment plan.
---------------------------------------------------------------------------

    139. Enhanced Installment Payments. As explained previously, small 
businesses and businesses owned by minorities and women face capital 
access difficulties not encountered by other firms and, thus, require 
special measures to ensure their opportunity to participate in 
broadband PCS. Accordingly, we will provide an ``enhanced'' installment 
payment plan for these entities. Pursuant to this enhanced installment 
payment plan, small businesses (as defined below) who win licenses in 
the entrepreneurs' blocks will be required to pay interest only for the 
first two years of the license term at the same interest rate as set 
forth in the general rule. Businesses owned by women and/or minorities 
will be able to make interest-only payments for three years. Interest 
will accrue at the Treasury note rate without the additional 2.5 
percent.\118\ And, finally, businesses that are both small and owned by 
women and/or minorities will be required to pay only interest for five 
years. Interest will accrue at the Treasury note rate.
---------------------------------------------------------------------------

    \118\To be eligible for these ``enhanced'' installment payments, 
a firm must satisfy either of the two alternative definitions of a 
woman or minority-owned business, as set forth in  181-192, infra, 
as well as the applicable financial caps.
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    140. These enhanced installment payments are narrowly tailored to 
the needs of the various designated entities, as reflected in the 
record in this proceeding. We believe that varying the moratorium on 
principal in the early years of the loan and varying the interest rate 
based on these needs will allow small businesses and companies owned by 
women and/or minorities to bid higher in auctions, thereby increasing 
their changes for obtaining licenses. In addition, it will allow them 
to concentrate their resources on infrastructure build-out and, 
therefore, it will increase the likelihood that they become viable PCS 
competitors.
    141. Unjust Enrichment Applicable to Installment Payments. To 
ensure that large businesses do not become the unintended beneficiaries 
of measures meant for smaller firms, we will use the unjust enrichment 
provisions adopted in the Second Report and Order applicable to 
installment payments. Specifically, if a licensee that was awarded 
installment payments seeks to assign or transfer control of its license 
to an entity not meeting the applicable eligibility standards set out 
above during the term of the license, we will require payment of the 
remaining principal and any interest accrued through the date of 
assignment as a condition of the license assignment or transfer. See 
Second Report and Order at  263; 47 CFR 1.2111(c). Moreover, if an 
entity seeks to assign or transfer control of a license to an entity 
that does not qualify for as favorable an installment payment plan, the 
installment payment plan, if any, for which the acquiring entity 
qualifies will become effective immediately upon transfer. Thus, a 
higher interest rate and earlier payment of principal may begin to be 
applied. For example, a transfer of a license in the fourth year after 
license grant from a small minority-owned firm to a small non-minority 
owned firm would require that the firm begin principal payments and the 
balance would begin accruing interest at a rate 2.5 percent above the 
rate that had been in effect.\119\ Finally, if an investor subsequently 
purchases an ``attributable'' interest in the businesses and, as a 
result, the gross revenues or total assets of the business exceed the 
applicable financial caps, this unjust enrichment provision will also 
apply.\120\
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    \119\We recognize that because of the five-year holding and 
limited transfer requirements in the entrepreneurs' blocks, these 
unjust enrichment provisions have limited applicability during the 
first five years of the license term. Nevertheless, there are some 
situations in which licensees are permitted to assign or transfer 
their licenses during this period and the provisions would then 
apply if the buyer would not have been qualified for installment 
payments or as favorable an installment payment plan. Furthermore, 
the unjust enrichment provisions are applicable for the full ten-
year license term.
    \120\See infra  158-168, for a discussion of which investor 
interests are ``attributable'' for purposes of calculating the gross 
revenues and total assets thresholds.
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G. Tax Certificates

    142. Congress instructed the Commission to consider the use of tax 
certificates to help ensure designated entity participation in 
spectrum-based services. See 47 U.S.C. Sec. 309(j)(4)(D). In the Second 
Report and Order we observed that tax certificates could be useful as a 
means of attracting investors to designated entity enterprises and to 
encourage licensees to assign or transfer control of licenses to 
designated entities in post-auction transactions. We stated further 
that we would examine the feasibility of using this measure in 
subsequent service-specific auction rules. Second Report and Order at  
251.
    143. We believe that tax certificates, which allow the recipients 
to defer capital gains taxes made on sales, are an appropriate tool to 
assist women and minority-owned businesses to attract start-up capital 
from non-controlling investors in broadband PCS. As explained above, 
due to discrimination in private lending markets and other factors, 
these designated entities face added obstacles in accessing capital. 
Therefore, in order to ensure that such businesses have a meaningful 
opportunity to participate in auctions, it is necessary to adopt 
measures to encourage investment in minority and woman-owned companies. 
Moreover, because of the severe underrepresentation of women and 
minorities in telecommunications, we believe that it is appropriate to 
give PCS licensees the incentive, through the grant of tax 
certificates, to assign or transfer their authorizations to such 
entities in post-auction sales. This measure will provide added 
assurance that minority and women-owned entities have the opportunity 
to participate in broadband PCS services, as mandated by Congress. 
Accordingly, we will issue tax certificates to non-controlling initial 
investors in minority and women-owned broadband PCS applicants (in any 
frequency block), upon the sale of their non-controlling interests. We 
will also issue tax certificates to broadband PCS licensees (in any 
frequency block) who assign or transfer control of their licenses to 
minority and women-owned entities.
    144. We have used tax certificates over the years to encourage 
broadcast licensees and cable television operators to transfer their 
stations and systems to minority buyers.\121\ We also have granted tax 
certificates to shareholders in minority-controlled broadcast or cable 
entities who sell their shares, when such interests were acquired to 
assist in the financing of the acquisition of the facility.\122\ These 
broadcast and cable tax certificates are issued pursuant to the 
Internal Revenue Code, 26 U.S.C. Sec. 1071. While Congress' goal in 
authorizing tax certificates under Section 309(j)(4)(D) of the Act is 
somewhat different, and focuses on ensuring the opportunity for 
designated entities to participate in auctions and spectrum-based 
services, we think that tax certificates will be equally valuable in 
the broadband PCS context. Issuance of tax certificates to investors in 
minority and women-owned businesses and licensees that sell to 
minorities and women will augment the other measures we adopt today to 
encourage minorities and women to participate in broadband PCS and will 
increase the ability of these entities to access financing for that 
purpose.
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    \121\See 1982 Policy Statement; 1978 Policy Statement. We have 
also employed tax certificates as a means of encouraging fixed 
microwave operators to relocate from spectrum allocated to emerging 
technologies. See Third Report and Order and Memorandum Opinion and 
Order, ET Docket No. 92-9, 8 FCC Rcd 6589, 58 FR 46547, Sept. 2, 
1993.
    \122\See 1982 Policy Statement, 92 FCC 2d at 855-58.
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    145. In implementing this program, we will borrow from our existing 
tax certificate program and grant tax certificates, upon request, that 
will enable the licensees and investors meeting the criteria outlined 
here to defer the gain realized upon a sale by: (1) Treating it as an 
involuntary conversion under 26 U.S.C. Sec. 1033, with the recognition 
of gain avoided by the acquisition of qualified replacement property; 
or (2) electing to reduce the basis of certain depreciable property; or 
both. Tax certificates will be available to initial investors in 
minority and woman-owned businesses who provide ``start-up'' financing, 
which allows these businesses to acquire licenses at auction or in the 
post-auction market, and those investors who purchase interests within 
the first year after license issuance, which allows for the 
stabilization of the designated entities' capital base. The definition 
of a minority or women-owned entity is set forth below\123\ and, with 
regard to our investor tax certificate policy, the entity in which the 
investment is made must satisfy that definition at the time of the 
original investment as well as after the investor's shares are sold. 
For post-auction market sales, tax certificates will be issued only to 
licensees who sell to entities that meet that definition. Tax 
certificates will be granted only upon completion of the sale, although 
parties may request a declaratory ruling from the Commission regarding 
the tax certificate consequences of prospective transactions.
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    \123\See infra  181-192.
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    146. One-Year Holding Period. As with our other tax certificate 
policies, we are concerned about avoiding ``sham'' arrangements to 
obtain tax certificates and, pursuant to Section 309(j)(4)(E), thus 
adopt measures to prevent abuses. As in our existing tax certificate 
program,\124\ we will impose a one-year holding requirement on the 
transfer of control or assignment of broadband PCS licenses by women 
and minority-owned businesses who obtained such licenses through the 
benefit of tax certificates. We believe that the rapid resale of such 
licenses at a profit would subvert our goal of ensuring the opportunity 
to participate by minority or woman-owned businesses. If the buyer 
itself is a women or minority-owned business, however, our objectives 
still will be satisfied. Thus, as an exception to the holding 
requirement, we will permit the assignment or transfer of control of 
licenses during this period to other qualified minority and women-owned 
businesses. We note, however, that the assignee or transferee who 
receives this license before the end of the original one-year holding 
period will also be subject to a one-year holding requirement, from the 
date of consummation of the assignment or transfer.
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    \124\See Amendment of Section 73.3597 of the Commission's Rules, 
Memorandum Opinion and Order, 99 FCC 2d 971, 974 (1985).
---------------------------------------------------------------------------

    147. Finally, in the Broadband PCS Reconsideration Order, we 
indicated that we would address in this proceeding proposals for 
issuing tax certificates to cellular operators who divest their 
cellular holdings in order to come into compliance with our rules 
governing cellular operators' participation in broadband PCS. Several 
commenters argued that tax certificates should be issued to all such 
companies who divest their holdings.\125\ To accomplish the directive 
in Section 309(j)(4)(D) that minority groups and women are given the 
opportunity to participate in the provision of spectrum-based services, 
we have decided to issue tax certificates to such cellular companies so 
long as their cellular interests are divested to businesses owned by 
minorities and/or women, as defined in this order. In this manner, we 
can further implement Congress's goal to facilitate the participation 
of minorities and women in spectrum-based services. We will also impose 
a one-year holding period requirement on the assignment or transfer of 
control of cellular licenses obtained by women and minority-owned 
businesses through the benefit of this tax certificate policy.
---------------------------------------------------------------------------

    \125\See, e.g., Petitions for Reconsideration of GTE Service 
Corporation and Comcast Corporation of Second Report and Order in 
GEN Docket 90-314.
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H. Provisions for Rural Telephone Companies

    148. After the release of the Second Report and Order, rural 
telephone companies made numerous ex parte presentations concerning how 
we can best ensure that rural areas are provided broadband PCS. In 
addition, we have received several petitions for reconsideration of the 
Second Report and Order that address our definition of rural telephone 
companies in the generic auction rules. In this Order, we address the 
treatment of rural telephone companies for purposes of competitive 
bidding for broadband PCS licenses and address below some of the issues 
raised in petitions for reconsideration of the Second Report and Order 
concerning the definition of these entities.
    149. In the Broadband PCS Reconsideration Order, we adopted an 
important measure that will help rural telephone companies become 
viable providers of PCS services. In response to numerous requests from 
rural telephone company interests, we increased from 20 percent to 40 
percent the cellular attribution threshold for rural telephone 
companies with non-controlling cellular interests in their areas. See 
Broadband PCS Reconsideration Order at 125. This action increases the 
number of rural telephone companies that will be eligible to hold PCS 
licenses. In taking this action, we recognized that their existing 
infrastructure makes rural telephone companies well suited to introduce 
PCS services rapidly into their service areas and adjacent areas. Thus, 
this action will help speed service to rural areas, which tend to be 
less profitable to serve for companies without existing infrastructure 
than more densely populated urban areas.
    150. We suggested in the Second Report and Order that allowing 
broadband PCS licenses to be geographically partitioned may be a means 
to permit rural telephone companies to hold licenses to provide service 
in their telephone service areas.\126\ Many rural telephone companies 
proposed some form of partitioning in their comments, arguing that if 
they were required to bid on entire BTA or MTA licenses to obtain 
licenses covering their wireline service areas, they would be 
effectively barred from entering the broadband PCS industry. They 
contend that under a partitioning plan, they would be able to serve 
areas in which they already provide service, while the remainder of the 
PCS service area could be served by other providers. Such a plan, they 
argue, would encourage rural telephone companies to take advantage of 
existing infrastructure in providing PCS services, thereby speeding 
service to rural areas.\127\ We believe that these proposals have 
merit, and therefore we now adopt a license partitioning system to 
provide these designated entities the enhanced opportunity to 
participate in the provision of broadband PCS and to deploy broadband 
PCS in their rural services areas rapidly.
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    \126\See Second Report and Order at 243, n. 186. We note that 
although we stated in n. 186 that we would consider partitioning for 
rural telephone companies in the reconsideration of the broadband 
PCS service rules, we have concluded that this issue should be 
addressed along with other issues concerning designated entities. 
See Broadband PCS Reconsideration Order at 83, n. 113. In our 
deliberations on this issue, we incorporate into this proceeding the 
record developed in GEN Docket No. 90-314.
    \127\See, e.g., comments of GVNW at 2-4, Rural Cellular 
Association at 16, U.S. Intelco at 16.
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    151. Our partitioning system will allow rural telephone companies 
to obtain broadband PCS licenses that are geographically partitioned 
from larger PCS service areas. These companies will be permitted to 
acquire partitioned broadband PCS licenses in either of two ways in any 
frequency blocks: (1) They may form bidding consortia consisting 
entirely of rural telephone companies to participate in auctions, and 
then partition the licenses won among consortia participants, and (2) 
they may acquire partitioned broadband PCS licenses from other 
licensees through private negotiation and agreement either before or 
after the auction. Each rural telephone company member of a consortium 
will, following the auction, be required to file a long-form 
application for its respective, mutually agreed-upon geographic area. 
If rural telephone company consortia are formed to bid on licenses in 
the entrepreneurs' blocks, the eligibility rules for those blocks will 
apply (i.e., the cumulative gross revenues and assets of the consortium 
members may not exceed the financial caps for eligibility in these 
blocks).\128\ We will require that partitioned areas conform to 
established geopolitical boundaries (such as county lines) and that 
each area include all portions of the wireline service area of the 
rural telephone company applicant that lies within the PCS service 
area. In addition, if a rural telephone company receives a partitioned 
license post-auction from another PCS licensee, the partitioned area 
must be reasonably related to the rural telephone company's wireline 
service area that lies within the PCS service area.\129\ We recognize 
that rural telephone companies will require some flexibility in 
fashioning the areas in which they will receive partitioned licenses, 
so we do not adopt a strict rule concerning the reasonableness of the 
partitioned area. Generally, we will presume as reasonable a 
partitioned area that contains no more than twice the population of 
that portion of a rural telephone company's wireline service area that 
lies within the PCS service area. Each licensee in each partitioned 
area will be responsible for meeting the build-out requirements in its 
area.
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    \128\As discussed below, we will permit a consortium consisting 
entirely of small businesses to exceed the entrepreneurs' blocks 
financial thresholds. See infra 179-180. Therefore, if each member 
of a consortium of rural telephone companies also satisfies the 
definition of a small business, we will allow the consortium to bid 
in the entrepreneurs' blocks even if it exceeds the gross revenues 
and total assets caps.
    \129\This provision will not apply when rural telephone 
companies form consortia only among themselves and then partition 
the license area. In this circumstance, one or more partitioned 
areas may have to be larger in order for the entire PCS service area 
to be served.
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    152. Allowing partitioning of rural areas served by rural telephone 
companies provides a viable opportunity for many of these designated 
entities who desire to offer PCS to their customers as a complement to 
their local telephone services. For example, rural telephone companies 
who cannot afford or do not desire to bid for or construct PCS systems 
for an entire BTA can thus acquire licenses in areas they wish to serve 
or form bidding consortia and partition the entire BTA among 
themselves. We believe that rural partitioning is an efficient method 
of getting a license in the hands of an entity that will provide rapid 
service to rural areas.
    153. We have decided not to adopt any other auction-related 
measures specifically for rural telephone companies in this Order. We 
believe that the partitioning plan we are adopting will provide rural 
telephone companies with substantial capabilities to acquire licenses 
to provide broadband PCS in their rural telephone service areas, 
consistent with our statutory mandate. In addition, our eligibility 
criteria for bidding in the entrepreneurs' blocks, discussed below, 
will permit virtually all telephone companies whose service areas are 
predominantly rural to bid on licenses in frequency blocks C and F 
without competition from the large telephone companies and other deep-
pocketed bidders. Thus, virtually all rural telephone companies will be 
able to bid for broadband PCS licenses and defer payment in accordance 
with the installment payment plans we are adopting for the 
entrepreneurs' blocks. We also note that if a rural telephone company 
meets the definition of a small business or a business owned by 
minorities and/or women, it would enjoy a bidding credit and 
``enhanced'' installment payments applicable to those groups when 
bidding on licenses in these blocks. We do not think that any other 
measures are necessary in order to satisfy the statute's directive that 
we ensure that rural telephone companies have the opportunity to 
participate in the provision of spectrum-based services, and to satisfy 
our goals to ensure that PCS is provided to all areas of the country 
including rural areas.

I. Upfront Payments

    154. Upfront payment requirements are designed to ensure that 
bidders are qualified and serious and to provide the Commission with a 
source of funds in the event that it becomes necessary to assess 
default or bid withdrawal penalties.\130\ The upfront payment ensures 
that bids during the course of the auction are bona fide and convey 
information about the value of the underlying licenses. Our standard 
upfront payment for broadband PCS is $0.02 per MHz per pop, which is 
equivalent to roughly six percent of the license value, based on an 
estimate in a Congressional Budget Office report of the total value of 
the auctionable spectrum.\131\ A number of commenters assert that the 
Commission could enhance the opportunity of designated entities to 
participate in competitive bidding by reducing the required upfront 
payment for those applicants.\132\ We agree that the $0.02 per MHz per 
pop upfront payment requirement might impose a barrier for smaller 
entities wishing to participate in the auctions. Moreover, we note that 
most bidders in the entrepreneurs' blocks will be entitled to pay for 
their licenses in installments, which requires a down payment of only 
five percent of the winning bid. We are concerned that requiring an 
upfront payment that may be larger than the down payment that the 
winning bidder is required to tender could discourage auction 
participation.
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    \130\Second Report and Order, 169-80.
    \131\Id. at 177.
    \132\See e.g., comments of AWCC at 31-32, Minnesota Equal Access 
at 2, NAMTEC at 20, Rural Cellular Corp. at 2, U.S. Intelco at 22-
23.
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    155. For these reasons, we will reduce the upfront payment 
requirement to $0.015 per MHz per pop for bidders in the entrepreneurs' 
blocks. This 25 percent discount should facilitate auction 
participation by capital-constrained companies and permit them to 
conserve resources for infrastructure development after winning a 
license. Moreover, since the upfront payment is still substantial, 
ranging from slightly below $20,000 for a 30 MHz license in the 
smallest BTAs to more than $10 million for the New York BTA, insincere 
bidding will be discouraged and the Commission will have access to 
funds if it must collect default or bid withdrawal penalty payments.

J. Definitions and Eligibility

1. Eligibility to Bid in the Entrepreneurs' Blocks
    156. As noted previously, eligibility to bid in the two 
entrepreneurs' blocks, C and F, is limited to companies that, together 
with their affiliates and investors, had gross revenues of less than 
$125 million in each of the last two years and have total assets of 
less than $500 million at the time their short form applications are 
filed. In addition, we will prohibit an applicant from bidding in these 
blocks if any one individual investor or principal in the applicant has 
$100 million or greater in personal net worth at the short form 
application filing date.
    157. In determining whether an applicant satisfies these financial 
thresholds, we will count the gross revenues and total assets of the 
applicant as well as those of its investors with ``attributable'' 
interests. The subsection that follows discusses what interests are 
attributable for these purposes. In addition, it sets forth exceptions 
to these attribution rules for minority and women-owned applicants and 
for publicly-traded companies.
a. Attribution Rules for the Entrepreneurs' Blocks
    158. Qualified ``Entrepreneurs''. As a general rule, the gross 
revenues and total assets of all investors in, and affiliates of, an 
applicant are counted on a cumulative, fully-diluted basis for purposes 
of determining whether the $125 million/$500 million thresholds have 
been exceeded, and on an individual basis regarding the $100 personal 
net worth standard.\133\ There are two exceptions to this rule, 
however. First, applicants that meet the definition of a small business 
may, as discussed below, form consortia of small businesses that, on an 
aggregate basis, exceed the gross revenue/total asset caps. Second, the 
gross revenues, total assets, personal net worth, and affiliations of 
any investor in the applicant are not considered so long as the 
investor holds less than 25 percent of the applicant's passive equity. 
For corporations, we shall use the term passive equity investors to 
mean investors who hold only non-voting stock or de minimis amounts of 
voting stock that include no more than five percent of the voting 
interests. Where different classes of stock are held, however, the 
total amount of equity must still be less than 25 percent to meet this 
requirement. For partnerships, the term means limited partnership 
interests that do not have the power to exercise control of the 
entity.\134\ The passive investor exception will be available, however, 
only so long as the applicant remains under the control of one or more 
entities or individuals (defined as the ``control group'') and the 
control group holds at least 25 percent of the applicant's equity and, 
in the case of corporate applicants, at least 50.1 percent of the 
voting stock.\135\ In the case of partnership applicants, the control 
group must hold all the general partnership interests. Winning bidders 
are required to identify on their long-form applications the identity 
of the members of this control group and the means of ensuring control 
(such as a voting trust agreement). The gross revenues, total assets 
and personal net worth (if applicable) of each member of the control 
group and each member's affiliates will be counted toward the $125 
million gross revenues/$500 million total assets thresholds or the 
individual $100 million personal net worth standard, regardless of the 
size of the member's total interest in the applicant.
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    \133\By ``fully-diluted,'' we mean the agreements such as stock 
options, warrants and convertible debentures will generally be 
considered to have a present effect and will be treated as if the 
rights thereunder already have been fully exercised.
    \134\Applicants must be prepared to demonstrate that the limited 
partners do not have influence over the affairs of the applicant 
that is inconsistent with their roles as passive investors. For 
purposes of our rules, we presume that any general partner has the 
power to control a partnership. Therefore, each general partner in a 
partnership will be considered part of the partnership's control 
group.
    \135\So long as the applicant remains under the de jure and de 
facto control of the control group, we shall not bar passive 
investors from entering into management agreements with applicants.
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    159. The attribution levels we have selected here are intended to 
balance the competing considerations that apply in this particular 
context and may differ from those we have used in other circumstances. 
As a general matter, the 25 percent limitation on equity investment 
interests will serve as a safeguard that the very large entities who 
are excluded from bidding in these blocks do not, through their 
investments in qualified firms, circumvent the gross revenue/total 
asset caps. At the same time, it will afford qualified bidders a 
reasonable measure of flexibility in obtaining needed financing from 
other entities, while ensuring that such entities do not acquire 
controlling interests in the eligible bidders.\136\ Similarly, the five 
percent threshold for attributing revenues of investors with voting 
stock in corporate applicants is designed to keep ineligible parties 
from exerting undue control over eligible firms.\137\ For all of these 
reasons, we also will attribute the gross revenues and total assets of 
entities, or the personal net worth of individuals, that otherwise 
constitute ``affiliates'' of the applicant.\138\
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    \136\Several commenters have suggested that we establish an 
attribution threshold for investors in a broadband PCS applicant. 
See, e.g., ex parte filings of Columbia PCS, June 2, 1994 (20 
percent threshold), and Impulse Telecommunications Corporation, May 
27, 1994 (10 percent threshold).
    \137\In the event that the five percent voting stock limitation 
proves to be overly restrictive, we may consider whether a higher 
threshold (e.g., 15 percent) would be sufficient to meet our 
concerns about undue control from large investors.
    \138\The definition of an ``affiliate'' is set forth in 
subsection 5, infra.
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    160. Qualified Woman and Minority-Owned ``Entrepreneurs''. As 
discussed above, the record demonstrates that women and minorities have 
especially acute problems in obtaining financing, due in part to 
discriminatory lending practices by private financial institutions. To 
address these special problems and to afford women and minority-owned 
businesses more flexibility in attracting financing, it is necessary to 
provide these entities with an alternative, somewhat more relaxed 
option regarding the attribution of revenues of passive investors. 
Under this alternative standard, we will not attribute to the applicant 
the gross revenues, assets, or net worth of any single investor in a 
minority or woman-owned applicant unless it holds more than 49.9 
percent of the passive equity (which is defined to include as much as 
five percent of a corporation's voting stock). To guard against abuses, 
however, the control group of applicants choosing this option would 
have to own at least 50.1 percent of the applicant's equity, as well as 
retain control and hold at least 50.1 percent of the voting stock.\139\ 
As discussed above with regard to general eligibility to bid in the 
entrepreneurs' blocks, winning bidders must identify on their long-form 
applications a control group (this time consisting entirely of 
minorities and/or women or entities 100 percent owned and controlled by 
minorities and/or women) and the gross revenues and net worth of each 
member of the control group and each member's affiliates will be 
counted toward the $125 million gross revenue/$500 million total asset 
thresholds or the individual $100 million personal net worth 
limitation, regardless of the size of the member's total interest in 
the applicant.
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    \139\As noted previously, the control group of a partnership 
applicant must hold all of the general partnership interests.
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    161. Relaxing the attribution standard somewhat in determining 
eligibility of women and minority-owned companies to bid for licenses 
on frequency blocks C and F directly addresses what most commenters 
have stated to be the biggest obstacle to entry for these designated 
entities: obtaining adequate financing. By this measure, women and 
minorities who are eligible to bid in these blocks (i.e., who otherwise 
meet the $125 million gross revenues/$500 million total asset standard) 
will be required to maintain control of their companies and, at the 
same time, will have flexibility to attract significant infusions of 
capital from a single investor. The requirement that the minority and 
women principals hold 50.1 percent of the company's equity mitigates 
substantially the danger that a well-capitalized investor with a 
substantial ownership stake will be able to assume de facto control of 
the applicant. Because this step gives large companies, who are 
otherwise ineligible to bid in the entrepreneurs' blocks, a significant 
incentive to ``partner'' with minority and women-owned firms, it will 
enhance the likelihood that these designated entities will be both 
successful in the auctions and become viable, long-term competitors in 
the PCS industry.
    162. Of course, women and minority-owned firms, like any other 
applicant for a C or F block license, may sell a larger portion of 
their companies' equity, provided that they also abide by the general 
eligibility requirements to bid in the entrepreneurs' blocks. 
Specifically, the gross revenues, total assets and net worth of all 
investors holding 25 percent or more of the company's passive equity 
(as defined to include 5 percent or more of the voting stock) will be 
attributed toward the $125 million/$500 million caps or the $100 
million personal net worth standard. In this event, the control group 
will be required to hold at least 25 percent of the company's equity 
and 50.1 percent of its voting stock.
    163. Qualified Publicly-Traded ``Entrepreneurs''. We also believe 
that these attribution rules may impose a particular hardship on 
publicly traded companies, which have little control over the ownership 
of their stock, and whose voting stock typically is widely held. 
Therefore, for purposes of determining eligibility to bid in the 
entrepreneurs' blocks, we adopt an exception from these rules for 
publicly traded companies.\140\ Specifically, we will not attribute the 
gross revenues or total assets of a shareholder in a publicly traded 
company that owns up to 25 percent of the corporation's equity, even if 
that equity is represented by up to 15 percent of the voting stock. To 
take advantage of this exception, however, the eligible control group 
of the applicant still must control the corporation, hold at least 50.1 
percent of the voting stock, and at least 25 percent of the company's 
equity.\141\
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    \140\``Publicly-traded company'' shall mean a business entity 
organized under the laws of the United States whose shares, debt or 
other ownership interests are traded on an organized securities 
exchange within the United States.
    \141\We note that this exception for publicly held companies is 
only applicable for purposes of assessing eligibility to bid in the 
entrepreneurs' blocks and for the general installment payment 
option. In the event that a publicly traded company can demonstrate 
that the 15 percent threshold would impose a serious hardship, the 
Commission would entertain a request to raise the threshold in 
individual cases. Companies seeking such relief must also 
demonstrate that raising the threshold would not contravene the 
Commission's control objectives, as described in this Order. We do 
not believe, however, that publicly traded corporations with 
individual shareholders owning up to 15 percent active equity 
require additional special provisions such as bidding credits, 
``enhanced'' installment payments, or tax certificates to overcome 
capital access problems. Thus, we will not apply this exception with 
regard to the small business definition or the definition of a woman 
or minority-owned business.
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    164. De Facto Control Issues. We shall codify in our rules a 
provision explaining more explicitly the term ``control,'' so that 
applicants will have clear guidance concerning the requirement that a 
control group maintains de facto as well as de jure control of the 
firms that are eligible for special treatment under the rules for 
broadband PCS. For this purpose, we shall borrow from certain SBA rules 
that are used to determine when a firm should be deemed an affiliate of 
a small business.\142\ These SBA rules, which are codified in 13 CFR 
121.401, provide several specific examples of instances in which an 
entity might have control of a firm even though the entity has less 
than 50 percent of the voting stock of a concern, and thus provide a 
useful model for our rules. Through reference to circumstances such as 
those described in the SBA rules, our rules will expressly alert 
designated entities that control of the applicant through ownership of 
50.1 percent of the firm's voting interests may be insufficient to 
ensure de facto control of the applicant if, for example, the voting 
stock of the eligible control group is widely dispersed. In those and 
other circumstances, ownership of 50.1 percent of the voting stock may 
be insufficient to assure control of the applicant. Of course, apart 
from these structural issues relative to control, eligible entities 
must not, during the license term, abandon control of their licenses 
through any other mechanism. As we stated in the Second Report and 
Order, designated entities must be prepared to demonstrate that they 
are in control of the enterprise.\143\
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    \142\As discussed below, these SBA affiliation rules also will 
be used as a basis for our own rules defining ``affiliates'' for 
purposes of determining whether particular entities meet the 
financial thresholds for bidding in the entrepreneurs' blocks or for 
qualifying as a small business.
    \143\Second Report and Order at 278, citing Intermountain 
Microwave, 24 Rad. Reg. 983, 984 (1963).
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    165. Financial Benefits. To ensure that the control group has a 
substantial financial stake in the venture, we shall adopt certain 
additional requirements, also borrowed from SBA rules. As noted 
previously, we shall require that at least 50.1 percent of each class 
of voting stock and at least 25 percent (or 50.1 percent for the 
alternative option for minority and women-owned businesses) of the 
aggregate of all outstanding shares of stock to be unconditionally 
owned by the control group members. In addition, 50.1 percent of the 
annual distribution of dividends paid on the voting stock of a 
corporate applicant concern must be paid to these members. Also, in the 
event stock is sold, the control group members must be entitled to 
receive 100 percent of the value of each share of stock in his or her 
possession. Similarly, in the event of dissolution or liquidation of 
the corporation, the control group members must be entitled to receive 
at least 25 percent (or 50.1 percent, as the case may be) of the 
retained earnings of the concern and 100 percent of the value of each 
share of the stock in his or her possession, subject, of course, to any 
applicable laws requiring that debt be paid before distribution of 
equity.
    166. Partnerships and other non-corporate entities will be subject 
to similar requirements. Indicia of ownership that we will consider in 
non-corporate cases include (but are not limited to) (a) the right to 
share in the profits and losses, and receive assets or liabilities upon 
liquidation, of the enterprise pro rata in relationship to the 
designated entity's ownership percentage and (b) the absence of 
opportunities to dilute the interest of the designated entity (through 
capital calls or otherwise) in the venture. As with corporations, our 
concern is ensuring that the economic opportunities and benefits 
provided through these rules flow to designated entities, as Congress 
directed.
    167. Application of the Five-Year Holding Rule. Finally, we explain 
how these attribution rules apply with regard to the five-year holding 
and limited transfer period for C and F block licensees. During this 
five-year period, a C or F block licensee must not sell more than 25 
percent of its passive equity to a single investor if the resulting 
attribution of that investor's gross revenues or total assets would 
bring the company over the $125 million gross revenues/$500 million 
total assets thresholds, or if that investor's personal net worth 
exceeds the $100 million personal net worth cap. Similarly, while 
individual members of the control group may change (if it would not 
result in a transfer of control of the company), the control group must 
maintain control and at least 25 percent of the equity and 50.1 percent 
of the voting stock.\144\ A company will be permitted to grow beyond 
these gross revenues/total assets caps, however, through equity 
investment by non-attributable (i.e. passive) investors, debt 
financing, revenue from operations, business development or expanded 
service.\145\
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    \144\A minority or woman-owned company must continue to adhere 
to the attribution rules applicable to it, set out above.
    \145\These rules will continue to apply in this manner 
throughout the license term with regard to a firm's continuing 
eligibility for installment payments, ``enhanced'' installment 
payments and bidding credits.
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    168. Abuses. As stated above, we intend by these attribution rules 
to ensure that bidders and recipients of these licenses in the 
entrepreneurs' blocks are bona fide in their eligibility, and we intend 
to conduct random audits both before the auctions and during the 10-
year initial license period to ensure that our rules are complied with 
in letter and spirit. If we find that large firms or individuals 
exceeding our personal net worth caps are able to assume control of 
licensees in the entrepreneurs' blocks or otherwise circumvent our 
rules, we will not hesitate to force divestiture of such improper 
interests or, in appropriate cases, issue forfeitures or revoke 
licenses. In this regard, we reiterate that it is our intent, and the 
intent of Congress, that women, minorities and small businesses be 
given an opportunity to participate in broadband PCS services, not 
merely as fronts for other entities, but as active entrepreneurs.
b. Limit on Licenses Awarded in Entrepreneurs' Blocks
    169. The special provisions which we adopt for designated entities 
are based, in part, on our mandate to fulfill the congressional goal 
that we disseminate licenses among a wide variety of applicants. 47 
U.S.C. Sec. 309(j)(3)(B). Therefore, in adopting the financial 
assistance measures set forth in this Report and Order, we are 
concerned about the possibility, even if remote, that a few bidders 
will win a very large number of the licenses in the entrepreneurs' 
blocks. As a consequence, the benefits that Congress intended for 
designated entities would be enjoyed, in disproportionate measure, by 
only a few individuals or entities. Congress, in our view, did not 
intend that result. We shall therefore take steps to ensure that the 
financial assistance provided through our rules is dispersed to a 
reasonable number of applicants who win licenses in these blocks.
    170. To achieve a fair distribution of the benefits intended by 
Congress, we shall impose a reasonable limit on the total number of 
licenses within the entrepreneurs' blocks that a single entity may win 
at auction. In setting this limit, we shall take care not to impose a 
restriction that would prevent applicants from obtaining a sufficient 
number of licenses to create large and efficient regional services. 
Specifically, we shall impose a limitation that no single entity may 
win more than 10 percent of the licenses available in the 
entrepreneurs' blocks, or 98 licenses. These licenses may all be in 
frequency block C or all in frequency block F, or in some combination 
of the two blocks. Such a limit will ensure that at least ten winning 
bidders enjoy the benefits of the entrepreneurs' blocks. At the same 
time, it will allow bidders to effectuate aggregation strategies that 
include large numbers of licenses and extensive geographic coverage.
    171. Further, this limitation will apply only to the total number 
of licenses that may be won at auctions in these blocks; it is not an 
ownership cap that applies to licenses that might be obtained after the 
auctions. For purposes of implementing this restriction, we shall 
consider licenses to be won by the same entity if an applicant (or 
other entity) that controls, or has the power to control licenses won 
at the auction, controls or has the power to control another license 
won at the auction.
2. Definition of Small Business
    172. In the Second Report and Order we adopted a definition for 
small businesses based on the standard definition used by the Small 
Business Administration (SBA). This definition permits an applicant to 
qualify for installment payments based on a net worth not in excess of 
$6 million with average net income after Federal income taxes for the 
two preceding years not in excess of $2 million. 13 CFR 
Sec. 121.601.\146\ In the Second Report and Order, we noted, however, 
that, in certain telecommunications industry sectors, this limit may 
not be high enough to encompass those entities that, while needing the 
assistance provided by installment payments, have the financial 
wherewithal to construct and operate the systems. Therefore we 
indicated that, on a service specific basis, we might adjust this 
definition upward to accommodate capital intensive telecommunications 
businesses. See Second Report and Order at 267.
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    \146\The SBA has recently changed its net worth/net income 
standard as it applies to its Small Business Investment Company 
(SBIC) Program. See 59 Fed. Reg. 16953, 16956 (April 8, 1994). The 
new standard for determining eligibility for small business concerns 
applying for financial and/or management assistance under the SBIC 
program was increased to $18 million net worth and $6 million after-
tax net income. 15 CFR Sec. 121.802(a)(3)(i). The change in this 
size standard was attributable to an adjustment for inflation and 
changes in the SBIC program ``designed to strengthen and expand the 
capabilities of SBICs to finance small businesses so that they can 
increase their contribution to economic growth and job creation.'' 
59 Fed. Reg. at 16955. However, Section 121.601, which was the SBA 
size standard cited in the Notice and the Second Report and Order, 
has not been modified by the SBA. For purposes of our generic 
competitive bidding rules, in consultation with the SBA, we will 
reexamine our $6 million net worth/$2 million annual profits 
definition in light of the SBA's recent action.
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    173. Many commenters, including the Chief Counsel for Advocacy of 
the SBA, argue that the SBA net worth/net revenue definition is too 
restrictive and will exclude businesses of sufficient size to survive, 
much less succeed, in the competitive broadband PCS marketplace. The 
SBA's Chief Counsel for Advocacy and the Suite 12 Group advocate 
adoption of a gross revenue test, arguing that a net worth test could 
be misleading as some very large companies have low net worth. The 
SBA's Chief Counsel for Advocacy recommends that the revenue standard 
be raised to include firms that (together with affiliates) have less 
than $40 million in gross revenue. Similarly, Suite 12 suggests a $75 
million in annual sales threshold.\147\ As another option, the SBA's 
Chief Counsel for Advocacy suggests that the Commission consider a 
higher revenue ceiling or adopt different size standards for different 
telecommunications markets.\148\
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    \147\Many other commenters set forth their recommendations on 
the appropriate small business definition for broadband PCS 
preferences. See, e.g., comments of Tri-State ($5 million average 
annual operating cash flow), Luxcel (net worth not exceeding $20 
million), and Iowa Network (less than $40 million in annual 
revenues).
    \148\Some parties recommend using the SBA's alternative 1500 
employee standard. See, e.g., comments of SBA Associate 
Administrator for Procurement Assistance at 2, CFW Communications at 
2, and Iowa Network at 17. A number of other commenters, including 
the SBA's Chief Counsel for Advocacy, argue, however, that adoption 
of this alternative SBA definition would open up a huge loophole in 
the designated entity eligibility criteria. Specifically, they 
contend that telecommunications is a capital, rather than labor, 
intensive industry, and that an entity with 1,500 employees is 
likely to be extremely well capitalized and have no need for the 
special treatment mandated by Congress in the Budget Act. See, e.g., 
comments of SBA Chief Counsel for Advocacy at 8, LuxCel Group, Inc. 
at 4, Suite 12 Group at 10-11.
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    174. We expect broadband PCS to be a highly capital intensive 
business requiring bidders to expend tens of millions of dollars to 
acquire a license and construct a system even in the smaller broadband 
PCS markets. Thus, we believe that our current small business 
definition is overly restrictive because it would exclude most 
businesses possessing the financial resources to compete successfully 
in the provision of broadband PCS services. Accordingly, we modify our 
small business definition for broadband PCS auctions to ensure the 
participation of small businesses with the financial resources to 
compete effectively in an auction and in the provision of broadband PCS 
services.
    175. There is substantial support in the record for a $40 million 
gross revenue standard. For example, the SBA recommends that for 
broadband PCS, a small business be defined as one whose average annual 
gross revenues for its past three years do not exceed $40 million.\149\ 
It states that this definition isolates those companies that have 
significantly greater difficulty in obtaining capital than large 
enterprises. At the same time, the SBA contends that a company with $40 
million in revenue is sufficiently large that it could survive in a 
competitive wireless communications market.\150\ Similarly, the SBA 
Chief Counsel for Advocacy asserts that a $40 million threshold will 
allow participation by firms ``of sufficient size to meet demands in 
almost all small markets and some medium-size markets without 
significant outside financial assistance.''\151\ For purposes of 
broadband PCS, we shall therefore define a small business as any firm, 
together with its attributable investors and affiliates, with average 
gross revenues for the three preceding years not in excess of $40 
million.\152\ In addition, an applicant will not qualify as a small 
business if any one attributable investor in, or affiliate of, the 
entity has $40 million or more in personal net worth.\153\
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    \149\Ex parte filing of U.S. Small Business Administration, June 
24, 1994.
    \150\Id.
    \151\Comments of SBA Office of Advocacy at 10. Cf. comments of 
Iowa Network and Telephone Electronics Corporation (advocating a $40 
million annual revenue criterion for telephone companies) and reply 
comments of North American Interactive Partners and Kingwood 
Associates (advocating $40 million gross-revenue criterion for 
applicants for the fifty most-populous BTAs, based on estimated 
average build-out cost).
    \152\The establishment of small business size standards is 
generally governed by Section 3 of the Small Business Act of 1953, 
as amended, 15 U.S.C. Sec. 642(a). Recent amendments to that statute 
provide that small business size standards developed by Federal 
agencies must be based on the average gross revenues of such 
business over a period of not less than three years. See Pub. L. No. 
102-366, Title II, Sec. 222(a), 106 Stat. 999 (1992); 15 U.S.C. 
Sec. 632 (a)(2)(B)(ii).
    \153\Unlike our eligibility criteria to bid in the 
entrepreneurs' blocks, we do not adopt a total assets standard here. 
We believe that the $40 million gross revenue cap for small 
businesses, together with the $500 million total asset threshold we 
set for entry into the entrepreneurs' blocks in the first instance, 
should be sufficient to ensure that only bona fide small businesses 
are able to take advantage of the measures intended for those 
designated entities.
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    176. For purposes of determining whether an entity qualifies as a 
small business, we will follow the control group and attribution rules 
set forth with regard to eligibility to bid in the entrepreneurs' 
blocks. In particular, winning bidders are required to identify on 
their long-form applications a control group that holds at least 50.1 
percent of the voting interests of the applicant (and otherwise has de 
facto control) and owns at least a 25 percent equity stake. The gross 
revenues of each member of the control group and each member's 
affiliates will be counted toward the $40 million gross revenue 
threshold, regardless of the size of the member's total interest in the 
applicant. The $40 million personal net worth limitation will also 
apply to each member of the control group. We will not consider the 
gross revenues or personal net worth of any other investor unless the 
investor holds 25 percent or more of the outstanding passive equity in 
the applicant, which, as defined above, includes as much as five 
percent of the voting stock in a corporate applicant.
    177. We also adopt the more relaxed attribution standard set forth 
in the entrepreneurs' blocks section with regard to investors in 
minority and female-owned applicants. Specifically, we will not 
consider the gross revenues or personal net worth of a single passive 
investor in a minority or female-owned small business unless the 
investor holds in excess of a 49.9 percent passive interest (which 
includes as much as five percent of a corporate applicant's voting 
stock), provided the women or minority control group maintains at least 
50.1 percent of the equity and, in the case of a corporate applicant, 
at least 50.1 percent of the voting stock.\154\ We believe that such 
revenue attribution will ensure that only bona fide small businesses 
are able to take advantage of the special provisions we have adopted, 
but will allow those businesses to attract sufficient equity capital to 
be truly viable contenders in the PCS industry.
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    \154\See supra 160.
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    178. These financial eligibility rules will continue to apply 
throughout the license term. Thus, firms that received bidding credits 
and ``enhanced'' installment payments based on their small business 
status will be subject to the repayment penalties outlined above, if an 
investor subsequently purchases an ``attributable'' interest (e.g. 25 
percent or more of the firm's equity) and, as a result, the gross 
revenues of the firm exceed the $40 million gross revenues cap, or the 
personal net worth of the investor exceeds the $40 million personal net 
worth threshold.
    179. Finally, we will allow a consortium of small businesses to 
qualify for any of the measures adopted in this order applicable to 
individual small businesses. As used here, the term ``consortium'' 
means a conglomerate organization formed as a joint venture among 
mutually-independent business firms, each of which individually 
satisfies the definition of a small business.
    180. Several commenters argue that a consortium should not qualify 
for special treatment unless the consortium itself meets the 
established definitional criteria.\155\ They contend that the FCC 
should not allow consortia to be used as a means of circumventing the 
usual prerequisites for these special provisions. In the Second Report 
and Order, we concluded that consortia might be permitted to receive 
benefits based on participation in the consortium by one or more 
designated entities, but believed such a consortium should not be 
entitled to qualify for measures designed specifically for designated 
entities. As a general matter, we shall continue to adhere to that 
principle. We think, however, that in the broadband PCS service, 
allowing small businesses to pool their resources in this manner is 
necessary to help them overcome capital formation problems and thereby 
ensure their opportunity to participate in auctions and to become 
strong broadband PCS competitors. Because of the exceptionally large 
capital requirements in this service, we agree with the SBA Chief 
Counsel for Advocacy that, so long as individual members of the 
consortium satisfy the definition of a small business, the 
congressional objective of ensuring opportunities for small business 
will be fully met. Individual small entities that join to form 
consortia, as distinguished from a single entity with gross revenues in 
excess of $40 million, still are likely to encounter capital access 
problems and, thus, should qualify for members aimed at small 
businesses. We do not believe however, that this congressional goal 
will be satisfied if special measures are allowed for consortia that 
are ``predominantly'' or ``significantly'' owned and/or controlled by 
small businesses, as recommended by several commenters.\156\ This would 
have the effect of eviscerating our small business definitional 
criteria and would not further the ability of bona fide small 
businesses to participate in PCS services.
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    \155\See comments of McCaw at 21 and Myers at 6.
    \156\See, e.g., comments of Rural Cellular Corp. at 2, Bell 
Atlantic at 17, NAMTEC at 19, and AT&T at 25-26.
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3. Definition of Women and Minority-Owned Business
    181. As discussed above, we have taken steps in this order to 
address the special funding problems faced by minority and women-owned 
firms and thereby to ensure that these groups have the opportunity to 
participate and become strong competitors in the broadband PCS 
service.\157\ We thus have adopted a tax certificate program for women 
and minorities to allow more sources of potential funding, have relaxed 
the attribution standard used to determine eligibility to bid for 
licenses on frequency blocks C and F, and have adopted special measures 
for installment payments and bidding credits.
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    \157\As noted in the Second Report and Order, the members of the 
following groups will be considered ``minorities'' for purposes of 
our rules: ``[T]hose of Black, Hispanic Surnamed, American Eskimo, 
Aleut, American Indian and Asiatic American extraction.'' See 
Statement of Policy on Minority Ownership of Broadcasting 
Facilities, 68 FCC 2d 979, 980 n.8 (1978); Commission Policy 
Regarding the Advancement of Minority Ownership in Broadcasting, 92 
FCC 2d 849, 489 n.1 (1982). Moreover, as adopted in the Second 
Report and Order, minority and women-owned businesses will be 
eligible for special measures only if the minority and women 
principals are also United States citizens.
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    182. As also indicated above, for purposes of implementing these 
steps, we have departed from the definition of a minority and woman-
owned firm that was adopted in the Second Report and Order. There, we 
found generally that to establish ownership by minorities and women, a 
strict eligibility standard should be adopted that required minorities 
or women to have at least a 50.1 percent equity stake and a 50.1 
percent controlling interest in the designated entity. Second Report 
and Order at 277; 47 CFR Sec. 1.2110(b)(2). For the broadband PCS 
auctions, we retain the requirement that minorities and/or women 
control the applicant and hold at least 50.1 percent of a corporate 
applicant's voting stock. However, to establish their eligibility for 
certain benefits, summarized below, we shall impose an additional 
requirement that, even where minorities and women hold at least 50.1 
percent of the applicant's equity, other investors in the applicant may 
own only passive interests, which, for corporate applicants, is defined 
to include as much as five percent of the voting stock. In addition, 
provided that certain restrictions are met, we shall also allow women 
and minority-owed firms the option to reduce to 25 percent the 50.1 
percent minimum equity amount that must be held.
    183. We emphasized in the Second Report and Order that we did not 
intend to restrict the use of various equity financing mechanisms and 
incentives to attract financing, provided that the minority and women 
principals continued to own 50.1 percent of the equity, calculated on a 
fully-diluted basis, and that their equity interest entitled them to a 
substantial stake in the profits and liquidation value of the venture 
relative to the non-controlling principals. We noted, however, that 
different standards that meet the same objectives may be appropriate in 
other contexts. Second Report and Order at 278. In view of the 
evidence of discriminatory lending experiences faced by minority and 
women entrepreneurs and the exceptional great financial resources 
believed to be required by broadband PCS applicants, we conclude that 
it is appropriate to allow more flexibility with regard to the 50.1 
percent equity requirements for this service in order to open doors to 
more sources of equity financing for women and minority-owned firms.
    184. We shall therefore allow women and minority-owned firms the 
following options. First, they may satisfy the general definition set 
forth in the Second Report and Order, which requires the minority and/
or female principles to control the applicant, own at least 50.1 
percent of its equity and, in the case of corporate applicants, hold at 
least 50.1 percent of the voting stock. Under this option, other 
investors may own as much as a 49.9 percent passive equity interest. As 
noted above regarding eligibility to bid in the entrepreneurs' blocks, 
passive equity in the corporate context means only non-voting stock may 
be held, or stock that includes no more than five percent of the voting 
interests.\158\ For partnerships, the term means limited partnership 
interests that do not have the power to exercise control of the equity. 
In addition, as required in the Second Report and Order, all investor 
interests will be calculated on a fully-diluted basis, meaning that 
agreements such as stock options, warrants and convertible debentures 
generally will be considered to have a present effect and will be 
treated as if the rights thereunder have been fully exercised.\159\ We 
recognize that the requirement that other investors own only passive 
interests is a departure from the definition of a minority or women-
owned business adopted in the Second Report and Order, but because of 
the very significant financial contribution that may be made by such 
other investors in designated entities, we believe that the passive 
equity requirement is appropriate as an additional safeguard to ensure 
that minorities and/or women retain control of the applicant.
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    \158\For example, under this option, a corporate applicant with 
two classes of issued and outstanding stock, 100 shares of voting 
stock and 100 shares of non-voting stock, could sell to a single 
non-eligible entity 49.9 percent of the applicant's equity, 
consisting of 5 shares of the corporate's voting stock and 94 shares 
of its non-voting stock. Under this scenario, eligible minorities or 
women, in order to retain at least 50.1 percent of the value of all 
outstanding shares of the corporation's stock, must own all of the 
corporation's remaining shares of stock; that is, 95 shares of 
voting stock and six shares of non-voting stock.
    \159\As also noted in the Second Report and Order, we will 
consider departing from the requirement that the equity of investors 
in minority and women-owned businesses must be calculated on a 
fully-diluted basis only upon a demonstration, in individual cases, 
that options or conversion rights held by non-controlling principals 
will not deprive the minority and women principals of a substantial 
financial stake in the venture or impair their rights to control the 
designated equity. See Second Report and Order at 277.
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    185. As a second option, women and minority-owned firms may sell up 
to 75 percent of the company's equity, provided that no single investor 
may hold 25 percent or more of the firm's passive equity, which is 
defined in the same manner as above. For example, a corporation with 
100 shares of voting stock and 100 shares of non-voting stock, with the 
200 shares representing the total outstanding shares of the company, 
could qualify as a minority or women-owned business under the following 
circumstances. The minority or women principals would have to own at 
least 51 shares of voting stock, which satisfies the requirement that 
they have voting control and, in this case, also meets the requirements 
that they hold at least 25 percent of the equity. Two other investors 
could each own 44 shares of non-voting stock and five shares of voting 
stock, which represents 24.5 percent of the company's equity for each 
of the shareholders. A third investor could own the remaining 12 shares 
of non-voting stock and five shares of the voting stock, or 8.5 percent 
of the equity. The remaining 34 shares of voting stock may be sold to 
other investors provided that no single investor owns more than five 
shares.
    186. Whichever option is chosen, we will require establishment of a 
``control group'' in much the same way we did for purposes of 
eligibility to bid in the entrepreneurs' blocks. Specifically, winning 
bidders, transferees or assignees must identify on their long-form 
applications a control group (consisting entirely of minorities and/or 
women or entities 100 percent owned and controlled by minorities and 
women) that has de jure and de facto control of the applicant and holds 
either at least 50.1 or 25 percent of the applicant's equity, depending 
upon which option is elected.
    187. We believe that a modification of our 50.1 percent equity 
requirement will best achieve Congress' objective of providing 
effective and long-term economic opportunities for women and minority-
owned firms in broadband PCS. At the same time, we shall maintain 
strict enforcement of the requirement that actual control reside with 
the qualified designated entities. Thus, to establish their eligibility 
for tax certificates, enhanced installment payments, bidding credits 
and relaxed cellular attribution rules, women and minority-owned 
applicants electing to use the 25 percent equity option may not in any 
instance allow an individual investor who is not in the control group 
to own more than a 25 percent passive equity interest. This restriction 
will apply even in circumstances in which allowing an investor to 
exceed these limitations would not result in the applicant's exceeding 
the gross revenues and other financial standards that apply to other 
bidders in the entrepreneurs' blocks and other situations involving 
financial caps. These structural safeguards, as well as the general 
requirement that other investors hold only passive interests in women 
and minority-owned applicants, will help to ensure that control truly 
remains with the women and minority designated entities.
    188. For example, a women or minority-owned firm electing to use 
the 25 percent option may have a non-eligible investor with more than a 
25 percent passive stake and still qualify to bid in the entrepreneurs' 
blocks or for benefits that apply to small businesses, as long as the 
attributable revenues of the investor do not cause the applicant to 
exceed the gross revenues/total assets caps. In these contexts, no 
additional restrictions are necessary, because women and minority-owned 
applicants, like other applicants, are eligible to bid in these blocks 
and to qualify as small businesses so long as they comply with the same 
restrictions on financial eligibility that apply to other applicants. 
Since the attribution rule itself operates to ensure compliance with 
size limitations, it is not necessary to impose additional restrictions 
on the size of interests held by investors with attributable interests. 
This firm will not qualify, however, for special measures applicable 
only to women and minority-owned businesses, such as ``enhanced'' 
installment payments or the 15 or 25 percent bidding credits, because 
it has a single non-eligible investor with more than a 25 percent 
passive interest. In circumstances in which women and minorities are 
required to retain only 25 percent of the firm's equity, this 
additional structural restriction is appropriate because the objective 
in this context is to ensure not merely financial eligibility, but that 
women and minorities retain control of the license.
    189. We set forth previously rules defining more explicitly the 
term ``control'' for purposes of determining whether a ``control 
group'' maintains de facto as well as de jure control of an 
applicant.\160\ Those rules apply equally to the minority and women 
principals of minority and women-owned applicants. Consistent with our 
general policies with regard to women-owned applicants for purposes of 
our multiple ownership and cross-ownership rules in this broadcast 
context, we shall not adopt, at this time, any special rules or 
presumptions to determine whether women-owned applicants exercise 
independent control of their firms. See In the Matter of Clarification 
of Commission Policies Regarding Spousal Attribution, 7 FCC Rcd 1920, 
57 FR 8845, Mar. 13, 1992.
---------------------------------------------------------------------------

    \160\See supra 164.
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    190. Our requirement that control rest with minorities and/or women 
and the clarifications above ensure that parties do not attempt to 
evade the statutory requirement to provide economic opportunities and 
ensure participation by businesses owned by these groups. We reaffirm 
our commitment to investigate all allegations of fronts, shams or other 
methods used by those who try to obtain a benefit to which they are not 
lawfully entitled. In this vein, we again admonish parties that we will 
conduct random pre- and post-auction audits to ensure that applicants 
receiving these benefits are bona fide designated entities.
    191. We also note here that we are departing from the provision in 
the Second Report and Order that bars publicly traded companies from 
qualifying as minority and woman-owned businesses for purposes of 
participating in auctions. Most of the steps taken to assist these 
designated entities in this Order (e.g., bidding credits and 
installment payments) are confined to winning bidders in the 
entrepreneurs' blocks, where there is a financial limit on the size of 
participants. Because of the expected large capital entry costs of 
broadband PCS, we believe that even publicly traded companies owned by 
women and minorities that qualify to bid in blocks C and F require 
additional measures, such as bidding credits and installment payments, 
to be able to participate successfully. We emphasize, however, that the 
exception to the attribution rules for publicly traded companies to be 
eligible to bid in the entrepreneurs' blocks does not apply here.\161\ 
To qualify for measures targeted exclusively to women and minority-
owned businesses, a company must satisfy the definition set forth in 
this section.
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    \161\With regard to qualifying to bid in the entrepreneurs' 
blocks, we stated that we would not attribute the revenues or assets 
of an investor that owns up to 15 percent of a publicly traded 
applicant's voting stock. For privately held companies, the voting 
stock threshold is five percent. See supra 158, 163.
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    192. As noted above, applicants owned by women and minorities must 
meet the limitations on gross revenues, total assets and personal net 
worth to qualify for entry into the entrepreneurs' blocks. The size 
limitations do not apply, however, to all measures designed to assist 
applicants owned by minorities and/or women. The tax certificate policy 
applies to all broadband PCS licenses and is not limited to licenses in 
the entrepreneurs' blocks. Therefore, businesses owned by minorities 
and women need not meet the gross revenue and other financial 
restrictions to qualify for tax certificates. Similarly, the relaxed 
cellular attribution threshold for minority and women-owned firms 
adopted in the Broadband PCS Reconsideration Order is not limited to 
the entrepreneurs' blocks. Thus, minority and women-owned firms that do 
not meet the gross revenues, total assets and net worth restrictions 
may nevertheless qualify for the 40 percent cellular attribution rule. 
But minority and women-owned firms must satisfy the Commission's 
structural ownership requirements to receive the benefits of tax 
certificates and the relaxed cellular attribution rule; that is, they 
are subject to the limitation that interests held by investors who are 
not women and minorities must be passive.
4. Definition of Rural Telephone Company
    193. As discussed above, we have adopted several measures to assist 
rural telephone companies in the broadband PCS service. We decide here 
the definition of rural telephone companies who are eligible for those 
benefits. As explained below, for this service, we shall depart from 
the definition adopted in the Second Report and Order and define rural 
telephone companies as local exchange carriers having 100,000 or fewer 
access lines, including all affiliates.
    194. As we pointed out in the Second Report and Order,\162\ most of 
those responding to our tentative conclusion in the Notice concerning 
the definition of a rural telephone company contended that the proposed 
definition, which was based on the standard contained in Section 63.58 
of the Commission's Rules, was too restrictive. A variety of more 
inclusive definitions were recommended.\163\ Some commenters advocated 
a definition in which a company would qualify if it satisfied either of 
two alternative criteria based on population of communities served or 
number of access lines.\164\ Others advocated adoption of a definition 
focusing simply on the number of access lines provided.\165\ One 
commenter advocated a definition focusing exclusively on revenues 
rather than access lines, with the standard for rural telephone company 
status at annual revenues under $100 million.\166\ In addition, some 
advocated a somewhat more restrictive definition.\167\
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    \162\Second Report and Order at 279-282.
    \163\See, e.g., comments of Saco River, Telephone Electronics, 
and Iowa Network (advocating amending the proposed definition merely 
by raising the population threshold to 10,000), and comments of 
Chickasaw (advocating definition including companies that 
predominantly, but not exclusively, serve customers in communities 
of less than 10,000 in non-urbanized areas).
    \164\See, e.g., comments of Telocator, TDS, NYNEX, NOTA, NTCA 
and Saco River (recommending a definition including companies that 
either provide service only within communities of 10,000 or less in 
non-urbanized areas or provide 10,000 or fewer access lines (and no 
more than 150,000 in conjunction with affiliates)); comments of 
OPASTCO (recommending defining rural telephone companies as those 
that either provide exchange service only within communities of 
10,000 or less in non-urbanized areas or that provide 50,000 or 
fewer access lines; and comments of SBA Chief Counsel for Advocacy 
(recommending a definition including companies serving communities 
of 20,000 or less in non-urbanized areas or providing 50,000 or 
fewer access lines (including lines provided by affiliates)).
    \165\See, e.g., comments of STCL, MEBTEL, CFW, Minnesota Equal 
Access Network, Rural Cellular Assn., Rural Cellular Corp., 
Rochester Tel. Corp, McCaw, DialPage, APC, TDS and Gulf Telephone 
Co. (suggesting caps between 25,000 and 150,000 access lines).
    \166\Comments of PMN.
    \167\See, e.g., comments of GTE (definition would apply only to 
companies that exclusively serve customers in communities of 10,000 
or less in non-urbanized areas and that provide wireline exchange 
service to 10,000 or fewer customers).
---------------------------------------------------------------------------

    195. Many commenters suggested limiting rural telephone eligibility 
to carriers serving communities with no more than 10,000 inhabitants, 
asserting that such a standard better comports with common notions 
about which telephone companies are ``rural.''\168\ A number of other 
commenters supported a definition of rural telephone company that would 
include a limitation on the size of the company. OPASTCO, for example, 
asserted that such a limitation would comport with the statutory 
mandate to ensure opportunity for rural telephone companies because 
``the problem such companies face in the competitive bidding arena'' is 
as much a function of their size as of the rural character of their 
service areas.''\169\ NTCA similarly contended that small companies 
have shown the interest and commitment needed to fulfill the explicit 
statutory goal of ``rapid deployment of new * * * services for * * * 
those residing in rural areas,'' citing as support a report on the 
deployment of digital switching by small LECs.\170\ Other parties 
suggested that we look to the unenacted antecedent of the Budget Act, 
S. 1134, in which a rural company was defined as an entity that either 
(a) ``provides telephone exchange service by wire in a rural area'' 
(i.e., a non-urbanized area containing no incorporated place with more 
than 10,000 inhabitants), (b) ``provides telephone exchange service by 
wire to less than 10,000 subscribers,'' or (c) ``is a telephone utility 
whose income accrues to a State or political subdivision thereof.''
---------------------------------------------------------------------------

    \168\See, e.g., comments of OPASTCO, Iowa Network, Saco River 
and Telephone Electronics.
    \169\Comments of OPASTCO at 5.
    \170\Comments of NTCA at 7-8.
---------------------------------------------------------------------------

    196. In the Second Report and Order, we adopted a definition of 
``rural telephone company'' that includes independently owned and 
operated local exchange carriers that (1) do not serve communities with 
more than 10,000 inhabitants in the licensed area, and (2) do not have 
more than 50,000 access lines, including all affiliates. 47 CFR 
Sec. 1.2110(b)(3). We stated our belief that a limitation on the size 
of eligible rural telephone companies is appropriate because Congress 
did not intend for us to give special treatment to large LECs that 
happen to serve small rural communities. See Second Report and Order at 
282.
    197. Several parties who filed petitions for reconsideration of the 
Second Report and Order argue that the definition adopted for rural 
telephone companies may be too restrictive given the capital intensive 
nature of broadband PCS.\171\ We also note that NTCA argued in its 
comments in this proceeding that it is neither necessary nor 
appropriate to use the same criteria to define rural telephone 
companies in rules pertaining to different services, technologies, and 
industries.\172\ Likewise, in an ex parte letter, OPASTCO states that 
by defining rural telephone company for purposes of broadband PCS as a 
local exchange carrier with less than $100 million in revenue, the 
Commission will properly capture in the defined class locally-owned 
telephone companies who are truly interested in providing services to 
rural areas.\173\ OPASTCO notes that the ``same universe of companies'' 
that would fall under such a revenue threshold would be captured by a 
definition that includes all telephone companies having 100,000 or 
fewer access lines.\174\
---------------------------------------------------------------------------

    \171\See, e.g., petitions of South Dakota Network (SDN), U.S. 
Intelco, NTCA, Rural Cellular Association and TDS. We note that 
similar arguments have been made with respect to other services.
    \172\See comments of NTCA at 4.
    \173\Ex parte filing of filing of OPASTCO, June 2, 1994, at 2; 
see also comments of PMN at 7-8.
    \174\Id.
---------------------------------------------------------------------------

    198. Our challenge in establishing a definition of a rural 
telephone company for broadband PCS is to achieve the congressional 
goal of promoting the rapid deployment of this new service in rural 
areas by targeting only those telephone companies whose service 
territories are predominantly rural in nature, and who are thus likely 
to be able to use on their existing wireline telephone networks to 
build broadband PCS infrastructures to serve rural America. For 
purposes of our rules governing broadband PCS licenses, we believe that 
this goal can best be achieved if we define rural telephone companies 
as those local exchange carriers having 100,000 or fewer access lines, 
including all affiliates. We agree with OPASTCO that such a definition 
will include virtually all of the telephone companies who genuinely are 
interested in providing services to rural areas. This definition will 
encourage participation by legitimate rural telephone companies without 
providing special treatment to large LECs. Therefore, we will better 
achieve the congressional goal of providing service rapidly to rural 
areas without giving benefits to large companies that do not require 
such assistance. Rural telephone companies that satisfy this definition 
thus will be eligible for rural partitioning, as discussed above.\175\
---------------------------------------------------------------------------

    \175\Such companies also will be eligible for special treatment 
under our cellular attribution rules for broadband PCS. See 47 CFR 
Sec. 24.204(d)(2)(ii).
---------------------------------------------------------------------------

    199. Anchorage Telephone Company argues in a petition for 
reconsideration of the Second Report and Order that our definition of a 
rural telephone company should include telephone companies that are 
owned by governmental authorities. Anchorage contends that Congress 
meant to mandate special consideration not only for telephone carriers 
serving rural areas but also for all municipally-owned telcos, even 
those with wholly or predominantly urban service areas.\176\ This 
argument is based on its interpretation of the Senate bill that was 
antecedent to the enacted Budget Act. Anchorage argues that the Senate 
bill containing the prototype of a mandate for special consideration 
for rural telephone companies directed the FCC to grant ``rural program 
licenses'' to ``qualified'' common carriers and explicitly said that 
the category of ``qualified'' carriers included all state-owned and 
municipally-owned telephone companies. Anchorage further states that 
the report of the conference committee that drafted the Budget Act 
declares that the Senate's ``findings'' are incorporated by 
reference.\177\ Anchorage also asserts that without the aid of special 
assistance it and most other state-owned and municipal telcos won't be 
able to purchase spectrum licenses at auction because it is politically 
infeasible for them to generate and retain enough surplus revenue to 
fund such investments, due to popular aversion to increases in taxes or 
telephone rates.\178\
---------------------------------------------------------------------------

    \176\Anchorage Petition at 2-3.
    \177\Id.
    \178\Id. at 4-5.
---------------------------------------------------------------------------

    200. We find no merit in Anchorage's arguments. There is no 
specific evidence that Congress intended the term ``rural telephone 
companies'' to include all state or municipally-owned telephone 
companies. To the contrary, the fact that an antecedent bill contained 
an explicit mandate for preferential treatment of government-owned 
telephone companies that was deleted from the enacted bill could just 
as easily be interpreted as an indication that Congress rejected such a 
rule. Further, we disagree that state and municipal governments lack 
the means to participate successfully in auctions. Such governments 
have substantial capabilities to raise funds through private financing, 
bond offerings and taxation. Therefore, our definition of a rural 
telephone company will not encompass telephone companies that are owned 
by government authorities.
5. Definition of an Affiliate
    201. Many of the eligibility criteria set forth above are based on 
the size of the entity applying for a broadband PCS license and/or 
seeking special treatment under our designated entity policies. Each of 
these size standards ($125 million gross revenues/$500 million total 
assets/$100 million personal net worth, $40 million gross revenues/$40 
million personal net worth, and 100,000 access lines) requires 
applicants to include, among other parties, ``affiliates'' when 
calculating their attributable gross revenues, total assets, net worth 
or access lines. This affiliation requirement is intended to prevent 
entities that, for all practical purposes, do not meet these size 
standards from receiving benefits targeted to smaller entities.\179\ We 
adopt specific affiliation rules for purposes of applying these 
eligibility criteria based in part on the Small Business 
Administration's affiliation rules.\180\
---------------------------------------------------------------------------

    \179\See, e.g., Second Report and Order at 272.
    \180\See 13 CFR Sec. 121.401 (1993) (formerly at 13 CFR 
Sec. 121.3 (1989)).
---------------------------------------------------------------------------

    202. In the Second Report and Order, we referenced the SBA's 
affiliation rules for purposes of defining generally whether an entity 
qualifies as a small business and gave examples of how the affiliation 
rules would be applied. We continue to believe that the SBA's 
affiliation rules provide a solid foundation on which to build our own 
affiliation rules for purposes of the small business definition for 
broadband PCS and for the other size standards adopted in this 
order.\181\ Accordingly, for purposes of these eligibility 
restrictions, we will again borrow from the SBA's rules for outside 
affiliations. In addition, to ensure that applicants have clear 
guidance concerning these matters, we shall include in our rules more 
detailed information concerning the circumstances in which an entity 
will be deemed an affiliate of the applicant.
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    \181\SBA's affiliation rules were promulgated under the 
authority in Section 3 of the Small Business Act of 1953, as 
amended, 15 U.S.C. Sec. 632, which provides that, to be eligible for 
benefits provided by SBA and other agencies, a ``small-business 
concern'' must be ``independently owned and operated.'' See Small 
Business Size Standards, 54 FR 52634 (December 21, 1989).
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    203. Like the eligibility rules we have adopted here governing size 
limitations for broadband PCS, the SBA's rules provide that size 
determinations shall include the applicant and all of its 
``affiliates.''\182\ At the outset, before considering in more detail 
all the types of affiliations that might exist when guided by the SBA 
rules, we review briefly our own rules described above, concerning 
attributable interests. Those rules provide that, so long as a control 
group is established, the gross revenues, assets or net worth of an 
investor in a PCS applicant or licensee will be attributed to the 
applicant or licensee only if the investor holds more than 25 percent 
of the applicant's passive equity or is part of a control group that 
controls the applicant. Therefore, only where an investor has such 
attributable interests in the broadband PCS applicant or licensee do we 
need to examine whether the investor has a relationship with other 
persons or outside entities that rises to the level of an affiliation 
with the PCS applicant, and if so, whether the affiliate's revenues or 
net worth, when aggregated with the applicant's, exceed our size 
eligibility thresholds.
---------------------------------------------------------------------------

    \182\See 13 CFR Sec. 121.401(a).
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    204. General Principles of Affiliation. When such an attributable 
interest exists, an affiliation under the SBA rules would arise, first, 
from ``control'' of an entity or the ``power to control it.'' Thus, 
under the SBA rules, entities are affiliates of each other when either 
directly or indirectly (i) one concern controls or has the power to 
control the other, or (ii) a third party or parties controls or has the 
power to control both. 13 CFR Sec. 121.401(a)(2)(i), (ii). In 
determining control, the SBA's rules provide generally that every 
business concern is considered to have one or more parties who directly 
or indirectly control or have the power to control it. The rules, in 
addition, provide specific examples of where control resides under 
various scenarios, such as through stock ownership or occupancy of 
director, officer or management positions. The rules also articulate 
general principles of control, and note, for example, that control may 
be affirmative or negative and that it is immaterial whether control is 
exercised so long as the power to control exists. 13 CFR 
Sec. 121.401(c)(1). Second, an affiliation, under SBA rules, may also 
arise out of an ``identity of interest'' between or among parties. 13 
CFR Sec. 121.401(a)(2)(iii), (d). We shall adopt these same general 
provisions in our affiliation rules for broadband PCS.
    205. In adopting these affiliation rules, we emphasize that these 
rules will not be applied in a manner that defeats the objectives of 
our attribution rules. Our attribution rules expressly permit 
applicants to disregard the gross revenues, total assets and net worth 
of passive investors, provided that an eligible control group has de 
facto and de jure control of the applicant. Our attribution rules are 
designed to preserve control of the applicant by eligible entities, yet 
allow investment in the applicant by entities that do not meet the size 
restrictions in our rules. Therefore, so long as the requirements of 
our attribution rules are met, the affiliation rules will not be used 
to defeat the underlying policy objectives of allowing such passive 
investors. More specifically, if a control group has de facto and de 
jure control of the applicant, we shall not construe the affiliation 
rules in a manner that causes the interests of passive investors to be 
attributed to the applicant.
    206. Applying these SBA affiliation rules, and affiliation would 
arise, for example, where an entity with an attributable interest in a 
broadband PCS applicant is under the control of another entity. An 
affiliation would also arise where an entity with an attributable 
interest in a broadband PCS applicant controls, or has the power to 
control, another entity. For example, if a 10 percent voting 
shareholder of a PCS applicant is also a shareholder in a large 
Corporation X, when should Corporation X be deemed an affiliate of the 
PCS applicant as a result of the shareholder's ownership interest in 
both entities? Under the SBA rules and the rules we adopt here, 
Corporation X would be deemed an affiliate of the applicant if the 
shareholder controlled or had the power to control Corporation X, in 
which case, Corporation X's gross revenues must be included in 
determining the applicant's gross revenues.
    207. For purposes of determining control, ownership interests will 
be calculated on a fully-diluted basis. Thus, for example, stock 
options, convertible debentures, and agreements to merge (including 
agreements in principle) will generally be considered to have a present 
effect on the power to control or own an interest in either an outside 
entity or the PCS applicant or licensee.\183\ We will treat such 
options, debentures, and agreements generally as though the rights held 
thereunder had been exercised.\184\ However, an affiliate cannot use 
such options and debentures to appear to terminate its control over or 
relationship with another concern before it actually does so.\185\
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    \183\We recognize that we have adopted a different rule for 
purposes of our broadband PCS-cellular ownership rules. See 47 
C.F.R. Sec. 24.204(d)(2)(v). In that context, however, our purpose 
was not to establish the financial position, or potential financial 
position, of applicants bidding in auctions.
    \184\See 13 C.F.R. Sec. 121.401(f). SBA's rules provide the 
following examples to guide the application of this provision:
    Example 1. If company ``A'' holds an option to purchase a 
controlling interest in company ``B,'' the situation is treated as 
though company ``A'' had exercised its rights and had become owner 
of a controlling interest in company ``B.'' The [annual revenues] of 
both concerns must be taken into account in determining size.
    Example 2. 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. [A and B are affiliates of each 
other].
    \185\Id. SBA's rules provide this example:
    If large company ``A'' holds 70% (70 of 100 outstanding shares) 
of the voting stock of company ``B'' and gives a third party an 
option to purchase 66 of the 70 shares owned by company ``A,'' 
company ``B'' will be deemed to be an affiliate of company ``A'' 
until the third party actually exercises its option to purchase such 
shares. In order to prevent large company ``A'' from circumventing 
the intent of the regulation which [gives] present effect to stock 
options, the option is not considered to have present effect in this 
case.
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    208. Voting and Other Trusts. In a similar vein, we also borrow 
from the SBA's rules and our own rules in other services to find 
affiliation under certain voting trusts in order to prevent a 
circumvention of eligibility rules. The SBA's rules provide that a 
voting trust, or similar agreement, cannot be used to separate voting 
power from beneficial ownership of voting stock for the purpose of 
shifting control of or the power to control an outside concern, if the 
primary purpose of the trust is to meet size eligibility rules.\186\ 
Similarly, under the Commission's broadcast multiple ownership rules, 
stock interests held in trust may be attributed to any person who holds 
or shares the power to vote such stock, has the sole power to sell such 
stock, has the right to revoke the trust at will or to replace the 
trustee at will.\187\ Also, under the broadcast rules, if a trustee has 
a familial, personal or extra-trust business relationship to the 
grantor or the beneficiary of a trust, the stock interests held in 
trust will be considered assets of the grantor or beneficiary, as 
appropriate.\188\ Because we believe the broadcast rules provide more 
definitive guidance in this particular area, we shall use them as a 
model for the affiliation rules adopted here. Thus, for example, if an 
investor with an attributable interest in a PCS applicant holds a 
beneficial interest in stock of another firm that amounts to a 
controlling interest in that other firm, depending on the identity of 
the trustee, the other firm may be considered an affiliate and its 
assets and gross revenues may be attributed to the PCS applicant.
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    \186\13 CFR Sec. 121.401(g).
    \187\See 47 CFR Sec. 73.3555 note 2(e).
    \188\Id.
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    209. Officers, Directors and Key Employees. Under the SBA's 
affiliation rules, affiliations also generally arise where persons 
serve as the officers, directors or key employees of another concern 
and they represent a majority or controlling element of that other 
concern's board of directors and/or management of the outside 
entity.\189\ We shall adopt an identical rule. Thus, if a person with 
an attributable interest in a broadband PCS applicant, through his or 
her other key employment positions or positions on the board of another 
firm, controls that other firm, then the other firm will be considered 
an affiliate of the applicant. Such affiliations may or may not result 
in the applicant's exceeding our size limitations. As this rule 
reflects, for purposes of attributing the financial position of an 
outside entity in this context, officers and directors of an outside 
concern are not foreclosed entirely from holding attributable or non-
attributable interests in a PCS applicant. Whether or not such persons 
control the outside entity, we also do not want to prohibit these 
persons, who may be experienced in the telecommunications, finance, or 
communications and equipment industries, from assisting start-up 
companies in PCS by serving as officers or directors of the applicant. 
Thus, under our general attribution rule, if such persons serving as 
officers or directors of the applicant do not control the applicant or 
otherwise have an attributable interest in the applicant, their outside 
affiliations (even if controlling) will not be considered at all for 
purposes of determining the applicant's eligibility under our 
rules.\190\
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    \189\See 13 CFR Sec. 121.401(h). 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. 13 CFR Sec. 121.405.
    \190\SBA's size standard affiliation rules also provide that 
affiliations can arise in a variety of other scenarios, such as 
where one concern is dependent upon another for contracts and 
business, where firms share joint facilities, or have joint venture 
of franchise license agreements. To the extent we believe these 
rules may have general applicability in the context of our policies 
for broadband PCS, we shall codify them in our affiliate rules. We 
caution parties that issues relating to de facto control of the 
applicant (or parties with attributable interests in the applicant) 
could also arise under arrangements not expressly codified in the 
rules.
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    210. Affiliation Through Identity of Interest: Family and Spousal 
Relationships. As expressed in the SBA's rules, an affiliation may 
arise not only through control, but out of an ``identity of interest'' 
between or among parties. See 13 CFR Sec. 121.401(a)(2)(iii). For 
example, affiliation can arise between or among members of the same 
family or persons with common investments in more than one concern. In 
determining who controls or has the power to control an entity, persons 
with an identity of interests may be treated as though they were one 
person. 13 CFR Sec. 121.401(d). For example, if two shareholders in 
Corporation X are both attributable shareholders in the PCS applicant, 
to the extent that together they have the power to control Corporation 
X, Corporation X may be deemed an affiliate of the applicant.
    211. Similarly, as under the SBA rules, we must consider spousal 
and other family relationships in determining whether an affiliation 
exists. Under the SBA rules for determining small business status, for 
example, members of the same family may be treated as though they were 
one person because they have an ``identity of interest.'' 13 CFR 
Sec. 121.401(d). Likewise, in order to determine whether individuals 
are economically disadvantaged, the SBA rules governing eligibility for 
participation in the government's ``section 8(a)'' program for socially 
and economically disadvantaged small businesses have special provisions 
for attributing spousal interests. The latter rules provide generally 
that half of the jointly-owned interests of an applicant and his or her 
spouse must be attributed to the applicant for purposes of determining 
the applicant's net worth. See 13 CFR Sec. 124.106(a)(2)(i)(A)(1).
    212. In the context of the auction eligibility rules at issue here, 
we begin by clarifying that our reason for considering spousal and 
kinship relationships is not to determine whether the spouse or other 
kin of a woman-owned applicant actually is controlling the applicant, 
thereby violating our eligibility rules for woman-owned businesses. As 
discussed above, our rules do not embody any presumptions concerning 
spousal control in that context.\191\ Rather, our objective here is to 
ensure both that entities permitted to bid in the entrepreneurs' blocks 
are actually in need of special financial assistance and that otherwise 
ineligible entities do not circumvent the rules prohibiting entry by 
funding family members that purport to be eligible applicants.
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    \191\See supra 189.
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    213. In formulating these rules, we need to consider also that, as 
a practical matter, it will not be possible for us prior to the 
auctions to resolve all questions that pertain to the individual 
circumstances of particular applicants. Furthermore, if we determine 
subsequent to an auction that a winning bidder in fact was ineligible 
to bid because of spousal or kinship relationships, not only will 
authorization of service be delayed but, as discussed above, 
disqualified applicants may be subject to substantial penalties. In 
these circumstances, we think that the public interest requires that we 
endeavor, insofar as possible, to establish brightline tests for 
determining when the financial interests of spouses and other kin 
should be attributed to the applicant.
    214. We have decided that, for purposes of determining whether the 
financial limitations in our eligibility rules have been met, we will 
in every instance attribute the financial interests of an applicant's 
spouse to the applicant. This will resolve any concern that an 
applicant might transfer his or her assets to a spouse in order to 
satisfy the personal net worth or control restrictions that apply to 
eligible entities. For example, an applicant could not transfer stock 
or other assets to his or her spouse and thereby dispose of interests 
that, if held by the applicant, would render the applicant ineligible. 
Just as importantly, this approach will resolve any concern that an 
applicant might participate in bidding in the entrepreneurs' blocks by 
using the personal assets of an ineligible spouse, which would defeat 
entirely the objective of excluding very large entities from bidding in 
these blocks.
    215. In adopting this rule, we fully recognize that instances could 
arise in which, if all factors were considered, attributing a spouse's 
financial interests to the applicant could lead to harsh results. As a 
general matter, however, we think it provides a workable bright-line 
standard that resolves fully our policy concerns and avoids undesirable 
ambiguity concerning the nature of our requirements. As in the SBA 
rules, however, one exception is clearly warranted; this affiliation 
standard would not apply if the applicant and his or her spouse are 
subject to a legal separation recognized by a court of competent 
jurisdiction. In calculating their personal net worth, investors in the 
applicant who are legally separated must, of course, still include 
their share of interests in community property held with a spouse.
    216. As indicated above, circumstances could also arise in which 
other kinship relationships are used as a means to evade our 
eligibility requirements. Because we believe kinship relationships in 
many cases do not present the same potential for abuse that exists with 
spousal relationships, particularly in terms of the ``identity of 
interests'' that are likely to exist between the persons involved, we 
shall adopt a more relaxed standard for determining when kinship 
interests must be attributed to applicants. In this area, we shall 
follow the same standard that is applied by the SBA when interpreting 
its ``identity of interest'' rule described above. Specifically, an 
identity of interests between family members and applicants will be 
presumed to exist, but the presumption can be rebutted by showing that 
the family members are estranged, or that their family ties are remote, 
or that the family members are not closely related in business matters. 
See generally Texas-Capital Contractors, Inc. v. Abdnor, 933 F.2d 261 
(5th Cir. 1990). For purposes of determining who is a family member 
under this rule, we shall use a definition that is identical to the 
definition of ``immediate family member'' in the SBA's rules, 13 CFR 
Sec. 124.100.
    217. In appropriate cases, an applicant should be able to rebut the 
presumption regarding kinship affiliations with relative ease, simply 
by demonstrating that the applicant has no close relationship in 
business matters with the relevant family members. Of course, should 
such business relationships arise with a winning applicant after the 
auction, we might need to consider whether the applicant intended to 
circumvent the requirements of our eligibility rules. Our holding 
period rule, which, as discussed above, requires that winning bidders 
in the entrepreneurs' blocks maintain an ownership structure meeting 
our eligibility requirements for five years, will serve as an 
additional safeguard against possible abuses arising from kinship 
relationships.

VIII. Conclusion, Procedural Matters, and Ordering Clauses

A. Conclusion

    218. In fashioning rules for competitive bidding for broadband PCS 
licenses, we seek to promote the public policy goals set forth for us 
by Congress. We believe that the rules adopted in this Fifth Report and 
Order satisfy this objective. These rules should facilitate the rapid 
implementation of new broadband communications services through 
advanced technologies and efficient spectrum use, thus advancing the 
public interest by providing consumers with competitive and innovative 
wireless voice and data services and also fostering economic growth. 
The rules will allow for the public to recover a portion of the value 
of the public spectrum, and will promote access to broadband PCS 
services by consumers, producers and new entrants by ensuring that 
small businesses, rural telephone companies and businesses owned by 
minorities and women will have genuine opportunities to participate in 
the auctions and in the provision of service. We expect that the advent 
of PCS will benefit consumers by raising the overall level of 
competition in many already competitive segments of the 
telecommunications industry and providing competition in others for the 
first time, promote job creation in the communications and information 
sector of the domestic economy, and enhance productivity and efficiency 
in industry as a whole.

B. Final Regulatory Flexibility Analysis

    219. Pursuant to the Regulatory Flexibility Act of 1980, an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice 
of Proposed Rule Making in PP Docket No. 93-253. Written comments on 
the IRFA were requested. The Commission's final analysis is as follows:
    220. Need for and purpose of the action. This rule making 
proceeding was initiated to implement Section 309(j) of the 
Communications Act, as amended. The rules adopted herein will carry out 
Congress's intent to establish a system of competitive bidding for 
broadband PCS licenses. The rules adopted herein also will carry out 
Congress's intent to ensure that small businesses, rural telephone 
companies, and businesses owned by women and minorities are afforded an 
opportunity to participate in the provision of spectrum-based services.
    221. Issues raised in response to the IRFA. The IRFA noted that the 
proposals under consideration in the NPRM included the possibility of 
new reporting and recordkeeping requirements for a number of small 
business entities. No commenters responded specifically to the issues 
raised in the IRFA. We have made some modifications to the proposed 
requirements as appropriate.
    222. Significant alternatives considered and rejected. All 
significant alternatives have been addressed in the Fifth Report and 
Order.

C. Ordering Clauses

    223. Accordingly, it is ordered that part 24 of the Commission's 
Rules is amended as set forth in the attachment hereto.
    224. It is further ordered that the rules changes made herein will 
become effective 30 days after their publication in the Federal 
Register. This action is taken pursuant to Sections 4(i), 303(r) and 
309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 
Secs. 154(i), 303(r) and 309(j).

List of Subjects in 47 CFR Part 24

    Radio.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Final Rules

    Part 24 of Chapter I of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

    1. The authority citation for Part 24 continues to read as follows:

    Authority: Secs. 4, 301, 302, 303, 309 and 332, 48 Stat. 1066, 
1082, as amended; 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless 
otherwise noted.


Sec. 24.204  [Amended]

    2. Section 24.204 is amended by replacing references to ``Section 
24.305'' and ``Section 24.307'' in paragraphs (f)(1) and (f)(2), 
respectively, with ``Sec. 24.705'' and ``Sec. 24.707''.
    3. A new subpart H consisting of Secs. 24.701 through 24.720 is 
added to Part 24 to read as follows:

Subpart H--Competitive Bidding Procedures for Broadband PCS

Sec.
24.701  Broadband PCS subject to competitive bidding.
24.702  Competitive bidding design for Broadband PCS licensing.
24.703  Competitive bidding mechanisms.
24.704  Withdrawal, default and disqualification penalties.
24.705  Bidding application (FCC Form 175 and 175-S Short-Form).
24.706  Submission of upfront payments and down payments.
24.707  Long-form applications.
24.708  License grant, denial, default, and disqualification.
24.709  Eligibility for licenses for frequency Blocks C and F.
24.710  Limitation on licenses won at auction for frequency Blocks C 
and F.
24.711  Installment payments for licenses for frequency Blocks C and 
F.
24.712  Bidding credits for licenses for frequency Blocks C and F.
24.713  Tax certificates.
24.714  Eligibility for partitioned licenses.
24.720  Definitions.

Subpart H--Competitive Bidding Procedures for Broadband PCS


Sec. 24.701  Broadband PCS subject to competitive bidding.

    Mutually exclusive initial applications to provide broadband PCS 
service are subject to competitive bidding procedures. The general 
competitive bidding procedures found in 47 CFR Part 1, Subpart Q will 
apply unless otherwise provided in this part.


Sec. 24.702  Competitive bidding design for Broadband PCS licensing.

    (a) The Commission will employ the following competitive bidding 
designs when choosing from among mutually exclusive initial 
applications to provide broadband PCS service:
    (1) Simultaneous multiple round auctions.
    (2) Sequential auctions.
    (b) The Commission may design and test alternative procedures. The 
Commission will announce by Public Notice before each auction the 
competitive bidding design to be employed in a particular auction.
    (c) The Commission may use combinatorial bidding, which would allow 
bidders to submit all or nothing bids on combinations of licenses, in 
addition to bids on individual licenses. The Commission may require 
that to be declared the high bid, a combinatorial bid must exceed the 
sum of the individual bids by a specified amount or percentage. 
Combinatorial bidding may be used with any type of auction design.
    (d) The Commission may use single combined auctions, which combine 
bidding for two or more substitutable licenses and award licenses to 
the highest bidders until the available licenses are exhausted. This 
technique may be used in conjunction with any type of auction.


Sec. 24.703  Competitive bidding mechanisms.

    (a) Sequencing. The Commission will establish and may vary the 
sequence in which broadband PCS licenses will be auctioned.
    (b) Grouping. In the event the Commission uses either a 
simultaneous multiple round competitive bidding design or combinatorial 
bidding, the Commission will determine which licenses will be auctioned 
simultaneously or in combination.
    (c) Reservation Price. The Commission may establish a reservation 
price, either disclosed or undisclosed, below which a license subject 
to auction will not be awarded.
    (d) Minimum Bid Increments. The Commission will, by announcement 
before or during an auction, require minimum bid increments in dollar 
or percentage terms.
    (e) Stopping Rules. The Commission will establish stopping rules 
before or during multiple round auctions in order to terminate an 
auction within a reasonable time.
    (f) Activity Rules. The Commission will establish activity rules 
which require a minimum amount of bidding activity. In the event that 
the Commission establishes an activity rule in connection with a 
simultaneous multiple round auction, each bidder will be entitled to 
request and will be automatically granted one waiver of such rule 
during each auction stage.
    (g) Suggested Minimum Bid. The Commission may establish suggested 
minimum bids on each license. Bids below the suggested minimum bid 
would count as activity under the activity rule only if no bids at or 
above the suggested minimum bid are received.


Sec. 24.704  Withdrawal, default and disqualification penalties.

    (a) When the Commission conducts a simultaneous multiple round 
auction pursuant to Sec. 24.702(a)(1), the Commission will impose 
penalties on bidders who withdraw high bids during the course of an 
auction, who default on payments due after an auction closes, or who 
are disqualified.
    (1) Bid withdrawal prior to close of auction. A bidder who 
withdraws a high bid during the course of an auction will be subject to 
a penalty equal to the difference between the amount bid and the amount 
of the winning bid the next time the license is offered by the 
Commission. No withdrawal penalty would be assessed if the subsequent 
winning bid exceeds the withdrawn bid. This penalty amount will be 
deducted from any upfront payments or down payments that the 
withdrawing bidder was deposited with the Commission.
    (2) Default or disqualification after close of auction. If a high 
bidder defaults or is disqualified after the close of such an auction, 
the defaulting bidder will be subject to the penalty in paragraph 
(a)(1) of this section plus an additional penalty equal to three (3) 
percent of the subsequent winning bid. If the subsequent winning bid 
exceeds the defaulting bidder's bid amount, the 3 percent penalty will 
be calculated based on the defaulting bidder's bid amount. These 
amounts will be deducted from any upfront payments or down payments 
that the defaulting or disqualified bidder has deposited with the 
Commission.
    (b) When the Commission conducts sequential oral auctions pursuant 
to Sec. 24.702(a)(2), the Commission may modify the penalties set forth 
in subsection (a) above to be paid in the event of bid withdrawal, 
default or disqualification; provided, however, that such penalties 
shall not exceed the penalties specified above.
    (1) If a bid is withdrawn before the Commission has declared the 
bidding to be closed for the license bid on, no bid withdrawal penalty 
will be assessed.
    (2) If a bid is withdrawn after the Commission has declared the 
bidding to be closed for the license bid on, the penalty specified in 
paragraph (a)(2) of this section will apply.


Sec. 24.705  Bidding application (FCC Form 175 and 175-S Short-Form).

    All applicants to participate in competitive bidding for broadband 
PCS licenses must submit applications on FCC Forms 175 and 175-S 
pursuant to the provisions of Secs. 1.2105 of the Chapter and 24.813. 
The Commission will issue a Public Notice announcing the availability 
of broadband PCS licenses and, in the event that mutually exclusive 
applications are filed, the date of the auction for those licenses. 
This Public Notice also will specify the date on or before which 
applicants intending to participate in a broadband PCS auction must 
file their applications in order to be eligible for that auction, and 
it will contain information necessary for completion of the application 
as well as other important information such as the materials which must 
accompany the Forms, any filing fee that must accompany the application 
or any upfront payment that will need to be submitted, and the location 
where the application must be filed.


Sec. 24.706  Submission of upfront payments and down payments.

    (a) Where the Commission uses simultaneous multiple round auctions 
or oral sequential auctions, bidders will be required to submit an 
upfront payment in accordance with Sec. 1.2106 of this Chapter and 
Sec. 24.711(a)(1).
    (b) Winning bidders in an auction must submit a down payment to the 
Commission in accordance with Sec. 1.2107(b) of this Chapter and 
Sec. 24.711(a)(2).


Sec. 24.707  Long-form applications.

    Each winning bidder will be required to submit a long-form 
application on FCC Form 401, as modified, within ten (10) business days 
after being notified that it is the winning bidder. Applications on FCC 
Form 401 shall be submitted pursuant to the procedures set forth in 
Subpart I of this Part and Sec. 1.2107 (c) and (d) of this Chapter and 
any associated Public Notices. Only auction winners (and applicants 
seeking partitioned licenses pursuant to agreements with auction 
winners under Sec. 24.714) will be eligible to file applications on FCC 
Form 401 for initial broadband PCS licenses in the event of mutual 
exclusivity between applicants filing Form 175. Winning bidders need 
not complete Schedule B to Form 401.


Sec. 24.708  License grant, denial, default, and disqualification.

    (a) Except with respect to entities eligible for installment 
payments (see Sec. 24.711), each winning bidder will be required to pay 
the balance of its winning bid in a lump sum payment within five (5) 
business days following the award of the license. Grant of the license 
will be conditioned upon full and timely payment of the winning bid 
amount.
    (b) A bidder who withdraws its bid subsequent to the close of 
bidding, defaults on a payment due or is disqualified will be subject 
to the penalties specified in Sec. 1.2109 of this Chapter.


Sec. 24.709  Eligibility for licenses for frequency Blocks C and F.

    (a) General Rule. (1) No application is acceptable for filing and 
no license shall be granted for frequency Block C or frequency Block F, 
unless the applicant, together with its affiliates and persons holding 
interests in the applicant and their affiliates, have gross revenues of 
less than $125 million in each of the last two calender years and total 
assets of less than $500 million at the time the applicant's short-form 
(Form 175) application is filed.
    (2) No application is acceptable for filing and no license shall be 
granted for frequency Block C or frequency Block F, if, at the time the 
application is filed, the applicant (or person holding an interest in 
the applicant) is an individual and he or she (or affiliates) has $100 
million or greater in personal net worth at the time the applicant's 
short-form (Form 175) application is filed.
    (3) Any licensee awarded a license pursuant to this section (or 
pursuant to Sec. 24.839(d)(2)) shall maintain its eligibility until at 
least five years from the date of initial license grant, except that 
increased gross revenues, increased total assets or personal net worth 
due to non-attributable equity investments (i.e., from sources whose 
revenues, total assets and personal net worth are not considered under 
paragraph (b)(4) of this section), debt financing, revenue from 
operations, business development or expanded service shall not be 
considered.
    (b) Attribution and Aggregation of Gross Revenues, Total Assets, 
and Personal Net Worth. (1) Except as specified in paragraphs (b)(3) 
and (4) of this section, the gross revenues and total assets of the 
applicant (or licensee) and its affiliates, and other persons that hold 
interests in the applicant (or licensee) and their affiliates shall be 
considered on a cumulative basis and aggregated for purposes of 
determining whether the applicant (or licensee) is eligible for a 
license for frequency Block C or frequency Block F under this section.
    (2) the personal net worth of individual applicants (or licensees) 
and other persons that hold interests in the applicant (or licensee), 
and their affiliates, if under the amount in paragraph (a)(2) of this 
section, shall not be considered for purposes of determining whether 
the applicant (or licensee) is eligible for a license for frequency 
Block C or frequency Block F under this section.
    (3) Where an applicant (or licensee) is a consortium of small 
businesses, the gross revenues and total assets of each small business 
shall not be aggregated.
    (4) (i) The gross revenues, total assets and personal net worth of 
a person that holds an interest in the applicant (or licensee) shall 
not be considered for purposes of determining financial eligibility so 
long as:
    (A) Such person holds no more than 25 percent of the applicant's 
(or licensee's) passive equity and is not a member of the applicant's 
(or licensee's) control group; and
    (B) The applicant (or licensee) has a control group that owns at 
least 25 percent of the applicant's (or licensee's) total equity and, 
if a corporation, holds at least 50.1 percent of the applicant's (or 
licensee's) voting interests.
    (ii) The gross revenues, total assets and personal net worth of a 
person that holds an interest in the applicant (or licensee) shall not 
be considered for purposes of determining financial eligibility so long 
as:
    (A) Such person holds no more than 49.9 percent of the applicant's 
(or licensee's) passive equity and is not a member of the applicant's 
(or licensee's) control group; and
    (B) The applicant (or licensee) has a control group that consists 
entirely of members of minority groups and/or women and that owns at 
least 50.1 percent of the applicant's (or licensee's) total equity and, 
if a corporation, at least 50.1 percent of the applicant's (or 
licensee's) voting interests.
    (iii) The gross revenues, total assets and personal net worth of a 
person that holds an interest in the applicant (or licensee) shall not 
be considered for purposes of determining financial eligibility so long 
as:
    (A) Such person owns no more than 25 percent of the applicant's (or 
licensee's) total equity, which shall include not more than 15 percent 
of the voting stock;
    (B) The applicant (or licensee) is a publicly traded corporation; 
and
    (C) The applicant (or licensee) has an eligible control group that 
holds at least 50.1 percent of the voting stock, if a corporation, and 
at least 25 percent of the applicant's (or licensee's) equity.

    Note: Ownership interests shall be calculated on a fully diluted 
basis; all agreements such as warrants, stock options and 
convertible debentures will generally be treated as if the rights 
thereunder already have been fully exercised, except that the such 
agreements may not be used to appear to terminate or divest 
ownership interests before they actually do so.

    (c) Short-Form Application Certification; Long-Form Application 
Disclosure. (1) All applicants for a license for frequency Block C or 
frequency Block F shall certify on its short-form application (Form 
175) that they are eligible to bid on and obtain licenses in those 
blocks pursuant to this section.
    (2) In addition to the requirements in subpart I, all applicants 
that are winning bidders on frequency Blocks C and F shall, in an 
exhibit to their long-form applications--
    (i) Identify each member of the applicant's control group, 
regardless of the size of the member's total interest in the applicant, 
and each member's minority group or gender classification, if 
applicable;
    (ii) Disclose the gross revenues and total assets of the applicant 
and its affiliates, and other persons that hold interests in the 
applicant and their affiliates (including all members of the 
applicant's control group), unless exempted under paragraph (b)(4) of 
this section; and
    (iii) Certify that the personal net worth of the applicant (if an 
individual), each affiliates and each person that hold an interest in 
the applicant is less than $100 million.
    (d) Audits. Applicants and licensees claiming eligibility under 
this section shall be subject to random audits by the Commission.
    (e) Definitions. The terms affiliate, business owned by members of 
minority groups and women, consortium of small businesses, control 
group, gross revenues, members of minority groups, passive equity, 
personal net worth, publicly traded corporation, and total assets used 
in this section are defined in Sec. 24.720.


Sec. 24.710  Limitation on licenses won at auction for frequency Blocks 
C and F.

    (a) No applicant may be deemed the winning bidder of more than 98 
of the licenses available for frequency Blocks C and F. Any applicant 
who is the high bidder for more than 98 of the licenses available for 
frequency Blocks C and F shall be required to withdraw its bid(s) for a 
sufficient number of licenses to achieve compliance with this section 
and may be subject to bid withdrawal penalties under Sec. 24.704.
    (b) For purposes of paragraph (a) of this section, licenses will be 
deemed to be won by the same bidder if an entity that controls or has 
the power to control any applicant that wins licenses at the auction, 
has the power to control any other applicant that wins licenses at the 
auction.


Sec. 24.711  Installment payments for licenses for frequency Blocks C 
and F.

    (a) Except as provided in paragraphs (b), (c) and (d) of this 
section, an applicant that has $75 million or less in gross revenues in 
each of the preceding two calendar years and that is a winning bidder 
for frequency Blocks C or F in a BTA market other than the fifty 
largest markets and any eligible applicant that is a winning bidder for 
frequency Blocks C or F in one of the fifty largest BTA markets, may 
pay the full amount of its winning bid in installments as follows:
    (1) Each eligible bidder shall pay an upfront payment of $0.015 per 
MHz per pop for the maximum number of licenses (in terms of MHz-pops) 
on which it intends to bid.
    (2) Each winning bidder shall make a down payment equal to ten 
percent of their winning bids; a winning bidder shall bring its total 
amount on deposit with the Commission (including upfront payment) to 
five percent of its winning bids within five business days after the 
auction closes and the remainder of the down payment (five percent) 
shall be paid within five business days after the application required 
by Sec. 24.809(b) is granted.
    (3) Each eligible licensee shall pay the remainder of its winning 
bids in installment payments with interest imposed based on the rate 
for ten-year U.S. Treasury obligations applicable on the date the 
license is granted, plus 2.5 percent; interest-only payments for the 
first year; and principal and interest payments amortized over the 
remaining nine years of the license.
    (4) For purposes of determining whether an applicant has $75 
million or less in gross revenues, gross revenues shall be attributed 
to the applicant and aggregated as provided in Sec. 24.709(b), except 
that Sec. 24.709(b)(4)(iii) shall not apply.
    (b) An applicant that qualifies as a business owned by members of 
minority groups and/or women may pay the full amount of its winning bid 
in installments in the same manner as in paragraphs (a)(1) and (a)(2) 
of this section, except that interest-only payments may be paid for the 
first three years and interest shall be paid at the rate for ten-year 
U.S. Treasury obligations applicable on the date the license is 
granted.
    (c) An applicant that qualifies as a small business or as a 
consortium of small businesses may pay the full amount of its winning 
bid in installments in the same manner as in paragraphs (a)(1) and 
(a)(2) of this section, except that interest-only payments may be paid 
for the first two years.
    (d) An applicant that qualifies as a small business owned by 
members of minority groups and/or women or as a consortium of small 
businesses owned by members of minority groups and/or women may pay the 
full amount of its winning bid in installments in the same manner as in 
paragraphs (a)(1) and (a)(2) of this section, except that interest-only 
payments may be paid for the first five years and interest shall be 
paid at the rate for ten-year U.S. Treasury obligations applicable on 
the date the license is granted.
    (e) Unjust Enrichment. (1) If a licensee that utilizes installment 
financing under this section seeks to assign or transfer control of its 
license to an entity not meeting the eligibility standards for 
installment payments, the licensee must make full payment of the 
remaining unpaid principal and any unpaid interest accrued through the 
date of assignment or transfer as a condition of approval.
    (2) If a licensee that utilizes installment financing under this 
section seeks to make any change in ownership structure that would 
result in the licensee losing eligibility for installment payments, the 
licensee shall first seek Commission approval and must make full 
payment of the remaining unpaid principal and any unpaid interest 
accrued through the date of assignment or transfer as a condition of 
approval. Increases in gross revenues or total assets that result from 
equity investments that are not attributable to the licensee under 
Sec. 24.709(b)(4), revenues from operations, business development or 
expanded service shall not be considered changes in ownership structure 
under this paragraph.
    (3) If a licensee seeks to make any change in ownership that would 
result in the licensee qualifying for a less favorable installment plan 
under paragraphs (a), (b) or (c) of this section, the licensee shall 
seek Commission approval and must adjust its payment plan to reflect 
its new eligibility status under paragraphs (a), (b) or (c) of this 
section. A licensee may not switch its payment plan to a more favorable 
plan.


Sec. 24.712  Bidding credits for licenses for frequency Blocks C and F.

    (a) A winning bidder that qualifies as a small business or a 
consortium of small businesses may use a bidding credit of ten percent 
to lower the cost of its winning bid.
    (b) A winning bidder that qualifies as a business owned by members 
of minority groups and/or women may use a bidding credit of fifteen 
percent to lower the cost of its winning bid.
    (c) A winning bidder that qualifies as a small business owned by 
members of minority groups and/or women or a consortium of small 
business owned by members of minority groups and/or women may use a 
bidding credit of twenty-five percent to lower the cost of its winning 
bid.
    (d) Unjust Enrichment. (1) If a licensee that utilizes a bidding 
credit under this section seeks to assign or transfer control of its 
license to an entity not meeting the eligibility standards for bidding 
credits or seeks to make any other change in ownership that would 
result in the licensee no longer qualifying for bidding credits under 
this section, the licensee must seek Commission approval and reimburse 
the government for the amount of the bidding credit as a condition of 
the approval of such assignment, transfer or other ownership change.
    (2) If a licensee that utilizes a bidding credit under this section 
seeks to assign or transfer control of its license to an entity meeting 
the eligibility standards for lower bidding credit or seeks to make any 
other change in ownership that would result in the licensee qualifying 
for a lower bidding credit under this section, the licensee must seek 
Commission approval and reimburse the government for the difference 
between the amount of the bidding credit obtained by the licensee and 
the bidding credit for which the assignee, transferee or licensee is 
eligible under this section as a condition of the approval of such 
assignment, transfer or other ownership change.


Sec. 24.713   Tax certificates.

    (a) Any non-controlling initial investor in a business owned by 
members of minority groups and/or women and who provides ``start-up'' 
financing, which allows such business to acquire a broadband PCS 
license(s), and any non-controlling investor who purchases an interest 
in a broadband PCS license held by a business owned by members of 
minority groups and/or women within the first year after license 
issuance, may, upon the sale or such investment or interest, request 
from the Commission a tax certificate.

    Note: For purposes of this subsection, non-controlling investor 
means any person who is not part of the control group of a business 
owned by members of minority groups and/or women as defined in 
Sec. 24.720(k).

    (b) Any broadband PCS licensee who assigns or transfer control of 
its license to a business owned by members of minority groups and/or 
women may request that the Commission issue the licensee a tax 
certificate. Any licensee that obtain a broadband PCS license through 
the benefit of a tax certificates under this subsection shall not 
assign or transfer control of its license within one year of its 
license grant date, unless such assignee or transferee qualifies as a 
business owned by members of minority groups and/or women, which shall 
not assign or transfer control of the license within one year of the 
grant date of the assignment or transfer.
    (c) Any licensee in the Domestic Public Cellular Radio 
Telecommunications Service who assigns or transfer control of its 
cellular license(s) to a business owned by members of minority groups 
and/or women may request that the Commission issue the licensee a tax 
certificate. Such tax certificates will only be issued if the principal 
purpose of the assignment or transfer of control is to allow the 
cellular licensee to become eligible for a broadband PCS license(s) 
beyond the limitations imposed on the cellular licensee by Sec. 24.204. 
Any licensee that obtains a cellular license through the benefit of a 
tax certificate under this paragraph shall not assign or transfer 
control of its license within one year of its license grant date, 
unless such assignee or transferee qualifies as a business owned by 
members of minority groups and/or women, which shall not assign or 
transfer control of the license within one year of the grant date of 
the assignment or transfer.


Sec. 24.714   Eligibility for partitioned licenses

    (a) Notwithstanding Sec. 24.202, an applicant that is a rural 
telephone company, as defined in Sec. 24.720(e), may be granted a 
broadband PCS license that is geographically partitioned from a 
separately licensed MTA or BTA, so long as the MTA or BTA applicant or 
licensee has voluntarily agreed (in writing) to partition a portion of 
the license to the rural telephone company.
    (b) If partitioned licenses are being applied for in conjunction 
with a license(s) to be awarded through competitive bidding 
procedures--
    (1) The applicable procedures for filing short-form applications 
and for submitting upfront payments and down payments contained in this 
part and part 1 of this Chapter shall be followed by the applicant, who 
must disclose as part of its short-form application all parties to 
agreement(s) with or among rural telephone companies to partition the 
license pursuant to this section, if won at auction (see 47 CFR 
Sec. 1.2105(a)(2)(viii));
    (2) Each rural telephone company that is a party to an agreement to 
partition the license shall file a long-form application for its 
respective, mutually agreed-upon geographic area together with the 
application for the remainder of the MTA or BTA filed by the auction 
winner.
    (c) If the partitioned license is being applied for as a partial 
assignment of the MTA or BTA license following grant of the initial 
license, request for authorization for partial assignment of a license 
shall be made pursuant to Sec. 24.839.
    (d) Each application for a partitioned area (long-form initial 
application or partial assignment application) shall contain a 
partitioning plan that must propose to establish a partitioned area to 
be licensed that meets the following criteria:
    (1) Conforms to established geopolitical boundaries (such as county 
lines);
    (2) Includes the wireline service area of the rural telephone 
company applicant; and
    (3) Is reasonably related to the rural telephone company's wireline 
service area.
    Note: A partitioned service area will be presumed to be reasonably 
related to the rural telephone company's wireline service area if the 
partitioned service area contains no more than twice the population 
overlap between the rural telephone company's wireline service area and 
the partitioned area.
    (e) Each licensee in each partitioned area will be responsible for 
meeting the construction requirements in its area (see Sec. 24.203).


Sec. 24.720   Definitions.

    (a) Scope. The definitions in this section apply to Secs. 24.709-
24.715, unless otherwise specified in those sections.
    (b) Small Business; Consortium of Small Businesses.
    (1) A small business is an entity that
    (i) Together with its affiliates has average annual gross revenues 
that are not more than $40 million for the preceding three calendar 
years;
    (ii) Has no attributable investor or affiliate that has a personal 
net worth of $40 million or more;
    (iii) Has a control group all of whose members and affiliates are 
considered in determining whether the entity meets the $40 million 
annual gross revenues and personal net worth standards; and
    (iv) Such control group holds 50.1 percent of the entity's voting 
interest, if a corporation, and at least 25 percent of the entity's 
equity on a fully diluted basis, except that a business owned by 
members of minority groups and/or women (as defined in paragraph(c) of 
this section) may also qualify as a small business if a control group 
that is 100 percent composed of members of minority groups and/or women 
holds 50.1 percent of the entity's voting interests, if a corporation, 
and 50.1 percent of the entity's total equity on a fully diluted basis 
and no single other investor holds more than 49.9 percent of passive 
equity in the entity. Ownership interests shall be calculated on a 
fully diluted basis; all agreements such as warrants, stock options and 
convertible debentures will generally be treated as if the rights 
thereunder already have been fully exercised, except that the such 
agreements may not be used to appear to terminate or divest ownership 
interests before they actually do so.
    (2) For purposes of determining whether an entity meets the $40 
million gross revenues and $40 million personal net worth standards in 
paragraph (b)(1) of this section, gross revenues and personal net worth 
shall be attributed to the entity and aggregated as pro-
vided in Sec. 24.709(b), except that
Sec. 24.709(b)(4)(iii) shall not apply.
    (3) A small business consortium is a conglomerate organization 
formed as a joint venture between mutually-independent business firms, 
each of which individually satisfies the definition of a small business 
in paragraph (b)(1) of this section.
    (c) Business Owned by Members of Minority Groups and/or Women. A 
business owned by members of minority groups and/or women is an entity:
    (1) That has a control group composed 100 percent of members of 
minority groups and/or women who are United States Citizens, and
    (2) Such control group owns and holds 50.1 percent of the voting 
interests, if a corporation, and
    (i) Owns and holds 50.1 percent of the total equity in the entity, 
provided that all other investors hold passive interests; or
    (ii) Holds 25 percent of the total equity in the entity, provided 
that no single other investor holds more than 25 percent passive equity 
interests in the entity. Ownership interests shall be calculated on a 
fully diluted basis; all agreements such as warrants, stock options and 
convertible debentures will generally be treated as if the rights 
thereunder already have been fully exercised, except that such 
agreements may not be used to appear to terminate or divest ownership 
interests before they actually do so.
    (d) Small Business Owned by Members of Minority Groups and/or 
Women; Consortium of Small Businesses Owned by Members of Minority 
Groups and/or Women. A small business owned by members of minority 
groups and/or women is an entity that meets the definitions in both 
paragraphs (b) and (c) of this section. A consortium of small 
businesses owned by members of minority groups and/or women a 
conglomerate organization formed as a joint venture between mutually-
independent business firms, each of which individually satisfies the 
definition of a small business in paragraphs (b)(1) and (c) of this 
section.
    (e) Rural Telephone Company. A rural telephone company is a local 
exchange carrier having 100,000 or fewer access lines, including all 
affiliates.
    (f) Gross Revenues. Gross revenues shall mean all income received 
by an entity, whether earned or passive, before any deductions are made 
for costs of doing business (e.g., cost of goods sold), as evidenced by 
audited quarterly financial statements for the relevant period.
    (g) Total Assets. Total assets shall mean the book value (except 
where generally accepted accounting principles (GAAP) require market 
valuation) of all property owned by an entity, whether real or 
personal, tangible or intangible, as evidenced by the most recent 
audited quarterly financial statements.
    (h) Personal Net Worth. Personal net worth shall mean the market 
value of all assets (real and personal, tangible and intangible) owned 
by an individual, less all liabilities (including personal guarantees) 
owned by the individual in his individual capacity or as a joint 
obligor.
    (i) Members of Minority Groups. Members of minority groups includes 
individuals of African American, Hispanic-surnamed, American Eskimo, 
Aleut, American Indian and Asian American extraction.
    (j) Passive Equity. Passive equity shall mean:
    (1) For corporations, non-voting stock or stock that includes no 
more than five percent of the voting equity;
    (2) For partnerships, joint ventures and other non-corporate 
entities, limited partnership interests and similar interests that do 
not afford the power to exercise control of the entity.
    (k) Control Group. A control group is an entity, or a group of 
individuals or entities that possesses de jure control and de facto 
control of an applicant or licensee, and as to which the applicant's or 
licensee's charters, bylaws, agreements and any other relevant 
documents (and amendments thereto) provide:
    (1) That the entity and/or its members own unconditionally at least 
50.1 percent of the total voting interests of a corporation;
    (2) That the entity and/or its members receive at least 50.1 
percent of the annual distribution of any dividends paid on the voting 
stock of a corporation;
    (3) That, in the event of dissolution or liquidation of a 
corporation, the entity and/or its members are entitled to receive 100 
percent of the value of each share of stock in its possession and a 
percentage of the retained earnings of the concern that is equivalent 
to the amount of equity held in the corporation; and
    (4) That the entity and/or its members have the right to receive 
dividends, profits and regular and liquidating distributions from the 
business in proportion to its interest in the total equity of the 
applicant or licensee.

    Note: Voting control does not always assure de facto control, 
such as, for example, when the voting stock of the control group is 
widely dispersed (see, e.g., Sec. 24.270(l)(2)(iii)).

    (l) Affiliate. (1) An individual or entity is an affiliate of:
    (i) An applicant; or
    (ii) A person holding an attributable interest in an applicant 
under Sec. 24.709 (both referred to herein as ``the applicant'') if 
such individual or entity--
    (A) Directly or indirectly controls or has the power to control the 
applicant, or
    (B) Is directly or indirectly controlled by the applicant, or
    (C) Is directly or indirectly controlled by a third party or 
parties that also controls or has the power to control the applicant, 
or
    (D) 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. 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 stock 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 to 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.
    (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. In a corporation where the officers and directors own 
various size blocks of stock 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 has the power 
to control a concern, persons with an identity of interest will be 
treated as though they were one person.

    Example. Two shareholders in Corporation Y each have 
attributable interests in the same PCS applilcation. 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 in Interest) 
are treated as though they are one person and Corporation Y would 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. In calculating 
their net worth, investors who are legally separated must include their 
share of interests in property held jointly with a spouse.
    (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. A owns a controlling interest in Corporation X. A's 
sister-in-law, B, has an attributable interest in a PCS 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.
    (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 are generally treated as though the 
rights held thereunder had been exercised. However, an affiliate cannot 
use such options and debentures to appear to terminate its control over 
another concern before it actually does so.

    Example 1. If company B holds an option to purchase a 
controlling interest in company A, who holds an attributable 
interest in a PCS 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. If a large company, BigCo, holds 70% (70 of 100 
outstanding shares) of the voting stock of company A, who holds an 
attributable interest in a PCS 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 A, and thus the 
applicant, until SmallCo actually exercises its option 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 effect 
in this case.
    Example 3. 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 these 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 or 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 determining whether the business operation is a joint 
venture.
    (ii) The parties to a joint venture are considered to be affiliated 
with each other.
    (m) Publicly Traded Corporation. A publicly traded corporation is a 
business entity organized under the laws of the United States whose 
shares, debt or other ownership interests are traded on an organized 
securities exchange within the United States.
    4. A new subpart I consisting of Secs. 24.801 through 24.844 is 
added to Part 24 to read as follows:

Subpart I--Interim Application, Licensing, and Processing Rules for 
Broadband PCS

Sec.
24.801  [Reserved]
24.802  [Reserved]
24.803  Authorization required.
24.804  Eligibility.
24.805  Formal and informal applications.
24.806  Filing of broadband PCS applications; Fees; Number of 
copies.
24.807  [Reserved]
24.808  [Reserved]
24.809  Standard application forms and permissive changes or minor 
modifications for the broadband Personal Communications Services.
24.810  [Reserved]
24.811  Miscellaneous forms.
24.812  [Reserved]
24.813  General application requirements.
24.814  [Reserved]
24.815  Technical content of applications; maintenance of list of 
station locations.
24.816  Station antenna structures.
24.817  [Reserved]
24.818  [Reserved]
24.819  Waiver of rules.
24.820  Defective applications.
24.821  Inconsistent or conflicting applications.
24.822  Amendment of application to participate in auction for 
licenses in the broadband Personal Communications Services filed on 
FCC Form 175.
24.823  Amendment of applications for licenses in the broadband 
Personal Communications Services (other than applications filed on 
FCC Form 175).
24.824  [Reserved]
24.825  Application for temporary authorizations.
24.826  Receipt of application; applications in the broadband 
Personal Communications Services filed on FCC Form 175 and other 
applications in the broadband Personnel Communications Services.
24.827  Public notice period.
24.828  Dismissal and return of applications.
24.829  Ownership changes and agreements to amend or to dismiss 
applications or pleadings.
24.830  Opposition to applications.
24.831  Mutually exclusive applications.
24.832  Consideration of applications.
24.833  [Reserved]
24.834  [Reserved]
24.835  [Reserved]
24.836  [Reserved]
24.837  [Reserved]
24.838  [Reserved]
24.839  Transfer of control or assignment of license.
24.840  [Reserved]
24.841  [Reserved]
24.842  [Reserved]
24.843  Extension of time to complete construction.
24.844  Termination of authorization.

Subpart I--Interim Application, Licensing, and Processing Rules for 
Broadband PCS


Sec. 24.801  [Reserved]


Sec. 24.802  [Reserved]


Sec. 24.803  Authorization required.

    No person shall use or operate any device for the transmission of 
energy or communications by radio in the services authorized by this 
part except as provided in this part.


Sec. 24.804  Eligibility.

    (a) General. Authorizations will be granted upon proper application 
if:
    (1) The applicant is qualified under all applicable laws and 
Commission regulations, policies and decisions;
    (2) There are frequencies available to provide satisfactory 
service; and
    (3) The public interest, convenience or necessity would be served 
by a grant.
    (b) Alien ownership. A broadband PCS authorization to provide 
Commercial Mobile Radio Service may not be granted to or held by:
    (1) Any alien or the representative of any alien.
    (2) Any corporation organized under the laws of any foreign 
government.
    (3) Any corporation of which any officer or director is an alien or 
of which more than one-fifth of the capital stock is owned of record or 
voted by aliens or their representatives or by a foreign government or 
representative thereof or any corporation organized under the laws of a 
foreign country.
    (4) Any corporation directly or indirectly controlled by any other 
corporation of which any officer or more than one-fourth of the 
directors are aliens, or of which more than one-fourth of the capital 
stock is owned of record or voted by aliens, their representatives, or 
by a foreign government or representative thereof, or by any 
corporation organized under the laws of a foreign country, if the 
Commission finds that the public interest will be served by the refusal 
or revocation of such license.
    (c) A broadband PCS authorization to provide Private Mobile Radio 
Service may not be granted to or held by a foreign government or a 
representative thereof.


Sec. 24.805  Formal and informal applications.

    (a) Except for an authorization under any of the conditions stated 
in Section 308(a) of the Communications Act of 1934 (47 U.S.C. 
Sec. 308(a)), the Commission may grant the following authorizations 
only upon written application received by it: station licenses; 
modifications of licenses; renewals of licenses; transfers and 
assignments of station licenses, or any right thereunder.
    (b) Except as may be otherwise permitted by this part, a separate 
written application shall be filed for each instrument of authorization 
requested. Applications may be:
    (1) ``Formal applications'' where the Commission has prescribed in 
this Part a standard form; or
    (2) ``Informal applications'' (normally in letter form) where the 
Commission has not prescribed a standard form.
    (c) An informal application will be accepted for filing only if:
    (1) A standard form is not prescribed or clearly applicable to the 
authorization requested;
    (2) It is a document submitted, in duplicate, with a caption which 
indicates clearly the nature of the request, radio service involved, 
location of the station, and the application file number (if known); 
and
    (3) It contains all the technical details and informational 
showings required by the rules and states clearly and completely the 
facts involved and authorization desired.


Sec. 24.806  Filing of broadband PCS applications; Fees; Numbers of 
copies.

    (a) As prescribed by Secs. 24.705, 24.707 and 24.809, standard 
formal application forms applicable to broadband PCS may be obtained 
from either:
    (1) Federal Communications Commission, Washington, DC 20554; or
    (2) By calling the Commission's Forms Distribution Center, (202) 
632-3676.
    (b) Applications to participate in competitive bidding for 
broadband PCS service must be filed on FCC Form 175 in accordance with 
the rules in Sec. 24.705 and Part 1, Subpart Q of this Chapter. In the 
event of mutual exclusivity between applicants filing FCC Form 175, 
only auction winners will be eligible to file subsequent long-form 
applications on FCC Form 401 to provide broadband PCS service. Mutually 
exclusive applications filed on FCC Form 175 are subject to competitive 
bidding under those rules. Broadband PCS applicants filing FCC Form 401 
need not complete Schedule B.
    (c) All applications for broadband PCS licenses (other than 
applications to participate in competitive bidding filed on FCC Form 
175) shall be submitted for filing to: Federal Communications 
Commission, Washington, DC 20554, Attention: Broadband PCS Processing 
Section.

Applications requiring fees as set forth at Part 1, Subpart G of this 
chapter must be filed in accordance with Sec. 0.401(b) of this Chapter.
    (d) All correspondence or amendments concerning a submitted 
application shall clearly identify the name of the applicant, applicant 
identification number or Commission file number (if known) or station 
call sign of the application involved, and may be sent directly to the 
Common Carrier Bureau, Broadband PCS Processing Section.
    (e) Except as otherwise specified, all applications, amendments, 
correspondence, pleadings and forms (including FCC Form 175) shall be 
submitted on one original paper copy and with three microfiche copies, 
including exhibits and attachments thereto, and shall be signed as 
prescribed by Sec. 1.743 of this Chapter. Filings of five pages or less 
are exempt from the requirement to submit on microfiche, as are 
emergency filings such as letters requesting special temporary 
authority. Those filing any amendments, correspondence, pleadings and 
forms must simultaneously submit the original hard copy which must be 
stamped ``original''. Abbreviations may be used if they are easily 
understood. In addition to the original hard copy, those filing 
pleadings, including pleadings under Sec. 1.2108 of this Chapter, shall 
also submit two paper copies as provided in Sec. 1.51 of this Chapter.
    (1) Microfiche copies. Each microfiche copy must be a copy of the 
signed original. Each microfiche copy shall be a 148mm x 105mm negative 
(clear transparent characters appearing on an opaque background) at 24x 
to 27x reduction for microfiche or microfiche jackets. One of the 
microfiche sets must be a silver halide camera master or a copy made on 
silver halide film such as Kodak Direct Duplicatory Film. The 
microfiche must be placed in paper microfiche envelopes and submitted 
in a B6 (125 mm x 176 mm) or 5 x 7.5 inch envelope. All applicants must 
leave Row ``A'' (the first row for page images) of the first fiche 
blank for in-house identification purposes. Each microfiche copy of 
pleadings shall include:
    (i) The month and year of the document;
    (ii) The name of the document;
    (ii) The name of the filing party;
    (iv) The file number, applicant identification number, and call 
sign, if assigned;
    (v) The identification number and date of the Public Notice 
announcing the auction in response to which the application was filed 
(if applicable).
    (2) All applications and all amendments must have the following 
information printed on the mailing envelope, the microfiche envelope, 
and on the title area at the top of the microfiche:
    (i) The name of the applicant;
    (ii) The type of application (e.g., 30 MHz MTA, 30 MHz BTA, 10 MHz 
BTA);
    (iii) The month and year of the document;
    (iv) The name of the document;
    (v) The file number, applicant identification number, and call 
sign, if assigned; and
    (vi) The identification number and date of the Public Notice 
announcing the auction in response to which the application was filed 
(if applicable).


Sec. 24.807  [Reserved]


Sec. 24.808  [Reserved]


Sec. 24.809  Standard application forms and permissive changes or minor 
modifications for the broadband Personal Communications Services.

    (a) Applications to participate in competitive bidding for 
broadband PCS licenses must be filed on FCC Forms 175 and 175-S.
    (b) Subsequent application by auction winners or non-mutually 
exclusive applicants for broadband PCS licenses under Part 24. FCC Form 
401 (``Application for New or Modified Common Carrier Radio Station 
Under Part 22'') shall be submitted by each auction winner for each 
broadband PCS license applied for on FCC Form 175. In the event that 
mutual exclusivity does not exist with respect to a license identified 
on an applicant's FCC Form 175, the Commission will so inform the 
applicant and the applicant will also file FCC Form 401. Blanket 
licenses are granted for each market frequency block. Applications for 
individual sites are not needed and will not be accepted. See 
Sec. 24.11. Broadband PCS applicants filing FCC Form 401 need not 
complete Schedule B.
    (c) Extensions of time and reinstatement. When a licensee cannot 
complete construction in accordance with the provisions of Sec. 24.203, 
a timely application for extension of time (FCC Form 489) must be 
filed.
    (d) License for mobile subscriber station--These stations are 
considered to be associated with and covered by the authorization 
issued to the carrier serving the land mobile station. No additional 
authorization is required.


Sec. 24.810  [Reserved]


Sec. 24.811  Miscellaneous forms.

    (a) Licensee qualifications. FCC Form 430 (``Common Carrier and 
Satellite Radio Licensee Qualifications Report'') shall be filed by 
broadband Personal Communications Service licensees only as required by 
Form 490 (Application for Assignment or Transfer of Control Under Part 
22).
    (b) Renewal of station license. Except for renewal of special 
temporary authorizations, FCC Form 405 (``Application for Renewal of 
Station License'') must be filed in duplicate by the licensee between 
thirty (30) and sixty (60) days prior to the expiration date of the 
license sought to be renewed.


Sec. 24.812  [Reserved]


Sec. 24.813  General application requirements.

    (a) Each application (including applications filed on Forms 175 and 
401) for a broadband PCS license or for consent to assign or transfer 
control of a broadband PCS license shall disclose fully the real party 
or parties in interest and must include in an exhibit the following 
information:
    (1) A list of any business five percent or more of whose stock, 
warrants, options or debt securities are owned by the applicant or an 
officer, director, stockholder or key management personnel of the 
applicant. This list must include a description of each such business's 
principal business and a description of each such business's 
relationship to the applicant.
    (2) A list of any party which holds a five percent or more interest 
in the applicant, or any entity in which a five percent or more 
interest is held by another party which holds a five percent or more 
interest in the applicant (e.g., if Company A owns 5% of Company B (the 
applicant) and 5% of Company C, then Companies A and C must be listed 
on Company B's application).
    (3) A list of the names, addresses, citizenship and principal 
business of any person holding five percent or more of each class of 
stock, warrants, options or debt securities together with the amount 
and percentage held, and the name, address, citizenship and principal 
place of business of any person on whose account, if other than the 
holder, such interest is held. If any of these persons are related by 
blood or marriage, include such relationship in the statement.
    (4) In the case of partnerships, the name and address of each 
partner, each partner's citizenship and the share or interest 
participation in the partnership. This information must be provided for 
all partners, regardless of their respective ownership interests in the 
partnership. A signed and dated copy of the partnership agreement must 
be included in the application.
    (b) Each application for a broadband PCS license must:
    (1) Submit the information required by the Commission's Rules, 
requests and application forms;
    (2) Be maintained by the applicant substantially accurate and 
complete in all significant respects in accordance with the provisions 
of Sec. 1.65 of this chapter.
    (3) Show compliance with and make all special showings that may be 
applicable;
    (c) Where documents, exhibits, or other lengthy showings already on 
file with the Commission contain information which is required by an 
application form, the application may specifically refer to such 
information, if:
    (1) The information previously filed is over one A4 (21 cm x 29.7 
cm) or 8.5 x 11 inch (21.6 cm x 27.9 cm) page in length, and all 
information referenced therein is current and accurate in all 
significant respects under Sec. 1.65 of this chapter; and
    (2) The reference states specifically where the previously filed 
information can actually be found, including mention of:
    (i) The station call sign or application file number whenever the 
reference is to station files or previously filed applications; and
    (ii) The title of the proceeding, the docket number, and any legal 
citations, whenever the reference is to a docketed proceeding.

However, question on an application form which call for specific 
technical data, or which can be answered by a ``yes'' or ``no'' or 
other short answer shall be answered as appropriate and shall not be 
cross-referenced to a previous filing.
    (d) In addition to the general application requirements of Subpart 
F and Secs. 1.2105 of this Chapter, 24.813 and 24.815, applicants shall 
submit any additional documents, exhibits, or signed written statements 
of fact:
    (1) As may be required by these rules; and
    (2) As the Commission, at any time after the filing of an 
application and during the term of any authorization, may require from 
any applicant, permittee or licensee to enable it to determine whether 
a radio authorization should be granted, denied or revoked.
    (e) Except when the Commission has declared explicitly to the 
contrary, an informational requirement does not in itself imply the 
processing treatment of decisional weight to be accorded the response.
    (f) All applicants (except applicants filing FCC Form 175) are 
required to indicate at the time their application is filed whether or 
not a Commission grant of the application may have a significant 
environmental impact as defined by Sec. 1.1307 of this Chapter. If 
answered affirmatively, the requisite environmental assessment as 
prescribed in Sec. 1.1311 of this Chapter must be filed with the 
application and Commission environmental review must be completed prior 
to construction. See Sec. 1.1312 of this chapter. All broadband PCS 
licensees are subject to continuing obligation to determine whether 
subsequent construction may have a significant environmental impact 
prior to undertaking such construction and to otherwise comply with 
Sec. 1.1301 through 1.1319 of this Chapter. See Sec. 1.1312 of this 
Chapter.


Sec. 24.814  [Reserved]


Sec. 24.815  Technical content of applications; maintenance of list of 
station locations.

    (a) All applications required by this part shall contain all 
technical information required by the application forms or associated 
Public Notice(s). Applications other than initial applications for a 
broadband PCS license must also comply with all technical requirements 
of the rules governing the broadband PC (see Subparts C and E of this 
Part as appropriate). The following paragraphs describe a number of 
general technical requirements.
    (b) Each application (except applications for initial licenses 
filed on Form 175) for a license for broadband PCS must comply with the 
provisions of Secs. 24.229-24.238 of the Commission's Rules.
    (c)-(i) [Reserved]
    (j) The location of the transmitting antenna shall be considered to 
be the station location. Broadband PCS licensees must maintain a 
current list of all station locations, which must describe the 
transmitting antenna site by its geographical coordinates and also by 
conventional reference to street number, landmark, or the equivalent. 
All such coordinates shall be specified in terms of degrees, minutes, 
and seconds to the nearest second of latitude and longitude.


Sec. 24.816  Station antenna structures.

    (a) Unless the broadband PCS licensee has received prior approval 
from the FCC, no antenna structure, including radiating elements, 
tower, supports and all appurtenances, may be higher than 61 m (200 
feet) above ground level at its site.
    (b) Unless the broadband PCS licensee has received prior approval 
from the FCC, no antenna structure that is located either at an airport 
or heliport that is available for public use and is listed in the 
Airport Directory of the current Airman's Information Manual or in 
either the Alaska or Pacific Airman's Guide and Chart Supplement, or at 
an airport or heliport under construction that is the subject of a 
notice or proposal on file with the FAA and, except for military 
airports, it is clearly indicated that the airport will be available 
for public use, or at an airport or heliport that is operated by the 
armed forces of the United States, or at a place near any of these 
airports or heliports, may be higher than:
    (1) 1 m above the airport elevation for each 100 m from the airport 
runway longer than 1 km within 6.1 km of the antenna structure.
    (2) 2 m above the airport elevation for each 100 m from the nearest 
runway shorter than 1 km within 3.1 km of the antenna structure.
    (3) 4 m above the airport elevation for each 100 m from the nearest 
landing pad within 1.5 km of the antenna structure.
    (c) A broadband PCS station antenna structure no higher than 6.1 m 
(20 feet) above ground level at its site or no higher than 6.1 m above 
any natural object or existing manmade structure, other than an antenna 
structure, is exempt from the requirements of paragraphs (a) and (b) of 
this section.
    (d) Further details as to whether an aeronautical study and/or 
obstruction marking and lighting may be required, and specifications 
for obstruction marking and lighting, are contained in Part 17 of the 
FCC Rules, Construction, Marking and Lighting of Antenna Structures. To 
request approval to place an antenna structure higher than the limits 
specified in paragraph (a), (b), and (c) of this section, the licensee 
must notify the Federal Aviation Administration (FAA) on FAA Form 7460-
1 and the FCC on FCC Form 854.


Secs. 24.817-24.818  [Reserved]


24.819  Waiver of rules.

    (a) Requests for waiver.
    (1) A waiver of these rules may be granted upon application or by 
the Commission on its own motion. Requests for waivers shall contain a 
statement of reason sufficient to justify a waiver. Waivers will not be 
granted except upon an affirmative showing:
    (i) That the underlying purpose of the rule will not be served, or 
would be frustrated, by its application in a particular case, and that 
grant of the waiver is otherwise in the public interest; or
    (ii) That the unique facts and circumstances of a particular case 
render application of the rule inequitable, unduly burdensome or 
otherwise contrary to the public interest. Applicants must also show 
the lack of a reasonable alternative.
    (2) If the information necessary to support a waiver request is 
already on file, the applicant may cross-reference to the specific 
filing where it may be found.
    (b) Denial of waiver, alternate showing required. If a waiver is 
not granted, the application will be dismissed as defective unless the 
applicant has also provided an alternative proposal which complies with 
the Commission's rules (including any required showings).


Sec. 24.820  Defective applications.

    (a) Unless the Commission shall otherwise permit, an application 
will be unacceptable for filing and will be returned to the applicant 
with a brief statement as to the omissions or discrepancies if:
    (1) The application is defective with respect to completeness of 
answers to questions, informational showings, execution or other 
matters of a formal character; or
    (2) The application does not comply with the Commission's rules, 
regulations, specific requirements for additional information or other 
requirements. See also Sec. 1.2105 of this Chapter.
    (b) Some examples of common deficiencies which result in defective 
applications under paragraph (a) of this section are:
    (1) The application is not filled out completely and signed;
    (2)-(4) [Reserved]
    (5) The application (other an application filed on FCC Form 175) 
does not include an environmental assessment as required for an action 
that may have a significant impact upon the environment, as defined in 
Sec. 1.1307 of this chapter.
    (6) [Reserved]
    (7) The application is filed prior to the Public Notice issued 
under Sec. 24.705, announcing the application filing date for the 
relevant auction or after the cutoff date prescribed in that Public 
Notice.
    (c) [Reserved]
    (d) If an applicant is requested by the Commission to file any 
documents or any supplementary or explanatory information not 
specifically required in the prescribed application form, a failure to 
comply with such request within a specified time period will be deemed 
to render the application defective and will subject it to dismissal.


Sec. 24.821  Inconsistent or conflicting applications.

    While an application is pending and undecided, no subsequent 
inconsistent or conflicting application may be filed by the same 
applicant, its successor or assignee, or on behalf or for the benefit 
of the same applicant, its successor or assignee.


Sec. 24.822  Amendment of application to participate in auction for 
licenses in the broadband Personal Communications Services filed on FCC 
Form 175.

    (a) The Commission will provide bidders a limited opportunity to 
cure defects in FCC Form 175 specified herein except for failure to 
sign the application and to make certifications, defects which may not 
be cured. See also Sec. 1.2105 of this Chapter.
    (b) In the broadband PCS, the only amendments to FCC Form 175 which 
will be permitted are minor amendments to correct minor errors or 
defects such as typographical errors. All other amendments to FCC Form 
175, such as changes in the information supplied pursuant to 
Sec. 24.813(a) or changes in the identification of parties to bidding 
consortia, will be considered to be major amendments. An FCC Form 175 
which is amended by a major amendment will be considered to be newly 
filed and cannot be resubmitted after applicable filing deadlines. See 
also Sec. 1.2105 of this Chapter.


Sec. 24.823  Amendment of applications for licenses in the broadband 
Personal Communications Services (other than applications filed on FCC 
Form 175).

    (a) Amendments as of right. A pending application may be amended as 
a matter of right if the application has not been designated for 
hearing.
    (1) Amendments shall comply with Sec. 24.829, as applicable; and
    (2) Amendments which resolve interference conflicts or amendments 
under Sec. 24.829 may be filed at any time.
    (b) The Commission or the presiding officer may grant requests to 
amend an application designated for hearing only if a written petition 
demonstrating good cause is submitted and properly served upon the 
parties of record.
    (c) Major amendments, minor amendments. The Commission will 
classify all amendments as minor except in the cases listed below. An 
amendment shall be deemed to be a major amendment subject to 
Sec. 24.827 if it proposes a substantial change in ownership or 
control.
    (d) If a petition to deny (or other formal objection) has been 
filed, any amendment, request for waiver or other written communication 
shall be served on the petitioner, unless waiver of this requirement is 
granted pursuant to paragraph (e) of this section. See also Sec. 1.2108 
of this Chapter.
    (e) The Commission may waive the service requirements of paragraph 
(d) of this section and prescribe such alternative procedures as may be 
appropriate under the circumstances to protect petitioners' interests 
and to avoid undue delay in a proceeding, if an applicant submits a 
request for waiver which demonstrates that the service requirement is 
unreasonably burdensome.
    (f) Any amendment to an application shall be signed and shall be 
submitted in the same manner, and with the same number of copies, as 
was the original application. Amendments may be made in letter form if 
they comply in all other respects with the requirements of this 
chapter.
    (g) An application will be considered to be a newly-filed 
application if it is amended by a major amendment (as defined in this 
section), except in the following circumstances:
    (1) [Reserved]
    (2) [Reserved]
    (3) The amendment reflects only a change in ownership or control 
found by the Commission to be in the public interest;
    (4) [Reserved]
    (5) The amendment corrects typographical transcription or similar 
clerical errors which are clearly demonstrated to be mistakes by 
reference to other parts of the application, and whose discovery does 
not create new or increased frequency conflicts;


Sec. 24.824  [Reserved]


Sec. 24.825  Application for temporary authorizations.

    (a) In circumstances requiring immediate or temporary use of 
facilities, request may be made for special temporary authority to 
install and/or operate new or modified equipment. Any such request may 
be submitted as an informal application in the manner set forth in 
Sec. 24.805 and must contain full particulars as to the proposed 
operation including all facts sufficient to justify the temporary 
authority sought and the public interest therein. No such request will 
be considered unless the request is received by the Commission at least 
10 days prior to the date of proposed construction or operation or, 
where an extension is sought, at least 10 days prior to the expiration 
date of the existing temporary authorization. The Commission may accept 
a late-filed request upon due showing of sufficient reasons for the 
delay in submitting such request.
    (b) Special temporary authorizations may be granted without regard 
to the 30-day public notice requirements of Sec. 24.827(b) when:
    (1) The authorization is for a period not to exceed 30 days and no 
application for regular operation is contemplated to be filed;
    (2) The authorization is for a period not to exceed 60 days pending 
the filing of an application for such regular operation;
    (3) The authorization is to permit interim operation to facilitate 
completion of authorized construction or to provide substantially the 
same service as previously authorized; or
    (4) The authorization is made upon a finding that there are 
extraordinary circumstances requiring operation in the public interest 
and that delay in the institution of such service would seriously 
prejudice the public interest.
    (c) Temporary authorizations of operation not to exceed 180 days 
may be granted under the standards of Section 309(f) of the 
Communications Act where extraordinary circumstances so require. 
Extensions of the temporary authorization for a period of 180 days each 
may also be granted, but the applicant bears a heavy burden to show 
that extraordinary circumstances warrant such an extension.
    (d) In cases of emergency found by the Commission, involving danger 
to life or property or due to damage of equipment, or during a national 
emergency proclaimed by the president or declared by the Congress or 
during the continuance of any war in which the United States is engaged 
and when such action is necessary for the national defense or safety or 
otherwise in furtherance of the war effort, or in cases of emergency 
where the Commission finds that it would not be feasible to secure 
renewal applications from existing licensees or otherwise to follow 
normal licensing procedure, the Commission will grant radio station 
authorizations and station licenses, or modifications or renewals 
thereof, during the emergency found by the Commission or during the 
continuance of any such national emergency or war, as special temporary 
licenses, only for the period of emergency or war requiring such 
action, without the filing of formal applications.


Sec. 24.826  Receipt of application; Applications in the broadband 
Personal Communications Services filed on FCC Form 175 and other 
applications in the broadband Personal Communications Services.

    (a) All applications for the initial provision of broadband PCS 
must be submitted on FCC Forms 175 and 175-S. Mutually exclusive 
initial applications in the broadband Personal Communications Services 
are subject to competitive bidding. FCC Form 401 (``Application for New 
or Modified Common Carrier Radio Station Under Part 22'') must be 
submitted by each winning bidder for each broadband PCS license for 
which application was made on FCC Form 175. In the event that mutual 
exclusivity does not exist between applicants for a broadband PCS 
license that have filed FCC Form 175, the sole applicant will be 
required to file FCC Form 401. The aforementioned Forms 175, 175-S, and 
401 are subject to the provisions of 47 CFR Part 1, Subpart Q 
(``Competitive Bidding Proceedings'') and Subpart H of this Part. 
Blanket licenses are granted for each market frequency block. 
Applications for individual sites are not needed and will not be 
accepted. See Sec. 24.11.
    (b) Applications received for filing are given a file number. The 
assignment of a file number to an application is merely for 
administrative convenience and does not indicate the acceptance of the 
application for filing and processing. Such assignment of a file number 
will not preclude the subsequent return or dismissal of the application 
if it is found to be not in accordance with the Commission's Rules.
    (c) Acceptance of an application for filing merely means that it 
has been the subject of a preliminary review as to completeness. Such 
acceptance will not preclude the subsequent return or dismissal of the 
application if it is found to be defective or not in accordance with 
the Commission's rules. (See Sec. 24.813 for additional information 
concerning the filing of applications.)


Sec. 24.827  Public notice period.

    (a) At regular intervals, the Commission will issue a public notice 
listing:
    (1) The acceptance for filing of all applications and major 
amendments thereto;
    (2) Significant Commission actions concerning applications listed 
as acceptable for filing;
    (3) Information which the Commission in its discretion believes of 
public significance. Such notices are intended solely for the purpose 
of informing the public and do not create any rights in an applicant or 
any other person.
    (4) Special environmental considerations as required by Part 1 of 
this chapter.
    (b) The Commission will not grant any application until expiration 
of a period of thirty (30) days following the issuance date of a public 
notice listing the application, or any major amendments thereto, as 
acceptable for filing; provided, however, that the Commission will not 
grant an application filed on Form 401 filed either by a winning bidder 
or by an applicant whom Form 175 application is not mutually exclusive 
with other applicants, until the expiration of a period of forty (40) 
days following the issuance of a public notice listing the application, 
or any major amendments thereto, as acceptable filing. See also 
Sec. 1.2108 of this Chapter.
    (c) As an exception to paragraphs (a)(1), (a)(2) and (b) of this 
section, the public notice provisions are not applicable to 
applications:
    (1) For authorization of a minor technical change in the facilities 
of an authorized station where such a change would not be classified as 
a major amendment (as defined by Sec. 24.823) were such a change to be 
submitted as an amendment to a pending application;
    (2) For issuance of a license subsequent to a radio station 
authorization or, pending application for a grant of such license, any 
special or temporary authorization to permit interim operation to 
facilitate completion of authorized construction or to provide 
substantially the same service as would be authorized by such license;
    (3) For extension of time to complete construction of authorized 
facilities (see Sec. 24.203;
    (4) For temporary authorization pursuant to Sec. 24.825(b);
    (5) [Reserved]
    (6) For an authorization under any of the proviso clauses of 
Section 308(a) of the Communications Act of 1934 (47 U.S.C. 308(a));
    (7) For consent to an involuntary assignment or transfer of control 
of a radio authorization; or
    (8) For consent to a voluntary assignment or transfer of control of 
a radio authorization, where the assignment or transfer does not 
involve a substantial change in ownership or control.


Sec. 24.828  Dismissal and return of applications.

    (a) Except as provided under Sec. 24.829, any application may be 
dismissed without prejudice as a matter of right if the applicant 
requests its dismissal prior to designation for hearing or, in the case 
of applications filed on Forms 175 and 175-S, prior to auction. An 
applicant's request for the return of his application after it has been 
accepted for filing will be considered to be a request for dismissal 
without prejudice. Applicants requesting dismissal of their 
applications may be subject to penalties contained in Sec. 1.2104 of 
this Chapter. Requests for dismissal shall comply with the provisions 
of Sec. 24.829 as appropriate.
    (b) A request to dismiss an application without prejudice will be 
considered after designation for hearing only if:
    (1) A written petition is submitted to the Commission and is 
properly served upon all parties of record, and
    (2) The petition complies with the provisions of Sec. 24.829 
(whenever applicable) and demonstrates good cause.
    (c) The Commission will dismiss an application for failure to 
prosecute or for failure to respond substantially within a specified 
time period to official correspondence or requests for additional 
information. Dismissal shall be without prejudice if made prior to 
designation for hearing or prior to auction, but dismissal may be made 
with prejudice for unsatisfactory compliance with Sec. 24.829 or after 
designation for hearing or after the applicant is notified that it is 
the winning bidder under the auction process.


Sec. 24.829  Ownership changes and agreements to amend or to dismiss 
applications or pleadings.

    (a) Applicability. Subject to the provisions of Sec. 1.2105 of this 
Chapter (Bidding Application and Certification Procedures; Prohibition 
of Collusion), this section applies to applicants and all other parties 
interested in pending applications who wish to resolve contested 
matters among themselves with a formal or an informal agreement or 
understanding. This section applies only when the agreement or 
understanding will result in:
    (1) A major change in the ownership of an applicant to which 
Secs. 24.823(c) and 24.823(g) apply or which would cause the applicant 
to lose its status as a designated entity under Sec. 24.709, or
    (2) The individual or mutual withdrawal, amendment or dismissal of 
any pending application amendment, petition or other pleading.
    (b) Policy. Parties to contested proceedings are encouraged to 
settle their disputes among themselves. Parties that, under a 
settlement agreement, apply to the Commission for ownership changes or 
for the amendment or dismissal of either pleadings or applications 
shall at the time of filing notify the Commission that such filing is 
the result of an agreement or understanding.
    (c) The provisions of Sec. 22.927 of the Commission's Rules will 
apply in the event of the filing of petitions to deny or other 
pleadings or informal objections filed against broadband PCS 
applications. The provisions of Sec. 22.928 of the Commission's Rules 
will apply in the event of dismissal of broadband PCS applications. The 
provisions of Sec. 22.929 of the Commission's Rules will apply in the 
event of threats to file petitions to deny or other pleadings or 
informal objections against broadband PCS applications.


Sec. 24.830  Opposition to applications.

    (a) Petitions to deny (including petitions for other forms of 
relief) and responsive pleadings for Commission consideration must 
comply with Sec. 1.2108 of this Chapter and must:
    (1) Identify the application or applications (including applicant's 
name, station location, Commission file numbers and radio service 
involved) with which it is concerned;
    (2) Be filed in accordance with the pleading limitations, filing 
periods, and other applicable provisions of Secs. 1.41 through 1.52 of 
this Chapter except where otherwise provided in Sec. 1.2108 of this 
Chapter;
    (3) Contain specific allegations of fact which, except for facts of 
which official notice may be taken, shall be supported by affidavit of 
a person or persons with personal knowledge thereof, and which shall be 
sufficient to demonstrate that the petitioner (or respondent) is a 
party in interest and that a grant of, or other Commission action 
regarding, the application would be prima facie inconsistent with the 
public interest;
    (4) Be filed within thirty (30) days after the date of public 
notice announcing the acceptance for filing of any such application or 
major amendment thereto (unless the Commission otherwise extends the 
filing deadline); and
    (5) Contain a certificate of service showing that it has been 
mailed to the applicant no later than the date of filing thereof with 
the Commission.
    (b) A petition to deny a major amendment to a previously-filed 
application may only raise matters directly related to the amendment 
which could not have been raised in connection with the underlying 
previously-filed application. This subsection does not apply, however, 
to petitioners who gain standing because of the major amendment.


Sec. 24.831  Mutually exclusive applications.

    (a) The Commission will consider applications for broadband PCS 
licenses to be mutually exclusive if they relate to the same 
geographical boundaries (MTA or BTA) and are timely filed for the same 
frequency block.
    (b) Mutually exclusive applications filed on Form 175 for the 
initial provision of broadband PCS are subject to competitive bidding 
in accordance with the procedures in Subpart H of this part and in Part 
1, Subpart Q of this Chapter.
    (c) An application will be entitled to comparative consideration 
with one or more conflicting applications only if the Commission 
determines that such comparative consideration will serve the public 
interest.
    (d)-(j) [Reserved]


Sec. 24.832  Consideration of applications.

    (a) Applications for an instrument of authorization will be granted 
if, upon examination of the application and upon consideration of such 
other matters as it may officially notice, the Commission finds that 
the grant will serve the public interest, convenience and necessity. 
See also Sec. 1.2108 of this Chapter.
    (b) The grant shall be without a formal hearing if, upon 
consideration of the application, any pleadings or objections filed, or 
other matters which may be officially noticed, the Commission finds 
that:
    (1) The application is acceptable for filing and is in accordance 
with the Commission's rules, regulations and other requirements;
    (2) The application is not subject to a post-auction hearing or to 
comparative consideration pursuant to Sec. 24.831 with another 
application(s);
    (3) A grant of the application would not cause harmful electrical 
interference to an authorized station;
    (4) There are no substantial and material questions of fact 
presented; and
    (5) The applicant is qualified under current FCC regulations and 
policies.
    (c) If the Commission should grant without a formal hearing an 
application for an instrument of authorization which is subject to a 
petition to deny filed in accordance with Sec. 24.830, the Commission 
will deny the petition by the issuance of a Memorandum Opinion and 
Order which will concisely state the reasons for the denial and dispose 
of all substantial issues raised by the petition.
    (d) Whenever the Commission, without a formal hearing, grants any 
application in part, or subject to any terms or conditions other than 
those normally applied to applications of the same type, it shall 
inform the applicant of the reasons therefor, and the grant shall be 
considered final unless the Commission revises its action (either by 
granting the application as originally requested, or by designating the 
application for a formal evidentiary hearing) in response to a petition 
for reconsideration which:
    (1) Is filed by the applicant within thirty (30) days from the date 
of the letter or order giving the reasons for the partial or 
conditioned grant;
    (2) Rejects the grant as made and explains the reasons why the 
application should be granted as originally requested; and
    (3) Returns the instrument of authorization.
    (e) The Commission will designate an application for a formal 
hearing, specifying with particularity the matters and things in issue, 
if upon consideration of the application, any pleadings or objections 
filed or other matters which may be officially noticed, the Commission 
determines that:
    (1) A substantial and material question of fact is presented (see 
also Sec. 1.2108 of this Chapter);
    (2) The Commission is unable for any reason to make the findings 
specified in paragraph (a) of this section and the application is 
acceptable for filing, complete and in accordance with the Commission's 
rules, regulations and other requirements; or
    (3) The application is entitled to comparative consideration (under 
Sec. 24.831) with another application (or applications).
    (f) The Commission may grant, deny or take other action with 
respect to an application designated for a formal hearing pursuant to 
paragraph (e) of this section or Part 1 of this Chapter.
    (g) [Reserved]
    (h) Reconsideration or review of any final action taken by the 
Commission will be in accordance with Subpart A of Part 1 of this 
Chapter.


Sec.  24.833-24.838  [Reserved]


Sec. 24.839  Transfer of control or assignment of license.

    (a) Approval required. Authorizations shall be transferred or 
assigned to another party, voluntarily (for example, by contract) or 
involuntarily (for example, by death, bankruptcy or legal disability), 
directly or indirectly or by transfer of control of any corporation 
holding such authorization, only upon application and approval by the 
Commission. A transfer of control or assignment of station 
authorization in the broadband Personal Communications Service is also 
subject to Secs. 24.711(e), 24.712(d), 24,713(b) (unjust enrichment) 
and 1.2111(a) of this Chapter (reporting requirement).
    (1) A change from less than 50% ownership to 50% or more ownership 
shall always be considered a transfer of control.
    (2) In other situations a controlling interest shall be determined 
on a case-by-case basis considering the distribution of ownership and 
the relationships of the owners, including family relationships.
    (b) Forms required.
    (1) Assignment.
    (i) FCC Form 490 shall be filed to assign a license or permit.
    (ii) In the case of involuntary assignment, FCC Form 490 shall be 
filed within thirty (30) days following the event giving rise to the 
assignment.
    (2) Transfer of control.
    (i) FCC Form 490 shall be submitted in order to transfer control of 
a corporation holding a license or permit.
    (ii) In the case of involuntary transfer of control, FCC Form 490 
shall be filed within thirty (30) days following the event giving rise 
to the transfer.
    (3) Form 430. Whenever an application must be filed under 
paragraphs (a)(1) or (2) of this section, the assignee or transferee 
shall file FCC Form 430 (``Common Carrier Radio License Qualification 
Report'') unless an accurate report is on file with the Commission.
    (4) Notification of completion. The Commission shall be notified by 
letter of the date of completion of the assignment or transfer of 
control.
    (5) If the transfer of control of a license is approved, the new 
licensee is held to the original construction requirement of 
Sec. 24.203.
    (c) In acting upon applications for transfer of control or 
assignment, the Commission will not consider whether the public 
interest, convenience and necessity might be served by the transfer or 
assignment of the authorization to a person other than the proposed 
transferee or assignee.
    (d) Restrictions on Assignments and Transfers of Licenses for 
Frequency Blocks C and F. No assignment or transfer of control of a 
license for frequency Block C or frequency Block F will be granted 
unless--
    (1) The application for assignment or transfer of control is filed 
after five years from the date of the initial license grant;
    (2) The application for assignment or transfer of control is filed 
after three years from the date of the initial license grant and the 
proposed assignee or transferee meets the eligibility criteria set 
forth in Sec. 24.709;
    (3) The application is for partial assignment of a partitioned 
service area to a rural telephone company pursuant to Sec. 24.714 and 
the assignee meets the eligibility criteria set forth in Sec. 24.709; 
or
    (4) The application is for an involuntary assignment or transfer of 
control to a bankruptcy trustee appointed under involuntary bankruptcy, 
an independent receiver appointed by a court of competent jurisdiction 
in a foreclosure action or, in the event of death or disability, to a 
person or entity legally qualified to succeed the decrease or disabled 
person under the laws of the place having jurisdiction over the estate 
involved; provided that, the applicant requests a waiver pursuant to 
this paragraph.
    (e) If the assignment or transfer of control of a license is 
approved, the assignee or transferee is subject to the original 
construction requirement of Sec. 24.203.


Secs. 24.840-24.842  [Reserved]


Sec. 24.843  Extension of time to complete construction.

    (a) If construction is not completed within the time period set 
forth in Sec. 24.203, the authorization will automatically expire. 
Before the period for construction expires an application for an 
extension of time to complete construction (FCC Form 489) may be filed. 
See paragraph (b) of this section. Within 30 days after the 
authorization expires an application for reinstatement may be filed on 
FCC Form 489.
    (b) Extension of Time to Complete Construction. An application for 
extension of time to complete construction may be made on FCC Form 489. 
Extension of time requests must be filed prior to the expiration of the 
construction period. Extensions will be granted only if the licensee 
shows that the failure to complete construction is due to causes beyond 
its control.
    (c) An application for modification of an authorization (under 
construction) does not extend the initial construction period. If 
additional time to construct is required, an FCC Form 489 must be 
submitted.
     (d) [Reserved]


Sec. 24.844  Termination of authorization.

    (a) Termination of authorization.
    (1) All authorizations shall terminate on the date specified on the 
authorization or on the date specified by these rules, unless a timely 
application for renewal has been filed.
    (2) If no application for renewal has been made before the 
authorization's expiration date, a late application for renewal will be 
considered only if it is filed within thirty (30) days of the 
expiration date and shows that the failure to file a timely application 
was due to causes beyond the applicant's control. During this 30-day 
period, a reinstatement application must be filed on FCC Form 489. 
Service to subscribers need not be suspended while a late-filed renewal 
application is pending, but such service shall be without prejudice to 
Commission action on the renewal application and any related sanctions. 
See also Sec. 24.16 (Criteria for Comparative Renewal Proceedings).
    (b) Termination of special temporary authorization. A special 
temporary authorization shall automatically terminate upon failure to 
comply with the conditions in the authorization.
    (c) [Reserved]

[FR Doc. 94-17931 Filed 7-21-94; 8:45 am]
BILLING CODE 6712-01-M