[Federal Register Volume 59, Number 189 (Friday, September 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24303]


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[Federal Register: September 30, 1994]


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FEDERAL COMMUNICATIONS COMMISSION

 

Public Information Collection Requirement Submitted to Office of 
Management and Budget for Review

September 27, 1994.
    The Federal Communications Commission has submitted the following 
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 10102, New 
Executive Office Building, Washington, D.C. 20503, (202) 395-3561. For 
further information, contact Judy Boley, Federal Communications 
Commission, (202) 418-0214.
    Please note: The Commission has requested expedited review of this 
collection by September 30, 1994, under the provisions of 5 CFR 
1320.18.

Title: Implementation of Section 309(j) of the Communications Act--
Competitive Bidding, Second Report and Order and Second Memorandum 
Opinion and Order, PP Docket No. 93-253.
OMB Control Number: 3060-0600.
Action: Revised Collections.
Respondents: Individuals, State or local governments, Non-profit 
institutions, Business or other for-profit, including small businesses.
Frequency of response: On occasion and recordkeeping requirements
Estimated Annual Burden:

------------------------------------------------------------------------
                                                    Estimated           
                                          No. of     average   Estimated
            Section/forms              Respondents   hrs per     annual 
                                                     response   burden  
------------------------------------------------------------------------
Section 1.2105.......................      13,400         .50      6,700
Section 1.2107.......................      10,000        1        10,000
Section 1.2108.......................       2,350       20        47,000
Section 1.2110.......................       1,000        2         2,000
Section 1.2110*......................       1,000        1         1,000
Section 1.2111.......................         100         .50         50
Microfiche...........................      13,400        2        26,800
FCC Form 175.........................      13,400         .50      6,700
FCC Form 175-S.......................       6,400         .25        675
------------------------------------------------------------------------
*Recordkeeping requirement.                                             
Total Annual Burden: 100,925 Hours.                                     

Needs and Uses: In the Second Memorandum Opinion and Order the 
Commission modified and supplemented several of its generic rules 
governing the auctioning of all licenses subject to 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 and also whether 
applicants are entitled to receive certain benefits. Affected public 
are any member of the public who wants to become or remain a licensee.
    The foregoing estimates include the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding the burden estimates 
or any other aspect of the collection of information, including 
suggestions for reducing the burden, to the Federal Communications 
Commission, Records Management Branch, Paperwork Reduction Project, 
Washington, D.C. 20554 and to the Office of Management and Budget 
Paperwork Reduction Project, Washington, D.C. 20503.

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

Subpart Q--Competitive Bidding Proceedings

    Authority: 47 U.S.C. 309(j).

General Procedures

Section 1.2101  Purpose

    The provisions of this subpart implement Section 309(j) of the 
Communications Act of 1934, as added by the Omnibus Budget 
Reconciliation Act of 1993 (P.L. 103-66), authorizing the Commission 
to employ competitive bidding procedures to choose from among two or 
more mutually exclusive applications for certain initial licenses.

Section 1.2102  Eligibility of Applications for competitive Bidding

    (a) Mutually exclusive initial applications in the following 
services or classes of services are subject to competitive bidding:
    (1) Interactive Video Data Service (see 47 CFR Part 95, Subpart 
F). This subsection does not apply to applications which were filed 
prior to July 26, 1993;
    (2) Marine Public Coast Stations (see 47 CFR Part 80, Subpart 
J);
    (3) Multipoint Distribution Service and Multichannel Multipoint 
Distribution Service (see 47 CFR Part 21, Subpart K). This 
subsection does not apply to applications which were filed prior to 
July 26, 1993;
    (4) Exclusive Private Carrier Paging above 900 MHz (see 47 CFR 
Part 90, Subpart P and the Private Carrier Paging Exclusivity Report 
and Order, 8 FCC Rcd 8318, 58 FR 62289 (Nov. 26, 1993));
    (5) Public Mobile Services (see 47 CFR Part 22), except in the 
800 MHz Air-Ground Radiotelephone Service, and in the Rural Radio 
Service. This subsection does not apply to applications in the 
cellular radio service, such as cellular unserved area applications, 
that were filed prior to July 26, 1993;
    (6) Specialized Mobile Radio Service (SMR) (see 47 CFR Part 90, 
Subpart S) including applications based on finder's preferences for 
frequencies allocated to the SMR service (see 47 CFR Part 90.173);
    (7) Personal Communications Services (PCS) (see 47 CFR Part 24); 
and

    Note: To determine the rules that apply to competitive bidding 
in the foregoing services, specific service rules should be 
consulted.

    (b) The following types of license applications are not subject 
to competitive bidding procedures;
    (1) Applications for renewal of licenses;
    (2) Applications for modification of license; provided, however, 
that the Commission may determine that applications for modification 
that are mutually exclusive with other applications should be 
subject to competitive bidding;
    (3) Applications for subsidiary communications services. A 
``subsidiary communications service'' is a class of service where 
the signal for that service is indivisible from that of the main 
channel signal and that main channel signal is exempt from 
competitive bidding under other provisions of these rules. See, 
e.g., Sec. 1.2102(c) (exempting broadcast services). Examples of 
such subsidiary communications services are those transmitted on 
subcarriers within the FM baseband signal (see 47 CFR Sec. 73.295), 
and signals transmitted within the Vertical Blanking Interval of a 
broadcast television signal; and
    (4) Applications for frequencies used as an intermediate link or 
links in the provision of a continuous, end-to-end service where no 
service is provided directly to subscribers over the frequencies. 
Examples of such intermediate links are (a) point-to-point microwave 
facilities used to connect a cellular radio telephone base station 
with a cellular radio telephone mobile telephone switching office 
and (b) point-to-point microwave facilities used as part of the 
service offering in the provision of telephone exchange or 
interexchange service.
    (c) Applications in the following services or classes of 
services are not subject to competitive bidding:
    (1) Alaska-Private Fixed Stations (see 47 CFR Part 80, Subpart 
O);
    (2) Broadcast radio (AM and FM) and broadcast television (VHF, 
UHF, LPTV) under 47 CFR Part 73;
    (3) Broadcast Auxiliary and Cable Television Relay Services (see 
47 CFR Part 74, Subparts D, E, F, G, H and L and Part 73, Subpart 
B);
    (4) Instructional Television Fixed Service (see 47 CFR Part 74, 
Subpart I);
    (5) Maritime Support Stations (see 47 CFR Part 80, Subpart N);
    (6) Marine Operational Fixed Stations (see 47 CFR Part 80, 
Subpart L);
    (7) Marine Radiodetermination Stations (see 47 CFR Part 80, 
Subpart M);
    (8) Personal Radio Services (see 47 CFR Part 95), except 
applications filed after July 26, 1993, in the Interactive Video 
Data Service (see 47 CFR Part 95, Subpart F);
    (9) Public Safety, Industrial/Land Transportation, General and 
Business Radio categories above 800 MHz, including finder's 
preference requests for frequencies not allocated to the SMR service 
(see 47 CFR Section 90.173), and including until further notice of 
the Commission, the Automated Vehicle Monitoring Service (see 47 CFR 
Sec. 90.239);
    (10) Private Land Mobile Radio Services between 470-512 Mhz (see 
47 CFR Part 90, Subparts B-F), including those based on finder's 
preferences, see 47 CFR Section 90.173;
    (11) Private Land Mobile Radio Services below 470 MHz (see 47 
CFR Part 90, Subparts B-F) except in the 220 MHz band (see 47 CFR 
Part 90, Subpart T), including those based on finder's preferences 
(see 47 CFR Section 90.173); and
    (12) Private Operational Fixed Services (see 47 CFR Part 94).

Section 1.2103 Competitive Bidding Design Options

    (a) The Commission will select the competitive bidding design(s) 
to be used in auctioning particular licenses or classes of licenses 
on a service-specific basis. The choice of competitive bidding 
design will generally be made pursuant to the criteria set forth in 
the Second Report and Order in PP Docket No. 93-253, FCC 94-61, 59 
FR 22980 (May 4, 1994), adopted March 8, 1994, but the Commission 
may design and test alternative methodologies. The Commission will 
choose from one or more of the following types of auction designs 
for services or classes of services subject to competitive bidding:

(1) Single round sealed bid auctions (either sequential or 
simultaneous)
(2) Sequential oral auctions
(3) Simultaneous multiple round auctions

    (b) 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. 
Combinatorial bidding may be used with any type of auction.
    (c) 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.

Section 1.2104 Competitive Bidding Mechanisms

    (a) Sequencing. The Commission will establish the sequence in 
which multiple 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 may, by announcement 
before or during an auction, require minimum bid increments in 
dollar or percentage terms. The Commission may also establish 
suggested minimum opening bids on a service-specific basis.
    (e) Stopping Rules. The Commission may establish stopping rules 
before or during multiple round auctions in order to terminate the 
auctions within a reasonable time.
    (f) Activity Rules. The Commission may establish activity rules 
which require a minimum amount of bidding activity.
    (g) Withdrawal, Default and Disqualification Penalties. As 
specified below, when the Commission conducts a simultaneous 
multiple round auction pursuant to Sec. 1.2103, the Commission will 
impose penalties on bidders who withdraw high bids during the course 
of an auction, or 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 has 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 
subsection (1) plus an additional penalty equal to 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.
    When the Commission conducts single round sealed bid auctions or 
sequential oral auctions, the Commission may modify the penalties to 
be paid in the event of bid withdrawal, default or disqualification; 
provided, however, that such penalties shall not exceed the 
penalties specified above.
    (h) The Commission will generally release information concerning 
the identities of bidders before each auction but may choose, on an 
auction-by-auction basis, to withhold the identity of the bidders 
associated with bidder identification numbers.
    (i) The Commission may delay, suspend, or cancel an auction in 
the event of a natural disaster, technical obstacle, evidence of 
security breach, unlawful bidding activity, administrative 
necessity, or for any other reason that affects the fair and 
efficient conduct of the competitive bidding. The Commission also 
has the authority, at its sole discretion, to resume the competitive 
bidding starting from the beginning of the current or some previous 
round or cancel the competitive bidding in its entirety.

Section 1.2105 Bidding Application and Certification Procedures; 
Prohibition of Collusion

    (a) Submission of Short Form Application (FCC Form 175). In 
order to be eligible to bid, an applicant must timely submit a 
short-form application (FCC Form 175), together with any appropriate 
filing fee set forth by Public Notice. Unless otherwise provided by 
Public Notice, the Form 175 need not be accompanied by an upfront 
payment (see Section 1.2106 of this part).
    (1) All Form 175s will be due:
    (i) On the date(s) specified by Public Notice; or
    (ii) In the case of application filing dates which occur 
automatically by operation of law (see, e.g., 47 CFR Section 
22.902), on a date specified by Public Notice after the Commission 
has reviewed the applications that have been filed on those dates 
and determined that mutual exclusivity exists.
    (2) The Form 175 must contain the following information:
    (i) Identification of each license on which the applicant wishes 
to bid;
    (ii) The applicant's name, if the applicant is an individual. If 
the applicant is a corporation, then the short-form application will 
require the name and address of the corporate office and the name 
and title of an officer or director. If the applicant is a 
partnership, then the application will require the name, citizenship 
and address of all partners, and, if a partner is not a natural 
person, then the name and title of a responsible person should be 
included as well. If the applicant is a trust, then the name and 
address of the trustee will be required. If the applicant is none of 
the above, then it must identify and describe itself and its 
principals or other responsible persons;
    (iii) The identity of the person(s) authorized to make or 
withdraw a bid;
    (iv) If the applicant applies as a designated entity pursuant to 
Sec. 1.2110 of these rules, a statement to that effect and a 
declaration, under penalty of perjury, that the applicant is 
qualified as a designated entity under Sec. 1.2110 of the 
Commission's Rules;
    (v) Certification that the applicant is legally, technically, 
financially and otherwise qualified pursuant to Section 308(b) of 
the Communications Act of 1934, as amended. The Commission will 
accept applications certifying that a request for waiver or other 
relief from the requirements of Section 310 is pending;
    (vi) Certification that the applicant is in compliance with the 
foreign ownership provisions of Section 310 of the Communications 
Act of 1934, as amended;
    (vii) Certification that the applicant is and will, during the 
pendency of its application(s), remain in compliance with any 
service-specific qualifications applicable to the licenses on which 
the applicant intends to bid including, but not limited to, 
financial qualifications. The Commission may require certification 
in certain services that the applicant will, following grant of a 
license, come into compliance with certain service-specific rules, 
including, but not limited to, ownership eligibility limitations;
    (viii) An exhibit, certified as truthful under penalty of 
perjury, identifying all parties with whom the applicant has entered 
into partnerships, joint ventures, consortia or other agreements, 
arrangements or understandings of any kind relating to the licenses 
being auctioned, including any such agreements relating to the post-
auction market structure.
    (ix) Certification under penalty of perjury that it has not 
entered and will not enter into any explicit or implicit agreements, 
arrangements or understandings of any kind with any parties other 
than those identified pursuant to subsection (viii) regarding the 
amount of their bids, bidding strategies or the particular licenses 
on which they will or will not bid;

    Note: The Commission may also request applicants to submit 
additional information for informational purposes to aid in its 
preparation of required reports to Congress.

    (b) Modification and Dismissal of Form 175. (1) Any Form 175 
that is not signed or otherwise does not contain all of the 
certifications required pursuant to this section is unacceptable for 
filing and cannot be corrected subsequent to any applicable filing 
deadline. The application will be dismissed with prejudice and the 
upfront payment, if paid, will be returned.
    (2) The Commission will provide bidders a limited opportunity to 
cure defects specified herein (except for failure to sign the 
application and to make certifications) and to resubmit a corrected 
application. Form 175 may be amended or modified to make minor 
changes or correct minor errors in the application (such as 
typographical errors). The Commission will classify all amendments 
as major or minor, pursuant to rules applicable to specific 
services. An application will be considered to be a newly filed 
application if it is amended by a major amendment and may not be 
resubmitted after applicable filing deadlines.
    (3) Applicants who fail to correct defects in their applications 
in a timely manner as specified by Public Notice will have their 
applications dismissed with no opportunity for resubmission.
    (c) Prohibition of Collusion. (1) Except as provided in 
paragraphs (c)(2) and (c)(3) of this subsection, after the filing of 
short-form applications, all bidders are prohibited from 
cooperating, collaborating; discussing or disclosing in any manner 
the substance of their bids or bidding strategies, or discussing or 
negotiating settlement agreements, with other bidders until after 
the high bidder makes the required down payment, unless such bidders 
are members of a bidding consortium or other joint bidding 
arrangement identified on the bidder's short-form application 
pursuant to Section 1.2105(a)(2)(viii).
    (2) Applicants may modify their short-form applications to 
reflect formation of consortia or changes in ownership at any time 
before or during an auction, provided such changes do not result in 
a change in control of the applicant, and provided that the parties 
forming consortia or entering into ownership agreements have not 
applied for the same license. Such changes will not be considered 
major modifications of the application.
    (3) After the filing of short-form applications, applicants may 
make agreements to bid jointly for licenses, provided the parties to 
the agreement have not applied for the same license.

Section 1.2106 Submission of Upfront Payments

    (a) The Commission may require applicants for licenses subject 
to competitive bidding to submit an upfront payment. In that event, 
the amount of the upfront payment and the procedures for submitting 
it will be set forth in a Public Notice. No interest will be paid on 
upfront payments.
    (b) Upfront payments must be made either 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.
    (c) If an upfront payment is not in compliance with the 
Commission's Rule, or if insufficient funds are tendered to 
constitute a valid upfront payment, the applicant shall have a 
limited opportunity to correct its submission to bring it up to the 
minimum valid upfront payment prior to the auction. If the applicant 
does not submit at least the minimum upfront payment, it will be 
ineligible to bid, its application will be dismissed and any upfront 
payment it has made will be returned.
    (d) The upfront payment(s) of a bidder will be credited toward 
any down payment required for licenses on which the bidder is the 
high bidder. Where the upfront payment amount exceeds the required 
deposit of a winning bidder, the Commission may refund the excess 
amount after determining that no bid withdrawal penalties are owed 
by that bidder.
    (e) In accordance with the provisions of subsection (d), in the 
event a penalty is assessed pursuant to Sec. 1.2104 for bid 
withdrawal or default, upfront payments or down payments on deposit 
with the Commission will be used to satisfy the bid withdrawal or 
default penalty before being applied toward any additional 
obligations that the high bidder may have.

Section 1.2107 Submission of Down Payment and Filing of Long-Form 
Applications

    (a) After bidding has ended, the Commission will identify and 
notify the high bidder and declare the bidding closed.
    Within five (5) business days after being notified that it is a 
high bidder on a particular license(s), a high bidder must submit to 
the Commission's lockbox bank such additional funds (the ``down 
payment'') as are necessary to bring its total deposits (not 
including upfront payments applied to satisfy penalties) up to 
twenty (20) percent of its high bid(s). (In single round sealed bid 
auctions conducted under Sec. 1.2103, however, bidders may be 
required to submit their down payment with their bids.) This down 
payment must be made by wire transfer or 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. Winning bidders 
who are qualified designated entities eligible for installment 
payments under Sec. 1.2110(d) are only required to bring their total 
deposits up to ten (10) percent of their winning bid(s). Such 
designated entities must pay the remainder of the twenty (20) 
percent down payment within five (5) business days of grant of their 
application. See Sec. 1.2110(e) (1) and (2) of this subpart. Down 
payments will be held by the Commission until the high bidder has 
been awarded the license and has paid the remaining balance due on 
the license, in which case it will not be returned, or until the 
winning bidder is found unqualified to be a licensee or has 
defaulted, in which case it will be returned, less applicable 
penalties. No interest will be paid on any down payment.
    (c) A high bidder that meets its down payment obligations in a 
timely manner must, within ten (10) business days after being 
notified that it is a high bidder, submit an additional application 
(the ``long-form application'') pursuant to the rules governing the 
service in which the applicant is the high bidder (unless it has 
already submitted such an application, as contemplated by 
Sec. 1.2105(a)(1)(b). For example, if the applicant is a high bidder 
for a license in the Interactive Video Data Service See 47 CFR Part 
95, Subpart F), the long form application will be submitted on FCC 
Form 574 in accordance with Section 95.815 of the Rules. 
Notwithstanding any other provision in Title 47 of the Code of 
Federal Regulations to the contrary, high bidders need not submit an 
additional application filing fee with their long-form applications. 
Notwithstanding any other provision in Title 47 of the Code of 
Federal Regulations to the contrary, the high bidder's long-form 
application must be mailed or otherwise delivered to: Office of the 
Secretary, Federal Communications Commission, Attention: Auction 
Application Processing Section, 1919 M Street, NW., Room 222, 
Washington, DC 20554.
    An applicant that fails to submit the required long-form 
application as required under this subsection, and fails to 
establish good cause for any late-filed submission, shall be deemed 
to have defaulted and will be subject to the penalties set forth in 
Sec. 1.2104 of the Commission's Rules.
    (d) As an exhibit to its long-form application, the applicant 
must provide a detailed explanation of the terms and conditions and 
parties involved in any bidding consortia, joint venture, 
partnership or other agreement or arrangement it had entered into 
relating to the competitive bidding process prior to the time 
bidding was completed. Such agreements must have been entered into 
prior to the filing of short-form applications pursuant to 
Sec. 1.2105.

Section 1.2108 Procedures for Filing Petitions To Deny Against 
Long-Form Applications

    (a) Where petitions to deny are otherwise provided for under the 
Act or the Commission's Rules, and unless other service-specific 
procedures for the filing of such petitions are provided for 
elsewhere in the Commission's Rules, the procedures in this section 
shall apply to the filing of petitions to deny the long-form 
applications of winning bidders.
    (b) Within thirty (30) days after the Commission gives public 
notice that a long-form applications has been accepted for filing, 
petitions to deny that application may be filed. Any such petitions 
must contain allegations of fact supported by affidavit of a person 
or persons with personal knowledge thereof.
    (c) An applicant may file an opposition to any petition to deny, 
and the petitioner a reply to such opposition. Allegations of fact 
or denials thereof must be supported by affidavit of a person or 
persons with personal knowledge thereof. The times for filing such 
opposition and replies will be those provided in Sec. 1.45 of these 
Rules.
    (d) If the Commission determines that:
    (1) An applicant is qualified and there is no substantial and 
material issue of fact concerning that determination, it will grant 
the application.
    (2) An applicant is not qualified and that there is no 
substantial issue of fact concerning that determination, the 
Commission need not hold an evidentiary hearing and will deny the 
application.
    (3) Substantial and material issues of fact require a hearing, 
it will conduct a hearing. The Commission may permit all or part of 
the evidence to be submitted in written form and may permit 
employees other than administrative law judges to preside at the 
taking of written evidence. Such hearing will be conducted on an 
expedited basis.

Section 1.2109 License Grant, Denial, Default, and Disqualification

    (a) Unless otherwise specified in these rules, auction winners 
are required to pay the balance of their winning bids in a lump sum 
within five (5) business days following award of the license. Grant 
of the license will be conditioned on full and timely payment of the 
winning bid.
    (b) If a winning bidder withdraws its bid after the Commission 
has declared competitive bidding closed or fails to remit the 
required down payment within five (5) business days after the 
Commission has declared competitive bidding closed, the bidder will 
be deemed to have defaulted, its application will be dismissed, and 
it will be liable for the default penalty specified in 
Sec. 1.12104(g)(2). In such event, the Commission may either re-
auction the license to existing or new applicants or offer it to the 
other highest bidders (in descending order) at their final bids. The 
down payment obligations set forth in Sec. 1.2107(b) will apply.
    (c) A winning bidder who is found unqualified to be a licensee, 
fails to remit the balance of its winning bid in a timely manner, or 
defaults or is disqualified for any reason after having made the 
required down payment, will be deemed to have defaulted and will be 
liable for the penalty set forth in Sec. 1.2104(g)(2). In such 
event, the Commission will conduct another auction for the license, 
affording new parties an opportunity to file applications for the 
license.
    (d) Bidders who are found to have violated the antitrust laws or 
the Commission's rules in connection with their participation in the 
competitive bidding process may be subject, in addition to any other 
applicable sanctions, to forfeiture of their upfront payment, down 
payment of full bid amount, and may be prohibited from participating 
in future auctions.

Section 1.2110 Designated Entities

    (a) Designated entities are small businesses, businesses owned 
by members of minority groups and/or women, and rural telephone 
companies.
    (b) Definitions. (1) Small businesses. The Commission will 
establish the definition of a small business on a service-specific 
basis, taking into consideration the characteristics and capital 
requirements of the particular service.
    (2) Businesses owned by member of minority groups and/or women. 
Unless otherwise provided in rules governing specific services, a 
business owned by members of minority groups and/or women is one in 
which minorities and/or women who are U.S. citizens control the 
applicant, have at least 50.1 percent equity ownership and, in the 
case of a corporate applicant, a 50.1 percent voting interest. For 
applicants that are partnerships, every general partner either must 
be a minority and/or woman (or minorities and/or women) who are U.S. 
citizens and who individually or together own at least 50.1 percent 
of the partnership equity, or an entity that is 100 percent owned 
and controlled by minorities and/or women who are U.S. citizens. The 
interests of minorities and women are to be calculated on a fully-
diluted basis; agreements such as stock options and convertible 
debentures shall be considered to have a present effect on the power 
to control an entity and shall be treated as if the rights 
thereunder already have been fully exercised. However, upon a 
demonstration that options or conversion rights held by non-
controlled principals will not deprive the minority and female 
principals of a substantial financial stake in the venture or impair 
their rights to control the designated entity, a designated entity 
may seek a waiver of the requirement that the equity of the minority 
and female principals must be calculated on a fully-diluted basis. 
The term minority includes individuals of African American, 
Hispanic-surnamed, American Eskimo, Aleut, American Indian and Asian 
American extraction.
    (3) Rural telephone companies. A rural telephone company is any 
local exchange carrier, including affiliates (as defined in 
1.2110(b)(4)), with 100,000 access lines or fewer.
    (4) Affiliate. (1) An individual or entity is an affiliate of 
(a) an applicant or (b) 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--
    (i) Directly or indirectly controls or has the power to control 
the applicant, or
    (ii) Is directly or indirectly controlled by the applicant, or
    (iii) Is directly or indirectly controlled by a third party or 
parties that also controls or has the power to control the 
applicant, or
    (v) 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 application. While neither 
shareholder has enough shares to individually control Corporation Y, 
together they have the power to control Corporation Y. The two 
shareholders with these common investments (or identity 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 sowing.
    (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, and 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 
effective 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 of 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.
    (c) The Commission may set aside specific licenses for which 
only eligible designated entities, as specified by the Commission, 
may bid.
    (d) The Commission may permit partitioning of service areas in 
particular services for eligible designated entities.
    (e) The Commission may permit small businesses (including small 
business owned by women, minorities, or rural telephone companies 
that qualify as small businesses) and other entities determined to 
be eligible on a service-specific basis, which are high bidders for 
licenses specified by the Commission, to pay the full amount of 
their high bids in installments over the term of their licenses 
pursuant to the following:
    (1) Unless otherwise specified, each eligible applicant paying 
for its license(s) on an installment basis must deposit by wire 
transfer or cashier's check in the manner specified in 
Sec. 1.2107(b) sufficient additional funds as are necessary to bring 
its total deposits to ten (10) percent of its winning bid(s) within 
five (5) business days after the Commission has declared it the 
winning bidder and closed the bidding. Failure to remit the required 
payment will make the bidder liable to pay penalties pursuant to 
Sec. 1.2104(g)(2).
    (2) Within five (5) business days of the grant of the license 
application of a winning bidder eligible for installment payments, 
the licensee shall pay another ten (10) percent of the high bid, 
thereby commencing the eligible licensee's installment payment plan. 
Failure to remit the required payment will make the bidder liable to 
pay penalties pursuant to Sec. 1.2104(g)(2).
    (3) Upon grant of the license, the Commission will notify each 
eligible licensee of the terms of its installment payment plan. 
Unless other terms are specified in the rules of particular 
services, such plans will:
    (i) Impose interest based on the rate of U.S. Treasury 
obligations (with maturities closest to the duration of the license 
term) at the time of licensing;
    (ii) Allow installment payments for the full license term;
    (iii) Begin with interest-only payments for the first two years; 
and
    (iv) Amortize principal and interest over the remaining term of 
the license.
    (4) A license granted to an eligible entity that elects 
installment payments shall be conditioned upon the full and timely 
performance of the licensee's payment obligations under the 
installment plan.
    (i) If an eligible entity making installment payments is more 
than ninety (90) days delinquent in any payment, it shall be in 
default.
    (ii) Upon default or in anticipation of default of one or more 
installment payments, a licensee may request that the Commission 
permit a three to six month grace period, during which no 
installment payments need be made. In considering whether to grant a 
request for a grace period, the Commission may consider, among other 
things, the licensee's payment history, including whether the 
licensee has defaulted before, how far into the license term the 
default occurs, the reasons for default, whether the licensee has 
met construction build-out requirements, the licensee's financial 
condition, and whether the licensee is seeking a buyer under an 
authorized distress sale policy. If the Commission grants a request 
for a grace period, or otherwise approves a restructured payment 
schedule, interest will continue to accrue and will be amortized 
over the remaining term of the license.
    (iii) Following expiration of any grace period without 
successful resumption of payment or upon denial of a grace period 
request, or upon default with no such request submitted, the license 
will automatically cancel and the Commission will initiate debt 
collection procedures pursuant to Part 1, Subpart O of the 
Commission's Rules.
    (e) The Commission may award bidding credits (et seq., payments 
discounts) to eligible designated entities. Competitive bidding 
rules applicable to individual services will specify the designated 
entities eligible for bidding credits, the licenses for which 
bidding credits are available, the amounts of bidding credits and 
other procedures.
    (f) The Commission may establish different upfront payment 
requirement for categories of designated entities in competitive 
bidding rules of particular auctionable services.
    (g) The Commission may offer designated entities a combination 
of the available preferences or additional preferences.
    (h) Designated entities must describe on their long-form 
applications how they satisfy the requirements for eligibility for 
designated entity status, and must list and summarize on their long-
form applications all agreements that effect designated entity 
status, such as partnership agreements, shareholder agreements, 
management agreements and other agreements, including oral 
agreements, which establish that the designated entity will have 
both de facto and de jure control of the entity. Such information 
must be maintained at the licensees' facilities or by their 
designated agents for the term of the license in order to enable the 
Commission to audit designated entity eligibility on an ongoing 
basis.
    (i) The Commission may, on a service-specific basis, permit 
consortia, each member of which individually meets the eligibility 
requirements, to qualify for any designated entity provisions.
    (j) The Commission may, on a service-specific basis, permit 
publicly-traded companies that are owned by members of minority 
groups or women to qualify for any designated entity provisions.

Section 1.2111 Assignment or Transfer of Control: Unjust Enrichment

    (a) Reporting requirement. An applicant seeking approval for a 
transfer of control or assignment (otherwise permitted under the 
Commission's Rules) of a license within three years of receiving a 
new license through a competitive bidding procedure must, together 
with its application for transfer of control or assignment, file 
with the Commission a statement indicating that its license was 
obtained through competitive bidding. Such applicant must also file 
with the Commission the associated contracts for sale, option 
agreements, management agreements, or other documents disclosing the 
total consideration that the applicant would receive in return for 
the transfer or assignment of its license. This information should 
include not only a monetary purchase price, but also any future, 
contingent, in-kind, or other consideration (e.g., management or 
consulting contracts either with or without an option to purchase; 
below market financing).
    (b) Unjust enrichment payment: set-asides. As specified in this 
subsection, an applicant seeking approval for a transfer of control 
or assignment (otherwise permitted under the Commission's Rules) of 
a license acquired by the transferor or assignor pursuant to a set-
aside for eligible designated entities under Sec. 1.2110(c) of the 
Commission's Rules, or who proposes to take any other action 
relating to ownership or control that will result in loss of status 
as an eligible designated entity, must seek Commission approval and 
may be required to make an unjust enrichment payment (Payment) to 
the Commission by cashier's check or wire transfer before consent 
will be granted. The Payment will be based upon a schedule that will 
take account of the term of the license, any applicable construction 
benchmarks, and the estimated value of the set-aside benefit, which 
will be calculated as the difference between the amount paid by the 
designated entity for the license and the value of a comparable non-
set-aside license in the free market at the time of the auction. The 
Commission will establish the amount of the Payment and the burden 
will be on the applicants to disprove this amount. No Payment will 
be required if:
    (1) The license is transferred or assigned more than five years 
after its initial issuance, unless otherwise specified; or
    (2) The proposed transferee or assignee is an eligible 
designated entity under Sec. 1.2110(c) of the Commission's Rules or 
the service-specific competitive bidding rules of the particular 
service, and so certifies.
    (c) Unjust enrichment payment: installment financing. An 
applicant seeking approval for a transfer of control or assignment 
(otherwise permitted under the Commission's rules) of a license 
acquired by the transferor or assignor through a competitive bidding 
procedure utilizing installment financing available to designated 
entities under Sec. 1.2110(d) of the Rules will be required to pay 
the full amount of the remaining principal balance as a condition of 
the license transfer. No payment will be required if the proposed 
transferee or assignee assumes the installment payment obligations 
of the transferor or assignor, and if the proposed transferee or 
assignee is itself qualified to obtain installment financing under 
Sec. 1.2110(d) of the Rules or the service-specific competitive 
bidding rules of the particular service, and so certifies.
    (d) Unjust enrichment payment: bidding credits. An applicant 
seeking approval for a transfer of control or assignment (otherwise 
permitted under the Commission's Rules) of a license acquired by the 
transferor or assignor through a competitive bidding procedure 
utilizing bidding credits available to eligible designated entities 
under Sec. 1.2110(e) of the Rules, or who proposes to take any other 
action relating to ownership or control that will result in loss of 
status as an eligible designated entity, must seek Commission 
approval and will be required to make an unjust enrichment payment 
(Payment) to the government by wire transfer or cashier's check 
before consent will be granted. The Payment will be the sum of the 
amount of the bidding credit plus interest at the rate applicable 
for installment financing in effect at the time the license was 
awarded. See Sec. 1.2110(e). No payment will be required if the 
proposed transferee or assignee is an eligible designated entity 
under Sec. 1.2110(e) of the Commission's Rules or the service-
specific competitive bidding rules of the particular service, and so 
certifies.

[FR Doc. 94-24303 Filed 9-29-94; 8:45 am]
BILLING CODE 6712-01-M