[Federal Register Volume 68, Number 139 (Monday, July 21, 2003)]
[Rules and Regulations]
[Pages 42984-43002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18430]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 21, 22, 24, 27, 73, 80, 90, 95 and 101

[WT Docket No. 97-82; FCC 03-98]


Competitive Bidding Procedures

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission addresses five petitions for 
reconsideration filed in response to the Commission's Part 1 Order on 
Reconsideration of the Third Report and Order, and Fifth Report and 
Order. The Commission also adopts several minor modifications and 
revisions to certain part 1 general competitive bidding rules to 
provide specific guidance to auction participants and to streamline the 
competitive bidding regulations.

DATES: Effective September 19, 2003.

FOR FURTHER INFORMATION CONTACT: Regina Martin, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, at (202) 418-
0660.

SUPPLEMENTARY INFORMATION: This is a summary of the Second Order on 
Reconsideration of the Third Report and Order, and Order on 
Reconsideration of the Fifth Report and Order, adopted on April 22, 
2003 and released on May 8, 2003. The full text of this document is 
available for public inspection and copying during regular business 
hours at the FCC Reference Information Center, Portals II, 445 12th 
Street, SW., Room CY-A257, Washington, DC, 20554. This document may 
also be purchased from the Commission's duplicating contractor, Qualex 
International, Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, 
or via e-mail [email protected].

I. Overview

    1. In the Second Order on Reconsideration of the Third Report and 
Order, and Order on Reconsideration of the Fifth Report and Order, the 
Commission addresses five petitions for reconsideration filed in 
response to the Commission's Order on Reconsideration of the Part 1 
Third Report and Order, 65 FR 52401 (August 29, 2000), and Fifth Report 
and Order, 65 FR 52323 (August 29, 2000), which clarified and amended 
the general competitive bidding rules for all auctionable services.
    2. Specifically, in the Order on Reconsideration of the Part 1 
Fifth Report and Order, the Commission:
    [sbull] Clarifies that in calculating an applicant's gross revenues 
under the controlling interest standard, the personal net worth, 
including personal income, of its officers and directors will not be 
attributed to the applicant. To the extent that the officers and 
directors of the applicant are controlling interest holders of other 
entities, the Commission will attribute the gross revenues of those 
entities to the applicant.
    [sbull] Establishes a narrow exemption for the officers and 
directors of a rural telephone cooperative so that the gross revenues 
of the affiliates of a rural telephone cooperative's officers and 
directors need not be attributed to the applicant. Specifically, the 
gross revenues of the affiliates of an applicant's officers and 
directors will not be attributed if either the applicant or a 
controlling interest, as the case may be, meets all of the following 
conditions: (i) The applicant (or the controlling interest) is validly 
organized as a cooperative pursuant to state law; (ii) the applicant 
(or the controlling interest) is a ``rural telephone company'' as 
defined by the Communications Act; and (iii) the applicant (or the 
controlling interest) is eligible for tax-exempt status under the 
Internal Revenue Code. However, the exemption will not apply if the 
gross revenues or other financial and management resources of the 
affiliates of the applicant's officers and directors (or the 
controlling interest's officers and directors) are available to the 
applicant.
    [sbull] Declines to revise the controlling interest standard to 
exclude entities operating under control group structures.
    [sbull] Modifies the Commission's part 1 default payment rule, 
Sec.  1.2104(g)(2), to incorporate the combinatorial bidding default 
rule adopted in the 700 MHz Second Memorandum Opinion and Order.
    [sbull] Revises the part 1 rules to make certain conforming edits 
in the following areas: (i) License default; (ii) definition of 
consortium; (iii) women- and minority-owned businesses; (iv) 
clarification of the attribution rule; (v) ownership disclosure 
requirements; and (vi) short-form disclosure requirements for small or 
very small business consortiums. Additionally, technical edits are made 
to Commission rules that refer to service-specific competitive bidding 
rules that have been removed, revised, or modified.
    3. In the Second Order on Reconsideration of the Part 1 Third 
Report and Order, the Commission:
    [sbull] Dismisses a repetitive challenge to modifications to the 
installment payment rules adopted in the Part 1 Third Report and Order, 
63 FR 770 (January 7, 1998) and the Order on Reconsideration of the 
Part 1 Third Report and Order.
    [sbull] Reorganizes Sec.  1.2112(a) to move the requirement that 
each application fully disclose all ``real party or parties in 
interest'' into Sec.  1.2112(a)(1). The Commission also conforms Sec.  
1.2112(a)(1) to the disclosure requirements as set forth in Sec.  
1.919(e) to ensure a complete disclosure of the identity and 
relationship of those persons or entities directly or indirectly owning 
or controlling (or both) the applicant.

II. Order on Reconsideration of the Part 1 Fifth Report and Order

A. Controlling Interest Standard

    4. In the Part 1 Fifth Report and Order, 65 FR 52323 (August 29, 
2000), the Commission adopted as its general attribution rule a 
controlling interest standard, Sec.  1.2110(c)(2), to be used for 
determining which applicants are eligible for small business status. 
The attribution rule is significant because, among other things, it is 
used to determine which applicants qualify as small businesses and 
therefore, may apply for bidding credits if they are available in a 
particular service.
    5. Under the controlling interest standard, the Commission 
attributes to the applicant the gross revenues of the applicant, its 
controlling interests, the applicant's affiliates, and the affiliates 
of the applicant's controlling interests, in assessing whether the 
applicant is eligible for the Commission's small business provisions. 
Section 1.2110(c)(2)(i) defines a controlling interest as including 
``individuals or entities with either de jure or de facto control.'' 
Thus, there may be more than one ``controlling interest'' whose gross 
revenues must be counted. The premise

[[Page 42985]]

of this rule is that all parties that control an applicant or have the 
power to control an applicant, and such parties' affiliates, will have 
their gross revenues counted and attributed to the applicant in 
determining the applicant's eligibility for small business status or 
for any other size-based status using a gross revenue threshold.
Attribution of Officers and Directors
    Personal Net Worth of Officers and Directors.
    6. Generally, the Commission has excluded personal net worth, 
including personal income and assets, from attribution for purposes of 
eligibility for small business provisions. In making this 
determination, the Commission has stated that attribution of personal 
net worth was not necessary because most wealthy individuals are likely 
to have their wealth tied to the ownership of other businesses. The 
Commission finds this rationale equally applicable here. Accordingly, 
for purposes of the controlling interest standard, the Commission 
clarifies that in calculating an applicant's gross revenues under Sec.  
1.2110, the personal net worth, including personal income and assets, 
of its officers and directors will not be attributed to the applicant. 
This clarification is consistent with the Commission's decisions in 
several service-specific rulemakings. For instance, in using the 
controlling interest standard to determine the eligibility of 
applicants in the 929-931 MHz Paging Service (``Auction No. 26'') for 
small business bidding credits, the Commission made clear that the 
personal net worth, including personal income, of controlling interests 
was not attributable to the applicant.
    7. Personal income of officers and directors, however, is 
distinguishable from the gross revenues received by any business 
entities such individuals may control. For example, if an officer or 
director were to operate a separate business, the gross revenues 
derived from that separate business would be attributed to the 
applicant, although any personal income from such separate business 
would not be attributed. Further, if an officer or director of an 
applicant were an affiliate of another entity through any ownership 
interest or other means of affiliation, the gross revenues of such 
entity would be attributed to the applicant, whereas any income derived 
directly by an officer or director from that entity would be considered 
personal income and not attributed to the applicant. Finally, 
applicants are reminded that by operation of the Commission's rules all 
affiliates of controlling interests are attributable to the applicant. 
Thus, although the Commission does not attribute to the applicant the 
personal income of its officers and directors, to the extent that the 
officers and directors are controlling interest holders of other 
entities, the Commission attributes the gross revenues of those 
entities to the applicant.
    Application of Attribution Rule to the Officers and Directors of a 
Rural Telephone Cooperative.
    8. The Commission grants Rural Telecommunications Group's (``RTG'') 
request to exclude from attribution the gross revenues of entities 
controlled by a rural telephone cooperative's officers and directors, 
by providing a narrow exemption only available where the gross revenues 
of the affiliates of a rural telephone cooperative's officers and 
directors would otherwise be attributable based solely on their status 
as officers and directors of the rural telephone cooperative applicant 
or as officers and directors of a rural telephone cooperative that 
controls the applicant. However, if an officer or director of a rural 
telephone cooperative is considered a controlling interest of the 
applicant under another section of the controlling interest attribution 
rule, this exemption does not apply. For example, if an officer or 
director of the rural telephone cooperative manages its operations 
pursuant to a management agreement and either has authority to make 
certain decisions regarding the services offered by the applicant, or 
significantly influences such decisions, the gross revenues of other 
entities controlled by the officer or director would be attributed to 
the rural telephone cooperative. The Commission denies Neoworld's 
suggestion to broadly exempt officers and directors from the 
controlling interest standard where an applicant institutes a 
contractual mechanism in an effort to insulate officers and directors 
from involvement in an applicant's telecommunications activities.
    Limited Exemption for Rural Telephone Cooperatives.
    9. In light of the unique nature of rural telephone cooperatives, 
an exemption from the requirement that the gross revenues of entities 
controlled by a rural telephone cooperative's officers and directors 
are attributed to the applicant would not undermine the purpose of the 
controlling interest attribution rule. The attribution rules are 
intended to eliminate incentives for entities to create small business 
``fronts'' that would enable large firms to secure a benefit to which 
they are not entitled, i.e., small business bidding credits. The 
Commission agrees with the commenters' explanation that the key 
differences between rural cooperatives and other structures make it 
highly unlikely that rural telephone cooperatives would be able to 
participate in the types of sham transactions the rule is designed to 
protect against. For example, ownership and control of the cooperative 
remain in the hands of patrons of the cooperative (i.e., telephone 
subscribers), rather than in non-patron equity investors as is often 
the case with traditional corporations or other business forms. 
Additionally, unlike traditional corporations or other business forms, 
the outside business interests of individual officers and directors of 
rural telephone cooperatives are not financial and management resources 
available to the cooperative. Further, because of the democratic 
structure of cooperatives, the patrons of each cooperative control the 
cooperative. Finally, members contribute equity to, and control, the 
capital of the cooperative, as opposed to outside investors. In light 
of these factors, grant of RTG's petition does not undermine the 
purpose of the controlling interest attribution rule.
    10. Accordingly, based upon the comments received, the Commission 
adopts a narrow exemption for the officers and directors of a rural 
telephone cooperative so that the gross revenues of the affiliates of a 
rural telephone cooperative's officers and directors need not be 
attributed to the applicant. In the Commission's experience, rural 
telephone cooperatives frequently create wholly owned subsidiaries, or 
similar entities, to participate in Commission auctions. Accordingly, 
this exemption for the applicant's officers and directors would also 
extend to situations where the applicant is not a rural telephone 
cooperative but is controlled by an eligible rural telephone 
cooperative. For example, X is a rural telephone cooperative that 
satisfies all the elements of the exemption. X creates a subsidiary Y. 
Y's officers and directors are controlling interests solely based upon 
their status as officers and directors--i.e., solely pursuant to Sec.  
1.2110(c)(2)(ii)(F). Y has no other controlling interests. Then, for 
purposes of determining eligibility for small business provisions, the 
gross revenues of the affiliates of X's officers and directors and 
affiliates of Y's officers and directors are not attributed to Y. If, 
however, Y has another controlling interest (other than Y's officers 
and directors and X's officers and directors) that is not an eligible 
rural telephone cooperative or controlled by an eligible

[[Page 42986]]

rural telephone cooperative, then the exemption does not apply to Y's 
officers and directors or such controlling interest's officers or 
directors. However, the gross revenues of the affiliates of X's 
officers and directors would not be attributed to Y. Specifically, the 
gross revenues of the affiliates of an applicant's officers and 
directors will not be attributed if either the applicant or a 
controlling interest, as the case may be, meets all of the following 
conditions: (i) The applicant (or the controlling interest) is validly 
organized as a cooperative pursuant to state law;\1\ (ii) the applicant 
(or the controlling interest) is a ``rural telephone company'' as 
defined by the Communications Act;\2\ and (iii) the applicant (or the 
controlling interest) is eligible for tax-exempt status under the 
Internal Revenue Code. 26 U.S.C. 1381(a)(2)(C); 26 U.S.C.A. 501(c)(12). 
However, the exemption will not apply if the gross revenues or other 
financial and management resources of the affiliates of the applicant's 
officers and directors (or the controlling interest's officers and 
directors) are available to the applicant. Further, the mere presence 
of an eligible rural telephone cooperative as a controlling interest 
will not ensure that the exemption is wholly applicable to the 
applicant. Thus, where an applicant is not an eligible rural telephone 
cooperative, if the applicant has a controlling interest (other than 
the applicant's officers and directors or the eligible rural telephone 
cooperative's officers and directors) that is not an eligible rural 
telephone cooperative, or controlled by an eligible rural telephone 
cooperative, the exemption will not apply to the applicant's officers 
and directors or such controlling interest's officers and directors. 
However, in that situation, the gross revenues of the affiliates of the 
eligible rural telephone cooperative's officers and directors would not 
be attributed to the applicant. The exemption the Commission creates is 
appropriate because where the eligible rural cooperative ultimately 
controls the applicant, the gating criterion of the cooperative 
structure precludes the applicant from being a sham entity.
---------------------------------------------------------------------------

    \1\ A cooperative is defined pursuant to state law not federal 
law. Accordingly, the Commission requires that a rural telephone 
cooperative be validly organized as a cooperative under state law. 
See e.g., New Mexico Cooperation Act, N.M. Stat. Ann. Sec.  53-4-1 
(Michie 1978); Colo. Rev. Stat. Ann. Sec.  7-56-103 (West 2002).
    \2\ 47 U.S.C. 153(37). The term ``rural telephone company'' is 
defined in 47 U.S.C. 153(37) and in 47 CFR 1.2110(c)(4) and 51.5. 
Since passage of the Telecommunications Act of 1996, the Commission 
generally has used the statutory definition to determine which local 
exchange carriers can be classified as rural telephone companies. 
The statutory definition uses a range of standards, including the 
population of a jurisdiction and the number of access lines serving 
communities of various sizes. Specifically, section 153(37) states:
    The term ``rural telephone company'' means a local exchange 
carrier operating entity to the extent that such entity--
    (A) provides common carrier service to any local exchange 
carrier study area that does not include either--
    (i) any incorporated place of 10,000 inhabitants or more, or any 
part thereof, based on the most recently available population 
statistics of the Bureau of the Census; or
    (ii) any territory, incorporated or unincorporated, included in 
an urbanized area, as defined by the Bureau of the Census as of 
August 10, 1993;
    (B) provides telephone exchange service, including exchange 
access, to fewer than 50,000 access lines;
    (C) provides telephone exchange service to any local exchange 
carrier study area with fewer than 100,000 access lines; or
    (D) has less than 15 percent of its access lines in communities 
of more than 50,000 on the date of enactment of the 
Telecommunications Act of 1996. 47 U.S.C. 153(37).
---------------------------------------------------------------------------

    11. The exemption the Commission adopts is tailored to the factual 
assertions and policy arguments provided by commenters. The test the 
Commission adopts will ensure that the Commission's general assumptions 
regarding cooperatives hold true with respect to each applicant seeking 
to avail itself of this exemption. Thus, for example, the Commission is 
limiting this exemption only to those rural telephone cooperatives that 
are eligible for Federal tax-exempt status (i.e., those that derive 85% 
or more of their income from subscribers). Adopting such an objective 
factor, as well as the other objective factors, will ensure that such 
exemption would be used only by bona fide community-based cooperatives, 
not sham entities. The Commission believes that this action will 
increase the number of rural telephone cooperatives that are eligible 
for small business status (and the corresponding bidding credits). Such 
a result will enhance the ability of rural telephone cooperatives to 
participate in spectrum auctions. This, in turn, will promote the 
deployment of advanced telecommunications services in rural areas as 
Congress mandated in section 309(j).
    12. Accordingly, the Commission incorporates this exemption into 
the controlling interest standard contained in Sec.  1.2110. If an 
applicant uses this exemption, its certification on its short-form 
application (FCC Form 175) that it ``is qualified as a designated 
entity under Sec.  1.2110'' constitutes a certification that it is 
eligible for this narrow exemption. In addition, in the long-form 
application (FCC Form 601) and in the application for assignment or 
transfer of control (FCC Form 603), applicants seeking to use this 
exemption will be required to establish eligibility for this exemption 
based on the factors listed.
    13. Consistent with the policy objectives underlying the 
Commission's decision, the Commission grants three pending waiver 
requests filed by rural telephone cooperative applicants in Auction No. 
44. Specifically, three winning bidders that are rural telephone 
cooperatives (or wholly-owned by rural telephone cooperatives) filed 
substantively identical requests for waiver of Sec.  
1.2110(c)(2)(ii)(F). See Applications to Participate in an FCC Auction 
(FCC 175) of Cable and Communications Corporation, Northeast Nebraska 
Telephone Company, and Poka Lambro Telecommunications, Ltd. (initially 
filed May 8, 2002) (respectively, the ``C&C Application, Northeast 
Application, and Poka Lambro Application''). Short form applications 
for Auction No. 44, including the instant applications, may be viewed 
on the Commission's auctions Web site. See https://auctionfiling.fcc.gov/form175/index.htm. In connection with their 
demonstrations of eligibility for designated entity bidding credits, 
these applicants argued that the gross revenues of the affiliates of 
the cooperative's officers and directors should not be attributed to 
the cooperative. They note that the outside business interests of the 
cooperative's officers and directors ``have no impact on the 
cooperative's ability to raise capital or compete for FCC licenses'' 
due to the cooperative structure under which they are organized. The 
Commission believes that waiver of the requirement that the gross 
revenues of entities controlled by a rural telephone cooperative's 
officers and directors are to be attributed to the applicant would be 
consistent with its decision to adopt an exemption for rural telephone 
cooperatives and would promote the development of additional wireless 
services in their particular rural communities. Accordingly, consistent 
with the Commission's decision, it grants these waivers conditioned 
upon the submission to the Commission of information demonstrating the 
applicant's compliance with the factors adopted herein.
    14. The Commission denies Neoworld's suggestion to broadly exempt 
officers and directors from the controlling interest standard where an 
applicant institutes a contractual mechanism to insulate officers and 
directors from involvement in an applicant's telecommunications 
activities. Generally, Sec.  1.2110(c)(2)(ii)(F) reflects the corporate 
reality that business decisions and corporate policy

[[Page 42987]]

are established by a corporation's board of directors and officers. 
Providing a broad exemption for officers and directors of an applicant 
would ultimately underestimate the role of officers and directors in an 
organization; thereby potentially providing large businesses with a 
significant monetary benefit reserved only for eligible small 
businesses. Such a result is contrary to the Commission's intent when 
adopting the controlling interest rule. As the Commission noted in the 
Part 1 Fifth Report and Order, the Commission adopted the attribution 
rules to ensure that small business bidding credits are extended only 
to bona fide small businesses. Further, adoption of Neoworld's drastic 
revision to the Commission's rules would essentially require the 
Commission to conduct a case-by-case review of the specific insulating 
mechanism employed to ensure that the arrangements are legitimate and 
are not sham transactions. In contrast, the exemption the Commission 
adopts for rural telephone cooperatives does not require such a case-
by-case analysis. The cooperative's structure coupled with the factors 
identified serves as gating criteria obviating a need for such a case-
by-case analysis.
    Application of Controlling Interest Standard to Control Group 
Structures.
    15. TeleCorp, Tritel, Poplar, and Summit (``Petitioners'') request 
that the Commission revise the controlling interest standard to exclude 
entities operating under the Commission's previously adopted control 
group structure. Petitioners state that they are concerned that the 
controlling interest standard could be interpreted to provide that 
officers and directors are always considered to have a controlling 
interest even under a control group structure. Petitioners argue that a 
literal reading of the rule could be used to expand the definition of 
affiliates so that greater gross revenues and assets would be 
attributed on that basis alone. Specifically, Petitioners request that 
newly established affiliates of existing restricted C/F block licensees 
that were structured so as to establish their eligibility under a 
control group attribution rule be able to utilize the same structure 
used by the existing restricted C/F block licensee to establish their 
eligibility. The Petitioners did not indicate the context of their 
request, i.e., whether they sought to use the control group attribution 
rule solely to determine eligibility to hold a restricted C/F block 
license, or also to determine if an unjust enrichment payment would be 
owed upon transfer of control or assignment of such a license.
    16. To the extent Petitioners are seeking a modification to the 
Commission's rule, the Commission denies their petitions for 
reconsideration and affirms the Commission's decision in the Part 1 
Fifth Report and Order to consider officers and directors as 
controlling interests in a licensee or applicant. However, to avoid 
similar questions in the future, the Commission restates the 
application of the attribution rules with respect to eligibility to 
hold restricted C/F block licenses. Generally, if an applicant does not 
hold a restricted C/F block license under the former control group 
rules it must use the controlling interest attribution rule to 
determine eligibility to hold restricted C/F block licenses, whether 
through auctions or through assignment or transfer of control. However, 
with respect to the acquisition of restricted C/F block licenses 
through assignment or transfer of control, wholly-owned subsidiaries 
and commonly controlled affiliates (whether newly formed or in 
existence prior to the adoption of the controlling interest attribution 
rule) that establish their eligibility directly through an existing 
restricted C/F block licensee, will be eligible to hold a C/F block 
restricted license to the same extent as the existing restricted C/F 
block licensees. Thus, in the context of an application to assign or 
transfer a restricted C/F block license, the eligibility of an existing 
restricted C/F block licensee (that obtained its license under the 
former control group rules) and its wholly owned subsidiaries and 
commonly controlled affiliates to hold such licenses (as opposed to 
eligibility for small business provisions such as bidding credits) may 
be determined without application of the controlling interest 
attribution rule. For example, X creates a wholly-owned subsidiary Y. X 
also has a commonly controlled affiliate Z. X obtained its restricted 
C/F block licenses under the former control group rules. W, an 
unrelated party, also obtained its restricted C/F block licenses under 
the former control group rules. W seeks to assign its restricted C/F 
block licenses to Y and Z. Because X, Y, and Z are commonly controlled, 
Y and Z may establish their eligibility to hold restricted C/F block 
licenses through X without application of the controlling interest 
attribution standard. Further, X, Y, and Z will continue to be eligible 
to hold restricted C/F block licenses provided they comply with the 
requirements of Sec.  24.709. See TeleCorp Order, 16 FCC Rcd at 3725-
26, Paras. 23-41. Significantly, X, Y, and Z can only exceed the total 
assets test by permissible growth pursuant to Sec.  24.709(a)(2). Id. 
at para. 29. This explanation does not alter the determination that, as 
stated in the Part 1 Fifth Report and Order, for all future C/F block 
auctions, all applicants will be subject to the attribution rules in 
effect at the time of filing their short-form applications.
    17. For purposes of determining an assignee's or transferee's 
eligibility for benefits offered to small businesses, such as bidding 
credits and installment financing, and the application of the unjust 
enrichment provisions, all applicants will be subject to the 
attribution rules in effect at the time of filing their applications 
for assignment or transfer of control. The Commission has previously 
determined that the fact that an existing restricted C/F block licensee 
may choose to retain a control group structure does not exempt it from 
attributing the gross revenues of its affiliates, including the gross 
revenues of other entities controlled by its officers and directors, to 
the licensee for purposes of determining eligibility for small business 
provisions, such as bidding credits and installment financing.

B. Calculation of Default Payments in Combinatorial Bidding

    18. The Commission incorporates into the part 1 general competitive 
bidding rules the combinatorial bidding default rule adopted in the 700 
MHz Second Memorandum Opinion and Order, 66 FR 10374 (February 15, 
2001). The Commission adopts this provision because the effects of 
default in a combinatorial bidding auction are so detrimental to the 
integrity of the auctions system that they require a strong deterrent 
against insincere bidding and strategic default. As a commenter noted, 
in response to the Auction No. 31 Combinatorial Bidding Comment Public 
Notice, 65 FR 35636 (June 5, 2000), ``[d]efault in a combinatorial 
auction has more far reaching consequences than does default in an 
auction of single items. In particular, a default in a combinatorial 
auction could affect the award of many other licenses and [could] be 
used strategically to do so.'' Comments of Alekansdar Pekec and Michael 
H. Rothkopf, ``Making the FCC's First Combinatorial Auction Work Well'' 
(filed June 9, 2000) at section 6. Thus, the rule as adopted in the 700 
MHz Second Memorandum Opinion and Order is necessary to adequately 
discourage defaults, deter frivolous or insincere bidding, and 
generally protect the integrity of the auction process. The rule will 
be used to calculate default

[[Page 42988]]

payments for all auctions where a combinatorial bidding design is 
employed. Although the Commission adopts a new combinatorial bidding 
default rule, the competitive bidding rules are otherwise applicable. 
Thus, for example, the winning bid for a package creates the same 
obligation for the whole package as does a winning bid for a single 
license in the context of simultaneous multiple round auction without 
combinatorial bidding.
    19. For convenience sake, the Commission provides the following 
explanation of the application of the rule. This substantially 
reiterates the explanation provided in the 700 MHz Second Memorandum 
Opinion and Order.
    (i) Where a defaulting bidder held winning bids on individual 
licenses (i.e., not as part of a package), and in a subsequent auction 
the licenses are also won individually, the deficiency portion will be 
calculated by subtracting the subsequent winning bid from the defaulted 
bid. 47 CFR 1.2104(g)(3)(i)(a) as adopted herein. The deficiency 
portion for such bids will be calculated on a license-by-license basis 
(i.e., in the event of defaults on multiple bids, the differences 
between the amounts originally bid and the amounts subsequently bid 
will not be aggregated to determine a net amount owed). Id. For 
example, if a bidder defaults on two bids, one for License A for $100 
and one for License B for $150, and in a subsequent auction, the 
licenses are won as License A for $150 and License B for $120, the 
default payment would be calculated separately for License A (by 
comparing the original bid ($100) to the amounts subsequently bid 
($150), yielding no deficiency but an additional 25% payment)) and 
License B (by comparing the original bid ($150) to the amount 
subsequently bid for License B ($120), yielding a deficiency of $30, 
plus an additional 25% payment)). If the subsequent winning bid(s) 
exceed the defaulted bid(s), no deficiency portion will be assessed. 
Even in the absence of a deficiency portion, however, an additional 25% 
payment will be due. Id.
    (ii) Where a defaulting bidder won licenses in package(s), and in a 
subsequent auction the licenses are won either (a) in the same 
package(s), or (b) in smaller packages or as individual licenses that 
correlate to the defaulted package(s), the deficiency portion will be 
determined on a package-by-package basis. 47 CFR 1.2104(g)(3)(i)(b) as 
adopted herein. In the event a defaulting bidder defaults on more than 
one such bid, the differences between the amount originally bid and the 
amounts(s) subsequently bid will not be aggregated to determine a net 
amount owed. Id. For example, if a bidder defaults on Package ABC 
(i.e., a package consisting of Licenses A, B and C) with a bid of $900 
and Package DE with a bid of $600, and in a subsequent auction, the 
licenses are won as License A for $200, Package BC for $600, and 
Package DE for $700, the default payment would be calculated separately 
for Package ABC (by comparing the original bid ($900) to the amounts 
subsequently bid for License A and Package BC ($200 and $600, which 
equals $800, yielding a $100 deficiency plus the additional payment)) 
and Package DE (by comparing the original bid ($600) to the amount 
subsequently bid for Package DE ($700, yielding no deficiency, but an 
additional 25% payment)). Thus, in this situation, the deficiency 
portion will be calculated in a manner analogous to where the licenses 
are sold individually. However, with regard to each individual package, 
where the licenses are subsequently sold individually or as part of 
smaller packages, the amounts received in the subsequent auction will 
be aggregated in order to determine any deficiency.
    (iii) Where a defaulting bidder or bidders won licenses either 
individually or as part of packages, and in a subsequent auction the 
licenses are won as larger packages or different packages (not 
including the situation described in preceding paragraph), the 
deficiency portion will be calculated by subtracting the aggregate 
amount originally bid for the licenses from the aggregate amount bid in 
the subsequent auction for the licenses. 47 CFR 1.2104(g)(3)(i)(c) as 
adopted herein. For example, if a bidder defaults on Package AB with a 
bid of $200 and Package CD with a bid of $300, and in a subsequent 
auction the licenses are sold as Package AC for $250 and Package BD for 
$250, the default payment would be calculated by aggregating the 
amounts originally bid ($200 plus $300 equals $500) to the amounts 
subsequently bid ($250 plus $250 equals $500) to determine the 
deficiency amount ($500 less $500 equals $0); the additional payment 
would be based on either the original aggregate amount or the 
subsequent aggregate amount, whichever is less (in this case, they are 
the same, $500). Thus, in this situation, the deficiency portion will 
not be calculated on a bid-by-bid basis.
    (iv) If, in a situation requiring that bids be aggregated in order 
to determine the deficiency portion of the default payments for bids, 
there are multiple defaulting bidders, the default payment (both the 
deficiency portion and the additional 25% payment portion) will be 
allocated to the defaulting bidders in proportion to the their share of 
the aggregated default bids. 47 CFR 1.2104(g)(3)(i)(d) as adopted 
herein. For example, if Bidder 1 defaults on Package ABC for $200, and 
Bidder 2 defaults on Package DE for $400, and in a subsequent auction 
the licenses are won in Package AB for $150 and Package CDE for $350, 
Bidder 1 would be liable for 1/3 of the default payment and Bidder 2 
would be responsible for 2/3. The total default payment would be equal 
to the difference between the total of the original bids ($600) and the 
total of the subsequent amounts bid ($500) plus an additional amount of 
25% of the total of the subsequent amounts bid. The total default 
payment therefore would equal $100 ($600-$500) plus 25 percent of $500 
($125), for a total default payment of $225.
    (v) In the event that a bidding credit applies to any applicable 
bids(s), the deficiency portion of the default payment will be assessed 
using the lesser of the difference between gross bids and the 
difference between net bids. 47 CFR 1.2104(g)(3) as adopted herein. (In 
the event that a bidder does not have a bidding credit, the bidder's 
gross bid and net bid are the same). In other words, the Commission 
will compare (i) the sum of the gross defaulted bid(s) minus the gross 
subsequent winning bid(s) and (ii) the sum of the net defaulted bid(s) 
minus the net subsequent winning bid(s). The Commission will use the 
lesser of (i) and (ii) to calculate the deficiency portion of the 
default payment.
    (vi) The default payment consists of the deficiency portion and an 
additional 25% payment. Id. The additional payment will be 25% of the 
lesser of the subsequent winning bids(s) and the defaulted bid(s). 47 
CFR 1.2104(g)(3)(ii) as adopted herein. The Commission will use the 
same gross or net bid(s) that were used to calculate the deficiency 
portion when assessing the additional 25% payment. Id. That is, the 
Commission will compare the defaulted and subsequent bid(s) according 
to the methods described for calculation of the deficiency portion of 
the default payment when determining whether the defaulted bid(s) or 
the subsequent winning bid(s) is the lesser amount. Id. Should there be 
no difference between the gross or net bid(s) for purposes of assessing 
the deficiency portion, the Commission will assess the additional 25% 
payment using the lesser of the gross or net bid(s).
    20. Finally, the Commission will maintain its practice of assessing 
an interim default payment with a slight modification. Specifically, in 
the case of combinatorial bidding defaults, the

[[Page 42989]]

Commission will assess a 25% interim default payment pending assessment 
of the final default payment after a subsequent auction. This procedure 
is appropriate because even under the most favorable set of 
circumstances for the defaulting bidder, i.e., where the bid price for 
the package at the subsequent auction exceeds defaulted bid, the final 
default payment would be 25% of the defaulted bid.

C. Licenses Subject to Auction After Default in Combinatorial Bidding 
Auctions

    21. When the Commission adopted the default rules, it stated, as a 
general rule, that in the event of default by a winning bidder, the 
best course of action would be to offer licenses for the spectrum in a 
subsequent auction. Currently, under the Commission's part 1 auction 
rules, if a bidder defaults on a bid (or bids), the Commission may 
offer the license(s) for the spectrum in a new auction or it may also 
offer the license(s) to the other highest bidders. In the 700 MHz 
Second Memorandum Opinion and Order, the Commission determined that for 
combinatorial bidding in the Upper 700 MHz band if a bidder defaults on 
a package bid, the Commission would auction the licenses making up the 
package on which the party defaulted, and only those licenses. This 
would occur even if, under the combinatorial bidding procedures, a 
different set of packages would have won had the defaulting bidder not 
bid. As the Commission explained in that 700 MHz Second Memorandum 
Opinion and Order, any other result would be extremely problematic in 
the context of combinatorial bidding. The Commission sees no reason to 
change this decision now. Accordingly, in all future combinatorial 
bidding auctions, the Commission will not offer the package or licenses 
to the next highest bidder and will instead auction the license(s) for 
the spectrum in a new auction.

D. Conforming Edits to Competitive Bidding Rules

    22. The Commission revises or removes service-specific and/or part 
1 competitive bidding rules in the following areas: (i) License 
default; (ii) definition of consortium; (iii) women- and minority-owned 
businesses; (iv) clarification of the attribution rule; (v) ownership 
disclosure requirements; and (vi) short-form disclosure requirements 
for small or very small business consortiums. Also, technical edits are 
made to Commission rules that refer to service-specific competitive 
bidding rules that have been removed, revised, or modified.
    23. License default. Section 1.2109, among other things, provides 
the conditions upon which a winning bidder will be deemed to have 
defaulted. Specifically, Sec.  1.2109(b) states, in pertinent part, 
that ``[i]f a winning bidder withdraws its bid * * * the bidder will be 
deemed to have defaulted, its application will be dismissed, and it 
will be liable for the default payment specified in Sec.  
1.2104(g)(2).'' However, Sec.  1.2109(c) states, in pertinent part, 
that ``[a] winning bidder who is found unqualified to be a licensee * * 
* will be deemed to have defaulted and will be liable for the payment 
set forth in Sec.  1.2104(g)(2).'' The language regarding the dismissal 
of an application was inadvertently omitted from Sec.  1.2109(c). Thus, 
the Commission revises Sec.  1.2109(c) to add dismissal language to 
conform to Sec.  1.2109(b).
    24. Definition of consortium. The Commission's service-specific 
competitive bidding rules for several services define the terms ``small 
business consortium'' and ``very small business consortium.'' However, 
neither of these terms are defined in the Commission's part 1 rules. To 
streamline the Commission's rules and eliminate redundancies, the 
Commission incorporates a definition of the term ``consortium'' into 
the part 1 rules. This definition is taken almost verbatim from the 
service-specific definitions. Accordingly, the Commission deletes the 
definitions of small and very small business consortium in the service-
specific competitive bidding rules.
    25. Further, the Commission has generally defined a ``small or very 
small business consortium'' as a conglomerate organization formed as a 
joint venture between or among mutually independent business firms, 
each of which individually satisfies the definition of a small or very 
small business as defined on a service-specific basis. In the Part 1 
Third Report and Order, the Commission, in clarifying the part 1 
definition of affiliate, determined that a ``consortium'' for purposes 
of determining status as a designated entity will not be treated as a 
``joint venture'' under the Commission's attribution standards. In that 
Order, however, the Commission failed to also revise the part 1 
definition of a ``small or very small business consortium.'' Thus, the 
Commission revises the part 1 rules to exclude the term ``joint 
venture'' from the definition of ``consortium.''
    26. Clarification of the attribution rules: In the Part 1 Fifth 
Report and Order, the Commission established a controlling interest 
standard for attributing to an applicant the gross revenues of the 
applicant, its affiliates, its controlling interest, and the affiliates 
of the applicant's controlling interests in determining which 
applicants qualify as small businesses. In doing so the Commission 
amended the part 1 competitive bidding rules to incorporate new rules 
adopting the controlling interest standard. Specifically, Sec.  
1.2110(c)(2)(ii)(F) provides, in pertinent part, that ``[o]fficers and 
directors of an entity shall be considered to have a controlling 
interest in the entity.'' Under the controlling interest standard, 
however, a controlling interest includes individuals or entities, or 
groups of individuals or entities, that have control of the applicant 
under the principles of either de jure or de facto control. Therefore, 
the Commission revises Sec.  1.2110(c)(ii)(F) to read, in pertinent 
part, that ``[o]fficers and directors of an applicant shall be 
considered to have a controlling interest in the applicant.''
    27. Additionally, the Commission makes slight modifications to 
Sec.  1.2110(b)(1)(i) to provide further guidance to applicants. 
Specifically, the term ``their affiliates'' in Sec.  1.2110(b)(1)(i) 
includes both affiliates of the applicant and affiliates of the 
applicant's controlling interests.
    28. Disclosure requirements for small businesses. Section 1.2112(a) 
of the Commission's rules formerly required all applications to 
participate in competitive bidding or for a license, authorization, 
assignment, or transfer of control to disclose certain information 
pertaining to controlling interests including ``a list of names, 
addresses, and citizenship of all controlling interests of the 
applicants, as set forth in Sec.  1.2110.'' In the Part 1 Fifth Report 
and Order, the Commission determined that only applicants claiming 
small business status would be required to disclose controlling 
interest information under Sec.  1.2112. Accordingly, the controlling 
interest disclosure requirements from Sec.  1.2112(a) were moved to 
Sec.  1.2112(b) which applies to entities claiming eligibility for 
small business provisions. At the same time, Sec.  1.2112(b) was 
divided into two parts: Paragraph (b)(1), applying to short-form 
applications; and paragraph (b)(2), applying to long-form applications. 
The controlling interest language from Sec.  1.2112(a), however, was 
inadvertently only carried over to paragraph (b)(1) instead of in both 
paragraphs (b)(1) and (b)(2). In addition, in dividing Sec.  1.2112(b) 
into two sections, the Commission failed to specifically mention 
applications for an assignment

[[Page 42990]]

or transfer of control. Accordingly, the Commission makes conforming 
edits to Sec.  1.2112(b) to correct these inadvertent errors to fully 
implement its intent that all applicants claiming small business 
status, including those filing applications for a license, 
authorization, assignment, or transfer of control as well as those 
filing short-form applications, are required to disclose the 
controlling interest information.
    29. Section 1.2112(b)(1)(i) requires an applicant to list, as part 
of the disclosure obligations, the ``names, addresses, and citizenship 
of all officers, directors, and other controlling interests of the 
applicant.'' However, in addition to these disclosures, certain 
service-specific rules also require the applicant to disclose the same 
information for affiliates and small and very small business 
consortium. Section 1.2112(b)(1)(i) does not require the applicant to 
disclose this additional information. The Commission removes the 
service-specific short-form disclosure requirements and revises 
subsection 1.2112(b)(1)(i) to add affiliate and small or very small 
business consortium language as part of the short-form disclosure 
obligations.
    30. Additionally, the Commission revises Sec.  1.2112(b)(1)(ii) to 
comport with the Commission's previous correction made to Sec.  
1.2112(a)(6) in the Part 1 Erratum. Specifically, the Commission 
revises Sec.  1.2112(b)(1)(ii) to require applicants claiming 
eligibility for small business provisions to list any FCC-regulated 
entity (instead of the current requirement to list any FCC-licensed 
entity) or applicant for an FCC license in which any controlling 
interest of the applicant owns a 10 percent or greater interest or a 
total of 10 percent or more of any class of stock, warrants, options or 
debt securities. This revision is consistent with the Commission's 
intent, as stated in the Part 1 Fifth Report and Order, to require that 
FCC-regulated entities be reported when there is a connection between 
such entity and the applicant at issue through a common owner.
    31. Women- and minority-owned businesses. The Commission's rules 
set forth certain provisions applicable to designated entities--small 
businesses, businesses owned by members of minority groups and/or 
women, and rural telephone companies. In particular, Sec.  1.2110(c)(3) 
of the part 1 general competitive bidding rules defines and provides 
the eligibility criteria for businesses owned by members of minority 
groups and/or women. However, Sec.  24.720 (c), (d), and (i)(2) also 
define women- and minority-owned businesses and qualifying minority 
and/or woman investor. In light of the Commission's ongoing efforts to 
eliminate from the Code of Federal Regulations service-specific 
competitive bidding rules that are either repetitive with or have been 
superseded by the part 1 general competitive bidding rules, the 
Commission removes Sec.  24.720 (c), (d), and (i)(2). The Commission's 
action is technical in nature and does not substantively affect the 
status of women- and minority-owed businesses.

III. Second Order on Reconsideration of the Third Report and Order

A. Installment Grace Periods and Imposition of Late Payment Fees

    32. NextWave urges the Commission to restore the original 
installment payment rules as adopted in the Competitive Bidding Second 
Report and Order, 59 FR 22980 (May 4, 1994). This Order does not 
address the petitions for reconsideration challenging the Commission's 
statement that Sec.  1.2104(g)(2) does not apply to licensees who 
default on their installment payments, see Order on Reconsideration of 
the Part 1 Third Report and Order, 66 FR 51594 (October 10, 2001). The 
Commission received three petitions for reconsideration on this point. 
NextWave Petition, TeleCorp/Tritel/Poplar/Summit Petition, and MetroPCS 
Petition. The Commission will address this point in a subsequent order. 
In its petition, NextWave again relies upon the arguments that the 
modifications to the rules constitute impermissible retroactive 
rulemaking, that the changes were unreasonable and not consistent with 
commercial practices, and that contract-based theories precluded the 
Commission from modifying the installment payment rules. These 
arguments were previously the subject of reconsideration and fully 
considered and rejected in the Order on Reconsideration of the Part 1 
Third Report and Order. Part 1 Fifth Report and Order; Compare NextWave 
Petition, filed September 28, 2000, in response to the Order on 
Reconsideration of the Part 1 Third Report and Order with NextWave 
Petition, filed February 17, 1998, in response to the Part 1 Third 
Report and Order. Additionally, as also noted, the Court of Appeals for 
the District of Columbia Circuit has substantially addressed and 
rejected these arguments in the context of a challenge to the 
application of the revised installment payment rules to the 218-219 MHz 
Service licensees. In light of these circumstances, the Commission 
declines to grant reconsideration.
    33. The Commission does not grant reconsideration for the purpose 
of allowing a petitioner to reiterate arguments already presented. This 
is particularly true where a petitioner advances arguments that the 
Commission previously considered and rejected in a prior order on 
reconsideration. If this were not the case, the Commission would be 
involved in a never-ending process of review that would frustrate the 
Commission's ability to conduct business in an orderly fashion. 
However, the Commission will entertain a petition for reconsideration 
if it is based on new evidence or changed circumstances or if the 
reconsideration is in the public interest. In this instance, NextWave's 
arguments were previously raised and fully addressed in the Order on 
Reconsideration of the Part 1 Third Report and Order. NextWave did not 
plead or otherwise establish new facts, changed circumstances, or new 
public interest considerations that would merit review of its request 
for reconsideration. Thus, the Commission dismisses NextWave's 
arguments here as repetitious.

B. Ownership Disclosure Requirements

    34. The Commission reorders Sec.  1.2112 to move the requirement 
that each application for competitive bidding, or for a license, 
authorization, assignment or transfer for control fully disclose all 
``real party or parties in interest'' from Sec.  1.2112(a) to Sec.  
1.2112(a)(1). At the same time, the Commission conforms Sec.  
1.2112(a)(1) to the disclosure requirements as set forth in Sec.  
1.919(e) to ensure that applicants include a complete disclosure of the 
identity and relationship of those persons or entities directly or 
indirectly owning or controlling (or both) the applicant. The 
Commission also reminds applicants that, if the information disclosed 
pursuant to Sec.  1.2112(a) changes while the application is pending, 
Sec.  1.65 of the Commission's rules requires that additional or 
corrected information be submitted. These rule revisions are consistent 
with the Commission's efforts to provide specific guidance to 
applicants, to provide transparency at all stages in the competitive 
bidding and licensing process; and, finally to ensure that the 
Commission, the public, and interested parties, are aware of the real 
party or parties in interest before the Commission acts on a pending 
application.

[[Page 42991]]

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Analysis

    35. As required by the Regulatory Flexibility Act, 5 U.S.C. 604, 
the Commission prepared a Supplemental Final Regulatory Flexibility 
Analysis for the Order on Reconsideration of the Part 1 Fifth Report 
and Order. The Commission also prepared a second Supplemental Final 
Regulatory Flexibility Analysis for the Second Order on Reconsideration 
of the Part 1 Third Report and Order.

B. Paperwork Reduction Act Analysis

    36. This Second Order on Reconsideration of the Part 1 Third Report 
and Order, and Order on Reconsideration of the Part 1 Fifth Report and 
Order contains new or modified information collection(s) subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It was 
submitted to the Office of Management and Budget (OMB) for review under 
section 3507(d) of the PRA. OMB, the general public and other Federal 
agencies are invited to comment on the new or modified collection(s) 
contained in this proceeding.

V. Supplemental Final Regulatory Flexibility Analysis (Order on 
Reconsideration of the Part 1 Fifth Report and Order)

    37. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), a Final Regulatory Flexibility Analysis (FRFA) was 
incorporated into the report and order section of the Part 1 Fifth 
Report and Order in WT Docket No. 97-82. The Commission received four 
petitions for reconsideration, two comments, two reply comments, and ex 
parte filings from three parties in response to the Part 1 Fifth Report 
and Order. This present supplemental FRFA (SFRA) conforms to the RFA.

A. Need for, and Objectives of, the Order on Reconsideration of the 
Part 1 Fifth Report and Order

    38. In August 2000, the Commission released the most recent 
comprehensive order in the part 1 proceeding, the Order on 
Reconsideration of the Part 1 Third Report and Order, Part 1 Fifth 
Report and Order, and Part 1 Fourth Further Notice of Proposed Rule 
Making, which clarified and amended the general competitive bidding 
rules for all auctionable services. Most significantly, in the Part 1 
Fifth Report and Order, the Commission adopted, as its general 
attribution rule, a controlling interest standard to be used for 
determining which applicants are eligible for small business status.
    39. The Commission received petitions for reconsideration from 
several parties in response to the Part 1 Fifth Report and Order. 
Petitioners request reconsideration of certain aspects of the new 
controlling interest standard, Sec.  1.2110(c)(2), by which the 
Commission attributes to the applicant the gross revenues of the 
applicant, its controlling interests, the applicant's affiliates, and 
the affiliates of the applicant's controlling interests, in assessing 
whether the applicant is eligible for the Commission's small business 
provisions. Specifically, petitioners request reconsideration of the 
attribution of the personal net worth of an applicant's officers and 
directors to the applicant, application of the controlling interest 
attribution rule as applied to the officers and directors of rural 
telephone cooperatives, and application of the controlling interest 
standard to entities operating under the former control group rules. In 
the Order on Reconsideration of the Part 1 Fifth Report and Order the 
Commission resolves the petitions for reconsideration filed in response 
to the Part 1 Fifth Report and Order.
    40. First, the Commission clarifies that in calculating an 
applicant's gross revenues under the controlling interest standard, the 
personal net worth, including personal income and assets, of its 
officers and directors will not be attributed to the applicant. To the 
extent that the officers and directors of the applicant are controlling 
interest holders of other entities, the Commission will attribute the 
gross revenues of those entities to the applicant. Second, based upon 
the comments received, the Commission adopts a narrow exemption for the 
officers and directors of a rural telephone cooperative so that the 
gross revenues of the affiliates of a rural telephone cooperative's 
officers and directors need not be attributed to the applicant. 
Specifically, the gross revenues of the affiliates of an applicant's 
officers and directors will not be attributed if either the applicant 
or a controlling interest, as the case may be, meets all of the 
following conditions: (i) The applicant (or the controlling interest) 
is validly organized as a cooperative pursuant to state law; (ii) the 
applicant (or the controlling interest) is a ``rural telephone 
company'' as defined by the Communications Act; and (iii) the applicant 
(or the controlling interest) is eligible for tax-exempt status under 
the Internal Revenue Code. However, the exemption will not apply if the 
gross revenues or other financial and management resources of the 
affiliates of the applicant's officers and directors (or the 
controlling interest's officers and directors) are available to the 
applicant. Third, the Commission declines to revise the controlling 
interest standard to exclude entities operating under control group 
structures. At the same time, the Commission restates the application 
of the attribution rules with respect to eligibility to hold restricted 
C/F block licenses.
    41. Lastly, on its own motion, the Commission also modifies the 
part 1 default payment rule, Sec.  1.2104(g)(2), to incorporate the 
combinatorial bidding default rule adopted in the 700 MHz Second 
Memorandum Opinion and Order. The Commission also makes certain 
ministerial conforming amendments and rule revisions to the part 1 
general competitive bidding rules, and portions of the service-specific 
competitive bidding rules, to conform to the new rule revisions in part 
1 in the following areas: (i) License default; (ii) definition of 
consortium; (iii) women- and minority-owned businesses; (iv) 
clarification of the attribution rule; (v) ownership disclosure 
requirements; and (vi) short-form disclosure requirements for small or 
very small business consortiums. Finally, technical edits are made to 
Commission rules that refer to service-specific competitive bidding 
rules that have been removed or revised.
B. Summary of Significant Issues Raised by Public Comments in Response 
to the FRFA Contained in the Order on Reconsideration of the Part 1 
Third Report and Order
    42. No petitions for reconsideration or comments were filed 
directly in response to the FRFA. However, the Commission did receive 
petitions for reconsideration and comments on issues affecting small 
businesses. As previously noted, in this SFRFA, petitioners request 
reconsideration of certain aspects of the new controlling interest 
standard, to be used for determining which applicants are eligible for 
small business status. Most notably, under the controlling interest 
standard, officers and directors of any applicant will be considered to 
have a controlling interest in the applicant. Thus, in calculating an 
applicant's gross revenues, the gross revenues of other entities 
controlled by such officers and directors must be included. 
Specifically, RTG seeks an exemption for rural telephone cooperatives 
from the requirement that the gross revenues of entities controlled by 
a rural telephone cooperative's officers and directors are to be 
attributed to the applicant. NTCA

[[Page 42992]]

and PVT reiterate points made by RTG. However, Neoworld seeks to extend 
RTG's proposal. In particular, Neoworld proposes that the Commission 
adopt a test under which an officer or director would not be considered 
to be a controlling interest if the applicant can demonstrate that it 
has developed insulating mechanisms to prevent such a director from 
being materially involved directly or indirectly in the management or 
telecommunications activities of the licensee.
    43. Furthermore, TeleCorp, Tritel, Poplar, and Summit 
(``Petitioners'') request that the Commission revise the controlling 
interest standard to exclude entities operating under the Commission's 
previously adopted control group structure. Petitioners are concerned 
that a literal reading of the rule could be used to expand the 
definition of affiliates so that greater gross revenues and assets 
would be attributed to an applicant on that basis alone. Specifically, 
Petitioners request that newly established affiliates of existing 
restricted C/F block licensees that were structured so as to establish 
their eligibility under a control group attribution rule be able to 
utilize the same structure used by the existing restricted C/F block 
licensee to establish their eligibility. Additionally, Petitioners 
request that the Commission clarify that the controlling interest 
standard excludes from attribution the personal assets and revenues of 
individuals.

C. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    44. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small organization,'' ``small business,'' and ``small governmental 
jurisdiction.'' The term ``small business'' has the same meaning as the 
term ``small business concern'' under the Small Business Act. A small 
business concern is one which: (i) Is independently owned and operated; 
(ii) is not dominant in its field of operation; and (iii) satisfies any 
additional criteria established by the SBA.
    45. The rule modifications and clarifications adopted in the Order 
on Reconsideration of the Part 1 Fifth Report and Order are of general 
applicability to all services and do not apply on a service-specific 
basis. Therefore, this SFRFA provides a general analysis of the impact 
of the revised part 1 rule on small businesses rather than a service by 
service analysis. Accordingly, the revised rules will apply to all 
entities that apply to participate in Commission auctions, including 
both small and large entities. The number of entities that may apply to 
participate in future Commission auctions is unknown. The number of 
small businesses that have participated in prior auctions has varied. 
In all of the Commission's auctions held to date except for the 
auctions for broadcast licenses, 1,752 out of a total of 2,235 
qualified bidders have been small businesses as that term has been 
defined under rules adopted by the Commission for specific services. 
Given these statistics, the Commission expects that, in the future, a 
large percentage of participants in its auctions program generally will 
continue to be small businesses; although there may not be a large 
percentage in every auction.

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    46. All license applicants, as contemplated by the actions the 
Commission takes in the Order on Reconsideration of the Part 1 Fifth 
Report and Order, are subject to the reporting and recordkeeping 
requirements of the competitive bidding rules. These requirements apply 
in the same way to both large and small entities. Furthermore, 
applicants are required to apply for spectrum auctions by filing a 
short-form application (FCC Form 175) prior to the auction. Applicants 
are also required to file a long-form application (FCC Form 601) at the 
conclusion of the auction. Specifically, entities seeking status as a 
small business must disclose on their FCC Form 175s, FCC Form 601s, and 
on their application for assignment or transfer of control (FCC Form 
603), separately and in the aggregate, the gross revenues of the 
applicant (or licensee), its affiliates, its controlling interests and 
affiliates of the applicant's controlling interests for each of the 
previous three years.
    47. As a result of the actions taken in the Order on 
Reconsideration of the Part 1 Fifth Report and Order, for purposes of 
the controlling interest standard, in calculating the gross revenues of 
any applicant under Sec.  1.2110, the personal net worth of its 
officers and directors will not be attributed to the applicant. 
However, auction applicants will be required to disclose the gross 
revenues received by any business entities such individuals may 
control. All affiliates of controlling interests are attributable to 
the applicant. Additionally, in the FCC Form 601, rural telephone 
cooperative auction applicants, or those controlled by rural telephone 
cooperatives, seeking an exemption from the requirement that the gross 
revenues of entities controlled by an applicant's officers and 
directors are attributed to the applicant must establish eligibility 
for this exemption based upon the four factors listed.

E. Steps Taken To Minimize the Economic Impact on Small Entities, and 
Significant Alternatives Considered

    48. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (i) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (ii) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(iii) the use of performance, rather than design, standards; and (iv) 
an exemption from coverage of the rule or any part thereof for small 
entities. The Commission has considered the economic impact on small 
entities of the following modifications and clarifications adopted in 
the Order on Reconsideration of the Part 1 Fifth Report and Order and 
has taken steps to minimize the burdens on small entities.
    49. Personal net worth of officers and directors. The Commission 
clarifies that, for purposes of the controlling interest standard, in 
calculating an applicant's gross revenues under Sec.  1.2110, the 
controlling interest standard, the personal net worth, including 
personal income and assets, of its officers and directors will not be 
attributed to the applicant. The Commission concludes that attribution 
of personal net worth is not necessary because most wealthy individuals 
are likely to have their wealth tied to the ownership of other 
businesses. Although the Commission does not attribute to the applicant 
the personal net worth of its officers and directors, to the extent 
that the officers and directors are affiliates of other entities, the 
Commission attributes the gross revenues of those entities to the 
applicant. Therefore, this will ensure that small business bidding 
credits are extended only to bona fide small businesses despite the 
personal net worth of wealthy individuals. An alternative action that 
would eliminate consideration of the gross revenues of such affiliates 
would provide an opportunity for large businesses to receive a 
significant monetary benefit

[[Page 42993]]

reserved only for eligible small businesses.
    50. Application of attribution rule to rural telephone 
cooperatives. The Commission adopts a narrow exemption for the officers 
and directors of a rural telephone cooperative so that the gross 
revenues of the affiliates of a rural telephone cooperative's officers 
and directors need not be attributed to the applicant. This exemption 
for the applicant's officers and directors extends to situations where 
the applicant is not a rural telephone cooperative but is controlled by 
an eligible rural telephone cooperative. Specifically, the gross 
revenues of the affiliates of an applicant's officers and directors 
will not be attributed if either the applicant or a controlling 
interest, as the case may be, meets all of the following conditions: 
(i) The applicant (or the controlling interest) is validly organized as 
a cooperative pursuant to state law; (ii) the applicant (or the 
controlling interest) is a ``rural telephone company'' as defined by 
the Communications Act; and (iii) the applicant (or the controlling 
interest) is eligible for tax-exempt status under the Internal Revenue 
Code. However, the exemption will not apply if the gross revenues or 
other financial and management resources of the affiliates of the 
applicant's officers and directors (or the controlling interest's 
officers and directors) are available to the applicant.
    51. The Commission limits this exemption to only those rural 
telephone cooperatives that are eligible for Federal tax-exempt status, 
which will ensure that such exemption would be used only by bona fide 
community-based cooperatives, not sham entities. The Commission 
believes that this action will increase the number of rural telephone 
cooperatives that are eligible for small business status (and the 
corresponding bidding credits). Such a result will enhance the ability 
of rural telephone cooperatives to participate in spectrum auctions. 
This, in turn, will promote the deployment of advanced 
telecommunications services in rural areas as Congress mandated in 
section 309(j). At the same time, the Commission concludes that an 
across-the-board change to Sec.  1.2110(c)(2)(ii)(F), as proposed as an 
alternative by Neoworld, to broadly exempt officers and directors from 
the controlling interest standard where an applicant institutes a 
contractual mechanism to insulate officers and directors from 
involvement in an applicant's telecommunications activities, is not 
warranted. Such a drastic revision to the Commission's rules would 
require additional scrutiny on the Commission's part to ensure that 
such contractual arrangements are legitimate and are not sham 
transactions that could undercut the basis of the attribution rule.
    52. Application of controlling interest standard to control group 
structures. The Commission affirms its decision in the Part 1 Fifth 
Report and Order to consider officers and directors as controlling 
interests in a licensee or applicant. However, to avoid similar 
questions in the future, the Commission takes this opportunity, in the 
Order on Reconsideration of the Part 1 Fifth Report and Order, to 
clarify the application of the attribution rules with respect to 
eligibility to hold restricted C/F block licenses. Generally, if an 
applicant does not hold a restricted C/F block license under the former 
control group rules it must use the controlling interest attribution 
rule to determine eligibility to hold restricted C/F block licenses, 
whether through auctions or through assignment or transfer of control.
    53. However, with respect to the acquisition of restricted C/F 
block licenses through assignment or transfer of control, wholly-owned 
subsidiaries and commonly controlled affiliates (whether newly formed 
or in existence prior to the adoption of the controlling interest 
attribution rule) that establish their eligibility directly through an 
existing restricted C/F block licensee, will be eligible to hold a C/F 
block restricted license to the same extent as the existing restricted 
C/F block licensees. Thus, in the context of an application to assign 
or transfer a restricted C/F block license, the eligibility of an 
existing restricted C/F block licensee (that obtained its license under 
the former control group rules) and its wholly owned subsidiaries and 
commonly controlled affiliates to hold such licenses (as opposed to 
eligibility for small business provisions) may be determined without 
application of the controlling interest attribution rule. For all 
future C/F block auctions, however, pursuant to the Commission's 
determination in the Part 1 Fifth Report and Order, all applicants will 
be subject to the attribution rules in effect at the time of filing 
their short-form applications. This decision will prevent large firms 
from illegitimately seeking small business status. A less restrictive 
alternative would frustrate the Commission's achievement of its goal of 
preventing large firms from gaining benefits only reserved for smaller 
entities.
    54. Conforming edits to the Part 1 competitive bidding rules. The 
Commission, on its own motion, makes certain ministerial conforming 
amendments and rule revisions to the part 1 general competitive bidding 
rules and portions of the service-specific competitive bidding rules to 
conform to the new rule revisions in part 1. These rule revisions are 
consistent with the Commission's efforts to provide specific guidance 
to future auction participants and to streamline the competitive 
bidding regulations by eliminating certain service-specific rules.

F. Report to Congress

    55. The Commission will send a copy of the Second Order on 
Reconsideration of the Third Report and Order, and Order on 
Reconsideration of the Fifth Report and Order, including this SFRFA, in 
a report to be sent to Congress pursuant to the Congressional Review 
Act. In addition, the Commission will send a copy of the Second Order 
on Reconsideration of the Third Report and Order, and Order on 
Reconsideration of the Fifth Report and Order, including this SFRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration.

VI. Second Supplemental Final Regulatory Flexibility Analysis (Second 
Order on Reconsideration of the Part 1 Third Report and Order)

    56. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), a Supplementary Final Regulatory Flexibility Analysis 
(SFRFA) was incorporated into the report and order section of the Order 
on Reconsideration of the Part 1 Third Report and Order in WT Docket 
No. 97-82. The Commission received three petitions for reconsideration 
and one reply comment in response to the Order on Reconsideration of 
the Part 1 Third Report and Order. This present second SFRFA conforms 
to the RFA.

A. Need for, and Objectives of, the Order on Reconsideration of the 
Part 1 Fifth Report and Order

    57. In August 2000, the Commission released the most recent 
comprehensive order in the Part 1 proceeding, the Order on 
Reconsideration of the Part 1 Third Report and Order, Part 1 Fifth 
Report and Order, and Part 1 Fourth Further Notice of Proposed Rule 
Making, which clarified and amended the general competitive bidding 
rules for all auctionable services. The Commission received petitions 
for reconsideration from several parties in response to the Order on 
Reconsideration of the Part 1 Third Report and Order. Specifically, the 
Commission received a petition for reconsideration, filed by NextWave, 
of the Commission's installment payment rules. In this Second Order on

[[Page 42994]]

Reconsideration of the Part 1 Third Report and Order, the Commission 
dismisses as repetitive NextWave's second challenge to modifications to 
the installment payment rules adopted in the 1997 Part 1 Third Report 
and Order. In addition, the Commission, on its own motion, makes 
certain conforming rule revisions to the part 1 general competitive 
bidding rules to clarify the requirement that applicants fully disclose 
the real party or parties in interest.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the FRFA Contained in the Order on Reconsideration of the Part 1 
Third Report and Order

    58. No petitions for reconsideration or comments were filed 
directly in response to the FRFA or on issues affecting small 
businesses.

C. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    59. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small organization,'' ``small business,'' and ``small governmental 
jurisdiction.'' The term ``small business'' has the same meaning as the 
term ``small business concern'' under the Small Business Act. A small 
business concern is one which: (i) is independently owned and operated; 
(ii) is not dominant in its field of operation; and (iii) satisfies any 
additional criteria established by the SBA.
    60. The rule revision adopted in this Second Order on 
Reconsideration of the Part 1 Third Report and Order rule is of general 
applicability to all services and does not apply on a service-specific 
basis. Therefore, this SFRFA provides a general analysis of the impact 
of the revised part 1 rule on small businesses rather than a service by 
service analysis. Accordingly, this rule revision will apply to all 
entities that apply to participate in Commission auctions, including 
both large and small entities. The number of entities that may apply to 
participate in future Commission auctions is unknown. The number of 
small businesses that have participated in prior auctions has varied. 
In all of the Commission's auctions held to date except for the 
auctions for broadcast licenses, 1,752 out of a total of 2,235 
qualified bidders have been small businesses as that term has been 
defined under rules adopted by the Commission for specific services. 
Given these statistics, the Commission expects that, in the future, a 
large percentage of participants in its auctions program generally will 
continue to be small businesses; although there may not be a large 
percentage in every auction.

D. Description of the Projected Reporting, Record-keeping, and Other 
Compliance Requirements

    61. All license applicants, as contemplated by the actions the 
Commission takes take in this Second Order on Reconsideration of the 
Part 1 Third Report and Order, are subject to the reporting and record-
keeping requirements of the competitive bidding rules. These 
requirements apply in the same way to both large and small entities. 
Applicants are required to apply for spectrum auctions by filing a 
short-form application (FCC Form 175) prior to the auction. Applicants 
are also required to file a long-form application (FCC Form 601) at the 
conclusion of the auction. Specifically, entities seeking status as a 
small business must disclose on their FCC Form 175s, FCC Form 601s, and 
on their application for assignment or transfer of control (FCC Form 
603), separately and in the aggregate, the gross revenues of the 
applicant (or licensee), its affiliates, its controlling interests and 
affiliates of the applicant's controlling interests for each of the 
previous three years.
    62. As a result of the actions taken in the Second Order on 
Reconsideration of the Part 1 Third Report and Order, all applicants, 
as part of the Commission's ownership disclosure requirements, are 
required to fully disclose all ``real party or parties in interest'' 
including a complete disclosure of the identity and relationship of 
those persons or entities directly or indirectly owning or controlling 
(or both) the applicant.

E. Steps Taken To Minimize the Economic Impact on Small Entities, and 
Significant Alternatives Considered

    63. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (i) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (ii) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(iii) the use of performance, rather than design, standards; and (iv) 
an exemption from coverage of the rule or any part thereof for small 
entities.
    64. The Commission has considered the economic impact on small 
entities of the reorganizing Sec.  1.2112(a) and making other 
conforming revisions to this rule as adopted in this Second Order on 
Reconsideration of the Part 1 Third Report and Order and has taken 
steps to minimize the burdens on small entities.
    65. Ownership disclosure requirements. In the Order on 
Reconsideration of the Part 1 Third Report and Order, the Commission 
revised Sec.  1.2112(a) which requires each application for competitive 
bidding (i.e., short-form application), or for a license, 
authorization, assignment or transfer for control to disclose fully the 
real party or parties in interest. Specifically, the Commission deleted 
unnecessary language, clarified certain sections, and reordered the 
disclosure requirements in order to provide applicants with a clearer 
understanding of the information that must be disclosed. Although the 
reorganization has generally resulted in greater clarity for 
applicants, the Commission is concerned that the current structure of 
the rule may be construed by some applicants as allowing them to 
provide less than a full disclosure of all the real parties in 
interest.
    66. Accordingly, the Commission reorders Sec.  1.2112 to move the 
requirement that an applicant to fully disclose all ``real party or 
parties in interest'' in the applicant or application from Sec.  
1.2112(a) to Sec.  1.2112(a)(1). At the same time, the Commission 
conforms Sec.  1.2112(a)(1) to the disclosure requirements as set forth 
in Sec.  1.919(e) to ensure that applicants include a complete 
disclosure of the identity and relationship of those persons or 
entities directly or indirectly owning or controlling (or both) the 
applicant to a section of the rule. This rule revision is preferred 
over a revision that would require disclosure of less information, 
because it is decidedly more consistent with the Commission's efforts 
to provide specific guidance to applicants, to provide transparency at 
all stages in the competitive bidding and licensing process; and, 
finally to ensure that the Commission, the public, and interested 
parties, are aware of the real party or parties in interest before the 
Commission acts on an application.

F. Report to Congress

    67. The Commission will send a copy of the Second Order on 
Reconsideration of the Third Report and Order, and Order on 
Reconsideration of the Fifth Report and Order, including this second 
SFRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act. In addition, the

[[Page 42995]]

Commission will send a copy of the Second Order on Reconsideration of 
the Third Report and Order, and Order on Reconsideration of the Fifth 
Report and Order, including this second SFRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration.

VII. Ordering Clauses

    68. It is ordered that, pursuant to the authority granted in 
sections 4(i), 5(b), 5(c)(1), 303(r), and 309(j) of the Communications 
Act of 1934, as amended, 47 U.S.C. 154(i), 155(b), 155(c)(1), 303(r), 
and 309(j), the Second Order on Recon are hereby adopted and parts 1, 
21, 22, 24, 27, 73, 80, 90, 95 and 101 of the Commission's rules are 
amended as set forth, and become effective September 19, 2003.
    69. It is further ordered that the Consumer Information Bureau, 
Reference Information Center, shall send a copy of the Second Order on 
Recon, including the Supplemental Final Regulatory Flexibility Analyses 
to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects

47 CFR Parts 1, 21, 22, 24 and 27

    Communications common carriers.

47 CFR Parts 73, 80, 90, 95 and 101

    Communications equipment.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR Parts 1, 21, 22, 24, 27, 73, 80, 90, 95 and 
101 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 
and 325(e).


0
2. Amend Sec.  1.913 by revising paragraphs (a)(2) and (b)(2) to read 
as follows:


Sec.  1.913  Application forms; electronic and manual filing.

    (a) * * *
* * * * *
    (2) FCC Form 602, Wireless Radio Services Ownership Form. FCC Form 
602 is used by applicants and licensees in auctionable services to 
provide and update ownership information as required by Sec. Sec.  
1.919, 1.948, 1.2112, and any other section that requires the 
submission of such information.
* * * * *
    (b) * * *
* * * * *
    (2) Any associated documents (see Sec.  1.2112) submitted with an 
application must be uploaded as attachments to the application whenever 
possible. The attachment should be uploaded via ULS in Adobe Acrobat 
Portable Document Format (PDF) whenever possible.
* * * * *

0
3. Amend Sec.  1.919 by revising paragraphs (a), (b) introductory text, 
and (e) to read as follows:


Sec.  1.919  Ownership information.

    (a) Applicants or licensees in Wireless Radio Services that are 
subject to the ownership reporting requirements of Sec.  1.2112 shall 
use FCC Form 602 to provide all ownership information required by the 
chapter.
    (b) Any applicant or licensee that is subject to the ownership 
reporting requirements of Sec.  1.2112 shall file an FCC Form 602, or 
file an updated form if the ownership information on a previously filed 
FCC Form 602 is not current, at the time it submits:
* * * * *
    (e) Applicants or licensees in Wireless Radio Services that are not 
subject to the ownership reporting requirements of Sec.  1.2112 are not 
required to file FCC Form 602. However, such applicants and licensees 
may be required by the rules applicable to such services to disclose 
the real party (or parties) in interest to the application, including 
(as required) a complete disclosure of the identity and relationship of 
those persons or entities directly or indirectly owning or controlling 
(or both) the applicant or licensee.

0
4. Amend Sec.  1.948 by revising paragraph (c) introductory text to 
read as follows:


Sec.  1.948  Assignment of authorization or transfer of control, 
notification of consummation.

* * * * *
    (c) Application required. In the case of an assignment of 
authorization or transfer of control, the assignor must file an 
application for approval of the assignment on FCC Form 603. If the 
assignee or transferee is subject to the ownership reporting 
requirements of Sec.  1.2112, the assignee or transferee must also file 
an updated FCC Form 602 or certify that a current FCC Form 602 is on 
file.
* * * * *

0
5. Amend Sec.  1.2103 by revising paragraph (a)(4) to read as follows:


Sec.  1.2103  Competitive bidding design options.

    (a) * * *
* * * * *
    (4) Combinatorial (package) bidding auctions.
* * * * *

0
6. Amend Sec.  1.2104 by adding paragraph (g)(3) to read as follows:


Sec.  1.2104  Competitive bidding mechanisms.

* * * * *
    (g) * * *
    (3) Default or disqualification in combinatorial bidding auctions 
after close of auction. A bidder assumes a binding obligation to pay 
its full bid amount upon acceptance of the high bid at the close of an 
auction. When the Commission conducts a combinatorial bidding auction 
pursuant to Sec.  1.2103 (a)(4), if a high bidder defaults or is 
disqualified after close of a combinatorial bidding auction, the 
defaulting bidder will be subject to a default payment. The default 
payment consists of a deficiency portion and an additional payment. The 
deficiency portion of the default payment shall be calculated as set 
forth in Sec.  1.2104(g)(3)(i). The additional payment shall be 
calculated as set forth in Sec.  1.2104(g)(3)(ii).
    (i) Deficiency payment. The deficiency portion of the default 
payment shall be calculated as set forth. In the case that any of the 
relevant bids are subject to bidding credits, the default payment will 
be adjusted in an analogous manner to that used in Sec.  1.2104(g)(1).
    (A) Where a defaulting bidder won licenses individually (i.e., not 
as part of a package), and in a subsequent auction the licenses are 
also won individually, the deficiency portion will be calculated on a 
license-by-license basis (i.e., the differences between the amounts 
originally bid and the amounts subsequently bid will not be aggregated 
to determine a net amount owed). If the subsequent winning bid(s) 
exceed the defaulted bid(s), no deficiency portion will be assessed. 
Even in the absence of a deficiency portion, however, an additional 25% 
payment will be due.
    (B) Where a defaulting bidder won licenses in a package(s), and in 
a subsequent auction the licenses are won either in the same 
package(s), or in smaller packages or as individual licenses that 
correlate to the defaulted package(s), the deficiency portion will be 
determined on a package-by-package basis, and the differences between 
the amount originally bid and the amount(s) subsequently bid will not 
be aggregated to determine a net amount owed. Thus,

[[Page 42996]]

in this situation, the deficiency portion will be calculated in an 
analogous manner to that used in Sec.  1.2104(g)(2). However, with 
regard to each individual package, where the licenses are subsequently 
sold individually or as part of smaller packages, the amounts received 
in the subsequent auction will be aggregated in order to determine any 
deficiency.
    (C) Where a defaulting bidder or bidders won licenses either 
individually or as part of packages, and in a subsequent auction the 
licenses are won as larger packages or different packages (not 
including the situation described in paragraph (b) of this section), 
the deficiency portion will be calculated by subtracting the aggregate 
amount originally bid for the licenses from the aggregate amount bid in 
the subsequent auction for the licenses.
    (D) When in the situation described in paragraph (c) of this 
section, there are multiple defaulting bidders, the default payment 
(both the deficiency portion and the additional amount portion) will be 
allocated to the defaulting bidders in proportion to the amount they 
originally bid.

    Example: Bidder 1 defaults on Package ABC for $200, and Bidder 2 
defaults on Package DE for $400, and in a subsequent auction the 
licenses are won in Package AB for $150 and Package CDE for $350, 
Bidder 1 would be liable for \1/3\ of the default payment and Bidder 
2 would be responsible for \2/3\. The total default payment would be 
equal to the difference between the total of the original bids 
($600) and the total of the subsequent amounts bid ($500) plus an 
additional amount of 25 percent of the total of the subsequent 
amounts bid. The total default payment therefore would equal $100 
($600-$500) plus 25 percent of $500 ($125), for a total default 
payment of $225.

    (ii) Additional payment. If a high bidder defaults or is 
disqualified after the close of such an auction, the defaulting bidder 
will be subject to the payment in paragraph (g)(3)(i) of this section 
plus an additional payment equal to 25 percent of the subsequent 
winning bid(s) or the defaulting bid(s), whichever is less. In the case 
that either the subsequent winning bid(s) or the defaulting bid(s) is 
subject to bidding credits, the additional payment will be calculated 
in an analogous manner to that used in Sec.  1.2104(g)(2). In 
calculating the additional payment to determine whether the defaulted 
bid(s) or the subsequent winning bid(s) is the lesser amount, the 
defaulted and subsequent bid(s) will be compared according to the rules 
set forth in paragraphs (g)(3)(i)(A) through (g)(3)(i)(D) of this 
section for calculation of the deficiency portion of the default 
payment.
* * * * *

0
7. Amend Sec.  1.2109 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  1.2109  License grant, denial, default, and disqualification.

* * * * *
    (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 ten (10) 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 payment specified in Sec. Sec.  1.2104(g)(2) or 
1.2104(g)(3), whichever is applicable. In such event, the Commission, 
at its discretion, may either re-auction the license(s) to existing or 
new applicants or offer it to the other highest bidders (in descending 
order) at their final bids. If the license(s) is offered to the other 
highest bidders (in descending order), the down payment obligations set 
forth in Sec.  1.2107(b) will apply. However, in combinatorial bidding 
auctions, the Commission will only re-auction the license(s) to 
existing or new applicants. The Commission will not offer the package 
or licenses to the next highest bidder.
    (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, its 
application will be dismissed, and it will be liable for the payment 
set forth in Sec. Sec.  1.2104(g)(2) or 1.2104(g)(3), whichever is 
applicable. In such event, the Commission may either re-auction the 
license(s) to existing or new applicants or offer it to the other 
highest bidders (in descending order) at their final bids. However, in 
combinatorial bidding auctions, the Commission will only re-auction the 
license(s) to existing or new applicants. The Commission will not offer 
the package or licenses to the next highest bidder.
* * * * *

0
8. Amend Sec.  1.2110 by revising paragraphs (b)(1)(i), (b)(1)(ii), 
(b)(3)(i) and (c)(2)(ii)(F), and adding new paragraphs (b)(3)(iii) and 
(c)(6) to read as follows:


Sec.  1.2110  Designated entities.

* * * * *
    (b) * * *
    (1) * * *
    (i) The gross revenues of the applicant (or licensee), its 
affiliates, its controlling interests, and the affiliates of the 
applicant's controlling interests shall be attributed to the applicant 
and considered on a cumulative basis and aggregated for purposes of 
determining whether the applicant (or licensee) is eligible for status 
as a small business, very small business, or entrepreneur, as those 
terms are defined in the service-specific rules. An applicant seeking 
status as a small business, very small business, or entrepreneur, as 
those terms are defined in the service-specific rules, must disclose on 
its short- and long-form applications, separately and in the aggregate, 
the gross revenues of the applicant (or licensee), its affiliates, its 
controlling interests, and the affiliates of the applicant's 
controlling interests for each of the previous three years.
    (ii) If applicable, pursuant to Sec.  24.709 of this chapter, the 
total assets of the applicant (or licensee), its affiliates, its 
controlling interests and affiliates of the applicant's controlling 
interests shall be attributed to the applicant and considered on a 
cumulative basis and aggregated for purposes of determining whether the 
applicant (or licensee) is eligible for status as an entrepreneur. An 
applicant seeking status as an entrepreneur must disclose on its short- 
and long-form applications, separately and in the aggregate, the gross 
revenues of the applicant (or licensee), its affiliates, its 
controlling interests and affiliates of the applicant's controlling 
interests for each of the previous two years.
* * * * *
    (3) * * *
    (i) Consortium. Where an applicant (or licensee) is a consortium of 
small businesses, very small businesses, or entrepreneurs, as those 
terms are defined in the service-specific rules, the gross revenues of 
each consortium member shall not be aggregated. Each consortium member 
must constitute a separate and distinct legal entity to qualify.
* * * * *
    (iii) Rural telephone cooperatives. (A) An applicant will be exempt 
from Sec.  1.2110(c)(2)(ii)(F) for the purpose of attribution in Sec.  
1.2110(b)(1), if the applicant or a controlling interest in the 
applicant, as the case may be, meets all of the following conditions:
    (1) the applicant (or the controlling interest) is organized as a 
cooperative pursuant to state law;
    (2) the applicant (or the controlling interest) is a ``rural 
telephone company'' as defined by the Communications Act; and
    (3) the applicant (or the controlling interest) is eligible for 
tax-exempt status under the Internal Revenue Code. The applicant will 
not be exempt from Sec.  1.2110(c)(2)(ii)(F) for the purpose of

[[Page 42997]]

attribution in Sec.  1.2110(b)(1) if the gross revenues or other 
financial and management resources of the affiliates of the applicant's 
officers and directors (or the controlling interest's officers and 
directors) are available to the applicant.
    (B) However, if the applicant is not an eligible rural telephone 
cooperative under paragraph (a) of this section, and the applicant has 
a controlling interest other than the applicant's officers and 
directors or an eligible rural telephone cooperative's officers and 
directors, paragraph (a) of this section applies with respect to the 
applicant's officers and directors and such controlling interest's 
officers and directors only when such controlling interest is either:
    (1) An eligible rural telephone cooperative under paragraph (a) of 
this section or
    (2) controlled by an eligible rural telephone cooperative under 
paragraph (a) of this section.
    (c) * * *
* * * * *
    (2) * * *
    (ii) * * *
    (F) Officers and directors of the applicant shall be considered to 
have a controlling interest in the applicant. The officers and 
directors of an entity that controls a licensee or applicant shall be 
considered to have a controlling interest in the licensee or applicant. 
The personal net worth, including personal income of the officers and 
directors of an applicant, is not attributed to the applicant. To the 
extent that the officers and directors of an applicant are affiliates 
of other entities, the gross revenues of the other entities are 
attributed to the applicant.
* * * * *
    (6) Consortium. A consortium of small businesses, very small 
businesses, or entrepreneurs is a conglomerate organization composed of 
two or more entities, each of which individually satisfies the 
definition of a small business, very small business, or entrepreneur, 
as those terms are defined in the service-specific rules. Each 
individual member must constitute a separate and distinct legal entity 
to qualify.
* * * * *

0
9. Revise Sec.  1.2112 to read as follows:


Sec.  1.2112  Ownership disclosure requirements for applications.

    (a) Each application to participate in competitive bidding (i.e., 
short-form application (see 47 CFR 1.2105)), or for a license, 
authorization, assignment, or transfer of control shall fully disclose 
the following:
    (1) List the real party or parties in interest in the applicant or 
application, including a complete disclosure of the identity and 
relationship of those persons or entities directly or indirectly owning 
or controlling (or both) the applicant;
    (2) List the name, address, and citizenship of any party holding 10 
percent or more of stock in the applicant, whether voting or nonvoting, 
common or preferred, including the specific amount of the interest or 
percentage held;
    (3) List, in the case of a limited partnership, the name, address 
and citizenship of each limited partner whose interest in the applicant 
is 10 percent or greater (as calculated according to the percentage of 
equity paid in or the percentage of distribution of profits and 
losses);
    (4) List, in the case of a general partnership, the name, address 
and citizenship of each partner, and the share or interest 
participation in the partnership;
    (5) List, in the case of a limited liability company, the name, 
address, and citizenship of each of its members whose interest in the 
applicant is 10 percent or greater;
    (6) List all parties holding indirect ownership interests in the 
applicant as determined by successive multiplication of the ownership 
percentages for each link in the vertical ownership chain, that equals 
10 percent or more of the applicant, except that if the ownership 
percentage for an interest in any link in the chain exceeds 50 percent 
or represents actual control, it shall be treated and reported as if it 
were a 100 percent interest; and
    (7) List any FCC-regulated entity or applicant for an FCC license, 
in which the applicant or any of the parties identified in paragraphs 
(a)(1) through (a)(5) of this section, owns 10 percent or more of 
stock, whether voting or nonvoting, common or preferred. This list must 
include a description of each such entity's principal business and a 
description of each such entity's relationship to the applicant (e.g., 
Company A owns 10 percent of Company B (the applicant) and 10 percent 
of Company C, then Companies A and C must be listed on Company B's 
application, where C is an FCC licensee and/or license applicant).
    (b) Designated entity status. In addition to the information 
required under paragraph (a) of this section, each applicant claiming 
eligibility for small business provisions shall disclose the following:
    (1) On its application to participate in competitive bidding (i.e., 
short-form application (see 47 CFR 1.2105)):
    (i) List the names, addresses, and citizenship of all officers, 
directors, affiliates, and other controlling interests of the 
applicant, as described in Sec.  1.2110, and, if a consortium of small 
businesses or consortium of very small businesses, the members of the 
conglomerate organization;
    (ii) List any FCC-regulated entity or applicant for an FCC license, 
in which any controlling interest of the applicant owns a 10 percent or 
greater interest or a total of 10 percent or more of any class of 
stock, warrants, options or debt securities. This list must include a 
description of each such entity's principal business and a description 
of each such entity's relationship to the applicant; and
    (iii) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  1.2110, for each of the following: 
The applicant, its affiliates, its controlling interests, and 
affiliates of its controlling interests; and if a consortium of small 
businesses, the members comprising the consortium.
    (2) As an exhibit to its application for a license, authorization, 
assignment, or transfer of control:
    (i) List the names, addresses, and citizenship of all officers, 
directors, and other controlling interests of the applicant, as 
described in Sec.  1.2110;
    (ii) List any FCC-regulated entity or applicant for an FCC license, 
in which any controlling interest of the applicant owns a 10 percent or 
greater interest or a total of 10 percent or more of any class of 
stock, warrants, options or debt securities. This list must include a 
description of each such entity's principal business and a description 
of each such entity's relationship to the applicant;
    (iii) List and summarize all agreements or instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility as 
a small business under the applicable designated entity provisions, 
including the establishment of de facto or de jure control; such 
agreements and instruments include articles of incorporation and 
bylaws, shareholder agreements, voting or other trust agreements, 
franchise agreements, and any other relevant agreements (including 
letters of intent), oral or written;
    (iv) List and summarize any investor protection agreements, 
including rights of first refusal, supermajority clauses, options, veto 
rights, and rights to hire and fire employees and to appoint members to 
boards of directors or management committees;

[[Page 42998]]

    (v) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  1.2110, for each of the following: 
the applicant, its affiliates, its controlling interests, and 
affiliates of its controlling interests; and if a consortium of small 
businesses, the members comprising the consortium; and
    (vi) List and summarize, if seeking the exemption for rural 
telephone cooperatives pursuant to Sec.  1.2110, all documentation to 
establish eligibility pursuant to the four factors listed under Sec.  
1.2110(b)(3)(iii).

PART 21--DOMESTIC PUBLIC FIXED RADIO SERVICES

0
10. The authority citation for part 21 continues to read as follows:

    Authority: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313, 
403, 404, 410, 602, 48 Stat. as amended, 1064, 1066, 1070-1073, 
1076, 1077, 1080, 1082, 1083, 1087, 1094, 1098, 1102; 47 U.S.C. 151, 
154, 201-205, 208, 215, 218, 303, 307, 313, 314, 403, 404, 602; 47 
U.S.C. 552, 554.

0
11. Amend Sec.  21.930 by revising paragraph (d)(2)(i) to read as 
follows:


Sec.  21.930  Five-year build-out requirements.

* * * * *
    (d) * * *
    (2) * * *
    (i) The competitive bidding procedures set forth in Sec. Sec.  
21.950 through 21.960 shall be followed by applicants seeking authority 
to provide MDS service to the unserved partitioned area.
* * * * *

0
12. Revise Sec.  21.954 to read as follows:


Sec.  21.954  Submission of upfront payments.

    Applicants who are small businesses eligible for reduced upfront 
payments will be required to submit an upfront payment amount in 
accordance with Sec.  21.960(d).

0
13. Amend Sec.  21.956 by revising paragraphs (b)(2) and (b)(3) to read 
as follows:


Sec.  21.956  Filing of long-from applications or statements of 
intention.

* * * * *
    (b) * * *
    (2) An exhibit detailing the terms and conditions and parties 
involved in any bidding consortia, joint venture, partnership or other 
agreement or arrangement the winning bidder had entered into relating 
to the competitive bidding process prior to the time bidding was 
completed (see 47 CFR 1.2107(d) of this chapter);
    (3) An exhibit complying with Sec. Sec.  1.2110(j) of this chapter 
and 21.960(f), if the winning bidder submitting the long-form 
application or statement of intention claims status as a designated 
entity.
* * * * *

0
14. Amend Sec.  21.960 by redesignating paragraphs (a), (b), (c), (d), 
(e), and (f) as paragraphs (b), (c), (d), (e), (f), and (g), and adding 
new paragraph (a) to read as follows:


Sec.  21.960  Designated entity provisions for MDS.

    (a) Eligibility for small business provisions. A small business is 
an entity that together with its affiliates has average annual gross 
revenues that are not more than $40 million for the preceding three 
calendar years.
* * * * *


Sec.  21.961  [Removed and Reserved]

0
15. Remove and reserve Sec.  21.961.

PART 22--PUBLIC MOBILE SERVICES

0
16. The authority citation for part 22 continues to read as follows:

    Authority: 47 U.S.C. 154, 222, 303, 309, and 332.

0
17. Revise Sec.  22.217 to read as follows:


Sec.  22.217  Bidding credit for small businesses.

    A winning bidder that qualifies as a small business, as defined in 
Sec.  22.223(b)(1), or a consortium of small businesses may use a 
bidding credit of thirty-five (35) percent to lower the cost of its 
winning bid. A winning bidder that qualifies as a small business, as 
defined in Sec.  22.223(b)(2), or consortium of small businesses may 
use a bidding credit of twenty-five (25) percent to lower the cost of 
its winning bid.

0
18. Revise Sec.  22.223 to read as follows:


Sec.  22.223  Designated entities.

    (a) Scope. The definitions in this section apply to Sec. Sec.  
22.201 through 22.227, unless otherwise specified in those sections.
    (b) A small business is an entity that either:
    (1) Together with its affiliates and controlling interests has 
average gross revenues that are not more than $3 million for the 
preceding three years; or
    (2) Together with its affiliates and controlling interests has 
average gross revenues that are not more than $15 million for the 
preceding three years.

0
19. Amend Sec.  22.225 by removing paragraph (a), redesignating 
paragraphs (b) and (c) as paragraphs (a) and (b), and revising newly 
redesignated paragraph (b) to read as follows:


Sec.  22.225  Records maintenance and definitions.

* * * * *
    (b) Definition. The term small business used in this section is 
defined in Sec.  22.223.

0
20. Amend Sec.  22.229 by removing paragraphs (a)(4) and (a)(5) and 
revising paragraph (b) to read as follows:


Sec.  22.229  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(i) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as an 
entrepreneur, as defined in this section, or a consortium of 
entrepreneurs may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.

PART 24--PERSONAL COMMUNICATIONS SERVICES

0
21. The authority citation continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 302, 303, 309, and 332.


0
22. Amend Sec.  24.321 by removing paragraph (a)(3) and revising 
paragraphs (b) and (c) to read as follows:


Sec.  24.321  Designated entities.

* * * * *
    (b) Bidding credits. After August 7, 2000, a winning bidder that 
qualifies as a small business, as defined in this section, or a 
consortium of small businesses may use the bidding credit specified in 
Sec.  1.2110(f)(2)(iii) of this chapter. A winning bidder that 
qualifies as a very small business, as defined in this section, or a 
consortium of very small businesses may use the bidding credit 
specified in Sec.  1.2110(f)(2)(ii) of this chapter.
    (c) Installment payments. Small businesses that are winning bidders 
on any regional license prior to August 7, 2000 will be eligible to pay 
the full amount of their winning bids in installments over the term of 
the license pursuant to the terms set forth in Sec.  1.2110(g) of this 
chapter.

0
23. Amend Sec.  24.709 by removing pargraph (c)(1)(ii)(B), 
redesignating paragraphs (c)(1)(ii)(C), (c)(1)(ii)(D), (c)(1)(ii)(E) 
and (c)(1)(ii)(F) as (c)(1)(ii)(B), (c)(1)(ii)(C), (c)(1)(ii)(D) and 
(c)(1)(ii)(E), and revising paragraphs

[[Page 42999]]

(b)(1)(v)(A)(3) introductory text, (b)(1)(v)(A)(3)(iv), 
(b)(1)(vi)(A)(3) introductory text, (b)(1)(vi)(A)(3)(iv), newly 
redesignated paragraphs (c)(1)(ii)(C), (c)(1)(ii)(E)(1), 
(c)(1)(ii)(E)(2) and paragraphs (c)(3) and (d) to read as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (v) * * *
    (A) * * *
    (3) The remaining 10 percent of the applicant's (or licensee's) 
total equity may be owned, either unconditionally or in the form of 
stock options, by any of the following entities, which may not comply 
with Sec.  24.720(g)(1):
* * * * *
    (iv) Qualifying investors, as specified in Sec.  24.720(g)(3).
* * * * *
    (vi) * * *
    (A) * * *
    (3) The remaining 20.1 percent of the applicant's (or licensee's) 
total equity may be owned by qualifying investors, either 
unconditionally or in the form of stock options not subject to the 
restrictions of paragraph (b)(1)(vi)(A)(1) of this section, or by any 
of the following entities which may not comply with Sec.  24.720(g)(1):
* * * * *
    (iv) Qualifying investors, as specified in Sec.  24.720(g)(3).
* * * * *
    (c) * * *
    (1) * * *
    (ii) * *
    (C) The identity of each affiliate of the applicant and each 
affiliate of individuals or entities identified pursuant to paragraphs 
(C)(1)(ii)(A) and (c)(1)(ii)(B) of this section;
* * * * *
    (E) * * *
    (1) A certified statement that such applicant complies with the 
requirements of the definition of publicly traded corporation with 
widely disbursed voting power set forth in Sec.  24.720(f);
    (2) The identity of each affiliate of the applicant.
* * * * *
    (3) Records maintenance. All applicants, including those that are 
winning bidders, shall maintain at their principal place of business an 
updated file of ownership, revenue and asset information, including 
those documents referenced in paragraphs (c)(2)(ii) and (c)(2)(iii) of 
this section and any other documents necessary to establish eligibility 
under this section and any other documents necessary to establish 
eligibility under this section or under the definition of small 
business. Licensees (and their successors in interest) shall maintain 
such files for the term of the license. Applicants that do not obtain 
the license(s) for which they applied shall maintain such files until 
the grant of such license(s) is final, or one year from the date of the 
filing of their short-form application (Form 175), whichever is 
earlier.
    (d) Definitions. The terms control group, existing investor, 
institutional investor, nonattributable equity, preexisting entity, 
publicly traded corporation with widely dispersed voting power, 
qualifying investor, and small business used in this section are 
defined in Sec.  24.720.


Sec.  24.711  [Amended]

0
24. Amend Sec.  24.711 by replacing the reference to ``section 
1.2110(o)'' in paragraph (a) with ``section 1.2110(n)''.

0
25. Amend Sec.  24.712 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  24.712  Bidding credits for licenses won for frequency Block C.

    (a) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a small business, as defined in Sec.  24.720(b)(1), or a 
consortium of small businesses may use a bidding credit of fifteen 
percent, as specified in Sec.  1.2110(f)(2)(iii) of this chapter, to 
lower the cost of its winning bid.
    (b) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a very small business, as defined in Sec.  24.720(b)(2), 
or a consortium of very small businesses may use a bidding credit of 
twenty-five percent as specified in Sec.  1.2110(f)(2)(ii) of this 
chapter, to lower the cost of its winning bid.
* * * * *


Sec.  24.714  [Amended]

0
26. Amend Sec.  24.714 by replacing the reference to ``The Bureau'' in 
paragraph (c)(2)(iii) with ``The Commission''.


Sec.  24.716  [Amended]

0
27. Amend Sec.  24.716 by replacing all references to ``section 
1.2110(o)'' in paragraphs (a) and (b) with ``section 1.2110(n)''.
0
28. Revise Sec.  24.717 to read as follows:


Sec.  24.717  Bidding credits for licenses for frequency Block F.

    (a) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a small business, as defined in Sec.  24.720(b)(1), or a 
consortium of small businesses may use a bidding credit of fifteen 
percent, as specified in Sec.  1.2110(f)(2)(iii) of this chapter, to 
lower the cost of its winning bid.
    (b) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a very small business, as defined in Sec.  24.720(b)(2), 
or a consortium of very small businesses may use a bidding credit of 
twenty-five percent as specified in Sec.  1.2110(f)(2)(ii) of this 
chapter, to lower the cost of its winning bid.

0
29. Amend Sec.  24.720 by removing paragraphs (b)(3) and (b)(4), 
redesignating paragraphs (e), (f), (g), (h), (i), and (j) as paragraphs 
(c), (d), (e), (f), (g), and (h), redesignating the Note to Paragraph 
(j) as the Note to Paragraph (h) and revising paragraph (b) 
introductory text and newly redesignated paragraph (g) to read as 
follows:


Sec.  24.720  Definitions.

* * * * *
    (b) Small and very small business. * * *
* * * * *
    (g) Qualifying investor. (1) A qualifying investor is a person who 
is (or holds an interest in) a member of the applicant's (or 
licensee's) control group and whose gross revenues and total assets, 
when aggregated with those of all other attributable investors and 
affiliates, do not exceed the gross revenues and total assets limits 
specified in Sec.  24.709(a), or, in the case of an applicant (or 
licensee) that is a small business, do not exceed the gross revenues 
limit specified in paragraph (b) of this section.
    (2) For purposes of assessing compliance with the minimum equity 
requirements of Sec.  24.709(b)(1)(v) and (b)(1)(vi), where such equity 
interests are not held directly in the applicant, interests held by 
qualifying investors shall be determined by successive multiplication 
of the ownership percentages for each link in the vertical ownership 
chain.
    (3) For purposes of Sec.  24.709(b)(1)(v)(A)(3) and 
(b)(1)(vi)(A)(3), a qualifying investor is a person who is (or holds an 
interest in) a member of the applicant's (or licensee's) control group 
and whose gross revenues and total assets do not exceed the gross 
revenues and total assets limits specified in Sec.  24.709(a).
* * * * *

[[Page 43000]]

PART 27--MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

0
30. The authority citation for part 27 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 332, 336, and 
337 unless otherwise noted.

0
31. Amend Sec.  27.210 by revising paragraph (b) to read as follows:


Sec.  27.210  Definitions.

* * * * *
    (b) Small and very small business. (1) A small business is an 
entity that, together with its affiliates and controlling interests, 
has average annual gross revenues that are not more than $40 million 
for the preceding three years.
    (2) A very small business is an entity that, together with its 
affiliates and controlling interests, has average annual gross revenues 
that are not more than $15 million for the preceding three years.

0
32. Revise Sec.  27.501 to read as follows:


Sec.  27.501  746-764 MHz and 776-794 MHz bands subject to competitive 
bidding.

    Mutually exclusive initial applications for licenses in the 746-764 
MHz and 776-794 MHz bands are subject to competitive bidding. The 
general competitive bidding procedures set forth in part 1, subpart Q 
of this chapter will apply unless otherwise provided in this subpart.


Sec.  27.502  [Amended]

0
33. Amend Sec.  27.502 by removing paragraph (c).

0
34. Amend Sec.  27.702 by removing paragraph (a)(4) and revising 
paragraph (b) to read as follows:


Sec.  27.702  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as an 
entrepreneur, as defined in this section, or a consortium of 
entrepreneurs may use the bidding credit specified in Sec.  
1.2110(f)(2)(i) of this chapter. A winning bidder that qualifies as a 
very small business, as defined in this section, or a consortium of 
very small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.

0
35. Amend Sec.  27.807 by removing paragraphs (a)(3) and (a)(4) and 
revising paragraph (b) to read as follows:


Sec.  27.807  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.
    36. Amend Sec.  27.906 by removing paragraphs (a)(3) and (a)(4), 
and revising paragraph (b) to read as follows:


Sec.  27.906  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.
    37. Amend Sec.  27.1006 by removing paragraphs (a)(3) and (a)(4), 
and revising paragraph (b) to read as follows:


Sec.  27.1006  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.

PART 73--RADIO BROADCAST SERVICES

0
38. The authority citation for part 73 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 334 and 336.


0
39. Amend Sec.  73.5005 by revising paragraph (a) to read as follows:


Sec.  73.5005  Filing of long-form applications.

    (a) Within thirty (30) days following the close of bidding and 
notification to the winning bidders, each winning bidder must submit an 
appropriate long-form application (FCC Form 301, FCC Form 346, FCC Form 
349 or FCC Form 330) for each construction permit or license for which 
it was the high bidder. Long-form applications filed by winning bidders 
shall include the exhibits required by Sec.  1.2107(d) of this chapter 
(concerning any bidding consortia or joint bidding arrangements); Sec.  
1.2110(j) of this chapter (concerning designated entity status, if 
applicable); and Sec.  1.2112 of this chapter (concerning disclosure of 
ownership and real party in interest information, and, if applicable, 
disclosure of gross revenue information for small business applicants).
* * * * *

0
40. Amend Sec.  73.5009 by revising paragraph (b) to read as follows:


Sec.  73.5009  Assignment or transfer of control.

* * * * *
    (b) The ownership disclosure requirements found at Sec.  1.2112(a) 
of this chapter shall not apply to an applicant seeking consent to 
assign or transfer control of a broadcast construction permit or 
license awarded by competitive bidding.

PART 80--STATIONS IN THE MARITIME SERVICES

0
41. The authority citation for part 80 continues to read as follows:

    Authority: Secs. 4, 303, 307(e), 309, and 332, 48 Stat. 1066, 
1082, as amended; 47 U.S.C. 154, 303, 307(e), 309, and 332, unless 
otherwise noted. Interpret or apply 48 Stat. 1064-1068, 1081-1105, 
as amended; 47 U.S.C. 151-155, 301-609; 3 UST 3450, 3 UST 4726, 12 
UST 2377.


0
42. Amend Sec.  80.1252 by removing paragraph (b)(3) and revising 
paragraphs (a) and (c) to read as follows:


Sec.  80.1252  Designated entities.

    (a) This section addresses certain issues concerning designated 
entities in maritime communications services subject to competitive 
bidding.
* * * * *
    (c) A winning bidder that qualifies as a small business, as defined 
in Sec.  80.1252(b)(1), or consortium of small businesses may use the 
bidding credit specified in Sec.  1.2110(f)(2)(ii) of this chapter. A 
winning bidder that qualifies as a very small business, as defined in 
Sec.  80.1252(b(2), or consortium of very small businesses may use the 
bidding credit specified in Sec.  1.2110(f)(2)(i) of this chapter.

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

0
43. The authority citation for part 90 continues to read as follows:

    Authority: Sections 4(i), 11, 303(g), 303(r), and 332(c)(7) of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 161, 
303(g), 303(r), 332(c)(7).


0
44. Revise Sec.  90.810 to read as follows:

[[Page 43001]]

Sec.  90.810  Bidding credits for small businesses.

    A winning bidder that qualifies as a small business, as defined in 
Sec.  90.814(b)(1), or a consortium of small businesses may use a 
bidding credit of 15 percent to lower the cost of its winning bid on 
any of the blocks identified in Sec.  90.617(d), Table 4B. A winning 
bidder that qualifies as a small business, as defined in Sec.  
90.814(b)(2), or a consortium of small businesses may use a bidding 
credit of 10 percent to lower the cost of its winning bid on any of the 
blocks identified in Sec.  90.617(d), Table 4B.


Sec.  90.813  [Amended]

0
45. Amend Sec.  90.813 by replacing the reference to ``The Bureau'' in 
paragraph (c)(2)(ii) with ``The Commission.''

0
46. Amend Sec.  90.814 by revising paragraph (b) to read as follows:


Sec.  90.814  Definitions.

    (b) A small business is an entity that either:
    (1) Together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has 
average gross revenues that are not more than $3 million for the 
preceding three years; or
    (2) Together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has 
average gross revenues that are not more than $15 million for the 
preceding three years.

0
47. Revise Sec.  90.815 to read as follows:


Sec.  90.815  Records maintenance and definitions.

    (a) Records maintenance. All winning bidders qualifying as small 
businesses, shall maintain at their principal place of business an 
updated file of ownership, revenue and asset information, including any 
documents necessary to establish eligibility as a small business, 
pursuant to Sec.  90.814, and/or a consortium of small businesses. 
Licensees (and their successors in interest) shall maintain such files 
for the term of the license.
    (b) Definitions. The term small business used in this section is 
defined in Sec.  90.814.

0
48. Amend Sec.  90.901 by revising the section heading to read as 
follows:


Sec.  90.901  800 MHz SMR spectrum subject to competitive bidding.

* * * * *
0
49. Revise Sec.  90.910 to read as follows:


Sec.  90.910  Bidding credits.

    A winning bidder that qualifies as a very small business, as 
defined in Sec.  90.912(b)(2), or a consortium of very small businesses 
may use a bidding credit of 35 percent to lower the cost of its winning 
bid on Spectrum Blocks A through V. A winning bidder that qualifies as 
a small business, as defined in Sec.  90.912(b)(1), or a consortium of 
small businesses may use a bidding credit of 25 percent to lower the 
cost of its winning bid on Spectrum Blocks A through V.

0
50. Amend Sec.  90.912 by removing paragraphs (b)(3) and (b)(4), and 
revising paragraph (b) introductory text to read as follows:


Sec.  90.912  Definitions.

* * * * *
    (b) Small and very small businesses. * * *
* * * * *

0
51. Revise Sec.  90.913 to read as follows:


Sec.  90.913  Record maintenance and definitions.

    (a) Records maintenance. All winning bidders qualifying as small or 
very small businesses, shall maintain at their principal place of 
business an updated file of ownership, revenue and asset information, 
including any document necessary to establish eligibility as a small or 
very small business, as defined in Sec.  90.912, and/or consortium of 
small businesses (or consortium of very small businesses). Licensees 
(and their successors in interest) shall maintain such files for the 
term of the license.
    (b) Definitions. The terms small and very small business used in 
this section are defined in Sec.  90.912.

0
52. Revise Sec.  90.1017 to read as follows:


Sec.  90.1017  Bidding credits for small businesses and very small 
businesses.

    A winning bidder that qualifies as a small business, as defined in 
Sec.  90.1021(b)(1), or a consortium of small businesses may use a 
bidding credit of 25 percent to lower the cost of its winning bid. A 
winning bidder that qualifies as a very small business, as defined in 
Sec.  90.1021(b)(2), or a consortium of very small businesses may use a 
bidding credit of 35 percent to lower the cost of its winning bid.

0
53. Amend Sec.  90.1021 by removing paragraph (b)(3) and revising (b) 
introductory text to read as follows:


Sec.  90.1021  Definitions concerning competitive bidding process.

* * * * *
    (b) Small and very small business. * * *
* * * * *

0
54. Revise Sec.  90.1023 to read as follows:


Sec.  90.1023  Records maintenance and definitions.

    (a) Records maintenance. All winning bidders qualifying as small or 
very small businesses shall maintain at their principal place of 
business an updated file of ownership, revenue, and asset information, 
including any documents necessary to establish eligibility as a small 
business or very small business, as defined in Sec.  90.1021, and/or 
consortium of small businesses (or consortium of very small 
businesses). Licensees (and their successors-in-interest) shall 
maintain such files for the term of the license. Applicants that do not 
obtain the license(s) for which they applied shall maintain such files 
until the grant of such license(s) is final, or one year from the date 
of the filing of their short-form application (FCC Form 175), whichever 
is earlier.
    (b) Definitions. The terms small and very small business used in 
this section are defined in Sec.  90.1021.

0
55. Amend Sec.  90.1103 by removing paragraphs (b)(3) and revising 
paragraphs (a) and (c) to read as follows:


Sec.  90.1103  Designated entities.

    (a) This section addresses certain issues concerning designated 
entities in the Location and Monitoring Service (LMS) subject to 
competitive bidding.
* * * * *
    (c) A winning bidder that qualifies as a small business, as defined 
in paragraph (b)(1) of this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
very small businesses, as defined in paragraph (b)(2) of this section, 
or a consortium of very small businesses may use the bidding credit 
specified in Sec.  1.2110(f)(2)(i) of this chapter.

PART 95--PERSONAL RADIO SERVICE

0
56. The authority citation for part 95 continues to read as follows:

    Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47 
U.S.C. 154, 303.


0
57. Amend Sec.  95.816 by removing paragraph (c)(3) and revising 
paragraph (d) to read as follows:


Sec.  95.816  Competitive bidding proceedings.

* * * * *
    (d) Bidding credits. A winning bidder that qualifies as a small 
business, as defined in this subsection, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as a 
very

[[Page 43002]]

small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in accordance 
with Sec.  1.2110(f)(2)(i) of this chapter.
* * * * *

PART 101--FIXED MICROWAVE SERVICES

0
58. The authority citation for part 101 continues to read as follows:

    Authority: 47 U.S.C. 154, 303.

0
59. Amend Sec.  101.538 by removing paragraphs (a)(4) and (a)(5) and 
revising paragraph (b) to read as follows:


Sec.  101.538  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(i) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as an 
entrepreneur, as defined in this section, or a consortium of 
entrepreneurs may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.

0
60. Revise Sec.  101.1107 to read as follows:


Sec.  101.1107  Bidding credits for very small businesses, small 
businesses and entrepreneurs.

    (a) A winning bidder that qualifies as a very small business, as 
defined in Sec.  101.1112, or a consortium of very small businesses may 
use a bidding credit of 45 percent to lower the cost of its winning 
bid.
    (b) A winning bidder that qualifies as a small business, as defined 
in Sec.  101.1112, or a consortium of small businesses may use a 
bidding credit of 35 percent to lower the cost of its winning bid.
    (c) A winning bidder that qualifies as an entrepreneur, as defined 
in Sec.  101.1112, or a consortium of entrepreneurs may use a bidding 
credit of 25 percent to lower the cost of its winning bid.
    (d) The bidding credits referenced in paragraphs (a), (b) and (c) 
of this section are not cumulative.

0
61. Revise Sec.  101.1109 to read as follows:


Sec.  101.1109  Records maintenance.

    All winning bidders qualifying as very small businesses, small 
businesses or entrepreneurs shall maintain at their principal place of 
business an updated file of ownership, revenue, and asset information, 
including any document necessary to establish eligibility as a very 
small business, small business or entrepreneur. Licensees (and their 
successors-in-interest) shall maintain such files for the term of the 
license. Applicants that do not obtain the license(s) for which they 
applied shall maintain such files until the grant of such license(s) is 
final, or one year from the date of the filing of their short-form 
application (FCC Form 175), whichever is earlier.


Sec.  101.1112  [Amended]

0
62. Amend Sec.  101.1112 by removing paragraphs (e) and (f).

0
63. Amend Sec.  101.1209 by revising paragraph (b) to read as follows:


Sec.  101.1209  Definitions.

* * * * *
    (b) Small business and very small business. (1) A small business is 
an entity that together with its affiliates and persons or entities 
that hold attributable interests in such entity and their affiliates, 
has average gross revenues that are not more than $40 million for the 
preceding three years.
    (2) A very small business is an entity that together with its 
affiliates and persons or entities that hold attributable interests in 
such entity and their affiliates, has average gross revenues that are 
not more than $15 million for the preceding three years.

0
64. Amend Sec.  101.1429 by removing paragraphs (a)(4) and (a)(5) and 
revising paragraph (b) to read as follows:


Sec.  101.1429  Designated entities.

* * * * *
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business, as defined in this section, or a consortium of very 
small businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(i) of this chapter. A winning bidder that qualifies as a 
small business, as defined in this section, or a consortium of small 
businesses may use the bidding credit specified in Sec.  
1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies as an 
entrepreneur, as defined in this section, or a consortium of 
entrepreneurs may use the bidding credit specified in Sec.  
1.2110(f)(2)(iii) of this chapter.

[FR Doc. 03-18430 Filed 7-18-03; 8:45 am]
BILLING CODE 6712-01-P