[Federal Register Volume 60, Number 126 (Friday, June 30, 1995)]
[Proposed Rules]
[Pages 34200-34212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16130]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 20 and 24
[PP Docket No. 93-253, GN Docket No. 90-314, GN Docket No. 93-252, FCC
95-263]
Race- and Gender-Based Provisions for the Auctioning of C Block
Broadband Personal Communications Services Licenses, Elimination
AGENCY: Federal Communications Commission.
ACTION: Further notice of proposed rule making.
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SUMMARY: The Commission adopts a Further Notice of Proposed Rule Making
proposing to amend its rules to eliminate race- and gender-based
provisions for the auctioning of C block broadband Personal
Communications Services licenses. The Commission proposes the rule
changes to prevent potential legal delays in conducting the C block
auction, while minimizing disruptions to existing business
relationships that were formed under the current rules.
DATES: Comments are to be filed on or before July 7, 1995. Reply
comments are not requested.
ADDRESSES: Comments should be sent to the Office of the Secretary,
Federal Communications Commission, Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT:
Ramona Melson or D'wana Speight, (202) 418-0620 (Wireless
Telecommunications Bureau), Kathleen O'Brien Ham, (202) 418-0660
(Wireless Telecommunications Bureau), or Peter Tenhula, (202) 418-1720
(Office of General Counsel).
SUPPLEMENTARY INFORMATION: This is the Commission's Further Notice of
Proposed Rule Making in PP Docket No. 93-253, GN Docket No. 90-314, GN
Docket No. 93-252, adopted June 23, 1995 and released June 23, 1995.
The full text of Commission decisions are available for inspection and
copying during normal business hours in the FCC Docket Branch (Room
230), 1919 M Street NW., Washington, D.C. The complete text of this
decision may also be purchased from the Commission's copy contractor,
International Transcription Service, Inc., (202) 857-3800, 2100 M
Street NW., Washington, D.C. 20037.
Summary of Further Notice of Proposed Rule Making
Introduction
1. In this Further Notice of Proposed Rule Making, we propose
measures to address legal uncertainties raised by the Supreme Court's
recent decision in Adarand Constructors, Inc. v. Pena.\1\ In proposing
these measures, we are mindful of the Commission's obligation and
commitment to ensure that the designated entities \2\ are afforded
opportunities to participate in the provision of spectrum-based
services. We are committed to this goal. Based on the unique
circumstances of the auction for licenses in the ``C block'' \3\ of
Personal Communications Services in the 2 GHz band (``broadband PCS''),
particularly the timing of the Supreme Court's decision in Adarand,\4\
we believe that our proposal to avoid further delay and legal
uncertainty concerning the C block auction is the best means of
providing opportunities for businesses owned by minorities \5\ and
women, many of whom have made preparations to bid in the C block
auction. We emphasize, however, that our proposal is limited to the
rules governing eligibility to participate in the C block auction.\6\
We also emphasize that our tentative conclusion to eliminate race- and
gender-based measures does not indicate that we have concluded that
race- or gender-based measures are inappropriate for future spectrum
auctions.
\1\ 63 U.S.L.W. 4523 (U.S. June 12, 1995).
\2\ The term ``designated entities,'' as used herein refers to
small business, rural telephone companies, and businesses owned by
minorities or women. Omnibus Budget Reconciliation Act of 1993, Pub.
L. No. 103-66, Title VI, Sec. 6002(a), 107 Stat. 312, 388 (1993)
(Budget Act).
\3\ The Commission allocated six broadband PCS frequency blocks
for auctioning. Specifically, these are designated as the A and B
blocks (consisting of 102 30 MHz Major Trading Area (MTA) licenses);
the C and F blocks (consisting of 493 30 MHz Basic Trading Area
(BTA) licenses and 493 10 MHz BTA licenses); and the D and E blocks
(consisting of 986 10 MHz BTA licenses). The Commission recently
completed its auction of the 99 A and B block licenses. See Public
Notice, ``Announcing the Winning Bidders in the FCC's Auction of 99
Licenses to Provide Broadband PCS in Major Trading Areas; Down
Payments Due March 20, 1995,'' March 13, 1995. The auctioning of the
493 C block licenses as announced in a public notice released in
tandem with this Further Notice of Proposed Rule Making is scheduled
to begin August 29, 1995. See Public Notice, ``FCC Sets August 29th
Auction Date for 493 BTA Licenses Located in the C Block for
Personal Communications Services in the 2 GHz Band, June 23, 1995.
\4\ Notably, the Adarand decision was announced on June 12,
1995, three days before the filing deadline for short-form
applications (Form 175) for the C block auctions.
\5\ Under our C block competitive bidding rules, the term
``minorities'' includes Blacks, Hispanics, American Indians, Alaskan
Natives, Asians, and Pacific Islanders. See 47 CFR 24.720(i).
\6\ Aside from the C block auction, we anticipate that parties
interested in other spectrum auctions will have additional
opportunities to comment at a future date.
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2. For purposes of the C block auction only, we propose to
eliminate all race- and gender-based provisions contained in our
competitive bidding rules applicable to such licenses in order to avoid
delay caused by the legal challenges to our existing rules that would
likely result from the Supreme Court's ruling in Adarand. It is our
belief that such delay will significantly impede the C block auction
and the expeditious dissemination of broadband PCS licenses to
entrepreneurs,\7\ including businesses owned by minorities and women.
In addition, we propose to treat women and minorities similarly in
light of the stay granted
[[Page 34201]]
Telephone Electronics Corp. (TEC), which implicated both gender and
minority provisions in our rules.
\7\ The term ``entrepreneurs,'' as used herein, refers to
applicants in the C block that have gross revenues of less than $125
million in each of the last two years and total assets of less than
$500 million at the time the FCC Form 175 is filed. See 47 CFR
24.709(a).
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We are concerned that gender-based provisions could similarly
result in legal challenges and delays to the C block auction. As
described below, we intend to make rule changes that are the least
disruptive to bidders who were in an advanced stage of planning to
participate in the C block auction at the time the Adarand decision was
handed down. We intend to make such changes swiftly, in order to
minimize the effect of the modified rules on existing business
relationships formed in anticipation of the C block auction.\8\
Moreover, in order to facilitate swift action on our rule changes,
comments are due July 7, 1995, and we are not requesting reply
comments.
\8\ The Commission has received numerous letters urging it to go
forward with the C block auction as expeditiously as possible. See,
e.g., Letter from Sandra Goeken Martis, Wireless Works, Inc., to
Cathy Sandoval, Office of Communications Business Opportunities,
Federal Communications Commission (FCC) (June 16, 1995); Letter from
Michael Walker, Executive Director, National Paging and Personal
Communications Association, to Reed Hundt, Chairman, FCC (June 16,
1995); Letter from Jonathan Chambers, Director, Public Policy,
Sprint Telecommunications Venture, to Reed E. Hundt, Chairman, FCC
(June 19, 1995); Letter from Roy M. Huhndorf, President, Cook Inlet
Region, Inc. to Reed E. Hundt, Chairman, FCC (June 14, 1995); Letter
from Eliot J. Greenwald and Howard C. Griboff, attorneys with
Fisher, Wayland, Cooper, Leader & Zaragoza L.L.P, representing
Central Alabama Partnership L.P. 132 and Mobile Tri-States L.P. 130,
to William F. Caton, Acting Secretary, FCC (June 16, 1995).
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3. Accordingly, we tentatively conclude that our broadband PCS
rules for the C block auction should be modified as follows:
Amend Sec. 24.709 of the Commission's Rules to make the
50.1/49.9 percent ``control group'' equity structure available to all
entrepreneurs' block applicants, and not solely businesses owned by
women or minorities.
Amend Sec. 24.720 of the Commission's Rules to eliminate
the exception to the affiliation rules that excludes the gross revenues
and total assets of affiliates controlled by minority investors who are
members of an applicant's control group.
Amend Sec. 24.711 of the Commission's Rules to provide for
three installment payment plans for entrepreneurs' block applicants
that are based solely on financial size. In particular, the small
business installment payment plan would reflect the terms previously
available to minority- or women-owned small businesses.
Amend Sec. 24.712 of the Commission's Rules to provide for
a 25 percent bidding credit for small businesses only.
Amend Sec. 24.204 of the Commission's Rules to make the 40
percent cellular attribution threshold applicable only to ownership
interests held by small businesses and rural telephone companies, or to
ownership interests held by investors in broadband PCS applicants/
licensees that are small businesses.
Amend 20.6 of the Commission's Rules to make the 40
percent attribution threshold applicable only to ownership interests
held by small businesses and rural telephone companies.\9\
\9\ The proposed rule changes are attached as Appendix A.
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Background
4. In the Omnibus Budget Reconciliation Act of 1993,\10\ Congress
authorized the FCC to award licenses by competitive bidding for certain
spectrum-based services.\11\ In authorizing the use of auctions,
Congress directed the Commission to ``ensure that small businesses,
rural telephone companies, and businesses owned by members of minority
groups and women [collectively known as ``designated entities''] are
given the opportunity to participate in the provision of spectrum-based
services.'' \12\ In response to many comments recommending how we
should implement Congress's mandate and providing data explaining
special problems faced by the designated entities, we adopted several
rules designed to encourage the participation of designation entities,
including women and minorities, in broadband PCS by addressing the
difficulties these groups experience in accessing capital.\13\ We
determined that these special provisions for minorities and women are
constitutional under the ``intermediate scrutiny'' standard of review
articulated in Metro Broadcasting, Inc. v. FCC, 497 U.S. 547, 564-565
(1990).\14\ In conjunction with these special provisions, we also
established ``entrepreneurs' blocks'' (the C and F frequency Blocks
allocated for broadband PCS) which require bidders to satisfy a
financial cap to be eligible to bid on licenses in these blocks.\15\
\10\ Budget Act, Pub. L. No. 103-66, Title VI, Sec. 6002(b), 107
Stat. 312 (1993).
\11\ Budget Act, Pub. L. 103-66, Title VI, Sec. 6002(a), 107
Stat. at 388.
\12\ 47 U.S.C. Sec. 309(j)(4)(D).
\13\ See Fifth Report and Order, PP Docket 93-253, 59 Fed. Reg.
37566 (July 22, 1994), 9 FCC Rcd 5532 (1994) (Fifth R&O), recon.
Fifth Memorandum Opinion and Order, 59 Fed. Reg. 63210 (Dec. 7,
1994), 10 FCC Rcd 403 (1994) (Fifth MO&O).
\14\ See Fifth R&O, 59 Fed. Reg. 37566 (July 22, 1994), 9 FCC
Rcd 5532, 5537 at para.9. In Metro Broadcasting, the Supreme Court
ruled that the Commission's minority preference program for mutually
exclusive applications for licenses for new radio or television
broadcast stations and its distress sale program did not violate the
equal protection component of the Fifth Amendment. The Court held
that Congressionally mandated minority programs (even if not
remedial in the sense of being designed to compensate victims of
past governmental or societal discrimination) ``are constitutionally
permissible to the extent that they serve important governmental
objectives within the power of Congress and are substantially
related to achievement of those objectives.'' Metro Broadcasting v.
FCC. 497 U.S. at 565.
\15\ 47 CFR Sec. 24.709(a).
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5. On March 15, 1995, in response to a request filed by TEC
alleging that our rules violated equal protection principles under the
Constitution, the U.S. Court of Appeals for the District of Columbia
Circuit issued an Order stating that ``those portions'' of the
Commission's Order ``establishing minority and gender preferences, the
C block auction employing those preferences, and the application
process for that auction shall be stayed pending completion of judicial
review.'' \16\ The court explained that TEC had ``demonstrated the
requisite likelihood of success on the merits.'' \17\ The stay,
however, was subsequently lifted on May 1, 1995, on TEC's motion, after
TEC decided to withdraw its lawsuit.\18\ On June 12, 1995, the Supreme
Court decided in Adarand to overrule Metro Broadcasting ``to the extent
that Metro Broadcasting is inconsistent with'' Adarand's holding that
``all racial classifications * * * must be analyzed by a reviewing
court under strict scrutiny.'' \19\ The Court ruled that any federal
program that makes distinctions on the basis of race must serve a
compelling governmental interest and must be narrowly tailored to serve
that interest.\20\
\16\ Telephone Electronics Corp. v. FCC, No. 95-1015 (D.C. Cir.
Mar. 15, 1995) (order granting stay).
\17\ Id at 2.
\18\ Telephone Electronics Corp. v. FCC, No. 95-1015 (D.C. Cir.
May 1, 1995) (order granting dismissal of petition for review).
\19\ Adarand, 63 U.S.L.W. at 4530.
\20\ Id at 4533.
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6. The holding in Adarand potentially affects four race- or gender-
based measures in our C block auction rules.\21\ The purpose of these
provisions was to address the lack of access to capital problem that
our record showed women
[[Page 34202]]
and minorities face.\22\ The first such provision enables businesses
owned by women or minorities to hold 50.1 percent of an applicant's
equity while another investor holds 49.9 percent of the equity.\23\
Second, under an exception to our affiliation rules, the gross revenues
and total assets of firms controlled by minority investors in the
applicant are not included for purposes of determining eligibility for
the C block.\24\ Third, small businesses and companies owned by
minorities or women receive the most favorable installment payment
options available to entrepreneurs' block applicants.\25\ Finally,
businesses owned by minorities or women and small businesses owned by
minorities or women receive larger bidding credits under our rules.\26\
The Adarand holding also potentially affects our commercial mobile
radio service (CMRS) spectrum aggregation limit and cellular PCS cross-
ownership rules under which ownership interests held by businesses
owned by minorities and women, as well as small businesses and rural
telephone companies, are subject to a higher attribution threshold.\27\
In addition, under our cellular PCS Cross-ownership rule, entities that
invest in broadband PCS licensees that are minority- or women-owned can
benefit from a higher attribution threshold.
\21\ In the Fifth R&O, we also adopted a tax certificate program
for minority and women-owned businesses under 26 U.S.C. Sec. 1071.
59 Fed Reg. 37566 (July 22, 1994), 9 FCC Rcd at 5580, para.113.
Congress subsequently repealed Section 1071. H.R. 831, 1045h Cong.
1st Sess. Sec. 2. As a result of this action by Congress, we are
compelled to eliminate the specific tax certificate provision in our
broadband PCS rules, 47 CFR Sec. 24.713, as indicated in Appendix A.
\22\ See Fifth R&O, 59 Fed. Reg. 37566 (July 22, 1994), 9 FCC
Rcd at 5537-5538, 5580, Paras. 10-13, 113.
\23\ 47 CFR Sec. 24.709(b)(6).
\24\ 47 CFR Sec. 24.720(1)(11)(ii).
\25\ 47 CFR Sec. 24.711.
\26\ 47 CFR Sec. 24.712.
\27\ 47 CFR Secs. 20.6 and 24.204.
Overview
7. While we stress our continued commitment to the goal of ensuring
broad participation in PCS by minority- and women-owned business,
Adarand requires that we reevaluate our method for accomplishing this
compelling objective. Adarand, which was issued just three days before
applications were due for participation in the C block, imposes a
strict scrutiny standard, the highest, most searching level of judicial
review, for evaluating the provisions to encourage minority
participation in PCS. That standard requires us to show a ``compelling
governmental interest'' for taking race into account.\28\ Under Adarand
the agency must show that it considered ``race-neutral alternatives''
and that the program is ``narrowly tailored'' to meet the compelling
governmental interest established by the record and findings.\29\
\28\ Adarand, 63 U.S.L.W. at 4530.
\29\ Id
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8. While we believe that our current record for the C block auction
is strong, we tentatively conclude that additional evidence would be
required to meet the strict scrutiny standard. The time required for
further fact-finding would necessitate a delay in holding the C block
auction. We tentatively conclude that such a delay would put the C
block winners at a greater competitive disadvantage vis-a-vis existing
wireless carriers such as cellular and enhanced SMR carriers, who have
a substantial head start in the market.\30\ Additionally, we believe
there is a high likelihood that before the auction, legal challenges
would be filed to question whether we have met the strict scrutiny
standard. Given the D.C. Circuit's willingness to stay the auctions
under an ``intermediate scrutiny standard,'' \31\ there is a high
likelihood that the court might impose another stay under the strict
scrutiny standard of review. A stay would prevent the auction from
going forward during litigation and cause lengthy delays in licensing
and time to market for the eventual winners. Even if the auction were
not stayed beforehand, there is a high likelihood that minority
applicants and possibly female applicants who elected the bidding
credits and other provisions available to members of those groups,
would be subject to petitions to deny their licenses, legal challenges
and possible injunctions on the issuance of their licenses. This would
again greatly delay their entry into the market, and diminish their
ability to compete.
\30\ Cellular operators, for example, have been in the wireless
market for over a decade, and after a very slow rise through the
1980's and into the 1990's sales have risen very quickly and
cellular operators are currently enrolling about 28,000 new
customers per day. See United States Department of Commerce,
National Telecommunications and Information Administration, May 30,
1995 at 2.
\31\ Telephone Electronics Corp v. FCC 95-1015 (order granting
stay).
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9. Based on the letters we have received from potential bidders,
many of whom have made extensive preparations to bid in the C block
auction, we conclude that at this time, minority and women bidders, as
well as other bidders, will have a better chance of becoming successful
PCS providers if we eliminate the race- and gender-based provisions
from the C block and adopt provisions based on economic size only. The
likely delays in market entry from doing otherwise would thwart
Congress's directive to disseminate PCS license quickly so competitive
service to the public can begin forthwith. Because of the urgent
situation posed by the need to auction these licenses in a speedy
fashion so the businesses can get to market, we reluctantly conclude
that we must drop the race- and gender-based provisions and adopt-
standards based solely on economic size.
10. We propose to eliminate the race- and gender-based provisions
in our rules in a manner that is the least disruptive to bidders
preparing to bid in the C block auction. We recognize that many of the
C block applicants, including minority- and women-owned businesses, as
well as small businesses, have already attracted capital and formed
business relationships in anticipation of the C block auction. We
further understand that these relationships are more likely to survive
if the auction is not significantly delayed, and our rule changes are
minimally disruptive to existing business plans. We have received
numerous informal comments expressing this point of view.\32\ We
believe, therefore, it is the best interests of furthering competition
and ownership diversity in the marketplace, that we eliminate as much
legal uncertainty as possible and proceed rapidly to auction the C
block licenses.
\32\ See. eg., Letter from Eliot J. Greenwald and Howard C.
Griboff, attorneys with Fisher, Wayland, Cooper, Leader & Zaragoza
L.L.P, representing Central Alabama Partnership L.P. 132 and Mobile
Tri-States L.P. 130, to William F. Caton, Acting Secretary, FCC
(June 16, 1995); Letter from Michael Walker, Executive Director,
National Paging and Personal Communications Association, to Reed
Hundt, Chairman, FCC (June 16, 1995); Letter from Sandra Goeken
Martis, Wireless Works, Inc., to Cathy Sandoval, Office of
Communications Business Opportunities, FCC (June 16, 1995); Letter
from Jonathan Chambers, Director, Public Policy, Sprint
Telecommunciations Venture, to Reed E. Hundt, Chairman, FCC (June
19, 1995); Letter from Roy M. Huhndorf, President, Cook Inlet
Region, Inc. to Reed E. Hundt, Chairman, FCC (June 14, 1995).
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11. We want to emphasize that our tentative conclusion to eliminate
race- and gender-based measures from the C block auction rules does not
indicate that we have concluded that race- or gender-based measures are
inappropriate for any of the other spectrum auctions we will hold in
the future. Moreover, we do not concede that our C block auction rules
themselves are unconstitutional in the wake of Adarand. We simply
believe that our program must now be evaluated under a stricter
constitutional standard than it was before. With regard to the C block
auction, we tentatively conclude that the advantages of moving forward
quickly outweigh the benefits that would be derived by developing an
extensive supplemental record for these rules that will pass a strict
scrutiny standard of review.\33\ We seek comment
[[Page 34203]]
on this tentative conclusion, and in particular, request information on
the time needed to develop a study to support race-based measures and
the scope of such a supplemental record. We conclude that our proposal
to eliminate the race- and gender-based measures from the C block
auction rules is consistent with our duty to implement the Budget
Act.\34\ We also seek comment on whether there are other ways to modify
the rules to comply with the strict scrutiny standard without
significantly delaying the C block auction.\35\
\33\ With respect to other auctions, however, we may develop a
supplemental record as part of our evaluation to meet the strict
scrutiny standard of Adarand.
\34\ See, e.g, Second Report and Order and Second Further Notice
of Proposed Rule Making, PR Docket No. 89-553, 60 Fed. Reg. 21987
(1995) (900 MHz SMR Second R&O/Second FNPRM).
\35\ See eg., Letter from Thomas A. Hart, Jr. National Paging
and Personal Communications Assoc., et. al. to William E. Kennard,
General Counsel, FCC (June 22, 1995); Letter from David Honig,
Executive Director, Minority Media and Telecommunications Council to
William E. Kennard, General Counsel, FCC (June 21, 1995); Letter
from James L. Winston, Executive Director and General Counsel,
National Association of Black Owned Broadcasters, and Lois E.
Wright, Vice President and Corporate Counsel Inner City Broadcasting
Corp., to Reed E. Hundt, Chairman, FCC (June 15, 1995).
12. Finally, we note that nothing in the TEC stay order or the
Adarand decision calls into question the concept of an entrepreneurs'
block. The D.C. Circuit singled out ``those portions'' of the
Commission's Orders ``establishing minority and gender preferences,''
not our rules designed to promote participation by small
businesses.\36\ Similarly, in Adarand the Court held that a strict
scrutiny standard of review applies to preferences based on race, not
size.\37\ Thus, attempts to ensure that small businesses have the
opportunity to compete with larger businesses are still judged under
the deferential rational basis standard. Indeed, the entrepreneurs'
block concept is bolstered by Adarand insofar as that decision requires
the consideration of race-neutral measures to promote equal
opportunity.\38\ Our record in the competitive bidding proceeding
suggests that many minority and women bidders will qualify as small
businesses under our rules,\39\ and, hence, be entitled to a small
business bidding credit and favorable installment payment terms.\40\ In
any event, very few businesses owned by minorities and women are
excluded from the entrepreneurs' block under our $125 million gross
revenue and $500 million total asset caps.
\36\ Telephone Electronics Corp. v. FCC, No. 95-1015 (order
granting stay).
\37\ Adarand, 63 U.S.L.W. at 4526.
\38\See Adarand, Id. at 4533, quoting Croson, 488 U.S. at 507
(under strict scrutiny, courts ask ``whether there was any
consideration of the use of race-neutral means to increase minority
business participation.'')
\39\ See, e.g., 900 MHz SMR Second R&O/Second FNPRM, 60 Fed.
Reg. 21987 (indicating that ``U.S. Census Data shows that
approximately 99% of all women-owned businesses and 99% of all
minority-owned businesses generated net receipts of $1 million or
less'', citing Women-Owned Business, WB 87-1, 1987 Economic Census,
p. 144, Table 8; Survey of Minority-Owned Business Enterprises, MB
87-4, 1987 Economic Census, pp. 81-82, Table 8).
\40\ 47 CFR Secs. 24.712 and 24.711.
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Proposed Rule Changes
A. Control Group Equity Structures
13. Background. Our current rules permit broadband PCS applicants
for licenses in the C block to utilize one of two equity structures so
that the gross revenues and total assets of persons or entities holding
non-attributable interests in such applicants will not be
considered.\41\ Use of either of these equity structures, however,
requires applicants to form a ``control group.''\42\ Under the first
equity structure option, the Control Group Minimum 25 Percent Equity
Option (which is available to all applicants), the control group must
hold at least 25 percent of the applicant's total equity and members of
the control group must have de facto control of the control group and
of the applicant, and hold at least 50.1 percent of the voting stock
and all general partnership interests within the control group.\43\ Of
that 25 percent equity, at least 15 percent must be held by
``qualifying investors.'' \44\ The remaining ten percent may be held by
qualifying investors, certain institutional investors, non-controlling
existing investors in any preexisting entity that is a member of the
control group, or individuals that are members of the applicant's
management team.\45\ Outside of the control group, the remaining 75
percent of the applicant's equity may be held by other non-controlling
investors; but, no investor in the applicant can hold more than 25
percent of the equity and remain non-attributable.\46\
\41\ See 47 CFR Sec. 24.709(b)(5) and (b)(6).
\42\ Under the control group mechanism, the gross revenues and
total assets of certain investors are not attributed provided the
applicant has a control group consisting of one or more individuals
or entities that are in de jure and de facto control of the
applicant. The gross revenues and total assets of each member of the
control group are counted toward the financial caps applicable to
the entrepreneurs' block licenses. See 47 CFR Sec. 24.720(k).
\43\ 47 CFR Sec. 24.709(b)(5)(i).
\44\Id. Under our rules, ``qualifying investors'' are defined as
members of or holders of an interest in members of the applicant's
or licensee's control group who 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
restrictions specified in our rules with regard to eligibility for
entrepreneurs' block licenses. 47 CFR Sec. 24.720(n)(1).
\45\ 47 CFR Sec. 24.709(b)(5)(i)(C).
\46\ 47 CFR Sec. 24.709(b)(3).
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14. Under the second equity structure option, the Control Group
Minimum 50.1 Percent Equity Option (which is currently available only
to minority or women applicants), the control group must own at least
50.1 percent of the applicant's total equity, with members of the
control group holding 50.1 percent of the voting stock and all general
partnership interests within the control group, and having de facto
control of both the control group and the applicant.\47\ Of that 50.1
percent equity, at least 30 percent must be held by qualifying
investors who are minority or women.\48\ The remaining 20.1 percent may
be held by qualifying investors, certain institutional investors, non-
controlling existing investors in any preexisting entity that is a
member of the control group, or individuals that are members of the
applicant's management team.\49\ Outside of the control group, the
remaining 49.9 percent of the applicant's equity may be held by a
single non-controlling investor who is considered non-attributable.\50\
\47\ 47 CFR Sec. 24.709(b)(6)(i).
\48\ 47 CFR Sec. 24.709(b)(6)(i)(A).
\49\ 47 CFR Sec. 24.709(b)(6)(i)(C).
\50\ 47 CFR Sec. 24.709(b)(4).
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15. Discussion. We propose to modify our rules to permit all C
block applicants to avail themselves of the 50.1/49.9 percent equity
structure. When we adopted the Control Group Minimum 50.1 Percent
Equity Option in the Fifth R&O, we determined that making such a
mechanism available to minority- or women-owned businesses would better
enable them to attract adequate financing. We have previously noted
that the primary impediment to participation by businesses owned by
women and minorities in broadband PCS is a lack of access to
capital.\51\ In light of the Supreme Court's holding in Adarand,
however, we proposed to make the Control Group Minimum 50.1 Percent
Equity Option available to small businesses \52\ and entrepreneurs
rather than limiting it to minority- of women-owned businesses. We
tentatively conclude that this proposed rule change would cause the
least disruption to existing business relationships formed in
anticipation of the C block auction that were premised on the use of
this particular equity structure. Our
[[Page 34204]]
proposed rule change enables minority- or women-owned businesses to
retain their 50.1/49.9 percent equity structures while extending this
control group option to other applicants in the entrepreneurs' block as
well. We also expect that this proposed rule change would mitigate the
likely legal challenges that could result if we moved forward with this
rule in its current form. Consequently, the proposed rule change would
facilitate the expeditious dissemination of the licenses. We seek
comment on this proposed rule change and on our tentative conclusions.
\51\ Fifth R&O, 59 Fed. Reg. 37566 (July 22, 1994), 9 FCC Rcd at
5537, para. 10.
\52\ Under our rules, a ``small business'' is defined as an
entity that, together with its affiliates and persons or entities
that hold interest in such entity and their affiliates, has average
gross revenues that are not more than $40 million for the preceding
three years. 47 CFR Sec. 24.720(b)(1).
16. We also recognize that, as a result of the proposed rule
change, all C block applicants would be able to take advantage of the
50.1/49.9 percent equity structure, including small businesses and
entrepreneurs. Nevertheless, we view this as the best approach to
preserve many of the existing business relationships that have been
formed, including those of women and minorities. We think this approach
would be the least disruptive and would allow many minority or women
applicants--both entrepreneurs and small businesses--to proceed. We
seek comment on this analysis.
17. Although we propose to eliminate the race- and gender-based
measures currently provided in our rules for the C block licenses, we,
nonetheless, intend to continue to request bidder information on the
short-form filings as to minority- or women-owned status. We
tentatively conclude that such information will assist us in analyzing
the applicant pool and the auction results to determine whether we have
accomplished substantial participation by minorities and women through
the broad provisions available to small businesses as directed by
Congress. This information will assist us in preparing our report to
Congress on the participation of designated entities in the auctions
and in the provision of spectrum-based services.\53\ In addition, such
information will be relevant in developing a supplemental record should
we find that special provisions solely for small businesses prove
unsuccessful in encouraging dissemination of licenses to a wide variety
of applicants, including businesses owned by members of minority groups
and women. In this regard, we retain discretion to tailor our approach
for future auctions. We seek comment on this monitoring proposal.
\53\ See 47 U.S.C. Sec. 309(j)(12)(D).
---------------------------------------------------------------------------
B. Affiliation Rules
18. Background. In the Fifth R&O, we adopted specific affiliation
rules for identifying all individuals and entities whose gross revenues
and assets must be aggregated with those of the applicant in
determining whether the applicant exceeds the financial caps for the
entrepreneurs' blocks or for small business size status.\54\ Our
affiliation rules identify which individuals or entities will be found
to control or be controlled by the applicant or an attributable
investor in the applicant by specifying which ownership interests or
other criteria will give rise to a finding of control and consequent
affiliation. We have adopted two narrowly tailored exceptions to our
affiliation rules in the broadband PCS context. Under one exception,
applicants affiliated with Indian tribes and Alaska Regional or Village
Corporations organized pursuant to the Alaska Native Claims Settlement
Act, 43 U.S.C. 1601 et seq., are generally exempted from the
affiliation rules for purposes of determining eligibility to
participate in bidding on C block licenses and to qualify as a small
business with a rebuttable presumption that revenues derived from
gaming, pursuant to the Indian Gaming Regulatory Act, 25 U.S.C. 2701 et
seq. will be included in the applicants eligibility determination.\55\
Under the second exception, the gross revenues and assets of affiliates
controlled by minority investors who are members of the applicant's
control group are not attributed to the applicant for purposes of
determining compliance with the eligibility standards for entry into
the entrepreneurs' block.\56\
\54\ Fifth R&O, Fed. Reg. 37566 (July 22, 1994), 9 FCC Rcd at
5620, 5625.
\55\ 47 CFR Sec. 24.720(l)(11)(i).
\56\ 47 CFR Sec. 24.720(l)(11)(ii).
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19. Discussion. We propose to eliminate the exception to our
affiliation rules pertaining to minority investors. In crafting this
exception, we anticipated that it would permit minority investors who
control other concerns to be members of an applicant's control group
and to bring their management skills and financial resources to bear in
its operation without the assets and revenues of those other concerns
being counted as part of the applicant's total assets and revenues.\57\
We further anticipated that such an exception would permit minority
applicants to pool their resources with other minority-owned businesses
and draw on the expertise of those who have faced similar barriers to
raising capital in the past.\58\ Consequently, we tentatively conclude
that it would be imprudent to extend such exception to all
entrepreneurs because to do so would frustrate the Commission's goals
in establishing the entrepreneurs' block--namely, to ensure that
broadband PCS will be disseminated among a wide variety of applicants
and to exclude many large telecommunications companies from bidding on
such blocks.\59\
\57\ Fifth MO&O, 59 Fed. Reg. 63210(Dec. 7, 1994), 10 FCC Rcd at
425-426, para. 41.
\58\ Id.
\59\ See Fifth R&O, 59 Fed. Reg. 37566 (July 22, 1994), 9 FCC
Rcd at 5538, para. 12.
---------------------------------------------------------------------------
20. Although this proposed rule change may significantly affect
certain existing business relationships formed in anticipation of the C
block auction, we must balance our concern about minimizing the adverse
impact on a limited number of existing business relationships with our
desire to mitigate the legal challenges that are likely to result from
the Court's Adarand decision in the absence of such rule change. In
this context, we tentatively conclude that such rule change will affect
a limited number of existing business relationships. By contrast,
without such rule change, award of all entrepreneurs' block licenses
could potentially be subject to substantial delay as a result of legal
challenges to this race-based exception to the affiliation rules
(regardless of the fact that such exception is limited in scope). We
tentatively conclude that such outcome would be inconsistent with both
the spirit and mandate of the Budget Act.\60\ We also tentatively
conclude that the proposed rule change not only complies with the
Budget Act but also benefits the general public, since it would
facilitate rapid deployment of broadband PCS in a manner most likely to
avoid judicial delay. We seek comment on this proposed rule change and
these tentative conclusions. We also do not propose to eliminate the
affiliation exception for Indian tribes and Alaska Regional or Village
Corporations. We tentatively conclude that the ``Indian Commerce
Clause'' of the United States Constitution provides an independent
basis for this exception that is not questioned by the Adarand
decision.\61\
\60\ The Budget Act instructs the Commission to provide for the
``rapid deployment of new technologies * * * without administrative
or judicial delays.'' 47 U.S.C. 309(j)(3)(A).
\61\ Order on Reconsideration, 59 Fed. Reg. 43062 (Aug. 22,
1994), FCC 94-217, (released Aug. 15, 1994); Fifth MO&O, 59 Fed.
Reg. 63210 (Dec. 7, 1994), 9 FCC Rcd at 5548-4449, Paras. 42-43. See
also Oklahoma Tax Commission v. Chickasaw Nation, 63 U.S.L.W. 4594,
4596 (Supreme Court upheld applicability of a categorical immunity
from certain State taxation to Indian tribes and their members and
not to ``non-Indians.'')
[[Page 34205]]
C. Installment Payments
21. Background. Entrepreneurs' block licensees are eligible for
installment payment plans that afford them the opportunity to pay for
their licenses over a period of time, and under certain financial
terms. Five different installment payment plans are currently available
to C block applicants under Sec. 24.711 of the Commission's Rules.\62\
The first installment payment plan is available to applicants with
gross revenues in excess of $75 million. This plan provides for the
payment of interest based on the 10-year U.S. Treasury rate, plus 3.5
percent with payment of principal and interest amortized over the term
of license.\63\
\62\ 47 CFR Sec. 24.711.
\63\ 47 CFR Sec. 24.711(b)(1).
---------------------------------------------------------------------------
22. The second installment payment plan is available to those
applicants with gross revenues between $40 and $75 million.\64\ This
plan provides for the payment of interest equal to the 10-year U.S.
Treasury rate plus 2.5 percent. The applicants eligible for this plan
may pay interest only for one year with the principal and interest
amortized over the remaining nine years of the license term. The third
installment payment plan is available only to applicants that qualify
as a small business or consortium of small businesses.\65\ This plan
provides for the payment of interest at the rate of the 10-year U.S.
Treasury rate plus 2.5 percent; however, the applicants eligible for
this plan may pay interest only for two years with principal and
interest amortized over the remaining eight years of the license term.
\64\ 47 CFR Sec. 711(b)(2).
\65\ 47 CFR Sec. 24.711(b)(3).
---------------------------------------------------------------------------
23. The remaining installment payment plans for available only to
minorities or women. Specifically, the fourth plan provides interest-
only payments for three years and payments of principal and interest
over the remaining seven years of the license term and is only
available to businesses owned by members of minority groups or women.
The final and most favorable installment payment plan provides
interest-only payments for six years and payments of principal and
interest amortized over the remaining four years of the license term.
This plan is only available to small businesses owned by members of
minority groups or women. Previously, the Commission has determined
that there is a basis for differentiating installment plans by
size.\66\
\66\ See Fifth R&O, 59 Fed. Reg. 37566 (July 22, 1994), 9 FCC
Rcd at 5593, Paras. 139-140; Fifth MO&O, 59 Fed. Reg. 63210 (Dec. 7,
1994), 10FCC Rcd at 458, para.101.
---------------------------------------------------------------------------
24. Discussion. We propose to modify this rule to eliminate the
special provisions that are tied to an applicant's status as a
minority- or women-owned business, and to provide for three installment
payment plans that are based solely on financial size. In this regard,
we propose to modify only installment payment plans available to small
businesses with gross revenues under $40 million.\67\ We propose to
extend the most favorable installment payment plan previously available
only to small minority- or women-owned firms to all small businesses.
Thus, we propose that all small businesses be permitted to pay for
their licenses in installments at the rate for ten-year U.S. Treasury
obligations applicable on the date the license is granted and that
payments include interest only for the first six years with payments of
principal and interest amortized over the remaining four years of the
license term. In effect, we are proposing the deletion of our current
Sec. 24.711(b)(3) and (4) and the renumbering of Sec. 24.711(b)(5) as
Sec. 24.711(b)(3) after the modification.
\67\ The first and second payment plans for eligible bidders
with gross revenues exceeding $75 million and with gross revenues
between $40 and $75 million will remain the same. 47 CFR
Sec. 24.711(b)(1) and (2).
---------------------------------------------------------------------------
25. This rule change will grant small businesses the same
installment plan available now to minority- or women-owned small
business. We believe this approach will prove to be the least
disruptive to the existing agreements between prospective bidders and
the financial community and will provide the most favorable plan to the
smallest companies. We seek comment on this proposal which will enable
all small business applicants to benefit from the most favorable
installment payment plan that was previously only available to
minority-or women-owned small businesses.
D. Bidding Credits
26. Background. Our current rules provide for three tiers of
bidding credits ranging between 10 percent and 25 percent. The bidding
credit acts as a discount on the winning bid amount that a license
actually has to pay for the license. A small business is granted a 10
percent bidding credit. A business that is owned by members of minority
groups or women is granted a 15 percent bidding credit. A small
business owned by members of minority groups or women is allowed to
aggregate the bidding credits for a 25 percent bidding credit.
27. Discussion. We propose to increase the bidding credit for small
business from 10 percent to 25 percent. We further propose to eliminate
the remaining bidding credits. This rule change eliminates the race-
and gender-based bidding credits and extends the 25 percent bidding
credit to all small businesses. We seek comment on this proposal. At
the same time, this proposal will enhance the competitiveness of all
small businesses which will receive an increase of 15 percent in their
bidding credits. The positions of minority- or women-owned small
businesses will remain the same because they will be eligible for a 25
percent bidding credit. Consequently, this proposal should be the least
disruptive to the current business arrangements and financial
agreements.
28. This proposal will allow the Commission and prospective bidders
to avoid litigation, allow the auction to proceed as close to its
original schedule as possible and permit prospective bidders to
maintain previously negotiated business arrangements and financial
agreements. Thus, we recommend amending Sec. 24.712(a) to raise the
bidding credit from 10 percent to 25 percent. We further recommend
deleting Sec. 24.712 (b) and (c) and re-numbering Sec. 24.712(d) as
Sec. 24.712(b). We seek comment on this outcome.
E. Cellular PCS Cross-Ownership and CMRS Spectrum Aggregation Limit
29. Background. Our cellular PCS cross-ownership rule currently
provides for a higher cellular ownership attribution threshold for
small businesses, rural telephone companies and businesses owned by
minorities or women than for other entities.\68\ Generally, our rules
provide that partnership and other ownership interests, and any stock
interest amounting to 20 percent or more of the equity, or outstanding
stock, or outstanding voting stock of a cellular licensee shall be
attributable for purposes of the cellular PCS cross-ownership
restrictions.\69\ If cellular ownership interests are held by small
businesses, rural telephone companies or businesses owned by minorities
or women, however, such interests are only attributable at the 40
percent or more level. In addition, cellular ownership interests held
by entities with non-controlling interests in a broadband PCS applicant
licensee are subject to a 40 percent attribution threshold for purposes
of Sec. 24.204. Similarly, our CMRS spectrum
[[Page 34206]]
aggregation limit provides that partnership and other ownership
interests, and any stock interest amounting to 20 percent or more of
the equity, or outstanding stock, or outstanding voting stock of a
cellular licensee shall be attributable for purposes of the cellular
PCS cross-ownership restrictions, except that those interests held by
small businesses, rural telephone companies or businesses owned by
minorities or women, are only attributable at the 40 percent or more
level.\70\
\68\ 47 CFR 24.204(d)(2)(ii).
\69\ Id.
\70\ 47 CFR Sec. 20.6(d)(2).
---------------------------------------------------------------------------
30. Discussion. We propose to modify the cellular PCS cross-
ownership and CMRS spectrum aggregation limit rules to remove the
provisions which increase the cellular attribution threshold to 40
percent on the basis of the race or gender of the holder of the
ownership interest or of the broadband PCS applicant in which such
holder is an investor. Accordingly, we propose to modify
Sec. 24.204(d)(2)(ii) of our rules to provide that the 40 percent
cellular attribution threshold will continue to apply if the ownership
interest is held by a small business or a rural telephone company or if
the ownership interest is held by an entity with a non-controlling
equity interest in a broadband PCS licensee or applicant that is a
small business. Similarly, we propose to modify Sec. 20.6(d)(2) of our
rules to provide that the 40 percent cellular attribution threshold
will continue to apply if the ownership interest is held by a small
business or a rural telephone company (including those owned by
minorities or women). Although this change could result in a lower
cellular attribution threshold for businesses owned by minorities and
women as well as for non-controlling investors in broadband PCS
applicants or licensees that are owned by minorities or women (with
respect to our cellular PCS cross-ownership rule), we believe that this
modification is necessary to ensure that our rules are insulated from
legal challenge. Moreover, the proposed rule change to our cellular PCS
cross-ownership rule may result in additional investment in broadband
PCS applicants that are small businesses, because this rule change
would extend the 40 percent cellular attribution threshold to such
investors in broadband PCS applicants that are small businesses. We
seek comment on this proposal. In addition, we recognize that both the
cellular PCS cross-ownership rule and the CMRS spectrum aggregation
limit apply to more than just the C block. We propose to limit our
specific rule changes to affect only the C block.
Procedural Matters
A. Regulatory Flexibility Act
As required by Section 603 of the Regulatory Flexibility Act, the
Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) of the expected impact on small entities of the policies and
rules proposed in this Further Notice of Proposed Rule Making. Written
public comments are requested on the IRFA. Comments must have a
separate and distinct heading designating them as responses to the IRFA
and must be filed by the comment deadlines provided above.
1. Reason for Action: This rule making proceeding was initiated to
secure comment on proposals to eliminate all race- and gender-based
provisions in our competitive bidding rules for our C block auction
only. The proposals advanced in the Further Notice of Proposed Rule
Making are also designed to implement Congress's goal of giving small
businesses, rural telephone companies, and businesses owned by members
of minority groups and women the opportunity to participate in the
provision of spectrum-based services in accordance with 47 U.S.C.
309(j)(4)(D).
2. Objectives: The Commission proposes changes to its rules for the
C block that are intended to be the least disruptive to bidders who
were in an advanced stage of planning to participate in the C block
auction. Specifically, the Commission seeks to ensure competition and
ownership diversity by avoiding a lengthy delay in the conduct of the
auction caused by probable legal challenges to our rules. The
Commission proposes to amend its rules to offer favorable bidding
credits and installment payment terms to small businesses. The
Commission also proposes to permit all C block applicants to avail
themselves of the 50.1/49.9 percent equity structure. The Commission
also proposes to eliminate the minority investor exception to the
affiliation rules. Finally, the Commission proposes to make revisions
to the PCS-cellular crossownership rule and the Commercial Mobile Radio
Services (CMRS) spectrum cap for purposes of the C block auction only.
3. Legal Basis: The proposed action is authorized under Sections
4(i), 303(r) and 309(j) of the Communications Act of 1934, 47 U.S.C.
154(i), 303(r) and 309(j), as amended.
4. Reporting, Recordkeeping, and Other Compliance Requirements: The
proposals under consideration in this Further Notice of Proposed Rule
Making do not include the possibility of new reporting and
recordkeeping requirements for small business entities.
5. Federal Rules Which Overlap, Duplicate or Conflict With These
Rules: None.
6. Description, Potential Impact, and Number of Small Entities
Involved: The rule changes proposed in this proceeding will affect all
small businesses regardless of whether each small business avails
itself of the favorable rule changes.
7. Any Significant Alternative Minimizing the Impact on Small
Entities Consistent with the Stated Objectives: This Further Notice of
Proposed Rule Making proposes certain mechanisms of preferential
treatment for small businesses, among other entities, to ensure
economic opportunity, such as favorable financing and bidding credits.
B. Paperwork Reduction Act
The proposals contained herein have been analyzed with respect to
the Paperwork Reduction Act of 1980, as amended, and found to impose no
new or modified information collection requirement on the public.
Implementation of any new or modified requirement will be subject to
approval by the Office of Management and Budget as prescribed by the
Paperwork Reduction Act of 1980, as amended.
C. Ex Parte Rules--Non-Restricted Proceeding
This is a non-restricted notice and comment rule making proceeding.
Ex parte presentations are permitted except during the Sunshine Agenda
period, provided they are disclosed as provided in Commission rules.
See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).
D. Ordering Clause
Authority for issuance of this Further Notice of Proposed Rule
Making is contained in sections 4(i), 303(r), and 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r) and
309(j).
Federal Communications Commission.
William F. Caton,
Acting Secretary.
List of Subjects
47 CFR Part 20
Commercial mobile radio services
47 CFR Part 24
Personal communications services
[[Page 34207]]
Proposed Rules
Parts 20 and 24 of Chapter I of Title 47 of the Code of Federal
Regulations is proposed to be amended as follows:
PART 20--COMMERCIAL MOBILE RADIO SERVICES
1. The authority citation for Part 20 continues to read as follows:
Authority: Secs. 4, 303, and 332, 48 Stat. 1066, 1082, as
amended; 47 U.S.C. 154, 3053 and 332, unless otherwise noted.
2. Section 20.6 is amended by revising paragraph (d)(2) to read as
follows:
Sec. 20.6 CMRS spectrum aggregation limit.
* * * * *
(d) * * *
(2) Partnership and other ownership interests and any stock
interest amounting to 20 percent or more of the equity, or outstanding
stock, or outstanding voting stock of a cellular licensee will be
attributable, except that ownership will not be attributed unless the
partnership and other ownership interests and any stock interest amount
to 40 percent or more of the equity, or outstanding stock, or
outstanding voting stock of a cellular licensee if the ownership
interest is held by a small business or a rural telephone company, as
these terms are defined in Sec. 1.2110 of this chapter or other
provisions of the Commission's rules.
* * * * *
PART 24--PERSONAL COMMUNICATIONS SERVICES
1. The authority citation for Part 24 continues to read as follows:
Authority: Secs. 4, 301, 302, 303, 309 and 332, 48 Stat. 1066,
1082, as amended; 47 U.S.C. Secs. 154, 301, 302, 303, 309 and 332,
unless otherwise noted.
2. Section 24.204 is amended by revising paragraph (d)(2)(ii) to
read as follows:
Sec. 24.204 Cellular eligibility.
* * * * *
(d) * * *
(2) * * *
(ii) Partnership and other ownership interests and any stock
interest amounting to 20 percent or more of the equity, or outstanding
stock, or outstanding voting stock of a cellular licensee will be
attributable, except that ownership will not be attributed unless the
partnership and other ownership interests and any stock interest amount
to 40 percent or more of the equity, or outstanding stock, or
outstanding voting stock of a cellular licensee if the ownership
interest is held by a small business or a rural telephone company, as
these terms are defined in Sec. 1.2110 of this chapter, or if the
ownership interest is held by an entity with a non-controlling equity
interest in a broadband PCS licensee or applicant that is a small
business as defined in Sec. 24.720.
* * * * *
3. Section 24.709 is amended by revising the heading and paragraphs
(a), (b)(6), (c)(1) introductory text, (c)(1)(ii)(B), (c)(2)
introductory text, (c)(2)(ii) and (e) to read as follows:
Sec. 24.709 Eligibility for licenses for frequency Block C.
(a) General Rule. (1) No application is acceptable for filing and
no license shall be granted for frequency block C, unless the
applicant, together with its affiliates and persons or entities that
hold interests in the applicant and their affiliates, have gross
revenues of less than $125 million in each of the last two years and
total assets of less than $500 million at the time the applicant's
short-form application (Form 175) is filed.
(2) The gross revenues and total assets of the applicant (or
licensee), and its affiliates, and (except as provided in paragraph (b)
of this section) of persons or entities that hold interests in the
applicant (or licensee), and their affiliates, 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 a licensee for frequency block C under this section.
(3) Any licensee awarded a license pursuant to this section (or
pursuant to Sec. 24.839(d)(2)) shall maintain its eligibility until at
least five years from the date of initial license grant, except that a
licensee's (or other attributable entity's) increased gross revenues or
increased total assets due to nonattributable equity investments (i.e.,
from sources whose gross revenues and total assets are not considered
under paragraph (b) of this section), debt financing, revenue from
operations or other investments, business development or expanded
service shall not be considered.
(b) * * *
(6) Control Group Minimum 50.1 Percent Equity Requirement. In order
to be eligible to exclude gross revenues and total assets of persons or
entities identified in paragraph (b)(4) of this section, an applicant
(or licensee) must comply with the following requirements:
(i) Except for an applicant (or licensee) whose sole control group
member is a preexisting entity, as provided in paragraph (b)(6)(ii) of
this section, at the time the applicant's short-form application (Form
175) is filed and until at least three years following the date of
initial license grant, the applicant's (or licensee's) control group
must own at least 50.1 percent of the applicant's (or licensee's) total
equity as follows:
(A) At least 30 percent of the applicant's (or licensee's) total
equity must be held by qualifying investors, either unconditionally or
in the form of options, exercisable at the option of the holder, at any
time and at any exercise price equal to or less than the market value
at the time the applicant files its short-form application (Form 175);
(B) Such qualifying investors must hold 50.1 percent of the voting
stock and all general partnership interests within the control group
and must have de facto control of the control group and of the
applicant;
(C) 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)(6)(i)(A) of this section, or by any of
the following entities which may not comply with Sec. 24.720(n)(1):
(1) Institutional investors, either unconditionally or in the form
of stock options;
(2) Noncontrolling existing investors in any preexisting entity
that is a member of the control group, either unconditionally or in the
form of stock options; or
(3) Individuals that are members of the applicant's (or licensee's)
management, either unconditionally or in the form of stock options.
(D) Following termination of the three-year period specified in
paragraph (b)(6)(i) of this section, qualifying investors must continue
to own at least 20 percent of the applicant's (or licensee's) total
equity, either unconditionally or in the form of stock options subject
to the restrictions in paragraph (b)(6)(i)(A) of this section. The
restrictions specified in paragraph (b)(6)(i)(C)(1) through (3) of this
section no longer apply to the remaining equity after termination of
such three-year period.
(ii) At the election of an applicant (or licensee) whose control
group's sole member is a preexisting entity, the 50.1 percent minimum
equity requirements set forth in paragraph (b)(6)(i) of this section
shall apply, except that only 20 percent of the applicant's (or
licensee's) total equity must be held by qualifying investors, and that
the remaining 30.1 percent of the applicant's (or licensee's) total
equity may be held by qualifying
[[Page 34208]]
investors, or noncontrolling existing investors in such control group
member or individuals that are members of the applicant's (or
licensee's) management. These restrictions on the identity of the
holder(s) of the remaining 30.1 percent of the licensee's total equity
no longer apply after termination of the three-year period specified in
paragraph (b)(96)(i) of this section.
* * * * *
(c) * * *
(1) Short-form Application. In addition to certifications and
disclosures required by Part 1, subpart Q of this Chapter and
Sec. 24.813, each applicant for a license for frequency Block C shall
certify on its short-form application (Form 175) that it is eligible to
bid on and obtain such license(s), and (if applicable) that it is
eligible for designated entity status pursuant to this section and
Sec. 24.720, and shall append the following information as an exhibit
to its Form 175:
* * * * *
(ii) * * *
(B) The citizenship and the gender or minority group classification
for each member of the applicant's control group if the applicant is a
business owned by members of minority groups and/or women;
* * * * *
(2) Long-form Application. In addition to the requirements in
subpart I of this part and other applicable rules (e.g.,
Secs. 24.204(f), 20.6(e), and 20.9(b)), each applicant submitting a
long-form application for a license(s) for frequency block C shall, in
an exhibit to its long-form application:
* * * * *
(ii) List and summarize all agreements or other instruments (with
appropriate reference to specific provisions in the text of such
agreements and instruments) that support the applicants's eligibility
for a license(s) for frequency Block C and its eligibility under
Secs. 24.711, 24.712 and 24.720, including the establishment of de
facto and de jure control; such agreements and instruments include
articles of incorporation and bylaws, shareholder agreements, voting or
other trust agreements, partnership agreements, management agreements,
joint marketing agreements, franchise agreements, and any other
relevant agreements (including letters of intent), oral or written; and
* * * * *
(e) Definitions. The terms affiliate, business owned by members of
minority groups and women, consortium of small businesses, control
group, existing investor, gross revenues, institutional investor,
members of minority groups, nonattributable equity, preexisting equity,
publicly traded corporation with widely dispersed voting power,
qualifying investor, small business and total assets used in this
section are defined in Sec. 24.720.
4. Section 24.711 is amended by revising the section heading and
the heading of paragraph (a), and paragraphs (a)(1), (b) introductory
text and (b)(3) to read as follows:
Sec. 24.711 Upfront payments, down payments and installment payments
for licenses for frequency Block C.
(a) Upfront Payments and Down Payments. (1) Each eligible bidder
for licenses on frequency Block C subject to auction shall pay an
upfront payment of $0.015 per MHz per pop for the maximum number of
licenses (in terms of MHz-pops) on which it intends to bid pursuant to
Sec. 1.2106 of this chapter and procedures specified by Public Notice.
* * * * *
(b) Installment Payments. Each eligible licensee of frequency Block
C may pay the remaining 90 percent of the net auction price for the
license in installment payments pursuant to Sec. 1.2110(e) of this
Chapter and under the following terms:
* * * * *
(3) For an eligible licensee that qualifies as a small business or
as a consortium of small businesses, interest shall be imposed based on
the rate for ten-year U.S. Treasury obligations applicable on the date
the license is granted; payments shall include interest only for the
first six years and payments of interest and principal amortized over
the remaining four years of the license term.
(c) Unjust Enrichment.
* * * * *
5. Section 24.712 is amended by revising the section heading and
paragraph (a), removing paragraphs (b) and (c), and redesignating
paragraph (d) as paragraph (b) to read as follows:
Sec. 24.712 Bidding credits for licenses for frequency Block C.
(a) A wining bidder that qualifies as a small business or a
consortium of small businesses may use a bidding credit of twenty-five
percent to lower the cost of its winning bid.
* * * * *
Sec. 24.713 [Removed and reserved]
6. Section 24.713 is removed and reserved.
7. A new Sec. 24.715 is added to Subpart H to read as follows:
Sec. 24.715 Eligibility for licenses for frequency Block F.
(a) General Rule.
(1) No application is acceptable for filing and no license shall be
granted for frequency block F, unless the applicant, together with its
affiliates and persons or entities that hold interests in the applicant
and their affiliates, have gross revenues of less than $125 million in
each of the last two years and total assets of less than $500 million
at the time the applicant's short-form application (Form 175) is filed.
(2) The gross revenues and total assets of the applicant (or
licensee), and its affiliates, and (except as provided in paragraph (b)
of this section) of persons or entities that hold interests in the
applicant (or licensee), and their affiliates, 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 a license for frequency block F under this section.
(3) Any licensee awarded a license pursuant to this section (or
pursuant to Sec. 24.839(d)(2)) shall maintain its eligibility until at
least five years from the date of initial license grant, except that a
licensee's (or other attributable entity's) increased gross revenues or
increased total assets due to nonattributable equity investments (i.e.,
from sources whose gross revenues, and total assets are not considered
under paragraph (b) of this section), debt financing, revenue from
operations or other investments, business development or expanded
service shall not be considered.
(b) Exceptions to General Rule--(1) Small Business Consortia. Where
an applicant (or licensee) is a consortium of small businesses, the
gross revenues and total assets of each small business shall not be
aggregated.
(2) Publicly-Traded Corporations. Where an applicant (or licensee)
is a publicly traded corporation with widely dispersed voting power,
the gross revenues and total assets of a person or entity that holds an
interests in the applicant (or licensee), and its affiliates, shall not
be considered.
(3) 25 Percent Equity Exception. The gross revenues and total
assets of a person or entity that holds an interest in the applicant
(or licensee), and its affiliates, shall not be considered so long as:
(i) Such person or entity, together with its affiliates, holds only
nonattributable equity equaling no more than 25 percent of the
applicant's (or licensee's) total equity;
[[Page 34209]]
(ii) Except as provided in paragraph (b)(5) of this section, such
person or entity is not a member of the applicant's (or licensee's)
control group; and
(iii) The applicant (or licensee) has a control group that complies
with the minimum equity requirements of paragraph (b)(5) of this
section, and, if the applicant (or licensee) is a corporation, owns at
least 50.1 percent of the applicant's (or licensee's) voting interests,
and, if the applicant (or licensee) is a partnership, holds all of its
general partnership interests.
(4) 49.9 Percent Equity Exception. The gross revenues and total
assets of a person or entity that holds an interest in the applicant
(or licensee), and its affiliates, shall not be considered so long as:
(i) Such person or entity, together with its affiliates, holds only
nonattributable equity equalling no more than 49.9 percent of the
applicant's (or licensee's) total equity;
(ii) Except as provided in paragraph (b)(6) of this section, such
person or entity is not a member of the applicant's (or licensee's)
control group; and
(iii) The applicant (or licensee) has a control group that complies
with the minimum equity requirements of paragraph (b)(6) of this
section and, if the applicant (or licensee) is a corporation, owns at
least 50.1 percent of the applicant's (or licensee's) voting interests,
and, if the applicant (or licensee) is a partnership, holds all of its
general partnership interests.
(5) Control Group Minimum 25 Percent Equity Requirement. In order
to be eligible to exclude gross revenues and total assets of persons or
entities identified in paragraph (b)(3) of this section, an applicant
(or licensee) must comply with the following requirements:
(i) Except for an applicant (or licensee) whose sole control group
member is a preexisting entity, as provided in paragraph (b)(5)(ii) of
this section, at the time the applicant's short-form application (Form
175) is filed and until at least three years following the date of
initial license grant, the applicant's (or licensee's) control group
must own at least 25 percent of the applicant's (or licensee's) total
equity as follows:
(A) At least 15 percent of the applicant's (or licensee's) total
equity must be held by qualifying investors, either unconditionally or
in the form of options exercisable, at the option of the holder, at any
time and at any exercise price equal to or less than the market value
at the time the applicant files its short-form application (Form 175);
(B) Such qualifying investors must hold 50.1 percent of the voting
stock and all general partnership interests within the control group,
and must have de facto control group and of the applicant;
(C) The remaining 10 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)(5)(i)(A) of this section, or by any of
the following entities, which may not comply with section 24.720(n)(1):
(1) Institutional investors, either unconditionally or in the form
of stock options;
(2) Noncontrolling existing investors in any preeexisting entity
that is a member of the control group, either unconditionally or in the
form of stock options; or
(3) Individuals that are members of the applicant's (or licensee's)
management, either unconditionally or in the form of stock options.
(D) Following termination of the three-year period specified in
paragraph (b)(5)(i) of this section, qualifying investors must continue
to own at least 10 percent of the applicant's (or licensee's) total
equity, either unconditionally or in the form of stock options subject
to the restrictions in paragraph (b)(5)(i)(A) of this section. The
restrictions specified in paragraph (b)(5)(i)(C)(1) through (3) of this
section no longer apply to the remaining equity after termination of
such three-year period.
(ii) At the election of an applicant (or licensee) whose control
group's sole member is a preexisting entity, the 25 percent minimum
equity requirements set forth in paragraph (b)(5)(i) of this section
shall apply, except that only 10 percent of the applicant's (or
licensee's) total equity must be held by qualifying investors and that
the remaining 15 percent of the applicant's (or licensee's) total
equity may be held by qualifying investors or noncontrolling existing
investors in such control group member or individuals that are members
of the applicant's (or licensee's) management. These restrictions on
the identity of the holder(s) of the remaining 15 percent of the
licensee's total equity no longer apply after termination of the three-
year period specified in paragraph (b)(5)(i) of this section.
(6) Control Group Minimum 50.1 Percent Equity Requirement. In order
to be eligible to exclude gross revenues and total assets of persons or
entities identified in paragraph (b)(4) of this section, an applicant
(or licensee) must comply with the following requirements:
(i) Except for an applicant (or licensee) whose sole control group
member is a preexisting entity, as provided in paragraph (b)(6)(ii) of
this section, at the time the applicant's short-form application (Form
175) is filed and until at least three years following the date of
initial license grant, the applicant's (or licensee's) control group
must own at least 50.1 percent of the applicant's (or licensee's) total
equity as follows:
(A) at least 30 percent of the applicant's (or licensee's) total
equity must be held by qualifying minority and/or women investors,
either unconditionally or in the form of options exercisable, at the
option of the holder, at any time and at any exercise price equal to or
less than the market value at the time the applicant files its short-
form application (Form 175);
(B) Such qualifying minority and/or women investors must hold 50.1
percent of the voting stock and all general partnership interests
within the control group and must have de facto control of the control
group and of the applicant;
(C) 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)(5)(i)(A) of this section, or by any of
the following entities, which may not comply with Sec. 24.720(n)(1):
(1) Institutional investors, either unconditionally or in the form
of stock options;
(2) Noncontrolling existing investors in any preexisting entity
that is a member of the control group, either unconditionally or in the
form of stock options; or
(3) Individuals that are members of the applicant's (or licensee's)
management, either unconditionally or in the form of stock options.
(D) Following termination of the three-year period specified in
paragraph (b)(6)(i) of this section, qualifying minority and/or women
investors must continue to own at least 20 percent of the applicant's
(or licensee's) total equity, either unconditionally or in the form of
stock options subject to the restrictions in paragraph (b)(6)(i)(A) of
this section. The restrictions specified in paragraph (b)(6)(i)(C)(1)
through (3) of this section no longer apply to the remaining equity
after termination of such three-year period.
(ii) At the election of an applicant (or licensee) whose control
group's sole member is a preexisting entity, the 50.1 percent minimum
equity requirements
[[Page 34210]]
set forth in paragraph (b)(6)(i) of this section shall apply, except
that only 20 percent of the applicant's (or licensee's) total equity
must be held by qualifying minority and/or women investors, and that
the remaining 30.1 percent of the applicant's (or licensee's) total
equity may be held by qualifying minority and/or women investors, or
noncontrolling existing investors in such control group member or
individuals that are members of the applicant's (or licensee's)
management. These restrictions on the identity of the holder(s) of the
remaining 30.1 percent of the licensee's total equity no longer apply
after termination of the three-year period specified in paragraph
(b)(6)(i) of this section.
(7) Calculation of Certain Interests. Except as provided in
paragraphs (b)(5) and (b)(6) of this section, ownership interests shall
be calculated on a fully diluted basis; all agreements such as
warrants, stock options and convertible debentures will generally be
treated as if the rights thereunder already have been fully exercised,
except that such agreements may not be used to appear to terminate or
divest ownership interests before they actually do so, in order to
comply with the nonattributable equity requirements in paragraphs
(b)(3)(i) and (b)(4)(i) of this section.
(8) Aggregation of Affiliate Interests. Persons or entities that
hold interest in an applicant (or licensee) that are affiliates of each
other or have an identify of interests identified in Sec. 24.720(l)(3)
will be treated as though they were one person or entity and their
ownership interests aggregated for purposes of determining an
applicant's (or licensee's) compliance with the nonattributable equity
requirements in paragraphs (b)(3)(i) and (b)(4)(i) of this section.
Example 1 of paragraph (b)(8). ABC Corp. is owned by
individuals, A, B, and C, each having an equal one-third voting
interest in ABC Corp. A and B together, with two-thirds of the stock
have the power to control ABC Corp. and have an identity of
interest. If A & B invest in DE Corp., a broadband PCS applicant for
block C, A and B's separate interests in DE Corp. must be aggregated
because A and B are to be treated as one person.
Example 2 for paragraph (b)(8). ABC Corp. has subsidiary BC
Corp., of which it holds a controlling 51 percent of the stock. If
ABC Corp. and BC Corp., both invest in DE Corp., their separate
interests in DE Corp. must be aggregated because ABC Corp. and BC
Corp. are affiliates of each other.
(c) Short-Form and Long-Form Applications: Certifications and
Disclosure--(1) Short-form Application. In addition to certifications
and disclosures required by Part 1. subpart Q of this Chapter and
Sec. 24.813, each applicant for a license for frequency Block F shall
certify on its short-form application (Form 175) that it is eligible to
bid on and obtain such license(s), and (if applicable) that it is
eligible for designated entity status pursuant to this section and
Sec. 24.720, and shall append the following information as an exhibit
to its Form 175:
(i) For an applicant that is a publicly traded corporation with
widely disbursed voting power:
(A) 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. 24.72(m);
(B) The identify of each affiliate of the applicant if not
disclosed pursuant to Sec. 24.813; and
(C) The applicant's gross revenues and total assets, computed in
accordance with paragraphs (a) and (b) of this section.
(ii) For all other applicants:
(A) The identity of each member of the applicant's control group,
regardless of the size of each member's total interest in the
applicant, and the percentage and type of interest held;
(B) The citizenship and the gender or minority group classification
for each member of the applicant's control group if the applicant is
claiming status as a business owned by members of minority groups and/
or women;
(C) The status of each conrtrol group member that is an
institutional investor, an existing investor, and/or a member of the
applicant's management;
(D) The identify 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)(C) of this section if not disclosed
pursuant to Sec. 24.813.
(E) A certification that the applicant's sole control group is a
preexisting entity, if the applicant makes the election in either
paragraph (b)(5)(ii) or (b)(6)(ii) of this section; and
(F) The applicant's gross revenues and total assets, computed in
accordance with paragraphs (a) and (b) of this section.
(iii) for each applicant claiming status as a small business
consortium, the information specified in paragraph (c)(1)(ii) of this
section, for each member of such consortium.
(2) Long-form Application. In addition to the requirements in
subpart I of this part and other applicable rules (e.g. Sec. 24.204(f),
20.6(e), 20.9(b)), each applicant submitting a long-form application
for license(s) for frequency Block F shall, in an exhibit to its long-
form application.
(i) Disclose separately and in the aggregate the gross revenues and
total assets, computed in accordance with paragraphs (a) and (b) of
this section, for each of the following: the applicant; the applicant's
affiliates, the applicant's control group members; the applicant's
attributable investors; and affiliates of its attributable investors;
(ii) List and summarize all agreements or other instruments (with
appropriate references to specific provisions in the text of such
agreements and instruments) that support the applicant's eligibility
for a license(s) for frequency Block F and its eligibility under
Secs. 24.711 through 24.270, including the establishment of de facto
and de jure control; such agreements and instruments include articles
of incorporation and bylaws, shareholder agreements, voting or other
trust agreements, partnership agreements, management agreements, joint
marketing agreements, franchise agreements, and any other relevant
agreements (including letters of intent), oral or written; and
(iii) List and summarize any investor protection agreements and
identify specifically any such provisions in those agreements
identified pursuant to paragraph (c)(2)(ii) of this section, 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.
(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 or under the definitions of small business and/or
business owned by members of minority groups and/or women. 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) Audits. (1) Applicants and licensees claiming eligibility under
this section or Secs. 24.711 through 24.720 shall be subject to audits
by the Commission, using in-house and contract resources. Selection for
audit
[[Page 34211]]
may be random, on information, or on the basis of other factors.
(2) Consent to such audits is part of the certification included in
the short-form application (Form 175). Such consent shall include
consent to the audit of the applicant's or licensee's books, documents
and other material (including accounting procedures and practices)
regardless of form or type, sufficient to confirm that such applicant's
or licensee's representations are, and remain, accurate. Such consent
shall include inspection at all reasonable times of the facilities, or
parts thereof, engaged in providing and transacting business, or
keeping records regarding licensed broadband PCS service and shall also
include consent to the interview of principals, employees, customers
and suppliers of the applicant or licensee.
(e) Definitions. The terms affiliate, business owned by members of
minority groups and women, consortium of small businesses, control
group, existing investor, gross revenues, institutional investor,
members of minority groups, nonattributable equity, preexisting entity,
publicly traded corporation with widely dispersed voting power,
qualifying investor, qualifying minority and/or woman investor, small
business and total assets used in this section are defined in
Sec. 24.720.
8. A new Sec. 24,716 is added to Subpart H to read as follows:
Sec. 24.716 Upfront payments, down payments, and installment payments
for licenses for frequency Block F.
(a) Upfront Payments and Down Payments. (1) Each eligible bidder
for licenses on frequency Block F subject to auction shall pay an
upfront payment of $0.015 per MHz per pop for the maximum number of
licenses (in terms of MHz-pops) on which it intends to bid pursuant to
Sec. 1.2106 of this chapter and procedures specified by public Notice.
(2) Each winning bidder shall make a down payment equal to ten
percent of its winning bid (less applicable bidding credits); a winning
bidder shall bring its total amount on deposit with the Commission
(including upfront payment) to five percent of its net winning bid
within five business days after the auction closes, and the remainder
of the down payment (five percent) shall be paid within five business
days after the application required by Sec. 24.809(b) is granted.
(b) Installment Payments. Each eligible licensee of frequency Block
F may pay the remaining 90 percent of the net auction price for the
license in installment payments pursuant to Sec. 1.2110(e) of this
chapter and under the following terms:
(1) For an eligible licensee with gross revenues exceeding $75
million (calculated in accordance with Sec. 24.709(a)92) and (b)) in
each of the two preceding years (calculated in accordance with
34.720(f)), interest shall be imposed based on the rate for ten-year
U.S. Treasury obligations applicable on the date the license is
granted, plus 3.5 percent; payments shall include both principal and
interest amortized over the term of the license.
``(2) For an eligible licensee with gross revenues not exceeding
$75 million (calculated in accordance with Sec. 24.709(a)(2) and (b))
in each of the two preceding years, interest shall be imposed based on
the rate for ten-year U.S. Treasury obligations applicable on the date
the license is granted, plus 2.5 percent; payments shall include
interest only for the first year and payments of interest and principal
amortized over the remaining nine years of the license term.
``(3) For an eligible licensee that qualifies as a Small business
or as a consortium of small businesses, interest shall be imposed based
on the rate for ten-year U.S. Treasury obligations applicable on the
date the license is granted, plus 2.5 percent; payments shall include
interest only for the first two years and payments of interest and
principal amortized over the remaining eight years of the license term.
``(4) For an eligible licensee that qualifies as a business owned
by members of minority groups and/or women, interest shall be imposed
based on the rate for ten-year U.S. Treasury obligations applicable on
the date the license is granted; payments shall include interest only
for the first three years and payments of interest and principal
amortized over the remaining seven years of the license term.
``(5) For an eligible licensee that qualifies as a small business
owned by members of minority groups and/or women or as a consortium of
small business owned by members of minority groups and/or women,
interest shall be imposed based on the rate for ten-year U.S. Treasury
obligations applicable on the date the license is granted; payments
shall include interest only for the first six years and payments of
interest and principal amortized over the remaining four years of the
license term.
(c) Unjust Enrichment. (1) If a licensee that utilizes installment
financing under this section seeks to assign or transfer control of its
license to an entity not meeting the eligibility standards for
installment payments, the licensee must make full payment of the
remaining unpaid principal and any unpaid interest accrued through the
date of assignment or transfer as a condition of approval.
``(2) If a licensee that utilizes installment financing under this
section seeks to make any change in ownership structure that would
result in the licensee losing eligibility for installment payments, the
licensee shall first seek Commission approval and must make full
payment of the remaining unpaid principal and any unpaid interest
accrued through the date of such change as a condition of approval. A
licensee's (or other attributable entity's) increased gross revenues or
increased total assets due to nonattributable equity investments (i.e.,
from sources whose gross revenues and total assets are not considered
under Sec. 24.709(b)), debt financing, revenue from operations or other
investments, business development or expanded service shall not be
considered to result in the licensee losing eligibility for installment
payments.
``(3) If a licensee seeks to make any change in ownership that
would result in the licensee qualifying for a less favorable
installment plan under this section, the licensee shall seek Commission
approval and must adjust its payment plan to reflect its new
eligibility status. A licensee may not switch its payment plan to a
more favorable plan.
9. A new Sec. 24.717 is added to Subpart H to read as follows:
Sec. 24.717 Bidding credits for licenses for frequency Block F.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses may use a bidding credit of ten percent
to lower the cost of its winning bid.
(b) A winning bidder that qualifies as a business owned by members
of minority groups and/or women may use a bidding credit of fifteen
percent to lower the cost of its winning bid.
(c) A winning bidder that qualifies as a small business owned by
members of minority groups and/or women or a consortium of small
business owned by members of minority groups and/or women may use a
bidding credit of twenty-five percent to lower the cost of its winning
bid.
(d) Unjust Enrichment. (1) If during the term of the initial
license grant (see Sec. 24.15), a licensee that utilizes a bidding
credit under this section seeks to assign or transfer control of its
license to an entity not meeting the eligibility standards for bidding
credits or seeks to make any other change in ownership that would
result in the licensee no
[[Page 34212]]
longer qualifying for bidding credits under this section, the licensee
must seek Commission approval and reimburse the government for the
amount of the bidding credit as a condition of the approval of such
assignment, transfer or other ownership change.
(2) If during the term of the initial license grant (see
Sec. 24.15), a licensee that utilizes a bidding credit under this
section seeks to assign or transfer control of its license to an entity
meeting the eligibility standards for lower bidding credits or seeks to
make any other change in ownership that would result in the licensee
qualifying for a lower bidding credit under this section, the licensee
must seek Commission approval and reimburse the government for the
difference between the amount of the bidding credit obtained by the
licensee and the bidding credit for which the assignee, transferee or
licensee is eligible under this section as a condition of the approval
of such assignment, transfer or other ownership change.
10. Section 24.720 is amended by revising paragraphs (l)(11)(ii)
and (n)(3) and adding paragraph (n)(4) to read as follows:
Sec. 24.720 Definitions.
* * * * *
(l) * * *
(11) * * *
(ii) For purposes of Sec. 24.713(a)(2) and paragraph (b)(2) of this
section, an entity controlled by members of minority groups is not
considered an affiliate of an applicant (or licensee) that qualify as a
business owned by members of minority groups and/or women if
affiliation would arise solely from control of such entity by members
of the applicant's (or licensee's) control group who are members of
minority groups. For purposes of this paragraph (l)(11)(ii), the term
minority-controlled entity shall mean, in the case of a corporation, an
entity in which 50.1 percent of the voting interests is owned by
members of minority groups or, in the case of a partnership, all of the
general partners are members of minority groups or entities controlled
by members of minority groups; and, in all cases, one in which members
of minority groups have both de jure and de facto control of the
entity.
* * * * *
(n) * * *
* * * * *
(3) For purposes of assessing compliance with the minimum equity
requirements of Sec. 24.709(b) (5) and (6), 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.
(4) For purposes of assessing compliance with the minimum equity
requirements of Sec. 24.713(b) (5) and (6), where such equity interests
are not held directly in the applicant, interests held by qualifying
investors and qualifying minority and/or women investors shall be
determined by successive multiplication of the ownership percentages
for each link in the vertical ownership chain.
[FR Doc. 95-16130 Filed 6-29-95; 8:45 am]
BILLING CODE 6712-01-M
