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

FEDERAL COMMUNICATIONS COMMISSION

Public Information Collection Requirement Submitted to Office of

Management and Budget for Review

September 27, 1994.

The Federal Communications Commission has submitted the following

information collection request to OMB for review and clearance under

the Paperwork Reduction Act of 1980, 44 U.S.C. Section 3507. Persons

wishing to comment on this information collection should contact

Timothy Fain, Office of Management and Budget, Room 10102, New

Executive Office Building, Washington, D.C. 20503, (202) 395-3561. For

further information, contact Judy Boley, Federal Communications

Commission, (202) 418-0214.

Please note: The Commission has requested expedited review of this

collection by September 30, 1994, under the provisions of 5 CFR

1320.18.

Title: Implementation of Section 309(j) of the Communications Act--

Competitive Bidding, Second Report and Order and Second Memorandum

Opinion and Order, PP Docket No. 93-253.

OMB Control Number: 3060-0600.

Action: Revised Collections.

Respondents: Individuals, State or local governments, Non-profit

institutions, Business or other for-profit, including small businesses.

Frequency of response: On occasion and recordkeeping requirements

Estimated Annual Burden:

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

Estimated

No. of average Estimated

Section/forms Respondents hrs per annual

response burden

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

Section 1.2105....................... 13,400 .50 6,700

Section 1.2107....................... 10,000 1 10,000

Section 1.2108....................... 2,350 20 47,000

Section 1.2110....................... 1,000 2 2,000

Section 1.2110*...................... 1,000 1 1,000

Section 1.2111....................... 100 .50 50

Microfiche........................... 13,400 2 26,800

FCC Form 175......................... 13,400 .50 6,700

FCC Form 175-S....................... 6,400 .25 675

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

*Recordkeeping requirement.

Total Annual Burden: 100,925 Hours.

Needs and Uses: In the Second Memorandum Opinion and Order the

Commission modified and supplemented several of its generic rules

governing the auctioning of all licenses subject to competitive

bidding. Applicants are required to file certain information so that

the Commission can determine whether the applicants are legally,

technically and financially qualified to be licensed and also whether

applicants are entitled to receive certain benefits. Affected public

are any member of the public who wants to become or remain a licensee.

The foregoing estimates include the time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and completing and reviewing the

collection of information. Send comments regarding the burden estimates

or any other aspect of the collection of information, including

suggestions for reducing the burden, to the Federal Communications

Commission, Records Management Branch, Paperwork Reduction Project,

Washington, D.C. 20554 and to the Office of Management and Budget

Paperwork Reduction Project, Washington, D.C. 20503.

Federal Communications Commission.

Williams F. Caton,

Acting Secretary.

Subpart Q--Competitive Bidding Proceedings

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

General Procedures

Section 1.2101 Purpose

The provisions of this subpart implement Section 309(j) of the

Communications Act of 1934, as added by the Omnibus Budget

Reconciliation Act of 1993 (P.L. 103-66), authorizing the Commission

to employ competitive bidding procedures to choose from among two or

more mutually exclusive applications for certain initial licenses.

Section 1.2102 Eligibility of Applications for competitive Bidding

(a) Mutually exclusive initial applications in the following

services or classes of services are subject to competitive bidding:

(1) Interactive Video Data Service (see 47 CFR Part 95, Subpart

F). This subsection does not apply to applications which were filed

prior to July 26, 1993;

(2) Marine Public Coast Stations (see 47 CFR Part 80, Subpart

J);

(3) Multipoint Distribution Service and Multichannel Multipoint

Distribution Service (see 47 CFR Part 21, Subpart K). This

subsection does not apply to applications which were filed prior to

July 26, 1993;

(4) Exclusive Private Carrier Paging above 900 MHz (see 47 CFR

Part 90, Subpart P and the Private Carrier Paging Exclusivity Report

and Order, 8 FCC Rcd 8318, 58 FR 62289 (Nov. 26, 1993));

(5) Public Mobile Services (see 47 CFR Part 22), except in the

800 MHz Air-Ground Radiotelephone Service, and in the Rural Radio

Service. This subsection does not apply to applications in the

cellular radio service, such as cellular unserved area applications,

that were filed prior to July 26, 1993;

(6) Specialized Mobile Radio Service (SMR) (see 47 CFR Part 90,

Subpart S) including applications based on finder's preferences for

frequencies allocated to the SMR service (see 47 CFR Part 90.173);

(7) Personal Communications Services (PCS) (see 47 CFR Part 24);

and

Note: To determine the rules that apply to competitive bidding

in the foregoing services, specific service rules should be

consulted.

(b) The following types of license applications are not subject

to competitive bidding procedures;

(1) Applications for renewal of licenses;

(2) Applications for modification of license; provided, however,

that the Commission may determine that applications for modification

that are mutually exclusive with other applications should be

subject to competitive bidding;

(3) Applications for subsidiary communications services. A

``subsidiary communications service'' is a class of service where

the signal for that service is indivisible from that of the main

channel signal and that main channel signal is exempt from

competitive bidding under other provisions of these rules. See,

e.g., Sec. 1.2102(c) (exempting broadcast services). Examples of

such subsidiary communications services are those transmitted on

subcarriers within the FM baseband signal (see 47 CFR Sec. 73.295),

and signals transmitted within the Vertical Blanking Interval of a

broadcast television signal; and

(4) Applications for frequencies used as an intermediate link or

links in the provision of a continuous, end-to-end service where no

service is provided directly to subscribers over the frequencies.

Examples of such intermediate links are (a) point-to-point microwave

facilities used to connect a cellular radio telephone base station

with a cellular radio telephone mobile telephone switching office

and (b) point-to-point microwave facilities used as part of the

service offering in the provision of telephone exchange or

interexchange service.

(c) Applications in the following services or classes of

services are not subject to competitive bidding:

(1) Alaska-Private Fixed Stations (see 47 CFR Part 80, Subpart

O);

(2) Broadcast radio (AM and FM) and broadcast television (VHF,

UHF, LPTV) under 47 CFR Part 73;

(3) Broadcast Auxiliary and Cable Television Relay Services (see

47 CFR Part 74, Subparts D, E, F, G, H and L and Part 73, Subpart

B);

(4) Instructional Television Fixed Service (see 47 CFR Part 74,

Subpart I);

(5) Maritime Support Stations (see 47 CFR Part 80, Subpart N);

(6) Marine Operational Fixed Stations (see 47 CFR Part 80,

Subpart L);

(7) Marine Radiodetermination Stations (see 47 CFR Part 80,

Subpart M);

(8) Personal Radio Services (see 47 CFR Part 95), except

applications filed after July 26, 1993, in the Interactive Video

Data Service (see 47 CFR Part 95, Subpart F);

(9) Public Safety, Industrial/Land Transportation, General and

Business Radio categories above 800 MHz, including finder's

preference requests for frequencies not allocated to the SMR service

(see 47 CFR Section 90.173), and including until further notice of

the Commission, the Automated Vehicle Monitoring Service (see 47 CFR

Sec. 90.239);

(10) Private Land Mobile Radio Services between 470-512 Mhz (see

47 CFR Part 90, Subparts B-F), including those based on finder's

preferences, see 47 CFR Section 90.173;

(11) Private Land Mobile Radio Services below 470 MHz (see 47

CFR Part 90, Subparts B-F) except in the 220 MHz band (see 47 CFR

Part 90, Subpart T), including those based on finder's preferences

(see 47 CFR Section 90.173); and

(12) Private Operational Fixed Services (see 47 CFR Part 94).

Section 1.2103 Competitive Bidding Design Options

(a) The Commission will select the competitive bidding design(s)

to be used in auctioning particular licenses or classes of licenses

on a service-specific basis. The choice of competitive bidding

design will generally be made pursuant to the criteria set forth in

the Second Report and Order in PP Docket No. 93-253, FCC 94-61, 59

FR 22980 (May 4, 1994), adopted March 8, 1994, but the Commission

may design and test alternative methodologies. The Commission will

choose from one or more of the following types of auction designs

for services or classes of services subject to competitive bidding:

(1) Single round sealed bid auctions (either sequential or

simultaneous)

(2) Sequential oral auctions

(3) Simultaneous multiple round auctions

(b) The Commission may use combinatorial bidding, which would

allow bidders to submit all or nothing bids on combinations of

licenses, in addition to bids on individual licenses. The Commission

may require that to be declared the high bid, a combinatorial bid

must exceed the sum of the individual bids by a specified amount.

Combinatorial bidding may be used with any type of auction.

(c) The Commission may use single combined auctions, which

combine bidding for two or more substitutable licenses and award

licenses to the highest bidders until the available licenses are

exhausted. This technique may be used in conjunction with any type

of auction.

Section 1.2104 Competitive Bidding Mechanisms

(a) Sequencing. The Commission will establish the sequence in

which multiple licenses will be auctioned.

(b) Grouping. In the event the Commission uses either a

simultaneous multiple round competitive bidding design or

combinatorial bidding, the Commission will determine which licenses

will be auctioned simultaneously or in combination.

(c) Reservation Price. The Commission may establish a

reservation price, either disclosed or undisclosed, below which a

license subject to auction will not be awarded.

(d) Minimum Bid Increments. The Commission may, by announcement

before or during an auction, require minimum bid increments in

dollar or percentage terms. The Commission may also establish

suggested minimum opening bids on a service-specific basis.

(e) Stopping Rules. The Commission may establish stopping rules

before or during multiple round auctions in order to terminate the

auctions within a reasonable time.

(f) Activity Rules. The Commission may establish activity rules

which require a minimum amount of bidding activity.

(g) Withdrawal, Default and Disqualification Penalties. As

specified below, when the Commission conducts a simultaneous

multiple round auction pursuant to Sec. 1.2103, the Commission will

impose penalties on bidders who withdraw high bids during the course

of an auction, or who default on payments due after an auction

closes or who are disqualified.

(1) Bid withdrawal prior to close of auction. A bidder who

withdraws a high bid during the course of an auction will be subject

to a penalty equal to the difference between the amount bid and the

amount of the winning bid the next time the license is offered by

the Commission. No withdrawal penalty would be assessed if the

subsequent winning bid exceeds the withdrawn bid. This penalty

amount will be deducted from any upfront payments or down payments

that the withdrawing bidder has deposited with the Commission.

(2) Default or disqualification after close of auction. If a

high bidder defaults or is disqualified after the close of such an

auction, the defaulting bidder will be subject to the penalty in

subsection (1) plus an additional penalty equal to 3 percent of the

subsequent winning bid. If the subsequent winning bid exceeds the

defaulting bidder's bid amount, the 3 percent penalty will be

calculated based on the defaulting bidder's bid amount. These

amounts will be deducted from any upfront payments or down payments

that the defaulting or disqualified bidder has deposited with the

Commission.

When the Commission conducts single round sealed bid auctions or

sequential oral auctions, the Commission may modify the penalties to

be paid in the event of bid withdrawal, default or disqualification;

provided, however, that such penalties shall not exceed the

penalties specified above.

(h) The Commission will generally release information concerning

the identities of bidders before each auction but may choose, on an

auction-by-auction basis, to withhold the identity of the bidders

associated with bidder identification numbers.

(i) The Commission may delay, suspend, or cancel an auction in

the event of a natural disaster, technical obstacle, evidence of

security breach, unlawful bidding activity, administrative

necessity, or for any other reason that affects the fair and

efficient conduct of the competitive bidding. The Commission also

has the authority, at its sole discretion, to resume the competitive

bidding starting from the beginning of the current or some previous

round or cancel the competitive bidding in its entirety.

Section 1.2105 Bidding Application and Certification Procedures;

Prohibition of Collusion

(a) Submission of Short Form Application (FCC Form 175). In

order to be eligible to bid, an applicant must timely submit a

short-form application (FCC Form 175), together with any appropriate

filing fee set forth by Public Notice. Unless otherwise provided by

Public Notice, the Form 175 need not be accompanied by an upfront

payment (see Section 1.2106 of this part).

(1) All Form 175s will be due:

(i) On the date(s) specified by Public Notice; or

(ii) In the case of application filing dates which occur

automatically by operation of law (see, e.g., 47 CFR Section

22.902), on a date specified by Public Notice after the Commission

has reviewed the applications that have been filed on those dates

and determined that mutual exclusivity exists.

(2) The Form 175 must contain the following information:

(i) Identification of each license on which the applicant wishes

to bid;

(ii) The applicant's name, if the applicant is an individual. If

the applicant is a corporation, then the short-form application will

require the name and address of the corporate office and the name

and title of an officer or director. If the applicant is a

partnership, then the application will require the name, citizenship

and address of all partners, and, if a partner is not a natural

person, then the name and title of a responsible person should be

included as well. If the applicant is a trust, then the name and

address of the trustee will be required. If the applicant is none of

the above, then it must identify and describe itself and its

principals or other responsible persons;

(iii) The identity of the person(s) authorized to make or

withdraw a bid;

(iv) If the applicant applies as a designated entity pursuant to

Sec. 1.2110 of these rules, a statement to that effect and a

declaration, under penalty of perjury, that the applicant is

qualified as a designated entity under Sec. 1.2110 of the

Commission's Rules;

(v) Certification that the applicant is legally, technically,

financially and otherwise qualified pursuant to Section 308(b) of

the Communications Act of 1934, as amended. The Commission will

accept applications certifying that a request for waiver or other

relief from the requirements of Section 310 is pending;

(vi) Certification that the applicant is in compliance with the

foreign ownership provisions of Section 310 of the Communications

Act of 1934, as amended;

(vii) Certification that the applicant is and will, during the

pendency of its application(s), remain in compliance with any

service-specific qualifications applicable to the licenses on which

the applicant intends to bid including, but not limited to,

financial qualifications. The Commission may require certification

in certain services that the applicant will, following grant of a

license, come into compliance with certain service-specific rules,

including, but not limited to, ownership eligibility limitations;

(viii) An exhibit, certified as truthful under penalty of

perjury, identifying all parties with whom the applicant has entered

into partnerships, joint ventures, consortia or other agreements,

arrangements or understandings of any kind relating to the licenses

being auctioned, including any such agreements relating to the post-

auction market structure.

(ix) Certification under penalty of perjury that it has not

entered and will not enter into any explicit or implicit agreements,

arrangements or understandings of any kind with any parties other

than those identified pursuant to subsection (viii) regarding the

amount of their bids, bidding strategies or the particular licenses

on which they will or will not bid;

Note: The Commission may also request applicants to submit

additional information for informational purposes to aid in its

preparation of required reports to Congress.

(b) Modification and Dismissal of Form 175. (1) Any Form 175

that is not signed or otherwise does not contain all of the

certifications required pursuant to this section is unacceptable for

filing and cannot be corrected subsequent to any applicable filing

deadline. The application will be dismissed with prejudice and the

upfront payment, if paid, will be returned.

(2) The Commission will provide bidders a limited opportunity to

cure defects specified herein (except for failure to sign the

application and to make certifications) and to resubmit a corrected

application. Form 175 may be amended or modified to make minor

changes or correct minor errors in the application (such as

typographical errors). The Commission will classify all amendments

as major or minor, pursuant to rules applicable to specific

services. An application will be considered to be a newly filed

application if it is amended by a major amendment and may not be

resubmitted after applicable filing deadlines.

(3) Applicants who fail to correct defects in their applications

in a timely manner as specified by Public Notice will have their

applications dismissed with no opportunity for resubmission.

(c) Prohibition of Collusion. (1) Except as provided in

paragraphs (c)(2) and (c)(3) of this subsection, after the filing of

short-form applications, all bidders are prohibited from

cooperating, collaborating; discussing or disclosing in any manner

the substance of their bids or bidding strategies, or discussing or

negotiating settlement agreements, with other bidders until after

the high bidder makes the required down payment, unless such bidders

are members of a bidding consortium or other joint bidding

arrangement identified on the bidder's short-form application

pursuant to Section 1.2105(a)(2)(viii).

(2) Applicants may modify their short-form applications to

reflect formation of consortia or changes in ownership at any time

before or during an auction, provided such changes do not result in

a change in control of the applicant, and provided that the parties

forming consortia or entering into ownership agreements have not

applied for the same license. Such changes will not be considered

major modifications of the application.

(3) After the filing of short-form applications, applicants may

make agreements to bid jointly for licenses, provided the parties to

the agreement have not applied for the same license.

Section 1.2106 Submission of Upfront Payments

(a) The Commission may require applicants for licenses subject

to competitive bidding to submit an upfront payment. In that event,

the amount of the upfront payment and the procedures for submitting

it will be set forth in a Public Notice. No interest will be paid on

upfront payments.

(b) Upfront payments must be made either by wire transfer or by

cashier's check drawn in U.S. dollars from a financial institution

whose deposits are insured by the Federal Deposit Insurance

Corporation and must be made payable to the Federal Communications

Commission.

(c) If an upfront payment is not in compliance with the

Commission's Rule, or if insufficient funds are tendered to

constitute a valid upfront payment, the applicant shall have a

limited opportunity to correct its submission to bring it up to the

minimum valid upfront payment prior to the auction. If the applicant

does not submit at least the minimum upfront payment, it will be

ineligible to bid, its application will be dismissed and any upfront

payment it has made will be returned.

(d) The upfront payment(s) of a bidder will be credited toward

any down payment required for licenses on which the bidder is the

high bidder. Where the upfront payment amount exceeds the required

deposit of a winning bidder, the Commission may refund the excess

amount after determining that no bid withdrawal penalties are owed

by that bidder.

(e) In accordance with the provisions of subsection (d), in the

event a penalty is assessed pursuant to Sec. 1.2104 for bid

withdrawal or default, upfront payments or down payments on deposit

with the Commission will be used to satisfy the bid withdrawal or

default penalty before being applied toward any additional

obligations that the high bidder may have.

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

Applications

(a) After bidding has ended, the Commission will identify and

notify the high bidder and declare the bidding closed.

Within five (5) business days after being notified that it is a

high bidder on a particular license(s), a high bidder must submit to

the Commission's lockbox bank such additional funds (the ``down

payment'') as are necessary to bring its total deposits (not

including upfront payments applied to satisfy penalties) up to

twenty (20) percent of its high bid(s). (In single round sealed bid

auctions conducted under Sec. 1.2103, however, bidders may be

required to submit their down payment with their bids.) This down

payment must be made by wire transfer or cashier's check drawn in

U.S. dollars from a financial institution whose deposits are insured

by the Federal Deposit Insurance Corporation and must be made

payable to the Federal Communications Commission. Winning bidders

who are qualified designated entities eligible for installment

payments under Sec. 1.2110(d) are only required to bring their total

deposits up to ten (10) percent of their winning bid(s). Such

designated entities must pay the remainder of the twenty (20)

percent down payment within five (5) business days of grant of their

application. See Sec. 1.2110(e) (1) and (2) of this subpart. Down

payments will be held by the Commission until the high bidder has

been awarded the license and has paid the remaining balance due on

the license, in which case it will not be returned, or until the

winning bidder is found unqualified to be a licensee or has

defaulted, in which case it will be returned, less applicable

penalties. No interest will be paid on any down payment.

(c) A high bidder that meets its down payment obligations in a

timely manner must, within ten (10) business days after being

notified that it is a high bidder, submit an additional application

(the ``long-form application'') pursuant to the rules governing the

service in which the applicant is the high bidder (unless it has

already submitted such an application, as contemplated by

Sec. 1.2105(a)(1)(b). For example, if the applicant is a high bidder

for a license in the Interactive Video Data Service See 47 CFR Part

95, Subpart F), the long form application will be submitted on FCC

Form 574 in accordance with Section 95.815 of the Rules.

Notwithstanding any other provision in Title 47 of the Code of

Federal Regulations to the contrary, high bidders need not submit an

additional application filing fee with their long-form applications.

Notwithstanding any other provision in Title 47 of the Code of

Federal Regulations to the contrary, the high bidder's long-form

application must be mailed or otherwise delivered to: Office of the

Secretary, Federal Communications Commission, Attention: Auction

Application Processing Section, 1919 M Street, NW., Room 222,

Washington, DC 20554.

An applicant that fails to submit the required long-form

application as required under this subsection, and fails to

establish good cause for any late-filed submission, shall be deemed

to have defaulted and will be subject to the penalties set forth in

Sec. 1.2104 of the Commission's Rules.

(d) As an exhibit to its long-form application, the applicant

must provide a detailed explanation of the terms and conditions and

parties involved in any bidding consortia, joint venture,

partnership or other agreement or arrangement it had entered into

relating to the competitive bidding process prior to the time

bidding was completed. Such agreements must have been entered into

prior to the filing of short-form applications pursuant to

Sec. 1.2105.

Section 1.2108 Procedures for Filing Petitions To Deny Against

Long-Form Applications

(a) Where petitions to deny are otherwise provided for under the

Act or the Commission's Rules, and unless other service-specific

procedures for the filing of such petitions are provided for

elsewhere in the Commission's Rules, the procedures in this section

shall apply to the filing of petitions to deny the long-form

applications of winning bidders.

(b) Within thirty (30) days after the Commission gives public

notice that a long-form applications has been accepted for filing,

petitions to deny that application may be filed. Any such petitions

must contain allegations of fact supported by affidavit of a person

or persons with personal knowledge thereof.

(c) An applicant may file an opposition to any petition to deny,

and the petitioner a reply to such opposition. Allegations of fact

or denials thereof must be supported by affidavit of a person or

persons with personal knowledge thereof. The times for filing such

opposition and replies will be those provided in Sec. 1.45 of these

Rules.

(d) If the Commission determines that:

(1) An applicant is qualified and there is no substantial and

material issue of fact concerning that determination, it will grant

the application.

(2) An applicant is not qualified and that there is no

substantial issue of fact concerning that determination, the

Commission need not hold an evidentiary hearing and will deny the

application.

(3) Substantial and material issues of fact require a hearing,

it will conduct a hearing. The Commission may permit all or part of

the evidence to be submitted in written form and may permit

employees other than administrative law judges to preside at the

taking of written evidence. Such hearing will be conducted on an

expedited basis.

Section 1.2109 License Grant, Denial, Default, and Disqualification

(a) Unless otherwise specified in these rules, auction winners

are required to pay the balance of their winning bids in a lump sum

within five (5) business days following award of the license. Grant

of the license will be conditioned on full and timely payment of the

winning bid.

(b) If a winning bidder withdraws its bid after the Commission

has declared competitive bidding closed or fails to remit the

required down payment within five (5) business days after the

Commission has declared competitive bidding closed, the bidder will

be deemed to have defaulted, its application will be dismissed, and

it will be liable for the default penalty specified in

Sec. 1.12104(g)(2). In such event, the Commission may either re-

auction the license to existing or new applicants or offer it to the

other highest bidders (in descending order) at their final bids. The

down payment obligations set forth in Sec. 1.2107(b) will apply.

(c) A winning bidder who is found unqualified to be a licensee,

fails to remit the balance of its winning bid in a timely manner, or

defaults or is disqualified for any reason after having made the

required down payment, will be deemed to have defaulted and will be

liable for the penalty set forth in Sec. 1.2104(g)(2). In such

event, the Commission will conduct another auction for the license,

affording new parties an opportunity to file applications for the

license.

(d) Bidders who are found to have violated the antitrust laws or

the Commission's rules in connection with their participation in the

competitive bidding process may be subject, in addition to any other

applicable sanctions, to forfeiture of their upfront payment, down

payment of full bid amount, and may be prohibited from participating

in future auctions.

Section 1.2110 Designated Entities

(a) Designated entities are small businesses, businesses owned

by members of minority groups and/or women, and rural telephone

companies.

(b) Definitions. (1) Small businesses. The Commission will

establish the definition of a small business on a service-specific

basis, taking into consideration the characteristics and capital

requirements of the particular service.

(2) Businesses owned by member of minority groups and/or women.

Unless otherwise provided in rules governing specific services, a

business owned by members of minority groups and/or women is one in

which minorities and/or women who are U.S. citizens control the

applicant, have at least 50.1 percent equity ownership and, in the

case of a corporate applicant, a 50.1 percent voting interest. For

applicants that are partnerships, every general partner either must

be a minority and/or woman (or minorities and/or women) who are U.S.

citizens and who individually or together own at least 50.1 percent

of the partnership equity, or an entity that is 100 percent owned

and controlled by minorities and/or women who are U.S. citizens. The

interests of minorities and women are to be calculated on a fully-

diluted basis; agreements such as stock options and convertible

debentures shall be considered to have a present effect on the power

to control an entity and shall be treated as if the rights

thereunder already have been fully exercised. However, upon a

demonstration that options or conversion rights held by non-

controlled principals will not deprive the minority and female

principals of a substantial financial stake in the venture or impair

their rights to control the designated entity, a designated entity

may seek a waiver of the requirement that the equity of the minority

and female principals must be calculated on a fully-diluted basis.

The term minority includes individuals of African American,

Hispanic-surnamed, American Eskimo, Aleut, American Indian and Asian

American extraction.

(3) Rural telephone companies. A rural telephone company is any

local exchange carrier, including affiliates (as defined in

1.2110(b)(4)), with 100,000 access lines or fewer.

(4) Affiliate. (1) An individual or entity is an affiliate of

(a) an applicant or (b) a person holding an attributable interest in

an applicant under Sec. 24.709 (both referred to herein as `'the

applicant'') if such individual or entity--

(i) Directly or indirectly controls or has the power to control

the applicant, or

(ii) Is directly or indirectly controlled by the applicant, or

(iii) Is directly or indirectly controlled by a third party or

parties that also controls or has the power to control the

applicant, or

(v) Has an ``identity of interest'' with the applicant.

(2) Nature of control in determining affiliation.

(i) Every business concern is considered to have one or more

parties who directly or indirectly control or have the power to

control it. Control may be affirmative or negative and it is

immaterial whether it is exercised so long as the power to control

exists.

Example. An applicant owning 50 percent of the voting stock of

another concern would have negative power to control such concern

since such party can block any action of the other stockholders.

Also, the bylaws of a corporation may permit a stockholder with less

than 50 percent of the voting stock to block any actions taken by

the other stockholders in the other entity. Affiliation exists when

the applicant has the power to control a concern while at the same

time another person, or persons, are in control of the concern at

the will of the party or parties with the power to control.

(ii) Control can arise through stock ownership; occupancy of

director, officer or key employee positions; contractual or other

business relations; or combinations of these and other factors. A

key employee is an employee who, because of his/her position in the

concern, has a critical influence in or substantive control over the

operations or management of the concern.

(iii) Control can arise through management positions where a

concern's voting stock is so widely distributed that no effective

control can be established.

Example. In a corporation where the officers and directors own

various size blocks of stock totaling 40 percent of the

corporation's voting stock, but no officer or director has a block

sufficient to give him or her control or the power to control and

the remaining 60 percent is widely distributed with no individual

stockholder having a stock interest greater than 10 percent,

management has the power to control. If persons with such management

control of the other entity are persons with attributable interests

in the applicant, the other entity will be deemed an affiliate of

the applicant.

(3) Identity of interest between and among persons. Affiliation

can arise between or among two or more persons with an identity of

interest, such as members of the same family or persons with common

investments. In determining if the applicant controls or has the

power to control a concern, persons with an identity of interest

will be treated as though they were one person.

Example. Two shareholders in Corporation Y each have

attributable interests in the same PCS application. While neither

shareholder has enough shares to individually control Corporation Y,

together they have the power to control Corporation Y. The two

shareholders with these common investments (or identity in interest)

are treated as though they are one person and Corporation Y would be

deemed an affiliate of the applicant.

(i) Spousal Affiliation. Both spouses are deemed to own or

control or have the power to control interests owned or controlled

by either of them, unless they are subject to a legal separation

recognized by a court of competent jurisdiction in the United

States. In calculating their net worth, investors who are legally

separated must include their share of interests in property held

jointly with a spouse.

(ii) Kinship Affiliation. Immediate family members will be

presumed to own or control or have the power to control interests

owned or controlled by other immediate family members. In this

context ``immediate family member'' means father, mother, husband,

wife, son, daughter, brother, sister, father- or mother-in-law, son-

or daughter-in-law, brother- or sister-in-law, step-father or -

mother, step-brother or -sister, step-son or -daughter, half brother

or sister. This presumption may be rebutted by showing that (A) the

family members are estranged, (B) the family ties are remote, or (C)

the family members are not closely involved with each other in

business matters. Example: A owns a controlling interest in

Corporation X. A's sister-in-law, B, has an attributable interest in

a PCS application. Because A and B have a presumptive kinship

affiliation, A's interest in Corporation X is attributable to B, and

thus to the applicant, unless B rebuts the presumption with the

necessary sowing.

(4) Affiliation through stock ownership.

(i) An applicant is presumed to control or have the power to

control a concern if he or she owns or controls or has the power to

control 50 percent or more of its voting stock.

(ii) An applicant is presumed to control or have the power to

control a concern even though he or she owns, controls or has the

power to control less than 50 percent of the concern's voting stock,

if the block of stock he or she owns, controls or has the power to

control is large as compared with any other outstanding block of

stock.

(iii) If two or more persons each owns, controls or has the

power to control less than 50 percent of the voting stock of a

concern, such minority holdings are equal or approximately equal in

size, and the aggregate of these minority holdings is large as

compared with any other stock holding, the presumption arises that

each one of these persons individually controls or has the power to

control the concern; however, such presumption may be rebutted by a

showing that such control or power to control, in fact, does not

exist.

(5) Affiliation arising under stock options, convertible

debentures, and agreements to merge. Stock options, convertible

debentures, and agreements to merge (including agreements in

principle) are generally considered to have a present effect on the

power to control the concern. Therefore, in making a size

determination, such options, debentures, and agreements are

generally treated as though the rights held thereunder had been

exercised. However, an affiliate cannot use such options and

debentures to appear to terminate its control over another concern

before it actually does so.

Example 1. If company B holds an option to purchase a

controlling interest in company A, who holds an attributable

interest in a PCS application, the situation is treated as though

company B had exercised its rights and had become owner of a

controlling interest in company A. The gross revenues of company B

must be taken into account in determining the size of the applicant.

Example 2. If a large company, BigCo, holds 70% (70 of 100

outstanding shares) of the voting stock of company A, who holds an

attributable interest in a PCS application, and gives a third party,

SmallCo, and option to purchase 50 of the 70 shares owned by BigCo,

BigCo will be deemed to be an affiliate of company A, and thus the

applicant, until SmallCo actually exercises its option to purchase

such shares. In order to prevent BigCo from circumventing the intent

of the rule which requires such options to be considered on a fully

diluted basis, the option is not considered to have present

effective in this case.

Example 3. If company A has entered into an agreement to merge

with company B in the future, the situation is treated as though the

merger has taken place.

(6) Affiliation under voting trusts.

(i) Stock interests held in trust shall be deemed controlled by

any person who holds or shares the power to vote such stock, to any

person who has the sole power to sell such stock, and to any person

who has the right to revoke the trust at will or to replace the

trustee at will.

(ii) If a trustee has a familial, personal or extra-trust

business relationship to the grantor of the beneficiary, the stock

interests held in trust will be deemed controlled by the grantor or

beneficiary, as appropriate.

(iii) If the primary purpose of a voting trust, or similar

agreement, is to separate voting power from beneficial ownership of

voting stock for the purpose of shifting control of or the power to

control a concern in order that such concern or another concern may

meet the Commission's size standards, such voting trust shall not be

considered valid for this purpose regardless of whether it is or is

not recognized within the appropriate jurisdiction.

(7) Affiliation through common management. Affiliation generally

arises where officers, directors, or key employees serve as the

majority or otherwise as the controlling element of the board of

directors and/or the management of another entity.

(8) Affiliation through common facilities. Affiliation generally

arises where one concern shares office space and/or employees and/or

other facilities with another concern, particularly where such

concerns are in the same or related industry or field of operations,

or where such concerns were formerly affiliated, and through these

sharing arrangements one concern has control, or potential control,

of the other concern.

(9) Affiliation through contractual relationships. Affiliation

generally arises where one concern is dependent upon another concern

for contracts and business to such a degree that one concern has

control, or potential control, of the other concern.

(10) Affiliation under joint venture arrangements.

(i) A joint venture for size determination purposes is an

association of concerns and/or individuals, with interests in any

degree or proportion, formed by contract, express or implied, to

engage in and carry out a single, specific business venture for

joint profit for which purpose they combine their efforts, property,

money, skill and knowledge, but not on a continuing or permanent

basis for conducting business generally. The determination whether

an entity is a joint venture is based upon the facts of the business

operation, regardless of how the business operation may be

designated by the parties involved. An agreement to share profits/

losses proportionate to each party's contribution to the business

operation is a significant factor in determining whether the

business operation is a joint venture.

(ii) The parties to a joint venture are considered to be

affiliated with each other.

(c) The Commission may set aside specific licenses for which

only eligible designated entities, as specified by the Commission,

may bid.

(d) The Commission may permit partitioning of service areas in

particular services for eligible designated entities.

(e) The Commission may permit small businesses (including small

business owned by women, minorities, or rural telephone companies

that qualify as small businesses) and other entities determined to

be eligible on a service-specific basis, which are high bidders for

licenses specified by the Commission, to pay the full amount of

their high bids in installments over the term of their licenses

pursuant to the following:

(1) Unless otherwise specified, each eligible applicant paying

for its license(s) on an installment basis must deposit by wire

transfer or cashier's check in the manner specified in

Sec. 1.2107(b) sufficient additional funds as are necessary to bring

its total deposits to ten (10) percent of its winning bid(s) within

five (5) business days after the Commission has declared it the

winning bidder and closed the bidding. Failure to remit the required

payment will make the bidder liable to pay penalties pursuant to

Sec. 1.2104(g)(2).

(2) Within five (5) business days of the grant of the license

application of a winning bidder eligible for installment payments,

the licensee shall pay another ten (10) percent of the high bid,

thereby commencing the eligible licensee's installment payment plan.

Failure to remit the required payment will make the bidder liable to

pay penalties pursuant to Sec. 1.2104(g)(2).

(3) Upon grant of the license, the Commission will notify each

eligible licensee of the terms of its installment payment plan.

Unless other terms are specified in the rules of particular

services, such plans will:

(i) Impose interest based on the rate of U.S. Treasury

obligations (with maturities closest to the duration of the license

term) at the time of licensing;

(ii) Allow installment payments for the full license term;

(iii) Begin with interest-only payments for the first two years;

and

(iv) Amortize principal and interest over the remaining term of

the license.

(4) A license granted to an eligible entity that elects

installment payments shall be conditioned upon the full and timely

performance of the licensee's payment obligations under the

installment plan.

(i) If an eligible entity making installment payments is more

than ninety (90) days delinquent in any payment, it shall be in

default.

(ii) Upon default or in anticipation of default of one or more

installment payments, a licensee may request that the Commission

permit a three to six month grace period, during which no

installment payments need be made. In considering whether to grant a

request for a grace period, the Commission may consider, among other

things, the licensee's payment history, including whether the

licensee has defaulted before, how far into the license term the

default occurs, the reasons for default, whether the licensee has

met construction build-out requirements, the licensee's financial

condition, and whether the licensee is seeking a buyer under an

authorized distress sale policy. If the Commission grants a request

for a grace period, or otherwise approves a restructured payment

schedule, interest will continue to accrue and will be amortized

over the remaining term of the license.

(iii) Following expiration of any grace period without

successful resumption of payment or upon denial of a grace period

request, or upon default with no such request submitted, the license

will automatically cancel and the Commission will initiate debt

collection procedures pursuant to Part 1, Subpart O of the

Commission's Rules.

(e) The Commission may award bidding credits (et seq., payments

discounts) to eligible designated entities. Competitive bidding

rules applicable to individual services will specify the designated

entities eligible for bidding credits, the licenses for which

bidding credits are available, the amounts of bidding credits and

other procedures.

(f) The Commission may establish different upfront payment

requirement for categories of designated entities in competitive

bidding rules of particular auctionable services.

(g) The Commission may offer designated entities a combination

of the available preferences or additional preferences.

(h) Designated entities must describe on their long-form

applications how they satisfy the requirements for eligibility for

designated entity status, and must list and summarize on their long-

form applications all agreements that effect designated entity

status, such as partnership agreements, shareholder agreements,

management agreements and other agreements, including oral

agreements, which establish that the designated entity will have

both de facto and de jure control of the entity. Such information

must be maintained at the licensees' facilities or by their

designated agents for the term of the license in order to enable the

Commission to audit designated entity eligibility on an ongoing

basis.

(i) The Commission may, on a service-specific basis, permit

consortia, each member of which individually meets the eligibility

requirements, to qualify for any designated entity provisions.

(j) The Commission may, on a service-specific basis, permit

publicly-traded companies that are owned by members of minority

groups or women to qualify for any designated entity provisions.

Section 1.2111 Assignment or Transfer of Control: Unjust Enrichment

(a) Reporting requirement. An applicant seeking approval for a

transfer of control or assignment (otherwise permitted under the

Commission's Rules) of a license within three years of receiving a

new license through a competitive bidding procedure must, together

with its application for transfer of control or assignment, file

with the Commission a statement indicating that its license was

obtained through competitive bidding. Such applicant must also file

with the Commission the associated contracts for sale, option

agreements, management agreements, or other documents disclosing the

total consideration that the applicant would receive in return for

the transfer or assignment of its license. This information should

include not only a monetary purchase price, but also any future,

contingent, in-kind, or other consideration (e.g., management or

consulting contracts either with or without an option to purchase;

below market financing).

(b) Unjust enrichment payment: set-asides. As specified in this

subsection, an applicant seeking approval for a transfer of control

or assignment (otherwise permitted under the Commission's Rules) of

a license acquired by the transferor or assignor pursuant to a set-

aside for eligible designated entities under Sec. 1.2110(c) of the

Commission's Rules, or who proposes to take any other action

relating to ownership or control that will result in loss of status

as an eligible designated entity, must seek Commission approval and

may be required to make an unjust enrichment payment (Payment) to

the Commission by cashier's check or wire transfer before consent

will be granted. The Payment will be based upon a schedule that will

take account of the term of the license, any applicable construction

benchmarks, and the estimated value of the set-aside benefit, which

will be calculated as the difference between the amount paid by the

designated entity for the license and the value of a comparable non-

set-aside license in the free market at the time of the auction. The

Commission will establish the amount of the Payment and the burden

will be on the applicants to disprove this amount. No Payment will

be required if:

(1) The license is transferred or assigned more than five years

after its initial issuance, unless otherwise specified; or

(2) The proposed transferee or assignee is an eligible

designated entity under Sec. 1.2110(c) of the Commission's Rules or

the service-specific competitive bidding rules of the particular

service, and so certifies.

(c) Unjust enrichment payment: installment financing. An

applicant seeking approval for a transfer of control or assignment

(otherwise permitted under the Commission's rules) of a license

acquired by the transferor or assignor through a competitive bidding

procedure utilizing installment financing available to designated

entities under Sec. 1.2110(d) of the Rules will be required to pay

the full amount of the remaining principal balance as a condition of

the license transfer. No payment will be required if the proposed

transferee or assignee assumes the installment payment obligations

of the transferor or assignor, and if the proposed transferee or

assignee is itself qualified to obtain installment financing under

Sec. 1.2110(d) of the Rules or the service-specific competitive

bidding rules of the particular service, and so certifies.

(d) Unjust enrichment payment: bidding credits. An applicant

seeking approval for a transfer of control or assignment (otherwise

permitted under the Commission's Rules) of a license acquired by the

transferor or assignor through a competitive bidding procedure

utilizing bidding credits available to eligible designated entities

under Sec. 1.2110(e) of the Rules, or who proposes to take any other

action relating to ownership or control that will result in loss of

status as an eligible designated entity, must seek Commission

approval and will be required to make an unjust enrichment payment

(Payment) to the government by wire transfer or cashier's check

before consent will be granted. The Payment will be the sum of the

amount of the bidding credit plus interest at the rate applicable

for installment financing in effect at the time the license was

awarded. See Sec. 1.2110(e). No payment will be required if the

proposed transferee or assignee is an eligible designated entity

under Sec. 1.2110(e) of the Commission's Rules or the service-

specific competitive bidding rules of the particular service, and so

certifies.

[FR Doc. 94-24303 Filed 9-29-94; 8:45 am]

BILLING CODE 6712-01-M