**PART 1‑‑PRACTICE AND PROCEDURE**

**SUBPART Q‑‑COMPETITIVE BIDDING PROCEEDINGS**

Important Note: This Subpart is subject to periodic review and revision.
Readers are therefore cautioned to consult the official version of this
Subpart for the latest version.

§ 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 (Pub.L. 103‑66) and the Balanced Budget Act
of 1997 (Pub.L. 105‑33), authorizing the Commission to employ
competitive bidding procedures to choose from among two or more mutually
exclusive applications for certain initial licenses.

§ 1.2102 Eligibility of applications for competitive bidding.

\(a\) Mutually exclusive initial applications are subject to competitive
bidding.

\(b\) The following types of license applications are not subject to
competitive bidding procedures:

\(1\) Public safety radio services, including private internal radio
services used by state and local governments and non‑government entities
and including emergency road services provided by not‑for‑profit
organizations, that

\(i\) Are used to protect the safety of life, health, or property; and

\(ii\) Are not commercially available to the public;

\(2\) Initial licenses or construction permits for digital television
service given to existing terrestrial broadcast licensees to replace
their analog television service licenses; or

\(3\) Noncommercial educational and public broadcast stations described
under 47 U.S.C. 397(6).

Note to § 1.2102: To determine the rules that apply to competitive
bidding, specific service rules should also be consulted.

§ 1.2103 Competitive bidding design options.

\(a\) 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:

\(1\) Simultaneous multiple‑round auctions (using remote or on‑site
electronic bidding);

\(2\) Sequential multiple round auctions (using either oral ascending or
remote and/or on‑site electronic bidding);

\(3\) Sequential or simultaneous single‑round auctions (using either
sealed paper or remote and/or on‑site electronic bidding); and

\(4\) Combinatorial (package/contingent) bidding auctions.

\(b\) The Commission may use combinatorial bidding, which would allow
bidders to submit all or nothing bids on combinations of licenses or
authorizations, in addition to bids on individual licenses or
authorizations. 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. The Commission may also allow bidders to submit contingent bids
on individual and/or combinations of licenses.

\(c\) 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.

\(d\) The Commission may use real time bidding in all electronic auction
designs.

§ 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, Minimum Opening Bids and Maximum Bid
Increments. The Commission may, by announcement before or during an
auction, require minimum bid increments in dollar or percentage terms.
The Commission also may establish minimum opening bids and maximum bid
increments 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 Payment. As specified
below, when the Commission conducts an auction pursuant to § 1.2103, the
Commission will impose payments 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 is subject to a payment 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. The bid
withdrawal payment is either the difference between the net withdrawn
bid and the subsequent net winning bid, or the difference between the
gross withdrawn bid and the subsequent gross winning bid, whichever is
less. No withdrawal payment is assessed if the subsequent winning bid
exceeds the withdrawn bid. This payment amount is 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 payment in paragraph (g)(1)
of this section plus an additional payment equal to 3 percent of the
subsequent winning bid. If the subsequent winning bid exceeds the
defaulting bidder\'s bid amount, the 3 percent payment will be
calculated based on the defaulting bidder\'s bid amount. If either bid
amount is subject to a bidding credit, the 3 percent credit will be
calculated using the same bid amounts and basis (net or gross bids) as
in the calculation of the payment in paragraph (g)(1) of this section.
Thus, for example, if gross bids are used to calculate the payment in
paragraph (g)(1) of this section, the 3 percent will be applied to the
gross amount of the subsequent winning bid, or the gross amount of the
defaulting bid, whichever is less.

\(h\) 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.

§ 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 upfront
payment set forth by Public Notice. Beginning January 1, 1999, all
short‑form applications must be filed electronically.

\(1\) All short‑form applications 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 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 short‑form application must contain the following information:

\(i\) Identification of each license on which the applicant wishes to
bid;

(ii)(A) 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
general 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; and

\(B\) Applicant ownership information, as set forth in § 1.2112.

\(iii\) The identity of the person(s) authorized to make or withdraw a
bid;

\(iv\) If the applicant applies as a designated entity pursuant to §
1.2110, a statement to that effect and a declaration, under penalty of
perjury, that the applicant is qualified as a designated entity under §
1.2110.

\(v\) 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 paragraph (a)(2)(viii) regarding the amount
of their bids, bidding strategies or the particular licenses on which
they will or will not bid.

\(x\) Certification that the applicant is not in default on any
Commission licenses and that it is not delinquent on any non‑tax debt
owed to any Federal agency.

\(xi\) For C block applicants, an attached statement made under penalty
of perjury indicating whether or not the applicant has ever been in
default on any Commission licenses or has ever been delinquent on any
non‑tax debt owed to any Federal agency.

Note to paragraph (a): 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 Short‑Form Application (FCC Form
175).

\(1\) Any short‑form application (FCC Form 175) that does not contain
all of the certifications required pursuant to this section is
unacceptable for filing and cannot be corrected subsequent to the
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. During
the resubmission period for curing defects, a short‑form application may
be amended or modified to cure defects identified by the Commission or
to make minor amendments or modifications. After the resubmission period
has ended, a short‑ form application may be amended or modified to make
minor changes or correct minor errors in the application. Major
amendments cannot be made to a short‑ form application after the initial
filing deadline. Major amendments include changes in ownership of the
applicant that would constitute an assignment or transfer of control,
changes in an applicant\'s size which would affect eligibility for
designated entity provisions, and changes in the license service areas
identified on the short‑form application on which the applicant intends
to bid. Minor amendments include, but are not limited to, the correction
of typographical errors and other minor defects not identified as major.
An application will be considered to be newly filed 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), (c)(3) and (c)(4) of this
section, after the filing of short‑form applications, all applicants 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 applicants
until after the high bidder makes the required down payment, unless such
applicants are members of a bidding consortium or other joint bidding
arrangement identified on the bidder\'s short‑form application pursuant
to § 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
licenses in any of the same geographic license areas. 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 licenses in any of the same geographic
license areas.

\(4\) After the filing of short‑form applications, a holder of a
non‑controlling attributable interest in an entity submitting a
short‑form application may acquire an ownership interest in, form a
consortium with, or enter into a joint bidding arrangement with, other
applicants for licenses in the same geographic license area, provided
that:

\(i\) The attributable interest holder certifies to the Commission that
it has not communicated and will not communicate with any party
concerning the bids or bidding strategies of more than one of the
applicants in which it holds an attributable interest, or with which it
has a consortium or joint bidding arrangement, and which have applied
for licenses in the same geographic license area(s); and

\(ii\) The arrangements do not result in any change in control of an
applicant; or

\(iii\) When an applicant has withdrawn from the auction, is no longer
placing bids and has no further eligibility, a holder of a
non‑controlling, attributable interest in such an applicant may obtain
an ownership interest in or enter into a consortium with another
applicant for a license in the same geographic service area, provided
that the attributable interest holder certifies to the Commission that
it did not communicate with the new applicant prior to the date that the
original applicant withdrew from the auction.

\(5\) Applicants must modify their short‑form applications to reflect
any changes in ownership or in membership of consortia or joint bidding
arrangements.

\(6\) For purposes of this paragraph:

\(i\) The term applicant shall include all controlling interests in the
entity submitting a short‑form application to participate in an auction
(FCC Form 175), as well as all holders of partnership and other
ownership interests and any stock interest amounting to 10 percent or
more of the entity, or outstanding stock, or outstanding voting stock of
the entity submitting a short‑form application, and all officers and
directors of that entity; and

\(ii\) The term bids or bidding strategies shall include capital calls
or requests for additional funds in support of bids or bidding
strategies.

Example: Company A is an applicant in area 1. Company B and Company C
each own 10 percent of Company A. Company D is an applicant in area 1,
area 2, and area 3. Company C is an applicant in area 3. Without
violating the Commission\'s Rules, Company B can enter into a consortium
arrangement with Company D or acquire an ownership interest in Company D
if Company B certifies either (1) that it has communicated with and will
communicate neither with Company A or anyone else concerning Company
A\'s bids or bidding strategy, nor with Company C or anyone else
concerning Company C\'s bids or bidding strategy, or (2) that it has not
communicated with and will not communicate with Company D or anyone else
concerning Company D\'s bids or bidding strategy.

§ 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 by wire transfer 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
Rules, 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 paragraph (d), in the event a
penalty is assessed pursuant to § 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 payment obligations that the high bidder
may have.

§ 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.

\(b\) Unless otherwise specified by public notice, within ten (10)
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 bid withdrawal or default payments) up to twenty (20)
percent of its high bid(s). (In single round sealed bid auctions
conducted under § 1.2103, however, bidders may be required to submit
their down payments with their bids.) Unless otherwise specified by
public notice, this down payment must be made by wire transfer 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. 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 or authorization, 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 payments. No interest on any down payment will
be paid to the bidders.

\(c\) 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. 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. Specific procedures for filing applications will
be set out by Public Notice. Ownership disclosure requirements are set
forth in § 1.2112. Beginning January 1, 1999, all long‑ form
applications must be filed electronically. An applicant that fails to
submit the required long‑form application under this paragraph and fails
to establish good cause for any late‑filed submission, shall be deemed
to have defaulted and will be subject to the payments set forth in §
1.2104.

\(d\) 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 § 1.2105.

\(e\) An applicant must also submit FCC Form 602 (see § 1.919 of this
chapter) with its long form application (FCC Form 601).

§ 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 a period specified by Public Notice, and after the
Commission by public notice announces that long‑form applications have
been accepted for filing, petitions to deny such applications may be
filed. In all cases, the period for filing petitions to deny shall be no
shorter than five (5) days. 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 time for filing such oppositions
shall be at least five (5) days from the filing date for petitions to
deny, and the time for filing replies shall be at least five (5) days
from the filing date for oppositions. The Commission may grant a license
based on any long‑form application that has been accepted for filing.
The Commission shall in no case grant licenses earlier than seven (7)
days following issuance of a public notice announcing long‑form
applications have been accepted for filing.

\(d\) 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 a 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.

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

\(a\) Unless otherwise specified by public notice, auction winners are
required to pay the balance of their winning bids in a lump sum within
ten (10) business days following the release of a public notice
establishing the payment deadline. If a winning bidder fails to pay the
balance of its winning bids in a lump sum by the applicable deadline as
specified by the Commission, it will be allowed to make payment within
ten (10) business days after the payment deadline, provided that it also
pays a late fee equal to five percent of the amount due. When a winning
bidder fails to pay the balance of its winning bid by the late payment
deadline, it is considered to be in default on its license(s) and
subject to the applicable default payments. Licenses will be awarded
upon the full and timely payment of winning bids and any applicable late
fees.

\(b\) If a winning bidder withdraws its bid after the Commission has
declared competitive bidding closed or fails to remit the required down
payment within ten (10) business days after the Commission has declared
competitive bidding closed, the bidder will be deemed to have defaulted,
its application will be dismissed, and it will be liable for the default
payment specified in § 1.2104(g)(2). In such event, the Commission, at
its discretion, 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 §
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
payment set forth in § 1.2104(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.

\(d\) 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 or full bid amount, and may be prohibited from participating in
future auctions.

§ 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 members 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‑controlling 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 operating entity to the extent that such entity‑‑

\(i\) provides common carrier service to any local exchange carrier
study area that does not include either

\(A\) any incorporated place of 10,000 inhabitants or more, or any part
thereof, based on the most recently available population statistics of
the Bureau of the Census, or

\(B\) any territory, incorporated or unincorporated, included in an
urbanized area, as defined by the Bureau of the Census as of August 10,
1993;

\(ii\) provides telephone exchange service, including exchange access,
to fewer than 50,000 access lines;

\(iii\) provides telephone exchange service to any local exchange
carrier study area with fewer than 100,000 access lines; or

\(iv\) has less than 15 percent of its access lines in communities of
more than 50,000 on the date of enactment of the Telecommunications Act
of 1996.

\(4\) Affiliate.

\(i\) An individual or entity is an affiliate of an applicant or of a
person holding an attributable interest in an applicant if such
individual or entity‑‑

\(A\) Directly or indirectly controls or has the power to control the
applicant, or

\(B\) Is directly or indirectly controlled by the applicant, or

\(C\) Is directly or indirectly controlled by a third party or parties
that also controls or has the power to control the applicant, or

\(D\) Has an \"identity of interest\" with the applicant.

\(ii\) Nature of control in determining affiliation.

\(A\) 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.

\(B\) 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.

\(C\) 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.

\(iii\) 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.

\(A\) 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.

\(B\) 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 the family members are
estranged, the family ties are remote, or 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 Y is attributable to B, and thus to the applicant, unless B
rebuts the presumption with the necessary showing.

\(iv\) Affiliation through stock ownership.

\(A\) 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.

\(B\) 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.

\(C\) 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.

\(v\) 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 come owner of a controlling interest in company A.
The gross revenues of company B must be taken into account in
determining the size of the applicant.

Example 2. If a large company, BigCo, holds 70% (70 of 100 outstanding
shares) of the voting stock of company A, who holds an attributable
interest in a PCS application, and gives a third party, SmallCo, an
option to purchase 50 of the 70 shares owned by BigCo, BigCo will be
deemed to be an affiliate of company A, and thus the applicant, until
SmallCo actually exercises its option to purchase such shares. In order
to prevent BigCo from circumventing the intent of the rule which
requires such options to be considered on a fully diluted basis, the
option is not considered to have present effect in this case.

Example 3. If company A has entered into an agreement to merge with
company B in the future, the situation is treated as though the merger
has taken place.

\(vi\) Affiliation under voting trusts.

\(A\) 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.

\(B\) If a trustee has a familial, personal or extra‑trust business
relationship to the grantor or the beneficiary, the stock interests held
in trust will be deemed controlled by the grantor or beneficiary, as
appropriate.

\(C\) 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.

\(vii\) 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.

\(viii\) 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.

\(ix\) 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.

\(x\) Affiliation under joint venture arrangements.

\(A\) 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.

\(B\) The parties to a joint venture are considered to be affiliated
with each other. Nothing in this subsection shall be construed to define
a small business consortium, for purposes of determining status as a
designated entity, as a joint venture under attribution standards
provided in this section.

\(xi\) Exclusion from affiliation coverage. For purposes of this
section, Indian tribes or Alaska Regional or Village Corporations
organized pursuant to the Alaska Native Claims Settlement Act (43 U.S.C.
1601 et seq.), or entities owned and controlled by such tribes or
corporations, are not considered affiliates of an applicant (or
licensee) that is owned and controlled by such tribes, corporations or
entities, and that otherwise complies with the requirements of this
section, except that gross revenues derived from gaming activities
conducted by affiliate entities pursuant to the Indian Gaming Regulatory
Act (25 U.S.C. 2701 et seq.) will be counted in determining such
applicant\'s (or licensee\'s) compliance with the financial requirements
of this section, unless such applicant establishes that it will not
receive a substantial unfair competitive advantage because significant
legal constraints restrict the applicant\'s ability to access such gross
revenues.

\(c\) 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.

\(e\) Bidding credits.

\(1\) The Commission may award bidding credits (i.e., payment 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.

\(2\) Size of bidding credits. A winning bidder that qualifies as a
small business or a consortium of small businesses may use the following
bidding credits corresponding to their respective average gross revenues
for the preceding 3 years:

\(i\) Businesses with average gross revenues for the preceding years, 3
years not exceeding \$3 million are eligible for bidding credits of 35
percent;

\(ii\) Businesses with average gross revenues for the preceding years, 3
years not exceeding \$15 million are eligible for bidding credits of 25
percent; and

\(iii\) Businesses with average gross revenues for the preceding years,
3 years not exceeding \$40 million are eligible for bidding credits of
15 percent.

\(f\) Installment payments. The Commission may permit small businesses
(including small businesses 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 by public notice, each eligible
applicant paying for its license(s) on an installment basis must deposit
by wire transfer in the manner specified in § 1.2107(b) sufficient
additional funds as are necessary to bring its total deposits to ten
(10) percent of its winning bid(s) within ten (10) 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
a default payment pursuant to § 1.2104(g)(2).

\(2\) Within ten (10) days of the conditional 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. If a
winning bidder eligible for installment payments fails to submit this
additional ten (10) percent of its high bid by the applicable deadline
as specified by the Commission, it will be allowed to make payment
within ten (10) business days after the payment deadline, provided that
it also pays a late fee equal to five percent of the amount due. When a
winning bidder eligible for installment payments fails to submit this
additional ten (10) percent of its winning bid, plus the late fee, by
the late payment deadline, it is considered to be in default on its
license(s) and subject to the applicable default payments. Licenses will
be awarded upon the full and timely payment of second down payments and
any applicable late fees.

\(3\) Upon grant of the license, the Commission will notify each
eligible licensee of the terms of its installment payment plan and that
it must execute a promissory note and security agreement as a condition
of the 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.

\(i\) Any licensee that fails to submit payment on an installment
obligation will automatically have an additional ninety (90) days in
which to submit its required payment without being considered
delinquent. Any licensee making its required payment during this period
will be assessed a late payment fee equal to five percent (5%) of the
amount of the past due payment. Late fees assessed under this paragraph
will accrue on the next business day following the payment due date.
Payments made at the close of any grace period will first be applied to
satisfy any lender advances as required under each licensee\'s \"Note
and Security Agreement.\" Afterwards, payments will be applied in the
following order: late charges, interest charges, principal payments.

\(ii\) If any licensee fails to make the required payment at the close
of the 90‑day period set forth in paragraph (i) of this section, the
licensee will automatically be provided with a subsequent 90‑day grace
period, except that no subsequent automatic grace period will be
provided for payments from C or F block licensees that are not made
within 90 days of the payment resumption date for those licensees, as
explained in Amendment of the Commission\'s Rules Regarding Installment
Payment Financing for Personal Communications Services (PCS) Licensees,
Order on Reconsideration of the Second Report and Order, WT Docket No.
97‑82, FCC 98‑46 (rel. Mar. 24, 1998). Any licensee making a required
payment during this subsequent period will be assessed a late payment
fee equal to ten percent (10%) of the amount of the past due payment.
Licensees shall not be required to submit any form of request in order
to take advantage of the initial 90‑day non‑delinquency period and
subsequent automatic 90‑day grace period. All licensees that avail
themselves of the automatic grace period must pay the required late
fee(s), all interest accrued during the non‑delinquency and grace
periods, and the appropriate scheduled payment with the first payment
made following the conclusion of the grace period.

\(iii\) If an eligible entity making installment payments is more than
one hundred and eighty (180) days delinquent in any payment, it shall be
in default, except that C and F block licensees shall be in default if
their payment due on the payment resumption date, referenced in
paragraph (f)(4)(ii) of this section, is more than ninety (90) days
delinquent.

\(iv\) Any eligible entity that submits an installment payment after the
due date but fails to pay any late fee, interest or principal at the
close of the 90‑day non‑delinquency period and subsequent automatic
grace period, if such a grace period is available, will be declared in
default, its license will automatically cancel, and will be subject to
debt collection procedures.

\(g\) The Commission may establish different upfront payment
requirements for categories of designated entities in competitive
bidding rules of particular auctionable services.

\(h\) The Commission may offer designated entities a combination of the
available preferences or additional preferences.

\(i\) 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.

\(j\) 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.

\(k\) 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.

\(l\) Audits.

\(1\) Applicants and licensees claiming eligibility under this section
shall be subject to audits by the Commission, using in‑house and
contract resources. Selection for audit 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 (FCC 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 FCC‑licensed service and shall also include consent to
the interview of principals, employees, customers and suppliers of the
applicant or licensee.

\(m\) Gross revenues. Gross revenues shall mean all income received by
an entity, whether earned or passive, before any deductions are made for
costs of doing business (e.g., cost of goods sold), as evidenced by
audited financial statements for the relevant number of most recently
completed calendar years or, if audited financial statements were not
prepared on a calendar‑year basis, for the most recently completed
fiscal years preceding the filing of the applicant\'s short‑form (FCC
Form 175). If an entity was not in existence for all or part of the
relevant period, gross revenues shall be evidenced by the audited
financial statements of the entity\'s predecessor‑in‑interest or, if
there is no identifiable predecessor‑in‑interest, unaudited financial
statements certified by the applicant as accurate. When an applicant
does not otherwise use audited financial statements, its gross revenues
may be certified by its chief financial officer or its equivalent and
must be prepared in accordance with Generally Accepted Accounting
Principles.

§ 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\'s 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 local consideration that
the applicant would receive in return for the transfer or assignment of
its license (see § 1.948 of this chapter). 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‑aside. As specified in this
paragraph 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 § 1.2110(c), 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
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 § 1.2110(c) or the service‑specific competitive bidding
rules of the particular service, and so certifies.

\(c\) Unjust enrichment payment: installment financing.

\(1\) 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,
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.

\(d\) Unjust enrichment payment: bidding credits.

\(1\) A licensee that utilizes a bidding credit, and that during the
initial term seeks to assign or transfer control of a license to an
entity that does not meet the eligibility criteria for a bidding credit,
will be required to reimburse the U.S. Government for the amount of the
bidding credit, plus interest based on the rate for ten year U.S.
Treasury obligations applicable on the date the license was granted, as
a condition of Commission approval of the assignment or transfer. If,
within the initial term of the license, a licensee that utilizes a
bidding credit seeks to assign or transfer control of a license to an
entity that is eligible for a lower bidding credit, the difference
between the bidding credit obtained by the assigning party and the
bidding credit for which the acquiring party would qualify, plus
interest based on the rate for ten year U.S. treasury obligations
applicable on the date the license is granted, must be paid to the U.S.
Government as a condition of Commission approval of the assignment or
transfer. If, within the initial term of the license, a licensee that
utilizes a bidding credit seeks to make any ownership change that would
result in the licensee losing eligibility for a bidding credit (or
qualifying for a lower bidding credit), the amount of the bidding credit
(or the difference between the bidding credit originally obtained and
the bidding credit for which the restructured licensee would qualify),
plus interest based on the rate for ten year U.S. treasury obligations
applicable on the date the license is granted, must be paid to the U.S.
Government as a condition of Commission approval of the assignment or
transfer.

\(2\) Payment schedule.

\(i\) The amount of payments made pursuant to paragraph (d)(1) of this
section will be reduced over time as follows:

\(A\) A transfer in the first two years of the license term will result
in a forfeiture of 100 percent of the value of the bidding credit (or in
the case of very small businesses transferring to small businesses, 100
percent of the difference between the bidding credit received by the
former and the bidding credit for which the latter is eligible);

\(B\) A transfer in year 3 of the license term will result in a
forfeiture of 75 percent of the value of the bidding credit;

\(C\) A transfer in year 4 of the license term will result in a
forfeiture of 50 percent of the value of the bidding credit;

\(D\) A transfer in year 5 of the license term will result in a
forfeiture of 25 percent of the value of the bidding credit; and

\(E\) for a transfer in year 6 or thereafter, there will be no payment.

\(ii\) These payments will have to be paid to the United States Treasury
as a condition of approval of the assignment, transfer, or ownership
change.

\(e\) Unjust enrichment: partitioning and disaggregation.

\(1\) Installment payments. Licensees making installment payments, that
partition their licenses or disaggregate their spectrum to entities not
meeting the eligibility standards for installment payments, will be
subject to the provisions concerning unjust enrichment as set forth in
this section.

\(2\) Bidding credits. Licensees that received a bidding credit that
partition their licenses or disaggregate their spectrum to entities not
meeting the eligibility standards for such a bidding credit, will be
subject to the provisions concerning unjust enrichment as set forth in
this section.

\(3\) Apportioning unjust enrichment payments. Unjust enrichment
payments for partitioned license areas shall be calculated based upon
the ratio of the population of the partitioned license area to the
overall population of the license area and by utilizing the most recent
census data. Unjust enrichment payments for disaggregated spectrum shall
be calculated based upon the ratio of the amount of spectrum
disaggregated to the amount of spectrum held by the licensee.

§ 1.2112 Ownership disclosure requirements for short‑ and long‑form
applications.

\(a\) Each application for a license or authorization or for consent to
assign or transfer control of a license or authorization shall disclose
fully the real party or parties in interest and must include in an
exhibit the following information:

\(1\) A list of any FCC‑regulated business 10 percent or more of whose
stock, warrants, options or debt securities are owned by the applicant
or an officer, director, attributable stockholder or key management
personnel of the applicant. This list must include a description of each
such business\'s principal business and a description of each such
business\'s relationship to the applicant;

\(2\) A list of any party holding a 10 percent or greater interest in
the applicant, including the specific amount of the interest;

\(3\) A list of any party holding a 10 percent or greater interest in
any entity holding or applying for any FCC‑regulated business in which a
10 percent or more interest is held by another party which holds a 10
percent or more interest in the applicant (e.g., If company A owns 10
percent of Company B (the applicant) and 10 percent of Company C then
Companies A and C must be listed on Company B\'s application;

\(4\) A list of the names, addresses, and citizenship of any party
holding 10 percent or more of each class of stock, warrants, options or
debt securities together with the amount and percentage held;

\(5\) A list of the names, addresses, and citizenship of all controlling
interests of the applicants, as set forth in § 1.2110;

\(6\) In the case of a general partnerships, the name, address and
citizenship of each partner, and the share or interest participation in
the partnership;

\(7\) In the case of a limited partnerships, the name, address and
citizenship of each limited partner whose interest in the applicant is
equal to or greater than 10 percent (as calculated according to the
percentage of equity paid in and the percentage of distribution of
profits and losses);

\(8\) In the case of a limited liability corporation, the name, address
and citizenship of each of its members; and

\(9\) A list of all parties holding indirect ownership interests in the
applicant, as determined by successive multiplication of the ownership
percentages for each link in the vertical ownership chain, that equals
10 percent or more of the applicant, except that if the ownership
percentage for an interest in any link in the chain exceeds 50 percent
or represents actual control, it shall be treated and reported as if it
were a 100 percent interest.

\(b\) In addition to the information required under paragraph (a) of
this section, each applicant for a license or authorization claiming
status as a small business shall, as an exhibit to its long‑form
application:

\(1\) Disclose separately and in the aggregate the gross revenues,
computed in accordance with § 1.2110, for each of the following: the
applicant and its affiliates, the applicant\'s attributable investors,
affiliates of its attributable investors, and, if a consortium of small
businesses, the members comprising the consortium;

\(2\) List and summarize all agreements or instruments (with appropriate
references to specific provisions in the text of such agreements and
instruments) that support the applicant\'s eligibility as a small
business under the applicable designated entity provisions, including
the establishment of de facto and de jure control; such agreements and
instruments include articles of incorporation and bylaws, shareholder
agreements, voting or other trust agreements, franchise agreements, and
any other relevant agreements (including letters of intent), oral or
written; and

\(3\) List and summarize any investor protection agreements, including
rights of first refusal, supermajority clauses, options, veto rights,
and rights to hire and fire employees and to appoint members to boards
of directors or management committees.

§ 1.2113 Construction prior to grant of application.

Subject to the provisions of this section, applicants for licenses
awarded by competitive bidding may construct facilities to provide
service prior to grant of their applications, but must not operate such
facilities until the FCC grants an authorization. If the conditions
stated in this section are not met, applicants must not begin to
construct facilities for licenses subject to competitive bidding.

\(a\) When applicants may begin construction. An applicant may begin
construction of a facility upon release of the Public Notice listing the
post‑ auction long‑form application for that facility as acceptable for
filing.

\(b\) Notification to stop. If the FCC for any reason determines that
construction should not be started or should be stopped while an
application is pending, and so notifies the applicant, orally (followed
by written confirmation) or in writing, the applicant must not begin
construction or, if construction has begun, must stop construction
immediately.

\(c\) Assumption of risk. Applicants that begin construction pursuant to
this section before receiving an authorization do so at their own risk
and have no recourse against the United States for any losses resulting
from:

\(1\) Applications that are not granted;

\(2\) Errors or delays in issuing public notices;

\(3\) Having to alter, relocate or dismantle the facility; or

\(4\) Incurring whatever costs may be necessary to bring the facility
into compliance with applicable laws, or FCC rules and orders.

\(d\) Conditions. Except as indicated, all pre‑grant construction is
subject to the following conditions:

\(1\) The application does not include a request for a waiver of one or
more FCC rules;

\(2\) For any construction or alteration that would exceed the
requirements of § 17.7 of this chapter, the licensee has notified the
appropriate Regional Office of the Federal Aviation Administration (FAA
Form 7460‑1), filed a request for antenna height clearance and
obstruction marking and lighting specifications (FCC Form 854) with the
FCC, PRB, Support Services Branch, Gettysburg, PA 17325;

\(3\) The applicant has indicated in the application that the proposed
facility would not have a significant environmental effect, in
accordance with §§ 1.1301 through 1.1319;

\(4\) Under applicable international agreements and rules in this part,
individual coordination of the proposed channel assignment(s) with a
foreign administration is not required; and

\(5\) Any service‑specific restrictions not listed herein.