**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | WT Docket No. 05-211         |
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| Implementation of the Commercial | ** |                              |
| Spectrum                         |    |                              |
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| Enhancement Act and              | *) |                              |
| Modernization of the             | ** |                              |
| Commission's Competitive Bidding |    |                              |
| Rules and Procedures             | *  |                              |
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**ORDER ON RECONSIDERATION OF THE SECOND REPORT AND ORDER**

**Adopted: June 1, 2006 Released: June 2, 2006**

By the Commission: Chairman Martin and Commissioner Copps issuing
separate statements; Commissioners Adelstein and Tate approving in part,
concurring in part and issuing separate statements.

Table of Contents

Heading Paragraph \#

I. introduction 1

II\. background 2

III\. DISCUSSION 7

A. Section 309(j)(3)(E)(ii) 8

B. Material Relationships 14

C. Unjust Enrichment 31

D. Review of Agreements, Annual Reporting Requirements and Audits 42

E. Regulatory Flexibility Act 43

iV. conclusion 45

VI\. Procedural matters 46

A. Paperwork Reduction Act Analysis 46

B. Congressional Review Act 47

C. Effective Date 48

VII\. ORDERING CLAUSE 49

APPENDIX -- Final Rules

# introduction

1.  In this Order on Reconsideration, on our own motion, we clarify
    certain aspects of the *Second Report and Order* in this proceeding
    ("*Designated Entity Second Report and Order*").[^1] We also address
    certain procedural issues raised in filings submitted in response to
    the *Designated Entity Second Report and Order*.[^2] As the record
    on reconsideration has not yet closed, however, we may deal with
    additional issues raised by interested parties at a later date.

# BACKGROUND 

2.  In the *Further Notice of Proposed Rule Making* in this docket,[^3]
    we sought comment on a proposal by Council Tree that we restrict the
    award of designated entity benefits to designated entities that have
    what Council Tree only generally referred to as "material
    relationships" with large in-region incumbent wireless service
    providers.[^4] We asked for comment on each of the elements of this
    proposal, including what types of "material relationships" should
    trigger a restriction on the availability of designated entity
    benefits and what types of entities other than large in-region
    incumbent wireless service providers should be covered.[^5]

3.  In the *Designated Entity Second Report and Order*, after reviewing
    the diverse comments filed in the record and taking into
    consideration what we have learned in administering the designated
    entity benefits program,[^6] we revised our rules ("Part 1"
    rules)[^7] to include certain "material relationships" as factors in
    determining designated entity eligibility. Specifically, we adopted
    rules to limit the award of designated entity benefits to any
    applicant or licensee that has "impermissible material
    relationships" or an "attributable material relationship" created by
    certain agreements with one or more other entities for the lease or
    resale (including under a wholesale arrangement) of its spectrum
    capacity. We found that these additional eligibility restrictions
    were necessary to meet our statutory obligations and to ensure that,
    in accordance with the intent of Congress, every recipient of the
    Commission's designated entity benefits is an entity that uses its
    licenses to directly provide facilities-based telecommunications
    services for the benefit of the public.[^8] In particular, we
    determined that the relationships underpinning such leasing and
    resale agreements underscored the need for stricter regulatory
    parameters to ensure that benefits were reserved to provide
    opportunities for designated entities to become robust independent
    facilities-based service providers with the ability to provide new
    and innovative services to the public, and to prevent the unjust
    enrichment of unintended beneficiaries.[^9]

4.  In the *Further Notice*, we also sought comment on whether, if we
    adopted a new restriction on the award of bidding credits to
    designated entities, we should adopt revisions to our unjust
    enrichment rules. We asked over what portion of the license term the
    unjust enrichment provisions should apply if we decided to require
    reimbursement by licensees that, either through a change of
    "material relationships" or assignment or transfer of control of the
    license, lose their eligibility for a bidding credit pursuant to any
    eligibility restriction that we might adopt. In the *Designated
    Entity Second Report and Order*, after reviewing the filings in the
    record and taking into account our experience with spectrum auctions
    and licensing, we adopted rule modifications to strengthen our
    unjust enrichment rules in order to better deter entities from
    attempting to circumvent our designated entity eligibility
    requirements and to recapture designated entity benefits when
    ineligible entities control licenses held by designated entities or
    exert impermissible influence over a designated entity.[^10]
    Specifically, as discussed fully below, we adopted a ten-year unjust
    enrichment schedule for licenses acquired with bidding credits.

5.  Finally, in the *Designated Entity Second Report and Order,* in
    order to ensure our continued ability to safeguard the award of
    designated entity benefits, we explained how we will implement our
    rules concerning audits, particularly with respect to designated
    entities that win licenses in the upcoming AWS auction, and refined
    our rules with respect to the reporting obligations of designated
    entities. In the reconsideration order we adopt today, we provide
    guidance on these implementation rules as well as on the substantive
    rules mentioned above.

6.  Since Federal Register publication of the *Designated Entity Second
    Report and Order*, several parties have submitted filings in this
    docket addressing various aspects of the order. As mentioned, we
    take note of several of these herein, including a series of filings
    submitted jointly by the Minority Media and Telecommunications
    Council ("MMTC), Council Tree Communications, Inc. ("Council Tree"),
    and Bethel Native Corporation ("Bethel Native") (together, "Joint
    Petitioners"), among which are a petition for expedited
    reconsideration and two supplements, a motion for expedited stay
    pending reconsideration or judicial review, and several lengthy *ex
    parte* notices. Other parties, including T-Mobile USA, Inc.
    ("T-Mobile") and CTIA have filed pleadings in opposition to those of
    Joint Petitioners.

# DISCUSSION 

7.  On our own motion, we address arguments that it would violate
    section 309(j)(3)(E)(ii) of the Communications Act to apply the new
    designated entity rules adopted in the *Designated Entity Second
    Report and Order* to the licenses offered in Auction No. 66. We also
    address arguments that the Commission did not provide sufficient
    notice under the Administrative Procedure Act and Regulatory
    Flexibility Act before adopting its material relationship rules and
    new unjust enrichment rules. With respect to our material
    relationship rules, we clarify how we will evaluate impermissible
    and attributable material relationships, including those that are
    grandfathered, for the purpose of determining eligibility for
    designated entity benefits and the imposition of unjust enrichment.
    We also respond to arguments that our expansion of the unjust
    enrichment payment schedule to ten years, and requirement of
    reimbursement of the entire bidding credit amount by designated
    entities that lose their eligibility for a bidding credit prior to
    filing the applicable construction notification were arbitrary and
    capricious. In addition, we clarify that the ten-year schedule
    applies only to licenses granted after release of the *Designated
    Entity Second Report and Order*. Finally, we clarify that our new
    rule relating to reportable eligibility events includes events that
    might affect a designated entity's eligibility under either our new
    material relationship or existing controlling interest standards.

## Section 309(j)(3)(E)(ii)

8.  In this section, we address the claim by the Joint Petitioners that
    adoption of our new rules contravened section 309(j)(3)(E)(ii) of
    the Communications Act.[^11] Joint Petitioners specifically assert
    that our application of the new designated entity rules to the
    licenses offered in Auction No. 66 violates the section
    309(j)(3)(E)(ii) directive that the Commission ensure that, after it
    issues bidding rules, "interested parties have sufficient time to
    develop business plans, assess market conditions, and evaluate the
    availability of equipment for the relevant services."[^12] We
    disagree.

9.  As an initial matter, we reject Joint Petitioners' basic assumption
    that the new designated entity rules implicate section
    309(j)(3)(E)(ii) at all. While that provision instructs the
    Commission to promote the objective of ensuring that interested
    parties "after the issuance of bidding rules" have "a sufficient
    time to develop business plans, assess market conditions, and
    evaluate the availability of equipment for the relevant services,"
    the new designated entity rules do not constitute "bidding rules"
    for purposes of section 309(j)(3)(E)(ii). As the Commission has
    explained, this provision does not require the Commission "to
    postpone an auction until every external factor that might influence
    a bidder\'s business plan is resolved with absolute certainty."[^13]
    Rather, we have indicated that the provision applies to
    "auction-specific information" and "specific mechanisms relating to
    day-to-day auction conduct including, for example, the structure of
    bidding rounds and stages, establishment of minimum opening bids or
    reserve prices, minimum acceptable bids, initial maximum eligibility
    for each bidder, activity requirements for each stage of the
    auction, activity rule waivers, criteria for determining reductions
    in eligibility, information regarding bid withdrawal and bid
    removal, stopping rules, and information relating to auction delay,
    suspension, or cancellation."[^14] In this case, the new designated
    entity rules included neither auction-specific information nor
    specific mechanisms relating to day-to-day auction conduct.
    Therefore, we do not believe that they fall under the rubric of
    section 309(j)(3)(E)(ii).

10. Even if, however, we were to agree with the Joint Petitioners that
    the new designated entity rules somehow implicate section
    309(j)(3)(E)(ii), we would still reject their contention that the
    Commission's action here runs afoul of the statutory provision. We
    note that parties were on notice for many months of the Commission's
    intent to apply the changes to the designated entity rules adopted
    in this proceeding to licenses issued in Auction No. 66.[^15] They
    thus had ample warning that a change in the designated entity rules
    was coming and should have been prepared to react as soon as the new
    rules were announced. Additionally, while the Joint Petitioners
    complain that the then-existing short-form filing deadline for
    Auction No. 66 was two weeks after the release of the new designated
    entity rules, auction applicants are permitted, even after the
    short-form filing deadline, to take a variety of steps "to develop
    business plans, assess market conditions, and evaluate the
    availability of equipment for the relevant services," including
    adding non-controlling investors at any time before or during the
    auction.[^16]

11. In any event, the Commission has rescheduled the deadline for filing
    short-form applications to participate in Auction No. 66, and
    interested parties now have until June 19, 2006, or 54 days after
    the release of the *Designated Entity Second Report and Order* to
    file their applications.[^17] The auction itself now is scheduled to
    take place on August 9, 2006, or more than three months after the
    Commission announced its new designated entity rules. In our expert
    judgment, even assuming that section 309(j)(3)(E)(ii) applies to
    these rules, this schedule provides applicants with more than
    sufficient time to adjust business plans and reevaluate market
    conditions in light of the new designated entity rules.[^18] Along
    these lines, we note that Joint Petitioners nowhere provide any
    estimate of what would be a sufficient period of time for designated
    entities to adjust to the new rules.[^19] Rather, they appear to
    argue that so long as the new rules are in place, they will be
    unable to participate in the auction. For example, while Bethel
    Native Corporation contends that it will be able to participate in
    Auction No. 66 if the new rules were no longer to apply to the
    licenses awarded in the auction, nowhere does it make a similar
    representation that it would be able to participate in Auction No.
    66 if given a sufficient period of time to adjust to the new rules,
    which is not surprising given Joint Petitioners' claim that the new
    rules "have the practical effect of eviscerating a designated
    entity's access to capital."[^20] Likewise, Council Tree claims:
    "\[I\]t will be virtually impossible as a practical matter to
    reconstruct or develop new business plans or financing alternatives
    for Designated Entities so long as the new rules are on the books. A
    mere postponement of the AWS auction is not sufficient under these
    circumstances."[^21] As a result, it is apparent that the Joint
    Petitioners' real objection is to the substance of the new rules and
    not to questions of timing under section 309(j)(3)(E)(ii).

12. Additionally, it is important to note that section 309(j)(3)
    requires the Commission to balance several statutory objectives. As
    the Commission has previously stated, "while Section 309(j)(3)(E)
    directs the Commission to provide interested parties adequate time
    to prepare prior to an auction, the statute also requires that the
    Commission promote several other objectives in exercising its
    competitive bidding authority, including the rapid deployment of new
    technologies and services to the public, promotion of economic
    opportunity and competition, recovery for the public of a portion of
    the value of the spectrum and avoidance of unjust enrichment, and
    efficient and intensive use of the spectrum."[^22] Two of these
    other statutory objectives are of particular importance here: (1)
    promoting the development and rapid deployment of new technologies,
    products, and services for the benefit of the public; and (2)
    avoiding unjust enrichment. We believe that these objectives impose
    on us here an obligation to avoid unnecessary or unreasonable delays
    of Auction No. 66. We have evidence that potential bidders have an
    immediate need for the licenses that will be offered in Auction No.
    66[^23] and that delaying the auction would impair the rapid
    deployment of affordable wireless service to the public.[^24]
    Indeed, there is evidence in the record that suggests that delaying
    the auction further will impede the ability of smaller entities to
    successfully obtain licenses in Auction No. 66,[^25] even though
    Joint Petitioners claim that our new rules will deter small
    businesses from participating in the auction. The alternative
    proposed by the Joint Petitioners of holding Auction No. 66 as
    currently scheduled but setting aside our new designated entity
    rules with respect to the licenses offered in that auction,[^26]
    would put us in the position of neglecting our statutory duty to
    avoid unjust enrichment by assuring that designated entity benefits
    go to those entities that use their licenses to provide
    facilities-based services for the benefit of the public.[^27] The
    additional alternative proposed by Joint Petitioners of delaying the
    auction to allow further comment on the rules adopted in the
    *Designated Entity Second Report and Order*[^28] would constitute
    unreasonable delay in light of our statutory obligation to promote
    the development and rapid deployment of services for the benefit of
    the public. For all of these reasons, we continue to believe that we
    have reasonably balanced the objectives set forth in section
    309(j)(3) and that proceeding with the auction as scheduled would
    best serve the public interest.

13. Finally, it is worth noting that Council Tree, in its comments in
    this proceeding, previously supported the Commission's proposal to
    apply new designated entity rules to the licenses offered in Auction
    No. 66.[^29] And, at the same time, Council Tree took the position
    that Auction No. 66 should not be delayed.[^30] When Council Tree
    made these comments, it was well aware of the general timeframe
    under which the Commission was operating, both with respect to this
    proceeding as well as the date of the auction. Indeed, recognizing
    the potentially tight time window at issue, Council Tree even urged
    the Commission, if necessary, to make the new designated entity
    rules effective immediately upon publication in the Federal
    Register, rather than with the normal thirty-day delay, so that the
    new rules could apply to the licenses offered in Auction No. 66, and
    the auction could be held on time.[^31] And this was despite the
    fact that Council Tree was advocating even broader changes to the
    designated entity rules than those the Commission ultimately decided
    to adopt. In light of this history, we believe that Council Tree's
    current claim that the Commission has violated section
    309(j)(3)(E)(ii) by applying the new designated entity rules to the
    licenses offered in Auction No. 66 and delaying the auction for over
    one month runs afoul of what the United States Court of Appeals for
    the District of Columbia Circuit has termed the "chutzpah
    doctrine."[^32]

## Material Relationships

14. *Notice.* In their Supplement, Joint Petitioners argue that we
    violated the Administrative Procedure Act[^33] by adopting the new
    material relationship rules.[^34] They contend, first, that we
    failed to give sufficiently specific notice, and thus sufficient
    opportunity for comment, on the new restrictions on leasing and
    resale arrangements. Second, they argue that we made certain aspects
    of the rules immediately effective without the requisite statutory
    notice. We find both claims unconvincing.

15. It is settled that an agency "is not required to adopt a final rule
    that is identical to the proposed rule."[^35] In fact, "\[a\]gencies
    are free -- indeed, they are encouraged -- to modify proposed rules
    as a result of the comments they receive."[^36] If they were not
    free to do so, agencies "could learn from the comments on \[their\]
    proposals only at the peril of subjecting \[themselves\] to
    rulemaking without end."[^37] As long as parties could have
    anticipated that the rule ultimately adopted was "possible," it is
    considered a "logical outgrowth" of the original proposal, and there
    is no violation of the APA's notice requirements.[^38]

16. Applying these standards, it is clear that there was ample notice of
    the new material relationship rules in this case. The *Further
    Notice* emphasized the Commission's ongoing commitment "to
    prevent\[ing\] companies from circumventing the objectives of the
    designated entity eligibility rules"[^39] and to ensuring that "its
    small business provisions \[are\] available only to bona fide small
    businesses."[^40] After discussing existing rules, we noted Council
    Tree's concern that those rules did "not adequately prevent large
    corporations from structuring relationships in a manner that allows
    them to gain access to benefits reserved for small businesses."[^41]
    We then took note of Council Tree's specific proposal for addressing
    this concern, namely that designated entity benefits be withheld
    from any prospective licensee that has a "material relationship"
    with a "large, in-region incumbent wireless service provider."[^42]
    While we tentatively proposed adoption of Council Tree's rule, we
    also sought comment "on whether other 'material relationships' . . .
    should trigger a restriction on the award of designated entity
    benefits."[^43] Similarly, we asked whether limiting the prohibited
    "material relationships" to "large incumbent wireless service
    providers" or entities "with significant interests in communications
    services" would be "sufficient to address any concerns that our
    designated entity program may be subject to potential abuse from
    larger corporate entities."[^44]

17. In addition to contemplating a broad range of entities beyond the
    narrow category proposed by Council Tree, the *Further Notice* made
    clear that we were considering several approaches to defining a
    "material relationship." We noted that Council Tree proposed that a
    "material relationship" would exist based on, *inter alia*, "any
    material operational arrangement . . . (such as management, joint
    marketing, trademark, or other arrangements.)"[^45] We did not
    tentatively propose adopting that definition, however, but instead
    broadly sought comment "on the specific nature of the relationship
    that should trigger such a restriction."[^46]

18. Contrary to Council Tree's claim that it had no notice that an
    arrangement such as lease or resale could constitute a "material
    relationship," the *Further Notice* specifically contemplated it. We
    noted that in our Secondary Markets proceeding, we had concluded
    "that certain spectrum manager leases between a designated entity
    licensee and a non-designated entity lessee would cause the spectrum
    lessee to become an attributable affiliate of the licensee, thus
    rendering the licensee ineligible for designated entity benefits and
    making such a spectrum lease impermissible."[^47] We then sought
    comment on whether we should follow a similar approach here: "We
    seek comment on what, if any, standard should be used to determine
    whether a spectrum leasing arrangement is a 'material relationship'
    for the purpose of any additional restriction on the availability of
    designated entity benefits that we might adopt."[^48] We went on to
    ask "whether other arrangements should be taken into account" and
    "\[i\]f so, what arrangements should we consider?"[^49]

19. The comments filed in response to the *Further Notice* reflected the
    broad scope of the questions posed there, and they ranged from those
    suggesting a complete overhaul of the Commission's designated entity
    eligibility rules to those recommending that we maintain the status
    quo.[^50] Commenting parties clearly understood that the Commission
    was contemplating rule changes that would extend beyond material
    relationships with incumbent wireless carriers. For example, Dobson
    Communications Corporation noted that the Commission had sought
    comment "as to whether . . . restrictions should be placed on DEs
    that partner with other large companies that are not in-region
    wireless carriers."[^51] Dobson urged the Commission to do so,
    arguing that "\[i\]f it is proven true that the benefits designed
    for small businesses are instead being realized by large strategic
    investors, it surely should not matter whether that investor is an
    in-region incumbent wireless service provider or not."[^52] Council
    Tree, on the other hand, argued that the prohibition should remain
    narrowly circumscribed to only large incumbent wireless
    carriers.[^53] Likewise, parties clearly understood that
    arrangements such as spectrum leases could constitute "material
    relationships" and commented on the subject.[^54]

20. Based on a review of those comments, and given our experience in
    awarding designated entity benefits, we determined that we should
    modify our rules to achieve Congress's objectives of preventing
    unjust enrichment and promoting true participation by designated
    entities in the provision of spectrum-based services for the benefit
    of the public. We concluded that "certain agreements" between
    designated entities and others are "by their very nature . . .
    generally inconsistent with Congress's legislative intent,"
    regardless of what other kind of entity they involve.[^55]
    Specifically, we explained that "where an agreement concerns the
    actual use of the designated entity's spectrum capacity, it is the
    agreement, as opposed to the party with whom it is entered into,
    that causes the relationship to be ripe for abuse and creates the
    potential for the relationship to impede a designated entity's
    ability to become a facilities-based provider, as intended by
    Congress."[^56] Accordingly, we adopted rules in the *Designated
    Entity Second Report and Order* to limit the award of designated
    entity benefits to any applicant or licensee that has "impermissible
    material relationships" or an "attributable material relationship"
    created by agreements with one or more other entities for the lease
    or resale (including under a wholesale arrangement) of its spectrum
    capacity.

21. These rules were a logical outgrowth of the questions we asked in
    the *Further Notice* and are well within the scope of the inquiry
    initiated there. The fact that we elected to adopt a definition of
    material relationship that differed from that specifically proposed
    by Council Tree does not mean that we failed to provide notice of
    the rule modifications we ultimately adopted. We therefore reject
    Joint Petitioners' APA notice claim regarding the material
    relationship rules.

22. Second, we also disagree with the Joint Petitioners' contention that
    we made certain aspects of the rules immediately effective and find
    that such an argument is based on a gross misreading of the rule.
    The reference to the date of the release in the new rule did not
    impose any consequences on parties immediately following the date of
    release. Rather, once the rules became effective -- 30 days after
    Federal Register publication -- actions taken following the release
    might affect a party's status, but only if not undone in the period
    before the rule became effective. Thus, parties had the requisite
    period of notice to adjust in response to the new rule.

23. *Requests for General Clarification.* In addition to the arguments
    raised by the Petitioners, after releasing the *Designated Entity*
    *Second Report and Order* staff received a number of questions
    seeking general advice regarding how the Commission intended to
    implement its rule modifications. We therefore clarify how we will
    consider: (1) the meaning of "spectrum capacity" in the context of
    material relationships, (2) grandfathering, and (3) applicability of
    the rules to particular services.

24. *Material Relationships*. A number of questions have been raised
    regarding how the Commission will evaluate impermissible and
    attributable material relationships for the purposes of determining
    eligibility for both designated entity benefits and the imposition
    of unjust enrichment. In the *Designated Entity Second Report and
    Order*, we concluded that an applicant or licensee has
    "impermissible material relationships" when it has agreements with
    one or more other entities for the lease (under either spectrum
    manager or *de facto* transfer leasing arrangements) or resale
    (including under a wholesale arrangement) of, on a cumulative basis,
    more than 50 percent of the spectrum capacity of any individual
    license. We decided that such "impermissible material relationships"
    would render the applicant or licensee (i) ineligible for the award
    of future designated entity benefits, and (ii) subject to unjust
    enrichment on a license-by-license basis. We further concluded that
    an applicant or licensee has an "attributable material relationship"
    when it has one or more agreements with any individual entity,
    including entities and individuals attributable to that entity, for
    the lease (under either spectrum manager or *de facto* transfer
    leasing arrangements) or resale (including under a wholesale
    arrangement) of, on a cumulative basis, more than 25 percent of the
    spectrum capacity of any individual license that is held by the
    applicant or licensee. We decided that such an "attributable
    material relationship" would be attributed to the applicant or
    licensee for the purposes of determining the applicant's or
    licensee's (i) eligibility for future designated entity benefits,
    and (ii) liability for unjust enrichment on a license-by-license
    basis. As stated in the *Designated Entity Second Report and Order*,
    the Commission's policy is to assure that a designated entity
    preserves at least half of the spectrum capacity of each license for
    which the designated entity has been awarded and retained designated
    entity benefits in exchange for the provision of service as a
    facilities-based provider for the benefit of the public.[^57]

25. *Meaning of Spectrum Capacity.* We also take this opportunity to
    clarify how we will measure compliance with the thresholds we
    adopted in our definitions of material relationships. The
    restrictions we adopted regarding impermissible and attributable
    material relationships require a designated entity to assess the
    percentage of its spectrum capacity that will be leased (under
    either spectrum manager or *de facto* transfer leasing arrangements)
    or subject to resale (including under a wholesale arrangement).
    Since release of the *Designated Entity* *Second Report and Order*,
    parties have asked us to clarify the meaning of "spectrum capacity."
    Accordingly, we provide additional guidance on determining the
    percentage of a designated entity's spectrum capacity involved in
    lease or resale agreements.

26. We observe, as an initial matter, that there are a number of ways
    "spectrum capacity" could be defined. It would be difficult for the
    Commission to enumerate every possible means by which a licensee
    could lease or make its spectrum capacity available to another party
    to resell. By adopting "spectrum capacity" as a measurement, we
    sought to provide licensees with some flexibility to tailor their
    agreements to their business needs. We thus are reluctant to employ
    only a single measure of "spectrum capacity." Nevertheless, to
    assist designated entities as they evaluate secondary market
    transactions, we clarify that if they meet the spectrum capacity
    thresholds on a MHz \* pops basis, the Commission will find them in
    compliance. The MHz \* pops basis is consistent with the
    Commission's current method of apportioning unjust enrichment when
    licenses are partitioned and/or disaggregated and provides a
    meaningful measure here.[^58] However, while meeting the spectrum
    capacity thresholds on a MHz \* pops basis is sufficient to comply
    with our rules, it is not the only means of compliance. In other
    words, any entity meeting the thresholds on a MHz \* pops basis will
    be found in compliance, but entities not meeting the thresholds on a
    MHz \* pops basis may also be found in compliance based on other
    factors. The MHz \* pops measure is intended as a safe harbor; it is
    not meant to limit complying with the rules in other ways that we
    cannot fully anticipate at this time. We recognize that our decision
    not to enumerate all other means of compliance necessarily leaves
    some uncertainty, but we think that the MHz \* pops safe harbor
    provides sufficient certainty while allowing licensees and the
    Commission flexibility to conduct a more contextual analysis.

27. *Grandfathering.* In the *Designated Entity Second Report and
    Order*, we explained that we would not employ our new restrictions
    to reconsider the eligibility for any designated entity benefits
    that had been awarded to licensees prior to the April 25, 2006,
    release date of the decision or to determine eligibility for
    designated entity benefits in an application for a license, an
    authorization, or an assignment or transfer of control, or a
    spectrum lease that had been filed with the Commission before, and
    was still pending approval on, that date.

28. We received a number of inquiries regarding how the Commission will
    consider future agreements that were "agreed upon" prior to the
    release date of our decision. We therefore offer the following
    explanation. Agreements entered into by a designated entity -- and,
    to the extent required, approved by or pending approval by the
    Commission -- no later than April 24, 2006 that concern the lease or
    resale of the designated entity's spectrum capacity after the
    release date of the *Designated Entity Second Report and Order* are
    grandfathered for the purposes of existing eligibility benefits and
    the imposition of unjust enrichment to the extent that the
    designated entity has no discretion as to the future lease or
    resale. For example, if a designated entity licensee had entered
    into an agreement on or before April 24, 2006 pursuant to which it
    was required to make 26 percent of its spectrum capacity available
    to Company B for resale purposes in 2007, that agreement would be
    grandfathered and therefore would not affect the licensee's
    eligibility for existing designated entity benefits for that license
    nor would it trigger any future unjust enrichment obligations for
    that license. Even though Company B could not begin reselling the
    designated entity's spectrum until 2007, its unequivocal right to do
    so had been contractually established before the release date of the
    *Designated Entity Second Report and Order*.[^59]

29. If, however, the agreement allowed the designated entity to decide
    at some future point in time whether it would make spectrum
    available to Company B for resale purposes, and the designated
    entity did not legally commit itself to the resale until after April
    24, 2006, the agreement for resale would, on the date the designated
    entity made the legal commitment, give rise to an attributable
    material relationship and also would be considered in calculating
    whether the designated entity had entered into impermissible
    material relationships.[^60] Accordingly, the agreement might have
    implications for the designated entity's ongoing eligibility for
    designated entity benefits for that license and unjust enrichment
    obligations. This result would occur even if the agreement had,
    prior to the release date of the *Designated Entity Second Report
    and Order*, already been reviewed and approved by the Commission.
    Thus, the applicability of grandfathering to the future lease or
    resale of spectrum in a pre-existing agreement depends on whether or
    not the provision was a "done deal" such that, prior to April 25,
    2006, the decision to lease or to allow the resale of spectrum was
    no longer within the discretion of the designated entity.[^61]

30. *Applicability of Material Relationships Rules to Certain Services.*
    There has also been some question about the applicability of the new
    material relationship rules with regard to agreements to lease
    spectrum in the 700 MHz Guard Band Manager Service and those other
    services not covered by our secondary market leasing policies.[^62]
    Consequently, we clarify that the new material relationship rules
    will apply only to those services in which leasing is permitted
    under our secondary markets rules.[^63]

## Unjust Enrichment

31. *Notice*. In their petition for expedited reconsideration of the
    *Designated Entity Second Report and Order*, the Joint Petitioners
    argue that the Commission violated the Administrative Procedure Act
    by giving inadequate notice and opportunity for comment prior to
    adopting new unjust enrichment provisions.[^64] This claim is
    refuted by the plain language of the *Further Notice* and by the
    Joint Petitioners' own filings in response to it.

32. In the *Further Notice*, we observed that the Commission's existing
    rules "require the payment of unjust enrichment when an entity that
    acquires its license with small business benefits loses its
    eligibility for such benefits or transfers a license to another
    entity that is not eligible for the same level of benefits."[^65] We
    also noted that Council Tree had proposed extending this
    "reimbursement obligation" to any licensee that acquires a license
    with the help of a bidding credit but then "makes a change in its
    'material relationships' or seeks to assign or transfer control of
    the license to an entity that would result in its loss of
    eligibility for the bidding credit pursuant to any eligibility
    restriction that we adopt."[^66] According to Council Tree,
    strengthening the unjust enrichment rules was "necessary to fulfill
    the Commission's statutory obligation to prevent unjust
    enrichment."[^67] The *Further Notice* sought comment both on
    Council Tree's specific proposal and on whether we should seek to
    strengthen the unjust enrichment rules "in some other manner."[^68]
    We also asked a series of questions about the scope of the
    reimbursement obligation, seeking comment on whether it should be
    triggered only "where the licensee takes on new investment" or also
    when it "enters into any new 'material financial relationship' or
    'material operational relationship' that would have rendered the
    licensee ineligible for a bidding credit."[^69] Finally, while we
    noted Council Tree's proposal for a five-year reimbursement
    obligation, we did not even tentatively propose adopting it;
    instead, we asked "over what portion of the license term
    should . . . unjust enrichment provisions apply?"[^70]

33. Notwithstanding the broad scope of the questions asked by the
    *Further Notice*, Council Tree claims that parties had no notice
    that we were contemplating any changes to our unjust enrichment
    rules other than those specifically proposed by Council Tree. As the
    above discussion of the *Further Notice* makes clear, we did not put
    ourselves in such a straitjacket, and it would have been
    unreasonable for any party to believe that we had done so. Nowhere
    did we say we would consider only a five-year reimbursement
    obligation or that we would artificially limit the rule changes only
    to relationships with particular entities.

34. Indeed, the comments filed in response to the *Further Notice*
    demonstrate that parties did in fact understand the scope of the
    contemplated changes to the unjust enrichment rules. Council Tree
    itself squarely acknowledged that "\[t\]he Commission also seeks
    comment regarding over what portion of the license term should the
    unjust enrichment provisions apply."[^71] Council Tree went on to
    advocate retention of a five-year time period.[^72] On the other
    hand, MMTC, another of the Joint Petitioners now claiming lack of
    notice, urged "the Commission \[to\] consider expanding the unjust
    enrichment standard to encompass the entire license term and not
    just the first five years."[^73] MMTC also suggested that the
    Commission consider adjusting its reimbursement obligations to
    require repayment of 100 percent of the value of the bidding
    credit.[^74] Similarly, STX supported "stricter unjust enrichment
    rules so that the U.S. Treasury may be made whole in the event that
    a designated entity turns out to have been merely a front organized
    to secure bidding credits for a large incumbent wireless service
    provider."[^75]

35. The changes we ultimately adopted to our unjust enrichment rules
    were clearly within the scope of the revisions contemplated by the
    *Further Notice* or, at a minimum, a logical outgrowth of them.
    Indeed, had we only revised the five-year unjust enrichment schedule
    for certain types of transactions but not for others, we would have
    risked creating an illogical scheme that would have created an
    incentive for designated entities to prioritize certain types of
    transactions over others. For all of these reasons, we reject the
    Joint Petitioner's APA notice claim.

36. *Impact of New Rules.* In the *Designated Entity Second Report and
    Order*, we adopted changes to our unjust enrichment rules to ensure
    that designated entity benefits go to their only intended
    beneficiaries.[^76] We agreed with commenters that the adoption of
    stricter unjust enrichment rules would increase the probability that
    the designated entity would develop into a competitive
    facilities-based service provider and deter speculation by those who
    do not intend to offer service to the public, or who intend to use
    bidding credits to obtain a license at a discount and later to sell
    it at the full market price for a windfall profit.[^77]

37. We therefore modified our unjust enrichment rules to expand the
    unjust enrichment payment schedule from five to ten years.[^78]
    Further, we required that the Commission be reimbursed for the
    entire bidding credit amount owed if a designated entity loses its
    eligibility for a bidding credit prior to the filing of the
    applicable construction notifications.[^79] Specifically, we adopted
    the following ten-year unjust enrichment schedule for licenses
    acquired with bidding credits. For the first five years of the
    license term, if a designated entity loses its eligibility for a
    bidding credit for any reason,[^80] including but not limited to,
    entering into an "impermissible material relationship" or an
    "attributable material relationship," seeking to assign or transfer
    control of a license, or entering into a *de facto* transfer lease
    with an entity that does not qualify for bidding credits, 100
    percent of the bidding credit, plus interest, is owed.[^81] For
    years six and seven of the license term, 75 percent of the bidding
    credit, plus interest, is owed.[^82] For years eight and nine, 50
    percent of the bidding credit, plus interest, is owed, and for year
    ten, 25 percent of the bidding credit, plus interest, is owed.[^83]
    We also imposed a requirement that the Commission must be reimbursed
    for the entire bidding credit amount owed, plus interest, if a
    designated entity loses its eligibility for a bidding credit for any
    reason,[^84] including but not limited to, entering into an
    "impermissible material relationship" or an "attributable material
    relationship," seeking to assign or transfer control of a license,
    or entering into a *de facto* transfer lease with an entity that is
    not eligible for bidding credits prior to the filing of the
    notification informing the Commission that the construction
    requirements applicable at the end of the license term have been
    met.[^85]

38. Joint Petitioners assert that the new provisions will eliminate
    designated entities' access to capital and financing. For several
    reasons, these claims do not justify reconsideration of the recent
    rule changes.

39. First, Joint Petitioners contend that the new unjust enrichment
    rules "have the practical effect of eliminating a designated
    entity's access to capital by closing an accepted exit path if the
    business is not going well."[^86] This is so because, according to
    Joint Petitioners, "private equity and other investors frequently
    adhere to three to seven year investment horizons, with five being
    an accepted average."[^87] Joint Petitioner's assertions regarding
    "accepted averages" do not demonstrate, however, that designated
    entities access to capital will be eliminated. Indeed, we are not
    convinced that three to seven years is a reasonable timeframe for
    investors to expect to recover their capital investments in
    facilities to provide spectrum-based services. In a recently
    concluded proceeding addressing the leasing of Educational Broadcast
    Service spectrum, a broad cross-section of commenters, including a
    private equity investment firm,[^88] submitted evidence that
    insufficient capital would flow to businesses that want to develop
    that spectrum if the length of spectrum lease terms was limited to
    fifteen years.[^89] These parties argued that lessees needed access
    to the spectrum for thirty years or more in order to provide the
    necessary certainty to justify capital investment in the band.[^90]
    The Commission was "persuaded by the analyses presented by
    commenters indicating the difficulty that commercial lessees may
    have in obtaining financing if leases are limited to a shorter
    duration" than thirty years.[^91] Given our recent finding that
    access to Educational Broadcast Service spectrum for longer than
    fifteen years is essential to attract the capital needed to deploy
    facilities for spectrum based services, we are not convinced that
    the appropriate investment horizon for designated entity status
    should be only three to seven years.[^92] Designated entity benefits
    are offered to ensure that small businesses have an opportunity to
    participate in the provision of spectrum-based services, not to
    ensure the short-term "exit strategies" of parties providing
    capital. The Commission strengthened its rules to ensure that those
    that receive such benefits were properly motivated to build out
    their spectrum and provide services for the benefit of the public by
    closing off the opportunity to sell licenses awarded with bidding
    credits for huge profits without ever having to provide actual
    facilities based services. The Joint Petitioners' predictions
    regarding the new rules' effect on venture capital alone are not a
    basis for reconsidering the rules.

40. Second, even if some sources of financing and capital would no
    longer be available on the same terms as before, the adoption of new
    rules is not arbitrary and capricious, or otherwise contrary to law.
    The Commission must balance the various statutory objectives of
    Section 309(j), and based on the record in response to the *Further
    Notice* and many years of experience, we found that the new unjust
    enrichment rules are necessary to increase the probability that
    designated entities will develop into facilities-based providers of
    service for the benefit of the public.[^93] Again, it is neither the
    Commission's statutory responsibility nor its intent merely to
    provide small businesses with generalized economic opportunities in
    connection with spectrum licenses.[^94] The Commission has not been
    charged with providing entities with a path to financial success,
    but rather with an obligation to facilitate opportunities for small
    businesses to provide spectrum based services to the public.[^95]
    Therefore, it is our responsibility to create strong incentives for
    designated entities to use spectrum to provide facilities-based
    service to the public instead of holding their licenses and selling
    them for profit. We believe that our new rules create appropriate
    incentives in this regard while still affording designated entities
    the opportunity to achieve financial success by providing service to
    the public. It is important to remember that designated entities are
    provided with bidding credits in order to enable them to obtain
    spectrum and then provide facilities-based service to the public. To
    the extent that they do not do so, but instead sell their licenses
    to others in the marketplace at market prices, we believe that it is
    reasonable that they no longer be allowed to enjoy the benefit of
    obtaining spectrum at below-market prices.

41. *Clarification.* We believe that clarification is warranted of our
    statement in the *Designated Entity Second Report and Order* that
    "retroactive penalties \[will\] not be imposed on pre-existing
    designated entities."[^96] Specifically, we clarify that the
    newly-adopted ten-year unjust enrichment schedule applies only to
    licenses that are granted after the release of the *Designated
    Entity Second Report and Order*.[^97] Likewise, the requirement that
    the Commission be reimbursed for the entire bidding credit amount
    owed if a designated entity loses its eligibility for a bidding
    credit prior to the filing of the notifications informing the
    Commission that the construction requirements applicable at the end
    of the license term have been met applies only to those licenses
    that are granted on or after the April 25, 2006 release date of the
    *Designated Entity Second Report and Order*. We also make
    corresponding corrections to section 1.2111 of our rules.[^98]

## Review of Agreements, Annual Reporting Requirements, and Audits

42. We also take this opportunity to clarify and emphasize certain
    aspects of section 1.2114, our newly-adopted rule relating to
    reportable eligibility events.[^99] As the rule expressly states,
    "\[a\] designated entity must seek Commission approval for all
    reportable eligibility events."[^100] As discussed in the
    *Designated Entity Second Report and Order*,[^101] we emphasize that
    section 1.2114 requires prior Commission approval for a reportable
    eligibility event. We also clarify that a reportable eligibility
    event includes any event that might affect a designated entity's
    ongoing eligibility, under either our material relationship or
    controlling interest standards,[^102] and we correct new section
    1.2114(a) accordingly. Although we affirm that we have delegated
    authority to the Wireless Telecommunications Bureau ("Bureau") to
    implement our rule changes on reporting,[^103] we anticipate that
    the Bureau's procedures will provide the means by which parties will
    apply for approval of all such arrangements. Such approval may
    require modifications to the terms of the parties' arrangements or
    unjust enrichment payments based on the impact of such arrangements
    on designated entity eligibility. We also take this opportunity to
    affirm our conclusions in the *Designated Entity Second Report and
    Order* with regard to the implementation of our regulations relating
    to the review of long-form applications and agreements to determine
    designated entity eligibility under the controlling interest
    standard. We also affirm our event-based and annual reporting
    requirements as well as our commitment to audit the eligibility of
    every designated entity that wins a license in the AWS auction at
    least once during the initial term.[^104]

## Regulatory Flexibility Act

43. We also disagree with the claims of the Joint Petitioners that our
    recently adopted rules violate the Regulatory Flexibility Act
    ("RFA").[^105] Among other things, the Joint Petitioners assert that
    we failed to provide adequate notice in the Initial Regulatory
    Flexibility Analysis ("IRFA") about the scope of the proposed rules,
    their application to current designated entity licensees, or the
    ten-year unjust enrichment schedule for licenses acquired with
    bidding credits. We note as an initial matter that the IRFA is not
    subject to judicial review. Section 611 of the RFA expressly
    prohibits courts from considering claims of non-compliance with the
    initial regulatory flexibility analysis requirement of RFA section
    603.[^106] Moreover, Joint Petitioners have not articulated the
    legal basis for their claim that a purported lack of notice
    constitutes an independent violation of the RFA. In any case, we
    have demonstrated above that the *Further Notice* (the substance of
    which was incorporated by reference in the IRFA) provided ample
    notice of the possible rule changes at issue here.[^107] For the
    same reason, any claim about the sufficiency of the Final Regulatory
    Flexibility Analysis ("FRFA") based on charges of inadequate notice
    and lack of opportunity for comment is also without merit.

44. We also disagree with the claims of the Joint Petitioners that we
    failed to describe significant alternatives to the rules we adopted
    in order to minimize any significant economic impact on small
    entities as required by the RFA. The Final Regulatory Flexibility
    Analysis ("FRFA") in the *Second Report and Order* referred to the
    substantive part of the Order, which discussed in great depth the
    impact of the rules on small businesses, alternatives considered,
    and why the Commission adopted the rules at issue. Reiteration of
    the discussion of the impact on small businesses in the FRFA is not
    required by the RFA,[^108] and such reiteration would have been
    repetitive here, as analyses of alternatives related to small
    businesses infuse the decision. In adopting our rule modifications
    to better achieve Congress's plan, we fully explained that we were
    finding a "reasonable balance between the competing goals of first,
    providing designated entities with reasonable flexibility in being
    able to obtain needed financing from investors and, second, ensuring
    that the rules effectively prevent entities ineligible for
    designated entity benefits from circumventing the intent of the
    rules by obtaining those benefits indirectly, through their
    investments in qualified businesses."[^109] Consistent with previous
    changes we have made to our designated entity rules, the rule
    modifications at issue were the result of trying to maintain this
    balance in "the face of a rapidly evolving telecommunications
    industry, legislative changes, judicial decisions, and the demand of
    the public for greater access to wireless services."[^110] Moreover,
    as evidenced by the expansive record compiled in this docket and our
    decision to defer the adoption of further rules, if any, until after
    we had provided additional opportunity for parties to comment, we
    adopted only those rules that we concluded were clearly warranted to
    deter abuse of the Commission's designated entity program.[^111]
    Consequently, we believe that our analysis fully complied with the
    requirements of the RFA.[^112]

# CONCLUSION

45. For all of the reasons set forth above, we clarify certain aspects
    of the S*econd Report and Order* as well as our rules for
    determining the eligibility of applicants for size-based benefits in
    the context of competitive bidding.

# proceduRal matters

## Paperwork Reduction Act Analysis

46. This document does not contain proposed information collection(s)
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13.  In addition, therefore, it does not contain any new or
    modified "information collection burden for small business concerns
    with fewer than 25 employees," pursuant to the Small Business
    Paperwork Relief Act of 2002, Public Law 107-198, *see* 44 U.S.C.
    3506(c)(4).

## Congressional Review Act

47. The Commission will include a copy of this Order on Reconsideration
    of the Second Report and Order in a report it will send to Congress
    and the Government Accountability Office pursuant to the
    Congressional Review Act, *see* 5 U.S.C. 801(a)(1)(A).

## Effective Date

48. This Order on Reconsideration of the Second Report and Order and the
    accompanying rule changes are effective upon publication in the
    Federal Register. We find there is good cause under section
    553(d)(3) of the Administrative Procedure Act[^113] to make the
    changes we implement with this Order effective upon Federal Register
    publication, without the usual 30-day period, because these
    changes (with the possible exception of those concerning the unjust
    enrichment rules) constitute minor points of clarification of the
    rules adopted in the Designated Entity Second Report and Order,
    which were published in the Federal Register on May 4, 2006.[^114]
    As to the clarifying changes in our unjust enrichment rules,[^115]
    these changes, at most, serve to "grant\[ \] or recognize\[ \] an
    exemption or relieve\[ \] a restriction" and would therefore fall
    within the exception contained in section 553(d)(1).[^116]

# Ordering Clause

49. IT IS ORDERED that pursuant to the authority granted in Sections
    4(i), 5(b), 5(c)(1), 303(r), and 309(j) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 154(i), 155(b), 155(c)(1), 303(r),
    and 309(j), this Order on Reconsideration of the Second Report and
    Order, is hereby ADOPTED and Part 1, Subpart Q of the Commission's
    rules are amended as set forth in the Appendix, effective upon the
    publication of this Order on Reconsideration in the Federal
    Register.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Marlene H. Dortch
>
> Secretary

**APPENDIX**

**Final Rules**

For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 1 as follows:

**PART 1 -- PRACTICE AND PROCEDURE**

For the reasons discussed in the preamble, the FCC amends part 1 of the
Code of Federal Regulations to read as follows:

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

Authority: 15 U.S.C. 79 [et seq.]{.underline}; 47 U.S.C. 151, 154(i),
154(j), 155, 157, 225, 303(r), and 309.

2\. Revise paragraphs (a), (b) introductory text, and (d)(2) of § 1.2111
to read as follows:

**[§ 1.2111 Assignment or transfer of control: unjust
enrichment.]{.underline}**

\(a\) [Reporting requirement]{.underline}. 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 local consideration that
the applicant would receive in return for the transfer or assignment of
its license (see § 1.948). 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]{.underline}. As specified in
this paragraph an applicant seeking approval for a transfer of control
or assignment (otherwise permitted under the Commission\'s rules) of, or
for entry into a material relationship (see §§ 1.2110, 1.2114)
(otherwise permitted under the Commission's rules) involving, a license
acquired by the applicant pursuant to a set-aside for eligible
designated entities under § 1.2110(c), or which proposes to take any
other action relating to ownership or control that will result in loss
of eligibility as a 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:

\* \* \* \* \*

\(d\) \* \* \*

\(2\) [Payment schedule.]{.underline}

\(i\) For licenses initially granted after April 25, 2006, the amount of
payments made pursuant to paragraph (d)(1) of this section will be 100
percent of the value of the bidding credit prior to the filing of the
notification informing the Commission that the construction requirements
applicable at the end of the initial license term have been met. If the
notification informing the Commission that the construction requirements
applicable at the end of the initial license term have been met, the
amount of the payments will be reduced over time as follows:

\(A\) A loss of eligibility in the first five 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 eligibility changing to qualify for a lower
bidding credit, 100 percent of the difference between the bidding credit
received and the bidding credit for which it is eligible);

\(B\) A loss of eligibility in years 6 and 7 of the license term will
result in a forfeiture of 75 percent of the value of the bidding credit
(or in the case of eligibility changing to qualify for a lower bidding
credit, 75 percent of the difference between the bidding credit received
and the bidding credit for which it is eligible);

\(C\) A loss of eligibility in years 8 and 9 of the license term will
result in a forfeiture of 50 percent of the value of the bidding credit
(or in the case of eligibility changing to qualify for a lower bidding
credit, 50 percent of the difference between the bidding credit received
and the bidding credit for which it is eligible); and

\(D\) A loss of eligibility in year 10 of the license term will result
in a forfeiture of 25 percent of the value of the bidding credit (or in
the case of eligibility changing to qualify for a lower bidding credit,
25 percent of the difference between the bidding credit received and the
bidding credit for which it is eligible).

\(ii\) For licenses initially granted before April 25, 2006, 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.

\(iii\) These payments will have to be paid to the United States
Treasury as a condition of approval of the assignment, transfer,
ownership change, or reportable eligibility event (see §1.2114).

\* \* \* \* \*

3\. Revise paragraph (a) of §1.2114 to read as follows:

**[§ 1.2114 Reporting of Eligibility Event.]{.underline}**

\(a\) A designated entity must seek Commission approval for all
reportable eligibility events. A reportable eligibility event is:

\(1\) Any spectrum lease (as defined in § 1.9003) or resale arrangement
(including wholesale agreements) with one entity or on a cumulative
basis that might cause a licensee to lose eligibility for installment
payments, a set-aside license, or a bidding credit (or for a particular
level of bidding credit) under § 1.2110 and applicable service-specific
rules.

\(2\) Any other event that might lead to a change in the eligibility of
a licensee for designated entity benefits.

\* \* \* \* \*

**STATEMENT OF CHAIRMAN KEVIN J. MARTIN**

*Re:* *Implementation of the Commercial Spectrum Enhancement Act and
Modernization of the Commission's Competitive Bidding Rules and
Procedures, Order on Reconsideration of the Second Report and Order (WT
Docket No. 05-211), FCC 06-78*

These changes to our designated entity rules arose out of a last-minute
proposal in the proceeding to adopt rules for the Advanced Wireless
Services spectrum. While I supported examining potential changes to our
designated entity rules for future auctions, I did not believe the rules
needed to be changed, especially in advance of the auction this summer.
Nevertheless, I agreed to the changes in order to obtain the support
needed to establish the rules for wireless services that were essential
to making the spectrum available for wireless broadband services this
summer.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**  

*Re: Implementation of the Commercial Spectrum Enhancement Act and
Modernization of the Commission's Competitive Bidding Rules and
Procedures (Order on Reconsideration of the Second R&O, WT Docket No.
05-211).*

Today's reconsideration order reaffirms that this Commission will not
tolerate unjust enrichment or fraud in the Designated Entity (DE)
program. In light of allegations that some of our prior auctions were
tainted by such practices, I believe we have a clear duty to take
affirmative action to eliminate loopholes in our existing rules.

I repeat here what I have stated previously -- we should have begun our
consideration of these rules last summer. That would have given us an
opportunity to reach consensus on the important question of which
companies should be allowed to acquire a partnership interest in a DE.
Unfortunately, revisiting that question at this point would mean further
postponing the long-scheduled AWS auction. That we cannot do.

Study after study demonstrates that our nation's broadband
infrastructure lags dramatically behind other industrialized nations. In
order to reverse this trend, we must encourage "third pipe" technologies
to provide some at least some challenge to the cable/telco broadband
duopoly in our cities. In rural areas, the situation is even graver. The
GAO recently announced that the Commission has not even properly
*measured* the rural-urban broadband gap -- a gap that no one disputes
is both significant and deeply troubling. In underserved rural regions
of our country, AWS spectrum can provide a desperately needed "first
pipe." The upcoming auction can be an important step in making this
happen.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

**APPROVING IN PART, CONCURRING IN PART**

*Re: Implementation of the Commercial Spectrum Enhancement Act and
Modernization of the Commission's Competitive Bidding Rules and
Procedures; Order on Reconsideration of the Second Report and Order; WT
Docket No. 05-211*

I support the specific clarifications in this Order on Reconsideration
because they in part respond to legitimate concerns from designated
entities regarding the possibly retroactive application of new rules. I
have this lingering concern, though, that the Commission's course of
action in this troubled proceeding, notwithstanding the legal
maneuvering in this decision, may still leave other issues unresolved.
As I have noted before, much of this uncertainty could have been avoided
had we started this proceeding earlier and kept it more narrowly
focused. I hope that the Commission's decisions over the past several
months do not prove to be the undoing of our most significant auction in
10 years.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

**APPROVING IN PART, CONCURRING IN PART**

*Re: Implementation of the Commercial Spectrum Enhancement Act and
Modernization of the Commission's Competitive Bidding Rules and
Procedures, Order on Reconsideration of the Second Report and Order (WT
Docket No. 05-211)*

Just last week, I was able to observe first-hand some of the most
extraordinary applications of digital communications services in our
country, from life-saving telemedicine in very remote villages, to the
participation of a parent via satellite in a child's graduation hundreds
of miles away. These experiences that we in the lower 48 states take for
granted are major feats of coordination in Alaska. I also heard from
many of those whose participation in the designated entity ("DE")
program is critical to those same remote citizens. I am sympathetic to
the concerns of DEs, who argue that requiring repayment of license
discounts prior to the end of a ten year "hold period" will discourage
investment and potentially limit a significant portion of designated
entity participation in future spectrum auctions.

However, as always, our decision involves a balancing of interests. I
therefore concur in this decision knowing that our efforts were to
strengthen, not weaken, the purposes of the DE program to ensure against
the potential for fraud, waste, and abuse, as well as to provide
adequate notice in order that the AWS auction can occur in a timely and
fair manner.

[^1]: Implementation of the Commercial Spectrum Enhancement Act and
    Modernization of the Commission's Competitive Bidding Rules and
    Procedures, *Second Report and Order and Second Further Notice of
    Proposed Rule Making*, 21 FCC Rcd 4753 (2006) ("*Designated Entity
    Second Report and Order"* and *"Second Further Notice of Proposed
    Rule Making"*).

[^2]: *See, e.g*., Petition for Expedited Reconsideration dated May 5,
    2006 ("Petition for Expedited Reconsideration") filed jointly by
    Council Tree Communications, Inc. ("Council Tree"), the Minority
    Media and Telecommunications Council ("MMTC"), and Bethel Native
    ("Bethel Native"); Motion for Expedited Stay Pending Reconsideration
    or Judicial Review dated May 5, 2006 filed jointly by Council Tree
    ("Motion for Expedited Stay"), MMTC and Bethel Native; CTIA -- The
    Wireless Association Opposition to Motion for Expedited Stay Pending
    Reconsideration or Judicial Review dated May 11, 2006; T-Mobile USA,
    Inc. Opposition to Stay dated May 12, 2006; Supplement to Motion for
    Expedited Stay Pending Reconsideration or Judicial Review and
    Petition for Expedited Reconsideration dated May 17, 2006, filed
    jointly by Council Tree, MMTC, and Bethel Native ("Supplement");
    Further Supplement to Motion for Expedited Stay dated May 25, 2006,
    filed jointly by Council Tree, MMTC, and Bethel Native ("Further
    Supplement").

[^3]: Implementation of the Commercial Spectrum Enhancement Act and
    Modernization of the Commission\'s Competitive Bidding Rules and
    Procedures, WT Docket No. 05-211, *Further* *Notice of Proposed Rule
    Making*, 21 FCC Rcd 1753 (2006) ("*Further Notice*").

[^4]: *See* Letter from Messrs. Steve C. Hillard and George T. Laub,
    Council Tree Communications, Inc. to Marlene H. Dortch, Secretary,
    Federal Communications Commission, WT Docket Nos. 02-353, 04-356,
    RM-10956 (June 13, 2005) (Council Tree *ex parte*).

[^5]: *Further Notice*, 21 FCC Rcd at 1760 ¶ 13.

[^6]: *See* *id.* § 1.2110. The Commission establishes small business
    size standards on a service-specific basis, taking into
    consideration the characteristics and capital requirements of the
    particular service. 47 C.F.R. § 1.2110(c)(1). In the *Part 1 Fifth
    Report and Order,* the Commission, in light of the *Adarand*
    decision, declined to adopt special provisions for minority- and
    women-owned businesses but noted that minority- and women-owned
    businesses that qualify as small businesses may take advantage of
    the provisions the Commission has adopted for small businesses.
    Amendment of Part 1 of the Commission's Rules -- Competitive Bidding
    Procedures, WT Docket No. 97-82, *Order on Reconsideration of the
    Third Report and Order, Fifth Report and Order, and Fourth Further
    Notice of Proposed Rule Making*, 15 FCC Rcd 15293, 15319 ¶ 48 (2000)
    ("*Part 1 Fifth Report and Order*") (citing *Adarand Constructors,
    Inc. v. Pena*, 515 U.S. 200, 227 (1995)). On several occasions, the
    Commission has declined to adopt bidding credits for large telephone
    companies that serve rural areas. *See, e.g.*, Implementation of
    Section 309(j) of the Communications Act -- Competitive Bidding, PP
    Docket No. 93-253, *Fifth Memorandum Opinion and Order*, 10 FCC Rcd
    403, 457-58, 462-63 ¶¶ 100, 111 (1994) ("*Competitive Bidding Fifth
    MO&O*"); Amendment of Part 1 of the Commission's Rules --
    Competitive Bidding Procedures, *Order on Reconsideration of the
    Third Report and Order, Fifth Report and Order, and Fourth Notice of
    Proposed Rule Making,* 15 FCC Rcd 15293, 15320-21 ¶¶ 51-52 (2000);
    Reallocation and Service Rules for the 698-746 MHz Spectrum Band
    (Television Channels 52-59), GN Docket No. 01-74, *Report and
    Order*, 17 FCC Rcd 1022, 1090-91 ¶ 176 (2002). The Commission
    determines eligibility for its small business provisions based on an
    entity's size determined pursuant to attribution rules. 47 C.F.R. §
    1.2110(b)(1)-(3). *But see* Amendment of Part 1 of the Commission's
    Rules -- Competitive Bidding Procedures, *Second Order on
    Reconsideration of the Third Report and Order and Order on
    Reconsideration of the Fifth Report and Order*, 18 FCC Rcd 10180,
    10191-94 ¶¶ 16-18 (2003) (establishing exemption for rural telephone
    cooperatives from the requirement that gross revenues of entities
    controlled by an applicant's officers and directors be attributed to
    the applicant), *modified on reconsideration,* *Second Order on
    Reconsideration of the Fifth Report and Order*, 20 FCC Rcd 1942
    (2005); 47 C.F.R. § 1.2110(b)(3)(iii) (exempting rural telephone
    cooperatives from attributing the gross revenues of its officers and
    directors).

[^7]: *See* 47 C.F.R. § 1.2101 *et. seq.*

[^8]: Section 309(j)(4)(D) directs the Commission to issue regulations
    to "ensure" that designated entities "are given the opportunity to
    participate in the provision of spectrum-based services." 47 U.S.C.
    § 309(j)(4)(D). We believe that the word "participate" in this
    directive contemplates significant involvement in the provision of
    services to the public, not merely passive ownership of a license to
    spectrum used by others to provide service. This view is supported
    by the legislative history of Section 309(j), in which Congress
    explains that the reason for imposing anti-trafficking restrictions
    and unjust enrichment payment obligations on entities that receive
    small business benefits is to deter "participation in the licensing
    process by those who have no intention of offering service to the
    public." [H.R. Rep. No. 103-111]{.smallcaps}, at 257-58 (1993)
    (Conference Agreement adopted House provisions, in relevant part,
    with amendments. [H.R. Conf. Rep. No]{.smallcaps}. 103-213, at 483
    (1993)).

[^9]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 21.

[^10]: *See* 47 C.F.R. § 1.2111.

[^11]: Petition for Expedited Reconsideration at 22-23.

[^12]: *See* 47 U.S.C. § 309(j)(3)(E)(ii).

[^13]: Auction of Automated Maritime Telecommunications System Licenses
    Scheduled for August 21, 2005, *Public Notice*, 20 FCC Rcd 7811
    (2005).

[^14]: Amendment of Part 1 of the Commission's Rules -- Competitive
    Bidding Procedures, Third Report and Order and Second Further Notice
    of Proposed Rulemaking, 13 FCC Rcd 374, 448 (1997). At the same
    time, we retained the flexibility to announce minor changes and
    clarifications to such mechanisms at any time before the auction.
    *Id*.at 448-49.

[^15]: See *Further Notice* at ¶ 21.

[^16]: *See* 47 C.F.R. § 1.2105(c). As applicants are well aware, filing
    a short-form application does not commit an applicant to actually
    participate in the auction or to make any kind of payments to the
    Commission. *See, e.g.*, Time Warner Cable May Bid in Wireless
    Auction, MarketWatch.com, May 10, 2006
    ([www.marketwatch.com](http://www.marketwatch.com/), visited May 22,
    2006) ("The company added that filing the application 'does not
    obligate Time Warner Cable or other companies to bid in the auction,
    but it provides us the flexibility to take part should we decide it
    makes business sense to do so.'"). And while filing an application
    to participate in the auction does subject applicants to certain
    regulatory restrictions, in practice, these restrictions do not bar
    a wide array of potential changes parties might wish to make to
    their business plans.

[^17]: *See* Auction of Advanced Wireless Services Licenses Rescheduled
    for August 9, 2006, Revised Schedule, Filing Requirements and
    Supplemental Procedures for Auction No. 66, *Public Notice*, FCC
    06-71 (rel. May 19, 2006).

[^18]: The third element covered by Section 309(j)(3)(E)(ii) \--
    evaluation of equipment availability \-- is not relevant under the
    circumstances here; neither the change in the designated entity
    rules nor the delay in the Auction No. 66 schedule would have had
    any conceivable effect on a potential bidder\'s evaluation of
    equipment availability.

[^19]: We note that in its *Further Supplement to Motion for Expedited
    Stay* ("*Further Supplement"*), Joint Petitioners assert that "the
    Commission has established a standard practice that significant
    changes to the core bidding rules contained in Subpart Q will only
    become effective *sixty* days following publication in the *Federal
    Register*." *Further Supplement* at 2, n.2 (emphasis in original).
    Contrary to Joint Petitioners' assertion, the Commission always has
    evaluated how much time is needed in order to satisfy the Section
    309(j)(3)(E)(ii) objectives as an *ad hoc* determination based on
    our expert assessment of all the factors, including the extent of
    the rule changes involved, the circumstances of the given auction
    and service at issue, the conditions of the market and the public
    needs during the general timeframe of the auction, and the
    potentially competing considerations of the other relevant statutory
    objectives in Section 309(j) (and in other applicable provisions) of
    the Communications Act. Rather than acknowledge this fact, the Joint
    Petitioners concoct a "standard practice" based solely on the
    Commission providing such a sixty-day period when it "established a
    uniform set of provisions for all auctionable services" by modifying
    rules governing status as a designated entity; governing auction
    application and payment issues; and governing competitive bidding
    design, procedure, and timing issues. *See* Amendment of Part 1 of
    the Commission's Rules -- Competitive Bidding Procedures, *Third
    Report and Order and Second Further Notice of Proposed Rule Making*
    in WT Docket No. 97-82, 13 FCC Rcd 374, 377-79 (1997) (three page
    "executive summary"). The scope of the *Designated Entity Second
    Report and Order* is hardly so broad. Finally, we note again that
    Auction No. 66 is now scheduled to commence more than three months
    after release of the *Second Report and Order*.

[^20]: *Motion for Expedited Stay* at 4-5. As explained *infra*, the
    Commission strongly disagrees with this claim.

[^21]: *See* Declaration of Steve C. Hilliard, Council Tree
    Communications, Inc., at ¶ 8 (attached to *Further Supplement to
    Motion for Expedited Stay*). *See also Further Supplement to Motion
    for Expedited Stay* at 10 ("BNC's or Council Tree's circumstances
    would not and will not change until the FCC's rules change.").

[^22]: Auction of Automated Maritime Telecommunications System Licenses
    Scheduled for August 21, 2005, *Public Notice*, 20 FCC Rcd 7811
    (2005).

[^23]: *See, e.g.*, T-Mobile Reply Comments at 4.

[^24]: *See, e.g,*. Comments of T-Mobile USA, Inc., AU Docket No. 06-3
    at 2 (filed Feb. 14, 2006).

[^25]: Comments of Rural Telecommunications Group and Organization for
    the Promotion and Advancement of Small Telecommunications Companies
    at 6.

[^26]: Petition for Expedited Reconsideration at 4-8.

[^27]: *See, e.g.*, Ex Parte of the U.S. Department of Justice at 4
    (supporting the strengthening of designated entity rules due to the
    fact that designated entities in the past have not always been truly
    independent competitive actors).

[^28]: Further Supplement at 2.

[^29]: *See* Council Tree Comments at viii, 61-62. Petitioner Minority
    Media and Telecommunications Council also espoused this view. *See*
    Comments of Minority Media and Telecommunications Council at 7-8.

[^30]: *See* *id*. at 61.

[^31]: *See* *id*. at 61.

[^32]: *See, e.g.*, *Caribbean Shippers Ass'n, Inc. v. Surface Transp.
    Bd.*, 145 F.3d 1362 (D.C. Cir. 1998); *Harbor Ins. Co. v. Schnabel
    Found. Co.*, 946 F.2d 930, 937 & n.5 (D.C. Cir. 1991) (subcontractor
    asserted contractor was negligent for relying on subcontractor\'s
    advice).

[^33]: Supplement to Motion for Expedited Stay Pending Reconsideration
    or Judicial Review and Petition for Expedited Reconsideration at 9.

[^34]: Supplement to Motion for Expedited Stay Pending Reconsideration
    or Judicial Review and Petition for Expedited Reconsideration at
    7-10.

[^35]: *Northeast Md. Waste Disposal Auth. v. EPA*, 358 F.3d 936, 951
    (D.C. Cir. 2004).

[^36]: *Id.*

[^37]: *Id.*

[^38]: *Id.*

[^39]: *Further Notice* ¶ 6.

[^40]: *Id.* ¶ 7.

[^41]: *Id.* ¶ 12.

[^42]: *Id.* ¶ 13.

[^43]: *Id.*; *see also id.* ¶ 19 (asking whether "additional entities"
    should be added to the list of those with which a designated entity
    may not have a "material relationship" without losing its status).
    We offered as an example of such a relationship one between "an
    otherwise qualified designated entity and an 'entity with
    significant interests in communications services.'" *Id.* ¶ 13. Our
    use of "such as" before this example makes clear that it was not the
    only one contemplated. In any event, insofar as the Commission
    sought comment on a far broader definition of the class of entities
    with whom a designated entity's material relationship might trigger
    the restriction of benefits, it should have been obvious to
    commenters that there was a possibility that an adopted restriction
    could apply to any relationships that the Commission deemed to be
    "material."

[^44]: *Further Notice* ¶ 15.

[^45]: *Further Notice* ¶ 13.

[^46]: *Id.*

[^47]: *Id.* ¶ 16. We noted that where "substantially all of the
    spectrum capacity of the licensee is to be leased" would effectively
    create an affiliate relationship between lessor and lessee, while
    lease of only "a small portion" of the capacity would not. *See id.*
    ¶ 16 n.38.

[^48]: *Id.*

[^49]: *Id.*

[^50]: *See, e.g*., Comments of CTIA -- The Wireless Association filed
    February 24, 2006; Comments of Verizon Wireless filed February 24,
    2006; Comments of Cook Inlet Region, Inc. filed February 24, 2006;
    Comments of The Minority Media and Telecommunications Council filed
    February 24, 2006; Comments of National Hispanic Media Coalition
    filed February 24, 2006.

[^51]: Comments of Dobson Communications Corporation at 2 (filed
    February 24, 2006).

[^52]: *Id.*

[^53]: Comments of Council Tree Communications, Inc. at 35-41 (filed
    February 24, 2006).

[^54]: *See, e.g.*, Comments of MMTC at 6 & n.16 (discussing spectrum
    lease and resale arrangements as examples of entities "manipulating
    the \[DE\] program"); Comments of Council Tree filed February 24,
    2006, at 50 ("material operating arrangement" should cover all
    arrangements other than "non-discriminatory roaming" agreement or
    "short-term de facto transfer leasing arrangement"); Reply Comments
    of Council Tree filed March 3, 2006, at 31 (discussing resale
    arrangements between DEs and incumbent wireless carriers).

[^55]: *Designated Entity Second Report and Order ¶* 23.

[^56]: *Designated Entity Second Report and Order ¶* 23.

[^57]: *Designated Entity Second Report and Order* at ¶ 27.

[^58]: *See* 47 C.F.R. §1.2111(e).

[^59]: The agreement would still count toward any assessment of whether
    the designated entity retained a controlling interest in the
    license, however.

[^60]: We note that the designated entity would not be able to make this
    legal commitment without the advance approval of the Commission.
    *See* 47 C.F.R. § 1.2114.

[^61]: This analysis is analogous to the one we use for evaluating
    whether the future ownership interests of a designated entity's
    investor are to be treated as "fully diluted" and thus immediately
    attributable to the designated entity. *See Competitive Bidding
    Fifth MO&O,* 10 FCC Rcd at 454-56, ¶¶ 93-96.

[^62]: *See* Promoting Efficient Use of Spectrum through Elimination of
    Barriers to the Development of Secondary Markets, WT Docket No.
    00-230, *Second Report and Order, Order on Reconsideration, and
    Second Further Notice of Proposed Rulemaking*, 19 FCC Rcd 17503,
    17528-36 ¶¶ 51-66 (2004) ("*Secondary Markets Second Report and
    Order*").

[^63]: *See* 47 C.F.R. § 1.9005; Promoting Efficient Use of Spectrum
    Through Elimination of Barriers to the Development of Secondary
    Markets, *Report and Order and Further Notice of Proposed
    Rulemaking*, 18 FCC Rcd 20604 (2003) (*Report and Order* and
    *Further Notice*, respectively), *Erratum*, 18 FCC Rcd 24817 (2003);
    *Secondary Markets Second Report and Order,* 19 FCC Rcd 17503
    (2004).

[^64]: Petition for Expedited Reconsideration at 18-22. These parties
    also argue that the Commission released its new unjust enrichment
    provisions too close to the short-form application deadline for
    Auction No. 66. *Id.* at 5-6.

[^65]: *Further Notice* at ¶ 20.

[^66]: *Id.*

[^67]: *Id.*; *see* 47 U.S.C. § 309(j)(4)(E); 47 C.F.R. § 1.2111(d).

[^68]: *Further Notice* at ¶ 20.

[^69]: *Id.*

[^70]: *Id.*

[^71]: Comments of Council Tree at 58 (citing the *Further Notice* at ¶
    20).

[^72]: *Id.*

[^73]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 35,
    referencing the Comments of MMTC at 15. Without explanation, MMTC
    proposed that the Commission adopt such a change in its unjust
    enrichment rules only after "initiating a \[new\] inquiry," *i.e.*
    rule making. MMTC expressly acknowledged, however, that in the
    *Further Notice* "\[t\]he Commission asks whether it should expand
    the scope of its unjust enrichment rules\[.\]" Given acknowledgement
    of this request, it is unclear why MMTC sought a further proceeding
    to adopt its proposal.

[^74]: *Id.*

[^75]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 35,
    referencing the Comments of STX at 2.

[^76]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    31; *see also* 47 C.F.R. § 1.2111(b)-(e).

[^77]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    36.

[^78]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    37.

[^79]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    38.

[^80]: *See* *Designated Entity Second Report and Order*, FCC 06-52, at
    ¶ 46, n.116 (discussing additional events that could result in a
    possible loss of designated entity eligibility).

[^81]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 37.

[^82]: *Id.*

[^83]: *Id.* If a designated entity loses its eligibility for the same
    level of bidding credit that it originally received for any reason,
    this unjust enrichment schedule will be applied to the difference
    between the original bidding credit and the bidding credit for which
    the designated entity, assignee, or assignor is eligible. *See id.*
    We also noted that the provisions of section 1.2112(e) of the
    Commission's rules may also apply. *See id.* n.106 (citing 47 C.F.R.
    § 1.2112(e) (discussing the assessment of unjust enrichment in the
    context of the partition and/or disaggregation of licenses)).

[^84]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 46,
    n.116 (discussing additional events that could result in a possible
    loss of designated entity eligibility).

[^85]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 38.
    For example, if a designated entity seeks to assign a license with a
    bidding credit to an entity that is not eligible for bidding credits
    eight years after the grant of the license and prior to the filing
    of the construction notification, 100 percent of the bidding credit,
    plus interest, will be owed, rather than the 50 percent unjust
    enrichment payment that would have been due had the construction
    notification been on file with the Commission, pursuant to the
    revised unjust enrichment schedule, above. *Id.*

[^86]: Petition for Expedited Reconsideration at 3-4.

[^87]: Petition for Expedited Reconsideration at 10.

[^88]: Ex parte Letter from James N. Perry, Jr., Managing Director for
    Madison Dearborn Partners, LLC to Marlene H. Dortch, Federal
    Communications Commission (dated March 31, 2006) in WT Docket No.
    03-66 at 1.

[^89]: S*ee, e.g.,* Amendment of Parts 1, 21, 73, 74 and 101 of the
    Commission's Rules to Facilitate the Provision of Fixed and Mobile
    Broadband Access, Educational and Other Advanced Services in the
    2150-2162 and 2500-2690 MHz Bands, WT Docket No. 03-66, *Third
    Memorandum Opinion and Order,* FCC 06-46 (rel. April 27, 2006), at
    ¶¶ 258-60 (comments of Madison Dearborn Partners, Inc., various
    schools and universities, George Mason University Instructional
    Foundation, Inc.).

[^90]: Nextel Opposition to Petition for Reconsideration in WT Docket
    No. 03-66 at 18-19.

[^91]: *See, generally*, Amendment of Parts 1, 21, 73, 74 and 101 of the
    Commission's Rules to Facilitate the Provision of Fixed and Mobile
    Broadband Access, Educational and Other Advanced Services in the
    2150-2162 and 2500-2690 MHz Bands, WT Docket No. 03-66, *Third
    Memorandum Opinion and Order,* FCC 06-46 (rel. April 27, 2006), ¶268
    (permitting EBS licensees to enter into leases with terms of up to
    30 years based on "analyses presented by commenters indicating the
    difficulty that commercial lessees may have in obtaining financing
    if leases are limited to a shorter duration").

[^92]: *Id.*

[^93]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    36.

[^94]: *Secondary Markets Second Report and Order* at ¶ 70.

[^95]: *See id.*

[^96]: *Designated Entity Second Report and Order*, FCC 06-52, at ¶ 41.

[^97]: *See* Letter from Carl W. Northrop, counsel for Salmon PCS, LLC,
    to Marlene H. Dortch, Secretary, FCC, WT Docket No. 05-211 (filed
    May 11, 2006).

[^98]: *See* Rules Appendix.

[^99]: 47 U.S.C. § 1.2114.

[^100]: 47 C.F.R. § 1.2114(a).

[^101]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    46, note 115 and accompanying text.

[^102]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    47, note 116 and accompanying text.

[^103]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    48.

[^104]: *See* *Designated Entity Second Report and Order*, FCC 06-52, at
    ¶¶ 42-50.

[^105]: *See* Supplement of Council Tree, MMTC and Bethel Native at 3-7.

[^106]: 5 U.S.C. §§ 603, 611(a),(c). *See* *United States Cellular
    Corporation v. FCC*, 254 F.3d 78 (D.C. Cir. 2001); *Allied Local &
    Regional Mfrs. Caucus v. EPA*, 215 F.3d 61, 79 (D.C. Cir. 2000).

[^107]: *See Further Notice*, Initial Regulatory Flexibility Analysis,
    21 FCC Rcd 1753 (2006). We also note that one of Joint Petitioners'
    primary claims -- that retroactive application of the unjust
    enrichment rules violates the RFA -- has been rendered moot by this
    *Order on Reconsideration*, which clarifies that the ten-year unjust
    enrichment schedule applies only to licenses initially granted to
    designated entities after April 25, 2006.

[^108]: *See* 5 U.S.C. § 605(a) ("Any Federal agency may perform the
    analyses required by sections 602, 603, and 604 of this title in
    conjunction with or as a part of any other agenda or analysis
    required by any other law if such other analysis satisfies the
    provisions of such sections.").

[^109]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    8.

[^110]: *Id.*

[^111]: *See Designated Entity Second Report and Order*, FCC 06-52, at ¶
    23.

[^112]: *United States Cellular Corporation v. FCC*, 254 F.3d 78 (D.C.
    Cir. 2001)(holding that "\[p\]urely procedural . . . RFA section 604
    requires nothing more than that the agency file a FRFA demonstrating
    a 'reasonable good faith effort to carry out \[RFA's\] mandate.'
    *Alenco Communications, Inc. v. FCC*, 201 F.3d 608, 625 (5^th^ Cir.
    2000).").

[^113]: 5 U.S.C. §553(d).

[^114]: 71 Fed. Reg. 26,245, May 4, 2006.

[^115]: 47 C.F.R. § 1.2111 as revised herein.

[^116]: 5 U.S.C. § 553(d)(1).