DA 01-2122

September 10, 2001

**Wireless Telecommunications Bureau Staff Provides Guidance on**

**Completing the Short-Form Application (FCC Form 175) for**

**Auction No. 40, Auction of Licenses for Lower and Upper Paging Bands**

Report No. AUC-01-40-H

In this Public Notice, the staff of the Wireless Telecommunications
Bureau ("Bureau") provides guidance on completing the short-form
application, FCC Form 175, for Auction No. 40. Common questions are
presented and answered below in the order in which they may arise as an
applicant fills out a short-form application.

**Pursuant to Commission rule, applicants must file their FCC Form 175
short-form applications electronically.**[^1] **For Auction No. 40,
applicants may file with the Commission at any time beginning at noon ET
on Wednesday, September 5, 2001, until 6:00 p.m. ET on Monday, September
17, 2001. Applicants are strongly encouraged to file early and are
responsible for allowing adequate time for filing their applications.
Applicants may update or amend their electronic applications multiple
times until the filing deadline of 6:00 p.m. ET on Monday, September 17,
2001. Late applications will not be accepted.**

Applicants are cautioned that the Commission's rules and decisions
control the processing of short-form applications and that the advice
and rule interpretations provided in this Public Notice constitute
informal staff opinion, not official Commission decisions or
rulings.[^2] Part 1 of the Commission's rules generally governs the
auction process, including short-form applications, in conjunction with
additional service-specific rules.[^3]

In addition, applicants are reminded that they must comply with all of
the Commission's rules governing short-form applications and not merely
those rules discussed in this Public Notice. This Public Notice
supplements the previously released *Auction No. 40 Procedures Public
Notice*,[^4] which addresses aspects of the short-form application not
discussed herein. Applicants should review all applicable rules, as well
as the *Auction No. 40 Procedures Public Notice*.[^5]

# I. Profile Page {#i.-profile-page .unnumbered}

Q.  Why does the profile page state "no P.O. Boxes" for the address of
    the applicant's contact person?

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A.  The Commission may send time-sensitive information to an applicant's
    contact person using overnight delivery services that will not
    deliver to post office box addresses. For example, the Commission
    sends information regarding incomplete applications by such a
    service. Applicants may need this information in order to revise
    their applications properly prior to the deadline for resubmission.
    Thus, it is in each applicant's interest to provide the Commission
    with an accurate street delivery address to which overnight
    deliveries can be sent.

> Applicants should be careful when copying letterhead addresses.
> Occasionally, letterheads that include both a post office box address
> and a street address list only one zip code, which may be correct for
> the post office box address but not the street address.

In addition, applicants indicating "\[s\]ame as applicant" for a contact
person's address should be careful not to give a post office box address
for the applicant.

## OWNERSHIP INFORMATION

Q.  What information must applicants disclose about Commission-regulated
    entities?

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A.  Together with other ownership information, all applicants must list
    any FCC-regulated entity or applicant for an FCC license in which
    the applicant or any party disclosed as having an ownership interest
    in the applicant owns 10 percent or more of any class of stock. This
    list must include a description of each regulated entity's principal
    business and its relationship to the applicant.[^6]

# III. Bidding Agreements {#iii.-bidding-agreements .unnumbered}

Q.  If an applicant shares authorized bidders with other applicant(s)
    for licenses in the same geographic area, must the applicant have
    formal bidding agreements with those other applicants?

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A.  Applicants for licenses in the same geographic area that share
    authorized bidders risk allegations concerning the possibility of
    communications that violate the Commission's anti-collusion rule.
    Applicants that enter into a formal bidding agreement with each
    other prior to filing their short-form applications are not subject
    to the prohibitions of that rule with respect to each other,
    provided that they identify the parties to any such agreement in
    their short-form applications.[^7] Alternatively, applicants that
    share authorized bidders can take steps to ensure that the
    individual authorized bidders (*e.g.*, individual members of a firm
    that serves as the authorized bidder for more than one applicant)
    will be limited to knowing the bids or bidding strategies of only
    one applicant until the down payment deadline.[^8]

Q. What if an applicant has controlling or ownership interests in common
with other applicants for licenses in the same geographic area? Is it
required to have formal bidding agreements with those other applicants?

A. Applicants having controlling interests, which includes all officers
and directors of the applicant, or ownership interests in common with
other applicants should review the Commission's anti-collusion rule
carefully. For purposes of the anti-collusion rule, each applicant
*includes* all controlling interests, as well as all holders of
ownership interests amounting to 10 percent or more of the
applicant.[^9] If, for example, an applicant's director also is the
director of a second applicant, the director's knowledge of one
applicant's bids or bidding strategies may be imputed to the other
applicant. Absent a properly disclosed bidding agreement between the two
applicants, these applicants risk allegations of anti-collusion rule
violations.

# IV. Bidding Credit Eligibility {#iv.-bidding-credit-eligibility .unnumbered}

**Applicants are reminded that they certify to the accuracy of
information and their compliance with the Commission's rules when they
submit their short-form applications. In particular, applicants seeking
bidding credits as a small business must certify that they qualify as a
small business. Winning bidders at the close of the auction must be
prepared to document revenues reported in their short-form applications
when they submit their long-form application(s) following the
auction.**[^10]

Q.  Must applicants seeking bidding credits list all of their officers
    and/or directors?

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A.  Yes. In addition to disclosing parties with ownership interests in
    the applicant,[^11] all applicants seeking bidding credits must list
    "the names, addresses, and citizenship of **all** officers,
    directors, and other controlling interests\[.\]"[^12] Relevant state
    laws vary regarding the number of required directors and officers,
    as well as whether one person may hold more than one directorship or
    office. To avoid any uncertainty, applicants should state that their
    application provides a complete list of relevant parties.[^13]

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Q.  Does Part 1 or Part 22 of the Commission's rules control what
    revenues are attributed to applicants seeking bidding credits?

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A.  Part 1 of the Commission's rules, **not** Part 22, controls what
    revenues are attributed to applicants seeking bidding credits.

> This is a **change** from the previous auction of licenses for the
> upper paging bands, Auction No. 26. Part 1 of the Commission's rules
> was amended following Auction No. 26.[^14] Currently, section 1.2110
> of the Commission's rules determines what revenues are relevant for
> bidding credit eligibility, regardless of redundant or contradictory
> rules in Part 22. As indicated in the *Auction No. 40 Procedures
> Public Notice*, "Part 1 rules that superseded inconsistent
> service-specific rules will control in Auction No. 40. *Accordingly,
> the "controlling interest" standard \[governing attribution of
> revenue\] as set forth \[in Part 1\] will be in effect for Auction No.
> 40, even if conforming edits to the CFR \[in Part 22\] are not made
> prior to the auction*."[^15]
>
> Part 1 rules, however, incorporate portions of the Part 22 rules. As
> indicated in Section 1.2110(c)(1), the Commission "establish\[es\] the
> definition of a small business on a service-specific basis, taking
> into account consideration \[of\] the characteristics and capital
> requirements of the particular service."[^16] With respect to the
> paging services, this means that the definition of small business in
> Section 22.223(b) remains in effect. Small businesses are defined in
> two groups, one with attributable average gross revenues of less than
> \$3 million and one with attributable average gross revenues of less
> than \$15 million.[^17]
>
> The Commission applies Part 1 rules regarding affiliation, controlling
> interests, and gross revenues, rather than Part 22, when determining
> whether an applicant qualifies as a small business within the
> definition of Section 22.223(b). **Applicants should take care not to
> rely on bidding credit eligibility information prepared for Auction
> No. 26 and should make sure that their applications comply with the
> Commission's current rules.**

Q.  What is included in gross revenues?

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A.  The Commission's rules provide an explicit definition of "gross
    revenues" for purposes of determining bidding credit
    eligibility.[^18] "Gross revenues" includes both earned and passive
    income, before any deductions are made for the cost of doing
    business.

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Q.  How many years of gross revenue information must be provided?

A. Three.[^19] Applicants should report audited financial information
for their three most recently completed fiscal years. If operating on a
calendar years basis, for Auction No. 40, those years would be 1998,
1999, and 2000.[^20]

Q.  What should applicants do if the audit for the most recently
    completed fiscal year has not been finished?

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A.  In that case, applicants should provide information from the three
    most recently completed fiscal years for which they have audited
    financial statements.

> For example, if an entity's fiscal year ends on August 31, the three
> most recently completed fiscal years prior to the September 17, 2001
> deadline for filing short-form applications will be September 1, 1998
> -- August 31, 1999 (FY 98); September 1, 1999 -- August 31, 2000 (FY
> 99); and September 1, 2000 -- August 31, 2001 (FY 00). However, the
> entity may not have finished preparing audited financial statements
> for FY 00 (September 1, 2000 -- August 31, 2001) before the September
> 17, 2001 short-form application deadline. In that case, an applicant
> reporting gross revenues for such an entity should indicate that the
> three most recently completely fiscal years for which the entity has
> audited financial statements are FY 97, 98, and 99 and provide
> information for those years.
>
> Applicants can reduce any uncertainty by providing as much information
> as possible, *e.g.*, the dates of the entity's fiscal years and how
> long after the end of the fiscal year audited financial statements
> usually become available. The Commission has stated in a related
> context that it expects applicants to obtain financial statements
> within a reasonable period of time after the close of the applicable
> calendar or fiscal year and that they should base any claim to
> eligibility on those financial statements. If an applicant delays, or
> takes action that results in delay in, the generation or submission of
> current audited financial statements in order to qualify as a small
> business when it otherwise would not, the applicant will risk being
> declared ineligible to participate in the auction or to receive
> licenses or to continue to hold licenses.[^21]

Q. What should applicants do if they do not prepare audited financial
statements?

A. "When an applicant does not otherwise use audited financial
statements, its gross revenues may be certified by its chief financial
officer or its equivalent and must be prepared in accordance with
Generally Accepted Accounting Principles."[^22] In such cases, the
applicant still would provide gross revenues for the three most recently
completed fiscal years. If, however, an applicant uses audited financial
statements, but simply does not have an audited financial statement for
the most recent fiscal year because one has not yet been prepared, the
applicant should report the three most recently completed fiscal years
for which it has prepared audited financial statements.

Q.  What if an entity was created less than three years ago?

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A.  If an entity was not in existence for all or part of the relevant
    period, gross revenues shall be evidenced by the audited financial
    statements of the entity's predecessor-in-interest.[^23] If there is
    no identifiable predecessor-in-interest for any relevant years, the
    applicant should so state while providing gross revenues for all
    relevant years in existence.

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Q.  If an entity and any identifiable predecessor-in-interest were
    created less than three years ago, how will three-year "average"
    gross revenues for that entity be determined?

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A.  If an entity and any identifiable predecessor-in-interest were
    created less than three years ago, average gross revenues will be
    determined by dividing the cumulative gross revenues of the entity
    and any identifiable predecessor-in-interest by the number of years
    they have been in existence.

> For example, a one-year-old entity, with no predecessor-in-interest,
> that has gross revenues totaling \$3,000,001 will be deemed to have
> average gross revenues of \$3,000,001 (or \$3,000,001 divided by 1
> year). For entities that can be traced back three years (or more) but
> that had no gross revenues during some portion of the previous three
> years, applicants should expressly state that the entity or its
> predecessor-in-interest was in existence during the relevant year(s)
> and had gross revenues of \$0. For entities that cannot be traced back
> three years, applicants should state so expressly and should **not**
> report gross revenues of \$0 for years that neither the entity nor any
> predecessor-in-interest were in existence.

Q.  Must an applicant include the personal income of individuals when
    reporting gross revenues?

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A.  The Commission does not consider most personal income to be gross
    revenue for purposes of determining bidding credit eligibility.[^24]
    For example, the Commission distinguishes the personal income of an
    applicant's officers and directors, such as salaries, from the
    revenues those individuals receive from their business activities.
    If an officer or director of an applicant operates a business as a
    sole proprietor, however, the gross revenues derived from that
    proprietorship should be reported and attributed to the applicant.

# V. Statement Regarding Prior Defaults or Delinquencies {#v.-statement-regarding-prior-defaults-or-delinquencies .unnumbered}

Q. Must all applicants provide a separate statement regarding prior
defaults on Commission licenses or delinquencies on non-tax debts to
other Federal agencies?

A. Yes. All applicants are required to provide "\[a\]n attached
statement made under penalty of perjury indicating whether or not the
applicant has ever been in default on any Commission license or has ever
been delinquent on any non-tax debt owed to any Federal agency."[^25]

> This statement is in addition to and separate from the required
> certification that the applicant is not currently in default.
> Applicants currently in default cannot file complete applications
> because they cannot certify that they are not currently in
> default.[^26] For this certification, "applicant" includes the
> applicant, its affiliates, its controlling interests, and affiliates
> of its controlling interests.[^27]

Q. Must applicants provide information regarding other entities' prior
defaults on Commission licenses or prior delinquencies on non-tax debts
to other Federal agencies?

A. Yes. For purposes of reporting prior defaults or delinquencies, each
applicant should state whether or not it, or its affiliates or
controlling interests, or the affiliates of its controlling interests,
have ever been in default on any Commission license or delinquent on any
non-tax debt owed to any Federal agency.[^28]

> Finally, applicants are reminded that the statement must cover
> delinquencies on non-tax debts to any Federal agency as well as any
> defaults on Commission licenses.

**- - - FCC - - -**

[^1]: *See* 47 C.F.R. § 1.2105(a).

[^2]: *See AMOR Family Broadcasting Group v. FCC*, 918 F.2d 960, 962
    (D.C. Cir. 1990); *P & R Temmer v.* FCC, 743 F.2d 918, 931 (D.C.
    Cir. 1984); *Request of 220 Television, Inc., Dayton Ohio*, 81 FCC
    2d 575, 577 (1980).

[^3]: *See* 47 C.F.R. § 1.2101 *et seq.*

[^4]: Lower and Upper Paging Bands Auction Scheduled for June 26, 2001;
    Notice and Filing Requirements, Minimum Opening Bids, Upfront
    Payments and Other Procedural Issues, *Public Notice*, DA 01-850
    (rel. April 9, 2001), 66 Fed Reg. 21143 ("*Auction No. 40 Procedures
    Public Notice*").

[^5]: Various deadlines announced in the *Auction No. 40 Procedures
    Public Notice* subsequently have been changed. *See* Lower and Upper
    Paging Bands Auction Scheduled for October 30, 2001, DA 01-1961
    (rel. Aug. 17, 2001) ("*Auction No. 40 Scheduling Notice*").

[^6]: 47 C.F.R. § 1.2112(a)(6). Page D-3 of Attachment D to the *Auction
    No. 40 Procedures Public Notice* should have included the phrase
    "owns 10 percent or more of the stock, whether voting or nonvoting,
    common or preferred," after "applicant" in the sixth line from the
    bottom of page D-3. Also, consistent with the current language of
    Section 1.2112(a)(6), page D-3 should have referred to "\[a\]ny
    FCC-**regulated** entity or applicant for an FCC license," rather
    than to "any FCC-**licensed** entity or applicant for an FCC
    license."

[^7]: 47 C.F.R. §§ 1.2105(a)(2)(viii) & (ix) and 1.2105(c).

[^8]: *See, generally,* Application of Nevada Wireless, *Memorandum
    Opinion and Order*, 13 FCC Rcd 11973 (1998).

[^9]: 47 C.F.R. § 1.2105(c)(6)(i).

[^10]: *See* 47 C.F.R. § 1.2110(j)(applicants must prove status on
    long-form applications).

[^11]: All applicants, regardless of whether they seek a bidding credit,
    may need to identify officers and/or directors in order to (1)
    identify a responsible officer or director and (2) comply with
    general ownership disclosure requirements. For example, "\[i\]f the
    applicant is a corporation, then the short-form application will
    require . . . the name and title of an officer or director." 47
    C.F.R. § 1.2105(a)(2)(ii)(A). Entities with other business
    structures have analogous requirements. *See* *id.* Furthermore, all
    applicants must provide "\[a\]pplicant ownership information, as set
    forth in § 1.2112." 47 C.F.R. § 1.2105(a)(2)(ii)(B). Section 1.2112
    may require the applicant to identify officers or directors (or
    analogous parties for partnerships and other forms of organization),
    depending upon the officers' and directors' ownership interests.
    *See* 47 C.F.R. §1.2112(a).

[^12]: 47 C.F.R. §1.2112(b)(1)(i) (emphasis added).

[^13]: The state of organization should be provided when an applicant
    identifies the citizenship of any entity, *e.g.*, when an applicant
    provides the "names, addresses, and citizenship of . . . controlling
    interests."

[^14]: *See* 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 (2000) ("*Part 1 Fifth Report and Order*").

[^15]: *Auction No. 40 Procedures Public Notice* at 15 (emphasis in
    original) (citing in part *Part 1 Fifth Report and Order* at 15330
    ¶78).

[^16]: 47 C.F.R. § 1.2110(c)(1).

[^17]: 47 C.F.R. § 22.223(b).

[^18]: 47 C.F.R. § 1.2110(n).

[^19]: 47 C.F.R. § 1.2110(b)(1).

[^20]: Attachment D to the *Auction No. 40 Procedures Public Notice*
    includes an example that uses gross revenues for 1997, 1998 and
    1999. *Auction No. 40 Procedures Public Notice* at D-5. That example
    does **not** mean that those are the years for which information
    should be provided.

[^21]: *See* Amendment of the Commission's Rules Regarding Installment
    Payment Financing for Personal Communications Services (PCS)
    Licensees, WT Docket No. 97-82, *Sixth Report and Order and Order on
    Reconsideration*, 15 FCC Rcd 16266, 16284 (2000).

[^22]: 47 C.F.R. § 1.2110(n).

[^23]: *Id.*

[^24]: *See* Revision of Part 22 and Part 90 of the Commission's Rules
    to Facilitate Future Development of Paging Systems, WT Docket No.
    96-18, *Memorandum Opinion and Order on Reconsideration and Third
    Report and Order*, 14 FCC Rcd 10030, 10086 ¶100 (1999) ("Personal
    income is treated as an element of personal net worth, and thus is
    not attributable" as gross revenues for purposes of determining
    bidding credit eligibility.)

[^25]: 47 C.F.R. § 1.2105(a)(2)(xi).

[^26]: All applicants must certify that they are not *currently* "in
    default on any commission license and . . . not delinquent on any
    non-tax debt owed to any Federal agency." 47 C.F.R.
    §1.2105(a)(2)(x).

[^27]: *See Part 1 Fifth Report and Order* at n. 142 (construing 47
    C.F.R. §§ 1.2110, 1.2105(a)(2)(x)).

[^28]: *Part 1 Fifth Report and Order* at 15317 ¶42 (discussing newly
    adopted 47 C.F.R. §1.2105(a)(2)(xi)).