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 Federal  Communications  Commission  FCC  00-  274 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 

 In  the  Matter  of 
 Amendment  of  Part  1  of  the  Commissions 
 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 

 Adopted:  July  27,  2000  Released:  August  14,  2000 
 Comment  Date:  45  days  after  publication  in  the  Federal  Register  Reply  Comment  Date:  66  days  after  publication  in  the  Federal  Register 

 By  the  Commission: 
 TABLE  OF  CONTENTS 
 Paragraph 

 I.  Overview......................................................................................................................................  1 
 II.  Executive  Summary......................................................................................................................  3 
 III.  Order  on  Reconsideration  of  the  Third  Report  and  Order...............................................................  6 
 A.  Introduction............................................................................................................................  6 
 B.  Clarification  of  Prohibition  on  Collusion.................................................................................  7 
 C.  Clarification  of  Section  1.2112  ...............................................................................................  9 
 D.  Computation  of  Bid  Withdrawal  Payments  Under  Section  1.2104  ..........................................  13 
 E.  Installment  Payment  Grace  Periods  and  Imposition  of  Late  Payment  Fees...............................  16 
 F.  Installment  Payment  Restructuring  .........................................................................................  29 
 G.  Installment  Payment  Obligations  Under  Assignments 
 of  Licenses  and  Transfers  of  Control.......................................................................................  31 
 H.  Clarification  of  Unjust  Enrichment  Rules................................................................................  34 
 I.  Inapplicability  of  Section  1.2104  to  Installment  Payment  Defaults..........................................  38 
 J.  Eligibility  for  Participation  .....................................................................................................  40 
 IV.  Fifth  Report  and  Order  .................................................................................................................  44 
 A.  Introduction............................................................................................................................  44 
 B.  Rules  Governing  Designated  Entities......................................................................................  45 
 1.  Designated  Entities........................................................................................  45 
 2.  Rural  Telephone  Company  Provisions  ...........................................................  51 
 3.  Installment  Payments.....................................................................................  54 
 4.  Attribution  of  Gross  Revenues  of  Investors  and  Affiliates..............................  58 
 C.  Default  Payments  ...................................................................................................................  68 
 D.  Administrative  Filing  Periods  for  Applications  and  Petitions  to  Deny  ...................................  74 
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 E.  Conclusion  .............................................................................................................................  78 
 V.  Fourth  Further  Notice  of  Proposed  Rule  Making...........................................................................  79 
 A.  Introduction............................................................................................................................  79 
 B.  Rules  Governing  Designated  Entities......................................................................................  80 
 1.  Total  Assets  Test  ...........................................................................................  80 
 2.  Attribution  of  Gross  Revenues  or  Total  Assets 
 of  Investors  and  Affiliates..............................................................................  82 
 VI.  Procedural  Matters  and  Ordering  Clauses  ....................................................................................  89 

 APPENDIX  A:  Final  Rules 
 APPENDIX  B:  List  of  Parties 
 APPENDIX  C:  Supplemental  Final  Regulatory  Flexibility  Analysis 
 APPENDIX  D:  Final  Regulatory  Flexibility  Analysis 
 APPENDIX  E:  Initial  Regulatory  Flexibility  Analysis 

 I.  OVERVIEW 
 1.  This  Order  on  Reconsideration  of  the  Third  Report  and  Order,  Fifth  Report  and  Order, 
 and  Fourth  Further  Notice  of  Proposed  Rule  Making  ("  Order  on  Reconsideration,"  "Fifth  Report  and 
 Order"  and  "Fourth  Notice")  clarifies  and  amends  our  general  competitive  bidding  rules  for  all 
 auctionable  services.  1  These  modifications  are  intended  to  increase  the  efficiency  of  the  competitive 
 bidding  process  and  provide  more  specific  guidance  to  auction  participants.  In  the  past,  the  Commission 
 adopted  separate  competitive  bidding  rules  for  each  auctionable  service.  2  This  rule  making  is  part  of  our 
 ongoing  effort  to  establish  a  uniform  and  streamlined  set  of  general  competitive  bidding  rules  for  all 
 auctionable  services  and  to  reduce  the  burden  on  both  the  Commission  and  the  public  of  conducting 
 service-  specific  auction  rule  makings. 

 2.  In  1994,  in  implementing  the  Omnibus  Budget  Reconciliation  Act  of  1993,  the 
 Commission  prescribed  certain  general  competitive  bidding  rules  and  procedures,  indicating  that  it  would 
 use  these  general  rules  and  procedures  as  a  basis  for  adopting  specific  competitive  bidding  rules  for  each 
 auctionable  service.  3  In  1997,  after  completing  15  spectrum  auctions  and  adopting  service-  specific 
 bidding  rules  for  each  such  auction,  we  initiated  a  proceeding  to  expand  the  general  competitive  bidding 
 rules,  contained  in  Part  1,  Subpart  Q  of  our  rules,  and  replace  any  inconsistent  or  repetitive  service-specific 
 auction  rules.  4  The  most  recent  comprehensive  order  in  this  proceeding  was  the  Third  Report 
 and  Order  and  Second  Further  Notice  of  Proposed  Rule  Making  ("  Part  1  Third  Report  and  Order"  and 

 1  The  general  competitive  bidding  rules  are  codified  at  47  C.  F.  R.    1.2101-  1.  2113. 
 2  See,  e.  g.,  47  C.  F.  R    21.  921-  21.  961  (Multipoint  Distribution  Service  (MDS));  47  C.  F.  R    24.  301-24.320 
 (narrowband  Personal  Communications  Service  (PCS));  47  C.  F.  R.    24.  701-  24.  720  (broadband  PCS);  47 
 C.  F.  R    90.  901-  90.913  (800  MHz  Specialized  Mobile  Radio  Service  (SMR));  47  C.  F.  R    90.1001-  90.1025  (220 
 MHz  Service);  47  C.  F.  R    100.71-  100.  80  (Direct  Broadcast  Satellite  (DBS)). 

 3  See  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Second  Report  and  Order,  9  FCC  Rcd  2348  (1994)  ("  Competitive  Bidding  Second  Report  and  Order"). 
 See  also  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Second  Memorandum  Opinion  and  Order,  9  FCC  Rcd  7245  (1994). 

 4  See  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Proceeding,  WT  Docket  No. 
 97-  82,  Order,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  5686  (1997) 
 ("  Part  1  Notice  of  Proposed  Rule  Making"). 
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 "Second  Notice").  5  In  this  Order  on  Reconsideration,  we  address  petitions  for  reconsideration  and 
 comments  filed  in  response  to  the  Part  1  Third  Report  and  Order.  The  Fifth  Report  and  Order  addresses 
 comments  filed  in  response  to  the  Second  Notice,  and  the  Fourth  Notice  adopted  herein  seeks  comment 
 on  additional  proposals  relating  to  the  general  competitive  bidding  rules. 

 II.  EXECUTIVE  SUMMARY 
 3.  In  this  Order  on  Reconsideration  we: 
 x  Amend  Section  1.2105(  c)(  1)  of  our  rules  to  clarify  that  the  prohibition  on  collusion  begins  on 
 the  filing  deadline  for  short-  form  applications  and  ends  on  the  down  payment  deadline. 

 x  Clarify  and  correct  the  ownership  disclosure  requirements  contained  in  Section  1.2112  of  our 
 rules.  In  particular,  with  respect  to  entities  not  seeking  designated  entity  status,  we  eliminate  the 
 requirement  to  include  debt  and  instruments  such  as  warrants,  convertible  debentures,  options  and  other 
 debt  interests  in  reporting  their  ownership  interests. 

 x  Amend  Section  1.2104(  g)(  1)  of  our  rules  to  clarify  that  in  the  case  of  multiple  bid  withdrawals 
 on  a  single  license,  within  the  same  or  subsequent  auction(  s),  the  payment  for  each  bid  withdrawal  will  be 
 calculated  based  on  the  sequence  of  bid  withdrawals  and  the  amounts  withdrawn.  We  further  clarify  that 
 no  withdrawal  payment  will  be  assessed  for  a  withdrawn  bid  if  either  the  subsequent  winning  bid  or  any 
 of  the  intervening  subsequent  withdrawn  bids,  in  either  the  same  or  subsequent  auction(  s),  equals  or 
 exceeds  that  withdrawn  bid.  In  addition,  we  amend  Section  1.2104(  g)(  1)  of  our  rules  to  provide  that  in 
 instances  in  which  bids  have  been  withdrawn  on  a  license  that  is  not  won  in  the  same  auction,  the 
 Commission  will  assess  an  interim  withdrawal  payment  equal  to  3  percent  of  the  amount  of  the  bid 
 withdrawals. 

 x  Retain,  for  the  most  part,  the  installment  payment  grace  period  and  late  payment  fee  provisions 
 adopted  in  the  Part  1  Third  Report  and  Order,  but  adopt  a  slight  modification  to  the  payment  due  dates 
 for  late  installment  payments  and  associated  late  fees. 

 x  Clarify  that  licensees  continue  to  have  the  opportunity  to  seek  restructuring  of  installment 
 payments.  There  is,  however,  no  longer  a  procedure  for  requesting  a  grace  period  to  stay  installment 
 payment  deadlines  pending  such  restructuring.  Rather,  licensees  will  be  subject  to  the  automatic  late 
 payment  provisions  of  Section  1.2110(  g)  as  adopted  herein. 

 x  Clarify  that  the  assignee  or  transferee  of  a  license  paid  for  through  installment  payments  is  not 
 responsible  for  the  license  debt  until  the  assignment  of  license  or  transfer  of  control  has  been 
 consummated. 

 5  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Procedures,  Allocation  of 
 Spectrum  Below  5  GHz  Transferred  from  Federal  Government  Use,  4660-  4685  MHz,  WT  Docket  No.  97-  82,  ET 
 Docket  No.  94-  32,  Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rule  Making,  13  FCC  Rcd 
 374  (1997)  ("  Part  1  Third  Report  and  Order"  and  "Second  Notice").  In  this  same  proceeding,  on  December  13, 
 1999,  the  Commission  released  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding 
 Procedures,  Third  Further  Notice  of  Proposed  Rulemaking,  WT  Docket  No.  97-  82,  14  FCC  Rcd  21558  (1999) 
 (seeking  comment  on  proposed  amendments  to  Section  1.2105(  c)(  1)  of  the  Commission's  rules,  which  prohibits 
 collusion  between  competing  bidders). 
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 x  Clarify  that  the  unjust  enrichment  rules  for  bidding  credits  (Section  1.2111(  d)  of  the 
 Commission's  rules)  do  not  apply  to  assignments  or  transfers  of  C  and  F  block  licenses  to  non-entrepreneurs. 
 We  further  clarify  that  pursuant  to  Sections  1.2111(  c)  and  (d)  of  our  rules,  Commission 
 approval  of  assignments  of  licenses  and  transfers  of  control  that  result  in  unjust  enrichment  with  respect 
 to  bidding  credits  and  installment  payments  is  conditioned  upon  full  payment  of  the  required  unjust 
 enrichment  payments  on  or  before  the  consummation  date. 

 x  Clarify  that  licensees  defaulting  on  installment  payments  are  subject  to  the  default  provisions 
 of  Section  1.2110(  f)(  4)  of  our  rules  (redesignated  herein  as  Section  1.2110(  g)(  4)),  and  not  to  Section 
 1.2104(  g). 

 x  Incorporate  into  the  Part  1  general  competitive  bidding  rules  the  "former  defaulter"  policies 
 adopted  with  respect  to  C  block  auction  applicants.  Specifically,  we:  (1)  allow  "former  defaulters,"  i.  e., 
 applicants  that  have  defaulted  or  been  delinquent  in  the  past,  but  have  since  paid  all  of  their  outstanding 
 non-  tax  debts  and  all  associated  charges  or  penalties,  to  certify  on  FCC  Form  175  that  they  are  not  in 
 default  and  are,  therefore,  eligible  for  auction  participation;  and  (2)  require  "former  defaulters"  to  pay  an 
 upfront  payment  amount  of  1.5  times  the  normal  amount  set  by  the  Bureau  for  any  given  license  in  a 
 Commission  auction. 

 x  Clarify  that  licensees  defaulting  on  installment  payments  will  be  permitted  to  participate  in 
 future  Commission  spectrum  auctions  if  they  have  either  (1)  paid  all  of  their  outstanding  non-  tax  debt, 
 along  with  all  associated  charges  and  penalties;  or  (2)  been  relieved  of  such  obligations  pursuant  to 
 otherwise  applicable  law.  In  all  instances,  installment  payment  defaulters  eligible  to  participate  in  future 
 auctions  will  be  required  to  pay  an  upfront  payment  amount  of  1.5  times  the  normal  amount  set  by  the 
 Bureau  for  any  given  license  in  a  Commission  auction  to  assure  their  future  financial  soundness. 

 4.  In  this  Fifth  Report  and  Order  we: 
 x  Decline,  at  this  time,  to  adopt  special  provisions  for  minority-  and  women-  owned  businesses 
 pending  completion  of  a  series  of  market  studies  to  determine  whether,  and  under  what  circumstances, 
 targeted  preferences  for  minorities  and  women  are  appropriate.  We  note,  however,  that  minority-  and 
 women-  owned  businesses  that  qualify  as  small  businesses  may  take  advantage  of  the  provisions  we  have 
 adopted  for  small  businesses. 

 x  Decline,  at  this  time,  to  adopt  special  provisions  for  rural  telephone  companies,  such  as  bidding 
 preferences  or  an  unserved  area  fill-  in  policy.  We  note,  however,  that  we  will  continue  to  provide  rural 
 telephone  companies  with  bidding  credits  should  such  entities  qualify  as  small  businesses. 

 x  Adhere  to  our  previous  decision  to  suspend  the  installment  payment  program.  We  will, 
 however,  continue  to  provide  small  businesses  with  bidding  credits  as  we  have  done  in  auctions  for  a 
 number  of  services,  e.  g.,  the  Local  Multipoint  Distribution  Service  ("  LMDS"),  Location  and  Monitoring 
 Service  ("  LMS"),  220  MHz  and  VHF  Public  Coast  services. 

 x  Adopt  as  our  general  attribution  rule  a  controlling  interest  standard  for  determining  which 
 applicants  qualify  as  small  businesses.  Under  this  standard,  we  will  attribute  to  the  applicant  the  gross 
 revenues  of  its  controlling  interests  and  their  affiliates  in  assessing  whether  the  applicant  qualifies  for  our 
 small  business  provisions,  such  as  bidding  credits.  We  do  not  adopt  a  minimum  equity  threshold.  Rather, 
 applicants  will  be  required  to  identify  controlling  interests  based  on  the  principles  of  either  de  jure  or  de 
 facto  control.  Current  C  and  F  block  licensees  will  continue  to  be  eligible  to  hold  their  licenses  regardless 
 of  whether  or  not  they  would  qualify  under  the  newly  established  attribution  rules  adopted  herein.  As  to 
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 future  C  and  F  block  auctions,  however,  all  applicants,  including  existing  C  and  F  block  licensees,  will  be 
 subject  to  the  attribution  rules  in  effect  at  the  time  of  filing  their  short-  form  applications. 

 x  Maintain  our  rule  of  calculating  default  payment  amounts  on  a  license-  by-  license  basis  and 
 implement  the  Balanced  Budget  Act  provisions  regarding  administrative  filing  periods  as  set  forth  below. 

 x  Delegate  to  the  Wireless  Telecommunications  Bureau  the  authority  to  make  any  revisions  to 
 the  Code  of  Federal  Regulations  that  are  necessary  to  conform  the  service-  specific  auction  rules  to  the 
 Part  1  general  competitive  bidding  rules. 

 5.  In  this  Fourth  Notice  we: 
 x  Seek  comment  on  whether  to  use  a  total  assets  test  in  conjunction  with  the  gross  revenues 
 measure  already  employed  to  determine  business  size. 

 x  Seek  comment  on  proposed  exceptions  to  the  requirement  in  the  Part  1  attribution  rules  that 
 certain  stock  interests  be  calculated  on  a  "fully  diluted"  basis. 

 III.  ORDER  ON  RECONSIDERATION  OF  THE  THIRD  REPORT  AND  ORDER 
 A.  Introduction 

 6.  In  response  to  the  Part  1  Third  Report  and  Order,  we  received  seven  petitions  for 
 reconsideration  and  two  comments  in  support  of  the  petitions  for  reconsideration.  6  The  petitioners  raise 
 various  issues  regarding  installment  payments  for  auction-  won  licenses.  7  For  the  reasons  discussed 
 below,  we  clarify  certain  rules  at  petitioners'  request  and  dismiss  or  deny  these  petitions  in  all  other 
 respects.  Further,  we  address  comments  filed  in  response  to  the  ULS  Notice  that  relate  to  aspects  of  our 
 auction  rules.  8  In  addition,  we  take  this  opportunity  to  clarify,  on  our  own  motion,  certain  aspects  of  the 
 Part  1  Third  Report  and  Order. 

 B.  Clarification  of  Prohibition  on  Collusion 
 7.  Background.  Section  1.2105(  c)(  1)  of  the  Commission's  rules  generally  prohibits 
 collusion  between  competing  bidders  from  "after  the  filing  of  short-  form  applications  .  .  .  until  after  the 
 high  bidder  makes  the  required  down  payment  .  .  .  ."  9  Our  bidder  information  packages  generally  state 
 that  "[  t]  his  prohibition  begins  with  the  filing  of  short-  form  applications,  and  ends  on  the  down  payment 

 6  A  list  of  the  parties  that  filed  pleadings  in  response  to  the  Part  1  Third  Report  and  Order,  and  the 
 abbreviations  used  to  refer  to  such  parties,  is  attached  at  Appendix  B. 
 7  The  installment  payment  rules  are  generally  codified  at  47  C.  F.  R.    1.2110. 

 8  See  Biennial  Regulatory  Review  --  Amendment  of  Parts  0,  1,  13,  22,  24,  26,  27,  80,  87,  90,  95,  97,  and 
 101  of  the  Commission's  Rules  to  Facilitate  the  Development  and  Use  of  the  Universal  Licensing  System  in  the 
 Wireless  Telecommunications  Services,  WT  Docket  No.  98-  20,  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd 
 9672  (1998)  ("  ULS  Notice"). 

 9  47  C.  F.  R.    1.  2105(  c)(  1). 
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 due  date."  10  Our  Public  Notices  specifically  provide  that  the  collusion  prohibition  becomes  effective  on 
 the  "filing  deadline  of  short-  form  applications"  and  ends  on  the  "post-  auction  down  payment  due  date."  11 
 To  avoid  any  confusion  regarding  when  the  prohibition  on  collusion  begins  and  ends,  we  believe  it  is 
 necessary  to  amend  Section  1.2105(  c)(  1)  of  our  rules.  12 

 8.  Discussion.  On  our  own  motion,  we  amend  Section  1.2105(  c)(  1)  of  our  rules  to  provide 
 that  applicants  are  prohibited  from  communicating  with  each  other  about  bids,  bidding  strategies,  or 
 settlements  from  "after  the  short-  form  application  filing  deadline  .  .  .  until  after  the  down  payment 
 deadline  .  .  .  ."  This  rule  change  makes  clear  that  competing  bidders  may  not  engage  in  communications 
 prohibited  by  the  rule  from  the  date  that  short-  form  applications  are  due  to  the  Commission  until  after  the 
 down  payment  deadline  has  passed.  The  amendment  affirms  that  there  is  a  uniform  date  for  all  bidders  on 
 which  restrictions  on  communications  begin  and  end.  Our  clarification  conforms  Section  1.2105(  c)(  1)  to 
 our  practice  of  applying  the  collusion  prohibition  to  applicants  beginning  on  the  due  date  for  the 
 submission  of  short-  form  applications.  13  In  addition,  it  is  consistent  with  our  policy  of  not  permitting 
 individual  bidders  to  abbreviate  the  period  during  which  the  collusion  prohibition  is  in  effect  by 
 submitting  down  payments  prior  to  the  down  payment  due  date. 

 C.  Clarification  of  Section  1.2112 
 9.  Background.  In  the  Part  1  Third  Report  and  Order,  we  concluded  that  detailed 
 ownership  information  is  necessary  to  ensure  that  applicants  claiming  designated  entity  status  qualify  for 
 such  status  and  that  all  applicants  comply  with  spectrum  caps  and  other  ownership  limits.  14  We  also 
 stated  that  disclosure  of  ownership  information  helps  bidders  identify  entities  that  are  subject  to  our  anti-collusion 
 rules.  15  To  these  ends,  we  promulgated  Section  1.2112,  16  based  on  our  broadband  PCS  rules,  17 
 to  serve  as  a  uniform  ownership  disclosure  rule  for  all  auctionable  services.  18 

 10  See,  e.  g.,  C,  D,  E,  &  F  Broadband  PCS  Auction,  March  23,  1999,  Bidder  Information  Package  at  109; 
 Location  and  Monitoring  Service  Auction,  December  15,  1998,  Bidder  Information  Package  at  61;  The  Phase  II 
 220  MHZ  Service  Auction,  September  15,  1998,  Bidder  Information  Package  at  65. 

 11  See,  e.  g.,  "Auction  of  168  Local  Multipoint  Distribution  Service  Licenses;  Status  of  Applications  to 
 Participate  in  the  Auction,"  Public  Notice,  DA  99-  639  (rel.  April  5,  1999);  "Auction  of  C,  D,  E,  and  F  Block 
 Broadband  PCS  Licenses;  Status  of  Applications  to  Participate  in  the  Auction,"  Public  Notice,  DA  99-  375  (rel. 
 February  24,  1999);  "Auction  of  528  Multilateration  Location  and  Monitoring  Service  Licenses;  Status  of 
 Applications  to  Participate  in  the  Auction,"  Public  Notice,  DA  99-  249  (rel.  January  29,  1999);  Auction  of  156-  162 
 MHz  VHF  Public  Coast  Station  Licenses;  Status  of  Applications  to  Participate  in  the  Auction,"  Public  Notice,  DA 
 98-  2248  (rel.  November  6,  1998). 

 12  See  Letter  to  Ari  Fitzgerald,  Federal  Communications  Commission,  from  Louis  Gurman,  dated  April  14, 
 1999.  The  Commission  is  also  seeking  comment  in  a  separate  proceeding  on  other  proposed  amendments  to 
 Section  1.2105(  c)(  1)  of  the  Commission's  rules.  See  Amendment  of  Part  1  of  the  Commission's  Rules  -- 
 Competitive  Bidding  Procedures,  Third  Further  Notice  of  Proposed  Rulemaking,  WT  Docket  No.  97-  82,  14  FCC 
 Rcd  21558  (1999). 

 13  See  "Wireless  Telecommunications  Bureau  Responds  to  Questions  About  Local  Multipoint  Distribution 
 Service  Auction,"  Public  Notice,  DA  98-  37  (rel.  January  9,  1998)  (stating  that  "[  a]  fter  the  deadline  for  submission 
 of  the  FCC  Form  175,  applicants  may  not  discuss  the  substance  of  their  bids  or  bidding  strategies  with  other 
 bidders  .  .  .  ."). 

 14  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  417,    73.  The  majority  of  commenters  supported  our 
 ownership  disclosure  requirements.  Id.  at  418,    74. 
 15  Id.  at  417-  18,    73. 
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 10.  Discussion.  Because  a  number  of  applicants  in  the  Phase  II  220  MHz  auction  found 
 Section  1.2112  confusing,  we  have  decided,  on  reconsideration,  to  reorganize  the  rule  in  a  more  logical, 
 straightforward  manner.  We  first  revise  Section  1.2112(  b)(  1)  to  use  the  term  "controlling  interest"  to 
 describe  the  parties  whose  connection  or  relationship  with  another  FCC-  regulated  business  must  be 
 reported  under  (b)(  1).  19  Then,  because  identification  of  controlling  interests  is  significant  only  for 
 applicants  claiming  designated  entity  status,  we  include  those  reporting  requirements  related  to  such 
 status  in  paragraph  (b),  which  applies  only  to  applicants  claiming  eligibility  for  small  business 
 provisions.  20  We  also  correct  the  rule  to  indicate  that  gross  revenues  must  be  reported  not  only  on  the 
 long-  form  application,  but  also  on  the  short-  form  application.  21 

 11.  In  addition,  we  correct  Section  1.2112(  a)(  3)  in  which  we  used  language  that  was  overly 
 broad.  Section  1.2112(  a)(  3)  states  erroneously  that  an  applicant  must  provide:  "[  a]  list  of  any  party 
 holding  a  10  percent  or  greater  interest  in  any  entity  holding  or  applying  for  any  FCC-  regulated  business 
 in  which  a  10  percent  or  more  interest  is  held  by  another  party  which  holds  a  10  percent  or  more  interest 
 in  the  applicant."  22  This  language  has  the  unintended  effect  of  requiring  the  reporting  of  parties  with  a 
 distant  relationship  to  the  applicant.  Section  1.2112(  a)(  3),  however,  also  provides  the  following  example: 
 "If  Company  A  owns  10  percent  of  Company  B  (the  applicant)  and  10  percent  of  Company  C  then 
 Companies  A  and  C  must  be  listed  on  Company  B's  application."  23  The  rule's  example  accurately  reflects 
 which  parties  we  intended  the  applicant  to  report.  That  is,  when  a  company  (Company  A)  that  must  be 
 reported  under  the  rule  because  of  its  ownership  interest  in  the  applicant  (Company  B)  also  owns  at  least 
 10  percent  of  another  company  that  is  an  FCC-  licensed  entity  or  applicant  for  an  FCC  license  (Company 
 C),  Company  C  must  be  reported.  Our  intent  was  to  require  that  FCC-  regulated  entities  be  reported  when 
 there  is  a  connection  between  such  an  entity  and  the  applicant  at  issue  through  a  common  owner.  We 
 therefore  amend  Section  1.2112  to  better  reflect  our  intent  and  comport  with  the  example  provided  in  the 
 rule.  24  In  addition,  we  amend  Section  1.2112  to  require  applicants  to  disclose,  in  the  case  of  a  limited 

 (Continued  from  previous  page)  16 
 47  C.  F.  R.    1.  2112. 

 17  See  47  C.  F.  R.    24.  813  (1997).  This  section  was  subsequently  removed  from  the  Code  of  Federal 
 Regulations.  See  Biennial  Regulatory  Review  --  Amendment  of  Parts  0,  1,  13,  22,  24,  26,  27,  80,  87,  90,  95,  97, 
 and  101  of  the  Commission's  Rules  to  Facilitate  the  Development  and  Use  of  the  Universal  Licensing  System  in 
 the  Wireless  Telecommunications  Services,  WT  Docket  No.  98-  20,  Report  and  Order,  13  FCC  Rcd  21027  (1998). 

 18  See  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  418-  19,    75. 

 19  A  "controlling  interest"  includes  individuals  or  entities,  or  groups  of  individuals  or  entities,  that  have 
 control  of  the  applicant  under  the  principles  of  either  de  jure  or  de  facto  control.  See  infra    58-  67  (discussing  the 
 "controlling  interest"  standard). 

 20  By  limiting  the  reporting  requirement  in  (b)(  1)  to  only  those  applicants  claiming  designated  entity  status, 
 this  revision  responds  to  AT&  T's  argument  that  the  requirement  is  overly  burdensome  for  large  publicly-  held 
 corporations  that  may  have  hundreds  of  officers  and  directors.  See  AT&  T  Comments  at  4. 

 21  See  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  418,  420,    75,  77. 

 22  47  C.  F.  R.    1.  2112(  a)(  3)  as  adopted  in  the  Part  1  Third  Report  and  Order. 
 23  Id. 
 24  See  47  C.  F.  R.    1.  2112(  a)(  6)  as  adopted  herein.  Note  that  (a)(  3)  is  renumbered  as  (a)(  6)  in  the  revised 
 rule. 
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 liability  company,  only  those  members  that  hold  a  10  percent  or  greater  interest  in  the  applicant.  25 
 Section  1.2112(  a)(  8),  as  adopted  in  the  Part  1  Third  Report  and  Order,  required  applicants  to  disclose  all 
 members  of  a  limited  liability  company,  regardless  of  their  ownership  interest  in  the  applicant.  We  now 
 revise  the  disclosure  requirement  pertaining  to  limited  liability  companies  to  be  consistent  with  those 
 regarding  limited  partnerships.  Finally,  we  change  other  aspects  of  the  sequencing  so  that  the  revised  rule 
 begins  by  seeking  general  information  in  Sections  1.2112(  a)(  1)  through  (a)(  4)  and  becomes  progressively 
 more  detailed  in  (a)(  5)  and  (a)(  6).  26  This  "building  block"  approach  is  intended  to  provide  applicants  with 
 a  clearer  understanding  regarding  the  information  that  must  be  disclosed. 

 12.  We  also  take  this  opportunity  to  address  relevant  comments  that  were  filed  separately  in 
 response  to  the  ULS  Notice.  27  In  their  comments  on  the  ULS  Notice,  AT&  T,  BAM,  and  FCBA  object  to 
 the  breadth  of  information  collected  in  Section  1.2112.  28  In  particular,  they  argue  that  the  requirement  to 
 identify  direct  and  indirect  owners  with  an  interest  of  10  percent  or  greater  is  burdensome  and  overly 
 broad.  29  We  disagree.  We  believe  that  the  10  percent  reporting  requirement  helps  competing  bidders 
 accurately  assess  the  legitimacy  of  their  auction  opponents  and  their  respective  bids.  30  As  discussed  in  the 
 Part  1  Third  Report  and  Order,  the  collection  of  detailed  ownership  information  is  necessary  for  ensuring 
 compliance  with  ownership  limits,  such  as  spectrum  caps.  31  Disclosure  of  ownership  information  also 
 aids  bidders  by  providing  them  with  information  about  their  auction  competitors  and  alerting  them  to 
 entities  subject  to  our  anti-  collusion  rules.  32  We  agree  with  commenters,  however,  that  Section  1.2112 
 could  be  less  burdensome  in  certain  regards.  Therefore,  except  for  entities  claiming  special  eligibility  or 
 designated  entity  status,  we  will  not  require  applicants  to  include  information  regarding  warrants, 
 convertible  debentures,  stock  options,  debt  securities  or  other  debt  interests  as  part  of  the  10  percent 
 reporting  requirement  unless  and  until  conversion  of  such  interests  is  effected.  Generally,  the 
 Commission  has  not  included  such  interests  in  calculating  ownership  interests  under  rules  establishing 
 various  ownership  limits.  33  We  agree  with  FCBA  and  AT&  T  that  the  current  reporting  burden  imposed 

 25  See  47  C.  F.  R.    1.  2112(  a)(  4)  as  adopted  herein. 

 26  See  47  C.  F.  R.    1.  2112(  a)  as  adopted  herein. 
 27  ULS  Notice,  13  FCC  Rcd  9672  (1998). 
 28  AT&  T  Comments  at  4-  5;  BAM  Comments  at  12;  FCBA  Comments  at  28-  29;  FCBA  Reply  Comments  at 
 19-  22. 
 29  AT&  T  Comments  at  5;  BAM  Comments  at  12;  FCBA  Reply  Comments  at  20-  21.  Section  1.  2112(  a)  of 
 our  rules  requires  applicants  to  disclose  various  stock  interests  of  10  percent  or  greater.  47  C.  F.  R.    1.2112(  a). 
 Note  that  for  purposes  of  determining  ownership  interests,  stock  interests  held  in  trust  shall  be  attributed  to  (1)  any 
 person  who  holds  or  shares  the  power  to  vote  such  stock;  (2)  any  person  who  has  the  sole  power  to  sell  such  stock; 
 and  (3)  in  the  case  of  stock  held  in  trust,  to  any  person  who  has  the  right  to  revoke  the  trust  at  will  or  to  replace  the 
 trustee  at  will.  If  the  trustee  has  a  familial,  personal,  or  extra-  trust  business  relationship  to  the  grantor  or  the 
 beneficiary,  the  grantor  or  beneficiary,  as  appropriate,  will  be  attributed  with  the  stock  interests  held  in  trust.  See 
 Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  419  n.  207. 

 30  See  id.  at  418,    74. 

 31  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  417,    73. 
 32  Id.  at  417-  18,    73.  For  purposes  of  our  anti-  collusion  rules,  the  term  applicant  is  defined  to  include 
 entities  that  have  a  10  percent  or  greater  interest  in  the  applicant.  47  C.  F.  R.    1.2105(  c)(  6)(  i). 
 33  See,  e.  g.,  47  C.  F.  R.    20.  6(  d)  (CMRS  spectrum  cap),  22.  942(  d)  (cellular  cross-  interest),  73.  3555  Note  2 
 (broadcast  multiple  ownership),  76.501  Note  2  (cable  cross-  ownership). 
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 on  applicants  may  exceed  the  benefit  of  requiring  disclosure  of  these  interests.  34  We  continue  to  believe, 
 however,  that  in  calculating  ownership  interests  for  the  purpose  of  determining  designated  entity  status 
 and  eligibility  for  bidding  credits,  warrants,  convertible  debentures,  options  and  other  debt  interests  must 
 be  treated  as  having  been  exercised  and  must  be  reported  as  part  of  the  applicants  disclosure.  35  In  the 
 case  of  applicants  seeking  special  eligibility  or  designated  entity  status,  the  Commission  has  traditionally 
 treated  these  interests  as  being  fully  diluted  because  it  is  reaching  determinations  regarding  the  bona  fide 
 nature  of  the  applicant.  36  Thus,  we  agree  with  AT&  T  that  it  is  reasonable  for  the  Commission  to  require 
 more  ownership  information  from  these  entities  where  such  information  is  designed  to  show  that  the 
 special  eligibility  and/  or  bidding  credit  is  both  legitimate  and  warranted.  37 

 D.  Computation  of  Bid  Withdrawal  Payments  Under  Section  1.2104 
 13.  Background.  Section  1.2104(  g)(  1)  of  the  Commission's  rules  sets  forth  the  payment 
 obligations  of  a  bidder  that  withdraws  a  high  bid  on  a  license  during  the  course  of  an  auction.  38 
 Specifically,  it  provides  that  a  bidder  that  withdraws  a  standing  high  bid  is  subject  to  a  payment  equal  to 
 the  difference  between  the  amount  of  the  withdrawn  bid  and  the  amount  of  the  subsequent  winning  bid 
 the  next  time  the  license  is  offered  by  the  Commission.  39  As  the  auctions  program  has  evolved,  however, 
 the  Commission  has  encountered  situations  involving  multiple  bid  withdrawals  on  a  single  license,  which 
 are  not  specifically  addressed  by  Section  1.2104(  g)(  1)  of  the  Commission's  rules.  We,  therefore,  believe 
 it  is  necessary  to  broaden  our  rule  to  clarify  its  application  to  this  particular  contingency.  In  addition,  we 
 wish  to  modify  Section  1.2104(  g)(  1)  to  more  specifically  articulate  our  policy  of  assessing  interim  bid 
 withdrawal  payments. 

 14.  Discussion.  On  our  own  motion,  we  clarify  a  policy  that  the  Bureau  has  relied  on  in  the 
 past.  If  a  bidder  withdraws  its  bid  and  there  is  no  higher  bid  in  the  same  or  subsequent  auction(  s),  the 
 bidder  that  withdrew  its  bid  is  responsible  for  the  difference  between  its  withdrawn  bid  and  the  net  high 
 bid  in  the  same  or  subsequent  auction(  s).  In  the  case  of  multiple  bid  withdrawals  on  a  single  license, 
 within  the  same  or  subsequent  auction(  s),  the  payment  for  each  bid  withdrawal  will  be  calculated  based 
 on  the  sequence  of  bid  withdrawals  and  the  amounts  withdrawn.  40  No  withdrawal  payment  will  be 
 assessed  for  a  withdrawn  bid  if  either  the  subsequent  winning  bid  or  any  of  the  intervening  subsequent 
 withdrawn  bids,  in  either  the  same  or  subsequent  auction(  s),  equals  or  exceeds  that  withdrawn  bid.  Thus, 
 a  bidder  that  withdraws  a  bid  will  not  be  responsible  for  any  withdrawal  payments  if  there  is  a  subsequent 

 34  FCBA  Reply  Comments  at  21;  AT&  T  Comments  at  5. 

 35  See  47  C.  F.  R.    1.  2112(  b);  compare  47  C.  F.  R.    1.  2112(  a)  with    1.2112(  b). 
 36  See  47  C.  F.  R.    24.  813  (1997).  This  section  was  subsequently  removed  from  the  Code  of  Federal 
 Regulations.  See  Biennial  Regulatory  Review  --  Amendment  of  Parts  0,  1,  13,  22,  24,  26,  27,  80,  87,  90,  95,  97, 
 and  101  of  the  Commission's  Rules  to  Facilitate  the  Development  and  Use  of  the  Universal  Licensing  System  in 
 the  Wireless  Telecommunications  Services,  WT  Docket  No.  98-  20,  Report  and  Order,  13  FCC  Rcd  21027  (1998). 

 37  See  AT&  T  Comments  at  5. 

 38  47  C.  F.  R.    1.  2104(  g)(  1). 
 39  Id. 
 40  See,  e.  g.,  "VHF  Public  Coast  Service  Auction  Closes,"  Public  Notice,  DA  98-  2542,  Attachment  C,  (rel. 
 December  16,  1998);  "Phase  II  220  MHz  Service  Auction  Closes,"  Public  Notice,  DA  98-  2143,  Attachment  C, 
 (rel.  October  23,  1998);  "LMDS  Auction  Closes,"  Public  Notice,  DA  98-  572,  Attachment  C,  (rel.  March  26, 
 1998);  "D,  E,  and  F  Block  Auction  Closes,"  Public  Notice,  DA  97-  81,  Attachment  B,  (rel.  January  15,  1997). 
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 higher  bid  in  the  same  or  subsequent  auction(  s).  This  policy  allows  bidders  to  most  efficiently  allocate 
 their  resources  as  well  as  to  evaluate  their  bidding  strategies  and  business  plans  during  an  auction  while, 
 at  the  same  time,  maintaining  the  integrity  of  the  auction  process.  The  Bureau  retains  the  discretion  to 
 scrutinize  multiple  bid  withdrawals  on  a  single  license  for  evidence  of  anti-  competitive  strategic  behavior 
 and  take  appropriate  action  when  deemed  necessary. 

 15.  We  also  wish  to  modify  Section  1.2104(  g)(  1)  of  our  rules  to  state  more  specifically  our 
 policy  of  assessing  interim  bid  withdrawal  payments.  We  amend  Section  1.2104(  g)(  1)  to  provide  that  in 
 instances  in  which  bids  have  been  withdrawn  on  a  license  that  is  not  won  in  the  same  auction,  the 
 Commission  will  assess  an  interim  withdrawal  payment  equal  to  3  percent  of  the  amount  of  the  bid 
 withdrawals.  The  3  percent  interim  payment  will  be  applied  toward  any  final  bid  withdrawal  payment 
 that  will  be  assessed  at  the  close  of  the  subsequent  auction  of  the  license.  Assessing  an  interim  bid 
 withdrawal  payment  ensures  that  the  Commission  receives  a  minimal  withdrawal  payment  pending 
 assessment  of  any  final  withdrawal  payment.  Below  are  some  examples  showing  application  of  the  bid 
 withdrawal  payment  rule: 

 (1)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  Bidder  B  places  a  bid  of  $90  and 
 withdraws.  In  that  same  auction,  Bidder  C  wins  the  license  at  a  bid  of  $95.  Withdrawal 
 payments  are  assessed  as  follows:  Bidder  A  owes  $5  ($  100  -  $95).  Bidder  B  owes 
 nothing. 

 (2)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  Bidder  B  places  a  bid  of  $95  and 
 withdraws.  In  that  same  auction,  Bidder  C  wins  the  license  at  a  bid  of  $90.  Withdrawal 
 payments  are  assessed  as  follows:  Bidder  A  owes  $5  ($  100  -  $95).  Bidder  B  owes  $5 
 ($  95  -  $90). 

 (3)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  in  that  same  auction,  Bidder  B 
 places  a  bid  of  $90  and  withdraws.  In  a  subsequent  auction,  Bidder  C  places  a  bid  of  $95 
 and  withdraws.  Bidder  D  wins  the  license  in  that  auction  at  a  bid  of  $80.  Withdrawal 
 payments  are  assessed  as  follows:  At  the  end  of  the  first  auction,  Bidder  A  and  Bidder  B 
 are  each  assessed  an  interim  withdrawal  payment  equal  to  3  percent  of  their  withdrawn 
 bids  pending  Commission  assessment  of  a  final  withdrawal  payment  (Bidder  A  would 
 owe  3%  of  $100,  or  $3,  and  Bidder  B  would  owe  3%  of  $90,  or  $2.  70).  At  the  end  of  the 
 second  auction,  Bidder  A  would  owe  $5  ($  100  -  $95)  less  the  $3  interim  withdrawal 
 payment  for  a  total  of  $2.  Because  Bidder  C  placed  a  subsequent  bid  that  was  higher  than 
 Bidder  B's  $90  bid,  Bidder  B  would  owe  nothing.  Bidder  C  would  owe  $15  ($  95  -  $80). 

 E.  Installment  Payment  Grace  Periods  and  Imposition  of  Late  Payment  Fees 
 16.  Background.  The  installment  payment  rules,  adopted  in  the  Competitive  Bidding  Second 
 Report  and  Order,  permitted  a  licensee  to  make  an  installment  payment  up  to  90  days  after  the  due  date 
 without  a  late  payment  charge  and  without  being  considered  in  default.  41  A  licensee  whose  installment 
 payment  was  more  than  90  days  past  due,  however,  was  in  default,  unless  a  "grace  period"  request  was 
 filed  prior  to  the  payment  due  date.  42  Specifically,  in  anticipation  of  default  on  one  or  more  installment 
 payments,  a  licensee  could  request  that  the  Commission  grant  a  three  to  six  month  grace  period  during 

 41  Competitive  Bidding  Second  Report  and  Order,  9  FCC  Rcd  at  2389-  91,    231-  240. 
 42  47  C.  F.  R.    1.  2110(  b)(  4)(  x)(  E)(  4)(  i)  and  (ii)  (1994).  See  also  Public  Notice,  "Reminder  to  Licensees 
 with  Installment  Payment  Plans:  Availability  of  Grace  Periods,"  12  FCC  Rcd  7971  (1997). 
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 which  no  installment  payments  need  be  made.  43  The  licensee  would  not  be  declared  in  default  during  the 
 pendency  of  such  request.  Grant  of  the  request  would  result  in  the  licensee  not  being  considered  in 
 default  during  the  grace  period,  and  the  interest  that  accrued  while  no  payments  were  made  would  be 
 amortized  over  the  remaining  term  of  the  license.  44  Following  the  expiration  of  any  grace  period  without 
 successful  resumption  of  payment,  or  upon  denial  of  a  grace  period  request,  or  default  with  no  such 
 request  submitted,  the  license  would  cancel  automatically.  45 

 17.  In  the  Part  1  Third  Report  and  Order,  we  modified  the  grace  period  provisions  as  applied 
 to  all  licensees  participating  in  an  installment  payment  plan  at  that  time.  46  These  provisions  took  effect  on 
 March  16,  1998,  60  days  after  their  publication  in  the  Federal  Register.  47  Thus,  beginning  with 
 installment  payments  due  on  or  after  March  16,  1998,  a  licensee  that  did  not  make  an  installment  payment 
 when  due  automatically  had  an  additional  90  days  in  which  to  submit  its  required  payment  without  being 
 considered  delinquent,  but  was  assessed  a  late  payment  fee  equal  to  5  percent  of  the  amount  of  the  past 
 due  installment  payment.  48  If  the  licensee  failed  to  make  the  required  payment  within  the  first  90-  day 
 period,  the  licensee  was  automatically  provided  a  subsequent  90  days  to  submit  its  required  payment 
 without  being  considered  delinquent,  this  time  subject  to  a  second,  additional  late  payment  fee  equal  to  10 
 percent  of  the  amount  of  the  past  due  installment  payment.  49  The  licensee  was  not  required  to  submit  a 
 request  to  take  advantage  of  these  provisions.  A  licensee  that  failed  to  make  payment  within  180  days 
 after  an  installment  payment  due  date  sufficient  to  pay  all  past  due  late  payment  fees,  interest,  and 
 principal,  was  deemed  to  have  failed  to  make  full  payment  of  its  obligation  and  the  license  was 
 automatically  cancelled  without  further  Commission  action.  50  The  late  payment  fee  and  automatic 
 cancellation  provisions  described  above  did  not  apply  to  licensees  with  grace  period  requests  that  were 
 properly  filed  prior  to  the  effective  date  of  the  Part  1  Third  Report  and  Order  until  such  time  as  the 
 Commission  (or  the  Bureau  upon  delegated  authority)  addressed  these  grace  period  requests.  51 

 43  47  C.  F.  R.    1.  2110(  b)(  4)(  x)(  E)(  4)(  ii)  (1994).  In  determining  whether  to  grant  a  request  for  a  grace 
 period,  the  Commission  (or  Wireless  Telecommunications  Bureau  upon  delegated  authority)  considered,  among 
 other  things,  the  licensee's  financial  condition  and  payment  history,  including  whether  the  licensee  had  previously 
 defaulted.  Id. 

 44  47  C.  F.  R.    1.  2110(  b)(  4)(  x)(  E)(  4)(  ii)  (1994). 

 45  47  C.  F.  R.    1.  2110(  b)(  4)(  x)(  E)(  4)(  iii)  (1994). 
 46  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  434-  42,    103-  113. 
 47  A  summary  of  the  Part  1  Third  Report  and  Order  appeared  in  the  Federal  Register  on  January  15,  1998. 
 See  63  Fed.  Reg.  2315  (1998). 
 48  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  436,    106;  47  C.  F.  R.    1.  2110(  f)(  4)(  i). 

 49  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  436,    106;  47  C.  F.  R.    1.  2110(  f)(  4)(  ii). 
 50  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  438,    107;  47  C.  F.  R.    1.  2110(  f)(  4)(  iii),  (iv). 
 51  See  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  441-  442,    113  (stating  that  "[  w]  e  further  clarify  that 
 such  licensees  are  not  deemed  to  be  in  default  on  these  licenses  until  such  time  as  the  Bureau  issues  a  decision  on 
 these  grace  period  requests").  See  also  Amendment  of  Part  95  of  the  Commission's  Rules  to  Provide  Regulatory 
 Flexibility  in  the  218-  219  MHz  Service,  WT  Docket  No.  98-  169,  Order,  Memorandum  Opinion  and  Order  and 
 Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  19064,  19072,    11  (1998)  (218-  219  MHz  Service  Order  and 
 NPRM);  Public  Notice,  "Wireless  Telecommunications  Bureau  Provides  Guidance  on  Grace  Period  and 
 Installment  Payment  Rules,"  DA  98-  1897,  at  3  (rel.  Sept.  18,  1998). 
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 18.  Discussion.  All  petitioners  oppose  some  aspect  of  the  modified  provisions  relating  to  the 
 submission  of  late  installment  payments.  Specifically,  Alpine  PCS  and  CONXUS  seek  repeal  of  the  rules 
 requiring  late  payment  fees;  52  DiGiPH  and  Houston  936  object  to  the  imposition  of  late  payment  fees  and 
 request  that  the  Commission  retain  the  90-  day  non-  delinquency  period  with  no  late  fee  imposed;  53 
 NextWave  proffers  a  270-  day  late  payment  window  consisting  of  a  90-  day  non-  delinquency  period, 
 followed  by  two  automatic  90-  day  periods  in  which  a  monthly  late  payment  fee  would  apply;  54  and  CTI 
 and  Loli  request  that  the  Commission  allow  licensees  in  the  218-  219  MHz  Service  (formerly,  Interactive 
 Video  and  Data  Service)  to  continue  submitting  grace  period  requests.  55  In  challenging  the  modified  late 
 payment  provisions,  petitioners  generally  argue  that:  (1)  they  are  unfair,  punitive,  and  commercially 
 unreasonable;  (2)  they  constitute  impermissible  retroactive  rulemaking  as  applied  to  licensees  currently 
 participating  in  the  installment  payment  plan;  and  (3)  they  violate  basic  contract  principles.  We  address 
 each  of  these  arguments  in  turn. 

 19.  While  installment  payments  must  be  timely,  the  Commission's  grace  period  provisions 
 provide  limited  relief  for  entities  that  find  themselves  in  financial  distress.  56  Petitioners  claim  that  the 
 revised  late  payment  provisions  are  unfair  because,  in  determining  auction  and  construction  strategies, 
 petitioners  had  relied  on  the  availability  of  a  90-  day  non-  delinquency  period  and  deferral  of  payment 
 obligations  while  grace  period  requests  remained  pending.  57  The  Commission's  late  payment  provisions, 
 however,  were  not  intended  to  serve  as  a  tool  that  licensees  might  use  in  their  normal  course  of  planning 
 auction  strategy  and  build-  out.  These  provisions  are  provided  for  extraordinary  circumstances  -- 

 52  See  generally  Alpine  PCS  Petition;  CONXUS  Petition. 
 53  See  generally  DiGiPH  Petition;  Houston  936  Petition. 
 54  See  NextWave  Petition  at  3.  We  specifically  considered,  and  declined  to  adopt,  such  an  alternative  late 
 payment  structure  in  the  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  438-  439,    108-  109  (in  response  to 
 comments  filed  by  Airadigm  (270-  day  window)  and  GWI  (pro-  rated  late  payment  fees)). 

 55  See  generally  CTI  Petition  and  Loli  Petition.  Accord  In-  Sync  Comments  at  1;  Bellingham  Comments  at  3. 
 On  a  related  matter,  the  Loli  Petition  at  3-  7  requests  that  the  Commission  (1)  suspend  all  payment  obligations  of 
 218-  219  MHz  Service  licensees  until  resolution  of  the  proposals  set  forth  in  the  Petition  for  Rulemaking  of 
 Euphemia  Banas,  et  al.  (filed  September  4,  1996,  amended  January  28,  1997,  February  26,  1997,  and  March  13, 
 1998)  ("  RM-  8951");  and  (2)  give  licensees  in  the  218-  219  MHz  Service  a  range  of  options  for  alleviating  financial 
 difficulties  similar  to  those  given  to  broadband  PCS  C  block  licensees  (see  Amendment  of  the  Commission's  Rules 
 Regarding  Installment  Payment  Financing  For  Personal  Communications  Services  (PCS)  Licensees,  WT  Docket  No. 
 97-  82,  Order  on  Reconsideration  of  the  Second  Report  and  Order,  13  FCC  Rcd  8345,  8358-  60,    34-  37  (1998)  ("  C 
 Block  Order  on  Reconsideration")).  Accord  In-  Sync  Comments  at  3-  6;  Bellingham  Comments  at  3-  4.  Although  the 
 Commission  did  not  suspend  the  payment  obligations  of  218-  219  MHz  Service  licensees,  it  decided  not  to  assess 
 late  payment  fees  or  cancel  218-  219  MHz  Service  licenses  for  which  a  properly  filed  grace  period  request  was 
 pending,  or  for  which  adequate  installment  payments  were  made  as  of  the  effective  date  of  the  new  Part  1  grace 
 period  rules  (i.  e.,  March  16,  1998),  until  resolution  of  the  issues  raised  in  RM-  8951.  See  218-  219  MHz  Service  Order  and  NPRM, 
 13  FCC  Rcd  at  19073,    13.  In  light  of  these  actions,  Loli's  requests  described  above  are  moot. 
 See  also  Amendment  of  Part  95  of  the  Commission's  Rules  to  Provide  Regulatory  Flexibility  in  the  218-  219  MHz 
 Service,  WT  Docket  No.  98-  169,  RM-  8951,  Report  and  Order  and  Memorandum  Opinion  and  Order,  15  FCC  Rcd 
 1497  (1999)  (adopting  a  restructuring  plan  for  existing  218-  219  MHz  Service  licensees  that  (i)  were  current  in 
 installment  payments;  (ii)  were  less  than  ninety  days  delinquent  on  the  last  payment  due  before  March  16,  1998;  or 
 (iii)  had  properly  filed  grace  period  requests  under  the  former  installment  payment  rules). 

 56  See  47  C.  F.  R.    1.  2110(  f)(  4)  (redesignated  herein  as    1.  2110(  g)(  4)). 

 57  See,  e.  g.,  DiGiPH  Petition  at  2,  4-  5;  In-  Sync  Comments  at  6. 
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 instances  of  financial  distress  --  for  which  temporary  relief  is  appropriate.  Petitioners'  assertions  of 
 reliance  on  such  provisions  for  any  other  purpose  are  misplaced.  Petitioners  also  claim  that  it  is  punitive 
 and  commercially  unreasonable  to  impose  the  same  late  payment  fee  amount  whether  the  payment  arrives 
 one  day  late  or  ninety  days  late.  58  We  disagree.  Our  fundamental  goal  in  adopting  the  late  payment 
 provisions  is  to  encourage  payment  by  the  due  date.  Achievement  of  this  goal  is  best  attainable  by 
 adhering  to  the  5  percent  and  10  percent  late  payment  fee  schedule  we  have  adopted.  A  prorated 
 approach  towards  late  fees  could  serve  as  a  disincentive  to  licensees  to  pay  on  time  and,  thereby, 
 undermine  achievement  of  our  basic  goal.  As  we  stated  in  the  Part  1  Third  Report  and  Order,  our 
 "approach  is  consistent  with  the  standard  commercial  practice  of  establishing  late  payment  fees  and 
 developing  financial  incentives  for  licensees  to  resolve  capital  issues  before  payment  due  dates."  59 
 Further,  the  approach  we  have  taken  is  a  commercially  reasonable  debt  management  practice  used  with 
 respect  to  a  variety  of  debt  instruments  from  credit  cards  to  mortgages.  Therefore,  we  disagree  with 
 petitioners'  claims  that  the  revised  late  payment  provisions  are  unfair,  punitive,  and  commercially 
 unreasonable. 

 20.  Petitioners  also  contend  that  the  regulatory  changes  to  the  installment  payment  program 
 adopted  in  the  Part  1  Third  Report  and  Order  are  unlawfully  retroactive,  insofar  as  they  could  have  an 
 adverse  effect  on  the  previously  established  installment  payment  obligations.  60  For  example,  CTI  claims 
 that  the  revised  late  payment  rules  unsettle  the  expectations  of  licensees  that  opted  to  pay  for  licenses  in 
 installments.  61  CONXUS  argues  that  a  "rule"  under  the  Administrative  Procedure  Act  ("  APA")  is 
 supposed  to  embody  "the  whole  or  a  part  of  any  agency  statement  of  general  or  particular  applicability 
 and  future  effect  .  .  .  ."  62  These  arguments  do  not  withstand  analysis. 

 21.  Our  new  Part  1  rules  do  not  violate  the  prohibitions  on  "primary  retroactivity"  under  the 
 APA  as  set  forth  in  Supreme  Court  cases  such  as  Bowen  v.  Georgetown  Univ.  Hospital,  488  U.  S.  204 
 (1988).  We  have  not,  for  example,  gone  back  to  past  transactions  and  imposed  new  penalties  for  conduct 
 which  was  previously  allowed  by  our  rules.  Rather,  the  Commission  here  merely  prescribed  rules  for  the 
 future,  i.  e.,  prospective  procedures  by  which  licensees  remit  installment  payments  after  March  16,  1998, 
 the  effective  date  of  the  new  rules,  that  deal  with  past  transactions,  i.  e.,  the  previously  established 
 installment  payment  obligations.  Such  a  rule  change  does  not  constitute  unlawful  retroactive  rulemaking 
 under  the  APA.  63 

 58  Alpine  PCS  Petition  at  2-  3;  CONXUS  Petition  at  3;  NextWave  Petition  at  2-  3. 
 59  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  440,    110  (citing,  e.  g.,  Eldon  H.  Reiley,  Guidebook  to 
 Security  Interests  in  Personal  Property    4.02(  iii)  (1989))  (emphasis  added). 
 60  See  CTI  Petition  at  5-  11.  See  also  Alpine  PCS  Petition  at  3-  5;  CONXUS  Petition  at  3-  7;  DiGiPH  Petition 
 at  2;  Houston  936  Petition  at  3-  4.  Accord  In-  Sync  Comments  at  6-  7. 
 61  CTI  Petition  at  5-  9. 

 62  CONXUS  Petition  at  4  (citing  5  U.  S.  C.    551(  4))  (emphasis  added). 
 63  For  example,  in  Bowen  v.  Georgetown  University  Hospital,  488  U.  S.  209,  219-  20  (1988),  Justice  Scalia 
 gave  the  following  illustration  of  a  regulation  that  was  not  improperly  retroactive  under  the  APA: 

 The  Treasury  Department  might  prescribe,  for  example,  that  for  purposes  of  assessing  future 
 income  tax  liability,  income  from  certain  trusts  that  has  previously  been  considered  nontaxable 
 will  be  taxable  --  whether  those  trusts  were  established  before  or  after  the  effective  date  of  the 
 regulation.  That  is  not  retroactivity  in  the  sense  at  issue  here,  i.  e.,  in  the  sense  of  altering  the  past 
 legal  consequences  of  past  actions.  Rather,  it  is  what  has  been  characterized  as  "secondary"  .  .  .  A 
 rule  with  exclusively  future  effect  .  .  .  can  unquestionably  affect  past  transactions  (rendering 
 (continued.) 
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 22.  Further,  the  fact  that  the  new  rules  may  unsettle  expectations  about  the  economic  benefits 
 of  participating  in  the  installment  payment  plan  does  not  make  the  new  rules  unlawfully  retroactive.  In 
 that  regard,  the  U.  S.  Court  of  Appeals  for  the  D.  C.  Circuit  has  explained:  "[  A]  new  rule  or  law  is  not 
 retroactive  'merely  because  it  .  .  .  upsets  expectations  based  on  prior  law.  '"  64  This  type  of  "secondary" 
 retroactivity  is  an  entirely  lawful  consequence  of  much  agency  rulemaking  and  does  not  by  itself  render  a 
 rule  invalid.  65  Commission  licensees,  in  particular,  have  no  vested  right  to  an  unchanged  regulatory 
 scheme  throughout  their  license  term.  66  Therefore,  petitioners'  claim  that  the  revised  late  payment 
 provisions  are  unlawfully  retroactive  fails. 

 23.  Finally,  petitioners  contend  that  contract  law  precludes  application  of  the  new  late 
 payment  procedures  to  licensees  paying  for  their  licenses  in  installments  prior  to  the  effective  date  of  the 
 Part  1  Third  Report  and  Order.  Houston  936,  for  example,  challenges  the  Commission's  elimination  of 
 the  90-  day  non-  delinquency  period,  which  was  incorporated  as  a  term  of  the  existing  promissory  notes 
 executed  by  900  MHz  Specialized  Mobile  Radio  service  (900  MHz  SMR)  licensees.  67  CONXUS  and 
 CTI  argue  that  adoption  of  the  new  late  payment  procedures  constitutes  unilateral  modification  (i.  e., 

 (Continued  from  previous  page) 
 previously  established  trusts  less  desirable  in  the  future),  but  it  does  not  for  that  reason  cease  to  be 
 a  rule  under  the  APA. 

 Accord  Bell  Atlantic  Tel.  Cos.  v.  FCC,  79  F.  3d  1195  (D.  C.  Cir.  1996)  (upholding  FCC  rule  changes  that  did  not 
 require  carriers  to  refund  sums  previously  collected,  but  which  used  past  facts  in  setting  the  carriers'  sharing 
 obligations  for  the  future  period). 

 64  DirectTV,  Inc.  v.  FCC,  110  F.  3d  816,  826  (D.  C.  Cir.  1997)  (quoting  Landgraf  v.  USI  Film  Products,  511 
 U.  S.  244,  269,  114  S.  Ct.  1483,  1499  (1994)).  "'Even  uncontroversially  prospective  statutes  may  unsettle 
 expectations  and  impose  burdens  on  past  conduct:  a  new  property  tax  or  zoning  regulation  may  upset  the 
 reasonable  expectations  that  prompted  those  affected  to  acquire  property;  .  .  .  .'"  Id.  (quoting  Landgraf,  511  U.  S. 
 at  270  n.  24). 

 65  See,  e.  g.,  Chemical  Manufacturers  Ass'n  v.  EPA,  869  F.  2d  1526,  1536  (D.  C.  Cir.  1989): 
 It  is  often  the  case  that  a  business  will  undertake  a  certain  course  of  conduct  based  on  the  current 
 law,  and  will  then  find  its  expectations  frustrated  when  the  law  changes.  This  has  never  been 
 thought  to  constitute  retroactive  rulemaking,  and  indeed  most  economic  regulation  would  be 
 unworkable  if  all  laws  disrupting  prior  expectations  were  deemed  suspect. 

 66  See  FCC  v.  National  Citizens  Comm.  for  Broadcasting,  436  U.  S.  775  (1978)  (upholding  prospective 
 regulations  limiting  multi-  media  ownership  under  the  FCC's  general  rulemaking  powers,  including  requirement  for 
 divestiture  as  a  condition  to  license  renewal);  Committee  for  Effective  Cellular  Rules  v.  FCC,  53  F.  3d  1309,  1316- 
 17  (D.  C.  Cir.  1995)  (in  upholding  FCC  rules  amending  the  technical  standards  for  determining  reliable  cellular 
 service,  resulting  in  restrictions  on  the  areas  served  by  existing  cellular  providers,  the  court  sustained  the 
 Commission's  right  to  modify  license  provisions  through  a  notice  and  comment  rulemaking);  WBEN,  Inc.  v. 
 United  States,  396  F.  2d  601,  cert.  denied,  393  U.  S.  914  (1968)  (upholding  license  modifications  that  limited 
 predawn  AM  broadcasting  rights  of  "daytimer"  licensees  that  previously  had  some  of  the  more  ample  privileges 
 granted  to  "fulltimer"  licensees). 

 67  See  Houston  936  Petition  at  1-  3.  See  also  DiGiPH  Petition  at  5  (referencing  C  block  notes);  Alpine  PCS 
 Petition  at  6-  7  (same).  Cf.  NextWave  Petition  at  5-  7  (Commission  should  reconcile  its  seemingly  conflicting  roles 
 of  regulator  and  party  to  commercial  contract). 
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 breach)  of  a  contract  between  the  Commission  and  the  licensees  for  payment  of  licenses  under  specified 
 payment  terms  even  without  a  signed  promissory  note.  68 

 24.  Installment  payment  programs  currently  exist  in  the  following  services:  the  218-  219  MHz 
 Service,  69  broadband  Personal  Communications  Services  (PCS)  frequency  block  C,  70  broadband  PCS 
 frequency  block  F,  71  broadband  PCS  frequency  block  A  (pioneers'  preference  licensees  only),  72  regional 
 narrowband  PCS,  73  900  MHz  SMR,  74  and  the  Multipoint  Distribution  Service  (MDS).  75  For  some 
 services  in  which  we  have  offered  installment  payments,  far  from  being  punitive  and  unreasonable,  we 
 have  afforded  extraordinary  relief  regarding  installment  payment  obligations.  Specifically,  we  suspended 
 the  effect  of  the  new  late  payment  provisions  as  applied  to  any  license  in  the  218-  219  MHz  Service  for 
 which  a  properly  filed  grace  period  request  was  pending  or  for  which  adequate  installment  payments  were 
 made  as  of  March  16,  1998,  pending  Commission  resolution  of  issues  raised  in  the  218-  219  MHz  Service 
 Order  and  NPRM.  76  Most  recently,  we  offered  restructuring  to  certain  218-  219  MHz  Service  licensees.  77 
 Further,  licensees  in  the  broadband  PCS  frequency  blocks  C  and  F  that  are  participating  in  the  installment 
 payment  program  have  signed  note  modifications  that  incorporate  the  late  payment  provisions  described 
 in  47  C.  F.  R.    1.2110(  f)(  4)  (redesignated  herein  as  47  C.  F.  R.    1.2110(  g)(  4)).  78  Regarding  these 
 licensees,  therefore,  there  is  no  conflict  between  the  application  of  the  new  late  payment  procedures  and 
 contract  law. 

 25.  Among  the  remaining  licensees  that  have  benefitted  from  Commission  installment 
 payment  plans,  licensees  in  broadband  PCS  frequency  block  A  and  regional  narrowband  PCS  did  not  sign 
 separate  loan  documents.  The  payment  terms  and  conditions  with  respect  to  these  licenses,  therefore, 

 68  See  CONXUS  Petition  at  7-  8;  CTI  Petition  at  8-  9.  See  also  In-  Sync  Comments  at  6. 
 69  47  C.  F.  R.    95.  816. 
 70  47  C.  F.  R.    24.  711. 
 71  47  C.  F.  R.    24.  716. 
 72  See  American  Personal  Communications  Washington-  Baltimore  MTA  #10  Frequency  Block  A,  File  No. 
 15000-  CW-  L-  94,  Call  Sign:  KNLF200,  Order,  11  FCC  Rcd  12384  (1996). 
 73  47  C.  F.  R.    24.  309. 

 74  47  C.  F.  R.    90.  812. 
 75  47  C.  F.  R.    21.  960. 
 76  218-  219  MHz  Service  Order  and  NPRM,  13  FCC  Rcd  at  19072-  19074,    12-  14. 
 77  Amendment  of  Part  95  of  the  Commission's  Rules  to  Provide  Regulatory  Flexibility  in  the  218-  219  MHz 
 Service,  WT  Docket  No.  98-  169,  RM-  8951,  Report  and  Order  and  Memorandum  Opinion  and  Order,  15  FCC 
 Rcd  1497  (adopting  a  restructuring  plan  for  existing  218-  219  MHz  Service  licensees  that  (i)  were  current  in 
 installment  payments;  (ii)  were  less  than  ninety  days  delinquent  on  the  last  payment  due  before  March  16,  1998;  or 
 (iii)  had  properly  filed  grace  period  requests  under  the  former  installment  payment  rules). 

 78  See  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Order  on  Reconsideration  of  the  Second 
 Report  and  Order,  13  FCC  Rcd  8345,  8373,    65  (1998);  see  also  Amendment  of  the  Commission's  Rules 
 Regarding  Installment  Payment  Financing  for  Personal  Communications  Service  (PCS)  Licenses,  Second  Report 
 and  Order  and  Further  Notice  of  Proposed  Rulemaking,  WT  Docket  No.  97-  82,  12  FCC  Rcd  16436  (1997). 
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 have  always  been  a  matter  of  Commission  regulation  through  the  Part  1  rules.  In  this  regard,  the 
 following  language  appears  on  the  licenses  themselves:  "This  authorization  is  subject  to  the  condition  that 
 the  remaining  balance  of  the  winning  bid  amount  will  be  paid  in  accordance  with  Part  1  of  the 
 Commission's  rules,  47  C.  F.  R.  Part  1."  These  licensees  were  aware,  or  should  have  been  aware,  that  the 
 terms  and  conditions  of  Part  1  or  other  aspects  of  the  license  can  be  modified  by  the  Commission  by 
 rulemaking,  and  that  such  changes  have  been  uniformly  upheld  by  the  courts  as  lawful.  79  The  Part  1 
 rules  at  issue  in  this  proceeding  were  modified  subject  to  APA-  consistent  administrative  rulemaking 
 procedures  and  are  intended  to  provide  greater  flexibility  to  licensees  in  determining  their  use  of  grace 
 periods  and  late  payment  provisions.  The  application  of  our  modified  late  payment  provisions  does  not 
 constitute  a  breach  of  contract  as  argued  by  these  petitioners. 

 26.  Some  SMR  and  MDS  licensees  argue  that  the  Promissory  Note  and  Security  Agreements 
 executed  by  these  licensees  bound  the  Commission  to  the  rules  in  place  at  the  time  of  the  license  grant. 
 This  is  demonstrably  incorrect.  The  Commission  did  not  promise  these  licensees,  or  any  other  licensees, 
 that  the  Part  1  rules  would  remain  unchanged  during  the  license  term.  Rather,  the  Note  and  Security 
 Agreement  provide  that  the  licensee  must  comply  with  "all  Commission  orders  and  regulations  applicable 
 to  the  licensee,"  80  without  regard  to  the  time  in  which  those  applicable  rules  were  promulgated  or 
 amended.  81  The  SMR  and  MDS  notes  emphasized  that  the  Commission's  rules,  as  amended,  would  take 
 precedence  over  the  terms  of  the  notes  in  case  of  any  conflict.  82  Moreover,  when  addressing  future 
 events,  such  as  the  making  of  installment  payments,  applications  for  grace  periods  and  incidents  of 
 default,  the  Note  and  Security  Agreement  refer  to  the  "then-  applicable"  rules  of  the  Commission,  83  a  clear 

 79  See  Stein,  Mitchell  &  Mezines,  ADMINISTRATIVE  LAW    41.04  at  page  41-  66  (observing  that  the  lower 
 courts  have  unanimously  permitted  agencies  to  modify  existing  licenses  through  APA  rulemakings). 
 80  MDS  and  SMR  Security  Agreements  at    11. 

 81  See  Association  of  Accredited  Cosmetology  v.  Alexander,  979  F.  2d  859,  863-  66  (D.  C.  Cir.  1992): 

 Member  schools  have  no  "vested  right"  to  future  eligibility  to  participate  in  the  GSL  program. 
 Although  we  do  not  doubt  AACS's  submission  that  the  schools  expected  to  be  eligible  in  the 
 future,  such  an  expectation  did  not  constitute  a  vested  interest.  Nowhere  in  the  Program 
 Participation  Agreements  are  member  schools  promised  or  even  led  to  believe  that  there  will  be 
 no  background  changes  in  the  federal  law.  The  Agreements  explicitly  provide  that  participating 
 schools  must  "comply  will  all  relevant  program  statutes  and  regulations."  (Emphasis  added.) 

 82  MDS  and  SMR  Notes  at  p.  5 

 The  enforceability  of  the  Note  and/  or  the  Security  Agreement  do  not  alter  the  rights  and 
 obligations  of  the  Maker  and  Payee  under  the  Communications  Act  of  1934,  as  amended,  or  under 
 the  then-  applicable  orders  and  regulations  of  the  Commission,  as  amended. 

 *  *  * 
 This  Note  shall  be  governed  by  and  construed  in  accordance  with  the  Communications  Act  of 
 1934,  as  amended,  the  then-  applicable  orders  and  regulations  of  the  Commission,  and  federal  law. 
 Nothing  in  this  Note  shall  be  deemed  to  modify  any  then-  applicable  orders  and  regulations  of  the 
 Commission,  and  nothing  in  this  Note  shall  be  deemed  to  release  the  Maker  from  compliance 
 therewith.  (Emphasis  added.) 

 83  For  example,  the  MDS  and  SMR  Notes  provide  at  p.  2: 

 (continued.) 
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 reference  to  the  rules  that  would  be  applicable  at  the  time  of  such  events.  Specifically  with  respect  to 
 "grace  periods"  which  were  modified  by  the  revision  of  Part  1,  the  SMR  and  MDS  Notes  are  worded 
 conditionally  --  "if  any  such  grace  period  or  extension  of  payments  is  provided  for  in  the  then-  applicable 
 orders  and  regulations  of  the  Commission."  84  This  conditional  language  confirms  that  the  "then-applicable" 
 grace  period  rules  referred  to  in  the  Note  are  those  rules  that  may  exist  at  the  time  in  the 
 future  when  a  grace  period  is  sought,  and  not  necessarily  the  rules  that  were  in  place  at  the  time  of  the 
 license  grant;  otherwise,  the  sentence  would  not  have  been  phrased  as  a  contingency,  but  would  have 
 cited  whatever  grace  period  rules  were  in  effect  at  the  time  of  the  Note.  Given  these  provisions,  the  last 
 paragraph  in  the  Note  --  which  states  that  the  Note  may  not  be  changed  except  by  an  agreement  in  writing 
 executed  by  the  party  against  whom  enforcement  of  such  change  is  sought  85  --  means  that  individual 
 modifications  to  any  particular  agreement  must  be  made  in  writing  by  mutual  consent.  Significantly, 
 however,  this  clause  does  not  preclude  service-  wide  changes  of  the  governing  rules  by  the  agency's  public 
 notice  and  comment  rulemaking  process.  Specifically,  the  Payee,  by  signing  such  Note,  has  already 
 agreed  to  be  bound  by  the  Commission's  rules  as  they  may  be  amended  from  time  to  time  in  the 
 provisions  of  the  Note  and  Security  Agreement  referencing  the  "then-  applicable"  rules  of  Commission.  86 
 We,  therefore,  retain  the  modified  grace  period  and  late  payment  fee  provisions  adopted  in  the  Part  1 
 Third  Report  and  Order.  87 

 27.  As  discussed  above,  we  conclude  that  the  revised  late  payment  rules  are  not 
 commercially  unreasonable,  do  not  constitute  impermissible  retroactive  rulemaking,  and  do  not  violate 
 basic  contract  principles.  We  believe,  however,  that  a  slight  modification  to  the  payment  due  dates  for 
 late  installment  payments  and  associated  late  fees  would  benefit  licensees.  Under  the  Part  1  Third  Report 

 (Continued  from  previous  page) 
 All  payments  shall  be  made  during  normal  business  hours  at  the  Commission's  designated  lockbox 
 location  as  set  forth  from  time  to  time  in  the  Commission's  then-  applicable  orders  and  regulations 
 and/  or  public  notices. 

 84  MDS  and  SMR  Notes  at  p.  2. 

 85  MDS  and  SMR  Notes  at  p.  5. 
 86  Some  petitioners  argue  that  the  Supreme  Court  decision  in  United  States  v.  Winstar  Corp.,  518  U.  S.  839 
 (1996),  precludes  the  unilateral  modifications  of  the  terms  of  the  Note  and  Security  Agreement.  See,  e.  g.,  Alpine 
 PCS  Petition  at  6;  CONXUS  Petition  at  7.  Winstar  addressed  an  entirely  different  regulatory  scheme,  and  one  in 
 which  the  Court  found  that  the  government  agreed  to  protect  private  parties  from  the  risk  of  changing  regulations. 
 Here,  in  contrast,  the  Note  and  Security  Agreement  put  the  licensees  on  notice  that  they  must  continue  to  comply 
 with  the  Commission's  regulations,  as  the  may  be  amended.  Alpine  PCS,  CONXUS  and  other  petitioners  do  not, 
 and  cannot,  point  to  any  provision  in  the  Notes  and  Security  Agreements  in  which  the  government  affirmatively 
 promised  not  to  make  any  regulatory  changes  that  would  affect  the  licensees  during  the  10-  year  life  of  the  licenses. 
 Accordingly,  the  Winstar  decision  has  no  application  to  the  circumstances  here. 

 87  While  the  instant  reconsideration  petitions  were  under  consideration,  we  informally  allowed  SMR  and 
 MDS  licensees  to  make  installment  payments  under  a  modified  regime  in  which  licensees  in  these  services  were 
 not  charged  a  late  fee  if  the  payment  was  made  within  90-  days  of  the  due  date  (as  provided  for  in  the  text  of  the 
 SMR  and  MDS  Notes),  and  in  which  a  10  percent  late  fee  was  imposed  for  payments  that  were  made  within  the 
 90-  180  day  period  (as  provided  for  in  the  new  Part  1  rules).  We  did  this  as  an  accommodation  to  these  licensees 
 so  as  not  to  prejudice  their  argument  that  the  Note  and  Security  Agreement  provisions  restricted  the  Commission 
 to  the  old  Part  1  rules,  at  least  for  the  first  90-  day  period.  Now  that  we  have  completed  our  review  on 
 reconsideration,  we  see  no  reason  to  continue  that  special  procedure,  since  we  have  concluded  that  the  Note  and 
 Security  Agreements  do  not  preclude  the  adoption  of  new  grace  period  and  payment  rules  for  the  future.  While  we 
 will  not  seek  to  recover  the  amounts  that  might  otherwise  have  been  due  for  late  payments  under  our  Part  1  rules 
 during  this  reconsideration  period,  we  will  commence  applying  the  Part  1  rules  uniformly  to  all  services,  including 
 SMR  and  MDS,  beginning  with  the  first  installment  payment  due  after  the  effective  date  of  this  rule  making. 
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 and  Order,  licensees  that  miss  an  installment  payment  are  given  up  to  two  90-  day  periods  in  which  to 
 submit  the  installment  payment  and  associated  late  fee  without  being  considered  delinquent.  88  Regularly 
 scheduled  installment  payments,  on  the  other  hand,  are  due  quarterly  (i.  e.,  every  3  months),  which  may 
 provide  a  licensee  with  up  to  92  calendar  days  to  make  timely  payment  depending  upon  the  month  in 
 which  the  payment  is  due.  This  discrepancy  in  payment  due  dates  may  cause  confusion  for  licensees.  For 
 example,  a  late  installment  payment  and  associated  late  fee  may  be  due  a  day  or  two  before  the  next 
 regularly  scheduled  quarterly  installment  payment.  Because  these  due  dates  are  so  proximate,  licensees 
 may  mistakenly  assume  that  they  can  pay  their  late  installment  payment  and  late  fee  on  the  due  date  of  the 
 next  regularly  scheduled  quarterly  installment  payment  without  incurring  an  additional  late  payment  fee 
 or  being  considered  delinquent. 

 28.  In  order  to  avoid  any  confusion  as  to  when  late  installment  payments  and  accompanying 
 late  fees  are  due,  we  will  amend  the  due  dates  for  late  installment  payments  to  comport  with  quarterly  due 
 dates.  Specifically,  rather  than  providing  licensees  that  fail  to  make  timely  installment  payments  with  two 
 90-  day  periods  in  which  to  satisfy  their  payment  obligations,  we  will  provide  such  licensees  with  two 
 quarters  (two  3-  month  periods)  in  which  to  submit  their  late  installment  payments  and  required  late  fees 
 without  being  considered  delinquent.  Thus,  due  dates  for  late  installment  payments  and  associated  late 
 fees  will  coincide  with  quarterly  due  dates  for  regularly  scheduled  installment  payments.  Although  we 
 modify  the  due  dates  for  submitting  late  installment  payments,  we  do  not  change  the  associated  late  fee 
 provisions.  We,  therefore,  amend  Section  1.2110(  f)(  4)  (redesignated  herein  as  Section  1.2110(  g)(  4))  of 
 our  rules  to  provide  that  a  licensee  that  fails  to  make  an  installment  payment  when  due  will  be  permitted 
 to  make  its  required  payment  by  the  end  of  the  next  quarter  (a  3-  month  period)  without  being  considered 
 delinquent,  but  will  be  assessed  a  late  payment  fee  equal  to  5  percent  of  the  amount  of  the  past  due 
 installment  payment.  89  If  the  licensee  fails  to  make  the  required  payment  within  the  first  quarter  after  the 
 regularly  scheduled  due  date,  the  licensee  will  be  allowed  to  make  its  required  payment  by  the  end  of  the 
 subsequent  quarter  without  being  considered  delinquent,  this  time  subject  to  a  second,  additional  late 
 payment  fee  equal  to  10  percent  of  the  amount  of  the  past  due  installment  payment.  90  The  licensee  is  not 
 required  to  submit  a  request  to  take  advantage  of  these  provisions.  A  licensee  that  fails  to  make  payment 
 within  two  quarters  (or  6  months)  after  an  installment  payment  due  date  sufficient  to  pay  all  past  due  late 
 payment  fees,  interest,  and  principal,  will  be  deemed  to  have  failed  to  make  full  payment  of  its  obligation 
 and,  as  has  been  the  case  since  the  inception  of  our  competitive  bidding  and  auction  specific  installment 
 payment  rules,  the  license  will  automatically  cancel  without  further  Commission  action.  91 

 F.  Installment  Payment  Restructuring 

 88  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  436,    106;  47  C.  F.  R.    1.  2110(  f)(  4)  (redesignated  herein 
 as    1.2110(  g)(  4)). 
 89  See  47  C.  F.  R.    1.2110(  g)(  4)  as  adopted  herein. 

 90  See  47  C.  F.  R.    1.  2110(  g)(  4)  as  adopted  herein.  These  amendments  of  the  due  dates  for  late  installment 
 payments  and  associated  late  fees  do  not  apply  to  C  and  F  block  licensees  that  were  provided  a  single  90-  day  non-delinquency 
 period  for  remittance  of  the  initial  resumption  payment  that  was  due  on  July  31,  1998.  See 
 Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications 
 Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Order  on  Reconsideration  of  the  Second  Report  and  Order,  13 
 FCC  Rcd  at  8355,    26. 

 91  See  47  C.  F.  R.    1.  2110(  g)(  4)  as  adopted  herein.  These  late  payment  fee  and  automatic  cancellation 
 provisions  do  not  apply  to  licensees  with  grace  period  requests  that  were  properly  filed  prior  to  the  effective  date 
 of  the  Part  1  Third  Report  and  Order  (March  16,  1998)  until  such  time  as  the  Commission  (or  the  Bureau  upon 
 delegated  authority)  addresses  those  grace  period  requests. 
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 29.  Background.  In  the  Competitive  Bidding  Second  Report  and  Order,  the  Commission 
 stated  that  once  it  granted  a  grace  period  request,  "a  defaulting  licensee  could  maintain  its  construction 
 efforts  and/  or  operations  while  seeking  funds  to  continue  payments  or  seek  from  the  Commission  a 
 restructured  payment  plan."  92  Reference  to  a  restructured  payment  plan  also  appeared  in  the  former  grace 
 period  rule,  Section  1.2110(  e)(  4)(  ii),  which  permitted  licensees  to  temporarily  suspend  their  installment 
 payments  pending  the  restructuring  of  such  payment  obligations.  93  In  amending  Section  1.2110  to  be 
 consistent  with  our  decision  in  the  Part  1  Third  Report  and  Order  to  revise  the  late  payment  provisions 
 and  eliminate  the  grace  payment  procedure,  we  removed  language  that  referred  to  a  restructured  payment 
 schedule. 

 30.  Discussion.  NextWave  objects  to  the  elimination  of  language  in  Section  1.2110  referring 
 to  a  restructuring  of  installment  payments.  94  NextWave  contends  that  the  Commission  eliminated  the 
 option  to  restructure  without  providing  notice  and  comment  or  any  rationale  for  the  elimination  in 
 violation  of  the  APA.  95  By  removing  language  in  Section  1.2110(  e)(  4)(  ii)  that  referenced  a  restructured 
 payment  schedule,  we  did  not  intend  to  eliminate  a  licensee's  option  to  request  restructuring  of  its 
 installment  payment  obligations.  We  simply  sought  to  amend  the  rule  to  provide  for  automatic  grace 
 periods  rather  than  requiring  a  showing  of  financial  need  to  support  a  grace  period  request.  Licensees  in 
 the  installment  payment  program  may  still  submit  requests  for  payment  restructuring  or  workouts.  There 
 is,  however,  no  longer  a  procedure  for  requesting  a  grace  period  to  stay  installment  payment  deadlines 
 pending  such  restructuring.  Rather,  licensees  will  be  subject  to  the  automatic  late  payment  provisions  of 
 Section  1.2110(  g)  as  adopted  herein.  96  Because  licensees  continue  to  have  the  opportunity  to  seek 
 restructuring  of  installment  payments,  the  Commission  was  not  required  under  the  APA  to  seek  comment 
 on  the  elimination  of  that  option.  Moreover,  the  reference  to  a  "restructured  payment  schedule"  in 
 Section  1.2110(  e)(  4)(  ii)  was  part  and  parcel  of  our  rule  section  that  provided  for  individual  grace  period 
 requests  and  financial  distress  showings.  97  We  proposed  to  amend  that  rule  section  in  its  entirety  and 
 adopt  automatic  grace  periods  in  the  Part  1  Notice  of  Proposed  Rule  Making.  98  Interested  parties  could 
 reasonably  have  anticipated  that  our  proposal  to  amend  the  grace  period  request  rule  could  result  in  the 
 amendment  of  language  in  that  rule  referencing  restructuring.  Thus,  omitting  a  reference  to  a  restructured 
 payment  schedule  is  within  the  specific  scope  of  the  Part  1  Notice  of  Proposed  Rule  Making  99  to  adopt 
 automatic  grace  periods  and  eliminate  the  requirement  to  file  financial  distress  showings  and,  therefore,  is 
 not  violative  of  the  APA. 

 92  Competitive  Bidding  Second  Report  and  Order,  9  FCC  Rcd  at  2391,    240  (emphasis  added). 
 93  Section  1.2110(  e)(  4)(  ii)  provided  in  part:  "If  the  Commission  grants  a  request  for  a  grace  period,  or 
 otherwise  approves  a  restructured  payment  schedule  .  .  .  ."  47  C.  F.  R.    1.2110(  e)(  4)(  ii)  (1997). 
 94  NextWave  Petition  at  4.  See  also  Loli  Petition  at  7-  8  (requesting  that  218-  219  MHz  Service  licensees  be 
 allowed  to  continue  filing  requests  for  "work-  outs"). 
 95  NextWave  Petition  at  5. 

 96  See  47  C.  F.  R.    1.  2110(  g)  as  adopted  herein. 
 97  47  C.  F.  R.    1.  2110(  e)(  4)(  ii)  (1997). 
 98  See  Part  1  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  at  5723-  5726,    71-  74. 
 99  See  Part  1  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  at  5723-  5726,    69-  78. 
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 G.  Installment  Payment  Obligations  Under  Assignments  of  Licenses  and  Transfers  of  Control 
 31.  Background.  The  Communications  Act  of  1934  (  Communications  Act),  as  amended, 
 requires  the  Commission  to  approve  assignments  of  licenses  and  transfers  of  control.  100  Prior  to  the 
 adoption  of  the  Universal  Licensing  System  (ULS)  Report  and  Order,  101  upon  approval  of  an  assignment 
 or  transfer,  the  Bureau  amended  its  licensing  database  for  certain  private  and  microwave  services.  102  If  an 
 assignment  or  transfer  was  not  consummated,  we  required  the  filing  of  a  second  transfer  application  that 
 reflected  the  "return"  of  the  license  from  the  putative  transferee  to  the  original  licensee.  103  The  ULS  rules, 
 however,  now  require  parties  to  assignments  of  licenses  or  transfers  of  control  in  all  wireless  services 
 only  to  file  a  notice  that  they  have  consummated  the  underlying  transaction,  at  which  point  the  Bureau 
 amends  its  licensing  database.  104 

 32.  Discussion.  In-  Sync  seeks  clarification  regarding  an  assignee's  or  transferee's 
 responsibility  for  installment  payment  debt  in  the  event  of  default  by  an  assignor  or  transferor  in  cases 
 where  the  Bureau  amended  its  database  simply  upon  approval  of  the  assignment  or  transfer.  105 
 Specifically,  In-  Sync  believes  that  the  assignee  or  transferee  should  not  be  responsible  for  licensee  debt 
 until  the  transaction  is  consummated.  106  As  an  initial  matter,  we  emphasize  that  the  consummation  date 
 of  an  assignment  of  license  or  transfer  of  control  governs  debt  obligations  irrespective  of  the  post-consummation 
 notification  requirement.  Therefore,  regarding  an  assignment  of  license,  we  clarify  that 
 the  assignee  of  a  license  paid  for  through  installment  payments  is  not  responsible  for  the  license  debt  until 
 the  transaction  is  consummated.  As  a  practical  matter,  for  services  where  licensees  have  signed 
 promissory  notes  (i.  e.,  C  block,  F  block,  MDS  and  900  MHz  SMR)  assignees  must  execute  loan 
 documents  and  consummation  does  not  occur  until  the  execution  of  such  documents.  In  these  instances, 
 the  assignee  will,  of  course,  be  aware  that  consummation  has  occurred.  However,  for  services  where 
 licensees  did  not  sign  promissory  notes  (i.  e.,  218-  219  MHz,  regional  narrowband  PCS  and  broadband 
 PCS  frequency  block  A  (pioneers'  preference  licenses)),  if  a  default  occurs  prior  to  consummation,  and 
 the  Commission  mistakenly  initiates  debt  collection  procedures  against  the  assignee  that  is  not  the  actual 
 licensee,  that  party  should  notify  the  Commission  in  writing  that  the  underlying  transaction  was  not 
 consummated  and  the  Commission  will  initiate  debt  collection  procedures  against  the  assignor  that  is  the 
 licensee. 

 33.  In  contrast  to  an  assignment  of  license,  with  transfers  of  control  the  licensee  does  not 
 change  and,  therefore,  remains  liable  for  the  debt  irrespective  of  consummation.  In  such  cases,  the 

 100  47  U.  S.  C.    310(  d). 
 101  Biennial  Regulatory  Review  --  Amendment  of  Parts  0,  1,  13,  22,  24,  26,  27,  80,  87,  90,  95,  97,  and  101  of 
 the  Commission's  Rules  to  Facilitate  the  Development  and  Use  of  the  Universal  Licensing  System  in  the  Wireless 
 Telecommunications  Services,  WT  Docket  No.  98-  20,  Report  and  Order,  13  FCC  Rcd  21027  (1998)  ("  ULS 
 Report  and  Order"). 

 102  See,  e.  g.,  47  C.  F.  R.    95.  821  (1997)  (218-  219  MHz  service). 

 103  See,  e.  g.,  ULS  Report  and  Order,  13  FCC  Rcd  at  21081,    118. 
 104  Id.  at  21081-  21082,    118-  119  and  Appendix  G  (final  rule  47  C.  F.  R.    1.  948(  d)).  The  ULS  rules 
 became  effective  on  February  16,  1999,  60  days  after  their  date  of  publication  in  the  Federal  Register. 
 105  In-  Sync  Comments  at  7. 

 106  Id. 
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 Commission  generally  looks  to  the  licensee  for  repayment  of  the  debt.  We  recognize,  however,  that  there 
 may  be  unusual  circumstances  in  which  the  Commission  might  look  beyond  the  licensee  for  repayment  of 
 the  debt,  e.  g.,  pierce  the  corporate  veil,  and  a  new  party  to  the  licensing  entity  could  become  subject  to 
 debt  collection  at  consummation.  We  reiterate  that  the  consummation  date  governs  the  debt  obligations 
 irrespective  of  the  post-  notification  requirements.  Therefore,  if  the  Commission  inadvertently  initiates 
 debt  collection  procedures  against  a  party  that  is  not  part  of  the  licensing  entity  because  the  transfer  of 
 control  was  not  consummated,  the  party  should  notify  the  Commission  in  writing  that  the  underlying 
 transaction  was  not  consummated  and  the  Commission  will  stop  its  debt  collection  proceedings  against 
 the  party  that  is  not  part  of  the  licensing  entity. 

 H.  Clarification  of  Unjust  Enrichment  Rules 
 34.  Background.  In  the  Part  1  Third  Report  and  Order,  the  Commission  revised  the  Part  1 
 unjust  enrichment  rules  as  applied  to  assignments  and  transfers  of  control  of  licenses  acquired  using 
 bidding  credits  and/  or  installment  payments.  107  Specifically,  if  a  licensee  seeks  to  assign  or  transfer 
 control  of  its  license  to  an  entity  not  meeting  the  same  eligibility  standards  for  installment  payments  at 
 any  time  during  the  initial  license  term,  the  licensee  must  make  full  payment  of  the  remaining  unpaid 
 principal  and  any  unpaid  interest  accrued  through  the  date  of  assignment  or  transfer  as  a  condition  of 
 Commission  approval.  108  Similarly,  if  a  licensee  seeks  to  assign  or  transfer  control  of  its  license  to  an 
 entity  not  meeting  the  same  eligibility  standards  for  bidding  credits,  the  licensee  must  reimburse  the 
 government  for  the  amount  of  the  bidding  credit,  plus  interest  based  on  the  rate  for  United  States  Treasury 
 obligations  applicable  on  the  date  the  license  is  granted,  as  a  condition  of  Commission  approval.  109 
 Unlike  the  unjust  enrichment  payment  for  installment  payments,  however,  the  unjust  enrichment  payment 
 for  bidding  credits  decreases  based  on  the  amount  of  time  the  initial  license  has  been  held,  with  no  unjust 
 enrichment  payment  due  after  the  fifth  year  of  initial  licensing.  110  In  making  these  changes  to  the  unjust 
 enrichment  rules  in  the  Part  1  Third  Report  and  Order,  we  specifically  superseded  the  existing  service-specific 
 unjust  enrichment  provisions,  replacing  each  of  those  rules  with  a  cross-  reference  to  the  new  Part 
 1  unjust  enrichment  rule,  47  C.  F.  R.    1.  2111.  111 

 35.  Discussion.  NextWave  seeks  clarification  regarding  the  application  of  the  revised  unjust 
 enrichment  rules  for  bidding  credits  (Section  1.2111(  d)  of  the  Commission's  rules)  and  the  broadband 
 PCS  entrepreneurs'  block  prohibition  on  assignments  and  transfers  to  non-  entrepreneurs  during  the  first 
 five  years  of  initial  licensing  (Section  24.839  of  the  Commission's  rules).  112  As  a  practical  matter,  under 
 the  Part  1  rules  as  modified  in  the  Part  1  Third  Report  and  Order,  bidding  credit  unjust  enrichment 
 payments  are  not  required  for  assignments  or  transfers  of  control  of  C  and  F  block  licenses  to  non-entrepreneurs 
 because,  as  NextWave  points  out,  Section  24.839  bars  such  assignments  or  transfers  until 
 five  years  after  the  date  of  the  initial  license  grant,  at  which  point  the  bidding  credit  unjust  enrichment 

 107  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  405-  409,    49-  56. 
 108  See  47  C.  F.  R.    1.  2111(  c). 
 109  See  47  C.  F.  R.    1.  2111(  d). 
 110  See  47  C.  F.  R.    1.  2111(  d)(  2). 
 111  See  47  C.  F.  R.    24.  309(  f)  (narrowband  PCS),  24.711  (C  block),  24.  716(  d)  (F  block),  27.  209(  d)(  1),  (2) 
 (WCS),  90.  812(  b)  (900  MHz),  95.816(  e)  (IVDS);  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  407,    53. 
 112  NextWave  Petition  at  8-  10.  47  C.  F.  R.    1.  2111(  d),  24.  839. 
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 penalties  of  Section  1.2111  lapse.  113  The  proscription  of  Section  24.839,  however,  does  not  apply  if  an 
 entrepreneur  proposes  to  assign  or  transfer  its  C  or  F  block  license  to  another  qualifying  entrepreneur.  114 
 In  such  a  case,  Section  1.2111  provides  for  unjust  enrichment  payments  with  respect  to  assignments  and 
 transfers  between  entities  qualifying  for  different  tiers  of  bidding  credits.  115 

 36.  NextWave  further  argues  that  the  Commission  has  not  adequately  explained  why  PCS 
 entrepreneur  block  licensees  are  subject  to  a  five-  year  transfer  restriction  when  licensees  in  other  services 
 are  allowed  to  assign  or  transfer  licenses  during  the  first  five  years  of  the  license  term,  subject  to  the 
 repayment  of  bidding  credits.  116  In  order  to  fulfill  our  statutory  duty  to  give  opportunities  to  small 
 businesses,  we  set  aside  the  PCS  C  and  F  blocks  for  participation  only  by  smaller  entities,  in  this  case, 
 entrepreneurs.  117  To  ensure  that  licenses  in  these  blocks  are  used  exclusively  by  smaller  entities,  we 
 adopted  a  rule  to  preclude  the  trafficking  of  entrepreneur  block  licenses  to  non-  entrepreneurs  for  the  first 
 five  years  of  licensing.  118  In  adopting  this  transfer  restriction,  we  explained  that  allowing  parties  to  take 
 advantage  of  bidding  in  the  entrepreneurs'  blocks  and  immediately  assign  or  transfer  control  of  the 
 authorizations  to  non-  entrepreneurs  would  undermine  our  goal  of  giving  entrepreneurs  the  opportunity  to 
 provide  PCS.  119  Since  these  entrepreneur  blocks  are  the  only  spectrum  set  aside  specifically  for  smaller 
 entities,  these  are  the  only  licenses  subject  to  the  five-  year  anti-  trafficking  provision.  In  contrast,  with 
 respect  to  services  in  which  all  entities,  large  and  small,  are  permitted  to  acquire  licenses,  our  objective  is 
 to  ensure  that,  irrespective  of  entity  size,  the  license  is  awarded  to  the  entity  that  values  it  most.  In  such 
 cases,  we  may  offer  bidding  credits  or  other  incentives  to  afford  small  entities  an  opportunity  to  acquire 
 licenses.  In  these  instances,  we  are  not  concerned  with  ensuring  that  a  block  of  spectrum  is  used 
 exclusively  by  smaller  entities  and,  therefore,  permit  the  transfer  of  licenses  early  in  the  license  term 
 subject  to  repayment  under  our  unjust  enrichment  rules  for  bidding  credits  and  installment  payments.  120 

 37.  We  further  clarify  that  pursuant  to  Sections  1.2111(  c)  and  (d)  of  our  rules,  Commission 
 approval  of  assignments  of  licenses  and  transfers  of  control  that  result  in  unjust  enrichment  with  respect 
 to  bidding  credits  and  installment  payments  is  conditioned  upon  full  payment  of  the  required  unjust 
 enrichment  payments  on  or  before  the  consummation  date.  121  In  other  words,  consummation  of  an 
 assignment  of  license  or  transfer  of  control  will  not  be  valid  unless  the  Commission  first  receives  the 
 required  unjust  enrichment  payment  in  full.  We  believe  that  this  clarification  will  ensure  efficiency  in  the 
 processing  and  consummation  of  assignments  of  licenses  and  transfers  of  control. 

 113  NextWave  Petition  at  8-  10.  47  C.  F.  R.    1.  2111(  d),  24.  839. 
 114  See  47  C.  F.  R.    24.  839. 
 115  See  47  C.  F.  R.    1.  2111(  d). 
 116  Nextwave  Petition  at  10. 
 117  Implementation  of  Section  309(  j)  of  the  Communications  Act  -  Competitive  Bidding,  PP  Docket  No.  93- 
 253,  Fifth  Report  and  Order,  9  FCC  Rcd  5532,  5580-  5589,    113-  129  (1994). 
 118  See  47  C.  F.  R.    24.  839. 

 119  See  Implementation  of  Section  309(  j)  of  the  Communications  Act  -  Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  at  5588,    128. 
 120  See  47  C.  F.  R.    1.  2111(  c)  and  (d). 

 121  47  C.  F.  R.    1.  2111(  c)  and  (d). 
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 I.  Inapplicability  of  Section  1.2104  to  Installment  Payment  Defaults 
 38.  Background.  In  the  Part  1  Third  Report  and  Order,  we  addressed  matters  relating  to 
 defaults  on  payment  obligations  by  winning  bidders  in  spectrum  auctions.  122  Under  Section  1.2104(  g), 
 winning  bidders  that  default  on  a  down  payment  or  full  payment  after  the  close  of  an  auction  are  subject 
 to  a  payment  equal  to  the  difference  between  the  amount  of  the  defaulted  bid  and  the  amount  of  the 
 winning  bid  the  next  time  the  license  is  auctioned,  plus  3  percent  of  the  lesser  of  these  amounts.  123  We 
 considered  whether  a  licensee  failing  to  make  a  timely  installment  payment  should  be  subjected  to  these 
 same  provisions.  In  paragraphs  115  and  116  of  the  Part  1  Third  Report  and  Order,  we  decided  against 
 imposing  the  default  provisions  of  Section  1.2104(  g)  with  respect  to  defaults  on  installment  payments.  124 
 We  found  that  without  such  additional  payments,  our  other  rules  and  installment  payment  terms  are 
 adequate  to  discourage  defaults.  Despite  the  clear  statement  on  this  point  in  paragraphs  115  and  116,  we 
 believe  that  paragraph  122  of  the  Part  1  Third  Report  and  Order  may  still  have  left  some  ambiguity  in 
 this  matter.  125  Specifically,  the  latter  paragraph  may  be  construed  as  stating  that  the  additional  payment 
 requirements  of  Section  1.2104(  g)(  2)  relating  to  down  payment  and  full  payment  defaulters  are  also 
 applicable  to  installment  payment  defaulters.  126 

 39.  Discussion.  We  clarify  that  licensees  defaulting  on  installment  payments  ("  installment 
 payment  defaulters")  are  not  subject  to  Section  1.2104(  g)(  2).  127  The  automatic  default  provisions  of 
 Section  1.2110(  f)(  4)  (redesignated  herein  as  1.2110(  g)(  4))  are  adequate  to  discourage  untimely 
 installment  payments.  128  We  note  that  while  Section  1.2109(  c)  identifies  types  of  defaulters  that  are 
 subject  to  Section  1.2104(  g)(  2),  the  rule  does  not  reference  installment  payment  defaulters.  129  Instead, 
 installment  payment  defaults  are  covered  by  Section  1.2110(  g)(  4),  as  designated  herein,  which  does  not 
 incorporate  Section  1.2104(  g)(  2).  As  we  noted  in  the  Part  1  Third  Report  and  Order,  the  risk  of  losing  a 
 license  should  provide  most  licensees  with  a  strong  incentive  to  avoid  default.  130  Accordingly,  we 
 conclude  that  Section  1.2104(  g)(  2)  does  not  apply  to  installment  payment  defaulters.  131  Rather,  pursuant 

 122  Part  I  Third  Report  and  Order,  13  FCC  Rcd  at  432-  434,    100-  102. 
 123  47  C.  F.  R.    1.  2104(  g). 
 124  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  443,    115-  116;  47  C.  F.  R.    1.2104(  g). 
 125  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  446,    122.  See  Amendment  of  Part  1  of  the 
 Commission's  Rules  --  Competitive  Bidding  Procedures,  WT  Docket  No.  97-  82,  Erratum  to  Third  Report  and 
 Order  and  Second  Further  Notice  of  Proposed  Rule  Making,  13  FCC  Rcd  4621,  4625,    8  (amending    122  of  the 
 Part  1  Third  Report  and  Order).  See  also  NextWave  Petition  at  7-  8. 

 126  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  446,    122;  47  C.  F.  R.    1.  2104(  g)(  2). 

 127  47  C.  F.  R.    1.  2104(  g)(  2).  But  note  that  licensees  in  the  installment  payment  program  that  default  on 
 down  payments  are  subject  to  Section  1.2104(  g)(  2).  See  47  C.  F.  R.    1.  2104(  g)(  2),  1.2110(  g)(  1)  (as  designated 
 herein). 

 128  47  C.  F.  R.    1.  2110(  f)(  4)  (redesignated  herein  as  1.  2110(  g)(  4)). 

 129  47  C.  F.  R.    1.2109(  c),  1.  2104(  g)(  2). 
 130  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  443,    116. 
 131  47  C.  F.  R.    1.  2104(  g)(  2). 
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 to  Section  1.2110(  g)(  4)(  iv),  as  designated  herein,  licensees  that  default  on  installment  payment 
 obligations  will  automatically  lose  their  licenses  and  be  subject  to  debt  collection  procedures.  132 

 J.  Eligibility  for  Participation 
 40.  Background.  The  Commission's  FCC  Form  175  short-  form  application  for  all  auctions 
 requires  applicants  to  certify  that  they  are  not  in  default  on  any  Commission  licenses  and  that  they  are  not 
 delinquent  on  any  non-  tax  debt  owed  to  any  Federal  agency.  133  The  purpose  of  this  rule  is  to  preserve  the 
 integrity  of  the  auction  process  and  to  ensure  that  bidders  are  capable  of  meeting  their  financial 
 commitments  to  the  Commission.  In  the  C  Block  Fourth  Report  and  Order,  the  Commission  determined 
 that  "former  defaulters,"  i.  e.,  applicants  that  have  defaulted  or  been  delinquent  in  the  past,  but  have  since 
 paid  all  of  their  outstanding  non-  Internal  Revenue  Service  Federal  debts  and  all  associated  charges  or 
 penalties,  are  eligible  to  participate  in  future  auctions  of  C  block  spectrum,  provided  that  they  are 
 otherwise  qualified.  134  In  addition,  the  Commission  adopted  a  special  upfront  payment  policy  for  "former 
 defaulters"  seeking  to  participate  in  C  block  auctions.  135  It  required  that  "former  defaulters"  make  an 
 upfront  payment  of  50  percent  more  than  the  normal  amount  set  by  the  Bureau  for  any  given  license  in  a 
 C  block  auction.  136  The  Commission  applied  these  policies  in  the  broadband  PCS  auction  that  concluded 
 on  April  15,  1999  (Auction  No.  22). 

 41.  Discussion.  On  our  own  motion,  we  hereby  incorporate  into  the  Part  1  general 
 competitive  bidding  rules  the  "former  defaulter"  policies  adopted  with  respect  to  C  block  auction 
 applicants.  While  we  have  determined  that  it  is  necessary  to  limit  participation  in  Commission  auctions 
 to  entities  that  can  certify  that  they  are  not  in  default  on  certain  debts,  we  also  believe  that  past  business 
 misfortunes  do  not  inevitably  preclude  an  entity  from  being  able  to  meet  its  present  and  future 
 responsibilities  as  a  Commission  licensee.  137  Therefore,  we  will  allow  "former  defaulters,"  i.  e.,  applicants 
 that  have  defaulted  or  been  delinquent  in  the  past,  but  have  since  paid  all  of  their  outstanding  non-  tax 
 debts  and  all  associated  charges  or  penalties,  to  certify  on  Form  175  that  they  are  not  in  default  and  are, 
 therefore,  eligible  for  auction  participation.  Thus,  a  bidder  that  has  defaulted  on  its  down  or  final 
 payment  obligation,  but  has  paid,  by  the  short-  form  application  deadline,  any  default  payments  assessed 
 by  the  Commission  (e.  g.,  the  initial  default  payment  of  3  percent  of  the  defaulted  bid  amount  pursuant  to 
 47  C.  F.  R.    1.  2104(  g)(  2))  is  qualified  to  certify  on  Form  175  that  it  is  not  in  default  and  is  eligible  to 
 participate  in  Commission  auctions.  Such  bidder,  however,  remains  subject  to  any  as  yet  unassessed 
 payment  obligations  pursuant  to  Section  1.2104(  g)  of  our  rules,  unless  otherwise  relieved  from  such 
 obligations  under  applicable  law.  138 

 132  47  C.  F.  R.    1.  2110(  g)(  4)(  iv)  (formerly  1.2110(  f)(  4)(  iv)). 
 133  See  47  C.  F.  R.    1.  2105(  a)(  2)(  x). 
 134  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Fourth  Report  and  Order,  13  FCC  Rcd  15743, 
 15753-  15754,    18  (1998). 

 135  Id.  at  15761-  15762,    34. 

 136  Id.  at  15761,    34. 
 137  See  id.  at  15754,    18. 
 138  See  47  C.  F.  R.    1.  2104(  g). 
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 42.  In  determining  the  upfront  payment  amounts  required  by  "former  defaulters"  seeking  to 
 participate  in  future  C  block  auctions,  the  Commission  reasoned  that  "the  integrity  of  the  auctions 
 program  and  the  licensing  process  dictates  requiring  a  more  stringent  financial  showing  from  applicants 
 with  a  poor  Federal  financial  track  record."  139  We  believe  that  this  reasoning  applies  with  equal  force  to 
 "former  defaulters"  seeking  to  participate  in  any  Commission  auction.  Consequently,  we  will  amend 
 Section  1.2106(  a)  of  our  general  competitive  bidding  rules  to  require  that  "former  defaulters"  pay  an 
 upfront  payment  amount  of  1.5  times  the  normal  amount  set  by  the  Bureau  for  any  given  license  in  a 
 Commission  auction.  140  So  that  the  Bureau  may  implement  this  rule,  we  will  require  applicants  to  make 
 an  additional  certification  revealing  whether  they  have  ever  been  in  default  on  any  Commission  license  or 
 have  ever  been  delinquent  on  any  non-  tax  debt  owed  to  any  Federal  agency.  141  If  any  one  of  an 
 applicant's  controlling  interests  or  their  affiliates  as  defined  by  Section  1.  2110  of  the  Commission's  rules 
 (as  adopted  herein)  has  ever  been  in  default  on  Commission  licenses  or  has  ever  been  delinquent  on  any 
 non-  tax  debt  owed  to  any  Federal  agency,  but  has  made  the  requisite  payment,  the  applicant  will  be 
 eligible  to  participate  in  Commission  auctions  but  will  be  considered  a  "former  defaulter"  for  purposes  of 
 the  upfront  payment  requirements.  142  We  may  use  credit  information  concerning  the  applicant,  its 
 controlling  interests  and  their  affiliates  to  verify  any  certified  statements  regarding  the  history  of 
 payments  made  to  the  Federal  government  by  such  entities. 

 43.  Under  Section  1.2110(  g)(  4),  as  designated  herein,  when  a  licensee  defaults  on  an 
 installment  payment,  its  license  automatically  cancels  without  any  action  by  the  Commission,  and  the 
 entire  outstanding  debt  obligation  becomes  subject  to  debt  collection  procedures.  143  A  licensee  that  has 
 previously  defaulted  on  an  installment  payment  will  be  permitted  to  participate  in  future  Commission 
 spectrum  auctions  under  certain  conditions.  In  order  to  be  eligible  for  participation  in  a  future  auction,  an 
 installment  payment  defaulter  must  have  either  (1)  paid  all  of  its  outstanding  non-  tax  debt,  along  with  all 
 associated  charges  and  penalties;  144  or  (2)  been  relieved  of  such  obligations  pursuant  to  otherwise 
 applicable  law.  145  In  all  instances,  installment  payment  defaulters  eligible  to  participate  in  future  auctions 

 139  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Fourth  Report  and  Order,  13  FCC  Rcd  at 
 15761,    34. 

 140  See  47  C.  F.  R.    1.  2106(  a)  as  adopted  herein. 

 141  See  47  C.  F.  R.    1.  2105(  a)(  2)(  xi)  as  adopted  herein. 
 142  See  47  C.  F.  R.    1.  2110  as  adopted  herein.  If  any  one  of  an  applicant's  controlling  interests  or  their 
 affiliates  as  defined  by  Section  1.  2110  of  the  Commission's  rules  (as  adopted  herein)  is  in  default  on  any 
 Commission  licenses  or  is  delinquent  on  any  non-  tax  debt  owed  to  any  Federal  agency  at  the  time  the  applicant 
 files  it  Form  175,  the  applicant  will  not  be  able  to  make  the  certification  required  by  Section  1.2105(  a)(  2)(  x)  of  the 
 Commission's  rules  and  will  not  be  eligible  to  participate  in  Commission  auctions.  47  C.  F.  R.    1.2110  (as 
 adopted  herein),  1.  2105(  a)(  2)(  x). 

 143  47  C.  F.  R.    1.  2110(  g)(  4)  (formerly    1.  2110(  f)(  4)). 

 144  See  47  C.  F.  R.    1.  2105(  a)(  2)(  x). 
 145  For  example,  under  the  Debt  Collection  Improvement  Act  of  1996  (DCIA),  the  Government  may  agree  to 
 a  compromise  of  the  claim.  31  U.  S.  C.    3711  et  seq.;  see  also  4  C.  F.  R.    103.  1  et  seq.  Similarly,  financial 
 obligations  due  to  the  Government  after  license  cancellation  may  be  subject  to  the  provisions  of  the  Bankruptcy 
 Code.  In  re  NextWave  Personal  Comms.,  Inc.,  200  F.  3d  43,  59  at  n.  15  (2d  Cir.  Dec.  22,  1999). 
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 will  be  required  to  pay  an  upfront  payment  amount  of  1.5  times  the  normal  amount  set  by  the  Bureau  for 
 any  given  license  in  a  Commission  auction  to  assure  their  future  financial  soundness.  146 

 IV.  FIFTH  REPORT  AND  ORDER 
 A.  Introduction 
 44.  In  the  Part  1  Third  Report  and  Order,  we  established  a  uniform  set  of  bidding  rules  for 
 all  auctionable  services  to  increase  the  efficiency  of  our  licensing  process.  147  In  the  Second  Notice,  we 
 sought  comment  on  a  variety  of  additional  proposals  relating  to  the  general  competitive  bidding  rules.  148 
 In  particular,  we  sought  comment  on  whether  a  sufficient  evidentiary  basis  exists  for  creating  bidding 
 preferences  for  minority-  and  women-  owned  businesses,  and  whether  there  are  mechanisms  we  should 
 employ  to  further  the  opportunities  for  rural  telephone  companies  to  participate  in  the  provision  of 
 spectrum-  based  services.  In  addition,  we  asked  whether  the  Commission  should  continue  its  installment 
 payment  program  for  small  businesses  and,  if  not,  whether  appropriate  alternatives  exist  that  would 
 further  the  goals  of  Section  309(  j)  of  the  Communications  Act.  149  Next,  we  requested  comment  on  what 
 uniform  attribution  standard  we  should  adopt  for  determining  whether  entities  seeking  bidding  credits 
 qualify  as  small  businesses.  Finally,  we  sought  comment  on  a  number  of  payment  and  administrative 
 issues,  including  the  appropriate  formula  for  calculating  default  payments.  In  response  to  the  Second 
 Notice,  we  received  six  comments  and  one  reply  comment.  150 

 B.  Rules  Governing  Designated  Entities 
 1.  Designated  Entities 
 45.  Background.  In  Adarand  Constructors,  Inc.  v.  Pena,  the  Supreme  Court  held  that  "all 
 racial  classifications  .  .  .  must  be  analyzed  by  a  reviewing  court  under  strict  scrutiny."  151  Under  the 
 Adarand  decision,  any  federal  program  that  uses  race  as  a  basis  for  decisionmaking  must  serve  a 
 compelling  governmental  interest  and  must  be  narrowly  tailored  to  serve  that  interest  in  order  to  pass 
 constitutional  muster.  152  In  United  States  v.  Virginia,  et  al.,  the  Supreme  Court  determined  that  gender-based 
 programs  are  subject  to  intermediate  scrutiny.  153  Under  this  standard  of  review,  there  must  be  an 
 "exceedingly  persuasive  justification"  for  a  program  in  which  gender  is  a  determining  factor  in 

 146  A  non-  discriminatory  requirement  that  installment  payment  defaulters  must  demonstrate  future  financial 
 viability  through  a  higher  upfront  payment  does  not  violate  the  prohibitions  in  Section  525  of  the  Bankruptcy 
 Code.  11  U.  S.  C.    525(  a). 

 147  Part  1  Third  Report  and  Order,  13  FCC  Rcd  374. 

 148  Second  Notice,  13  FCC  Rcd  at  471-  481,    170-  194. 
 149  47  U.  S.  C.    309(  j). 
 150  A  list  of  the  parties  that  filed  comments  in  response  to  the  Second  Notice,  and  the  abbreviations  used  to 
 refer  to  such  parties,  is  attached  at  Appendix  B. 
 151  Adarand  Constructors,  Inc.  v.  Pena,  515  U.  S.  200,  227  (1995). 

 152  Id.  at  227. 
 153  United  States  v.  Virginia,  et  al.,  518  U.  S.  515  (1996). 
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 decisionmaking.  154  Further,  a  gender-  based  government  action  is  constitutional  only  if  it  serves  an 
 important  governmental  objective  and  is  substantially  related  to  the  achievement  of  that  objective.  155 

 46.  In  the  Second  Notice,  the  Commission  sought  comment  on  whether  there  is  a  compelling 
 governmental  interest  that  would  justify  the  use  of  preferences  for  minority-  owned  businesses  or  an 
 exceedingly  persuasive  justification  to  support  gender-  based  preferences  for  women-  owned  businesses.  156 
 In  addition,  we  asked  commenters  to  provide  evidence  in  support  of  their  positions  and  to  indicate  what 
 measures,  if  any,  could  be  narrowly  tailored  to  withstand  judicial  review.  157  What  specifically  tailored 
 tools,  we  asked,  such  as  bidding  credits,  might  be  appropriate  or  should  preferences  be  given  to  minority-owned 
 or  women-  owned  businesses  that  also  qualify  as  small  businesses.  158 

 47.  Finally,  we  noted  that  the  Office  of  Management  and  Budget  ("  OMB")  modified  its 
 standards  for  the  classification  of  federal  data  on  race  and  ethnicity.  159  Specifically,  OMB:  (1)  separated 
 the  category  for  Asian  and  Pacific  Islander  into  two  categories  --  "Asian"  and  "Native  Hawaiian  or  Other 
 Pacific  Islander;"  and  (2)  changed  the  term  "Hispanic"  to  "Hispanic  or  Latino."  160  We  sought  comment 
 on  whether  we  should  amend  the  designated  entity  provisions  of  the  Part  1  rules  to  reflect  this  change.  161 

 48.  Discussion.  We  did  not  receive  any  comments  on  these  issues.  Because  the  record  is 
 sparse,  we  conclude  that  it  is  not  appropriate  to  adopt  special  provisions  for  minority-  owned  and  women-owned 
 businesses  at  this  time.  We  have  said  that  minority-  and  women-  owned  businesses  that  qualify  as 
 small  businesses  may  take  advantage  of  the  special  provisions  we  have  adopted  for  small  businesses.  162 

 49.  We  note,  too,  that  the  Commission's  Office  of  Communications  Business  Opportunities 
 (OCBO)  has  initiated  several  studies  to  gather  information  regarding  barriers  to  entry  faced  by  minority-and 
 women-  owned  firms  that  wish  to  participate,  or  have  participated,  in  Commission  auctions.  Further, 

 154  Id.  at  531-  534.  See  also  J.  E.  B.  v.  Alabama  ex  rel.  T.  B.,  511  U.  S.  127  (1994);  Mississippi  University  for 
 Women  v.  Hogan,  458  U.  S.  718  (1982). 
 155  United  States  v.  Virginia,  et  al.,  518  U.  S.  515,  531-  534. 

 156  Second  Notice,  13  FCC  Rcd  at  471,    172. 
 157  Id.  at  471-  472,    172. 
 158  Id.  at  472,    174. 
 159  Id.  at  474,    176  (citing  Office  of  Management  and  Budget,  Revisions  to  the  Standards  for  the 
 Classification  of  Federal  Data  on  Race  Ethnicity,  Notice  of  Decision,  62  Fed.  Reg.  58782  (Oct.  30,  1997)). 
 160  Office  of  Management  and  Budget,  Revisions  to  the  Standards  for  the  Classification  of  Federal  Data  on 
 Race  Ethnicity,  Notice  of  Decision,  62  Fed.  Reg.  58782  (October  30,  1997). 
 161  Second  Notice,  13  FCC  Rcd  at  474,    176. 

 162  Amendment  of  Parts  20  and  24  of  the  Commission's  Rules  --  Broadband  PCS  Competitive  Bidding  and 
 the  Commercial  Mobile  Radio  Service  Spectrum  Cap,  Amendment  of  the  Commission's  Cellular/  PCS  Cross-Ownership 
 Rule,  WT  Docket  No.  96-  59,  GN  Docket  No.  90-  314,  Report  and  Order,  11  FCC  Rcd  7824,  7833,    16 
 (1996);  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding,  Amendment  of  the 
 Commission's  Cellular  PCS  Cross-  Ownership  Rule,  Implementation  of  Sections  3(  n)  and  332  of  the 
 Communications  Act  Regulatory  Treatment  of  Mobile  Services,  PP  Docket  No.  93-  253,  GN  Docket  No.  90-  314, 
 GN  Docket  No.  93-  252,  Sixth  Report  and  Order,  11  FCC  Rcd  136,  143,    11  (1995). 
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 we  have  recently  commenced  several  new  studies  to  explore  additional  entry  barriers  and  to  seek  further 
 evidence  of  racial  and  gender  discrimination  against  potential  licensees.  In  addition,  we  will  continue  to 
 track  the  rate  of  participation  in  our  auctions  by  minority-  and  women-  owned  firms  and  evaluate  this 
 information  with  other  data  gathered  to  determine  whether  provisions  to  promote  participation  by 
 minorities  and  women  can  satisfy  judicial  scrutiny.  If  a  sufficient  record  can  be  adduced,  we  will 
 consider  race-  and  gender-  based  provisions  for  future  auctions. 

 50.  Finally,  having  received  no  comments  on  the  issue,  we  will  amend  our  definition  of  the 
 term  "minority"  in  Section  1.2110  of  the  general  competitive  bidding  rules  to  reflect  the  changes 
 identified  above.  163  This  will  conform  our  definition  of  the  term  minority  to  that  currently  used  by 
 OMB. 

 2.  Rural  Telephone  Company  Provisions 
 51.  Background.  In  the  Second  Notice,  we  noted  that  auctions  have  generally  provided  rural 
 telephone  companies  with  favorable  opportunities.  164  We  have  also  observed  that  the  percentage  of  rural 
 telephone  companies  that  have  won  rural  geographic  area  licenses  in  the  United  States  is  significant.  165 
 We  sought  comment  on  whether  there  were  additional  mechanisms  that  might  increase  opportunities  for 
 rural  telephone  companies  to  provide  spectrum-  based  services  to  the  public.  166 

 52.  Discussion.  Based  on  the  limited  record  before  us,  we  will  not,  at  this  time,  adopt 
 mechanisms,  such  as  bidding  preferences  or  an  unserved  area  fill-  in  policy,  specifically  for  rural 
 telephone  companies.  167  We  will,  however,  continue  to  provide  rural  telephone  companies  with  bidding 
 credits  should  such  entities  qualify  as  small  businesses.  The  Commission  has  great  interest  in  ensuring 
 that  rural  and  underserved  areas  have  access  to  competitive  advanced  telecommunications  services.  168 

 163  See  Second  Notice,  13  FCC  Rcd  at  474,    176;  47  C.  F.  R.    1.2110(  c)(  3)  as  amended  herein. 
 164  Second  Notice,  13  FCC  Rcd  at  475,    179  (citing  "The  FCC  Report  to  Congress  on  Spectrum  Auctions," 
 WT  Docket  No.  97-  150,  at  p.  25  (rel.  October  9,  1997)).  The  term  "rural  telephone  company"  is  defined  in  47 
 U.  S.  C.    153(  37)  and  in  47  C.  F.  R.    1.2110(  c)  as  adopted  herein. 

 165  Specifically,  in  "The  FCC  Report  to  Congress  on  Spectrum  Auctions,"  WT  Docket  No.  97-  150,  at  p.  25 
 (rel.  October  9,  1997),  we  noted  that  rural  telephone  companies  had  won  about  44  percent  of  the  123  rural  Basic 
 Trading  Area  ("  BTA")  licenses  in  the  United  States.  These  statistics  were  based  on  auctions  completed  as  of  the 
 date  of  the  report,  i.  e.,  Auction  Nos.  1-  15.  See  also  Second  Notice,  13  FCC  Rcd  at  475,    179. 

 166  Second  Notice,  13  FCC  Rcd  at  475,    179. 

 167  See  RTG  Comments  at  12-  17. 
 168  See  47  U.  S.  C.    309(  j)(  3)(  A).  In  addition,  the  Preamble  to  the  Telecommunications  Act  of  1996  provides 
 that  its  purpose  is  to  promote  competition  and  reduce  regulation  in  order  to  secure  lower  prices  and  higher  quality 
 services  for  American  telecommunications  consumers  and  encourage  the  rapid  deployment  of  new 
 telecommunications  technologies.  See  Telecommunications  Act  of  1996,  Pub.  L.  104-  104,  110  Stat.  56  (1996). 
 See  also  Statement  of  Policy  on  Establishing  a  Government-  to-  Government  Relationship  with  Indian  Tribes,  FCC 
 00-  207  (rel.  June  23,  2000);  Virginia  Tech  Foundation,  Inc.  Petition  for  Reconsideration  of  Request  for  Waiver  of 
 Section  101.  23  --  Auction  No.  17,  Local  Multipoint  Distribution  Service,  Order,  13  FCC  Rcd  4535  (1998)  and 
 Requests  for  Waiver  of  Section  101.  1003(  a)  of  the  Commission's  Rules  Establishing  Eligibility  Restrictions  on 
 Incumbent  LECs  and  Cable  Operators  in  the  Local  Multipoint  Distribution  Service,  Order,  13  FCC  Rcd  18694 
 (1998). 
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 Indeed,  the  Commission  has  implemented  a  number  of  initiatives  toward  achieving  that  goal.  169  We  will 
 address  issues  affecting  rural  communities  and  underserved  areas  in  other  upcoming  proceedings  and 
 believe  a  more  extensive  record  can  be  developed  at  that  time.  We  plan  to  consider  methods  for 
 enhancing  the  delivery  of  spectrum-  based  services  in  areas  that  traditionally  have  been  underserved  by 
 telecommunications  providers.  We  encourage  commenters  to  participate  in  such  future  proceedings.  The 
 record  developed  here  will  be  made  part  of  those  proceedings. 

 53.  We  do,  however,  want  to  highlight  one  issue  raised  by  commenters.  RTG  proposes  that 
 we  establish  geographic  area  licenses  no  larger  than  BTAs  in  all  future  auctions.  170  RTG  argues  that  the 
 use  of  small  areas  facilitates  the  delivery  of  service  to  rural  areas  by  increasing  the  opportunity  for  rural 
 small  businesses  and  rural  telephone  companies  to  acquire  licenses.  171  RTG  also  contends  that 
 authorizing  smaller  geographic  areas  increases  the  number  of  licenses  available  and  the  diversity  of 
 licenses,  and  facilitates  the  buildout  of  networks.  172  Section  309(  j)  of  the  Communications  Act  requires 
 the  Commission  to  disseminate  licenses  to  a  wide  variety  of  applicants,  including  small  businesses  and 
 rural  telephone  companies,  and  to  promote  the  development  and  rapid  deployment  of  new  technologies  to 
 the  public,  including  those  residing  in  rural  areas.  173  The  Commission  can  best  satisfy  this  mandate  by 
 establishing  license  areas  that  promote  these  goals  on  a  service-  specific  basis.  Although  we  have  used 
 small  license  areas  in  several  services  (e.  g.,  broadband  PCS  D,  E  and  F  blocks  and  LMDS)  and  may  do  so 
 in  specific  services  in  the  future,  we  are  unwilling  to  limit  our  flexibility  by  adopting  an  ironclad  rule 
 against  large  service  areas.  We  anticipate,  for  example,  that  certain  satellite-  based  services  may  not  be 
 particularly  suited  to  small  geographic  area  licensing,  while  other  services  may  indeed  be  more  suitable 
 for  this  type  of  license  category  (i.  e.,  the  broadband  PCS  C  block  auction).  We  always  invite  comment  on 
 these  issues  so  as  to  tailor  our  rules  for  specific  services  in  ways  that  afford  opportunities  to  a  wide 
 variety  of  entities. 

 3.  Installment  Payments 
 54.  Background.  In  the  Part  1  Third  Report  and  Order,  we  suspended  the  installment 
 payment  program.  174  Because,  however,  small  businesses  have  been  successful  in  the  auctions  in  which 

 169  See,  e.  g.,  Extending  Wireless  Telecommunications  Services  to  Tribal  Lands,  WT  Docket  No.  99-  266, 
 Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  FCC  00-  209  (rel.  June  30,  2000);  Federal-  State 
 Joint  Board  on  Universal  Service:  Promoting  Deployment  and  Subscribership  in  Unserved  and  Underserved 
 Areas,  Including  Tribal  and  Insular  Areas,  CC  Docket  No.  96-  45,  Twelfth  Report  and  Order,  Memorandum 
 Opinion  and  Order,  and  Further  Notice  of  Proposed  Rulemaking,  FCC  00-  208  (rel.  June  30,  2000).  In  particular, 
 in  the  Tribal  Lands  proceeding,  we  established  bidding  credits  that  will  be  available  in  future  auctions  in  markets 
 that  contain  qualifying  tribal  areas  that  have  a  telephone  service  penetration  rate  below  70  percent.  To  qualify  for 
 the  credit,  winning  bidders  must  commit  to  use  the  license  to  deploy  facilities  and  offer  service  to  qualifying  tribal 
 areas,  and  must  obtain  tribal  consent  to  such  deployment.  We  also  sought  comment  on  whether  to  award  bidding 
 credits  to  carriers  that  commit  to  serve  non-  tribal  areas  with  low  penetration  rates,  whether  to  award  transferable 
 credits  for  use  in  future  auctions  to  licensees  in  already-  established  wireless  services  that  deploy  facilities  and 
 provide  service  to  unserved  tribal  communities,  and  whether  to  make  credits  available  to  licensees  that  enter  into 
 partitioning  agreements  with  tribal  authorities. 

 170  RTG  Comments  at  14-  15. 

 171  Id.  at  15. 
 172  Id. 
 173  47  U.  S.  C.    309(  j) 
 174  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  397,    38. 
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 installment  payment  plans  were  offered,  we  sought  comment  on  ways  the  Commission  could  provide  an 
 effective  installment  payment  program  while  at  the  same  time  minimizing  the  concerns  (e.  g.,  licensee 
 default  or  difficulty  meeting  financial  obligations  to  the  Commission)  that  led  to  the  suspension  of 
 installment  payment  plans  for  small  businesses.  175  We  also  sought  comment  on  how  the  Commission 
 could  create  an  installment  payment  plan  that  would  encourage  only  serious,  financially  qualified  small 
 business  applicants  to  apply  for  licenses  while  ensuring  the  rapid  provision  of  service  to  the  public  and 
 guaranteeing  that  the  American  public  is  reasonably  compensated  for  use  of  the  spectrum.  176  In  addition, 
 we  sought  comment  on  how  the  Commission  might  fashion  an  installment  payment  program  that  would 
 meet  the  statutory  requirement  that  all  payments  of  principal  and  interest  for  covered  auctions  be 
 deposited  in  the  United  States  Treasury  by  the  statutory  deadline  (September  30,  2002)  for  collection.  177 
 We  further  requested  comment  on  means  other  than  bidding  credits  and  installment  payments  by  which 
 the  Commission  might  facilitate  the  participation  of  small  businesses  and  other  designated  entities  in  our 
 spectrum  auction  program.  178  Finally,  we  asked  whether  we  should  establish  the  interest  rate  for 
 installment  payments  (if  the  program  is  reinstituted)  based  upon  the  rate  of  United  States  Treasury 
 obligations  on  the  date  of  the  close  of  the  auction.  179 

 55.  Discussion.  Having  received  no  comments  regarding  reinstitution  of  our  installment 
 payment  program  or  alternatives  thereto,  we  will  adhere  to  our  previous  decision  to  suspend  the 
 installment  payment  program.  180  In  suspending  the  installment  payment  program,  we  concluded  that 
 small  businesses  need  not  receive  installment  payments  to  successfully  participate  in  our  spectrum 
 auctions.  181  We  noted,  for  example,  that  in  the  cellular  auction  for  unserved  areas,  which  had  no 
 installment  payment  plans,  36  percent  of  the  licenses  went  to  small  or  very  small  businesses.  182  In 
 addition,  we  stated  that  requiring  payment  in  full  within  a  short  time  after  the  close  of  the  auction  ensures 
 greater  financial  accountability  from  applicants.  183  Finally,  experience  has  shown  that  licensees  filing  for 
 bankruptcy  may  impede  the  Commission's  processes,  resulting  in  delayed  deployment  of  service.  184 

 56.  We  believe  that  Section  309(  j)  of  the  Communications  Act  requires  us  to  explore  ways  of 
 responding  to  the  investment  capital  needs  of  small,  minority-  owned  and  women-  owned  businesses.  185 

 175  Second  Notice,  13  FCC  Rcd  at  475-  476,    181. 

 176  Id.  at  476,    181. 
 177  Id.  See  Section  3007  of  the  Balanced  Budget  Act  of  1997,  Pub.  L.  105-  33,  Title  III,  111  Stat.  251  (1997) 
 ("  Balanced  Budget  Act"). 
 178  Second  Notice,  13  FCC  Rcd  at  476,    181. 

 179  Id.  at  476,    182. 
 180  See  Fresno  Mobile  Radio,  Inc.  v.  FCC,  165  F.  3d  965,  971  (upholding  Commission's  decision  to  eliminate 
 installment  payment  program  with  respect  to  800  MHz  SMR  licenses). 
 181  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  397-  398,    38. 

 182  Id. 

 183  Id.  at  398,    38. 
 184  See,  e.  g.,  In  re  GWI  PCS1,  Inc.,  No.  397-  39676-  SAF-  11  (Bankr.  N.  D.  Tex.);  In  re  NextWave  Personal 
 Communications,  Inc.,  No.  98  B  21529  (ASH)  (Bankr.  S.  D.  N.  Y.). 
 185  See  47  U.  S.  C.    309(  j)(  4)(  D). 
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 Accordingly,  while  we  believe  our  decision  to  offer  bidding  credits  has  been  extremely  helpful  in 
 allowing  these  designated  entities  a  foothold  in  many  of  our  auctionable  wireless  services,  we  remain 
 open  to  proposals  that  would  result  in  even  greater  participation  by  these  entities. 

 57.  The  Commission  will,  as  it  has  done  in  the  LMDS,  LMS,  220  MHz  Service,  and  VHF 
 Public  Coast  Service  auctions,  continue  to  provide  small  businesses  with  bidding  credits.  In  light  of  this 
 decision,  we  need  not  address  the  method  of  establishing  interest  rates  for  such  installment  payments.  If 
 we  reinstate  an  installment  payment  plan  in  the  future,  we  will  revisit  this  issue. 

 4.  Attribution  of  Gross  Revenues  of  Investors  and  Affiliates 
 58.  Background.  In  the  Second  Notice,  we  discussed  our  earlier  proposal  to  adopt  a  general 
 attribution  rule  for  determining  small  business  eligibility  for  all  future  auctions.  186  Specifically,  we 
 sought  further  comment  on  whether  to  adopt  a  "controlling  interest"  standard  for  attributing  to  an 
 applicant  the  gross  revenues  of  its  investors  and  affiliates  in  determining  whether  the  applicant  qualifies 
 as  a  small  business.  187  We  explained  that,  in  the  past,  the  Commission  adopted  service-  specific 
 attribution  rules  with  varying  standards  of  attribution.  188  In  addition,  we  asked  whether  a  "controlling 
 interest"  standard  is  sufficient  to  calculate  size  so  that  only  those  entities  truly  meriting  small  business 
 status  qualify  for  bidding  credits.  189  We  also  sought  comment  on  whether  alternate  standards  for 
 attributing  the  gross  revenues  of  investors  and  affiliates  in  an  applicant  would  better  meet  our  goals.  190 
 We  further  requested  comment  on  whether  or  not  the  controlling  interest  standard  would  be  strengthened 
 by  imposing  a  minimum  equity  requirement  (e.  g.,  15  percent)  that  any  person  or  entity  identified  as 
 controlling  must  hold.  191 

 59.  Discussion.  We  will  adopt  as  our  general  attribution  rule  a  "controlling  interest"  standard 
 for  determining  which  applicants  qualify  as  small  businesses.  Under  this  standard,  we  will  attribute  to  the 
 applicant  the  gross  revenues  of  its  controlling  interests  and  their  affiliates  in  assessing  whether  the 
 applicant  is  qualified  to  take  advantage  of  our  small  business  provisions,  such  as  bidding  credits.  We  note 
 that  operation  of  our  definition  of  "affiliate"  will  cause  all  affiliates  of  controlling  interests  to  be  affiliates 
 of  the  applicant.  192  We  believe  that  this  approach  is  simpler  and  more  flexible  than  the  previously  used 
 control  group  approach,  193  and  thus  will  be  more  straightforward  to  implement.  Moreover,  application  of 
 the  "controlling  interest"  standard  will  ensure  that  only  those  entities  truly  meriting  small  business  status 

 186  Second  Notice,  13  FCC  Rcd  at  476-  478,    183-  187.  The  Commission  initially  proposed  to  adopt  a 
 general  attribution  rule  for  determining  small  business  eligibility  in  the  Part  1  Notice  of  Proposed  Rule  Making,  12 
 FCC  Rcd  at  5703,    28. 

 187  Second  Notice,  13  FCC  Rcd  at  477,    185  and  Appendix  E  at  534-  536  (proposed  revision  to  47  C.  F.  R.   
 1.2110). 
 188  Second  Notice,  13  FCC  Rcd  at  477,    183. 

 189  Id.  at  477,    185. 
 190  Id.  at  477-  478,    185. 
 191  Id.  at  478,    186. 
 192  See  47  C.  F.  R.    1.  2110(  c)(  5)  as  redesignated  herein. 
 193  See,  e.  g.,  47  C.  F.  R.    24.  709(  b)(  5)  and  (6).  See  also  NextWave  Comments  at  2-  4. 
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 qualify  for  our  small  business  provisions.  We  used  this  same  approach  in  the  attribution  rules  for  the 
 LMDS,  800  MHz  SMR,  220  MHz,  VHF  Public  Coast  and  LMS  auction  proceedings.  194 

 60.  A  "controlling  interest"  includes  individuals  or  entities,  or  groups  of  individuals  or 
 entities,  that  have  control  of  the  applicant  under  the  principles  of  either  de  jure  or  de  facto  control.  Thus, 
 there  may  be  more  than  one  "controlling  interest"  whose  revenues  must  be  counted.  The  premise  of  this 
 rule  is  that  all  parties  that  control  an  applicant  or  have  the  power  to  control  an  applicant,  and  their 
 affiliates,  will  have  their  gross  revenues  counted  and  attributed  to  the  applicant  in  determining  the 
 applicant's  eligibility  for  small  business  status  or  for  any  other  size-  based  status  using  a  gross  revenue 
 threshold. 

 61.  De  jure  control  is  typically  evidenced  by  the  holding  of  50.1  percent  or  more  of  the 
 voting  stock  of  a  corporation  or,  in  the  case  of  a  partnership,  general  partnership  interests.  De  facto 
 control  is  determined  on  a  case-  by-  case  basis  and  includes  the  criteria  set  forth  in  Ellis  Thompson.  195  For 
 instance,  the  gross  revenues  of  managers  may  be  attributed  to  the  applicant  if  de  facto  control  standards 
 are  met.  196  We  do  not  believe  it  is  necessary  to  presume  that  equity  interests  of  less  than  50.1  percent  are 
 attributable  to  the  applicant  because  we  rely  on  the  concept  of  de  facto  control.  An  applicant  may  have 
 interest  holders  that  do  not  possess  de  jure  control  but  have  "actual"  (i.  e.,  de  facto)  control.  Therefore,  in 
 determining  the  gross  revenues  to  be  attributed  to  the  applicant,  we  will  include  individuals  or  entities  that 
 have  either  de  jure  or  de  facto  control.  Accordingly,  we  will  amend  Section  1.2110  to  incorporate  these 
 principles  of  control.  197 

 62.  Controlling  interests  must  be  identified  by  the  applicant  seeking  status  as  a  small 
 business.  198  The  "controlling  interest"  definition  provides  specific  guidance  on  the  calculation  of  various 
 types  of  ownership  interests.  For  purposes  of  calculating  equity  held  in  an  applicant,  the  definition 
 provides  for  full  dilution  of  certain  stock  interests,  warrants  and  convertible  debentures.  199  In  addition, 
 the  definition  provides  for  attribution  of  partnership  and  other  ownership  interests,  including  stock 
 interests  held  in  trust,  non-  voting  stock  and  indirect  ownership  through  intervening  corporations.  When 

 194  See  47  C.  F.  R.    101.1112  (LMDS);  47  C.  F.  R.    90.  912  (800  MHz  SMR);  47  C.  F.  R.    90.  1021  (220  MHz 
 service);  47  C.  F.  R.    80.1252(  c)  (Public  Coast);  47  C.  F.  R.    90.  1103(  c)  (LMS). 
 195  See  Ellis  Thompson  Corporation,  9  FCC  Rcd  7138,  7138-  7139,    9,  (1994)  ("  Ellis  Thompson"),  in  which 
 the  Commission  identified  the  following  factors  used  to  determine  control  of  a  business:  (1)  use  of  facilities  and 
 equipment;  (2)  control  of  day-  to-  day  operations;  (3)  control  of  policy  decisions;  (4)  personnel  responsibilities;  (5) 
 control  of  financial  obligations;  and  (6)  receipt  of  monies  and  profits.  See  also  Intermountain  Microwave,  24  Rad. 
 Reg.  (P&  F)  983  (1963);  In  re  Application  of  Baker  Creek  Communications,  L.  P.  for  Authority  to  Construct  and 
 Operate  Local  Multipoint  Distribution  Services  in  Multiple  Basic  Trading  Areas,  Memorandum  Opinion  and 
 Order,  13  FCC  Rcd  18709  (Wireless  Tel.  Bur.  1998)  (discussing  in  detail  the  factors  constituting  de  facto  control); 
 Stephen  F.  Sewell,  Assignments  and  Transfers  of  Control  of  FCC  Authorizations  Under  Section  310(  d)  of  the 
 Communications  Act  of  1934,  43  Fed.  Comm.  L.  J.  277  (1991). 

 196  See,  e.  g.,  47  C.  F.  R.    20.  6(  d)(  9). 

 197  See  47  C.  F.  R.    1.  2110  as  adopted  herein. 
 198  See  47  C.  F.  R.    1.  2112(  b)  as  adopted  herein. 
 199  See  47  C.  F.  R.    1.  2110(  c)(  2)(  ii)  as  adopted  herein.  See  also  47  C.  F.  R.    1.  2110(  b)(  4)(  v)  (redesignated  as 
   1.  2110(  c)(  5)(  v))  (defining  affiliation  arising  under  stock  options,  convertible  debentures,  and  agreements  to 
 merge)  and  NextWave  Comments  at  6  (supporting  the  Commission's  approach  of  calculating  equity  on  a  fully-diluted 
 basis). 
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 an  applicant  cannot  identify  controlling  interests  under  the  definition,  the  revenues  of  all  interest  holders 
 in  the  applicant  and  their  affiliates  will  be  attributed.  200  For  example,  if  a  company  is  owned  by  four 
 entities,  each  of  which  has  25  percent  voting  equity,  and  no  shareholders'  agreement  or  voting  trust  gives 
 any  one  of  them  control  of  the  company,  the  revenues  of  all  four  entities  must  be  attributed  to  the 
 applicant.  Treating  such  a  corporation  in  this  way  is  similar  to  our  treatment  of  a  general  partnership  --  all 
 general  partners  are  considered  to  have  a  controlling  interest.  This  rule,  we  believe,  looks  to  substance 
 over  form  in  assessing  eligibility  for  small  business  status.  201 

 63.  Some  commenters  have  expressed  concern  over  whether  the  revenues  of  so  called 
 "passive  investors"  would  be  attributed  to  the  applicant.  202  The  controlling  interest  standard  adopted 
 herein  will  be  applied  to  all  investors  in  an  applicant.  In  other  words,  if  any  investor  has  either  de  jure  or 
 de  facto  control  of  the  applicant,  that  investor's  gross  revenues  will  be  attributed  to  the  applicant  for 
 purposes  of  determining  whether  the  applicant  qualifies  as  a  small  business.  Application  of  the  principles 
 of  either  de  jure  or  de  facto  control  will  accurately  identify  those  investors  that  are  controlling  interests 
 and  that  are  not,  by  definition,  therefore,  "passive  investors."  We  note  too  that,  under  the  controlling 
 interest  standard,  the  officers  and  directors  of  any  applicant  will  be  considered  to  have  a  controlling 
 interest  in  the  applicant.  203 

 64.  We  believe  that  the  de  jure  and  de  facto  concepts  of  control,  together  with  the 
 application  of  our  affiliation  rules,  will  effectively  prevent  larger  firms  from  illegitimately  seeking  status 
 as  small  businesses.  For  this  reason,  we  disagree  with  the  commenter  that  urges  us  not  to  amend  our 
 attribution  rules  to  include  those  that  have  management  agreements  and  joint  marketing  agreements  with 
 the  applicant  or  licensee.  204  We  will  adopt  provisions  that  make  attributable  the  gross  revenues  of  those 
 that  have  management  or  marketing  agreements  with  the  applicant  or  licensee  where  such  agreements 
 grant  authority  over  key  aspects  of  the  applicant's  or  licensee's  business.  205  Management  or  joint 
 marketing  agreements,  for  example,  may  grant  authority  to  parties  other  than  the  applicant  or  licensee  to 
 make  decisions  concerning  the  nature  or  types  of  services  offered  by  the  applicant  or  licensee,  the  terms 
 upon  which  such  services  are  offered,  or  the  prices  charged  for  such  services.  Such  arrangements  allow 
 their  holders  to  exercise  control  of  the  applicant  or  licensee  and  therefore  should  be  included. 

 65.  We  decline  to  adopt  a  minimum  equity  requirement  for  controlling  interests  because  it  is 
 contrary  to  our  goal  of  providing  legitimate  small  businesses  maximum  flexibility  in  attracting  passive 

 200  The  Part  1  affiliation  rules  are  codified  at  47  C.  F.  R.    1.2110(  b)(  4)  (redesignated  herein  as   
 1.2110(  c)(  5)). 
 201  See  In  re  Application  of  Baker  Creek  Communications,  L.  P.  for  Authority  to  Construct  and  Operate  Local 
 Multipoint  Distribution  Services  in  Multiple  Basic  Trading  Areas,  Memorandum  Opinion  and  Order,  13  FCC  Rcd 
 18709  (Wireless  Tel.  Bur.  1998)  (discussing  in  detail  the  factors  constituting  de  facto  control). 

 202  Western  Comments  at  8-  9;  Americall  Comments  at  2-  3. 

 203  See  47  C.  F.  R.  1.  2110(  c)(  2)(  ii)(  F)  as  adopted  herein  (also  providing  that  the  officers  and  directors  of  an 
 entity  that  controls  a  licensee  or  applicant  shall  be  considered  to  have  a  controlling  interest  in  the  licensee  or 
 applicant).  This  rule  applies  to  the  officers  and  directors  of  rural  telephone  companies  and  of  entities  that  control 
 rural  telephone  companies.  See  RTG  Comments  at  20-  21  (requesting  that  the  Commission  rely  on  its  affiliation 
 rules  rather  than  presume  that  the  officers  and  directors  of  rural  telephone  companies  have  controlling  interests  in 
 the  companies). 

 204  Western  Comments  at  3-  5;  Western  Reply  Comments  at  3. 

 205  See  47  C.  F.  R.    1.  2110(  c)(  2)(  ii)(  I)  as  adopted  herein.  See  also  47  C.  F.  R.    20.  6(  d)(  9)  and  (10). 
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 financing.  A  minimum  equity  requirement  would  require  any  person  or  entity  identified  as  a  controlling 
 interest  to  retain  some  level  of  equity  in  the  applicant,  thereby  reducing  the  amount  of  equity  the  applicant 
 could  offer  to  non-  controlling  interests  in  exchange  for  financing.  This  policy  would  thus  limit  a  small 
 business'  ability  to  raise  capital  and  undermine  our  intention  of  promoting  small  business  participation  in 
 the  highly  competitive  telecommunications  marketplace. 

 66.  Further,  we  do  not  believe  that  the  adoption  of  a  minimum  equity  requirement  is 
 necessary  to  ensure  appropriate  identification  of  an  applicant's  controlling  interests  if  the  principles  of  de 
 jure  and  de  facto  control  are  applied.  These  principles  are,  in  effect,  broader  than  the  minimum  equity 
 requirement  because  they  look  to  actual  control  irrespective  of  the  amount  of  equity  held  in  an  applicant. 
 While  we  agree  with  commenters  that  lack  of  equity  may  indicate  lack  of  de  facto  control,  206  we  are  not 
 persuaded  that  this  factor  alone  is  dispositive.  207  Rather  than  focusing  solely  on  equity  holdings, 
 applicants  are  required  to  identify  those  controlling  interests  that  actually  have  control  through  application 
 of  the  principles  of  either  de  jure  or  de  facto  control.  This  approach,  which  has  proven  successful  in  the 
 broadcast  context,  we  conclude,  will  operate  equally  well  in  our  calculation  of  gross  revenues  for 
 purposes  of  determining  eligibility  for  bidding  preferences.  208  By  alerting  the  Commission  to  all 
 attributable  interests,  application  of  the  principles  of  de  jure  and  de  facto  control  will  preclude  unqualified 
 applicants  from  taking  advantage  of  our  small  business  provisions.  Moreover,  as  discussed  in  the  Part  1 
 Third  Report  and  Order,  requiring  detailed  ownership  information  under  Section  1.2112  will  ensure  that 
 applicants  claiming  small  business  status  qualify  for  such  status  and  that  all  applicants  comply  with 
 spectrum  caps  and  other  ownership  limits.  209 

 67.  We  agree  with  CIRI  that  these  new  rules  should  not  make  current  C  and  F  block  licensees 
 ineligible  to  hold  their  licenses.  210  The  eligibility  of  current  C  and  F  block  licensees  to  continue  to  hold 
 their  licenses  will  not  be  reassessed  based  on  the  new  attribution  rules.  These  licensees  will  remain 
 eligible  to  hold  their  licenses  regardless  of  whether  or  not  they  would  qualify  under  the  newly  established 
 attribution  rules.  Thus  far,  the  Commission  has  conducted  four  auctions  of  C  block  licenses  using  the 
 Part  24  attribution  rules.  211  In  many  instances,  entities  participating  in  these  auctions  restructured  their 
 businesses  and  formulated  business  relationships  based  upon  our  rules  in  effect  at  the  time.  In  good  faith, 
 these  entities  now  wish  to  continue  operating  under  the  Part  24  attribution  rules  rather  than  face  the 
 potential  disruption  caused  by  restructuring  their  organizations  and/  or  altering  their  business  strategies. 
 We  see  no  reason  to  require  that  existing  C  and  F  block  licensees  restructure  to  meet  new  standards  in 
 order  to  remain  licensees.  As  to  future  C  and  F  block  auctions,  however,  all  applicants,  including  existing 
 C  and  F  block  licensees,  will  be  subject  to  the  attribution  rules  in  effect  at  the  time  of  filing  their  short-form 
 applications.  For  auctions  that  begin  within  two  years  after  the  start  of  Auction  No.  22,  the  C,  E, 
 and  F  block  auction  that  began  on  March  23,  1999,  our  new  attribution  rules  will  have  no  effect  on  the 
 eligibility  as  an  entrepreneur  of  any  entity  that  was  eligible  for,  and  participated  in,  Auction  No.  5  or 

 206  See,  e.  g.,  AmeriCall  Comments  at  3. 
 207  See  NextWave  Comments  at  5-  6. 
 208  See,  e.  g.,  47  C.  F.  R.    73.  3555  (broadcast  multiple  ownership). 
 209  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  417-  421,    73-  78. 
 210  CIRI  Comments  at  2-  6. 
 211  See  47  C.  F.  R.    24.  709. 
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 Auction  No.  10.  212  Eligibility  for  small  business  preferences,  however,  will  be  determined  based  on  the 
 attribution  rules  in  effect  at  the  time  of  an  applicant's  short-  form  filing.  213  Similarly,  with  respect  to 
 transfers  of  control  and  assignments  of  license,  existing  C  and  F  block  licensees  may  be  assignees  or 
 transferees  within  the  first  five  years  of  license  grant  consistent  with  the  anti-  trafficking  provision 
 contained  in  Section  24.839(  d)  of  the  Commission's  rules.  214  Non-  licensees,  however,  are  precluded  from 
 being  assignees  or  transferees  within  the  first  five  years  of  license  grant  unless  they  qualify  as 
 entrepreneurs  based  on  the  attribution  rules  in  effect  at  the  time  of  assignment  or  transfer.  215 

 C.  Default  Payments 
 68.  Background.  In  the  Second  Notice,  we  sought  comment  on  whether  we  should  modify 
 Section  1.2104(  g)  of  our  rules  to  provide  that,  where  a  winning  bidder  defaults  on  multiple  licenses,  the 
 default  payment  will  be  determined  based  upon  the  aggregate  winning  bid  and  the  aggregate  winning  bid 
 the  next  time  the  licenses  are  offered  by  the  Commission.  216  We  sought  comment  on  whether  this  system 
 could  encourage  insincere  bidding  and  defaults  since  it  could  greatly  reduce  the  effective  penalty  for  a 
 default.  217  We  questioned  whether,  since  the  potential  defaulter  would  not  be  facing  the  full  harm  caused 
 by  the  default  on  the  additional  license,  the  incentive  for  insincere  bidding  and  default  would  be  too 
 great.  218  Indeed,  we  continued,  this  modification  could  encourage  speculation  by  encouraging  a  high 
 bidder  on  a  relatively  high  valued  license  that  anticipates  default  to  purposely  bid  and  default  on  a 
 relatively  low  valued  license  in  order  to  lessen  the  default  payment  assessed  under  our  rules.  219  Finally, 
 we  sought  comment  on  whether  such  a  modification  could  function  without  nullifying  the  provision  in 
 Section  1.2104(  g)  that  assesses  an  additional  default  payment  equal  to  three  percent  of  the  subsequent 
 winning  bid  or  the  amount  bid,  whichever  is  lower.  220  No  comments  were  received  on  this  issue. 

 212  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Fourth  Report  and  Order,  13  FCC  Rcd  15743, 
 15751,    13  and  15752,    15  (1998)  ("  C  Block  Fourth  Report  and  Order");  47  C.  F.  R.    24.  709(  b)(  9)(  i).  We  note 
 that  Auction  No.  22  was  originally  announced  as  an  auction  of  licenses  for  C,  D,  E,  and  F  block  spectrum; 
 however,  no  D  block  spectrum  remained  in  the  license  inventory  by  the  start  of  the  auction. 

 213  C  Block  Fourth  Report  and  Order  at    47 

 214  See  47  C.  F.  R.    24.  839(  d). 
 215  Id.  We  recently  issued  a  Further  Notice  of  Proposed  Rulemaking  seeking  comment  on  whether  to  open 
 to  all  qualified  applicants,  not  just  entrepreneurs,  certain  C  and  F  block  licenses.  Amendment  of  the 
 Commissions  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications  Services  (PCS) 
 Licensees,  WT  Docket  No.  97-  82,  FCC  00-  197,  Further  Notice  of  Proposed  Rulemaking  (rel.  June  7,  2000).  In 
 addition,  we  sought  comment  on  modifying  our  assignment  and  transfer  rules  for  C  and  F  block  licenses.  Id. 

 216  Second  Notice,  13  FCC  Rcd  at  479,    189;  47  C.  F.  R.    1.2104(  g). 

 217  Second  Notice,  13  FCC  Rcd  at  479,    189. 
 218  Id. 
 219  Id. 
 220  Id. 
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 69.  Discussion.  Section  1.2104(  g)(  2)  of  the  Commission's  rules  is  central  to  the  integrity  of 
 the  Commission's  auction  process.  221  The  principal  function  of  this  rule  is  to  establish  that  the  close  of  the 
 auction  creates  a  binding  contractual  obligation  by  the  high  bidder  to  pay  the  auction  price  for  the  license. 
 Whether  the  obligation  is  thereafter  breached  by  a  default  of  payment  or  by  a  failure  to  qualify  to  receive 
 the  license  for  which  the  bid  was  placed,  the  winning  bidder's  liability  remains  a  function  of  the  high  bid 
 and  is  based  on  the  obligation  that  was  incurred  at  auction,  plus  an  additional  3  percent  payment  as  set 
 forth  in  the  rule.  222 

 70.  Without  more  comment,  we  will  not  amend  our  rule  to  adopt  an  aggregate  approach  to 
 calculating  default  payments.  Rather,  we  will  continue  to  evaluate  each  licensee's  default  payment 
 obligations  on  a  license-  by-  license  basis.  In  other  words,  we  will  calculate  the  default  payment  owed  on 
 each  license  separately,  even  in  cases  where  a  single  bidder  defaults  on  multiple  licenses.  Therefore, 
 licensees  may  not  use  a  subsequent  auction  gain  from  one  defaulted  license  to  reduce  default  payments  on 
 other  licenses  that  are  subsequently  auctioned  for  less  than  that  originally  bid  by  the  defaulting  licensee. 

 71.  When  a  winning  bidder  defaults  on  a  license,  the  bidder  becomes  subject  to  a  default 
 payment  equal  to  the  difference  between  the  amount  bid  and  the  subsequent  winning  bid,  plus  an 
 additional  payment  equal  to  3  percent  of  the  lower  of  the  initial  winning  bid  or  the  subsequent  winning 
 bid.  223  In  the  case  of  multiple  defaults,  the  Commission  has  determined  that  the  amount  of  the  default 
 payment  is  calculated  on  a  license-  by-  license  basis  and  then  added  together  to  determine  the  total  default 
 payment. 

 72.  Our  auction  rules  were  designed  to  encourage  bidders  wishing  to  withdraw  their  bids  to 
 do  so  prior  to  the  close  of  the  auction,  rather  than  default  after  the  auction.  224  In  the  case  of  withdrawal, 
 the  additional  3  percent  payment  is  not  required.  225  Thus  no  withdrawal  payment  is  assessed  if  the 
 subsequent  winning  bid  exceeds  the  withdrawn  bid.  226  Encouraging  withdrawals  over  defaults  increases 
 auction  efficiency.  If  a  bidder  withdraws  its  bid  during  the  auction,  there  is  an  opportunity  for  another 
 bidder  to  win  the  license.  However,  if  the  bidder  defaults  after  the  auction,  a  new  spectrum  license  must 
 be  auctioned.  A  bidder  that  would  have  bid  to  win  the  license  after  a  withdrawal  may  not  be  as  willing  or 
 able  to  pay  if  it  has  to  wait  for  another  auction  before  it  can  obtain  the  license.  In  addition  to  the  time  and 
 expense  required  to  auction  the  new  spectrum  license  and  collect  the  default  payment,  a  subsequent 
 auction  results  in  a  delay  in  provision  of  service  to  the  public. 

 221  47  C.  F.  R.    1.  2104(  g)(  2). 

 222  By  imposing  the  obligation  to  pay  the  winning  bid  at  the  time  of  the  auction  close,  rather  than  at  the  time 
 of  the  license  grant,  the  Commission's  rules  make  clear  that  the  obligation  to  pay  the  winning  bid  amount 
 originates  at  the  close  of  the  auction,  not  the  grant  of  the  license,  and  thereby  eliminates  any  incentive  to  abandon 
 the  bid  before  the  license  grant  because  of  a  change  in  market  conditions  or  the  financial  condition  of  the  bidder. 
 In  short,  Section  1.2104(  g)(  2)  places  the  risk  of  a  post-  auction  change  of  circumstances  squarely  on  the  winning 
 bidder  rather  than  on  the  Commission. 

 223  47  C.  F.  R.    1.  2104(  g)(  2).  In  the  event  that  a  bidding  credit  applies  to  any  of  the  bids,  the  default  payment 
 is  either  the  difference  between  the  net  withdrawn  bid  and  the  subsequent  net  winning  bid,  or  the  difference 
 between  the  gross  withdrawn  bid  and  the  subsequent  gross  winning  bid,  whichever  is  less,  plus  an  additional 
 payment  equal  to  3  percent  of  the  lower  of  the  initial  winning  bid  or  the  subsequent  winning  bid. 

 224  Competitive  Bidding  Second  Report  and  Order,  9  FCC  Rcd  2348,  2374,    154. 

 225  Compare  47  C.  F.  R.    1.  2104(  g)(  1)  with  47  C.  F.  R.    1.  2104(  g)(  2). 
 226  47  C.  F.  R.    1.  2104(  g)(  1). 
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 73.  Were  we  to  allow  a  bidder  that  defaults  on  multiple  licenses  to  offset  subsequent  auction 
 losses  with  subsequent  auction  gains,  we  might  encourage  insincere  bidding  and  defaults  by  greatly 
 reducing  the  effective  penalty  for  a  default.  A  budget-  constrained  winning  bidder  that  anticipates  default 
 on  a  relatively  high  valued  license  would  have  an  incentive  to  bid  and  default  on  a  relatively  low  valued 
 license  that  would  be  likely  to  bring  a  higher  price  at  a  subsequent  auction  as  a  means  of  lowering  its  total 
 default  payment  under  our  rules.  Moreover,  if  the  payment  for  defaults  were  determined  by  aggregating 
 subsequent  auction  gains  and  losses,  a  bidder  that  would  otherwise  withdraw  a  bid  during  the  auction 
 might  have  an  incentive  to  default  after  the  auction  instead.  227  If  aggregation  of  subsequent  auction  gains 
 and  subsequent  auction  losses  would  result  in  a  net  gain,  the  defaulting  bidder  would  be  required  to  pay 
 only  the  3  percent  penalty,  an  amount  that  could  be  lower  than  the  withdrawal  payments  determined  on  a 
 license-  by-  license  basis. 

 D.  Administrative  Filing  Periods  for  Applications  and  Petitions  to  Deny 
 74.  Background.  In  the  Part  1  Third  Report  and  Order,  we  amended  Section  1.2108  of  our 
 rules  to  conform  to  the  provisions  in  the  Balanced  Budget  Act  of  1997  regarding  the  filing  period  for 
 petitions  to  deny  the  long-  form  applications  of  winning  bidders.  228  The  Balanced  Budget  Act  of  1997 
 gives  the  Commission  authority  to  shorten  the  period  in  which  license  applications  are  granted, 
 notwithstanding  Section  309(  b)  of  the  Communications  Act  which  generally  prohibits  the  Commission 
 from  granting  applications  for  licenses  prior  to  30  days  following  public  notice  of  their  filing.  229  Section 
 1.2108,  as  amended,  provides  that  the  Commission  shall  not  grant  a  license  less  than  seven  days  after 
 public  notice  that  long-  form  applications  have  been  accepted  for  filing  and  that,  in  all  cases,  the  period  for 
 filing  petitions  to  deny  such  applications  shall  be  no  shorter  than  five  days.  230 

 75.  Although  noting  our  belief  that  a  shortened  petition  to  deny  period  is  appropriate  for 
 future  auctions,  we  sought  comment  on  the  appropriate  length  of  a  petition  to  deny  period  in  light  of  this 
 legislation.  231  For  example,  we  sought  comment  on  whether  there  are  instances  in  which  the  Commission 
 should  provide  for  a  longer  period  than  the  minimums  set  forth  in  the  statute  for  the  filing  of  petitions  to 
 deny  or  for  the  grant  of  initial  licenses  in  auctionable  services  (five  days  and  seven  days,  respectively).  232 
 In  particular,  we  asked  commenters  to  address  whether  auctions  for  specific  services  (e.  g.,  broadcast 
 licenses)  require  longer  periods  for  the  filing  of  petitions  to  deny  and  why  this  may  be  so.  233  No 
 comments  on  these  matters  were  received. 

 76.  Discussion.  We  will  adopt  our  proposal  to  shorten  administrative  filing  periods,  when 
 possible,  as  directed  by  the  Balanced  Budget  Act  of  1997.  This  conclusion  is  consistent  with  our  mandate 

 227  See  BDPCS,  Inc.,  BTA  Nos.  B008,  B036,  B055,  B089,  B110,  B133,  B149,  B261,  B298,  B331,  B347, 
 B358,  B391,  B395,  B407,  B413,  and  B447,  Frequency  Block  C,  Memorandum  Opinion  and  Order,  FCC  00-  243 
 (rel.  July  10,  2000). 

 228  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  431-  432,    98;  47  C.  F.  R.    1.  2108. 

 229  Balanced  Budget  Act    3008;  47  U.  S.  C.    309(  b). 
 230  47  C.  F.  R.    1.  2108. 
 231  Second  Notice,  13  FCC  Rcd  at  480,    191. 
 232  Id. 
 233  Id. 
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 in  Section  309(  j)(  3)(  A)  of  the  Communications  Act,  which  obligates  us  to  promote  "the  development  and 
 rapid  deployment  of  new  technologies,  products,  and  services  for  the  benefit  of  the  public,  including  those 
 residing  in  rural  areas,  without  administrative  or  judicial  delays."  234 

 77.  In  order  to  have  a  consistent  and  general  rule  for  filing  petitions  to  deny,  we  will  establish 
 a  maximum  ten-  day  period  for  the  filing  of  such  petitions.  However,  because  the  provision  in  the 
 Balanced  Budget  Act  anticipates  --  and  we  believe  --  that  the  appropriate  period  for  filing  petitions  to 
 deny  may  vary  from  service  to  service,  we  will  delegate  to  the  appropriate  licensing  bureau  the  discretion, 
 to  be  exercised  in  exigent  circumstances,  to  reduce  this  period.  This  reduced  filing  period  may  not  be 
 shorter  than  that  prescribed  by  the  Balanced  Budget  Act.  We  will  increase  the  time  period  from  5  days 
 (as  originally  adopted  in  the  rule)  to  10  days  in  order  to  afford  parties  (including  small  businesses) 
 additional  flexibility  in  challenging  license  awards.  This  approach,  we  believe,  is  consistent  with  the 
 intent  of  Congress  in  the  Balanced  Budget  Act  to  more  expeditiously  resolve  these  disputes  while,  at  the 
 same  time,  ensuring  that  all  parties  (particularly  small  businesses)  have  a  reasonable  opportunity  to 
 exercise  their  rights  under  the  Communications  Act. 

 E.  Conclusion 
 78.  In  the  Part  1  Third  Report  and  Order,  we  stated  that  "[  t]  hese  changes  to  our  general 
 competitive  bidding  rules  are  intended  to  streamline  our  regulations  and  eliminate  unnecessary  rules 
 wherever  possible  .  .  .  ."  235  With  the  issuance  of  this  Order  on  Reconsideration  of  the  Third  Report  and 
 Order,  Fifth  Report  and  Order,  and  Fourth  Further  Notice  of  Proposed  Rule  Making,  we  have  made  a 
 majority  of  the  Part  1  rule  changes  contemplated  in  our  efforts  to  streamline  the  competitive  bidding 
 regulations.  The  next  step  in  this  process  is  to  eliminate  unnecessary  rules  to  the  best  of  our  ability  at  this 
 time.  Some  service-  specific  rules  repeat  portions  of  our  new  Part  1  rules  almost  verbatim;  236  others 
 contain  obvious  discrepancies.  237  In  our  attempt  to  provide  the  most  specific  guidance  possible  to  future 
 auction  participants,  we  believe  it  is  in  the  public  interest  to  conform  the  service-  specific  auction  rules  to 
 the  general  competitive  bidding  rules  in  cases  of  obvious  repetition  and  where  the  Commission 
 specifically  superseded  inconsistent  rules  in  the  course  of  the  Part  1  proceeding.  We  hereby  instruct  the 
 Wireless  Telecommunications  Bureau  to  make  conforming  edits  to  the  Code  of  Federal  Regulations 
 consistent  with  this  decision. 

 234  47  U.  S.  C.    309(  j)(  3)(  A)  (emphasis  added). 
 235  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  376,    1. 
 236  Compare,  e.  g.,  47  C.  F.  R.    24.720(  e)  (definition  of  "Rural  Telephone  Company"  in  the  broadband  PCS 
 rules)  with  47  C.  F.  R.    1.  2110(  b)(  3)  (definition  of  "Rural  Telephone  Companies"  in  the  Part  1  rules). 
 237  Compare,  e.  g.,  47  C.  F.  R.    1.2110(  e)(  2)  (redesignated  herein  as  47  C.  F.  R.    1.2110(  f)(  2))  (providing  a 
 standard  schedule  of  bidding  credits)  with    27.  209(  b),  (c)  and  27.  210(  b)  (providing  for  greater  bidding  credits 
 than  the  standard  schedule). 
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 V.  FOURTH  FURTHER  NOTICE  OF  PROPOSED  RULE  MAKING 
 A.  Introduction 
 79.  In  this  Fourth  Further  Notice  of  Proposed  Rule  Making,  we  seek  comments  on  a  total 
 assets  test  to  determine  small  business  status  and  propose  exceptions  to  the  attribution  rule's  requirement 
 that  certain  stock  interests  be  counted  on  a  "fully  diluted"  basis. 

 B.  Rules  Governing  Designated  Entities 
 1.  Total  Assets  Test 
 80.  Background.  In  the  first  Notice  of  Proposed  Rulemaking  in  this  proceeding,  we  proposed 
 to  define  small  businesses,  for  the  purposes  of  auctions,  "purely  in  terms  of  gross  revenues."  238  In  another 
 proceeding,  we  observed  that  "[  a]  ssets,  being  potentially  fluid  and  subject  to  inconsistent  valuation  .  .  .  are 
 generally  much  less  ascertainable  than  gross  revenues  .  .  .  ."  239  In  the  Part  1  Third  Report  and  Order,  we 
 adopted  our  proposal  to  use  gross  revenues  as  our  general  standard  for  measuring  a  business'  size.  We 
 indicated  at  that  time  that  a  gross  revenues-  based  standard  provides  "an  accurate,  equitable,  and  easily 
 ascertainable  measure  of  business  size."  240  Furthermore,  we  observed  that  while  a  total  assets  test  had 
 been  used  in  the  past  to  determine  eligibility  for  participation  in  entrepreneur  block  auctions,  it  had  not 
 been  employed  for  determining  small  business  eligibility.  241  We  also  relied  on  the  Small  Business  Act, 
 which  controls  how  agencies  may  prescribe  size  standards  for  categorizing  small  businesses.  This  statute 
 provides  no  assets  test  for  categorizing  business  concerns  that  provide  services.  242 

 81.  Discussion.  The  Commission  intends  its  small  business  provisions  to  be  available  only  to 
 bona  fide  small  businesses.  While  we  have  concluded  in  the  past  to  use  gross  revenues  as  the  measure  of 
 business  size,  based  on  correspondence  from  the  Small  Business  Administration,  we  take  this  opportunity 
 to  revisit  the  issue  of  whether  to  use  a  total  assets  test  as  well.  243  We  seek  comment  on  whether  the  use  of 
 a  total  assets  test,  in  conjunction  with  the  gross  revenues  measure  already  employed,  would  enhance  the 
 Commission's  determinations  of  small  business  status.  For  example,  commenters  may  address  whether  a 

 238  Part  1  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  at  5699-  5700,    20. 
 239  Rulemaking  to  Amend  Parts  1,  2,  21,  and  25  of  the  Commission's  Rules  to  Redesignate  the  27.  5-  29.5 
 GHz  Frequency  Band,  to  Reallocate  the  29.5-  30.  0  GHz  Frequency  Band,  to  Establish  Rules  and  Policies  for  Local 
 Multipoint  Distribution  Service  and  for  Fixed  Satellite  Services,  Petitions  for  Reconsideration  of  the  Commission's 
 Competitive  Bidding  Rules,  CC  Docket  No.  92-  297,  Second  Order  on  Reconsideration,  12  FCC  Rcd  15082, 
 15096-  97,    22  (1997)  (petitioners  had  sought  an  assets  test  whereby  entities  with  assets  exceeding  a  specific 
 threshold  would  be  excluded  from  eligibility  for  small  business  provisions). 

 240  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  388-  389,    19. 

 241  Id.  Eligibility  for  the  C  and  F  block  PCS  auctions  was  based  on  an  applicant's  gross  revenues  and  total 
 assets  (see  47  C.  F.  R.    24.  709(  a)).  "Total  assets"  are  defined  as  "the  book  value  .  .  .  of  all  property  owned  by  an 
 entity,  whether  real  or  personal,  tangible  or  intangible  .  .  .  ."  47  C.  F.  R.    24.720(  g). 

 242  See  15  U.  S.  C.    632(  a). 

 243  In  an  ex  parte  filing,  the  Small  Business  Administration,  Office  of  Advocacy,  asks  the  Commission  to 
 reconsider  the  use  of  a  total  assets  test.  See  Letter  to  William  E.  Kennard,  Chairman,  Federal  Communications 
 Commission,  from  Jere  W.  Glover,  Chief  Counsel  for  Advocacy,  and  S.  Jenell  Trigg,  Assistant  Chief  Counsel  for 
 Telecommunications,  Office  of  Advocacy,  U.  S.  Small  Business  Administration,  dated  September  10,  1998. 
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 gross  revenues  standard  alone  allows  participation  of  legitimate  start-  up  companies  that  are  supported 
 only  by  assets  held  by  affiliates.  In  the  alternative,  commenters  should  address  whether  our 
 comprehensive  affiliation  rules  counterbalance  the  effects  of  a  gross  revenues  standard  when  applied  to 
 such  enterprises.  We  ask  that  commenters  cite  to  specific  statistical  and/  or  anecdotal  evidence  when 
 addressing  these  issues.  If  supporting  use  of  an  assets  test,  commenters  should  address  appropriate 
 thresholds  for  small  business  determinations.  For  example,  commenters  may  address  whether  the  $500 
 million  total  assets  test  used  in  determining  eligibility  for  entrepreneurs'  block  auctions  provides  a 
 suitable  benchmark.  244  A  more  complete  record  on  this  matter  will  assist  the  Commission  in  meeting  its 
 goals  for  small  business  participation  in  future  spectrum  auctions. 

 2.  Attribution  of  Gross  Revenues  or  Total  Assets  of  Investors  and  Affiliates 
 82.  Background.  In  the  Second  Notice,  we  sought  further  comment  on  whether  to  adopt  a 
 "controlling  interest"  standard  as  our  general  rule  for  attributing  to  an  applicant  the  gross  revenues  of  its 
 investors  and  their  affiliates  in  determining  whether  the  applicant  is  eligible  for  small  business 
 preferences.  245  In  this  Fifth  Report  and  Order,  we  adopt  the  "controlling  interest"  standard  as  our  general 
 attribution  rule  for  all  future  auctions.  246  For  purposes  of  calculating  equity  held  in  an  applicant,  the 
 "controlling  interest"  definition  provides  for  full  dilution  of  certain  stock  interests,  such  as  warrants,  stock 
 options,  and  convertible  debentures.  247  Accordingly,  under  the  rule  we  adopt  today,  as  well  as  under  our 
 existing  rules,  agreements  of  this  type  are  generally  treated  as  if  the  rights  thereunder  have  been  fully 
 exercised.  248  In  our  Competitive  Bidding  Fifth  Memorandum  Opinion  and  Order  ("  Fifth  M  O  &  O"),  we 
 established  two  exceptions  to  the  "fully  diluted"  requirement  for  the  broadband  PCS  attribution  rule.  249 
 We  decided  that  two  types  of  ownership  interests,  "rights  of  first  refusal"  and  "put"  options,  would  not  be 
 considered  on  a  fully  diluted  basis  for  purposes  of  calculating  ownership  levels.  250 

 83.  Discussion.  In  this  Fourth  Notice,  we  seek  comment  on  whether  to  incorporate  into  our 
 Part  1  general  competitive  bidding  rules  the  two  exceptions  we  adopted  for  our  broadband  PCS  attribution 
 rule.  We  also  seek  comment  on  a  proposed  third  exception  to  our  general  requirement  that  we  treat 
 certain  stock  interests  as  "fully  exercised." 

 244  To  bid  in  the  PCS  entrepreneur  block  auctions,  applicants  were  required  to  have  less  than  $125  million  in 
 gross  revenues  and  less  than  $500  million  in  total  assets.  See  Implementation  of  Section  309(  j)  of  the 
 Communications  Act  -  Competitive  Bidding,  PP  Docket  No.  93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  at  5581- 
 82,    115.  See  also  47  C.  F.  R.    24.  709(  a). 

 245  Second  Notice,  13  FCC  Rcd  at  476-  78,    183-  87. 

 246  See  supra    58-  66. 
 247  See  supra    62. 
 248  See,  e.  g.,  47  C.  F.  R.    1.  2110(  c)(  5)(  v)  (formerly    1.2110(  b)(  4)(  v)),  24.  709(  b)(  7).  However,  agreements 
 such  as  warrants,  stock  options,  and  convertible  debentures  may  not  be  used  to  appear  to  terminate  or  divest 
 ownership  interests  before  they  actually  do  so.  See  47  C.  F.  R.    24.  709(  b)(  7). 

 249  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,  454-  56,    93-  95  (1994)  ("  Fifth  M  O  &  O"). 
 250  Id.  A  "right  of  first  refusal"  is  an  agreement  between  parties  which  grants  an  investor  the  right  to  match  a 
 purchase  offer  from  a  third  party.  See  id.  at  455  n.  220.  A  "put"  option  gives  the  holder  of  an  ownership 
 instrument  the  right  to  sell  a  share  of  stock  at  a  specified  price  at  any  time  up  to  the  expiration  date.  See  id.  at  454, 
   92. 
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 84.  Our  attribution  rules  are  designed  to  preserve  control  of  the  applicant  by  eligible  entities 
 while  allowing  investment  in  the  applicant  by  entities  that  do  not  meet  the  size  restrictions  in  our  rules.  251 
 We  recognize  that  some  forms  of  stock  options  and  convertible  debt  instruments  are  common  and  often 
 beneficial  to  the  management  of  a  company.  Convertible  debt  instruments  may  also  allow  designated 
 entities  to  obtain  debt  financing  at  a  lower  cost  than  would  otherwise  be  available,  thereby  preserving 
 working  capital  for  such  uses  as  the  further  construction  of  facilities.  Because  our  rules  generally  require 
 us  to  treat  stock  interests  on  a  fully  diluted  basis,  if  an  applicant  grants  its  lender  stock  conversion  rights 
 in  several  promissory  notes,  the  lender's  equity  could  exceed  the  applicable  limit  or  threshold,  thus 
 requiring  the  applicant  to  include  the  lender's  gross  revenues  in  determining  its  eligibility  as  a  designated 
 entity. 

 85.  Our  proposed  exception  to  the  general  attribution  rule  is  a  refinement  to  the  "fully 
 diluted"  requirement  that  addresses  stock  conversion  rights  that  are  granted  on  a  contingent  basis.  An 
 applicant  may  grant  conversion  rights  on  a  contingent  basis,  such  rights  vesting  only  in  the  event  that  the 
 lender  first  assigns  or  transfers  all  interest  in  one  or  more  other  debt  instruments  to  a  qualified  unaffiliated 
 third  party.  252  Thus,  the  contingent  right  of  conversion  in  one  debt  instrument  could  only  be  exercised 
 upon  divestiture  of  enough  equity  associated  with  the  other  debt  instruments  to  allow  the  lender  to  remain 
 below  the  applicable  equity  limit. 

 86.  We  tentatively  conclude  that  furtherance  of  the  policy  underlying  Section  1.2110(  c)(  5)(  v) 
 of  our  designated  entities  rule  does  not  require  us  to  consider  all  existing  stock  conversion  rights  as 
 having  been  fully  exercised  simultaneously  in  a  case  where  exercise  of  the  various  conversion  rights  are 
 mutually  exclusive  by  their  terms.  253  We  therefore  propose  an  exception  to  the  "fully  diluted" 
 requirement  in  Section  1.2110(  c)(  5)(  v)  to  permit  conversion  rights  or  stock  options  to  be  considered 
 individually  rather  than  collectively  when  they  are  mutually  exclusive.  254  Under  this  interpretation,  for 
 the  purpose  of  calculating  ownership  interests,  all  stock  interests  would  continue  to  be  calculated  on  a 
 fully  diluted  basis,  but  if  a  stock  interest  by  its  terms  is  mutually  exclusive  of  one  or  more  other  stock 
 interests,  the  various  ownership  interests  would  be  treated  as  having  been  fully  exercised  only  in  the 
 possible  combinations  in  which  they  can  be  exercised  by  their  holder.  255 

 87.  We  seek  comment  on  whether  we  should  amend  the  controlling  interest  standard  in  our 
 Part  1  general  competitive  bidding  rules  to  include  this  exception  to  our  requirement  for  calculating 

 251  See  Implementation  of  Section  309(  j)  of  the  Communications  Act--  Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5532,  5620,    205  (1994). 
 252  See  Letter  from  Amy  J.  Zoslov,  Chief,  Auctions  and  Industry  Analysis  Division,  Wireless 
 Telecommunications  Bureau,  to  Cheryl  A.  Tritt,  Esq.,  and  Michael  K.  Kurtis,  Esq.,  counsel  for  DiGiPH  PCS,  Inc., 
 13  FCC  Rcd  17950  (1998)  ("  Division  Letter  to  DiGiPH"). 

 253  47  C.  F.  R.    1.  2110(  c)(  5)(  v)  (formerly    1.2110(  b)(  4)(  v)). 

 254  Id. 
 255  For  example,  a  licensee  might  execute  three  promissory  notes,  giving  its  lender  the  right  to  convert  the 
 loan  amounts  to  15  percent,  20  percent,  and  25  percent  equity  interests  in  the  licensee.  If  the  conversion  rights  in 
 each  note  were  granted  on  a  contingent  basis,  vesting  only  on  the  condition  that  the  lender  divest  enough  equity 
 associated  with  the  other  notes  to  ensure  that  it  remains  below  the  applicable  equity  limit,  we  would  calculate  the 
 stock  interests  of  the  lender  in  all  three  notes  on  a  fully  diluted  basis,  but  we  would  not  consider  the  conversion 
 rights  in  all  three  notes  as  having  been  exercised  simultaneously.  Depending  on  the  equity  limit  that  is  applicable 
 in  a  given  case,  we  could  consider  the  various  stock  interests  as  having  been  exercised  alone  or  in  pairs.  See 
 Division  Letter  to  DiGiPH. 
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 ownership  interests  on  a  fully  diluted  basis.  Under  the  proposed  rule,  ownership  interests  that  by  their 
 terms  are  capable  of  being  exercised  simultaneously  or  successively  would  continue  to  be  treated 
 collectively  as  if  the  rights  thereunder  have  been  fully  exercised.  Ownership  interests  that  are  mutually 
 exclusive  would  be  considered  separately,  but  each  mutually  exclusive  ownership  interest  would  be 
 considered  in  combination  with  all  other  ownership  interests  that  are  capable  of  being  exercised  with  it 
 simultaneously  or  successively.  256  Thus,  in  calculating  the  equity  held  in  an  applicant,  we  propose  to 
 consider  the  various  combinations  of  stock  options  or  conversion  rights  that  could  possibly  be  exercised 
 by  an  investor.  For  each  combination,  the  ownership  interests  would  be  considered  to  have  been  fully 
 exercised,  and  each  combination  would  then  be  reviewed  in  the  context  of  the  specific  equity  limit  or 
 threshold  applicable  in  a  given  case.  We  also  propose  that,  for  purposes  of  this  rule,  we  consider  one 
 ownership  interest  to  be  mutually  exclusive  of  another  only  if  the  agreement  that  conveys  the  first  interest 
 contains  explicit  language  making  it  clear  that  the  rights  conveyed  by  that  agreement  cannot  be  exercised 
 unless  all  ownership  rights  associated  with  the  other  agreement  are  either  terminated  or  transferred  or 
 assigned  to  a  qualified  unaffiliated  third  party. 

 88.  We  further  propose  to  codify  in  our  Part  1  general  competitive  bidding  rules  the  policy 
 under  which  we  have  previously  adopted  two  exceptions  to  our  broadband  PCS  attribution  rule  for  the 
 same  reasons  identified  in  the  Fifth  M  O  &  O.  257  Under  these  exceptions,  we  would  not  treat  "rights  of 
 first  refusal"  and  "put"  options  as  having  been  exercised  for  purposes  of  calculating  ownership  levels.  We 
 seek  comment  on  this  proposal. 

 VI.  PROCEDURAL  MATTERS  AND  ORDERING  CLAUSES 
 A.  Regulatory  Flexibility  Analyses 
 89.  Pursuant  to  the  Regulatory  Flexibility  Act,  258  a  Supplemental  Final  Regulatory  Flexibility 
 Analysis  for  the  Order  on  Reconsideration  is  attached  at  Appendix  C. 

 90.  A  Final  Regulatory  Flexibility  Analysis  for  the  Fifth  Report  and  Order  is  contained  in 
 Appendix  D. 

 91.  An  Initial  Regulatory  Flexibility  Analysis  (  IRFA)  for  the  Fourth  Notice  is  attached  at 
 Appendix  E.  259  Comments  on  the  IRFA  should  be  labelled  as  IRFA  Comments,  and  should  be  submitted 
 pursuant  to  the  filing  dates  and  procedures  set  forth  in  paragraphs  94-  97,  infra. 

 256  In  the  example  described  in  supra  n.  255,  if  the  lender  was  subject  to  the  49.  9  equity  limit  in  Section 
 24.709(  b)(  4)  of  the  Commission's  C  block  eligibility  rules,  we  would  consider  the  conversion  rights  in  only  two  of 
 the  three  notes  as  having  been  exercised  simultaneously.  In  this  example,  combining  the  conversion  rights  in  two 
 of  the  notes  would  give  the  lender  either  35  percent,  40  percent,  or  45  percent  of  the  licensee's  total  equity. 
 Therefore,  the  lender  would  not  be  considered  to  have  exceeded  the  49.  9  percent  equity  limit  in  Section 
 24.709(  b)(  4).  See  Division  Letter  to  DiGiPH. 

 257  Fifth  M  O  &  O,  10  FCC  Rcd  at  454-  56    93-  95. 

 258  See  5  U.  S.  C.    604.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Contract  With 
 America  Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  CWAAA  is 
 the  Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA). 

 259  See  5  U.  S.  C.    603 
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 Federal  Communications  Commission  FCC  00-  274 
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 B.  Paperwork  Reduction  Act  Analysis 
 92.  This  Order  on  Reconsideration  of  the  Third  Report  and  Order,  Fifth  Report  and  Order, 
 and  Fourth  Further  Notice  of  Proposed  Rule  Making  contains  either  a  proposed  or  modified  information 
 collection.  As  part  of  its  continuing  effort  to  reduce  paperwork  burdens,  we  invite  the  general  public  and 
 the  Office  of  Management  and  Budget  (  OMB)  to  take  this  opportunity  to  comment  on  the  information 
 collections  contained  in  this  Order  on  Reconsideration  of  the  Third  Report  and  Order,  Fifth  Report  and 
 Order,  and  Fourth  Further  Notice  of  Proposed  Rule  Making  as  required  by  the  Paperwork  Reduction  Act 
 of  1995,  Pub.  L.  No.  104-  13.  Public  and  agency  comments  are  due  60  days  after  publication  of  the  Order 
 on  Reconsideration  of  the  Third  Report  and  Order,  Fifth  Report  and  Order,  and  Fourth  Further  Notice  of 
 Proposed  Rule  Making  in  the  Federal  Register.  Comments  should  address:  (a)  whether  the  proposed 
 collection  of  information  is  necessary  for  the  proper  performance  of  the  functions  of  the  Commission, 
 including  whether  the  information  shall  have  practical  utility;  (b)  the  accuracy  of  the  Commission's 
 burden  estimates;  (c)  ways  to  enhance  the  quality,  utility  and  clarity  of  the  information  collected;  and  (d) 
 ways  to  minimize  the  burden  of  the  collection  of  information  on  the  respondents,  including  the  use  of 
 automated  collection  techniques  or  other  forms  of  information  technology. 

 93.  In  addition  to  filing  comments  on  the  information  collections  contained  in  this  Fifth 
 Report  and  Order  with  the  Secretary,  a  copy  of  any  comments  on  the  information  collections  should  be 
 submitted  to  Judy  Boley,  Federal  Communications  Commission,  Room  1-  C804,  445  12  th  Street  S.  W., 
 Washington,  DC  20554,  or  via  the  Internet  to  jboley@  fcc.  gov  and  to  Edward  Springer,  OMB  Desk 
 Officer,  10236  NEOB,  725    17  th  Street,  N.  W.,  Washington,  DC  20503  or  via  the  Internet  to 
 edward.  springer@  omb.  eop.  gov. 

 C.  Filing  Procedures 
 94.  Pursuant  to  Sections  1.415  and  1.419  of  the  Commission's  rules,  47  C.  F.  R.    1.  415, 
 1.419,  interested  parties  may  file  comments  on  or  before  45  days  after  publication  in  the  Federal  Register, 
 and  reply  comments  on  or  before  66  days  after  publication  in  the  Federal  Register.  Comments  may  be 
 filed  using  the  Commission's  Electronic  Comment  Filing  System  (ECFS)  or  by  filing  paper  copies.  See 
 Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  13  FCC  Rcd  11322,  11326  (1998). 

 95.  Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to 
 <http://  www.  fcc.  gov/  e-  file/  ecfs.  html>.  Generally,  only  one  copy  of  an  electronic  submission  must  be 
 filed.  If  multiple  docket  or  rulemaking  numbers  appear  in  the  caption  of  this  proceeding,  however, 
 commenters  must  transmit  one  electronic  copy  of  the  comments  to  each  docket  or  rulemaking  number 
 referenced  in  the  caption.  In  completing  the  transmittal  screen,  commenters  should  include  their  full 
 name,  Postal  Service  mailing  address,  and  the  applicable  docket  or  rulemaking  number.  Parties  may  also 
 submit  an  electronic  comment  by  Internet  e-  mail.  To  obtain  filing  instructions  for  e-  mail  comments, 
 commenters  should  send  an  e-  mail  to  ecfs@  fcc.  gov,  and  should  include  the  following  words  in  the  body 
 of  the  message,  "get  form  <your  e-  mail  address>."  A  sample  form  and  directions  will  be  sent  in  reply. 

 96.  Parties  that  choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  If 
 participants  want  each  Commissioner  to  receive  a  personal  copy  of  their  comments,  an  original  plus  nine 
 copies  must  be  filed.  All  filings  must  be  sent  to  the  Commission's  Secretary,  Magalie  Roman  Salas, 
 Office  of  the  Secretary,  Federal  Communications  Commission,  The  Portals,  445  12th  Street,  S.  W.,  Room 
 TW-  A325,  Washington,  D.  C.  20554.  In  addition,  a  courtesy  copy  should  be  delivered  to  Leora 
 Hochstein,  Auctions  and  Industry  Analysis  Division,  Wireless  Telecommunications  Bureau,  Federal 
 Communications  Commission,  445  12th  Street,  S.  W.,  Room  #4A633,  Washington,  D.  C.  20554. 
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 Federal  Communications  Commission  FCC  00-  274 
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 97.  All  relevant  and  timely  comments  will  be  considered  by  the  Commission  before  final 
 action  is  taken  in  this  proceeding.  Comments  and  reply  comments  will  be  available  for  public  inspection 
 and  duplication  during  regular  business  hours  in  the  FCC  Reference  Information  Center,  Room  CY-  A257, 
 445  12th  Street,  S.  W.,  Washington,  DC  20554.  Copies  also  may  be  obtained  from  International 
 Transcription  Services,  Inc.,  445  12th  Street,  S.  W.,  Room  CY-  B400,  Washington,  DC  20554,  (202)  314- 
 3070. 

 D.  Contacts  for  Further  Information 
 98.  For  further  information  concerning  this  Order  on  Reconsideration  of  the  Third  Report 
 and  Order,  Fifth  Report  and  Order,  and  Fourth  Further  Notice  of  Proposed  Rule  Making,  contact  Leora 
 Hochstein  at  (202)  418-  1022  (Auctions  and  Industry  Analysis  Division,  Wireless  Telecommunications 
 Bureau).  For  additional  information  concerning  the  information  collections  contained  in  this  Order  on 
 Reconsideration  of  the  Third  Report  and  Order,  Fifth  Report  and  Order,  and  Fourth  Further  Notice  of 
 Proposed  Rule  Making,  contact  Judy  Boley  at  (202)  418-  0214  or  via  the  Internet  at  jboley@  fcc.  gov. 

 E.  Ordering  Clauses 
 99.  Accordingly,  IT  IS  ORDERED  that,  pursuant  to  the  authority  granted  in  Sections  4(  i), 
 303(  r)  and  309(  j)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  303(  r)  and 
 309(  j),  the  petitions  for  reconsideration  and  informal  requests  for  clarification  filed  in  response  to  the  Part 
 1  Third  Report  and  Order  are  GRANTED  IN  PART  and  DENIED  IN  PART,  as  provided  herein. 

 100.  IT  IS  FURTHER  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  Third  Report  and  Order,  Fifth  Report 
 and  Order,  and  Fourth  Further  Notice  of  Proposed  Rule  Making  is  hereby  ADOPTED  and  Part  1, 
 Subpart  Q  of  the  Commissions  rules  are  amended  as  set  forth  in  Appendix  A,  effective  60  days  after 
 publication  in  the  Federal  Register.  The  information  collection  contained  in  these  rules  becomes 
 effective  60  days  after  publication  in  the  Federal  Register,  following  OMB  approval,  unless  a  notice  is 
 published  in  the  Federal  Register  stating  otherwise. 

 101.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  47  U.  S.  C.    155(  c)  and  47  C.  F.  R.   
 0.131(  c)  and  0.331,  the  Chief  of  the  Wireless  Telecommunications  Bureau  IS  GRANTED  DELEGATED 
 AUTHORITY  to  prescribe  and  set  forth  procedures  for  the  implementation  of  the  provisions  adopted 
 herein,  including  the  authority  to  seek  comment  on  and  set  forth  mechanisms  relating  to  the  day-  to-  day 
 conduct  of  specific  auctions. 

 102.  IT  IS  FURTHER  ORDERED  that  the  Consumer  Information  Bureau,  Reference 
 Information  Center,  SHALL  SEND  a  copy  of  this  Order  on  Reconsideration  of  the  Third  Report  and 
 Order,  Fifth  Report  and  Order,  and  Fourth  Further  Notice  of  Proposed  Rule  Making,  including  the 
 Supplemental  Final  Regulatory  Flexibility  Analysis,  the  Final  Regulatory  Flexibility  Analysis,  and  the 
 Initial  Regulatory  Flexibility  Analysis  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business 
 Administration. 

 FEDERAL  COMMUNICATIONS  COMMISSION 

 Magalie  Roman  Salas 
 Secretary 
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 Federal  Communications  Commission  FCC  00-  274 
 A  -  1 
 APPENDIX  A 
 Final  Rules 
 Part  1  of  title  47  of  the  Code  of  Federal  Regulations  is  revised  to  read  as  follows: 
 1.  Section  1.2104  is  amended  by  revising  paragraphs  (g)(  1)  and  (g)(  2)  to  read  as  follows: 
   1.2104  Competitive  bidding  mechanisms. 
 *  *  *  *  * 
 (g)  *  *  * 
 (1)  Bid  withdrawal  prior  to  close  of  auction.  A  bidder  that  withdraws  a  high  bid  during  the  course  of  an 
 auction  is  subject  to  a  withdrawal  payment  equal  to  the  difference  between  the  amount  of  the  withdrawn 
 bid  and  the  amount  of  the  winning  bid  in  the  same  or  subsequent  auction(  s).  In  the  event  that  a  bidding 
 credit  applies  to  any  of  the  bids,  the  bid  withdrawal  payment  is  either  the  difference  between  the  net 
 withdrawn  bid  and  the  subsequent  net  winning  bid,  or  the  difference  between  the  gross  withdrawn  bid  and 
 the  subsequent  gross  winning  bid,  whichever  is  less.  No  withdrawal  payment  will  be  assessed  for  a 
 withdrawn  bid  if  either  the  subsequent  winning  bid  or  any  of  the  intervening  subsequent  withdrawn  bids 
 equals  or  exceeds  that  withdrawn  bid.  The  withdrawal  payment  amount  is  deducted  from  any  upfront 
 payments  or  down  payments  that  the  withdrawing  bidder  has  deposited  with  the  Commission.  In  the  case 
 of  multiple  bid  withdrawals  on  a  single  license,  the  payment  for  each  bid  withdrawal  will  be  calculated 
 based  on  the  sequence  of  bid  withdrawals  and  the  amounts  withdrawn  in  the  same  or  subsequent 
 auction(  s).  In  the  event  that  a  license  for  which  there  have  been  withdrawn  bids  is  not  won  in  the  same 
 auction,  those  bidders  for  which  a  final  withdrawal  payment  cannot  be  calculated  will  be  assessed  an 
 interim  bid  withdrawal  payment  equal  to  3  percent  of  the  amount  of  their  bid  withdrawals.  The  3  percent 
 interim  payment  will  be  applied  toward  any  final  bid  withdrawal  payment  that  will  be  assessed  at  the 
 close  of  the  subsequent  auction  of  the  license. 
 Example:  (1)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  Bidder  B  places  a  bid  of  $90  and 
 withdraws.  In  that  same  auction,  Bidder  C  wins  the  license  at  a  bid  of  $95.  Withdrawal  payments  are 
 assessed  as  follows:  Bidder  A  owes  $5  ($  100  -  $95).  Bidder  B  owes  nothing. 
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 Federal  Communications  Commission  FCC  00-  274 
 2 
 Example:  (2)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  Bidder  B  places  a  bid  of  $95  and 
 withdraws.  In  that  same  auction,  Bidder  C  wins  the  license  at  a  bid  of  $90.  Withdrawal  payments  are 
 assessed  as  follows:  Bidder  A  owes  $5  ($  100  -  $95).  Bidder  B  owes  $5  ($  95  -  $90). 
 Example:  (3)  Bidder  A  withdraws  a  bid  of  $100.  Subsequently,  in  that  same  auction,  Bidder  B 
 places  a  bid  of  $90  and  withdraws.  In  a  subsequent  auction,  Bidder  C  places  a  bid  of  $95  and  withdraws. 
 Bidder  D  wins  the  license  in  that  auction  at  a  bid  of  $80.  Withdrawal  payments  are  assessed  as  follows: 
 At  the  end  of  the  first  auction,  Bidder  A  and  Bidder  B  are  each  assessed  an  interim  withdrawal  payment 
 equal  to  3  percent  of  their  withdrawn  bids  pending  Commission  assessment  of  a  final  withdrawal  payment 
 (Bidder  A  would  owe  3%  of  $100,  or  $3,  and  Bidder  B  would  owe  3%  of  $90,  or  $2.  70).  At  the  end  of 
 the  second  auction,  Bidder  A  would  owe  $5  ($  100  -  $95)  less  the  $3  interim  withdrawal  payment  for  a 
 total  of  $2.  Because  Bidder  C  placed  a  subsequent  bid  that  was  higher  than  Bidder  B's  $90  bid,  Bidder  B 
 would  owe  nothing.  Bidder  C  would  owe  $15  ($  95  -  $80). 
 (2)  Default  or  disqualification  after  close  of  auction.  A  bidder  assumes  a  binding  obligation  to  pay  its  full 
 bid  amount  upon  acceptance  of  the  high  bid  at  the  close  of  an  auction.  If  a  high  bidder  defaults  or  is 
 disqualified  after  the  close  of  such  an  auction,  the  defaulting  bidder  will  be  subject  to  the  payment  in 
 paragraph  (g)(  1)  of  this  section  plus  an  additional  payment  equal  to  3  percent  of  the  subsequent  winning 
 bid.  If  the  subsequent  winning  bid  exceeds  the  defaulting  bidder's  bid  amount,  the  3  percent  payment  will 
 be  calculated  based  on  the  defaulting  bidder's  bid  amount.  If  either  bid  amount  is  subject  to  a  bidding 
 credit,  the  3  percent  credit  will  be  calculated  using  the  same  bid  amounts  and  basis  (net  or  gross  bids)  as 
 in  the  calculation  of  the  payment  in  paragraph  (g)(  1)  of  this  section.  Thus,  for  example,  if  gross  bids  are 
 used  to  calculate  the  payment  in  paragraph  (g)(  1)  of  this  section,  the  3  percent  will  be  applied  to  the  gross 
 amount  of  the  subsequent  winning  bid,  or  the  gross  amount  of  the  defaulting  bid,  whichever  is  less. 
 *  *  *  *  * 
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 Federal  Communications  Commission  FCC  00-  274 
 3 
 2.  Section  1.2105  is  amended  by  revising  paragraphs  (a)(  2)(  xi)  and  (c)(  1)  to  read  as  follows: 
   1.2105  Bidding  application  and  certification  procedures;  prohibition  of  collusion. 
 *  *  *  *  * 
 (a)(  2)  *  *  * 
 (xi)  An  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. 
 *  *  *  *  * 
 (c)  Prohibition  of  collusion.  (1)  Except  as  provided  in  paragraphs  (c)(  2),  (c)(  3)  and  (c)(  4)  of  this 
 section,  after  the  short-  form  application  filing  deadline,  all  applicants  are  prohibited  from  cooperating, 
 collaborating,  discussing  or  disclosing  in  any  manner  the  substance  of  their  bids  or  bidding  strategies,  or 
 discussing  or  negotiating  settlement  agreements,  with  other  applicants  until  after  the  down  payment 
 deadline,  unless  such  applicants  are  members  of  a  bidding  consortium  or  other  joint  bidding  arrangement 
 identified  on  the  bidder's  short-  form  application  pursuant  to    1.  2105(  a)(  2)(  viii). 
 *  *  *  *  * 
 3.  Section  1.2106  is  amended  by  revising  paragraph  (a)  to  read  as  follows: 
   1.  2106  Submission  of  upfront  payments. 
 (a)  The  Commission  may  require  applicants  for  licenses  subject  to  competitive  bidding  to  submit 
 an  upfront  payment.  In  that  event,  the  amount  of  the  upfront  payment  and  the  procedures  for  submitting  it 
 will  be  set  forth  in  a  Public  Notice.  Any  auction  applicant  that  has  previously  been  in  default  on  any 
 Commission  license  or  has  previously  been  delinquent  on  any  non-  tax  debt  owed  to  any  Federal  agency 
 must  submit  an  upfront  payment  equal  to  50  percent  more  than  that  set  for  each  particular  license.  No 
 interest  will  be  paid  on  upfront  payments. 
 *  *  *  *  * 
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 Federal  Communications  Commission  FCC  00-  274 
 4 
 4.  Section  1.2108  is  amended  by  revising  paragraph  (b)  to  read  as  follows: 
   1.  2108  Procedures  for  filing  petition  to  deny  against  long-  form  applications. 
 *  *  *  *  * 
 (b)  Within  a  period  specified  by  Public  Notice,  and  after  the  Commission  by  Public  Notice 
 announces  that  long-  form  applications  have  been  accepted  for  filing,  petitions  to  deny  such  applications 
 may  be  filed.  The  period  for  filing  petitions  to  deny  shall  be  no  more  than  ten  (10)  days.  The  appropriate 
 licensing  Bureau,  within  its  discretion,  may,  in  exigent  circumstances,  reduce  this  period  of  time  to  no 
 less  than  five  (5)  days.  Any  such  petitions  must  contain  allegations  of  fact  supported  by  affidavit  of  a 
 person  or  persons  with  personal  knowledge  thereof. 
 *  *  *  *  * 
 5.  Section  1.2110  is  amended  by  redesignating  paragraphs  (b)  through  (m)  as  (c)  through  (n),  adding 
 new  paragraph  (b),  and  revising  newly  redesignated  paragraphs  (c),  (g)(  4),  and  (j)  to  read  as  follows: 
   1.2110  Designated  entities. 
 *  *  *  *  * 
 (b)  Eligibility  for  small  business  provisions. 
 (1)  Size  attribution.  The  gross  revenues  of  the  applicant  (or  licensee),  its  controlling  interests  and  their 
 affiliates  shall  be  attributed  to  the  applicant  and  considered  on  a  cumulative  basis  and  aggregated  for 
 purposes  of  determining  whether  the  applicant  (or  licensee)  is  eligible  for  status  as  a  small  business  under 
 this  section.  An  applicant  seeking  status  as  a  small  business  under  this  section  must  disclose  on  its  short-and 
 long-  form  applications,  separately  and  in  the  aggregate,  the  gross  revenues  of  the  applicant  (or 
 licensee),  its  controlling  interests  and  their  affiliates  for  each  of  the  previous  three  years. 
 (2)  Aggregation  of  affiliate  interests.  Persons  or  entities  that  hold  interests  in  an  applicant  (or  licensee) 
 that  are  affiliates  of  each  other  or  have  an  identity  of  interests  identified  in    1.2110(  c)(  5)(  iii)  will  be 
 treated  as  though  they  were  one  person  or  entity  and  their  ownership  interests  aggregated  for  purposes  of 
 determining  an  applicant's  (or  licensee's)  compliance  with  the  requirements  of  this  section. 
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 Federal  Communications  Commission  FCC  00-  274 
 5 
 Example  1:  ABC  Corp.  is  owned  by  individuals,  A,  B  and  C,  each  having  an  equal  one-  third  voting 
 interest  in  ABC  Corp.  A  and  B  together,  with  two-  thirds  of  the  stock  have  the  power  to  control  ABC 
 Corp.  and  have  an  identity  of  interest.  If  A&  B  invest  in  DE  Corp.,  a  broadband  PCS  applicant  for  block 
 C,  A  and  B's  separate  interests  in  DE  Corp.  must  be  aggregated  because  A  and  B  are  to  be  treated  as  one 
 person  or  entity. 
 Example  2:  ABC  Corp.  has  subsidiary  BC  Corp.,  of  which  it  holds  a  controlling  51  percent  of  the  stock.  If 
 ABC  Corp.  and  BC  Corp.,  both  invest  in  DE  Corp.,  their  separate  interests  in  DE  Corp.  must  be 
 aggregated  because  ABC  Corp.  and  BC  Corp.  are  affiliates  of  each  other. 
 (3)  Exceptions.  (i)  Small  business  consortia.  Where  an  applicant  (or  licensee)  is  a  consortium  of  small 
 businesses,  the  gross  revenues  of  each  small  business  consortium  member  shall  not  be  aggregated.  Each 
 small  business  consortium  member  must  constitute  a  separate  and  distinct  legal  entity  to  qualify. 
 (ii)  Applicants  without  identifiable  controlling  interests.  Where  an  applicant  (or  licensee) 
 cannot  identify  controlling  interests  under  the  standards  set  forth  in  this  section,  the  gross  revenues  of  all 
 interest  holders  in  the  applicant,  and  their  affiliates,  will  be  attributable. 
 (c)  Definitions. 
 (1)  Small  businesses.  The  Commission  will  establish  the  definition  of  a  small  business  on  a  service-specific 
 basis,  taking  into  consideration  the  characteristics  and  capital  requirements  of  the  particular 
 service. 
 (2)  Controlling  interests.  (i)  For  purposes  of  this  section,  controlling  interest  includes  individuals  or 
 entities  with  either  de  jure  or  de  facto  control  of  the  applicant.  De  jure  control  is  evidenced  by  holdings 
 of  greater  than  50  percent  of  the  voting  stock  of  a  corporation,  or  in  the  case  of  a  partnership,  general 
 partnership  interests.  De  facto  control  is  determined  on  a  case-  by-  case  basis.  An  entity  must  disclose  its 
 equity  interest  and  demonstrate  at  least  the  following  indicia  of  control  to  establish  that  it  retains  de  facto 
 control  of  the  applicant: 
 (A)  the  entity  constitutes  or  appoints  more  than  50  percent  of  the  board  of  directors  or 
 management  committee; 
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 (B)  the  entity  has  authority  to  appoint,  promote,  demote,  and  fire  senior  executives  that  control 
 the  day-  to-  day  activities  of  the  licensee;  and 
 (C)  the  entity  plays  an  integral  role  in  management  decisions. 
 (ii)  Calculation  of  certain  interests. 
 (A)  Ownership  interests  shall  be  calculated  on  a  fully  diluted  basis;  all  agreements  such  as 
 warrants,  stock  options  and  convertible  debentures  will  generally  be  treated  as  if  the  rights  thereunder 
 already  have  been  fully  exercised. 
 (B)  Partnership  and  other  ownership  interests  and  any  stock  interest  equity,  or  outstanding  stock, 
 or  outstanding  voting  stock  shall  be  attributed  as  specified  below. 
 (C)  Stock  interests  held  in  trust  shall  be  attributed  to  any  person  who  holds  or  shares  the  power  to 
 vote  such  stock,  to  any  person  who  has  the  sole  power  to  sell  such  stock,  and  to  any  person  who  has  the 
 right  to  revoke  the  trust  at  will  or  to  replace  the  trustee  at  will.  If  the  trustee  has  a  familial,  personal,  or 
 extra-  trust  business  relationship  to  the  grantor  or  the  beneficiary,  the  grantor  or  beneficiary,  as 
 appropriate,  will  be  attributed  with  the  stock  interests  held  in  trust. 
 (D)  Non-  voting  stock  shall  be  attributed  as  an  interest  in  the  issuing  entity. 
 (E)  Limited  partnership  interests  shall  be  attributed  to  limited  partners  and  shall  be  calculated 
 according  to  both  the  percentage  of  equity  paid  in  and  the  percentage  of  distribution  of  profits  and  losses. 
 (F)  Officers  and  directors  of  an  entity  shall  be  considered  to  have  a  controlling  interest  in  the 
 entity.  The  officers  and  directors  of  an  entity  that  controls  a  licensee  or  applicant  shall  be  considered  to 
 have  a  controlling  interest  in  the  licensee  or  applicant. 
 (G)  Ownership  interests  that  are  held  indirectly  by  any  party  through  one  or  more  intervening 
 corporations  will  be  determined  by  successive  multiplication  of  the  ownership  percentages  for  each  link 
 in  the  vertical  ownership  chain  and  application  of  the  relevant  attribution  benchmark  to  the  resulting 
 product,  except  that  if  the  ownership  percentage  for  an  interest  in  any  link  in  the  chain  exceeds  50  percent 
 or  represents  actual  control,  it  shall  be  treated  as  if  it  were  a  100  percent  interest. 
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 (H)  Any  person  who  manages  the  operations  of  an  applicant  or  licensee  pursuant  to  a 
 management  agreement  shall  be  considered  to  have  a  controlling  interest  in  such  applicant  or  licensee  if 
 such  person,  or  its  affiliate,  has  authority  to  make  decisions  or  otherwise  engage  in  practices  or  activities 
 that  determine,  or  significantly  influence: 
 (1)  The  nature  or  types  of  services  offered  by  such  an  applicant  or  licensee; 
 (2)  The  terms  upon  which  such  services  are  offered;  or 
 (3)  The  prices  charged  for  such  services. 
 (I)  Any  licensee  or  its  affiliate  who  enters  into  a  joint  marketing  arrangement  with  an  applicant  or 
 licensee,  or  its  affiliate,  shall  be  considered  to  have  a  controlling  interest,  if  such  applicant  or  licensee,  or 
 its  affiliate,  has  authority  to  make  decisions  or  otherwise  engage  in  practices  or  activities  that  determine, 
 or  significantly  influence: 
 (1)  The  nature  or  types  of  services  offered  by  such  an  applicant  or  licensee; 
 (2)  The  terms  upon  which  such  services  are  offered;  or 
 (3)  The  prices  charged  for  such  services. 
 (3)  Businesses  owned  by  members  of  minority  groups  and/  or  women.  Unless  otherwise  provided  in  rules 
 governing  specific  services,  a  business  owned  by  members  of  minority  groups  and/  or  women  is  one  in 
 which  minorities  and/  or  women  who  are  U.  S.  citizens  control  the  applicant,  have  at  least  greater  than  50 
 percent  equity  ownership  and,  in  the  case  of  a  corporate  applicant,  have  a  greater  than  50  percent  voting 
 interest.  For  applicants  that  are  partnerships,  every  general  partner  must  be  either  a  minority  and/  or 
 woman  (or  minorities  and/  or  women)  who  are  U.  S.  citizens  and  who  individually  or  together  own  at  least 
 50  percent  of  the  partnership  equity,  or  an  entity  that  is  100  percent  owned  and  controlled  by  minorities 
 and/  or  women  who  are  U.  S.  citizens.  The  interests  of  minorities  and  women  are  to  be  calculated  on  a  fully 
 diluted  basis;  agreements  such  as  stock  options  and  convertible  debentures  shall  be  considered  to  have  a 
 present  effect  on  the  power  to  control  an  entity  and  shall  be  treated  as  if  the  rights  thereunder  already  have 
 been  fully  exercised.  However,  upon  a  demonstration  that  options  or  conversion  rights  held  by  non-controlling 
 principals  will  not  deprive  the  minority  and  female  principals  of  a  substantial  financial  stake 
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 in  the  venture  or  impair  their  rights  to  control  the  designated  entity,  a  designated  entity  may  seek  a  waiver 
 of  the  requirement  that  the  equity  of  the  minority  and  female  principals  must  be  calculated  on  a  fully-diluted 
 basis.  The  term  minority  includes  individuals  of  Black  or  African  American,  Hispanic  or  Latino, 
 American  Indian  or  Alaskan  Native,  Asian,  and  Native  Hawaiian  or  Pacific  Islander  extraction.  See 
 Office  of  Management  and  Budget,  Revisions  to  Standards  for  the  Classification  of  Federal  Data  on  Race 
 Ethnicity,  Notice  of  Decision,  62  FR  58782  (October  30,  1997). 
 *  *  *  *  * 
 (g)  *  *  * 
 (4)  A  license  granted  to  an  eligible  entity  that  elects  installment  payments 
 shall  be  conditioned  upon  the  full  and  timely  performance  of  the  licensee's  payment  obligations 
 under  the  installment  plan. 
 (i)  Any  licensee  that  fails  to  submit  its  quarterly  payment  on  an  installment  payment  obligation 
 (the  Required  Installment  Payment)  may  submit  such  payment  on  or  before  the  last  day  of  the 
 next  quarter  (the  "first  additional  quarter")  without  being  considered  delinquent.  Any  licensee 
 making  its  Required  Installment  Payment  during  this  period  (the  "first  additional  quarter  grace 
 period")  will  be  assessed  a  late  payment  fee  equal  to  five  percent  (5%)  of  the  amount  of  the  past 
 due  Required  Installment  Payment.  The  late  payment  fee  applies  to  the  total  Required 
 Installment  Payment  regardless  of  whether  the  licensee  submitted  a  portion  of  its  Required 
 Installment  Payment  in  a  timely  manner. 
 (ii)  If  any  licensee  fails  to  make  the  Required  Installment  Payment  on  or  before  the  last  day  of  the 
 first  additional  quarter  set  forth  in  paragraph  (i)  of  this  section,  the  licensee  may  submit  its 
 Required  Installment  Payment  on  or  before  the  last  day  of  the  next  quarter  (the  "second  additional 
 quarter"),  except  that  no  such  additional  time  will  be  provided  for  the  July  31,  1998  suspension 
 interest  and  installment  payments  from  C  or  F  block  licensees  that  are  not  made  within  90  days  of 
 the  payment  resumption  date  for  those  licensees,  as  explained  in  Amendment  of  the 
 Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications 
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 Services  (PCS)  Licensees,  Order  on  Reconsideration  of  the  Second  Report  and  Order,  WT 
 Docket  No.  97-  82,  13  FCC  Rcd  8345  (1998).  Any  licensee  making  the  Required  Installment 
 Payment  during  the  second  additional  quarter  (the  "second  additional  quarter  grace  period")  will 
 be  assessed  a  late  payment  fee  equal  to  ten  percent  (10%)  of  the  amount  of  the  past  due  Required 
 Installment  Payment.  Licensees  shall  not  be  required  to  submit  any  form  of  request  in  order  to 
 take  advantage  of  the  first  and  second  additional  quarter  grace  periods. 
 (iii)  All  licensees  that  avail  themselves  of  these  grace  periods  must  pay  the  associated  late 
 payment  fee(  s)  and  the  Required  Installment  Payment  prior  to  the  conclusion  of  the  applicable 
 additional  quarter  grace  period(  s).  Payments  made  at  the  close  of  any  grace  period(  s)  will  first  be 
 applied  to  satisfy  any  lender  advances  as  required  under  each  licensee's  "Note  and  Security 
 Agreement,"  with  the  remainder  of  such  payments  applied  in  the  following  order:  late  payment 
 fees,  interest  charges,  installment  payments  for  the  most  back-  due  quarterly  installment  payment. 
 (iv)  If  an  eligible  entity  obligated  to  make  installment  payments  fails  to  pay  the  total  Required 
 Installment  Payment,  interest  and  any  late  payment  fees  associated  with  the  Required  Installment 
 Payment  within  two  quarters  (6  months)  of  the  Required  Installment  Payment  due  date,  it  shall  be 
 in  default,  its  license  shall  automatically  cancel,  and  it  will  be  subject  to  debt  collection 
 procedures.  A  licensee  in  the  PCS  C  or  F  blocks  shall  be  in  default,  its  license  shall  automatically 
 cancel,  and  it  will  be  subject  to  debt  collection  procedures,  if  the  payment  due  on  the  payment 
 resumption  date,  referenced  in  paragraph  (g)(  4)(  ii)  of  this  section,  is  more  than  ninety  (90)  days 
 delinquent. 
 *  *  *  *  * 
 (j)  Designated  entities  must  describe  on  their  long-  form  applications  how  they  satisfy  the  requirements  for 
 eligibility  for  designated  entity  status,  and  must  list  and  summarize  on  their  long-  form  applications  all 
 agreements  that  affect  designated  entity  status  such  as  partnership  agreements,  shareholder  agreements, 
 management  agreements  and  other  agreements,  including  oral  agreements,  establishing,  as  applicable,  de 
 facto  or  de  jure  control  of  the  entity.  Such  information  must  be  maintained  at  the  licensees'  facilities  or 
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 by  their  designated  agents  for  the  term  of  the  license  in  order  to  enable  the  Commission  to  audit 
 designated  entity  eligibility  on  an  ongoing  basis. 
 *  *  *  *  * 
 6.  Section  1.2112  is  revised  to  read  as  follows: 
   1.  2112  Ownership  disclosure  requirements  for  short-  and  long-  form  applications. 
 (a)  Each  application  to  participate  in  competitive  bidding  (i.  e.,  short-  form  application  (see  47  CFR 
 1.2105)),  or  for  a  license,  authorization,  assignment,  or  transfer  of  control  shall  disclose  fully  the  real 
 party  or  parties  in  interest  and  must  list  the  following  information: 
 (1)  The  name,  address,  and  citizenship  of  any  party  holding  10  percent  or  more  of  stock  in  the  applicant, 
 whether  voting  or  nonvoting,  common  or  preferred,  including  the  specific  amount  of  the  interest  or 
 percentage  held. 
 (2)  In  the  case  of  a  limited  partnership,  the  name,  address  and  citizenship  of  each  limited  partner  whose 
 interest  in  the  applicant  is  10  percent  or  greater  (as  calculated  according  to  the  percentage  of  equity  paid 
 in  or  the  percentage  of  distribution  of  profits  and  losses); 
 (3)  In  the  case  of  a  general  partnership,  the  name,  address  and  citizenship  of  each  partner,  and  the  share  or 
 interest  participation  in  the  partnership; 
 (4)  In  the  case  of  a  limited  liability  company,  the  name,  address  and  citizenship  of  each  of  its  members 
 whose  interest  in  the  applicant  is  10  percent  or  greater. 
 (5)  All  parties  holding  indirect  ownership  interests  in  the  applicant  as  determined  by  successive 
 multiplication  of  the  ownership  percentages  for  each  link  in  the  vertical  ownership  chain,  that  equals  10 
 percent  or  more  of  the  applicant,  except  that  if  the  ownership  percentage  for  an  interest  in  any  link  in  the 
 chain  exceeds  50  percent  or  represents  actual  control,  it  shall  be  treated  and  reported  as  if  it  were  a  100 
 percent  interest. 
 (6)  Any  FCC-  licensed  entity  or  applicant  for  an  FCC  license,  in  which  the  applicant  or  any  of  the  parties 
 identified  in  subparagraphs  (1)  through  (5)  of  above,  owns  10  percent  or  more  of  stock,  whether  voting  or 
 nonvoting,  common  or  preferred.  This  list  must  include  a  description  of  each  such  entity's  principal 
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 11 
 business  and  a  description  of  each  such  entity's  relationship  to  the  applicant  (e.  g.,  Company  A  owns  10 
 percent  of  Company  B  (the  applicant)  and  10  percent  of  Company  C,  then  Companies  A  and  C  must  be 
 listed  on  Company  B's  application,  where  C  is  an  FCC  licensee  and/  or  license  applicant); 
 (b)  Designated  Entity  Status:  In  addition  to  the  information  required  under  paragraph  (a)  of  this  section, 
 each  applicant  claiming  eligibility  for  small  business  provisions  shall  disclose  the  following: 
 (1)  On  its  application  to  participate  in  competitive  bidding  (i.  e.,  short-  form  application  (see  47  CFR 
 1.2105)), 
 (i)  List  the  names,  addresses,  and  citizenship  of  all  officers,  directors,  and  other  controlling 
 interests  of  the  applicant,  as  described  in  1.2110; 
 (ii)  List  any  FCC-  licensed  entity  or  applicant  for  an  FCC  license,  in  which  any  controlling 
 interest  of  the  applicant  owns  a  10  percent  or  greater  interest  or  a  total  of  10  percent  or 
 more  of  any  class  of  stock,  warrants,  options  or  debt  securities.  This  list  must  include  a 
 description  of  each  such  entity's  principal  business  and  a  description  of  each  such  entity's 
 relationship  to  the  applicant; 
 (iii)  List  separately  and  in  the  aggregate  the  gross  revenues,  computed  in  accordance  with   
 1.2110,  for  each  of  the  following:  the  applicant,  its  affiliates,  its  controlling  interests,  and 
 affiliates  of  its  controlling  interests;  and  if  a  consortium  of  small  businesses,  the  members 
 comprising  the  consortium; 
 (2)  As  an  exhibit  to  its  long-  form  application  (i.  e.,  see  47  CFR  1.2107): 
 (i)  List  and  summarize  all  agreements  or  instruments  (with  appropriate  references  to  specific 
 provisions  in  the  text  of  such  agreements  and  instruments)  that  support  the  applicant's 
 eligibility  as  a  small  business  under  the  applicable  designated  entity  provisions,  including 
 the  establishment  of  de  facto  or  de  jure  control;  such  agreements  and  instruments  include 
 articles  of  incorporation  and  bylaws,  shareholder  agreements,  voting  or  other  trust 
 agreements,  franchise  agreements,  and  any  other  relevant  agreements  (including  letters  of 
 intent),  oral  or  written;  and 
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 (ii)  List  and  summarize  any  investor  protection  agreements,  including  rights  of  first  refusal, 
 supermajority  clauses,  options,  veto  rights,  and  rights  to  hire  and  fire  employees  and  to 
 appoint  members  to  boards  of  directors  or  management  committees. 
 (iii)  List  separately  and  in  the  aggregate  the  gross  revenues,  computed  in  accordance  with   
 1.2110,  for  each  of  the  following:  the  applicant,  its  affiliates,  its  controlling  interests,  and 
 affiliates  of  its  controlling  interests;  and  if  a  consortium  of  small  businesses,  the  members 
 comprising  the  consortium. 
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 B  -  1 
 APPENDIX  B 
 List  of  Parties 
 I.  Order  on  Reconsideration 
 Petitions  for  Reconsideration 
 Alpine  PCS,  Inc.,  et  al.  ("  Alpine  PCS") 
 Community  Teleplay,  Inc.  ("  CTI") 
 DiGiPH  PCS,  Inc.  ("  DiGiPH") 
 Loli,  Inc.  et  al.  ("  Loli") 
 NextWave  Telecom  Inc.  ("  NextWave") 

 Petition  for  Limited  Reconsideration  and  Clarification 
 CONXUS  Communications,  Inc.  ("  CONXUS") 
 Petition  for  Partial  Reconsideration 
 Houston  936  SMR,  Inc.  ("  Houston  936") 
 Comments 
 Bellingham  Corporation  and  Pueblo  Communications,  Inc.  ("  Bellingham") 
 In-  Sync  Interactive/  Akron,  Inc.  et  al.  ("  In-  Sync") 

 Comments  on  Section  1.2112  Filed  in  Universal  Licensing  System  Proceeding 
 Comments  of  AT&  T  Wireless  Services,  Inc.  ("  AT&  T") 
 Comments  of  Bell  Atlantic  Mobile,  Inc.  ("  BAM") 
 Comments  of  The  Federal  Communications  Bar  Association  ("  FCBA") 
 Reply  Comments  of  The  Federal  Communications  Bar  Association 

 II.  Fifth  Report  and  Order 
 Comments 
 AmeriCall  International,  LLC  ("  AmeriCall") 
 Cook  Inlet  Region,  Inc.  ("  CIRI") 
 National  Telephone  Cooperative  Association  ("  NTCA") 
 NextWave  Telecom  Inc.  ("  NextWave") 
 Rural  Telecommunications  Group  ("  RTG") 
 Western  Wireless  Corporation  ("  Western") 

 Reply  Comments 
 Western  Wireless  Corporation  ("  Western") 
 Ex  Parte  Filing 
 Small  Business  Administration 
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 C  -  1 
 APPENDIX  C 
 SUPPLEMENTAL  FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (ORDER  ON  RECONSIDERATION) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  1  an  Initial  Regulatory  Flexibility 
 Analysis  (IRFA)  was  incorporated  in  the  Notice  of  Proposed  Rulemaking  in  WT  Docket  No.  97-  82.  2  The 
 Commission  sought  written  public  comment  on  the  proposals  in  the  Notice  of  Proposed  Rulemaking, 
 including  comment  on  the  IRFA.  A  Final  Regulatory  Flexibility  Analysis  (FRFA)  was  incorporated  in 
 the  report  and  order  section  of  the  Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rule 
 Making  ("  Part  1  Third  Report  and  Order"  and  "Second  Notice").  3  The  Commission  received  seven 
 petitions  for  reconsideration  in  response  to  the  Part  1  Third  Report  and  Order  and  two  comments  in 
 support  of  the  petitions  for  reconsideration.  This  supplemental  FRFA  analyzes  the  modifications  adopted 
 in  response  to  those  petitions  and  comments,  and  conforms  to  the  RFA.  4 

 F.  Need  for,  and  Objectives  of,  This  Order  on  Reconsideration. 
 2.  This  Order  on  Reconsideration  of  the  Third  Report  and  Order  ("  Order  on  Reconsideration") 
 amends  and  clarifies  the  Commission's  general  competitive  bidding  rules  for  all  auctionable  services. 
 Specifically,  the  Commission  clarifies  that  the  prohibition  on  collusion  begins  on  the  filing  deadline  for 
 short-  form  applications  and  ends  on  the  down  payment  deadline.  In  addition,  the  Commission  clarifies 
 and  corrects  the  ownership  disclosure  requirements.  With  respect  to  entities  not  seeking  designated  entity 
 status,  we  eliminate  the  requirement  to  include  debt  and  instruments  such  as  warrants,  convertible 
 debentures,  options  and  other  debt  interests  in  reporting  their  ownership  interests.  The  Commission  also 
 amends  its  rules  to  clarify  that  in  the  case  of  multiple  bid  withdrawals  on  a  single  license,  within  the  same 
 or  subsequent  auction(  s),  the  payment  for  each  bid  withdrawal  will  be  calculated  based  on  the  sequence  of 
 bid  withdrawals  and  the  amounts  withdrawn.  The  Commission  further  amends  its  rules  to  provide  that  in 
 instances  in  which  bids  have  been  withdrawn  on  a  license  that  is  not  won  in  the  same  auction,  the 
 Commission  will  assess  an  interim  withdrawal  payment  equal  to  3  percent  of  the  amount  of  the  bid 
 withdrawals.  In  addition,  the  Commission  retains,  for  the  most  part,  the  installment  payment  grace  period 
 and  late  payment  fee  provisions  adopted  in  the  Part  1  Third  Report  and  Order,  but  adopts  a  slight 
 modification  to  the  payment  due  dates  for  late  installment  payments  and  associated  late  fees.  The 
 Commission  also  concludes  that  licensees  defaulting  on  installment  payments  are  subject  to  the  default 
 provisions  of  Section  1.2110(  f)(  4)  of  our  rules  (redesignated  herein  as    1.  2110(  g)(  4))  and  not  to  Section 
 1.2104(  g).  5  The  Commission  incorporates  into  the  Part  1  general  competitive  bidding  rules  the  "former 
 defaulter"  policies  adopted  with  respect  to  C  block  auction  applicants.  The  Commission  clarifies  the 
 circumstances  under  which  installment  payment  defaulters  will  be  eligible  to  participate  in  future 
 auctions.  Finally,  this  Order  on  Reconsideration  makes  a  number  of  clarifications  with  respect  to  the 

 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Contract  With  America 
 Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  CWAAA  is  the 
 Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA). 

 2  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Proceeding,  WT  Docket  No.  97-  82, 
 Order,  Memorandum  Opinion  and  Order,  and  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  5686,  5749  (1997). 
 3  Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  374,  492  ("  Part  1 
 Third  Report  and  Order"  and  "Second  Notice")  (Appendix  B)  (1997). 
 4  See  5  U.  S.  C.    604. 

 5  47  C.  F.  R.    1.2110(  f)(  4)  (redesignated  herein  as    1.  2110(  g)(  4)),  1.2104(  g). 
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 C  -  2 
 restructuring  of  installment  payments,  the  assignment  and  transfer  of  licenses  paid  for  through  installment 
 payments,  and  the  unjust  enrichment  rules  for  bidding  credits. 

 3.  These  amendments  and  clarifications  are  intended  to  simplify  the  Commission's  general 
 competitive  bidding  rules,  increase  the  efficiency  of  the  competitive  bidding  process,  and  provide  more 
 specific  guidance  to  auction  participants. 

 G.  Summary  of  Significant  Issues  Raised  by  Public  Comment  in  Response  to  the  FRFA  Contained  in  The  Part  1  Third  Report  and  Order. 

 4.  No  petitions  for  reconsideration  directly  addressed  the  FRFA  contained  in  the  Part  1  Third 
 Report  and  Order.  6  The  Commission,  however,  did  receive  petitions  for  reconsideration  of  the  Part  1 
 Third  Report  and  Order  that  addressed  issues  affecting  small  businesses.  In  particular,  the  Commission 
 received  petitions  opposing  various  aspects  of  the  installment  payment  grace  period  and  late  payment  fee 
 provisions  adopted  in  the  Part  1  Third  Report  and  Order.  7  The  Order  on  Reconsideration  addresses 
 petitioners'  arguments  and  concludes  that  the  revised  late  payment  rules  relating  to  the  submission  of 
 installment  payments  are  not  commercially  unreasonable,  do  not  constitute  impermissible  retroactive 
 rulemaking,  and  do  not  violate  basic  contract  principles.  8  The  Commission  further  determines  that  the 
 modified  grace  period  and  late  payment  fee  provisions  apply  to  900  MHz  SMR  and  MDS  licensees  that 
 have  signed  Promissory  Notes  and  Security  Agreements.  9  In  addition,  the  Commission  adopts  a  slight 
 modification  to  the  payment  due  dates  for  late  installment  payments  and  associated  late  fees  in  order  to 
 avoid  any  confusion  as  to  when  such  payments  are  due.  10  The  Commission  clarifies  that,  despite 
 amendments  to  the  installment  payment  rules,  licensees  in  the  installment  payment  program  continue  to 
 have  the  opportunity  to  seek  restructuring  of  installment  payments.  11  The  Commission  notes,  however, 
 that  there  is  no  longer  a  procedure  for  requesting  a  grace  period  to  stay  installment  payment  deadlines 
 pending  such  restructuring.  12  Rather,  licensees  will  be  subject  to  the  automatic  late  payment  provisions  of 
 Section  1.2110(  g)  of  the  Commission's  rules  as  adopted  in  this  Order  on  Reconsideration.  The 
 Commission  further  clarifies  in  response  to  comments  that  the  assignee  or  transferee  of  a  license  paid  for 
 through  installment  payments  is  not  responsible  for  the  license  debt  until  the  assignment  of  license  or 
 transfer  of  control  has  been  consummated.  13  Also  in  response  to  requests  for  clarification,  the 
 Commission  clarifies  that  the  unjust  enrichment  rules  for  bidding  credits  do  not  apply  to  assignments  and 
 transfers  of  C  and  F  block  licenses  to  non-  entrepreneurs.  14 

 6  One  party,  Merlin  Telecom,  Inc.,  filed  comments  in  response  to  the  IRFA.  These  comments  were  addressed  in 
 the  FRFA  contained  in  the  Part  1  Third  Report  and  Order.  See  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at 
 492  (Appendix  B). 

 7  See  Part  1  Third  Report  and  Order,  13  FCC  Rcd  at  434-  442,    103-  113. 

 8  See  supra    16-  28. 
 9  See  supra    26. 
 10  See  supra    27-  28. 
 11  See  supra    29-  30. 
 12  Id. 
 13  See  supra    31-  33. 
 14  See  supra    34-  37. 
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 H.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  Rules  will  Apply. 
 5.  The  Commission  is  required  to  provide  a  description  of,  and,  where  feasible,  an  estimate 
 of,  the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  15  The  RFA 
 generally  defines  the  term  "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business," 
 "small  organization,"  and  "small  governmental  jurisdiction."  16  In  addition,  the  term  "small  business"  has 
 the  same  meaning  as  the  term  "small  business  concern",  under  Section  3  of  the  Small  Business  Act, 
 unless  the  Commission  has  developed  one  or  more  definitions  that  are  appropriate  for  its  activities.  17 
 Under  the  Small  Business  Act,  a  "small  business  concern"  is  one  which:  (1)  is  independently  owned  and 
 operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  meets  any  additional  criteria  established  by 
 the  Small  Business  Administration  (SBA).  18  A  small  organization  is  generally  any  not-  for-  profit 
 enterprise  which  is  independently  owned  and  operated  and  is  not  dominant  in  its  field.  19  Nationwide,  as 
 of  1992,  there  were  approximately  275,801  small  organizations.  20  Small  governmental  jurisdiction 
 generally  means  governments  of  cities,  counties,  towns,  townships,  villages,  school  districts,  or  special 
 districts,  with  a  population  of  less  than  50,000.  21  As  of  1992,  there  were  approximately  85,006  such 
 jurisdictions  in  the  United  States.  22  This  number  includes  38,978  counties,  cities  and  towns;  of  these, 
 37,566,  or  96  percent,  have  populations  of  fewer  than  50,000.  23  The  Census  Bureau  estimates  that  this 
 ratio  is  approximately  accurate  for  all  governmental  entities.  Thus,  of  the  85,006  governmental  entities, 
 we  estimate  that  81,  600  (96  percent)  are  small  entities.  Nationwide,  there  are  4.44  million  small  business 
 firms,  according  to  SBA  reporting  data.  24 

 6.  The  rules  adopted  in  this  Order  on  Reconsideration  apply  to  all  entities,  including  small 
 entities,  seeking  to  obtain  licenses  in  auctionable  services  through  competitive  bidding.  These  rules 
 generally  apply  to  future  auctions.  In  estimating  the  number  of  small  entities  that  may  participate  in 
 future  auctions  of  radio  services,  we  anticipate  that  current  radio  services  licensees  are  representative  of 
 future  auction  participants.  The  following  is  our  estimate  of  the  number  of  small  entities  that  are  current 
 radio  licensees: 

 Cellular  Licensees.  Neither  the  Commission  nor  the  SBA  has  developed  a  definition  of  small  entities 
 applicable  to  cellular  licensees.  Therefore,  the  applicable  definition  of  small  entity  is  the  definition  under 

 15  5  U.  S.  C.    603(  b)(  3). 
 16  5  U.  S.  C.    601(  6). 
 17  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  "small  business  concern"  in  15  U.  S.  C.    632). 
 18  15  U.  S.  C.    632. 
 19  5  U.  S.  C.    601(  4). 
 20  1992  Economic  Census,  U.  S.  Bureau  of  the  Census,  Table  6  (special  tabulation  of  data  under  contract  to  Office 
 of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
 21  5  U.  S.  C.  601(  5). 

 22  U.  S.  Dept.  of  Commerce,  Bureau  of  the  Census,  1992  Census  of  Governments. 
 23  Id. 
 24  See  1992  Economic  Census,  U.  S.  Bureau  of  the  Census,  Table  6  (special  tabulation  of  data  under  contract  to 
 Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
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 the  SBA  rules  applicable  to  radiotelephone  (wireless)  companies.  This  definition  provides  that  a  small 
 entity  is  a  radiotelephone  company  employing  no  more  than  1,500  persons.  25  According  to  the  Bureau  of 
 the  Census,  only  12  radiotelephone  firms  out  of  a  total  of  1,178  such  firms  that  operated  during  1992  had 
 1,000  or  more  employees.  26  Therefore,  even  if  all  12  of  these  firms  were  cellular  telephone  companies, 
 nearly  all  cellular  carriers  were  small  businesses  under  the  SBA's  definition.  In  addition,  we  note  that 
 there  are  1,758  cellular  licenses;  however,  we  do  not  know  the  number  of  cellular  licensees,  since  a 
 cellular  licensee  may  own  several  licenses.  The  most  reliable  source  of  information  regarding  the  number 
 of  cellular  service  providers  nationwide  appears  to  be  data  the  Commission  publishes  annually  in  its 
 Telecommunications  Industry  Revenue  report,  regarding  the  Telecommunications  Relay  Service  (TRS). 
 The  report  places  cellular  licensees  and  Personal  Communications  Service  (PCS)  licensees  in  one  group. 
 According  to  the  most  recent  Telecommunications  Industry  Revenue  data,  808  carriers  reported  that  they 
 were  engaged  in  the  provision  of  either  cellular  service  or  Personal  Communications  Service  (PCS) 
 services.  27  We  do  not  have  data  specifying  the  number  of  these  carriers  that  are  not  independently  owned 
 and  operated  or  have  more  than  1,500  employees,  and  thus  are  unable  at  this  time  to  estimate  with  greater 
 precision  the  number  of  cellular  service  carriers  that  would  qualify  as  small  business  concerns  under  the 
 SBA's  definition.  Consequently,  we  estimate  that  there  are  no  more  than  808  small  cellular  service 
 carriers. 

 220  MHz  Radio  Service  --  Phase  I  Licensees.  The  220  MHz  service  has  both  Phase  I  and  Phase  II 
 licenses.  Phase  I  licensing  was  conducted  by  lotteries  in  1992  and  1993.  There  are  approximately  1,515 
 such  non-  nationwide  licensees  and  four  nationwide  licensees  currently  authorized  to  operate  in  the  220 
 MHz  band.  The  Commission  has  not  developed  a  definition  of  small  entities  specifically  applicable  to 
 such  incumbent  220  MHz  Phase  I  licensees.  To  estimate  the  number  of  such  licensees  that  are  small 
 businesses,  we  apply  the  definition  under  the  SBA  rules  applicable  to  radiotelephone  communications 
 companies.  This  definition  provides  that  a  small  entity  is  a  radiotelephone  company  employing  no  more 
 than  1,500  persons.  28  According  to  a  1995  estimate  by  the  Bureau  of  the  Census,  only  12  radiotelephone 
 firms  out  of  a  total  of  1,178  such  firms  that  operated  during  1992  had  1,000  or  more  employees.  29 
 Therefore,  assuming  this  general  ratio  has  not  changed  significantly  in  recent  years  in  the  context  of 
 Phase  I  220  MHz  licensees,  we  estimate  that  nearly  all  such  licensees  are  small  businesses  under  the 
 SBA's  definition. 

 220  MHz  Radio  Service  --  Phase  II  Licensees.  The  Phase  II  220  MHz  service  is  a  new  service,  and  is 
 subject  to  spectrum  auctions.  In  the  220  MHz  Third  Report  and  Order,  we  adopted  criteria  for  defining 
 small  businesses  and  very  small  businesses  for  purposes  of  determining  their  eligibility  for  special 
 provisions  such  as  bidding  credits  and  installment  payments.  30  We  have  defined  a  small  business  as  an 
 entity  that,  together  with  its  affiliates  and  controlling  principals,  has  average  gross  revenues  not  exceeding 

 25  13  C.  F.  R.    121.  201,  SIC  code  4812. 
 26  U.  S.  Bureau  of  the  Census,  U.  S.  Department  of  Commerce,  1992  Census  of  Transportation,  Communications, 
 and  Utilities,  UC92-  S-  1,  Subject  Series,  Establishment  and  Firm  Size,  Table  5,  Employment  Size  of  Firms:  1992, 
 SIC  Code  4812  (issued  May  1995). 

 27  Trends  in  Telephone  Service,  Table  19.  3  (March  2000). 

 28  13  C.  F.  R.    121.  201,  Standard  Industrial  Classification  (SIC)  code  4812. 
 29  U.  S.  Bureau  of  the  Census,  U.  S.  Department  of  Commerce,  1992  Census  of  Transportation,  Communications, 
 and  Utilities,  UC92-  S-  1,  Subject  Series,  Establishment  and  Firm  Size,  Table  5,  Employment  Size  of  Firms;  1992, 
 SIC  code  4812  (issued  May  1995). 

 30  220  MHz  Third  Report  and  Order,  12  FCC  Rcd  10943,  11068-  70,    291-  295  (1997). 
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 $15  million  for  the  preceding  three  years.  Additionally,  a  very  small  business  is  defined  as  an  entity  that, 
 together  with  its  affiliates  and  controlling  principals,  has  average  gross  revenues  that  are  not  more  than  $3 
 million  for  the  preceding  three  years.  31  The  SBA  has  approved  these  definitions.  32  An  auction  of  Phase  II 
 licenses  commenced  on  September  15,  1998,  and  closed  on  October  22,  1998.  33  Nine  hundred  and  eight 
 (908)  licenses  were  auctioned  in  3  different-  sized  geographic  areas:  three  nationwide  licenses,  30 
 Regional  Economic  Area  Group  (  REAG)  licenses,  and  875  Economic  Area  (EA)  licenses.  Of  the  908 
 licenses  auctioned,  693  were  sold.  Companies  claiming  small  business  status  won:  1  of  the  Nationwide 
 licenses,  67%  of  the  Regional  licenses,  47%  of  the  REAG  licenses  and  54%  of  the  EA  licenses.  As  of 
 January  22,  1999,  the  Commission  announced  that  it  was  prepared  to  grant  654  of  the  Phase  II  licenses 
 won  at  auction.  34  A  second  220  MHz  Radio  Service  auction  began  on  June  8,  1999  and  closed  on  June 
 30,  1999.  This  auction  offered  225  licenses  in  87  EAs  and  four  REAGs.  (A  total  of  9  REAG  licenses  and 
 216  EA  licenses.  No  nationwide  licenses  were  available  in  this  auction.)  Of  the  215  EA  licenses  won, 
 153  EA  licenses  (71%)  were  won  by  bidders  claiming  small  business  status.  Of  the  7  REAG  licenses 
 won,  5  REAG  licenses  (71%)  were  won  by  bidders  claiming  small  business  status. 

 Private  and  Common  Carrier  Paging.  The  Commission  has  adopted  a  two-  tier  definition  of  small 
 businesses  in  the  context  of  auctioning  licenses  in  the  Common  Carrier  Paging  and  exclusive  Private 
 Carrier  Paging  services.  A  small  business  will  be  defined  as  either  (1)  an  entity  that,  together  with  its 
 affiliates  and  controlling  principals,  has  average  gross  revenues  for  the  three  preceding  years  of  not  more 
 than  $3  million,  or  (2)  an  entity  that,  together  with  affiliates  and  controlling  principals,  has  average  gross 
 revenues  for  the  three  preceding  calendar  years  of  not  more  than  $15  million.  Because  the  SBA  has  not 
 yet  approved  this  definition  for  paging  services,  we  will  utilize  the  SBA's  definition  applicable  to 
 radiotelephone  companies,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  35  At  present,  there  are 
 approximately  24,000  Private  Paging  licenses  and  74,000  Common  Carrier  Paging  licenses.  According  to 
 the  most  recent  Telecommunications  Industry  Revenue  data,  172  carriers  reported  that  they  were  engaged 
 in  the  provision  of  either  paging  or  "other  mobile"  services,  which  are  placed  together  in  the  data.  36  We 
 do  not  have  data  specifying  the  number  of  these  carriers  that  are  not  independently  owned  and  operated  or 
 have  more  than  1,500  employees,  and  thus  are  unable  at  this  time  to  estimate  with  greater  precision  the 
 number  of  paging  carriers  that  would  qualify  as  small  business  concerns  under  the  SBA's  definition. 
 Consequently,  we  estimate  that  there  are  no  more  than  172  small  paging  carriers.  We  estimate  that  the 
 majority  of  private  and  common  carrier  paging  providers  would  qualify  as  small  entities  under  the  SBA 
 definition. 

 Mobile  Service  Carriers.  Neither  the  Commission  nor  the  SBA  has  developed  a  definition  of  small 
 entities  specifically  applicable  to  mobile  service  carriers,  such  as  paging  companies.  As  noted  above  in 
 the  section  concerning  paging  service  carriers,  the  closest  applicable  definition  under  the  SBA  rules  is  that 

 31  220  MHz  Third  Report  and  Order,  12  FCC  Rcd  at  11068-  69,    291. 
 32  See  Letter  from  A.  Alvarez,  Administrator,  SBA,  to  D.  Phythyon,  Chief,  Wireless  Telecommunications  Bureau, 
 FCC  (Jan.  6,  1998). 
 33  See  generally  Public  Notice,  "220  MHz  Service  Auction  Closes,"  Report  No.  WT  98-  36  (Wireless  Telecom. 
 Bur.  Oct.  23,  1998). 
 34  Public  Notice,  "FCC  Announces  It  is  Prepared  to  Grant  654  Phase  II  220  MHz  Licenses  After  Final  Payment  is 
 Made,"  Report  No.  AUC-  18-  H,  DA  No.  99-  229  (Wireless  Telecom.  Bur.,  rel.  Jan.  22,  1999). 
 35  13  C.  F.  R.    121.  201,  SIC  code  4812. 

 36  Trends  in  Telephone  Service,  Table  19.  3  (Feb.  19,  1999). 
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 for  radiotelephone  (wireless)  companies,  37  and  the  most  recent  Telecommunications  Industry  Revenue 
 data  shows  that  172  carriers  reported  that  they  were  engaged  in  the  provision  of  either  paging  or  other 
 mobile"  services.  38  Consequently,  we  estimate  that  there  are  no  more  than  172  small  mobile  service 
 carriers. 

 Broadband  Personal  Communications  Service  (PCS).  The  broadband  PCS  spectrum  is  divided  into  six 
 frequency  blocks  designated  A  through  F,  and  the  Commission  has  held  auctions  for  each  block.  The 
 Commission  defined  "small  entity''  for  blocks  C  and  F  as  an  entity  that  has  average  gross  revenues  of  less 
 than  $40  million  in  the  three  previous  calendar  years.  39  For  block  F,  an  additional  classification  for  "very 
 small  business"  was  added  and  is  defined  as  an  entity  that,  together  with  their  affiliates,  has  average  gross 
 revenues  of  not  more  than  $15  million  for  the  preceding  three  calendar  years.  40  These  regulations 
 defining  "small  entity''  in  the  context  of  broadband  PCS  auctions  have  been  approved  by  the  SBA.  41  No 
 small  businesses  within  the  SBA-  approved  definition  bid  successfully  for  licenses  in  blocks  A  and  B. 
 There  were  90  winning  bidders  that  qualified  as  small  entities  in  the  C  block  auctions.  A  total  of  93  small 
 and  very  small  business  bidders  won  approximately  40%  of  the  1,479  licenses  for  blocks  D,  E,  and  F.  42 
 On  March  23,  1999,  the  Commission  held  another  auction  (Auction  No.  22)  of  C,  D,  E,  and  F  block 
 licenses  for  PCS  spectrum  returned  to  the  Commission  by  previous  license  holders.  In  that  auction,  48 
 bidders  claiming  small  business,  very  small  business  or  entrepreneurial  status  won  272  of  the  341  licenses 
 (80%)  offered.  Based  on  this  information,  we  conclude  that  the  number  of  small  broadband  PCS 
 licensees  includes  the  90  winning  C  block  bidders,  the  93  qualifying  bidders  in  the  D,  E,  and  F  blocks, 
 and  the  48  winning  bidders  from  Auction  No.  22,  for  a  total  of  231  small  entity  PCS  providers  as  defined 
 by  the  SBA  and  the  Commission's  auction  rules. 

 Narrowband  PCS.  The  Commission  has  auctioned  nationwide  and  regional  licenses  for  narrowband  PCS. 
 There  are  11  nationwide  and  30  regional  licensees  for  narrowband  PCS.  The  Commission  does  not  have 
 sufficient  information  to  determine  whether  any  of  these  licensees  are  small  businesses  within  the  SBA-approved 
 definition  for  radiotelephone  companies.  At  present,  there  have  been  no  auctions  held  for  the 
 major  trading  area  (MTA)  and  basic  trading  area  (BTA)  narrowband  PCS  licenses.  The  Commission 
 anticipates  a  total  of  561  MTA  licenses  and  2,958  BTA  licenses  will  be  awarded  by  auction.  Such 
 auctions,  however,  have  not  yet  been  scheduled..  Given  that  nearly  all  radiotelephone  companies  have  no 
 more  than  1,500  employees  and  that  no  reliable  estimate  of  the  number  of  prospective  MTA  and  BTA 
 narrowband  licensees  can  be  made,  we  assume,  for  our  purposes  here,  that  all  of  the  licenses  will  be 
 awarded  to  small  entities,  as  that  term  is  defined  by  the  SBA. 

 37  13  C.  F.  R.    121.  201,  SIC  code  4812. 
 38  Trends  in  Telephone  Service,  Table  19.  3  (February  19,  1999). 
 39  See  Amendment  of  Parts  20  and  24  of  the  Commission's  Rules  --  Broadband  PCS  Competitive  Bidding  and  the 
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  Report  and  Order,  FCC  96-  278,  WT  Docket  No.  96-  59,    57- 
 60  (released  Jun.  24,  1996),  61  FR  33859  (Jul.  1,  1996);  see  also  47  C.  F.  R.  24.  720(  b). 

 40  See  Amendment  of  Parts  20  and  24  of  the  Commission's  Rules  --  Broadband  PCS  Competitive  Bidding  and  the 
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  Report  and  Order,  FCC  96-  278,  WT  Docket  No.  96-  59,    60 
 (1996),  61  FR  33859  (Jul.  1,  1996). 

 41  See,  e.  g.,  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding,  PP  Docket 
 No.  93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5532,  5581-  84  (1994). 
 42  FCC  News,  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  No.  71744  (rel.  Jan.  14,  1997). 
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 Rural  Radiotelephone  Service.  The  Commission  has  not  adopted  a  definition  of  small  entity  specific  to 
 the  Rural  Radiotelephone  Service.  43  A  significant  subset  of  the  Rural  Radiotelephone  Service  is  the  Basic 
 Exchange  Telephone  Radio  Systems  (BETRS).  44  We  will  use  the  SBA's  definition  applicable  to 
 radiotelephone  companies,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  45  There  are 
 approximately  1,000  licensees  in  the  Rural  Radiotelephone  Service,  and  we  estimate  that  almost  all  of 
 them  qualify  as  small  entities  under  the  SBA's  definition. 

 Air-  Ground  Radiotelephone  Service.  The  Commission  has  not  adopted  a  definition  of  small  entity 
 specific  to  the  Air-  Ground  Radiotelephone  Service.  46  Accordingly,  we  will  use  the  SBA's  definition 
 applicable  to  radiotelephone  companies,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  47  There 
 are  approximately  100  licensees  in  the  Air-  Ground  Radiotelephone  Service,  and  we  estimate  that  almost 
 all  of  them  qualify  as  small  under  the  SBA  definition. 

 Specialized  Mobile  Radio  (SMR).  The  Commission  awards  bidding  credits  in  auctions  for  geographic 
 area  800  MHz  and  900  MHz  SMR  licenses  to  two  tiers  of  firms:  (1)  "small  entities,"  those  with  revenues 
 of  no  more  than  $15  million  in  each  of  the  three  previous  calendar  years;  and  (2)  "very  small  entities," 
 those  with  revenues  of  no  more  than  $3  million  in  each  of  the  three  previous  calendar  years.  The 
 regulations  defining  "small  entity"  and  "very  small  entity"  in  the  context  of  800  MHz  SMR  (upper  10 
 MHz  and  lower  230  channels)  and  900  MHz  SMR  have  been  approved  by  the  SBA.  The  Commission 
 does  not  know  how  many  firms  provide  800  MHz  or  900  MHz  geographic  area  SMR  service  pursuant  to 
 extended  implementation  authorizations,  nor  how  many  of  these  providers  have  annual  revenues  of  no 
 more  than  $15  million.  One  firm  has  over  $15  million  in  revenues.  We  assume,  for  our  purposes  here, 
 that  all  of  the  remaining  existing  extended  implementation  authorizations  are  held  by  small  entities,  as 
 that  term  is  defined  by  the  SBA.  The  Commission  has  held  auctions  for  geographic  area  licenses  in  the 
 800  MHz  (upper  10  MHz)  and  900  MHz  SMR  bands.  There  were  60  winning  bidders  that  qualified  as 
 small  and  very  small  entities  in  the  900  MHz  auction.  Of  the  1,020  licenses  won  in  the  900  MHz  auction, 
 263  licenses  were  won  by  bidders  qualifying  as  small  and  very  small  entities.  In  the  800  MHz  SMR 
 auction,  38  of  the  524  licenses  won  were  won  by  small  and  very  small  entities. 

 Private  Land  Mobile  Radio  (PLMR).  PLMR  systems  serve  an  essential  role  in  a  range  of  industrial, 
 business,  land  transportation,  and  public  safety  activities.  These  radios  are  used  by  companies  of  all  sizes 
 operating  in  all  U.  S.  business  categories.  The  Commission  has  not  developed  a  definition  of  small  entity 
 specifically  applicable  to  PLMR  licensees  due  to  the  vast  array  of  PLMR  users.  For  the  purpose  of 
 determining  whether  a  licensee  is  a  small  business  as  defined  by  the  SBA,  each  licensee  would  need  to  be 
 evaluated  within  its  own  business  area.  The  Commission  is  unable  at  this  time  to  estimate  the  number  of 
 small  businesses  that  could  be  affected  by  the  rules.  However,  the  Commission's  1994  Annual  Report  on 
 PLMRs  48  indicates  that  at  the  end  of  fiscal  year  1994  there  were  1,087,267  licensees  operating  12,481,989 
 transmitters  in  the  PLMR  bands  below  512  MHz.  Any  entity  engaged  in  a  commercial  activity  is  eligible 
 to  hold  a  PLMR  license.  Therefore,  these  rules  could  potentially  affect  every  small  business  in  the  United 
 States  if  PLMR  licenses  are  subject  to  auction. 

 43  The  service  is  defined  in    22.  99  of  the  Commission's  Rules,  47  C.  F.  R.    22.  99. 

 44  BETRS  is  defined  in    22.  757  and  22.  759  of  the  Commission's  Rules,  47  C.  F.  R.    22.  757  and  22.  759. 
 45  13  C.  F.  R.  121.  201,  SIC  code  4812. 
 46  The  service  is  defined  in    22.  99  of  the  Commission's  Rules,  47  C.  F.  R.    22.  99. 
 47  13  C.  F.  R.    121.  201,  SIC  code  4812. 
 48  Federal  Communications  Commission,  60th  Annual  Report,  Fiscal  Year  1994,  at  116. 
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 Amateur  Radio  Service.  We  estimate  that  8,000  applicants  will  apply  for  vanity  call  signs  in  FY  2000. 
 All  are  presumed  to  be  individuals. 

 Aviation  and  Marine  Radio  Service.  Small  businesses  in  the  aviation  and  marine  radio  services  use  a 
 marine  very  high  frequency  (VHF)  radio,  any  type  of  emergency  position  indicating  radio  beacon 
 (EPIRB)  and/  or  radar,  a  VHF  aircraft  radio,  and/  or  any  type  of  emergency  locator  transmitter  (ELT).  The 
 Commission  has  not  developed  a  definition  of  small  entities  specifically  applicable  to  these  small 
 businesses.  Therefore,  the  applicable  definition  of  small  entity  is  the  definition  under  the  SBA  rules  for 
 radiotelephone  communications.  49  Most  applicants  for  recreational  licenses  are  individuals. 
 Approximately  581,000  ship  station  licensees  and  131,000  aircraft  station  licensees  operate  domestically 
 and  are  not  subject  to  the  radio  carriage  requirements  of  any  statute  or  treaty.  Therefore,  for  purposes  of 
 our  evaluations  and  conclusions  here,  we  estimate  that  there  may  be  at  least  712,  000  potential  licensees 
 that  are  individuals  or  small  entities,  as  that  term  is  defined  by  the  SBA. 

 Marine  Coast  Service.  Between  December  3,  1998  and  December  14,  1998,  the  Commission  held  an 
 auction  of  42  VHF  Public  Coast  licenses  in  the  157.1875-  157.4500  MHz  (ship  transmit)  and  161.775- 
 162.0125  MHz  (coast  transmit)  bands.  For  purposes  of  this  auction,  and  for  future  public  coast  auctions, 
 the  Commission  defines  a  "small"  business  as  an  entity  that,  together  with  controlling  interests  and 
 affiliates,  has  average  gross  revenues  for  the  preceding  three  years  not  to  exceed  $15  million  dollars.  A 
 "very  small"  business  is  one  that,  together  with  controlling  interests  and  affiliates,  has  average  gross 
 revenues  for  the  preceding  three  years  not  to  exceed  $3  million  dollars.  50  There  are  approximately  10,  672 
 licensees  in  the  Marine  Coast  Service,  and  the  Commission  estimates  that  almost  all  of  them  qualify  as 
 "small"  businesses  under  the  Commission's  definition,  which  has  been  approved  by  the  SBA. 

 Location  and  Monitoring  Service  (LMS).  The  SBA  has  not  developed  a  definition  of  small  entities 
 specifically  applicable  to  LMS  licensees.  Therefore,  the  applicable  definition  under  SBA  rules  of  a  small 
 entity  is  the  definition  under  the  rules  applicable  to  radiotelephone  (wireless)  companies.  This  provides 
 that  a  small  entity  is  a  radiotelephone  company  employing  no  more  than  1,500  persons.  51  According  to 
 the  Bureau  of  the  Census,  only  twelve  radiotelephone  firms  out  of  a  total  of  1,178  such  firms  which 
 operated  during  1992  had  1,000  or  more  employees.  52  Therefore,  using  such  data,  even  if  all  twelve  of 
 these  firms  were  LMS  companies,  nearly  all  such  carriers  were  small  businesses  under  the  SBA's 
 definition.  As  a  practical  matter,  there  are  only  a  handful  of  existing  LMS  licensees  --  those  being  those 
 licensed  under  the  former  Automatic  Vehicle  Monitoring  service. 

 Fixed  Microwave  Services.  Microwave  services  include  common  carrier,  53  private-  operational  fixed,  54 
 and  broadcast  auxiliary  radio  services.  55  At  present,  there  are  approximately  22,015  common  carrier  fixed 

 49  13  C.  F.  R.    121.  201,  SIC  code  4812. 
 50  Amendment  of  the  Commission's  Rules  Concerning  Maritime  Communications,  Third  Report  and  Order  and 
 Memorandum  Opinion  and  Order  (rel.  July  9,  1998)  PR  Docket  No.  92-  257,  FCC  98-  151 
 51 
 13  C.  F.  R.    121.201,  SIC  code  4812. 

 52 
 1992  Census,  Series  UC92-  S-  1,  at  Table  5,  SIC  code  4812. 

 53  47  C.  F.  R.    101  et  seq.  (formerly,  part  21  of  the  Commission's  Rules). 

 54  Persons  eligible  under  parts  80  and  90  of  the  Commission's  rules  can  use  Private  Operational-  Fixed  Microwave 
 services.  See  47  C.  F.  R.  parts  80  and  90.  Stations  in  this  service  are  called  operational-  fixed  to  distinguish  them 
 (continued.) 
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 licensees  and  61,670  private  operational-  fixed  licensees  and  broadcast  auxiliary  radio  licensees  in  the 
 microwave  services.  The  Commission  has  not  yet  defined  a  small  business  with  respect  to  microwave 
 services.  For  our  purposes  here,  we  will  utilize  the  SBA's  definition  applicable  to  radiotelephone 
 companies  --  i.  e.,  an  entity  with  no  more  than  1,500  persons.  56  Under  this  definition,  we  estimate  that  all 
 of  the  Fixed  Microwave  licensees  (excluding  broadcast  auxiliary  licensees)  would  qualify  as  small 
 entities. 

 Local  Multipoint  Distribution  Service.  The  Commission  held  two  auctions  for  licenses  in  the  Local 
 Multipoint  Distribution  Services  (LMDS)  (Auction  No.  17  and  Auction  No.  23).  For  both  of  these 
 auctions,  the  Commission  defined  a  small  business  as  an  entity,  together  with  its  affiliates  and  controlling 
 principals,  having  average  gross  revenues  for  the  three  preceding  years  of  no  more  than  $15  million  but 
 not  more  than  $40  million.  A  very  small  business  was  defined  as  an  entity,  together  with  affiliates  and 
 controlling  principals,  having  average  gross  revenues  for  the  three  preceding  years  of  not  more  than  $15 
 million.  Of  the  144  winning  bidders  in  Auction  Nos.  17  and  23,  125  bidders  (87%)  were  small  or  very 
 small  businesses. 

 24  GHz  --  Incumbent  24  GHz  Licensees.  The  rules  we  are  adopting  today  may  affect  incumbent  licensees 
 who  were  relocated  to  the  24  GHz  band  from  the  18  GHz  band,  and  applicants  who  wish  to  provide 
 services  in  the  24  GHz  band.  The  Commission  has  not  developed  a  definition  of  small  entities  applicable 
 to  licensees  in  the  24  GHz  band.  Therefore,  the  applicable  definition  of  small  entity  is  the  definition 
 under  the  SBA  rules  for  the  radiotelephone  industry  that  provides  that  a  small  entity  is  a  radiotelephone 
 company  employing  fewer  than  1,500  persons.  57  The  1992  Census  of  Transportation,  Communications, 
 and  Utilities,  conducted  by  the  Bureau  of  the  Census,  which  is  the  most  recent  information  available, 
 shows  that  only  12  radiotelephone  firms  out  of  a  total  of  1,178  such  firms  that  operated  during  1992  had 
 1,000  or  more  employees.  58  This  information  notwithstanding,  we  believe  that  there  are  only  two 
 licensees  in  the  24  GHz  band  that  were  relocated  from  the  18  GHz  band,  Teligent  and  TRW,  Inc.  59  Both 
 Teligent  and  TRW  appear  to  have  more  than  1,500  employees.  Therefore,  it  appears  that  no  incumbent 
 licensee  in  the  24  GHz  band  is  a  small  business  entity. 

 Future  24  GHz  Licensees.  The  proposals  also  affect  potential  new  licensees  on  the  24  GHz  band. 
 Pursuant  to  47  C.  F.  R.    24.  720(  b),  the  Commission  has  defined  small  business  for  Blocks  C  and  F 
 broadband  PCS  licensees  as  firms  that  had  average  gross  revenues  of  less  than  $40  million  in  the  three 

 (Continued  from  previous  page) 
 from  common  carrier  and  public  fixed  stations.  Only  the  licensee  may  use  the  operational-  fixed  station,  and  only 
 for  communications  related  to  the  licensee's  commercial,  industrial,  or  safety  operations. 

 55  Auxiliary  Microwave  Service  is  governed  by  part  74  of  Title  47  of  the  Commission's  Rules.  See  47  C.  F.  R.  74 
 et  seq.  Available  to  licensees  of  broadcast  stations  and  to  broadcast  and  cable  network  entities,  broadcast 
 auxiliary  microwave  stations  are  used  for  relaying  broadcast  television  signals  from  the  studio  to  the  transmitter,  or 
 between  two  points  such  as  a  main  studio  and  an  auxiliary  studio.  The  service  also  includes  mobile  TV  pickups, 
 which  relay  signals  from  a  remote  location  back  to  the  studio. 

 56  13  C.  F.  R.    121.  201,  SIC  4812. 

 57  See  13  C.  F.  R.    121.  201,  Standard  Industrial  Classification  (SIC)  Code  4812. 

 58  U.  S.  Bureau  of  the  Census,  U.  S.  Department  of  Commerce,  1992  Census  of  Transportation,  Communications, 
 and  Utilities,  UC92-  S-  1,  Subject  Series,  Establishment  and  Firm  Size,  Table  5,  Employment  Size  of  Firms:  1992, 
 SIC  Code  4812  (issued  May  1995). 

 59  Teligent  has  acquired  the  DEMS  licenses  of  FirstMark,  the  only  other  licensee  in  the  24  GHz  band  whose 
 license  has  been  modified  to  require  relocation  to  the  24  GHz  band. 
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 previous  calendar  years.  This  regulation  defining  small  business  in  the  context  of  broadband  PCS 
 auctions  has  been  approved  by  the  SBA.  60  With  respect  to  new  applicants  in  the  24  GHz  band,  we  shall 
 use  this  definition  of  small  business  and  apply  it  to  the  24  GHz  band  under  the  name  entrepreneur. 
 With  regard  to  small  business,  we  shall  adopt  the  definition  of  very  small  business  used  for  39  GHz 
 licenses  and  PCS  C  and  F  block  licenses:  businesses  with  average  annual  gross  revenues  for  the  three 
 preceding  years  not  in  excess  of  $15  million.  Finally,  very  small  business  in  the  24  GHz  band  shall  be 
 defined  as  an  entity  with  average  gross  revenues  not  to  exceed  $3  million  for  the  preceding  three  years. 
 The  Commission  will  not  know  how  many  licensees  will  be  small  or  very  small  businesses  until  the 
 auction,  if  required,  is  held.  Even  after  that,  the  Commission  will  not  know  how  many  licensees  will 
 partition  their  license  areas  or  disaggregate  their  spectrum  blocks,  if  partitioning  and  disaggregation  are 
 allowed. 

 39  GHz.  The  Commission  held  an  auction  (Auction  No.  30)  for  fixed  point-  to-  point  microwave  licenses 
 in  the  38.6  to  40.0  GHz  band  (39  GHz  Band).  61  For  this  auction,  the  Commission  defined  a  small 
 business  as  an  entity,  together  with  affiliates  and  controlling  interests,  having  average  gross  revenues  for 
 the  three  preceding  years  of  not  more  than  $40  million.  A  very  small  business  was  defined  as  an  entity, 
 together  with  affiliates  and  controlling  principals,  having  average  gross  revenues  for  the  three  preceding 
 years  of  not  more  than  $15  million.  The  SBA  has  approved  these  definitions.  62  Of  the  29  winning 
 bidders  in  Auction  No.  30,  18  bidders  (62%)  were  small  business  participants. 

 Multipoint  Distribution  Service  (MDS).  This  service  involves  a  variety  of  transmitters,  which  are  used  to 
 relay  data  and  programming  to  the  home  or  office,  similar  to  that  provided  by  cable  television  systems.  63 
 In  connection  with  the  1996  MDS  auction,  the  Commission  defined  small  businesses  as  entities  that  had 
 annual  average  gross  revenues  for  the  three  preceding  years  not  in  excess  of  $40  million.  64  This 
 definition  of  a  small  entity  in  the  context  of  MDS  auctions  has  been  approved  by  the  SBA.  65  These 
 stations  were  licensed  prior  to  implementation  of  Section  309(  j)  of  the  Communications  Act  of  1934,  as 
 amended.  66  Licenses  for  new  MDS  facilities  are  now  awarded  to  auction  winners  in  Basic  Trading  Areas 
 (BTAs)  and  BTA-  like  areas.  67  The  MDS  auctions  resulted  in  67  successful  bidders  obtaining  licensing 
 opportunities  for  493  BTAs.  Of  the  67  auction  winners,  61  meet  the  definition  of  a  small  business. 

 60  See  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  Fifth  Report  and 
 Order,  9  FCC  Rcd  5532,  5581-  82    115  (1994). 

 61  See  39  GHz  Band  Auction  Closes;  Winning  Bidders  of  2,173  Licenses  Announced,  Public  Notice,  DA  00-  1035 
 (rel.  May  10,  2000) 
 62  See  Letter  to  Ms.  Kathleen  OBrien  Ham,  Chief,  Auction  and  Industry  Analysis  Division,  Wireless 
 Telecommunications  Bureau,  Federal  Communications  Commission,  from  Aida  Alvarez,  Administrator,  U.  S. 
 Small  Business  Administration,  dated  February  4,  1998. 

 63  For  purposes  of  this  item,  MDS  includes  both  the  single  channel  Multipoint  Distribution  Service  (MDS)  and  the 
 Multichannel  Multipoint  Distribution  Service  (MMDS). 

 64  47  CFR  1.2110  (a)(  1). 

 65  Amendment  of  Parts  21  and  74  of  the  Commission's  Rules  with  Regard  to  Filing  Procedures  in  the  Multipoint 
 Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the 
 Communications  Act  -  Competitive  Bidding,  10  FCC  Rcd  9589  (1995),  60  FR  36524  (Jul.  17,  1995). 

 66  47  U.  S.  C.  309(  j). 

 67  Id.  A  Basic  Trading  Area  (BTA)  is  the  geographic  area  by  which  the  Multipoint  Distribution  Service  is  licensed. 
 See  Rand  McNally  1992  Commercial  Atlas  and  Marketing  Guide,  123rd  Edition,  pp.  36-  39. 
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 MDS  is  also  heavily  encumbered  with  licensees  of  stations  authorized  prior  to  the  MDS  auction.  SBA 
 has  developed  a  definition  of  small  entities  for  pay  television  services,  which  includes  all  such  companies 
 generating  $11  million  or  less  in  annual  receipts.  68  This  definition  includes  MDS  systems,  and  thus 
 applies  to  incumbent  MDS  licensees  and  wireless  cable  operators  which  may  not  have  participated  or 
 been  successful  in  the  MDS  auction.  Information  available  to  us  indicates  that  there  are  832  of  these 
 licensees  and  operators  that  do  not  generate  revenue  in  excess  of  $11  million  annually.  Therefore,  for 
 purposes  of  this  analysis,  we  find  there  are  approximately  892  small  MDS  providers  as  defined  by  the 
 SBA  and  the  Commission's  auction  rules. 

 Public  Safety  Radio  Services.  Public  Safety  radio  services  include  police,  fire,  local  government,  forestry 
 conservation,  highway  maintenance,  and  emergency  medical  services.  69  There  are  a  total  of 
 approximately  127,540  licensees  within  these  services.  Governmental  entities  70  as  well  as  private 
 businesses  comprise  the  licensees  for  these  services.  As  noted  above,  governmental  entities  with 
 populations  of  less  than  50,000  fall  within  the  SBA  definition  of  a  small  entity.  71  There  are  85,  006 
 governmental  entities  in  the  nation,  as  of  the  last  census.  72  This  number  includes  such  entities  as  states, 
 counties,  cities,  utility  districts,  and  school  districts.  There  are  no  figures  available  on  what  portion  of  this 
 number  has  populations  of  fewer  than  50,000;  however,  this  number  includes  38,978  counties,  cities,  and 
 towns  and  of  those,  37,566  or  96  percent,  have  populations  of  fewer  than  50,000.  73  The  Census  Bureau 
 estimates  that  this  ratio  is  approximately  accurate  for  all  governmental  entities.  Thus,  of  the  85,006 
 governmental  entities,  the  Commission  estimates  that  96  percent  or  81,  600  are  small  entities  that  may  be 
 affected  by  our  rules. 

 68  13  C.  F.  R.  121.201. 
 69  With  the  exception  of  the  special  emergency  service,  these  services  are  governed  by  Subpart  B  of  part  90  of  the 
 Commission's  Rules,  47  C.  F.  R.    90.  15  through  90.  27.  The  police  service  includes  26,  608  licensees  that  serve 
 state,  county,  and  municipal  enforcement  through  telephony  (voice),  telegraphy  (code)  and  teletype  and  facsimile 
 (printed  material).  The  fire  radio  service  includes  22,  677  licensees  comprised  of  private  volunteer  or  professional 
 fire  companies  as  well  as  units  under  governmental  control.  The  local  government  service  that  is  presently 
 comprised  of  40,  512  licensees  that  are  state,  county,  or  municipal  entities  that  use  the  radio  for  official  purposes 
 not  covered  by  other  public  safety  services.  There  are  7,  325  licensees  within  the  forestry  service,  which  is 
 comprised  of  licensees  from  state  departments  of  conservation  and  private  forest  organizations  who  set  up 
 communications  networks  among  fire  lookout  towers  and  ground  crews.  The  9,  480  state  and  local  governments 
 are  licensed  to  highway  maintenance  service  provide  emergency  and  routine  communications  to  aid  other  public 
 safety  services  to  keep  main  roads  safe  for  vehicular  traffic.  The  1,460  licensees  in  the  Emergency  Medical  Radio 
 Service  (EMRS)  use  the  39  channels  allocated  to  this  service  for  emergency  medical  service  communications 
 related  to  the  delivery  of  emergency  medical  treatment.  47  C.  F.  R.    90.  15  through  90.  27.  The  19,  478  licensees 
 in  the  special  emergency  service  include  medical  services,  rescue  organizations,  veterinarians,  handicapped 
 persons,  disaster  relief  organizations,  school  buses,  beach  patrols,  establishments  in  isolated  areas, 
 communications  standby  facilities,  and  emergency  repair  of  public  communications  facilities.  47  C.  F.  R.   
 90.33  through  90.  55. 

 70  47  C.  F.  R.    1.1162. 

 71  5  U.  S.  C.    601(  5). 
 72  1992  Census  of  Governments,  Bureau  of  the  Census,  U.  S.  Department  of  Commerce. 
 73  Id. 
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 Offshore  Radiotelephone  Service.  This  service  operates  on  several  UHF  TV  broadcast  channels  that  are 
 not  used  for  TV  broadcasting  in  the  coastal  area  of  the  states  bordering  the  Gulf  of  Mexico.  74  At  present, 
 there  are  approximately  55  licensees  in  this  service.  We  are  unable  at  this  time  to  estimate  the  number  of 
 licensees  that  would  qualify  as  small  under  the  SBA's  definition  for  radiotelephone  communications. 

 Wireless  Communications  Services.  This  service  can  be  used  for  fixed,  mobile,  radio-  location  and  digital 
 audio  broadcasting  satellite  uses.  The  Commission  defined  "small  business"  for  the  wireless 
 communications  services  (WCS)  auction  as  an  entity  with  average  gross  revenues  of  $40  million  for  each 
 of  the  three  preceding  years,  and  a  "very  small  business"  as  an  entity  with  average  gross  revenues  of  $15 
 million  for  each  of  the  three  preceding  years.  The  Commission  auctioned  geographic  area  licenses  in  the 
 WCS  service.  In  the  auction,  there  were  seven  winning  bidders  that  qualified  as  very  small  business 
 entities  and  one  winning  bidder  that  qualified  as  a  small  business  entity.  We  conclude  that  the  number  of 
 geographic  area  WCS  licensees  affected  includes  these  eight  entities. 

 General  Wireless  Communication  Service.  This  service  was  created  by  the  Commission  on  July  31, 
 1995  75  by  transferring  25  MHz  of  spectrum  in  the  4660-  4685  MHz  band  from  the  federal  government  to 
 private  sector  use.  The  Commission  sought  and  obtained  SBA  approval  of  a  refined  definition  of  "small 
 business"  for  GWCS  in  this  band.  76  According  to  this  definition,  a  small  business  is  any  entity,  together 
 with  its  affiliates  and  entities  holding  controlling  interests  in  the  entity,  that  has  average  annual  gross 
 revenues  over  the  three  preceding  years  that  are  not  more  than  $40  million.  77  By  letter  dated  March  30, 
 1999,  NTIA  reclaimed  the  spectrum  allocated  to  GWCS  and  identified  alternative  spectrum  at  4940-  4990 
 MHz.  On  February  23,  2000,  the  Commission  released  its  Notice  of  Proposed  Rule  Making  in  WT 
 Docket  No.  00-  32  proposoing  to  allocate  and  establish  licensing  and  service  rules  for  the  4.  9  GHz  band.  78 

 Television  Broadcasting  Stations.  The  SBA  defines  a  television  broadcasting  station  that  has  no  more  than  $10.  5  million  in  annual  receipts  as  a  small  business.  79  Television  broadcasting  stations  consist  of 
 establishments  primarily  engaged  in  broadcasting  visual  programs  by  television  to  the  public,  except  cable  and  other  pay  television  services.  80  Included  in  this  industry  are  commercial,  religious,  educational,  and 
 other  television  stations.  81  Also  included  are  establishments  primarily  engaged  in  television  broadcasting 

 74  This  service  is  governed  by  subpart  I  of  part  22  of  the  Commission's  Rules.  See  47  C.  F.  R.   
 22.1001  through  22.  1037. 
 75  See  Allocation  of  Spectrum  Below  5  GHz  Transferred  from  Federal  Government  Use,  ET  Docket  No.  94-  32, 
 Second  Report  and  Order,  11  FCC  Rcd  624  (1995). 
 76  See  Letter  to  Daniel  B.  Phythyon,  Chief,  Wireless  Telecommunications  Bureau,  Federal  Communications 
 Commission,  from  Aida  Alvarez,  Administrator,  U.  S.  Small  Business  Administration,  dated  May  19,  1998. 
 77  See  47  C.  F.  R.    26.  4. 

 78  See  In  the  Matter  of  the  4.9  GHz  Band  Transferred  From  Federal  Government  Use,  Notice  of  Proposed  Rule 
 Making,  WT  Docket  No.  00-  32,  15  FCC  Rcd  4778  (2000). 
 79  13  C.  F.  R.    121.  201,  Standard  Industrial  Code  (SIC)  4833  (1996). 

 80  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9  (1995). 

 81  Id.  See  Executive  Office  of  the  President,  Office  of  Management  and  Budget,  Standard  Industrial  Classification 
 Manual  (1987),  at  283,  which  describes  Television  Broadcasting  Stations  (SIC  Code  4833)  as:  Establishments 
 primarily  engaged  in  broadcasting  visual  programs  by  television  to  the  public,  except  cable  and  other  pay  television 
 services.  Included  in  this  industry  are  commercial,  religious,  educational  and  other  television  stations.  Also  included 
 (continued.) 
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 and  which  produce  taped  television  program  materials.  82  Separate  establishments  primarily  engaged  in  producing  taped  television  program  materials  are  classified  under  another  SIC  number.  83 
 There  were  1,509  television  stations  operating  in  the  nation  in  1992.  84  That  number  has  remained  fairly  steady  as  indicated  by  the  approximately  1,  590  operating  television  broadcasting  stations  in  the  nation 
 as  of  January  1999.  85  For  1992,  86  the  number  of  television  stations  that  produced  less  than  $10.0  million  in  revenue  was  1,155  establishments.  87  Thus,  of  the  1,590  television  stations  approximately  77%,  or  1,224,  of 
 those  stations  are  considered  small  businesses.  88  As  of  January  1999,  2136  low  power  television  stations  and  4921  television  translator  stations  were  also  licensed,  89  and  we  believe  the  vast  majority  of  these  stations 
 are  small  businesses.  These  estimates  may  overstate  the  number  of  small  entities  since  the  revenue  figures  on  which  they  are  based  do  not  include  or  aggregate  revenues  from  non-  television  affiliated  companies. 

 Radio  Broadcasting  Stations.  The  SBA  defines  a  radio  broadcasting  station  that  has  no  more  than  $5  million  in  annual  receipts  as  a  small  business.  90  A  radio  broadcasting  station  is  an  establishment  primarily 
 engaged  in  broadcasting  aural  programs  by  radio  to  the  public.  91  Included  in  this  industry  are  commercial,  religious,  educational  and  other  radio  stations.  92  Radio  broadcasting  stations  that  primarily  are  engaged  in 
 radio  broadcasting  and  that  produce  radio  program  materials  are  similarly  included.  93  However,  radio  stations  that  are  separate  establishments  and  are  primarily  engaged  in  producing  radio  program  material  are 

 (Continued  from  previous  page) 
 here  are  establishments  primarily  engaged  in  television  broadcasting  and  which  produce  taped  television  program 
 materials. 

 82  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9  (1995). 

 83  Id.;  SIC  7812  (Motion  Picture  and  Video  Tape  Production);  SIC  7922  (Theatrical  Producers  and  Miscellaneous 
 Theatrical  Services)  (producers  of  live  radio  and  television  programs). 

 84  FCC  News  Release  No.  31327,  January  13,  1993;  Economics  and  Statistics  Administration,  Bureau  of  Census, 
 U.  S.  Department  of  Commerce,  supra  note  6,  Appendix  A-  9. 

 85  FCC  News  Release,  "Broadcast  Station  Totals  as  of  January  31,  1999"  (rel.  Feb.  18,  1999). 

 86  Census  for  communications  establishments  are  performed  every  five  years,  during  years  ending  with  a  "2"  or  "7." 
 See  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  supra  note  6,  III. 

 87  The  amount  of  $10  million  was  used  to  estimate  the  number  of  small  business  establishments  because  the  relevant 
 census  categories  stopped  at  $9,999,999  and  began  at  $10,000,000.  No  category  for  $10.5  million  existed.  Thus,  the 
 number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 

 88  We  use  the  77%  figure  of  television  stations  producing  less  than  $10  million  in  revenue  for  1992  and  apply  it  to 
 the  1999  total  of  1,590  television  stations  to  arrive  at  stations  categorized  as  small  businesses. 

 89  FCC  News  Release,  "Broadcast  Station  Totals  as  of  January  31,  1999"  (rel.  Feb.  18,  1999). 

 90  13  C.  F.  R.    121.201,  SIC  4832. 
 91  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  supra  note  6, 
 Appendix  A-  9. 

 92  Id. 

 93  Id. 
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 classified  under  another  SIC  number.  94  The  1992  census  indicates  that  96%  (5,  861  of  6,127)  of  radio  station  establishments  produced  less  than  $5  million  in  revenue  in  1992.  95  Official  Commission  records  indicate 
 that  11,334  individual  radio  stations  were  operating  in  1992.  96  As  of  January  1999,  official  Commission  records  indicate  that  12,  496  radio  stations  were  operating.  97  We  conclude  that  a  similarly  high  percentage 
 (96%)  of  current  radio  broadcasting  licensees  are  small  entities.  98  As  of  January  1999,  there  were  also  3171  FM  translator/  booster  stations  licensed,  and  we  believe  the  vast  majority  of  these  stations  are  small 
 businesses.  These  estimates  may  overstate  the  number  of  small  entities  since  the  revenue  figures  on  which  they  are  based  do  not  include  or  aggregate  revenues  from  non-  radio  affiliated  companies. 

 Instructional  Television  Fixed  Service  (ITFS).  In  addition,  there  are  presently  2032  ITFS  licensees.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  may  be  included  in  the 
 definition  of  a  small  entity.  99  ITFS  is  a  non-  pay,  non-  commercial  educational  microwave  service  that,  depending  on  SBA  categorization,  has,  as  small  entities,  entities  generating  either  $10.5  million  or  less,  or 
 $11.  0  million  or  less,  in  annual  receipts.  100  However,  we  do  not  collect,  nor  are  we  aware  of  other  collections  of,  annual  revenue  data  for  ITFS  licensees.  Thus,  we  conclude  that  up  to  1932  of  these  licensees 
 are  small  entities. 
 Pending  and  Future  Broadcast  Applicants.  We  have  given  the  SBA  broadcast  size  standards,  supra.  The  competitive  bidding  procedures  set  forth  in  the  Order  on  Reconsideration  will  affect:  (1)  any  entity  with  a 
 pending  application  for  a  construction  permit  for  a  new  full  service  commercial  radio  or  analog  television  broadcast  station,  if  mutually  exclusive  applications  have  been  filed;  (2)  any  entity  that  files  an  application 
 in  the  future  for  a  new  full  service  commercial  radio  or  analog  television  station,  if  mutually  exclusive  applications  are  filed;  (3)  any  entity  with  a  pending  application  on  file,  or  filing  an  application  in  the  future, 
 for  a  new  low  power  television  station,  or  a  television  or  FM  translator  station,  if  mutually  exclusive  applications  have  been  or  are  filed;  (4)  any  entity  that  has  a  pending  or  future  application  to  make  a  make  a 
 major  change  in  an  existing  facility  in  any  commercial  broadcast  or  secondary  broadcast  service,  if  mutually  exclusive  applications  have  been  or  are  filed;  and  (5)  any  entity  that  has  filed  or  files  in  the  future  an 
 application  for  a  license  for  an  ITFS  station,  if  mutually  exclusive  applications  have  been  filed  or  are  filed. 
 We  estimate  that  there  are  currently  pending  before  the  Commission  the  following  mutually  exclusive  applications: 

   approximately  620  mutually  exclusive  applications  for  full  power  commercial  radio 
 stations,  and  approximately  165  competing  applications  for  full  power  commercial  analog  television  stations;  101 

 94  Id. 
 95  The  Census  Bureau  counts  radio  stations  located  at  the  same  facility  as  one  establishment.  Therefore,  each  co-located 
 AM/  FM  combination  counts  as  one  establishment. 

 96  FCC  News  Release  No.  31327,  January  13,  1993. 

 97  FCC  News  Release,  "Broadcast  Station  Totals  as  of  January  31,  1999"  (rel.  Feb.  18,  1999). 
 98  We  use  the  96%  figure  of  radio  station  establishments  with  less  than  $5  million  revenue  from  the  census  data  and 
 apply  it  to  the  12,  496  individual  station  count  to  arrive  at  11,  996  individual  stations  as  small  businesses. 

 99  See  5  U.  S.  C.    601(  3)-(  5). 

 100  See  13  C.  F.  R.    121.210,  SIC  4833,  4841  and  4899. 
 101  These  numbers  of  pending  applications  do  not  include  situations  where  both  commercial  and  noncommercial 
 applicants  have  filed  competing  applications  for  nonreserved,  or  "commercial,"  channels.  As  described  in  the  First 
 (continued.) 
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   approximately  275  mutually  exclusive  applications  for  low  power  television  stations 
 and  television  translator  stations,  and  approximately  20  competing  applications  for  FM  translator  stations;  and 

   approximately  200  or  more  mutually  exclusive  applications  for  ITFS  stations. 
 Although  applicants  for  broadcast  construction  permits  have  been  required  to  demonstrate  sufficient  financing  to  construct  and  initially  operate  the  proposed  broadcast  station,  we  do  not  require  the  filing  of 
 financial  information  specifically  concerning  the  entity  seeking  a  construction  permit,  such  as  the  entity's  annual  revenues.  Thus,  we  have  no  data  on  file  as  to  whether  entities  with  pending  permit  applications, 
 which  are  subject  to  the  new  competitive  bidding  selection  procedures  adopted  for  the  broadcast  services,  meet  the  SBA's  definition  of  a  small  business  concern.  However,  we  conclude  that,  given  the  smaller  size 
 of  the  markets  at  issue  in  the  pending  applications,  most  of  the  entities  with  pending  applications  for  a  permit  to  construct  a  new  primary  or  secondary  broadcast  station  are  small  entities,  as  defined  by  the  SBA 
 rules. 
 In  addition  to  the  pending  applicants  that  may  be  affected  by  the  auction  procedures  adopted  for  the  broadcast  services,  any  entity  that  applies  for  a  construction  permit  for  a  new  broadcast  station  in  the  future 
 will  be  subject  to  these  competitive  bidding  rules  if  mutually  exclusive  applications  are  filed.  It  is  not  possible,  at  this  time,  to  estimate  the  number  of  markets  for  which  mutually  exclusive  applications  will  be 
 received,  nor  the  number  of  entities  that  in  the  future  may  seek  a  construction  permit  for  a  new  broadcast  station.  Given  the  fact  that  fewer  new  stations  (particularly  fewer  analog  television  stations)  will  be  licensed 
 in  the  future  and  that  these  stations  generally  will  be  located  in  smaller,  more  rural  areas,  we  conclude  that  most  of  the  entities  applying  for  these  stations  will  be  small  entities,  as  defined  by  the  SBA  rules. 

 Digital  Audio  Radio  Service  (DARS).  The  Commission  has  not  developed  its  own  definition  of  small  entity  for  purposes  of  licensing  satellite  delivered  services.  Accordingly,  we  rely  on  the  definition  of 
 small  entity  provided  under  the  Small  Business  Administration  (SBA)  rules  applicable  to 
 Communications  Services,  Not  Elsewhere  Classified.  102  A  small  entity  under  these  SBA  rules  is  defined  as  an  entity  with  $11.0  million  or  less  in  annual  receipts.  The  two  current  U.  S.  satellite  DARS 

 licensees,  XM  Satellite  Radio  and  Sirius  Satellite  Radio,  are  in  the  midst  of  deplying  their  systems,  and  appear  to  have  no  revenues.  Thus,  XM  and  Sirius  are  small  entities  under  the  SBA  definition. 

 Direct-  to-  Home  (DTH)  Satellite  Service  --  Direct  Broadcast  Satellite  (DBS)  and  Home  Satellite  Services  (HSD).  Video  service  is  available  from  high  power  DBS  satellites  that  transmit  signals  to  small  DBS  dish 
 antennas  installed  at  subscribers'  premises,  and  from  medium  and  low  power  satellites  requiring  larger  satellite  dish  antennas.  In  the  last  year,  DirecTV  merged  with  United  States  Satellite  Broadcasting  Co., 
 Inc.  (USSB)  and  acquired  PrimeStar.  DirecTV  and  EchoStar  are  among  the  ten  largest  providers  of  multichannel  video  programming  service.  DBS  represented  a  12.  5%  share  of  the  national  MVPD  market 
 in  June  1999  and  HSD  represented  another  2.2%  of  that  market.  Thus,  it  appears  that  no  DBS  or  HSD  operators  meet  the  SBAs  definition  of  small  entity. 

 (Continued  from  previous  page) 
 Report  and  Order,  resolution  of  these  cases  will  be  addressed  in  our  noncommercial  proceeding  (MM  Docket  No.  95-31). 

 1987  Standard  Industrial  Classification  Manual;  13  CFR  Part  121. 
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 I.  Description  of  the  Projected  Reporting,  Record-  keeping,  and  Other  Compliance  Requirements. 
 7.  One  rule  amendment  adopted  in  this  Order  on  Reconsideration  will  decrease  the  reporting 
 requirements  for  entities  not  seeking  designated  entity  status.  Other  rule  amendments,  however,  may 
 increase  the  reporting  and  recordkeeping  requirements  for  all  license  applicants,  including  small  entities. 

 8.  Specifically,  we  amend  Section  1.2112  of  our  rules  to  reduce  the  amount  of  ownership 
 information  that  applicants  must  report  on  their  short-  and  long-  form  applications.  103  Section  1.2112 
 requires  applicants  to  identify  direct  and  indirect  owners  with  an  interest  of  10  percent  or  greater. 
 Previously  under  Section  1.2112,  in  calculating  the  10  percent  interest,  we  required  applicants  to  include 
 debt  and  interests  such  as  warrants  and  convertible  debentures,  stock  options,  debt  securities  or  other  debt 
 interests.  In  this  Order  on  Reconsideration,  we  amend  Section  1.2112  to  provide  that  such  interests  need 
 not  be  reported  unless  the  entity  is  seeking  status  as  a  designated  entity.  For  the  purpose  of  determining 
 designated  entity  status  and  eligibility  for  bidding  credits,  we  believe  that  warrants,  convertible 
 debentures,  options  and  other  debt  interests  should  be  treated  as  having  been  exercised.  For  the  broader 
 purpose  of  determining  all  applicants  ownership  interests,  we  will  not  require  information  regarding 
 interests  in  an  applicant  that  have  not  yet  vested. 

 9.  The  Commission  amends  its  general  competitive  bidding  rules  to  permit  former  defaulters, 
 i.  e.,  applicants  that  have  defaulted  or  been  delinquent  in  the  past,  but  have  since  paid  all  of  their 
 outstanding  non-  Internal  Revenue  Service  Federal  debts  and  all  associated  charges  or  penalties,  to  certify 
 on  FCC  Form  175  that  they  are  not  in  default  and  are,  therefore,  eligible  for  auction  participation.  104 
 "Former  defaulters"  will  be  required  to  pay  an  upfront  payment  amount  of  1.5  times  the  normal  amount 
 set  by  the  Bureau  for  any  given  license  in  a  Commission  auction.  105  So  that  the  Bureau  may  implement 
 this  rule,  it  will  require  applicants  to  make  an  additional  certification  revealing  whether  they  or  any  of 
 their  controlling  interests  or  affiliates  have  ever  been  in  default  on  any  Commission  license  or  have  ever 
 been  delinquent  on  any  non-  tax  debt  owed  to  any  Federal  agency.  106 

 10.  The  Order  on  Reconsideration  also  clarifies  that  the  assignee  or  transferee  of  a  license  paid 
 for  through  installment  payments  is  not  responsible  for  the  license  debt  until  the  assignment  or  transfer 
 has  been  consummated.  107  There  may  be  cases  in  which  the  Commission  believes  that  an  assignment  or 
 transfer  has  been  consummated  when  it  has  not.  In  such  instances,  the  Commission  may  mistakenly 
 initiate  debt  collection  procedures  against  the  wrong  party.  If  such  action  occurs,  the  affected  party 
 should  notify  the  Commission  in  writing  that  the  underlying  transaction  was  not  consummated  and  the 
 Commission  will  stop  its  debt  collection  proceedings  against  that  party.  108 

 103  See  supra  12. 
 104  See  supra    41. 
 105  See  supra    42-  43. 
 106  See  supra    42. 
 107  See  supra    32-  33. 
 108  See  supra    26-  27. 
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 J.  Steps  Taken  to  Minimize  the  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered. 
 11.  Incorporation  into  the  Part  1  general  competitive  bidding  rules  of  the  former  defaulter 
 policies  adopted  with  respect  to  C  block  auction  applicants  will  provide  more  opportunities  for  all  entities, 
 including  small  entities,  to  participate  in  spectrum  auctions.  The  former  defaulter  policies  adopted 
 herein  permit  all  former  defaulters  including  small  entities,  to  participate  in  future  spectrum  auctions 
 under  certain  conditions. 

 12.  All  petitioners  in  this  proceeding  oppose  some  aspect  of  the  Commissions  installment 
 payment  grace  period  and  late  payment  fee  provisions  adopted  in  the  Part  1  Third  Report  and  Order.  The 
 Commission  has  reviewed  petitioners  arguments  and  concludes  that  it  will  retain  these  provisions,  but 
 will  adopt  a  slight  modification  to  the  payment  due  dates  for  late  installment  payments  and  associated  late 
 fees.  109  Specifically,  we  amend  the  due  dates  for  installment  payments  to  comport  with  quarterly  due 
 dates.  An  alternative  would  be  to  maintain  the  current  rules,  but  this  modification  may  avoid  confusion  as 
 to  when  such  payments  are  due.  Revisions  to  the  Commissions  installment  payment  rules  were  first 
 proposed  in  the  notice  section  of  the  Order,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed 
 Rule  Making,  released  in  1997.  110  Comments  on  installment  payment  issues  were  received  and  addressed 
 in  the  Part  1  Third  Report  and  Order.  111  In  response  to  the  Part  1  Third  Report  and  Order,  the 
 Commission  received  petitions  for  reconsideration  of  its  installment  payment  grace  period  and  late 
 payment  fee  provisions.  In  concluding  to  retain  these  provisions  in  this  Order  on  Reconsideration,  the 
 Commission  has  thoroughly  reviewed  and  carefully  evaluated  all  of  the  opposing  arguments  presented.  112 
 The  Commission  rejected  the  alternative  of  reinstating  the  requirement  for  licensees  using  installment 
 payments  to  submit  grace  period  requests  demonstrating  financial  needs  due,  in  part,  to  the  burdens  that 
 procedure  imposes  on  small  business  licensees. 

 13.  The  Commission  determines  that  the  revised  late  payment  rules  relating  to  the  submission  of 
 installment  payments  are  not  commercially  unreasonable,  do  not  constitute  impermissible  retroactive 
 rulemaking,  and  do  not  violate  basic  contract  principles.  113  The  late  installment  payment  provisions  were 
 not  intended  to  serve  as  a  tool  that  licensees  might  use  in  their  normal  course  of  planning  auction  strategy 
 and  build-  out.  These  provisions  are  provided  for  extraordinary  circumstances  --  instances  of  financial 
 distress  --  for  which  temporary  relief  is  appropriate.  We  considered  a  number  of  alternatives  presented  by 
 petitioners,  but  found  that  those  proposals  were  not  consistent  with  the  Commissions  fundamental  goal  in 
 adopting  the  late  payment  provisions,  which  is  to  encourage  payment  on  the  due  date.  114  The 
 Commission  has  determined  that  this  goal  is  best  attainable  by  adhering  to  the  5  percent  and  10  percent 
 late  payment  fee  schedule  adopted  in  the  Part  1  Third  Report  and  Order.  The  Commission  further 
 determines  that  the  modified  grace  period  and  late  payment  fee  provisions  apply  to  900  MHz  SMR  and 
 MDS  licensees  that  have  signed  Promissory  Notes  and  Security  Agreements.  115  The  SMR  and  MDS 

 109  See  supra    16-  28. 

 110  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Proceeding,  Order,  Memorandum 
 Opinion  and  Order  and  Notice  of  Proposed  Rule  Making,  WT  Docket  No.  97-  82,  12  FCC  Rcd  5686,  5725  (1997). 
 111  Part  1  Third  Report  and  Order  at  13  FCC  Rcd  at  434-  442,    103-  113. 

 112  See  supra    16-  28. 
 113  Id. 
 114  See  supra    18-  28. 
 115  See  supra    26. 
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 notes  emphasized  that  the  Commissions  rules,  as  amended,  would  take  precedence  over  the  terms  of  the 
 notes  in  case  of  any  conflict.  The  Commission  clarifies  that,  despite  amendments  to  the  installment 
 payment  rules,  licensees  in  the  installment  payment  program  continue  to  have  the  opportunity  to  seek 
 restructuring  of  installment  payments.  116  The  Commission  notes,  however,  that  there  is  no  longer  a 
 procedure  for  requesting  a  grace  period  to  stay  installment  payment  deadlines  pending  such 
 restructuring.  117  Rather,  licensees  will  be  subject  to  the  automatic  late  payment  provisions  of  Section 
 1.2110(  g)  of  the  Commission's  rules  as  adopted  in  this  Order  on  Reconsideration. 

 K.  Report  to  Congress. 
 14.  The  Commission  shall  send  a  copy  of  this  Final  Regulatory  Flexibility  Analysis,  along  with 
 this  Order  on  Reconsideration,  in  a  report  to  Congress  pursuant  to  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996,  5  U.  S.  C.    801(  a)(  1)(  A).  A  copy  of  the  Order  and  this  FRFA  (or  a 
 summary  thereof)  will  be  published  in  the  Federal  Register.  See  5  U.  S.  C.    604(  b).  A  copy  of  the  Order 
 and  this  FRFA  will  also  be  sent  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 

 116  See  supra    29-  30. 
 117  Id. 
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 APPENDIX  D 
 FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (FIFTH  REPORT  AND  ORDER) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  1  an  Initial  Regulatory  Flexibility 
 Analysis  (IRFA)  was  incorporated  in  the  notice  section  of  the  Third  Report  and  Order  and  Second 
 Further  Notice  of  Proposed  Rule  Making  ("  Part  1  Third  Report  and  Order"  and  "Second  Notice")  in  WT 
 Docket  No.  97-  82.  2  The  Commission  sought  written  public  comment  on  the  proposals  in  the  Second 
 Notice,  including  comment  on  the  IRFA.  This  Final  Regulatory  Flexibility  Analysis  (FRFA)  in  this  Fifth 
 Report  and  Order  conforms  to  the  RFA,  as  amended  by  the  Contract  With  America  Advancement  Act  of 
 1996  (CWAAA),  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996).  3 

 A.  Need  for,  and  Objectives  of,  This  Fifth  Report  and  Order. 
 15.  This  Fifth  Report  and  Order  makes  substantive  amendments  to  the  Commission's  general 
 competitive  bidding  rules  for  auctionable  services.  Specifically,  the  Fifth  Report  and  Order  adopts  a 
 "controlling  interest"  standard  for  the  attribution  of  gross  revenues  in  determining  whether  a  license 
 applicant  qualifies  as  a  small  business.  4  The  "controlling  interest"  standard  is  intended  to  prevent  larger 
 firms  from  illegitimately  seeking  status  as  small  businesses  and  ensure  that  only  those  entities  truly 
 meriting  small  business  status  are  eligible  for  the  small  business  provisions.  In  addition,  the  Order 
 establishes  a  maximum  10-  day  filing  period  for  the  submission  of  petitions  to  deny  the  long-  form 
 applications  of  winning  bidders.  5  The  Commission  increases  the  filing  period  from  5  days  (as  adopted  in 
 the  Part  1  Third  Report  and  Order)  to  10  days  in  order  to  afford  parties  (including  small  businesses) 
 additional  flexibility  in  challenging  license  awards.  The  Commission  also  delegates  to  the  Wireless 
 Telecommunications  Bureau  the  authority  to  make  any  revisions  to  the  Code  of  Federal  Regulations  that 
 are  necessary  to  conform  the  service-  specific  auction  rules  to  the  Part  1  general  competitive  bidding 
 rules.  6  Finally,  the  Commission  addresses  other  issues  raised  by  the  Second  Notice  and  affirms  its  existing 
 rules  relative  to  those  issues. 

 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Contract  With  America 
 Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  CWAAA  is  the 
 Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA). 

 2  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Procedures,  Allocation  of  Spectrum 
 Below  5  GHz  Transferred  from  Federal  Government  Use,  4660-  4685  MHz,  WT  Docket  No.  97-  82,  ET  Docket 
 No.  94-  32,  Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rule  Making,  13  FCC  Rcd  374  (1997) 
 ("  Part  1  Third  Report  and  Order"  and  "Second  Notice")  (see  IRFA  at  Appendix  C). 

 3  See  5  U.  S.  C.    603. 

 4  See  supra    58-  67. 
 5  See  supra    74-  77. 
 6  See  supra    78. 
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 B.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA. 
 16.  No  comments  were  received  directly  in  response  to  the  IRFA.  The  Commission,  however, 
 did  receive  comments  on  issues  affecting  small  businesses  in  response  to  the  Second  Notice.  7 
 Specifically,  RTG  proposed  that  we  establish  geographic  area  licenses  no  larger  than  BTAs  in  all  future 
 auctions.  8  RTG  argued  that  the  use  of  small  areas  facilitates  the  delivery  of  service  to  rural  areas  by 
 increasing  the  opportunity  for  rural  small  businesses  and  rural  telephone  companies  to  acquire  licenses.  9 
 RTG  also  contends  that  authorizing  smaller  geographic  areas  increases  the  number  of  licenses  available 
 and  the  diversity  of  licenses,  and  facilitates  the  buildout  of  networks.  10  We  reject  RTGs  proposal. 
 Section  309(  j)  of  the  Communications  Act  requires  the  Commission  to  disseminate  licenses  to  a  wide 
 variety  of  applicants,  including  small  businesses  and  rural  telephone  companies,  and  to  promote  the 
 development  and  rapid  deployment  of  new  technologies  to  the  public,  including  those  residing  in  rural 
 areas.  11  We  believe  that  we  can  best  satisfy  this  mandate  by  establishing  license  areas  that  promote  these 
 goals  on  a  service-  specific  basis.  Although  we  have  used  small  license  areas  in  several  services  (e.  g., 
 broadband  PCS  D,  E  and  F  blocks  and  LMDS)  and  may  do  so  in  specific  services  in  the  future,  we  are 
 unwilling  to  limit  our  flexibility  by  adopting  an  ironclad  rule  against  large  service  areas.  We  anticipate, 
 for  example,  that  certain  satellite-  based  services  may  not  be  particularly  suited  to  small  geographic  area 
 licensing,  while  other  services  may  indeed  be  more  suitable  for  this  type  of  license  category  (i.  e.,  the 
 broadband  PCS  C  block  auction). 

 17.  Comments  were  also  filed  in  response  to  the  Commission's  proposal  to  adopt  a  "controlling 
 interest"  standard  as  its  general  attribution  rule  for  determining  which  applicants  qualify  as  small 
 businesses.  12  In  this  Fifth  Report  and  Order,  the  Commission  adopts  a  "controlling  interest"  standard  and 
 addresses  the  related  comments.  13  Under  the  "controlling  interest"  standard,  the  gross  revenues  of  the 
 applicant,  its  controlling  interests  and  their  affiliates  will  be  aggregated  and  attributed  to  the  applicant  in 
 determining  whether  the  applicant  qualifies  as  a  small  business.  A  "controlling  interest"  includes 
 individuals  or  entities  that  have  control  of  the  applicant  as  determined  by  the  principles  of  de  jure  or  de 
 facto  control. 

 18.  Commenters  raised  various  issues  regarding  the  attribution  standard.  Some  commenters 
 expressed  concern  over  whether  the  revenues  of  so  called  passive  investors  would  be  attributed  to  the 
 applicant.  14  The  Commission  states  that  the  controlling  interest  standard  adopted  herein  will  be  applied  to 
 all  investors  of  the  applicant.  15  In  other  words,  if  any  investor  has  either  de  jure  or  de  facto  control  of  the 

 7  Second  Notice,  13  FCC  Rcd  at  471-  482,    170-  194. 
 8  RTG  Comments  at  14-  15. 
 9  Id.  at  15. 
 10  Id. 
 11  47  U.  S.  C.    309(  j) 
 12  Second  Notice,  13  FCC  Rcd  at  477-  478,    185-  187. 
 13  See  supra    58-  67. 
 14  Western  Wireless  Corporation  ("  Western")  Comments  at  8-  9;  RTG  Comments  at  21;  AmeriCall  International, 
 LLC  ("  AmeriCall")  Comments  at  2-  3. 
 15  See  supra    63. 
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 applicant,  that  investor's  gross  revenues  will  be  attributed  to  the  applicant  for  purposes  of  determining 
 whether  the  applicant  qualifies  as  a  small  business.  16  Some  commenters  suggested  that  the  Commission 
 adopt  a  minimum  equity  requirement  for  controlling  interests.  17  The  Commission  concludes  that  rather 
 than  focusing  solely  on  equity-  holdings,  applicants  will  be  required  to  identify  those  controlling  interests 
 that  actually  have  control  through  application  of  the  principles  of  de  jure  or  de  facto  control.  18  Western 
 Wireless  Corporation  ("  Western")  urges  the  Commission  not  to  amend  its  attribution  rules  to  include 
 entities  that  have  management  and  joint  marketing  agreements  with  the  applicant  or  licensee.  19  The 
 Commission  adopts  provisions  that  make  attributable  the  gross  revenues  of  those  that  have  management 
 or  marketing  agreements  where  such  agreements  grant  authority  over  key  aspects  of  the  applicant's  or 
 licensee's  business.  20  Cook  Inlet  Region,  Inc.,  ("  CIRI")  urges  the  Commission  not  to  apply  any  new 
 attribution  or  affiliation  rules  adopted  in  this  proceeding  to  current  C  block  licensees  that  won  their 
 licenses  under  the  control  group  broadband  PCS  rules.  21  The  Commission  will  not  reassess  the  eligibility 
 of  current  C  and  F  block  licensees  to  continue  to  hold  their  licenses  under  the  new  attribution  rules 
 adopted  herein.  22  These  licensees  will  remain  eligible  to  hold  their  licenses  regardless  of  whether  or  not 
 they  would  qualify  under  the  newly  established  attribution  rules.  As  to  future  C  and  F  block  auctions, 
 however,  all  applicants,  including  existing  C  and  F  block  licensees,  will  be  subject  to  the  attribution  rules 
 in  effect  at  the  time  of  filing  their  short-  form  applications.  23  For  auctions  that  begin  within  two  years  after 
 the  start  of  Auction  No.  22  (March  23,  1999),  our  new  attribution  rules  will  have  no  effect  on  the 
 eligibility  as  an  entrepreneur  of  any  entity  that  was  eligible  for,  and  participated  in,  Auction  No.  5  or 
 Auction  No.  10.  24  Eligibility  for  small  business  preferences,  however,  will  be  determined  based  on  the 
 attribution  rules  in  effect  at  the  time  of  an  applicant's  short-  form  filing.  25 

 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  Rules  Will  Apply. 

 19.  The  Commission  is  required  to  provide  a  description  of,  and,  where  feasible,  an  estimate  of, 
 the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  26  The  rules  adopted  in 
 this  Fifth  Report  and  Order  apply  to  all  entities,  including  small  entities,  seeking  to  obtain  licenses  in 
 auctionable  services  through  competitive  bidding.  These  rules  generally  apply  to  future  auctions.  In 
 estimating  the  number  of  small  entities  that  may  participate  in  future  auctions  of  wireless  services,  we 
 anticipate  that  current  wireless  services  licensees  are  representative  of  future  auction  participants.  The 

 16  Id. 
 17  NextWave  Comments  at  5;  AmeriCall  Comments  at  3. 
 18  See  supra    66. 
 19  Western  Comments  at  3-  5. 
 20  See  supra    64. 
 21  CIRI  Comments  at  2-  4. 
 22  See  supra    67. 
 23  Id. 
 24  Id. 
 25  Id. 
 26  5  U.  S.  C.    603(  b)(  3). 
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 Commission  hereby  incorporates  into  this  FRFA  section  the  detailed  Supplemental  FRFA  analysis  and 
 descriptions  of  potentially  affected  small  entities,  supra,  including  the  cellular,  broadband  and 
 narrowband  PCS,  220  MHz,  paging,  mobile  service,  air-  ground,  SMR,  PLMR,  aviation  and  marine, 
 offshore  radiotelephone  services,  GWCS,  fixed  microwave,  rural,  wireless,  public  safety,  governmental 
 entities  and  Marine  Coast  Services.  27 

 D.  Description  of  the  Projected  Reporting,  Record-  keeping,  and  Other  Compliance  Requirements. 

 20.  All  license  applicants  are  subject  to  the  reporting  and  record-  keeping  requirements  of  the 
 competitive  bidding  rules.  28  Specifically,  applicants  are  required  to  apply  for  spectrum  auctions  by  filing 
 a  short-  form  application  prior  to  auction.  Applicants  are  also  required  to  file  a  long-  form  application  at 
 the  conclusion  of  an  auction.  Entities  seeking  treatment  as  "small  businesses"  must  disclose  on  their 
 short-  and  long-  form  applications,  separately  and  in  the  aggregate,  the  gross  revenues  of  the  applicant,  its 
 controlling  interests  (as  that  term  is  defined  in  this  Fifth  Report  and  Order),  and  their  affiliates. 

 E.  Steps  Taken  to  Minimize  the  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered. 

 21.  The  Commission  has  considered  the  economic  impact  on  small  entities  of  the  following  rules 
 and  modifications  adopted  in  this  Order  and  has  taken  steps  to  minimize  the  burdens  on  small  entities. 

 Attribution  of  Gross  Revenues  of  Investors  and  Affiliates.  The  Commission  adopts  a  "controlling 
 interest"  standard  for  attributing  to  an  applicant  the  gross  revenues  of  its  investors  and  affiliates  in 
 determining  whether  the  applicant  qualifies  as  a  small  business.  29  Application  of  the  controlling  interest 
 standard  protects  the  interests  of  small  businesses  by  preventing  larger  firms  from  illegitimately  seeking 
 small  business  status  and  ensuring  that  only  those  entities  truly  meriting  such  status  are  eligible  for  the 
 small  business  provisions.  The  Commission  further  concludes  that  the  eligibility  of  current  C  and  F  block 
 licensees  to  continue  to  hold  their  licenses  will  not  be  reassessed  based  on  the  new  attribution  rules.  30 
 Therefore,  these  licensees  will  continue  to  be  eligible  to  hold  their  licenses  regardless  of  whether  or  not 
 they  would  qualify  under  the  newly  established  attribution  rules.  By  applying  the  current,  rather  than  the 
 new,  rules  to  existing  C  and  F  block  licensees,  the  Commission  eliminates  the  burden  on  such  licensees  of 
 having  to  restructure  to  meet  new  standards  in  order  to  remain  licensees. 

 Administrative  Filing  Periods  for  Applications  and  Petitions  to  Deny.  The  Commission 
 establishes  a  maximum  10-  day  filing  period  for  submitting  petitions  to  deny  against  long-  form 
 applications.  31  The  Commission  increases  the  filing  period  from  5  days  (as  adopted  in  the  Part  1  Third 
 Report  and  Order)  to  10  days  in  order  to  afford  parties  (including  small  businesses)  additional  flexibility 
 in  challenging  license  applications. 

 22.  In  addition  to  the  modifications  adopted  in  this  Fifth  Report  and  Order,  the  Commission 
 affirms  its  existing  rules  with  respect  to  certain  other  issues  affecting  small  businesses.  Specifically,  the 

 27  See  Appendix  C  at  section  C,  supra. 
 28  See  47  C.  F.  R.  Part  1,  Subpart  Q. 
 29  See  supra    58-  67. 
 30  See  supra    67. 
 31  See  supra    74-  77. 
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 Commission  declines,  at  this  time,  to  adopt  special  provisions  for  minority-  and  women-  owned  businesses 
 pending  completion  of  a  series  of  market  studies  to  determine  whether,  and  under  what  circumstances, 
 targeted  preferences  for  minorities  and  women  are  appropriate.  32  The  Commission  notes,  however  that 
 minority-  and  women-  owned  businesses  that  qualify  as  small  businesses  may  take  advantage  of  the 
 provisions  adopted  for  small  businesses.  In  addition,  the  Commission  declines,  at  this  time,  to  adopt 
 special  provisions  for  rural  telephone  companies,  such  as  bidding  preferences  or  an  unserved  area  fill-  in 
 policy.  33  The  Commission  notes,  however,  that  it  will  continue  to  provide  rural  telephone  companies  with 
 bidding  credits  should  such  entities  qualify  as  small  businesses.  The  Commission  further  determines  that, 
 for  the  time  being,  it  will  not  offer  installment  payments  for  auctionable  services.  34  The  Commission 
 notes  that  commenters  did  not  offer  suggestions  as  to  how  to  retain  the  program  or  alternatives  to  replace 
 the  program.  The  Commission  states  that  it  will,  as  it  has  done  in  the  LMDS,  LMS,  220  MHz  Service, 
 and  VHF  Public  Coast  Service  auctions,  continue  to  provide  small  businesses  with  bidding  credits. 

 F.  Report  to  Congress. 
 23.  The  Commission  shall  send  a  copy  of  this  Final  Regulatory  Flexibility  Analysis,  along  with 
 this  Order,  in  a  report  to  Congress  pursuant  to  the  Small  Business  Regulatory  Enforcement  Fairness  Act 
 of  1996,  5  U.  S.  C.    801(  a)(  1)(  A).  A  copy  of  the  Order  and  this  FRFA  (or  a  summary  thereof)  will  be 
 published  in  the  Federal  Register.  See  5  U.  S.  C.    604(  b).  A  copy  of  the  Order  and  this  FRFA  will  also 
 be  sent  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 

 32  See  supra    45-  50. 
 33  See  supra    51-  53. 
 34  See  supra    54-  57. 
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 E  -  1 
 APPENDIX  E 
 INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (FOURTH  NOTICE) 
 2.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  1  the  Commission  has  prepared  this 
 Initial  Regulatory  Flexibility  Analysis  (IRFA)  of  the  expected  impact  on  small  entities  of  the  rules 
 proposed  in  this  Fourth  Further  Notice  of  Proposed  Rule  Making  ("  Fourth  Notice")  in  WT  Docket  No. 
 97-  82.  Written  public  comments  are  requested  on  the  IRFA.  Comments  on  the  IRFA  must  have  a 
 separate  and  distinct  heading  designating  them  as  responses  to  the  IRFA  and  must  be  filed  by  the 
 deadlines  for  comments  on  the  Fourth  Notice.  The  Commission  will  send  a  copy  of  the  Fourth  Notice, 
 including  this  IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  In 
 addition,  the  Fourth  Notice  and  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register. 

 G.  Need  for,  and  Objectives  of,  This  Fourth  Notice. 
 24.  This  Fourth  Notice  is  being  initiated  to  secure  comment  on  additional  issues  relating  to  the 
 general  competitive  bidding  rules  for  all  auctionable  services.  Specifically,  the  Fourth  Notice  seeks 
 comment  on  whether  the  Commission  should  use  a  total  assets  test,  in  conjunction  with  the  gross 
 revenues  measure  already  employed,  in  determining  whether  auction  applicants  qualify  as  small 
 businesses.  The  Commission  seeks  to  ensure  that  only  bona  fide  small  businesses  are  eligible  for  the 
 small  business  provisions.  It,  therefore,  solicits  comment  on  whether  the  application  of  a  total  assets  test 
 would  enhance  its  determinations  of  small  business  status.  Further,  in  the  Fifth  Report  and  Order,  the 
 Commission  adopts  as  its  general  attribution  rule  a  "controlling  interest"  standard,  which  provides  for  the 
 full  dilution  of  certain  stock  interests  for  purposes  of  calculating  equity  held  in  an  applicant.  2  In  this 
 Fourth  Notice,  the  Commission  proposes  to  codify  in  the  Part  1  competitive  bidding  rules  the  policy 
 under  which  it  previously  adopted  two  exceptions  to  the  "fully  diluted"  requirement  of  its  broadband  PCS 
 attribution  rule.  3  Under  these  exceptions,  two  types  of  ownership  interests,  "rights  of  first  refusal"  and 
 "put"  options,  would  not  be  considered  on  a  fully  diluted  basis  for  purposes  of  calculating  ownership 
 levels.  4  The  Commission  also  seeks  comment  on  whether  it  should  adopt  a  third  exception  to  the  "fully 
 diluted"  requirement  of  Section  1.2110(  b)(  4)(  v)  of  the  Commission's  Rules.  5  The  Commission  proposes 
 that,  in  calculating  the  equity  held  in  an  applicant,  the  conversion  rights  or  stock  options  be  considered 
 individually  rather  than  collectively  when  they  are  mutually  exclusive.  The  Commission  believes  that 
 these  proposals  will  enhance  its  assessments  of  small  business  eligibility. 

 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Contract  With  America 
 Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  CWAAA  is  the 
 Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA). 

 2  See  supra    58-  67. 

 3  See  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,  454-  56,    93-  95  (1994)  ("  Fifth  M  O  &  O"). 
 4  Id. 

 5  47  C.  F.  R.    1.2110(  b)(  4)(  v)  (redesignated  as  47  C.  F.  R.    1.  2110(  c)(  5)(  v)). 
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 H.  Legal  Basis. 
 25.  This  action  is  taken  pursuant  to  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.  Sections  154(  i),  155(  b),  155(  c)(  1),  303(  r),  and 
 309(  j). 

 I.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Proposed  Rules  Will  Apply. 

 26.  The  Commission  is  required  to  provide  a  description  of  and,  where  feasible,  an  estimate  of 
 the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  6  The  rules  proposed  in 
 this  Fourth  Notice  would  apply  to  license  applicants  seeking  small  business  status  in  all  future  auctions. 
 In  estimating  the  number  of  small  entities  that  may  participate  in  future  auctions  of  wireless  services,  the 
 Commission  anticipates  that  the  makeup  of  current  wireless  services  licensees  is  representative  of  future 
 auction  participants.  The  Commission  hereby  incorporates  into  this  IRFA  section  the  Supplemental 
 FRFA  analysis  and  descriptions  of  potentially  affected  small  entities.  7 

 J.  Description  of  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements. 
 27.  The  Fourth  Notice  proposes  the  adoption  of  a  total  assets  test  to  be  used  in  conjunction  with 
 the  gross  revenues  measure  already  employed  in  determining  whether  auction  applicants  qualify  as  small 
 businesses.  The  total  assets  test  would  require  auction  applicants  seeking  small  business  status  to  disclose 
 their  assets. 

 K.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered. 

 28.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in 
 reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives  (among  others):  (1)  the 
 establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the 
 resources  available  to  small  entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or 
 reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design, 
 standards;  and  (4)  an  exemption  from  coverage  of  the  rule  or  any  part  thereof  for  small  entities.  8 

 29.  The  Commission  has  adopted  specific  provisions  to  promote  small  business  participation  in 
 spectrum  auctions.  In  order  to  ensure  that  only  those  entities  truly  meriting  small  business  status  qualify 
 for  special  preferences,  such  as  bidding  credits,  the  Commission  must  have  an  accurate  and  easily 
 applicable  method  of  calculating  business  size.  While  it  has  concluded  in  the  past  to  use  gross  revenues 
 as  the  measure  of  business  size,  it  now  seeks  comment  on  whether  to  use  a  total  assets  test  as  well.  The 
 Commission  also  seeks  comment  on  whether  it  should  adopt  exceptions  to  the  general  requirement  that 
 certain  stock  interests  are  treated  as  fully  diluted  in  calculating  the  equity  held  in  an  applicant.  These 
 proposals  are  intended  to  help  the  Commission  realize  its  goal  of  widening  the  opportunities  for  small 
 businesses  in  the  spectrum  auction  program. 

 6  5  U.  S.  C.    603(  b)(  3). 
 7  See  Appendix  C  at  section  C,  supra. 
 8  See  5  U.  S.  C.    603. 
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 L.  Federal  Rules  Which  Overlap,  Duplicate,  Or  Conflict  With  These  Rules. 
 30.  None. 
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