Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations 68927

arises where one concern is dependent

upon another concern for contracts and

business to such a degree that one

concern has control, or potential

control, of the other concern.

(x) Affiliation under joint venture

arrangements. (A) A joint venture for

size determination purposes is an

association of concerns and/or

individuals, with interests in any degree

or proportion, formed by contract,

express or implied, to engage in and

carry out a single, specific business

venture for joint profit for which

purpose they combine their efforts,

property, money, skill and knowledge,

but not on a continuing or permanent

basis for conducting business generally.

The determination whether an entity is

a joint venture is based upon the facts

of the business operation, regardless of

how the business operation may be

designated by the parties involved. An

agreement to share profits/losses

proportionate to each party’s

contribution to the business operation is

a significant factor in determining

whether the business operation is a joint

venture.

(B) The parties to a joint venture are

considered to be affiliated with each

other. Nothing in this subsection shall

be construed to define a small business

consortium, for purposes of determining

status as a designated entity, as a joint

venture under attribution standards

provided in this section.

(xi) Exclusion from affiliation

coverage. For purposes of this section,

Indian tribes or Alaska Regional or

Village Corporations organized pursuant

to the Alaska Native Claims Settlement

Act (43 U.S.C. 1601 et seq.), or entities

owned and controlled by such tribes or

corporations, are not considered

affiliates of an applicant (or licensee)

that is owned and controlled by such

tribes, corporations or entities, and that

otherwise complies with the

requirements of this section, except that

gross revenues derived from gaming

activities conducted by affiliate entities

pursuant to the Indian Gaming

Regulatory Act (25 U.S.C. 2701 et seq.)

will be counted in determining such

applicant’s (or licensee’s) compliance

with the financial requirements of this

section, unless such applicant

establishes that it will not receive a

substantial unfair competitive advantage

because significant legal constraints

restrict the applicant’s ability to access

such gross revenues.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 00–29094 Filed 11–14–00; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 24

[PP Docket No. 93–253; FCC 00–299]

Broadband Personal Communications

Services (PCS) Competitive Bidding

and the Commercial Mobile Radio

Service Spectrum Cap

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: This document denies various

petitioners’ requests to alter the

Commission’s C and F block

competitive bidding rules. It does not

change the rules except to reinstate

provisions that had been inadvertently

eliminated from the rules in a previous

order. The Commission’s determination

with respect to these requests promotes

the goals of the Communications Act.

DATES: Effective November 15, 2000.

FOR FURTHER INFORMATION CONTACT:

Audrey Bashkin, Attorney, Auctions

and Industry Analysis Division,

Wireless Telecommunications Bureau,

at (202) 418–0660.

SUPPLEMENTARY INFORMATION: This is a

summary of an Order on

Reconsideration in the Amendment of

the Commission’s Rules Regarding

Broadband PCS Competitive Bidding

and the Commercial Mobile Radio

Service Spectrum Cap. The complete

text of the Order on Reconsideration is

available for inspection and copying

during normal business hours in the

FCC Reference Center (Room CY–A257),

445 12th Street, SW, Washington, DC. It

may also be purchased from the

Commission’s copy contractor,

International Transcription Services,

Inc. (ITS, Inc.), 1231 20th Street, NW,

Washington, DC 20036, (202) 857–3800.

It is also available on the Commission’s

web site at http://www.fcc.gov/wtb/

auctions. 

I. Introduction

1. In this Order on Reconsideration,

we first address three petitions for

reconsideration of the Commission’s

Fifth Memorandum Opinion and Order

in PP Docket No. 93–253 (‘‘Competitive

Bidding Fifth Memorandum Opinion

and Order’’) in which the Commission

resolved petitions for reconsideration or

clarification of its rules governing

competitive bidding for ‘‘entrepreneurs’

block’’ (C and F block) Personal

Communications Services licenses in

the 2 GHz band (‘‘broadband PCS’’), See

59 FR 63210 (December 7, 1994). We

next address nine petitions for

reconsideration of the Commission’s

Report and Order in WT Docket No. 96–

59 and GN Docket No. 90–314 (‘‘DEF

Report and Order’’) in which the

Commission modified its competitive

bidding and ownership rules for

broadband PCS. See 61 FR 33859 (July

1, 1996). Finally, we reinstate

provisions which, in the Competitive

Bidding Sixth Report and Order, were

inadvertently eliminated from one of the

Commisson’s competitive bidding rules.

See 60 FR 37786 (July 21, 1995).

II. Background

2. Consistent with Congress’ mandate

to promote the participation of small

businesses, rural telephone companies,

and businesses owned by members of

minority groups and women

(collectively, ‘‘designated entities’’) in

the provision of spectrum-based

services, the Commission originally

limited eligibility for C and F block PCS

licenses to ‘‘entrepreneurs’’ and adopted

special provisions for those blocks to

assist small and women- and minorityowned businesses. The Commission

considers entrepreneurs, with regard to

the C and F blocks, to be those entities

that can meet the auction and licensing

eligibility requirements of § 24.709 of

the Commission’s rules. The principal

requirement is set forth in § 24.709(a)(1),

as follows:

No application is acceptable for filing and

no license shall be granted for frequency

block C or frequency block F, unless the

applicant, together with its affiliates and

persons or entities that hold interests in the

applicant and their affiliates, have gross

revenues of less than $125 million in each of

the last two years and total assets of less than

$500 million at the time the applicant’s

short-form application (Form 175) is filed.

Under § 24.709, C and F block licensees

are required to maintain their eligibility

until at least five years from the date of

the initial license grant. Licensees,

however, are permitted to grow beyond

the gross revenue and total assets caps

through equity investment by nonattributable investors, debt financing,

revenue from operations, business

development, or expanded service.

3. The Commission has held four

entrepreneurs’ block PCS auctions to

date, Auction No. 5, the first auction of

C block spectrum, ended on May 6,

1996 and was followed quickly by

Auction No. 10, another C block

auction, which concluded on July 16,

1996. Auction No. 11, the first F block

auction, ended on January 14, 1997, and

also included D and E block spectrum.

The fourth auction, Auction No. 22,

made available additional C and F

block, as well as E block, spectrum and

concluded on April 15, 1999.

68928 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations

III. Reconsideration of the Competitive

Bidding Fifth Memorandum Opinion

and Order

A. Background

4. In the Competitive Bidding Fifth

Memorandum Opinion and Order, the

Commission, responding to petitions for

reconsideration or clarification of the

Competitive Bidding Fifth Report and

Order, 59 FR 37566 (July 22, 1994), and

the Competitive Bidding Order on

Reconsideration, 59 FR 43062 (August

22, 1994), clarified and modified its

rules in order to allow better

participation in broadband PCS by

entrepreneurs and designated entities.

B. Control Group Equity Exceptions

5. Background. To be eligible to

participate in entrepreneurs’ (C or F)

block auctions, an applicant (together

with its affiliates and persons or entities

that hold interests in the applicant and

their affiliates) must have had gross

revenues of less than $125 million in

each of the last two years and must have

total assets of less than $500 million.

We recently adopted as our general

attribution rule a ‘‘controlling interest’’

standard and decided that this standard

would govern attribution for purposes of

determining entrepreneur and small

business eligibility for future auctions of

C and F block licenses. However, in

each of the past four C and F block

auctions, we applied an attribution rule

that provided for two ‘‘control group’’

equity exceptions—the ‘‘25 percent

equity exception’’ and the ‘‘49.9 percent

equity exception’’—under which

auction applicants could exclude from

their gross revenue and asset totals the

gross revenues and total assets of

passive investors. Both exceptions

required the applicant to form a

‘‘control group’’ within which

‘‘qualifying investors’’ owned at least

50.1 percent of the applicant’s voting

interests. Under the 25 percent equity

exception, the applicant’s control group

was required to own at least 25 percent

of the applicant’s total equity; and,

within the control group, qualifying

investors were required to hold at least

15 percent of the applicant’s total

equity. Under the 49.9 percent equity

exception, the applicant’s control group

was required to own at least 50.1

percent of the applicant’s total equity;

and, within the control group,

qualifying investors were required to

hold at least 30 percent of the

applicant’s total equity. If these and

certain other requirements were met, the

gross revenues and total assets of noncontrolling investors were not attributed

to the applicant.

6. For publicly-traded corporations

with widely dispersed voting stock

ownership, the Commission in the

Competitive Bidding Fifth Memorandum

Opinion and Order created an

additional exception. Under the

‘‘publicly-traded corporations

exception,’’ applicable to the four C and

F block auctions conducted to date, no

person could own more than 15 percent

of the applicant’s equity or be able to

control the election of more than 15

percent of the applicant’s board of

directors. Moreover, no person, other

than the applicant’s management or

members of its board of directors, in

their capacities as such, could have de

facto control of the applicant. If these

and certain other requirements were

met, the gross revenues and total assets

of persons holding an interest in the

applicant were not attributed to the

applicant.

7. Discussion. One commenter objects

that under the control group exceptions,

small, widely held, publicly-traded

companies ‘‘cannot serve at the ‘control

group’ level of the PCS applicant and

are thereby effectively precluded from

raising equity capital through the

pursuit of joint ventures with noncontrolling strategic investors.’’ The

commenter petitions the Commission

either to allow publicly-traded

companies to serve as control groups or

to ‘‘extend the public company

exemption to the control group level.’’

While there was nothing in the control

group rules explicitly preventing a

publicly-traded company from using

one of the control group equity

exceptions or even from serving as the

control group of an applicant, as a

practical matter, these options were

unlikely to be available to corporations

that were publicly-traded. Nevertheless,

we believe that the Commission

provided such corporations with ample

opportunity to obtain financing and to

form strategic relationships with other

entities. Such corporations were able,

under the publicly-traded corporations

exception, to sell classes of stock to

strategic investors in amounts up to 15

percent of the corporation’s equity.

They were also permitted to obtain

unlimited amounts of debt financing

from, or enter into management

agreements with, other entities,

provided that such arrangements did

not constitute a transfer of de jure or de

facto control of the applicant or

licensee. Given our recent

determination that the controlling

interest standard would apply to all

future C and F block auctions, we

dismiss as moot the commenter’s

request as to such auctions. Moreover,

we believe that to relax the

entrepreneurs’ block exceptions in the

manner the commenter’s requests for

existing C and F block licensees would

seriously undermine the effectiveness of

the financial caps and, for this reason,

deny the commenter’s petition with

regard to such licensees.

IV. Reconsideration of the DEF Report

and Order

A. Background

8. In the DEF Report and Order, the

Commission, responding to the

Supreme Court’s decision in Adarand

Constructors, Inc. v. Pen ̃a (‘‘Adarand’’),

modified its F block rules to make them

race- and gender-neutral, as it

previously had done for the C block.

B. Auction Timing

9. Two commenters ask that the

Commission delay the start date of

Auction No. 11. As stated, Auction No.

11, which began on August 26, 1996,

concluded on January 14, 1997.

Accordingly, the petitions of these

commenters’ are dismissed as moot.

C. Changes Resulting From Adarand

10. Background. In the DEF Report

and Order, the Commission examined

the F block auction rules in light of the

Supreme Court’s decision in Adarand

that all racial classifications must be

analyzed by a reviewing court under

strict scrutiny. The Commission decided

that it did not have sufficient evidence

to support its F block race- and genderbased provisions and concluded that the

F block rules should be race and gender

neutral. Accordingly, the Commission

modified the F block rules regarding

control group equity structures,

affiliation, installment payment plans,

and bidding credits. The changes to the

F block rules followed analogous

modifications to the C block rules by the

Commission in the Competitive Bidding

Sixth Report and Order, which was

upheld by the D.C. Circuit Court of

Appeals in Omnipoint v. FCC. Two days

after release of the DEF Report and

Order, the Supreme Court clarified that

under ‘‘intermediate scrutiny,’’ the

standard of review for gender

classifications, the government must

demonstrate an ‘‘exceedingly persuasive

justification’’ in order to defend genderbased government action, emphasizing

that such action is constitutional only if

it serves an important governmental

objective and is substantially related to

the achievement of that objective.

11. In the Second Further Notice, 63

FR 770 (January 7, 1998), we sought

comment on whether there is a

compelling governmental interest that

Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations 68929

would justify the use of preferences for

minority-owned businesses or an

exceedingly persuasive justification to

support gender-based preferences for

women-owned businesses. 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. We sought comment on

what specifically tailored tools, such as

bidding credits, might be appropriate or

whether preferences should be given to

minority-owned or women-owned

businesses that also qualify as small

businesses. In our recent Part 1 Fifth

Report and Order, 65 FR 52323 (August

29, 2000), we noted that we did not

receive any comments on these issues

and concluded that because the record

was sparse we did not believe that it

was appropriate to adopt special

provisions for minority- and womenowned businesses at that time.

12. Discussion. One commenter asks

the Commission to reconsider its

decision to eliminate race and gender

preferences. It argues that the

Commission is subject to fewer time

pressures for the F block auction than it

was for the initial C block auction and

that the Commission has had the time

to make, and should make, the factual

showing necessary to justify

reimplementing its race and gender F

block provisions. This commenter’s

request is moot with regard to the two

F block auctions already completed.

13. With regard to future F block

auctions, we do not have a sufficient

record to justify the reimplementation of

race- and gender-based auction rules. As

stated, we received no comments on

these issues in response to the Second

Further Notice. We note that our Office

of Communications Business

Opportunities has initiated several

studies to examine ownership of

telecommunications facilities by

minority- and women-owned entities.

Further, 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 womenowned 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. We,

therefore, deny the commenter’s

petition. We discuss other petitions

addressing specific rule changes

resulting directly or indirectly from the

Adarand decision.

i. Control Group Equity Exception and

Affiliation Exception

14. Background. Control Group Equity

Exception. As explained earlier, the

Commission’s rules applicable to the

four past C and F block auctions

provided for two control group equity

exceptions to the entrepreneurs’ block

financial caps. Under these exceptions,

the gross revenues and total assets of

certain persons or entities holding

interests in an applicant were not

considered for purposes of determining

eligibility to participate in a C or F block

auction. As originally adopted, the 49.9

percent equity exception was available

only to women- and minority-owned

businesses. In the DEF Report and

Order, the Commission made the 49.9

percent equity exception available to all

small businesses and entrepreneurs.

15. Affiliation Exception. In the

Competitive Bidding Sixth Report and

Order, the Commission modified an

exception to the C and F block

affiliation rules under which the gross

revenues and assets of affiliates

controlled by minority investors that

were members of a C or F block

applicant’s control group were not

attributed to the applicant. The

exception as modified allowed every

small business C block applicant to

exclude the gross revenues and assets of

any affiliates that did not exceed the

entrepreneurs’ block caps, provided that

the gross revenues and total assets of all

such affiliates of the small business

applicant, when aggregated, did not

exceed those caps. The modified

exception was limited to C block

applicants; language making the

exception applicable to F block

applicants was inadvertently

eliminated. Subsequently, in the DEF

Report and Order, instead of extending

the exception to F block applicants, the

Commission removed the exception

entirely, expressing skepticism that the

exception was still needed and

acknowledging the argument that the

exception might allow too many larger

entities to qualify as small businesses.

The Commission stated that it would

consider waiver requests to allow

participation in the first F block auction

by parties that had participated in the

first C block auction and had relied on

the affiliation exception in structuring

themselves.

16. Discussion. One commenter

contends that elimination of the

affiliation exception for the F block is

unfair to F block bidders that

participated in the original C block

auction, because such bidders designed

business plans that anticipated bidding

in both blocks under the same bidding

credit structure. We find this petition

unpersuasive. As stated, the

Commission offered Auction No. 11

applicants that had participated in the

first C block auction the opportunity to

request a waiver in order to be able to

participate in Auction No. 11; however,

the Commission received no such

requests. Another commenter argues

that the Commission should adopt the

affiliation exception for the F block and

eliminate the 49.9 percent equity

exception or, alternatively, eliminate or

retain both the affiliation and the 49.9

percent equity exceptions. As we noted,

the Commission eliminated the

affiliation exception for the C block as

well as the F block; and we continue to

believe that the exception may lead to

abuses. Accordingly, we deny the

requests of the two commenters’ with

regard to existing licensees. With regard

to past auctions, we dismiss as moot the

two commenters’ petitions.

Additionally, in light of our recent

determination that the controlling

interest standard will apply to all future

C and F block auctions, we dismiss as

moot the two commenters’ petitions

with regard to future auctions.

ii. C Block Licenses as Assets

17. Background. In the DEF Report

and Order, the Commission decided not

to treat C block licenses as assets for

purposes of determining an applicant’s

eligibility for the then-upcoming F block

auction, fearing that including such

licenses might preclude C block winners

from F block eligibility. The

Commission stated that, because of the

Commission’s previous indications that

the C and F blocks are linked, it would

be unfair to disqualify C block winners

from participation in the F block

auction on the basis of their success in

acquiring capital for the C block

auction. Specifically, the Commission

had earlier noted that the two blocks are

contiguous and lend themselves to

aggregation and that together they are

subject to a cap on the number of

licenses that may be won at auction.

The Commission expressed concern that

treating C block licenses as assets for

purposes of eligibility for the initial F

block auction could frustrate business

plans and auction strategies made in

reliance on the Commission’s earlier

statements. The Commission also noted

that it was uncertain whether C block

licenses that had already been won

would be issued before the F block

auction. Finally, the Commission

decided that licenses other than C block

licenses would be included in the total

68930 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations

asset calculations of applicants for the F

block auction.

18. Discussion. Commenter asserts

that it is inconsistent for the

Commission not to require the inclusion

of C block licenses in applicants’ total

asset valuations when the Commission

requires A and B block broadband PCS

licenses to be included in such

valuations. Commenter argues further

that Commission’s decision will

diminish opportunities for small

businesses in the F block auction. The

commenter also suggests that the

issuance of C block licenses after

Auction No. 11 to winners of F block

licenses in Auction No. 11 could

interfere with the ability of such license

holders to maintain their eligibility as

entrepreneurs. One commenter counters

that another commenter has

misconstrued the Commission’s rules

for maintaining entrepreneur eligibility

and that, under the rules, entrepreneur

eligibility is not lost simply because a

license acquires additional licenses.

19. Because Auction No. 11 has

already occurred, the commenter’s

petition is now moot as to that auction.

We believe, however, that the

Commission’s decision was correct. In

reaching this decision, the Commission

determined that to prevent F block

auction participation by C block

winners on the basis of their earlier

ability to raise capital within the

limitations of our rules would be unfair.

To further the Congressional objective

that PCS licenses be disseminated

among a wide variety of applicants, we

encourage the success of C and F block

licensees and recognize that such

success is generally accompanied by

asset growth. For this reason, we will

not require applicants for participation

in future auctions to treat either C or F

block licenses as assets for purposes of

determining applicants’ C or F block

entrepreneur eligibility. We will,

however, continue to require that all

other Commission licenses be included

in the total asset calculations on the

short-form applications for C and F

block auctions. We also clarify that the

acquisition by C or F block licenses of

other Commission licenses,

entrepreneurs’ block or otherwise, will

not of itself prevent licensees’ continued

eligibility to hold entrepreneurs’ block

licenses.

iii. Bidding Credits

20. Background. Under the originally

adopted F block bidding credit rule, a

small business was granted a 10 percent

bidding credit; a business owned by

members of minority groups or women

was granted a 15 percent bidding credit;

and a small business owned by

members of minority groups or women

was allowed to aggregate these bidding

credits for a 25 percent bidding credit.

In the DEF Report and Order, the

Commission eliminated the race- and

gender-based aspects of its bidding

credit provisions and, instead, adopted

a two-tiered approach. Under the

modified rule, small businesses receive

a 15 percent bidding credit and very

small businesses receive a 25 percent

bidding credit. In the C Block Fourth

Report and Order, 63 FR 50791

(September 23, 1998), the Commission

changed the C block bidding credit rule

to adopt, for Auction No. 22 and

subsequent C block auctions, the same

two tiers that it had the F block.

21. Discussion. Commenter objects to

the fact that the Commission did not

adopt the same bidding credit for the F

block that it had for the initial C block

auction, a 25 percent bidding credit for

all small businesses. Commenter argues

that minority-owned bidders had an

‘‘understanding that, at a minimum, the

Commission would preserve for them

the rules as they existed in the C block

auction.’’ The Commission considered

and rejected similar arguments in the

DEF Report and Order. The Commission

disagreed that entities interested in

bidding in Auction No. 11 had the same

expectations as C block applicants in

structuring their businesses or

formulating strategies in reliance on the

tiered bidding credits originally

adopted. The Commission explained,

moreover, that the timing of the F block

modification allowed the Commission

to take a different approach than it had

for the C block. The Commission also

indicated that a two-tiered approach

would ensure that the smallest

businesses receive the greatest benefit.

Commenter has not provided any new

rationale to justify our deviating from

this reasoning here, and its petition is

therefore denied. We note, as

mentioned, that under current rules,

bidding credits are the same for C and

F block licenses.

iv. Installment Financing

22. Background. The originally

adopted F block rules provided for five

different installment payment plans.

One of these plans was available only to

entities owned by members of minority

groups or women, while another plan

was restricted to small businesses

owned by members of minority groups

or women. To satisfy the requirements

of Adarand, the Commission, in the DEF

Report and Order, eliminated these two

plans. Of the three remaining plans, one

was available only to small businesses.

With the elimination of the two plans

restricted to minority groups or women,

the small business plan became the

likely choice for minority- and womenowned small businesses. The

Commission modified this plan in the

DEF Report and Order. As modified, the

plan offers small businesses or small

business consortia a two-year interestonly period with an interest rate equal

to the ten-year U.S. Treasury rate and

principal amortized over the remaining

eight years of the license term. This plan

has the same interest rate as, but a

shorter interest-only period than, the

two eliminated plans and also the plan

available to small businesses in the first

two C block auctions. The Commission

concluded that the availability of the

small business plan would provide

minority- and women-owned businesses

an opportunity to participate in the

provision of spectrum-based services.

The Commission explained that the

build-out requirement for F block

licenses is less stringent than it is for C

block licenses and that a two-year

interest only period would provide F

block licensees a substantial period in

which to construct their systems, while

also encouraging them to provide

service to the public quickly. It

explained further that restricting the

interest-only period to two years would

deter speculation and insincere bidding.

Finally, the Commission discussed how

the revised small business installment

payment plan was still extremely

attractive in comparison to other

financing options likely to be available

to small businesses.

23. In the Part 1 Third Report and

Order, 63 FR 2315 (January 15, 1998),

we suspended the installment payment

program. Accordingly, we decided in

the C Block Fourth Report and Order

not to offer installment payments for

Auction No. 22. Most recently, in the

Part 1 Fifth Report and Order, we

decided to adhere to our previous

decision to suspend the installment

payment program.

24. Discussion. We received petitions

from several commenters opposing the

alterations in the DEF Report and Order

to the F block installment financing

plans and, in particular, objecting to the

reduction of the interest-only payment

period under the small business plan.

Given our current suspension of

installment payment financing, these

petitions are, as a practical matter, moot

with regard to future F block auctions.

Furthermore, we believe that, even with

the two-year interest-only period, the

plan available to small business winners

in Auction No. 11 provided them with

sufficient assistance to build out their

systems and provide timely service. For

this reason, we decline to alter the terms

of existing, F block installment loans.

Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations 68931

D. Upfront Payment and Down Payment

25. Background. Under the originally

adopted rules, participants in an F block

auction were required to submit an

upfront payment of $0.015 per MHz per

pop (or bidding unit) for the maximum

number of licenses on which they

intended to bid in any one round.

Winning bidders were required to

supplement their upfront payment with

a down payment sufficient to bring their

total deposits up to 10 percent of their

winning bid(s). Based upon its

experience in the first C block auction,

the Commission changed the rules in

the DEF Report and Order to require an

upfront payment of $0.06 per MHz per

pop and a down payment that,

including the upfront payment amount,

would total 20 percent of a participant’s

winning bid(s).

26. In the Part 1 Third Report and

Order, we affirmed the Commission’s

decision in the Competitive Bidding

Second Report and Order, 59 FR 22980

(May 4, 1994), that the upfront payment

amount and terms should be determined

on an auction-by-auction basis. We also

concluded that a standard down

payment of 20 percent is appropriate for

all auctionable services; however, we

reserved the right, in the event of

unusual circumstances affecting a

particular service, to adopt a different

down payment amount by rule in that

service. Accordingly, in the C Block

Fourth Report and Order, we modified

our part 24 rules for the C and F blocks

to reflect that upront payments would

be established on an auction-by-auction

basis and that winning C and F block

bidders would be subject to the 20

percent down payment requirement of

part 1 of the Commission’s rules.

27. Discussion. These commenters all

protest the changes in the DEF Report

and Order to the F block upfront and/

or down payment rules. With regard to

past auctions, these petitions are moot.

With regard to future auctions, we

continue to adhere to the wisdom of

tailoring the specific amount and terms

of the upfront payment to each specific

auction. We also maintain our

conviction, expressed in the Part 1

Third Report and Order, that a 20

percent down payment is an appropriate

amount to provide the Commission with

sufficient assurance that a winning

bidder will be able to pay the full

amount of its winning bid and that it

possesses the financial strength to

attract the capital necessary to deploy

and operate its system. In addition, we

continue to believe that a 20 percent

down payment facilitates our discovery

early in the licensing process that an

applicant might be unable to finance its

winning bid.

E. Administrative Procedure

i. Contract With America Advancement

Act

28. Background. Shortly before

release of the DEF Report and Order,

Congress enacted the Contract with

America Advancement Act of 1996

(CWAAA), which, inter alia, requires

generally that a ‘‘major rule’’ cannot

take effect until 60 days after the later

of the rule’s publication in the Federal

Register or submission by the Federal

agency of a required report to Congress.

Under CWAAA, a major rule is one—

that the Administrator of the Office of

Information and Regulatory Affairs [OIRA] of

the Office of Management and Budget finds

has resulted in or is likely to result in—(A)

an annual effect on the economy of

$100,000,000 or more; (B) a major increase in

costs or prices for consumers, individual

industries, Federal, State, or local

government agencies, or geographic regions;

or (C) significant adverse effects on

competition, employment, investment,

productivity, [or] innovation * * *.

The Commission determined, and OIRA

concurred, that the rule changes made

in the DEF Report and Order were not

major. Accordingly, the Commission

made the rules effective 30 days after

their July 1, 1996 Federal Register

publication.

29. Discussion. Commenter contends

that the Commission violated CWAAA

by failing to determine that the rule

changes resulting from the DEF Report

and Order were major and delaying

their effectiveness for at least 60 days

after their Federal Register publication.

By terms of the statutory language,

OIRA’s finding that the rule changes

were not major is dispositive.

Commenter’s argument is therefore

rejected.

ii. Regulatory Flexibility Act

30. Commenter also claims that the

Commission failed to describe

significant alternatives to the rules

designed to minimize any significant

economic impact on small entities as

required by the Regulatory Flexibility

Act (RFA). We disagree. The portion of

the DEF Report and Order—the Final

Regulatory Flexibility Analysis

(FRFA)—addressing this RFA

requirement refers to the substantive

part of the Order, which discusses in

great depth the impact of the rules on

small businesses, alternatives

considered, and why each alternative

was rejected or adopted. Consolidation

of the discussion of the impact on small

businesses from the item into the FRFA

would have been repetitive in this

instance, where analyses of alternatives

related to small businesses infuse the

decision. Indeed, the commenter

identifies no specific instances where

the Commission omitted consideration

of such alternatives. Accordingly, the

commenter’s petitions are denied.

V. Ordering Clauses

31. Authority for issuance of the

Order on Reconsideration is contained

in sections 4(i), 5(b), 5(c)(1), 309(r), and

309(j) of the Communications Act of

1934, as amended, 47 U.S.C. sections

154(i), 155(b), 156(c)(1), 303(r), and

309(j). Accordingly, it is ordered that

part 24 of the Commission’s rules is

amended as specified and becomes

effective November 15, 2000.

List of Subjects in 47 CFR Part 24

Personal communications services.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

Rule Changes

For the reasons discussed in the

preamble, the Federal Communications

Commission amends 47 CFR part 24 as

follows:

PART 24—PERSONAL

COMMUNICATIONS SERVICES

1. The authority citation for part 24

continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303,

309 and 332.

2. Section 24.709 is amended by

revising paragraphs (b)(5)(i)(D) and

(b)(5)(ii) to read as follows:

§ 24.709 Eligibility for licenses for

frequency Blocks C and F.

* * * * *

(b) * * *

(5) * * *

(i) * * *

(D) Following termination of the

three-year period specified in paragraph

(b)(5)(i) of this section, qualifying

investors must continue to own at least

10 percent of the applicant’s (or

licensee’s) total equity unconditionally

or in the form of stock options subject

to the restrictions in paragraph

(b)(5)(i)(A) of this section. The

restrictions specified in paragraph

(b)(5)(i)(C)(1) through (b)(5)(i)(C)(4) of

this section no longer apply to the

remaining equity after termination of

such three-year period.

(ii) At the election of an applicant (or

licensee) whose control group’s sole

member is a preexisting entity, the 25

percent minimum equity requirements

set forth in paragraph (b)(5)(i) of this

section shall apply, except that only 10

68932 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Rules and Regulations

percent of the applicant’s (or licensee’s)

total equity must be held in qualifying

investors, and that the remaining 15

percent of the applicant’s (or licensee’s)

total equity may be held by qualifying

investors, or noncontrolling existing

investors in such control group member

or individuals that are members of the

applicant’s (or licensee’s) management.

These restrictions on the identity of the

holder(s) of the remaining 15 percent of

the licensee’s total equity no longer

apply after termination of the three-year

period specified in paragraph (b)(5)(i) of

this section.

* * * * *

[FR Doc. 00–29323 Filed 11–14–00; 8:45 am]

BILLING CODE 6712–01–M

DEPARTMENT OF ENERGY

48 CFR Parts 927 and 970

RIN: 1991–AB55

Acquisition Regulations: Revision of

Patent Regulations Relating to DOE

Management and Operating Contracts

AGENCY: Department of Energy.

ACTION: Interim final rule and

opportunity for public comment.

SUMMARY: The Department of Energy

(DOE) is amending the Department of

Energy Acquisition Regulation (DEAR)

to improve the patent coverage relating

to management and operating contracts.

The clauses contained herein generally

reflect the clauses used in such DOE

contracts over the last five years. The

changes made pursuant to this rule

adapt patent related clauses to

subcontracting under management and

operating contracts, will result in

clauses stated in ‘‘plain language,’’ and

will provide a complete set of patent

clauses for all varieties of management

and operating contract.

DATES: This rule is effective December

15, 2000. Comments on the interim final

rule should be submitted by January 16,

2001.

ADDRESSES: Comments (3 copies) should

be addressed to: Robert M. Webb, U.S.

Department of Energy, Office of

Procurement and Assistance

Management, 1000 Independence

Avenue, SW., Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT:

Robert M. Webb at (202) 586–8264.

SUPPLEMENTARY INFORMATION:

I. Background.

II. Explanation of Changes in the Patent

Rights Clauses.

III. Procedural Requirements.

A. Review Under Executive Order 12866.

B. Review Under Executive Order 12988.

C. Review Under the Regulatory Flexibility

Act.

D. Review Under the Paperwork Reduction

Act.

E. Review Under the National

Environmental Policy Act.

F. Review Under Executive Order 13132.

G. Review Under the Unfunded Mandates

Reform Act of 1995.

H. Review Under the Treasury and General

Government Appropriations Act, 1999.

I. Congressional Review.

I. Background

The Department of Energy (DOE or

Department) last revised its patent

regulations covering management and

operating contracts on March 2, 1995 at

60 FR 11824. That rule created two

patent rights clauses, one for nonprofit

contractors and a second for profitmaking contractors. The former adapted

the Bayh-Dole clause, granting title to

inventions first conceived or reduced to

practice under the contract to the

contractor, for use in management and

operating (M&O) contracts. The second

clause retained title to those inventions

in the United States. In the interim it

has become apparent that the clauses

could be designed to more effectively

deal with the realities of performance

under DOE management and operating

contracts. There is a need to modify the

specified clauses to reflect additional

statutory requirements and the special

treatment of exceptional circumstances

in defense related activities. This

interim final rule fulfills those needs.

This rulemaking establishes three

clauses, one for nonprofit contractors,

one for profit-making contractors where

their contracts do not provide for

technology transfer responsibilities, and

a third for large profit-making

contractors where their contracts do

provide for technology transfer

activities. The terms of the third clause

reflect DOE’s probable issuance of an

advance waiver under which large

profit-making management and

operating contractors with a technology

transfer mission will receive title to

inventions. The individual class waiver

that is likely to be granted may cause

the actual terms of the patent clause

used to vary from the model published

here.

This interim final rule also adapts

customary ancillary patent clauses to

the special circumstances of DOE’s

management and operating contracts.

The clause normally used to authorize

and give consent to a contractor to use

or manufacture an invention has been

modified to allow a contractor to request

and DOE to authorize copying

copyrighted work. It also reflects that if

a subcontractor is employed under a

management and operating contract to

perform research and development, the

clause flowed down should use

paragraph (a) as in the Federal

Acquisition Regulation (FAR) Alternate

1, as opposed to the basic clause as is

called for under paragraph (b) of the

FAR clause.

The interim final rule limits the

notice and assistance clause to

subcontracts valued at $25,000 or more.

The FAR clause limit for flowdown is

the simplified acquisition threshold of

$100,000.

The interim final rule establishes a

flowdown for patent indemnity. In the

area of royalties, the interim final rule

provides for the contractor to provide to

DOE information bearing on any royalty

proposed to be paid after contract

award. The relevant FAR provision does

not foresee long term contracting with

the variety of royalty activities that the

Department is currently experiencing

under its management and operating

contracts.

This interim final rule also makes

small changes to clauses for notice of

right to request patent waiver and rights

to proposal data, resulting from their

being drafted in ‘‘plain language.’’

Additionally, a change has been made to

DEAR Part 927 to assure that the

facilities license contained in the three

M&O patent clauses is used in

appropriate contracts not subject to Part

970.

II. Explanation of Changes in the Patent

Rights Clauses

A. Plain Language

All clauses in this interim final rule,

except the nonprofit clause at 970.5204–

101, were rewritten from former clauses

to incorporate suggested language and

sentence structure for clarifying and

simplifying contract provisions. For

example, the clause language is written

in the present tense and exceptions are

generally stated at the beginning of

regulatory provisions. Italicized

headings were added to all

subparagraphs. At such time as the FAR

is revised to reflect ‘‘plain language,’’

particularly with regard to the BayhDole clause at FAR 52.227–11 (the core

of the clause at 970.5204–101), which is

overseen by the Department of

Commerce, these regulations will be

reviewed and revised as appropriate.

B. Organization of Clause Provisions

Modest changes were made to the

organization of each of the patent rights

clauses, so that like topics and

provisions appear in a similar order in

all of the clauses, as shown by the

index. Also, if the same provision

appeared in more than one clause, an