[Federal Register Volume 79, Number 220 (Friday, November 14, 2014)]
[Proposed Rules]
[Pages 68172-68202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26924]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[RM-11395, GN Docket No. 12-268, WT Docket Nos. 14-170, 05-211; FCC 14-
146]


Updating Competitive Bidding Rules; Expanding the Economic and 
Innovation Opportunities of Spectrum Through Incentive Auctions; 
Implementation of the Commercial Spectrum Enhancement Act

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This Notice of Proposed Rulemaking (NPRM) seeks comment on the 
revision of certain competitive bidding rules and provides notice of 
the Commission's intention to resolve longstanding petitions for 
reconsideration.

DATES: Comments are due on or before December 29, 2014 and reply 
comments are due on or before January 20, 2015.

ADDRESSES: All filings in response to the NPRM must refer to GN Docket 
No. 12-268 and WT Docket Nos. 14-170 and 05-211. The Commission 
strongly encourages parties to develop responses to the NPRM that 
adhere to the organization and structure of the NPRM. Comments may be 
filed using the Commission's Electronic Comment Filing System (ECFS):
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing ECFS: http://fjallfoss.fcc.gov/ecfs2.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
    All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th Street SW., Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes must be 
disposed of before entering the building.
    Commercial overnight mail (other than U.S. Postal Service Express 
Mail and Priority Mail) must be sent to 9300 East Hampton Drive, 
Capitol Heights, MD 20743.
    U.S. Postal Service first-class, Express, and Priority mail must be 
addressed to 445 12th Street SW., Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, or audio format), send an email to <a href="/cdn-cgi/l/email-protection#d3b5b0b0e6e3e793b5b0b0fdb4bca5"><span class="__cf_email__" data-cfemail="ddbbbebee8ede99dbbbebef3bab2ab">[email protected]</span></a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (TTY).

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: Kathryn Hinton at (202) 418-
0660.

[[Page 68173]]


SUPPLEMENTARY INFORMATION: This is a summary of the Competitive Bidding 
NPRM released on October 10, 2014. The complete text of the Competitive 
Bidding NPRM is available for public inspection and copying from 8:00 
a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 
8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information 
Center, 445 12th Street SW., Room CY-A257, Washington, DC 20554. The 
Competitive Bidding NPRM may be purchased from the Commission's 
duplicating contractor, Best Copy and Printing, Inc. (BCPI), 445 12th 
Street SW., Room CY-B402, Washington, DC 20554, telephone 202-488-5300, 
facsimile 202-488-5563, or by contacting BCPI on its Web site: http://www.BCPIWEB.com. When ordering documents from BCPI, please provide the 
appropriate FCC document number, for example, FCC 14-146. The complete 
text is also available on the Commission's Web site at http://wireless.fcc.gov, or by using the search function on the ECFS Web page 
at http://www.fcc.gov/cgb/ecfs.

Initial Paperwork Reduction Act of 1995 Analysis

    The NPRM contains proposed new or modified information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.

I. Introduction

    1. The Commission proposes to reform some of its general part 1 
rules governing competitive bidding for spectrum licenses to reflect 
changes in the marketplace, including the challenges faced by new 
entrants. The Commission's proposals also advance the statutory 
directive to ensure that small businesses, rural telephone companies, 
and businesses owned by members of minority groups and women 
(collectively, designated entities or DEs) are given the opportunity to 
participate in the provision of spectrum-based services, and fulfill 
the commitment the Commission made in the Broadcast Television Spectrum 
Incentive Auction Report & Order. Expanding the Economic and Innovation 
Opportunities of Spectrum Through Incentive Auctions, 79 FR 48442, Aug. 
15, 2014. Together these proposals will assure that the Commission's 
part 1 rules continue to promote the Commission's fundamental statutory 
objectives. The Commission expects to act on the issues it raises here 
soon enough to allow all parties to account for any changes while 
planning for the Broadcast Television Spectrum Incentive Auction 
(hereinafter, Incentive Auction or BIA).
    2. In the Competitive Bidding NPRM, the Commission proposes to: (1) 
Provide small businesses greater opportunity to participate in the 
provision of a wide range of spectrum-based services by modifying the 
Commission's eligibility requirements, updating the standardized 
schedule of small business sizes, and eliminating duplicative reporting 
requirements, while also seeking comment on whether to strengthen its 
rules to prevent the unjust enrichment of ineligible entities; (2) 
Amend the Commission's former defaulter rule to balance concerns that 
the current rule is overly broad with the Commission's continued need 
to ensure that auction bidders are financially reliable; (3) Codify an 
established competitive bidding procedure that prohibits the same 
individual or entity from becoming qualified to bid on the basis of 
more than one short-form (FCC Form 175) application in a specific 
auction; (4) Prevent entities that are exclusively controlled by a 
single individual or set of individuals from becoming qualified to bid 
on overlapping licenses based on more than one short-form application 
in a specific auction; and (5) Retain the current rules governing joint 
bidding arrangements among non-nationwide providers and prohibit joint 
bidding arrangements among nationwide providers.
    3. The Commission also provides notice of its intention to resolve 
long standing petitions for reconsideration and proposes necessary 
clean-up revisions to its part 1 competitive bidding rules.

II. Eligibility for Bidding Credits

    4. In establishing the Commission's auction authority, Congress 
vested the Commission with broad discretion in balancing a number of 
competing objectives. These included, among other things, special 
provisions to ensure that DEs, including small businesses, have the 
opportunity to participate at auction and in the provision of spectrum-
based services. Section 309(j)(4)(D) of the Communications Act (the 
Act) requires that when the Commission prescribes regulations in 
designing systems of competitive bidding, it shall ``ensure that small 
businesses, rural telephone companies, and businesses owned by members 
of minority groups and women are given the opportunity to participate 
in the provision of spectrum-based services, and, for such purposes, 
consider the use of . . . bidding preferences.'' In addition, the 
statute directs that in designing such systems of competitive bidding, 
the Commission shall seek to promote ``economic opportunity and 
competition . . . by avoiding excessive concentration of licenses and 
by disseminating licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women.'' At the same time, the Act 
requires the Commission to ``prevent unjust enrichment as a result of 
the methods employed to issue licenses. . . .''
    5. The Commission's challenge in providing opportunities to small 
businesses and entrepreneurs pursuant to these provisions has always 
been to find a reasonable balance between the competing goals of 
affording such entities reasonable flexibility to obtain the capital 
necessary to participate in the provision of spectrum-based services 
and effectively preventing the unjust enrichment of ineligible 
entities. See Implementation of the Commercial Spectrum Enhancement Act 
and Modernization of the Commission's Competitive Bidding Rules and 
Procedures, 71 FR 26245, May 4, 2006 (DE Second Report and Order). Over 
the two-decade span of the auctions program, the Commission has 
periodically modified its rules to achieve the right balance given 
changing circumstances in the wireless industry.
    6. The Commission takes the opportunity to consider whether its 
rules continue to serve their intended purposes and the public interest 
in an evolving mobile wireless marketplace. In the past decade, the 
rapid adoption of smartphones and tablet computers and the widespread 
use of mobile applications, combined with the increasing deployment of 
high-speed 3G and now 4G technologies, have driven significantly more 
intensive use of mobile networks. This progression from the provision 
of mobile voice services to the provision of mobile broadband services 
has increased the need for access to spectrum. In addition, in the past 
decade, the number of small and regional mobile wireless service 
providers has significantly decreased, yet regional and local service 
providers continue to offer consumers additional

[[Page 68174]]

choices in the areas they serve. As the costs of spectrum and network 
deployment have increased in the last 20 years, especially for small 
and new entrants, access to capital for acquiring licenses is critical 
for these providers to take advantage of different opportunities to 
participate in the provision of spectrum-based services, including 
through facilities-based deployment, spectrum leasing, and mobile 
virtual network operator arrangements.
    7. The Commission addresses the concerns of parties that argue that 
its current rules inhibit, rather than foster, the inclusion of small 
businesses in the wireless marketplace. The Commission offers proposals 
to increase the opportunities for small businesses to become spectrum 
licensees. At the same time, the Commission remains mindful of its 
responsibility to ensure that benefits are provided only to qualifying 
entities and seeks comment on modifying its current unjust enrichment 
rules.
    8. As a first step in reassessing how the Commission determines 
small business eligibility, the Commission proposes to repeal the 
attributable material relationship (AMR) rule and to re-examine the 
need for the related decade-old policy that has limited small 
businesses seeking bidding credits to providing primarily retail, 
facilities-based service directly to the public with each of their 
licenses. The Commission proposes to instead adopt a more flexible 
approach under which it would evaluate small business eligibility on a 
license-by-license basis, using a two-pronged test. Under this 
proposal, the Commission would apply existing rules requiring 
attribution of controlling interests in, and affiliates of, a small 
business venture to determine whether the applicant: (1) Meets the 
applicable small business size standard, and (2) retains control over 
the spectrum associated with the individual licenses for which it seeks 
benefits. The Commission further proposes to modify the language of 47 
CFR 1.9020 to make clear that DE lessors may fully engage in spectrum 
manager leasing under the same de facto control standard as non-DE 
lessors. With these proposals, the Commission revisits its statutory 
mandate under 47 U.S.C. 309(j)(4)(D) ``to ensure that small businesses, 
rural telephone companies, and businesses owned by members of minority 
groups and women are given the opportunity to participate in the 
provision of spectrum-based services'' in light of today's wireless 
marketplace. Alternatively, the Commission also seeks comment on 
retaining the policy and/or some variation of the AMR rule. The 
Commission also asks whether it should revisit its unjust enrichment 
rules to assure that the Commission maintains the right balance 
considering its responsibility to safeguard the award of small business 
benefits to only eligible entities.
    9. The Commission also proposes to modify the generally applicable 
schedule of small business size standards and bidding credits, which 
has remained unchanged in the 17 years since it was first adopted. The 
goal of these proposals is to encourage small business participation in 
spectrum license auctions and to ensure that the Commission's gross 
revenue definitions accurately reflect what constitutes a ``small 
business'' in today's marketplace, taking into consideration the 
relative size of the large, national providers. Specifically, the 
Commission proposes revisions to its small business definitions and 
seeks comment on whether to change the bidding credit percentages that 
would apply to those definitions. The Commission also seeks comment on 
whether to offer alternative bidding preferences to entities based on 
criteria other than business size by revenue.
    10. Additionally, the Commission proposes to repeal the DE annual 
reporting requirement. The Commission questions whether the value of 
the information provided in those reports outweighs the regulatory 
burden that the reporting obligation places on small businesses.
    11. Collectively, these proposals seek to update the Commission's 
rules to reflect that small businesses need greater opportunities to 
gain access to capital so that they may have an opportunity to 
participate in the provision of spectrum-based services in today's 
communications marketplace. The Commission recognizes that high capital 
costs associated with building and operating wireless broadband 
networks may require small businesses to find alternative revenue 
streams, including through secondary markets, so that they have an 
opportunity to acquire licenses at auction and participate in the 
provision of spectrum-based services. The Commission anticipates that 
by revising its rules to allow small businesses to take advantage of 
the same opportunities to utilize their spectrum capacity and gain 
access to capital as those afforded to larger licensees, the Commission 
can better achieve its statutory directives. The Commission nonetheless 
remains mindful of its obligation to prevent unjust enrichment of 
ineligible entities. The Commission describes and seeks comment on each 
of its specific proposals.

A. Attribution Rules and Small Business Policies

    12. Background. As its principal means of fulfilling the statutory 
goals for DEs, the Commission makes auction bidding credits available 
to eligible small businesses. A small business is eligible for bidding 
credits if its gross revenues, in combination with those of its 
``attributable'' interest holders, fall below applicable service-
specific financial caps. Since 2000, the Commission has applied a 
``controlling interest'' standard to all services when making these 
attribution determinations in the small business context. Under this 
standard, the Commission attributes to an applicant the gross revenues 
of the applicant, its controlling interests, its affiliates, and the 
affiliates of the applicant's controlling interests. 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. Affiliates include entities or 
individuals that directly or indirectly control or have the power to 
control the applicant, directly or indirectly are controlled by the 
applicant, directly or indirectly are controlled by a third party that 
also controls the applicant, or have an ``identity of interest'' with 
the applicant.
    13. In adopting secondary markets rules in the 2004 Secondary 
Markets Second Report and Order, the Commission sought to expand and 
enhance secondary markets to permit spectrum to flow more freely among 
users and uses in response to economic demand, to the extent consistent 
with its public interest objectives. Promoting Efficient Use of 
Spectrum Through Elimination of Barriers to the Development of 
Secondary Markets, Second Report and Order, Order on Reconsideration, 
and Second Further Notice of Proposed Rulemaking, 69 FR 77522, Dec. 27, 
2004 (Secondary Markets Second Report and Order). The Commission 
explained that it intended for its rules to allow more flexible use of 
spectrum by licensees and other spectrum users, better define 
licensees' and spectrum users' rights and responsibilities, enable the 
use of spectrum across various dimensions (frequency, space, and time), 
promote the efficient use of spectrum, and provide for continued 
technological advances. While the Commission ostensibly extended the 
new de facto control standard for spectrum manager leasing to DE 
lessors, it nonetheless required that a licensee receiving DE

[[Page 68175]]

benefits be an entity that actually provides service under the license. 
The Commission explained that it intended that DEs should remain 
primarily providers of facilities-based service directly to the public. 
That conclusion was based on an interpretation of the legislative 
history underlying the Act's provisions regarding unjust enrichment, as 
well as the continued application of the Commission's controlling 
interest standard and affiliation rules.
    14. In the Secondary Markets Second Report and Order, the 
Commission also advised that in examining whether a spectrum lessee 
would, under a spectrum manager lease, become a controlling interest or 
affiliate of the licensee, the licensee should look to all of the 
relevant circumstances, including how large a portion of its total 
capacity to provide spectrum-based services would be leased, what 
involvement it would have with the spectrum lessee as a result of the 
spectrum lease, and what relationship the two parties have with one 
another apart from the lease. The Commission concluded that a spectrum 
manager lease between a designated entity licensee and a spectrum 
lessee with a prior business relationship where substantially all of 
the spectrum capacity of the licensee is to be leased would cause the 
spectrum lessee to become an attributable affiliate of the licensee. 
Such affiliation would render the licensee ineligible for designated 
entity or entrepreneur benefits and, therefore, would make such a 
spectrum lease impermissible. On the other hand, the Commission 
reasoned that a spectrum manager lease involving a small portion of the 
designated entity or entrepreneur licensee's spectrum capacity where no 
relationship existed between the licensee and spectrum lessee apart 
from the lease would likely be permissible. Situations falling 
somewhere between these two examples would have to be evaluated 
according to the individual circumstances involved.
    15. Subsequently in 2006, at the behest of interested parties, 
including Council Tree, the Commission released a further notice, which 
sought comment on the specific nature of the types of relationships 
that should trigger the attribution of revenues to determine 
eligibility for designated entity benefits. See Implementation of the 
Commercial Spectrum Enhancement Act and Modernization of the 
Commission's Competitive Bidding Rules and Procedures, 71 FR 6992, Feb. 
10, 2006. For instance, Council Tree initially proposed that the 
Commission should restrict a designated entity applicant's ``material 
relationships,'' including both financial and operational agreements, 
in order to more carefully ensure that designated entity benefits are 
awarded only to bona fide eligible entities. In the DE Second Report 
and Order, the Commission, to further protect against unjust 
enrichment, departed from its case-by-case approach and instead adopted 
a bright-line test to require a small business applicant or licensee to 
automatically attribute to itself the gross revenues of any entity with 
which it had an ``attributable material relationship.'' It reasoned 
that an agreement that concerns the actual use of the DE's spectrum 
capacity is one that causes the relationship to be ripe for abuse and 
creates the potential for the relationship to impede a DE's ability to 
become a facilities-based provider, as intended by Congress. The 
Commission concluded that an applicant or licensee has an AMR when it 
has one or more agreements with any individual entity for the lease 
(under either spectrum manager or de facto transfer leasing 
arrangements) or resale (including under a wholesale arrangement) of, 
on a cumulative basis, more than 25 percent of the spectrum capacity of 
any individual license held by the applicant or licensee.
    16. Council Tree and others challenged the AMR rule and other 
aspects of the Commission's 2006 Order in the United States Court of 
Appeals for the Third Circuit on the grounds that they failed to take 
into account circumstances regarding small businesses' access to 
capital, among other things. In subsequent years, the Office of 
Advocacy in the U.S. Small Business Administration (SBA) also expressed 
its belief to the Commission that the 2006 changes to the small 
business rules had ``inhibited participation by small entities and 
minority businesses in recent spectrum auctions,'' and that the changes 
were unnecessary in light of the availability of the audit process 
included in the Commission's original auction rules. In 2010, although 
the court ultimately upheld the AMR rule, it nonetheless questioned 
some of the Commission's reasoning, noting what it termed the 
Commission's ``inattention'' to the nature of the wireless wholesale 
business. Questioning why the Commission chose to attribute certain 
relationships to achieve its stated policy of DEs as facilities-based 
providers, the court observed that wholesaling includes an extensive 
provision of service component. The court said that it was therefore 
not obvious that the Commission needed to prohibit DEs from engaging 
primarily in a wholesale business in order to prevent them from simply 
monetizing their bidding credits with a large carrier, ``so long as 
[DEs] do not sell or lease overly large quantities of their capacity to 
any single lessee or buyer.'' Remarking that the Commission appeared 
not to have acknowledged this issue, the court commended it to the 
Commission's attention on remand.
    17. Recently, in February 2014, the Minority Media & Telecom 
Council (MMTC) filed a white paper with the Commission making nine 
recommendations to facilitate the participation of minority- and women-
owned businesses in upcoming auctions. Listed first among these is the 
repeal of the AMR rule. MMTC argues that the rule impedes the ability 
of small entities to become providers of spectrum-based service, 
explaining that wholesaling and leasing arrangements are important 
vehicles for small and minority-owned businesses to build and 
efficiently use capital.
    18. MMTC's White Paper argues that ``over the course of fifty-six 
wireless auctions during the past 20 years, the majority of DEs that 
currently hold wireless licenses are incumbent rural telephone 
companies, very few DEs are new entrants, and even fewer DEs are 
(minority-owned business enterprises) MBEs.'' MMTC and its supporters 
maintain that DE participation in spectrum auctions dramatically 
decreased after the Commission's adoption of its 2006 rule 
modifications and claim that the results from Auctions 66 and 73 
``showed a precipitous drop in DE participation from the average 70% 
value of winning bids over previous years, to only 4.0% and 2.6% 
respectively.''
    19. Other parties concur with MMTC's concerns about the AMR rule, 
arguing that the development of the Commission's rules and policies 
over the last decade, including adoption of the AMR rule, have 
significantly hindered their ability to access capital and largely 
impeded their ability to acquire and use wireless spectrum licenses in 
today's wireless marketplace. Parties claim that the AMR rule creates 
insurmountable obstacles for new and existing small businesses to gain 
access to capital in secondary markets where they argue small 
businesses can play important roles in assuring that licensed spectrum 
is effectively and efficiently utilized. In a March 2014 request for 
clarification or waiver of the AMR rule, Grain Management, LLC 
described how the rule could prevent a small, minority-owned, new-
entrant lessor of spectrum capacity on licenses acquired without DE 
benefits from being eligible for such benefits in future auctions. See 
Grain Management, LLC's Request for

[[Page 68176]]

Clarification or Waiver of 47 CFR 1.2110(b)(3)(iv)(A); Implementation 
of the Commercial Spectrum Enhancement Act and Modernization of the 
Commission's Competitive Bidding Rules and Procedures; Expanding the 
Economic and Innovation Opportunities of Spectrum Through Incentive 
Auctions; Amendment of the Commission's Rules with Regard to Commercial 
Operations in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz 
Bands, WT Docket No. 05-211; GN Docket Nos. 12-268 and 13-185, Order, 
29 FCC Rcd 9080 (2014).
    20. Discussion. The Commission concludes that it is appropriate to 
revisit its small business eligibility rules and evaluate whether to 
rebalance its competing goals in order to provide small businesses 
additional opportunities to gain access to new sources of capital 
necessary for participation in the provision of spectrum-based services 
in today's marketplace, while guarding against unjust enrichment of 
ineligible entities. Chief among the actions that the Commission takes 
in the Competitive Bidding NPRM is its proposal to repeal the AMR rule 
and to re-examine the related decade-old policy underlying it. In lieu 
of the bright-line test of the AMR rule, the Commission proposes a two-
pronged approach to evaluate an entity's eligibility for small business 
benefits. This approach would use its existing controlling interest and 
affiliation standards to determine what revenues are attributable to an 
applicant based upon a rigorous review of all relevant relationships 
and agreements, which will ensure that the small business makes 
independent decisions about its business operation. Alternatively, the 
Commission also seeks comment on whether it should retain the policy 
but modify the AMR rule with some other attribution threshold to 
determine an applicant's eligibility for small business benefits.
    21. Using long standing principles of control and affiliation, the 
Commission proposes to safeguard small business benefits by attributing 
the revenues of any entity that has the ability to control, or 
potentially control, an applicant's business venture. The Commission's 
existing attribution rules examine the extent to which a small business 
may combine its efforts, property, money, skill and knowledge with 
another. Further, where there is an agreement to share profits/losses 
proportionate to each party's contribution to the business operation, 
the existing rules consider these issues as a factor in whether to 
attribute that party to the applicant as its affiliate. Because the 
Commission's proposals should allow small businesses greater 
flexibility to engage in business ventures that include increased forms 
of leasing and other spectrum use arrangements, the Commission 
anticipates that the combined effect of the proposals--by allowing a 
small business greater flexibility to adopt a more individualized 
business model for each license it holds--should increase the potential 
sources of revenue for the small business and potentially decrease the 
likelihood that it would be subject to undue influence by any 
particular user of a single license. The Commission's proposed approach 
would also ensure that a licensee retains control of all licenses for 
which it seeks bidding credits, while providing greater flexibility in 
potential uses for any licenses acquired without such benefits. The 
Commission seeks comment on this proposal and asks commenters to 
specifically address how and why a small business may be more or less 
likely to be subject to undue influence by a user of its spectrum under 
this approach. Additionally, the Commission proposes to modify the 
language of 47 CFR 1.9020 to make clear how the secondary market rules 
apply to DE lessors, which should provide greater flexibility to small 
businesses in how they choose to use their spectrum. The Commission 
also seeks comment on whether any corresponding changes may be 
warranted in its unjust enrichment rules to ensure that small business 
bidding credits are extended only to qualifying small businesses.
    22. The AMR rule and the policy that spurred its adoption were 
intended to prevent unjust enrichment by establishing safeguards to 
ensure that entities ineligible for small business incentives could not 
circumvent the Commission's rules by obtaining those benefits 
indirectly, through their relationships with eligible entities. The 
Commission based its decisions, in large measure, on legislative 
history suggesting that anti-trafficking restrictions and unjust 
enrichment payment obligations were needed to deter participation in 
the licensing process by those who have no intention of offering 
service to the public. For example, in the Secondary Markets Second 
Report and Order, the Commission relied on the legislative history in 
rejecting a commenter's argument that ``[t]here [was] no reason to 
believe that Congress intended to limit designated entities to only one 
form of participation in the spectrum market--construction and 
operation of a facilities-based network.'' In adopting the AMR rule, 
the Commission reaffirmed that interpretation of the legislative 
history, concluding that the adoption of the AMR rule, along with other 
modifications, was necessary to strengthen its implementation of 
Congress's directives with regard to DEs and to ensure that, in 
accordance with the intent of Congress, every recipient of its DE 
benefits is an entity that uses its licenses to directly provide 
facilities-based telecommunications services for the benefit of the 
public.
    23. Yet, in the Commission's attempts to safeguard small business 
benefits from unjust enrichment, it appears that the Commission's 
policy and corresponding rule modifications may have had the unintended 
consequence of hindering the Commission's ability to satisfy its 
statutory goal of promoting opportunities for wireless entry by small 
businesses. Moreover, the Commission notes that the statute does not 
specifically state, nor does the House Report make clear, that Congress 
intended to require that ``offering service to the public'' be defined 
only as DEs directly providing facilities-based telecommunications 
services for the benefit of the public. The Commission may have placed 
undue weight on language from the House Report, given all of the 
various factors that the actual text of 47 CFR 309(j) gives the 
Commission the discretion to balance. In interpreting statutes, 
analysis of the statutory text, aided by established principles of 
interpretation, controls.
    24. While the policy of requiring primarily the direct provision of 
facilities-based service by a small business seeking bidding credits is 
one way to protect against unjust enrichment, the Commission 
tentatively concludes that it is not the only way to ensure that 
benefits are provided solely to those entities that Congress intended. 
The Commission also recognizes that the AMR rule, which was adopted to 
further that policy, may inhibit the highest and best use of spectrum 
by preventing small businesses that lack access to traditional sources 
of capital from being able to acquire alternative revenue streams 
through leasing and other spectrum use arrangements, even in 
circumstances where they retain control over their business venture. 
MMTC argues that there has been a documented decline in DE 
participation and success at auction following the adoption of the 
Commission's rule changes in 2006, based on the relative value of 
licenses won by DEs compared to non-DEs. While the Commission notes 
that the relative value of licenses won at auction is only one measure 
to gauge success of the small business program and that there are other

[[Page 68177]]

relevant factors to consider in assessing whether the Commission has 
met its statutory obligations for small businesses, the Commission 
nonetheless concurs that over the last decade small businesses have 
faced various increased difficulties in becoming wireless licensees.
    25. The Commission contemplates that a different approach may be 
more effective in balancing its competing goals of affording small 
businesses reasonable flexibility to obtain the capital necessary to 
participate in the provision of spectrum-based services and effectively 
preventing the unjust enrichment of ineligible entities. Inasmuch as 
Congress has granted the Commission the discretion to weigh the varying 
objectives of section 309(j), the Commission proposes rule 
modifications that, if adopted, could offer a more balanced approach 
for achieving its statutory directives. The Commission therefore 
proposes to repeal the AMR rule and evaluate small business eligibility 
in a manner that could provide DEs with greater opportunities to 
participate in the provision of spectrum-based services, including 
through secondary market transactions. The Commission anticipates that 
this, in turn, will help DEs gain access to capital by enabling leasing 
and other spectrum use arrangements. Allowing more DEs and small 
businesses to participate in spectrum leases and other spectrum use 
agreements will also promote the Commission's goals of promoting more 
efficient and dynamic use of the important spectrum resource through 
secondary market spectrum transactions.
    26. The Commission seeks comment on this proposal to repeal the AMR 
rule, and its tentative conclusions regarding its need to re-evaluate 
its small business policy. Should the Commission discontinue its policy 
requiring small businesses seeking bidding credits to provide primarily 
direct, facilities-based service on each individual license? Would this 
proposal better promote Congress's intent for small businesses? Would 
the proposal to eliminate this policy and to repeal the AMR rule have 
the unintended effect of providing ineligible entities with access to 
discounted spectrum?
    27. In a mature wireless industry where leasing and other spectrum 
use arrangements may be important tools to enable wireless providers to 
raise capital and participate at auction, is it appropriate to provide 
small businesses seeking bidding credits with greater flexibility to 
enter into such spectrum use arrangements? Should the Commission 
consider an alternative spectrum capacity use limit for a bright-line 
attribution test, and if so what is the appropriate percentage and what 
spectrum use arrangements should it include? Would eliminating the 
policy that small businesses provide primarily facilities-based service 
with each individual license increase or decrease the risk of unjust 
enrichment to ineligible entities and/or the warehousing of spectrum? 
What safeguards should the Commission consider to ensure that bidding 
credits are extended only to qualifying small businesses, as Congress 
intended? Alternatively, should the Commission retain the AMR rule and 
the related policy that small businesses primarily provide facilities-
based service, but stipulate that neither would kick in for a set 
number of years? This approach might provide small businesses with an 
opportunity to raise capital early in the license term but still 
require that they eventually become primarily facilities-based 
providers of service when the AMR rule kicks in. Commenters should 
address when the AMR rule and the related policy regarding facilities-
based service should kick in and how construction build-out 
requirements should be measured. Commenters should also address whether 
the Commission's proposed shift in policy would continue to allow 
auctions to award licenses to those entities that value the spectrum 
most highly, which fosters the Commission's ability to accomplish 
Congress's multi-faceted policy objectives. Will rebalancing the 
Commission's approach to Congress's goals provide adequate safeguards 
against unjust enrichment to ensure that bidding credits are awarded 
only to qualifying small businesses?
    28. Proposed Standard for Evaluating Small Business Eligibility. 
The Commission proposes a more focused approach to evaluate small 
business eligibility that looks at who controls, or has the potential 
to control, the applicant and any spectrum acquired with the use of 
small business benefits. Specifically, the Commission proposes to apply 
a two-pronged test using its existing controlling interest and 
affiliation rules to determine: (1) Whether an applicant meets the 
applicable small business size standard, and (2) whether it retains 
control over the spectrum associated with the licenses for which it 
seeks small business benefits. This approach will allow the Commission 
to separate its review of those who control, or have the power to 
control, the small business applicant's business venture, and are 
therefore attributable for purposes of determining eligibility, from 
those that use (and may control) its spectrum capacity, which would 
affect the small business's ability to retain its benefits with respect 
to any particular license. Consistent with the Commission's existing 
controlling interest and affiliation rules under 47 CFR 
1.2110(c)(2)(ii)(H)-(I), it will attribute the revenues of those 
entities or individuals that determine or significantly influence the 
nature or types of services offered by the small business, the terms 
upon which such services are offered, and the prices charged for such 
services. The Commission's proposals would expand the types of services 
the small business might offer as part of its overall business venture, 
but would not alter how the Commission carefully monitors those that 
have the ability to control, or potentially control, the applicant or 
licensee and its business venture. The Commission seeks comment on 
these specific proposals.
    29. The first prong would evaluate whether an applicant meets the 
applicable small business size standard and is therefore eligible for 
benefits. To evaluate small business eligibility, the Commission 
proposes to apply its existing controlling interest standard and 
affiliation rules to determine whether an entity should be attributable 
based on whether that entity has de jure or de facto control of, or is 
affiliated with, the applicant's overall business venture. De jure 
control is typically evidenced by the holding 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 to determine whether the licensee 
has actual control over its business venture. Thus, pursuant to 47 CFR 
1.2110 and consistent with the Commission's current analysis, under its 
proposal, control and affiliation may arise through, among other 
things, ownership interests, voting interests, or the terms of any 
agreements that create a controlling, or potentially controlling, 
relationship over the applicant's business venture. The Commission 
therefore notes that its proposal to eliminate the policy that small 
businesses seeking benefits primarily provide facilities-based service 
does not alter the rules that require it to consider whether 
facilities-sharing and other agreements confer control of or create 
affiliation with the applicant. The proposal also does not alter the 
general standard by which the Commission

[[Page 68178]]

evaluates whether a licensee has ceded de facto control and effected an 
unauthorized transfer of control of its spectrum authorization to a 
third party.
    30. The Commission's continued careful and targeted examination of 
these issues will allow it to ensure that a small business applicant 
has the independent ability to direct its decision making regarding its 
overall business venture and how its licenses are used to offer service 
to the public. Moreover, those claiming small business benefits will 
continue to be bound by the Commission's existing rules regarding 
control and attribution, which should be familiar to all existing and 
future Commission licensees. By providing small businesses with greater 
opportunities to access revenue streams through leasing and other 
spectrum use agreements, the Commission anticipates that they will have 
more flexibility to employ business models that suit their individual 
needs and therefore will be less likely to be influenced by deep-
pocketed investors or parties with which they have a spectrum use 
agreement. Furthermore, this approach recognizes the Commission's 
earlier conclusion in the Secondary Markets proceeding that the mere 
existence of a spectrum use agreement between a small business and 
another party does not, without more, cause the other party to become 
an attributable interest holder in the applicant. This approach, 
coupled with the Commission's proposed departure from the policy of 
requiring small businesses to provide primarily facilities-based 
service directly to the public with each of its licenses, should allow 
small businesses to gain access to capital and better enable them to 
participate in auctions and in the provision of spectrum-based 
services, so long as the terms of any spectrum use agreement do not 
confer control or create an affiliation that would lead to attribution 
of disqualifying revenues. Will this approach promote long-term 
investment, market participation and competition in the wireless 
industry by small businesses?
    31. Once the first prong has been met, the Commission would 
evaluate eligibility under the second prong. Under the second prong, 
the Commission proposes to determine an entity's eligibility to retain 
small business benefits on a license-by-license basis, based on whether 
the entity has maintained de jure and de facto control of the license. 
Under this proposed license-by-license approach, an entity will not 
necessarily lose its eligibility for all current and future small 
business benefits solely because of a decision associated with any 
particular license. Instead, while a small business might incur unjust 
enrichment obligations if it relinquishes de jure or de facto control 
of any particular license for which it claimed benefits, so long as the 
revenues of its attributable interest holders (i.e., the DE's 
affiliates, its controlling interests, and the affiliates of its 
controlling interests) continue to qualify under the relevant small 
business size standard, it could still retain its eligibility to retain 
current and future benefits on existing and future licenses. In other 
words, an applicant need not be eligible for small business benefits on 
each of the licenses it holds in order to demonstrate its overall 
eligibility for such benefits. For instance, if a small business 
chooses to permissibly relinquish benefits, incurring any applicable 
unjust enrichment obligation, and transfer de facto control of a 
license through a de facto transfer lease, that lease will not 
necessarily make the lessee an attributable interest holder in the 
applicant or cause the applicant to become ineligible for other small 
business benefits it might have or want to acquire.
    32. The Commission stresses that small businesses, like all its 
licensees, remain subject to its rules to prevent unauthorized 
transfers of control of their license authorizations pursuant to 
section 310(d) of the Act. Accordingly, if a small business seeking 
benefits executes a spectrum use agreement that does not comply with 
the Commission's relevant standard of de facto control, it will be 
subject to unjust enrichment obligations for the benefits associated 
with that particular license. If the terms of that spectrum use 
agreement go so far as to confer control of, or the potential to 
control, the small business's overall business venture, the business 
could risk the attribution of revenues, which could render it 
ineligible for all current and future small business benefits on all 
licenses. Except where the leasing standard of de facto control applies 
under the secondary market rules, the criteria of Intermountain 
Microwave and Ellis Thompson will continue to apply to any Commission 
licensee, including a small business, for purposes of assessing whether 
it can demonstrate that it retains de facto control of its business 
venture and spectrum authorization. See Applications for Microwave 
Transfers to Teleprompter Approved with Warning; Non-broadcast and 
General Action Report No. 1142, Public Notice (by the Commission en 
banc), 12 FCC 2d 559, 559-60 (1963) (Intermountain Microwave); Ellis 
Thompson Corporation, 60 FR 1776, Jan. 5, 1995. Small businesses will, 
however, be free under this proposal from the added policy requirement 
regarding the extent to which it must use each individual spectrum 
license for the provision of facilities-based service in order to 
retain eligibility for small business benefits.
    33. The Commission seeks comment on its proposed two-pronged 
approach to evaluate attribution and establish eligibility for small 
business benefits. Will this proposal provide small businesses with the 
flexibility necessary to participate in an evolving wireless 
marketplace? Does the absence of a bright-line attribution standard 
hinder an applicant's ability to assess its eligibility for small 
business benefits? Will the Commission's proposed approach allow it to 
safeguard the benefits it awards and prevent ineligible entities from 
obtaining benefits indirectly, through arrangements with eligible small 
businesses? Should the Commission take additional steps to assure that 
ineligible entities cannot exercise undue influence over a small 
business, or will its proposed approach empower small businesses to 
make their own decisions with respect to the highest and best use of 
each of their licenses without risking the undue influence of their 
investors or spectrum users? For instance, should the Commission, in 
considering whether the user's revenues should be attributable to the 
small business applicant, consider any limits on the amount of its 
spectrum capacity a small business seeking benefits can allow a third 
party to use, even where such use is otherwise permissible under 
Commission rules and the agreement on its own does not create a 
controlling interest or affiliation in the applicant's business 
venture?
    34. Should the Commission limit the ability of a small business 
seeking benefits to lease all of its spectrum capacity or should the 
Commission allow it to be primarily engaged in the business of leasing 
provided that it complies with small business eligibility rules? Would 
allowing a small business seeking benefits to lease 100 percent of its 
spectrum capacity on any individual license, and/or on all of its 
licenses, increase the potential of the unjust enrichment of ineligible 
entities? Commenters should address how that risk increases or 
decreases based on the amount of spectrum capacity that may be leased. 
Should the Commission be concerned that a small business leasing large 
quantities of its spectrum capacity to a single user has allowed 
another entity to receive the benefit of its bidding credits?

[[Page 68179]]

    35. Should there be a standard by which the Commission should 
automatically attribute the gross revenues of an entity with which a 
small business seeking benefits has spectrum use agreements if it has 
such agreements with a single entity in numerous markets? How should 
the Commission view small businesses that have multiple financial and/
or operational arrangements with another licensee or entity where the 
agreements do not otherwise create a controlling interest or 
affiliation with the small business? Should the existence of such 
multiple agreements create a rebuttable presumption of affiliation 
similar to the kinship affiliation rule, or does the Commission's 
existing rule of ``affiliation through contractual relationships'' 
already adequately guard against a third party acquiring control, or 
the potential to control, the small business through such agreements? 
For instance, should the Commission permit a small business seeking 
benefits to have a combination of capital investments, loan, marketing, 
management and leasing agreements with another Commission licensee 
without attributing the gross revenues of that entity to the small 
business? Is there a combination of agreements that should cause more 
concern in assessing small business benefit eligibility, and should any 
combination of agreements with a single party create a rebuttable 
presumption of attribution or an ineligibility for small business 
benefits? Are there any specific types of agreements that are more 
likely to confer control or undue influence of the small business 
seeking benefits that should cause the Commission to automatically 
attribute the gross revenues of the entity to the small business or 
render the small business ineligible for benefits?
    36. Do the Commission's proposals provide small business applicants 
with sufficient flexibility to access capital, compete in auctions, and 
participate in new and innovative ways in the provision of service in 
the wireless marketplace while retaining their benefits? Do the 
Commission's proposals make it more or less likely that a small 
business will be unduly influenced by the entities with which it 
engages in spectrum use agreements? Commenters opposing these proposals 
should indicate specific concerns. Commenters supporting these 
proposals should offer any other suggestions the Commission should 
consider to revise its rules and reform its small business policies. To 
what extent do the Commission's proposed changes for small business 
eligibility positively or negatively affect auction revenues? To what 
extent do the Commission's proposals appropriately balance its 
competing statutory obligations in section 309(j) of the Act?
    37. Proposed Standard for Evaluating DE Leasing. The Commission 
also proposes to modify the language of 47 CFR 1.9020 to comport with 
the Commission's proposed approach to assessing small business 
eligibility. Specifically, the Commission proposes to make clear that 
DEs may fully benefit from the same de facto control standard for 
spectrum manager leasing in the Commission's secondary market rules as 
non-DE lessors.
    38. In developing its regulatory scheme for leasing generally, the 
Commission determined that section 310(d) of the Act did not require 
the continued application of the facilities-based Intermountain 
Microwave six-part test that had, since 1963, been applied to determine 
whether a licensee was exercising the requisite level of de facto 
control over its licensed operations. Instead, the Commission adopted a 
revised de facto control standard for leasing arrangements for purposes 
of applying the requirements of section 310(d). Under the revised 
standard, a spectrum manager lease does not constitute a transfer of de 
facto control so long as the licensee (1) maintains an active, ongoing 
oversight role in ensuring that the lessee complies with Commission 
rules and policies; (2) retains responsibility for all interactions 
with the Commission required under the license related to the use of 
the leased spectrum; and (3) remains primarily and directly accountable 
to the Commission for any lessee violation of these policies and rules.
    39. While the Commission nominally applied the new standard to all 
licensees, it explained that DEs would be required to retain their 
eligibility under the traditional facilities-focused de facto control 
standard of 47 CFR 1.2110 and Intermountain Microwave. Thus, the 
Commission stated that small businesses could engage in leasing only to 
the extent that doing so would not affect their eligibility for 
benefits. Further, it required that a licensee receiving DE benefits be 
an entity that actually provides service under the license. As 
explained above, the Commission expressed concern that unless it 
continued to require DEs to remain engaged primarily in the provision 
of facilities-based services to the public it would run the risk that 
small business incentives, particularly bidding credits, would 
indirectly benefit entities that would not qualify for those incentives 
in the primary market. To that end, the Commission specified that small 
businesses could not retain their benefits if they made spectrum 
leasing their primary business.
    40. Consistent with the Commission's proposed revisions to 
assessing small business eligibility, including the elimination of the 
requirement that small businesses primarily provide facilities-based 
service on each license they hold, the Commission proposes a 
modification to its spectrum manager leasing rule. Specifically, the 
Commission proposes to modify the language in 47 CFR 1.9020(d)(4) to 
remove the conflicting reference to the control standard of 47 CFR 
1.2110 in order to make clear that small business lessors are fully 
subject to the same de facto control standard for spectrum manager 
leasing that applies to all other licensees. This modification should 
clarify that 47 CFR 1.9010 alone defines whether a licensee, including 
a small business, retains de facto control of the spectrum that it 
leases to a spectrum lessee in the context of spectrum manager leasing. 
This proposal does not alter the fact that small businesses must remain 
eligible for benefits under 47 CFR 1.2110. Instead, the proposed 
modification clarifies that one de facto standard applies to determine 
whether the licensee has de facto control of the spectrum in the 
context of a spectrum manager lease (i.e., 47 CFR 1.9010), and the 
other applies to determine whether a third party has control, or the 
potential to control, the licensee and its business venture for the 
purposes of attribution of revenues (i.e., 47 CFR 1.2110). In sum, the 
Commission's proposal departs from the traditional Intermountain 
Microwave facilities-focused de facto control standard with regard to 
an individual spectrum lease agreement for a particular license. As 
long as the small business: (1) Maintains an active, ongoing oversight 
role in ensuring that the lessee complies with Commission rules and 
policies; (2) retains responsibility for all interactions with the 
Commission required under the license related to the use of the leased 
spectrum; and (3) remains primarily and directly accountable to the 
Commission for any lessee violation of these policies and rules, it 
will be considered to maintain de facto control of its spectrum for the 
purposes of that spectrum manager lease. Spectrum manager leasing 
applications will continue to be evaluated to determine whether control 
of, or affiliation with, the small business applicant and its overall 
business venture has arisen through any the terms of the leasing

[[Page 68180]]

agreement that might lead to attribution and result in unjust 
enrichment under 47 CFR 1.2110.
    41. When the Commission adopted 47 CFR 1.9010, it noted that a 
licensee's continued control over the licensed use of spectrum lies at 
the heart of what it means to retain the license and the rights 
thereunder and that it could no longer generally assume that the 
licensee must perform the non-licensed activities identified in 
Intermountain Microwave in order to conclude that the licensee has 
retained its license and all rights thereunder. The Commission proposes 
that its modification will make clear that this conclusion applies 
equally to all licensees. Are there any reasons why the Commission 
should retain its existing language in 47 CFR 1.9020(d)(4)? Should the 
Commission consider limiting the amount of spectrum a small business 
can lease to a single entity under 47 CFR 1.9020, in order to ensure 
that the small business retains control over its business venture as 
required in 47 CFR 1.2110? Commenters opposing the Commission's 
proposal should offer alternative suggestions for how it could allow 
small businesses to play a larger role in secondary market 
transactions.

B. Unjust Enrichment

    42. The integrity of the small business benefit program depends on 
ensuring that only entities eligible for benefits receive them. To 
safeguard against abuse, the Commission has long relied on unjust 
enrichment provisions, which require a small business to pay back the 
benefits it accrued where appropriate, and careful vigilance in 
approving applications and transactions. With the proposals set forth 
in the Competitive Bidding NPRM, the Commission anticipates that these 
provisions will be as important as ever and that strong enforcement of 
the provisions is critical. The Commission therefore seeks comment on 
whether any changes are appropriate to strengthen its unjust enrichment 
rules and how best the Commission can continue to scrutinize 
applications and proposed transactions to ensure that only eligible 
entities receive benefits, while not undermining the Act's directive to 
ensure that DEs are given the opportunity to participate in the 
provision of spectrum-based services.
    43. Pursuant to 47 CFR 1.2111(b), small businesses are obligated to 
make unjust enrichment payments if they seek, inter alia, to assign or 
transfer control of licenses to a non-eligible party, for a period of 
up to five years from the initial issuance of the license. In 
rebalancing the Commission's policy objectives to provide small 
businesses greater opportunities to participate at auction and in the 
provision of spectrum-based services, it remains focused on its 
responsibility to ensure that benefits are provided only to qualifying 
entities.
    44. The Commission therefore invites comment on whether its 
existing five year unjust enrichment payment schedule continues to 
provide a sufficient safeguard to ensure that benefits are provided 
only to qualifying entities. Commenters should be specific about 
whether there is a need to adjust its current five year unjust 
enrichment repayment schedule, and the appropriate length and 
reimbursement percentages for any repayment schedule revisions. If 
commenters support a different repayment period or different 
percentages for the repayment schedule, they should be specific about 
why their suggested approach would better meet its goals and balance 
the Commission's statutory objectives.
    45. Specifically, the Commission also seeks comment on whether it 
should consider adopting a 10 year unjust enrichment repayment schedule 
for licenses acquired with bidding credits, including its benefits and 
costs. Extending the length of the unjust enrichment repayment schedule 
to 10 years may help deter speculation and prevent spectrum 
warehousing. At the same time, extending the length of the unjust 
enrichment repayment schedule could restrict small businesses' access 
to capital, which could limit their ability to participate in the 
provision of spectrum-based services, contrary to the Commission's 
underlying goals in this proceeding. How does the length of the 
repayment schedule affect a small business's capital fundraising and 
business planning efforts? Are there lessons the Commission can draw 
from based on parties' experience raising capital when the 10 year 
unjust enrichment period was in place from 2006 until 2010? If the 
Commission repeals the AMR rule as proposed and also modifies the 
unjust enrichment rules, what would be the combined effect on the 
ability of a small business to raise capital and participate at auction 
and in the provision of service, particularly when compared to the 
existing rule?
    46. Are there other unjust enrichment provisions that the 
Commission should consider? For example, should the Commission require 
full reimbursement, plus interest, if a small business loses its 
eligibility prior to meeting the construction requirements applicable 
at the end of the license term? Commenters should discuss how such an 
approach would impact the Commission's interest in protecting against 
unjust enrichment, while ensuring that small businesses have access to 
capital to participate at auction and in the provision of service. Is a 
different reimbursement percentage (something less than 100 percent) 
preferable? Are other safeguards sufficient to protect the Commission's 
interests regarding unjust enrichment?
    47. The Commission seeks comment on whether it may grant small 
businesses greater flexibility to participate in the provision of 
spectrum-based services, as it has proposed, while also ensuring that 
only those entities Congress intended have access to benefits. The 
Commission asks commenters to address how the unjust enrichment rules 
affect their ability to secure and retain capital and whether its rules 
require other further modifications to safeguard the award of small 
business benefits. By granting small businesses greater regulatory 
flexibility to demonstrate eligibility, does the Commission increase or 
decrease the likelihood that non-eligible entities can assert undue 
influence over a small business's decision making for its business 
venture and its utilization of licenses to participate in the provision 
of spectrum-based services?
    48. The Commission also seeks comment on how other government 
programs ensure that only an intended class of recipients receive 
benefits that are awarded to eligible entities. Are there other 
government programs that have greater safeguards than the Commission 
currently employs? How do other government agencies and small business 
benefit programs prevent abuse and guard against unjust enrichment of 
ineligible entities? Commenters should be specific about any analogies 
that can be drawn between the Commission's small business benefits and 
similar benefits awarded by other agencies and programs.
    49. The Commission's efforts to provide increased flexibility to 
small businesses must be balanced with vigilant enforcement to ensure 
that only bona fide small businesses receive benefits. The Commission 
has a strong interest in ensuring that truthful and accurate 
information is available to the Commission and the public for purposes 
of implementing and enforcing policies it finds to be in the public 
interest. Such information is imperative to the Commission's ability to 
safeguard the benefits it awards and to prevent unjust enrichment. To 
the extent the Commission modifies rules regarding its small business 
benefits, it will remain vigilant in undertaking careful review of

[[Page 68181]]

all applications of those seeking to acquire or retain bidding credits 
to ensure that the gross revenues of all parties that control, or have 
the potential to control, the applicant are properly attributed in 
compliance with its controlling interest and affiliation rules. The 
Commission emphasizes that it will remain focused on ensuring that an 
applicant's certifications for eligibility comport with the actual 
terms of its agreements with relevant parties. In so doing, the 
Commission expects that it can properly execute its statutory 
responsibility to continue to prevent unjust enrichment of ineligible 
entities.

C. Bidding Credits

    50. The Commission also takes a fresh look at the primary way that 
it facilitates participation by small businesses at auction through its 
bidding credit program. The Commission notes that the generally 
applicable small business definitions and corresponding bidding 
preferences were adopted in 1997 and finds that it is appropriate to 
revisit whether these standards have kept pace with an evolving 
wireless marketplace. Toward that end, the Commission proposes to 
increase the general size standards, measured by gross revenues, for 
purposes of determining an entity's eligibility for a bidding 
preference. The Commission also proposes to continue its practice of 
evaluating which small business definitions will apply on a service-by-
service basis, based upon associated capital requirements for a 
particular service. In addition, the Commission seeks comment on 
whether to increase the bidding credit percentages applicable to 
associated small business categories. Finally, the Commission seeks 
comment on its ability to consider bidding preferences for other types 
of DEs, entities that serve unserved/underserved areas or areas with 
persistent poverty, as well as persons and entities that have overcome 
disadvantages. The Commission expects that the questions raised here 
will provide a meaningful opportunity to evaluate whether its bidding 
credit program continues to achieve its objectives. The Commission 
seeks concrete, specific, data-driven feedback by commenters to 
facilitate its review. The Commission invites commenters to suggest 
other creative ideas that would promote its statutory objectives, but 
it emphasizes that for any such proposals it is imperative to provide 
ample supporting evidence.
    51. An auction applicant may claim eligibility for a bidding credit 
when filing a short-form application. The Commission's short-form 
application is the first part of its two-phased auction application 
process. In the first phase, any party desiring to participate in an 
auction must file a streamlined short-form application in which it 
certifies under penalty of perjury as to its qualifications to 
participate in a Commission auction. In its review of the short-form 
applications, Commission staff presume the information and 
certifications contained in the short-form applications are true unless 
they are incomplete, internally inconsistent or contradicted by 
information in the Commission's records. Eligibility to participate in 
bidding is based on information in an applicant's short-form 
application and its certifications, and on its upfront payment. In the 
second phase of the Commission's application process, a winning bidder 
files a more comprehensive long-form (FCC Form 601) application. The 
long-form application is subject to more extensive review and is the 
basis for any determination that a winning bidder is qualified to hold 
a Commission license and for the award of any claimed bidding credit.
1. Small Business Bidding Credits
    52. Background. Bidding credits operate as a percentage discount on 
the winning bid amounts of a qualifying small business. By making the 
acquisition of spectrum licenses more affordable for new and existing 
small businesses, bidding credits facilitate their access to needed 
capital. The Commission establishes eligibility for bidding credits for 
each auctionable service, adopting one or more definitions of the small 
businesses that will be eligible. The Commission's small business 
definitions have been based on an applicant's average annual gross 
revenues over a three-year period. In establishing the gross revenues 
thresholds for the small business definitions to be applied to a 
specific service, the Commission takes into account the capital 
requirements and other characteristics of the particular service. In 
order to qualify for a small business bidding credit an applicant must 
demonstrate that its gross revenues, in combination with those of its 
``attributable'' interest holders, fall below the applicable financial 
caps.
    53. The Commission's rules provide a schedule of small business 
definitions and corresponding bidding credits. In adopting bidding 
credits for a particular service, the Commission has found that the use 
of the small business size standards and credits set forth in the part 
1 schedule provides consistency and predictability for small 
businesses. Section 1.2110(f) sets forth three tiers of bidding 
credits: (1) A 35 percent bidding credit for businesses with average 
annual gross revenues for the preceding three years not exceeding $3 
million; (2) A 25 percent bidding credit for businesses with average 
annual gross revenues for the preceding three years not exceeding $15 
million; and (3) A 15 percent bidding credit for businesses with 
average annual gross revenues for the preceding three years not 
exceeding $40 million.
    54. Discussion. The Commission proposes to increase the gross 
revenues thresholds defining the three tiers of small businesses in the 
part 1 schedule by which the Commission provides the corresponding 
available bidding credits and seeks comment on alternatives. The 
Commission also proposes to continue its practice of deciding which 
small business definitions will apply on a service-by-service basis 
depending on the capital requirements of the particular spectrum to be 
auctioned. In addition, the Commission seeks comment on whether the 
bidding credit percentages that apply to these small business 
definitions should be increased.
    55. Since the inception of the Commission's DE program, and 
particularly in the past decade, the evolution of the mobile wireless 
marketplace from mobile voice to mobile broadband has increased the 
demands on wireless networks and the need for access to spectrum, 
heightening the capital-intensive nature of the industry. Moreover, the 
number of small and regional mobile wireless service providers has 
significantly decreased, though regional and local service providers 
continue to offer consumers additional choices in the areas they serve. 
In light of these changes and statutory goals, the Commission seeks 
comment on how it should reconsider definitions of what constitutes a 
small business in the wireless industry.
    56. The Commission proposes to increase the gross revenues 
thresholds in its part 1 schedule to reflect the changing nature of the 
wireless industry, including the overall increase in the size of 
wireless networks and the increase in capital costs to deploy them. The 
Commission notes that these changes have resulted in an increase in the 
size of the wireless service providers that can be considered to be 
``small'' relative to the large nationwide providers. By proposing 
adjustments to the Commission's small business size standards, it aims 
to promote the effective participation of small businesses in auctions 
and in the provision of spectrum-based services.
    57. In considering how much to adjust the gross revenues 
thresholds, the

[[Page 68182]]

Commission proposes to use the price index for the U.S. Gross Domestic 
Product (GDP price index) published by the U.S. Department of Commerce 
(Commerce). The Commission notes that the SBA, as part of its size 
standards review, recently used the GDP price index to adjust its 
receipts-based industry size standards. In particular, the Commission 
proposes to adjust the current gross revenues thresholds with the 
percentage change in the GDP price index between 1997 and 2013. The 
indices are available on Commerce's Bureau of Economic Analysis Web 
site, under Tables 1.1.4 and 1.1.15, at http://www.bea.gov/itable.
    58. The Commission believes that the GDP price index may reflect 
certain industry trends and a relevant range of economic activity 
better than the available wireless industry price indices published by 
the Bureau of Labor and Statistics (BLS). In barely a decade, the shift 
from a voice-centric to a data-centric wireless industry has seen 
mobile broadband data services grow from their nascent stage to become 
a significant share of the industry's market revenues. However, the 
available wireless industry price indices may under represent broadband 
data services because the indices are based on voice-centric 
definitions of service plans. Moreover, broadband data plans are not 
treated as a separate category in the indices, and the BLS description 
of the indices is unclear about how the advent of mobile broadband 
services has been factored into the voice-centric consumer and producer 
prices indices that were introduced in 1997 and 1999, respectively. 
Furthermore, the wireless industry consumer and producer price indices 
may exclude goods and inputs that are relevant for the range of 
economic activity involved in the provision of wireless services. 
Therefore, the Commission proposes to use the broader GDP price index. 
The GDP price index increased by 36.4 percent from 1997 to 2013. Based 
on this 36.4 percent increase, the Commission proposes new gross 
revenues thresholds that are obtained by multiplying the current 
thresholds by 1.364 and rounding to the nearest million. Specifically, 
the Commission proposes to revise the standardized schedule in 47 CFR 
1.2110(f) as follows: (1) Businesses with average annual gross revenues 
for the preceding three years not exceeding $4 million would be 
eligible for a 35 percent bidding credit; (2) Businesses with average 
annual gross revenues for the preceding three years not exceeding $20 
million would be eligible for a 25 percent bidding credit; and (3) 
Businesses with average annual gross revenues for the preceding three 
years not exceeding $55 million would be eligible for a 15 percent 
bidding credit.
    59. The Commission seeks comment on its proposal to adjust the 
current gross revenues thresholds in its small business size standards 
using the GDP price index. Is there a different price index that better 
reflects industry developments and the relevant range of economic 
activity? Is there an alternative method for setting new gross revenues 
thresholds that does not require adjusting the current gross revenues 
thresholds with a price index?
    60. The Commission tentatively concludes that its proposed gross 
revenues thresholds better reflect the larger size of wireless networks 
today, and thus expect that they will preserve the effectiveness of the 
Commission's bidding credit program in the current mobile wireless 
marketplace. Consumer demand for widely available mobile broadband 
services has increased providers' need for additional capital to 
acquire spectrum and deploy service. This trend is reflected in the 
changing structure of the industry. By increasing the gross revenues 
thresholds that define small businesses and thereby making bidding 
credits available to a larger number of entities, the Commission seeks 
to facilitate a higher rate of participation by entities that might 
otherwise find it difficult to obtain the necessary capital to 
participate at auction. The Commission seeks comment on whether the 
proposed increases in the revenues thresholds are likely to increase 
the percentage of entities that will benefit from its small business 
bidding credits, by providing better access to capital and enabling 
them to seek access to the spectrum necessary to meet consumer demand 
for mobile broadband services. At the same time, to further the 
statutory objectives of the auction program, the Commission must adopt 
revenues thresholds that will avoid including firms that have adequate 
access to financing for spectrum based on their revenue levels. The 
Commission therefore seeks to avoid setting eligibility for bidding 
credits at a level that is over inclusive, which would defeat the 
purpose of the bidding credits and undermine the statutory objectives 
of the program. Any new thresholds the Commission adopts should provide 
economic opportunity to small businesses, while maintaining good 
economic incentives for small businesses to seek diverse forms of 
financing for spectrum.
    61. The Commission seeks comment on this proposal. Specifically, 
how have capital costs, construction costs, and administrative costs 
faced by wireless providers changed since the mid-1990s? Have the costs 
of spectrum usage rights increased significantly since the early stages 
of the Commission's auction program such that it is more difficult for 
small businesses to acquire wireless spectrum today?
    62. Commenters who agree that the industry's evolution warrants new 
definitions for small businesses should discuss what gross revenues 
thresholds are appropriate for defining small businesses in the 
wireless context. Commenters should explain their methodologies for 
deriving alternative thresholds and should supply supporting data or 
justifications for the Commission's use in evaluating and applying such 
methodologies. If commenters do not provide data on wireless providers' 
gross revenues, what alternative factors should the Commission consider 
in determining what constitutes a ``small business'' in today's 
wireless marketplace?
    63. The Commission also seeks comment on whether to adopt a small 
business size standard based on criteria other than gross revenues. As 
the Commission recently noted in the AWS-3 proceeding, in first 
adopting gross revenues-based small business size standards for 
eligibility for DE benefits, the Commission rejected the SBA's 
employee-based business size standard for cellular or other wireless 
telecommunications entities as a means to qualify as a DE. The 
Commission concluded that such a definition would be too inclusive and 
would allow many large telecommunications firms to take advantage of 
preferences not intended for them. The Commission notes that according 
to census data, if it adopted the SBA's small business employee-based 
size standard for cellular or other wireless telecommunications 
entities (i.e., 1,500 or fewer employees) more than 96 percent of 
wireless companies would be considered small businesses. The Commission 
therefore tentatively concludes not to reconsider its conclusion that 
the SBA's employee-based definition is too inclusive for the purposes 
of establishing DE eligibility.
    64. In addition, the Commission asks commenters to consider whether 
it should increase the bidding credit percentages (i.e., discount 
amounts) currently available to small businesses in 47 CFR 1.2110(f). 
Should the Commission use the existing bidding credit percentages, but 
apply them to higher gross revenues thresholds? Should the Commission 
add additional

[[Page 68183]]

small business definitions and associated tiers of bidding credits 
above or below the tiers proposed above? Commenters supporting 
additional tiers of bidding credits should propose a corresponding 
gross revenues threshold for each additional tier. Commenters 
supporting changes to the existing bidding credit percentages in the 
Commission's part 1 rules should explain the basis for their proposals 
and provide any supporting data for the Commission's use in evaluating 
potential changes to the part 1 schedule. Commenters should also 
address whether increases in the bidding credit percentages are 
necessary if the Commission adopts its proposal to modify the gross 
revenues thresholds for its small business definitions since that will 
have the effect of increasing the level of bidding credit a substantial 
number of small businesses would receive compared to its current rules. 
For instance, by increasing the revenues thresholds, entities 
previously eligible for small business bidding credits under the 
current schedule may become eligible for a higher bidding credit tier 
under the proposed amended schedule, and entities that previously 
exceeded the highest revenue threshold may become eligible. Similarly, 
bidders that previously exceeded the thresholds as a result of 
attributable revenues under the AMR rule may fall below the thresholds, 
and thus become eligible for small business bidding credits, if the AMR 
rule is eliminated as proposed in the Competitive Bidding NPRM.
    65. Further, the Commission proposes to continue its practice of 
soliciting comment on the appropriate small business size standards in 
connection with establishing rules for any particular service. As the 
Commission has done in the past and pursuant to 47 CFR 1.2110(c)(1), it 
would continue to take into consideration the characteristics and 
capital requirements of each service. The Commission seeks comment on 
this proposal. Alternatively, should the Commission utilize all three 
small business definitions and bidding credit tiers in every service? 
Under this approach, the Commission would make bidding credits 
available to any business that meets one of the small business 
definitions without engaging in an assessment of the likely capital 
requirements of the specific service for which licenses are being 
offered. What are the advantages and disadvantages of this alternative 
approach? If the Commission continues to adopt small business 
definitions on a service-by-service basis, are there other factors that 
it should consider in determining which small business definition to 
apply to a specific service? Alternatively, if the Commission adopts 
its proposed modifications to the AMR and small business size 
standards, should it consider reducing the level of bidding credits it 
awards? Commenters should provide specific suggestions on how the 
Commission should weigh its proposals collectively.
    66. The Commission also seeks comment on whether any revisions it 
adopts in this proceeding to its part 1 schedule of small business size 
standards and associated bidding credit percentage levels should apply 
to the specific small business definitions and bidding credit 
percentages the Commission has previously adopted for specific 
services, and, if so, how such revisions would be implemented. In 
particular, the Commission proposes that any new rules adopted in this 
proceeding would apply to the 600 MHz band spectrum licenses to be 
offered in the BIA. In the BIA proceeding, the Commission adopted a 15 
percent bidding credit for small businesses (defined as entities with 
average annual gross revenues for the preceding three years not 
exceeding $40 million) and a 25 percent bidding credit for very small 
businesses (defined as entities with average annual gross revenues for 
the preceding three years not exceeding $15 million). Consistent with 
the increased gross revenues thresholds the Commission proposes for the 
standardized schedule in its part 1 competitive bidding rules, the 
Commission also proposes to increase the gross revenues thresholds 
associated with the 15 and 25 percent bidding credits adopted for the 
600 MHz band. That is, for the 600 MHz band, the Commission proposes to 
provide a bidding credit of 25 percent for businesses with average 
gross revenues for the preceding three years not exceeding $20 million 
and a bidding credit of 15 percent for businesses with average gross 
revenues for the preceding three years not exceeding $55 million. The 
Commission seeks comment on this proposal. In addition, the Commission 
seeks comment on whether to adopt a third tier of small business 
bidding credits for the 600 MHz band that would provide a 35 percent 
bidding credit to businesses with average gross revenues for the 
preceding three years not exceeding $4 million. If the Commission re-
auctions licenses for existing services, should the previously adopted 
service-specific small business definitions and bidding credit 
percentages be revised for those services to reflect any changes to its 
part 1 schedule in 47 CFR 1.2110(f)(2)?
2. Other Bidding Preferences
    67. The Commission's primary method of fulfilling its statutory 
mandate regarding DEs has been to offer auction bidding credits to 
small business applicants. Periodically, however, interested parties 
have suggested that the Commission offer bidding preferences to 
entities based on criteria other than business size. As the Commission 
has explained in the past, its ability to implement suggestions to 
target bidding credits to other types of entities is constrained by 
both its statutory authority and standards of judicial review. The 
Commission seeks comment on these suggestions and asks commenters to 
specifically address the statutory authority and judicial scrutiny 
issues that may limit its ability to entertain recommendations to alter 
the focus of its current bidding preferences.
a. Minority- and Women-Owned Businesses and Rural Telephone Companies
    68. Section 309(j)(4)(D) of the Act directs the Commission to 
consider the use of bidding preferences to ensure that small 
businesses, rural telephone companies, and businesses owned by members 
of minority groups and women are given the opportunity to participate 
in the provision of spectrum-based services. The Commission seeks 
comment on whether the current small business provisions are sufficient 
to promote participation by businesses owned by minorities and women, 
as well as rural telephone companies. To the extent that commenters 
propose additional provisions to ensure participation by minority-owned 
or women-owned businesses, they should address how such provisions 
could be crafted to meet the relevant standards of judicial review. The 
Commission asks commenters advocating for the adoption of rural bidding 
credits to supply data demonstrating that rural telephone companies 
lack access to capital or face barriers to capital formation similar to 
those faced by other DEs.
b. Unserved/Underserved Areas and Persistent Poverty Preferences
    69. The Commission seeks comment on whether it should extend 
bidding credits to winning bidders that deploy facilities and provide 
service to unserved or underserved areas. If the Commission adopts 
bidding credits for service to unserved or underserved areas what 
criteria should it consider to determine if an area is unserved or 
underserved? Should any unserved/

[[Page 68184]]

underserved area bidding credits be available in all areas lacking 
service, only in rural areas, or only in persistently poor counties? As 
required of providers awarded universal service funds through the 
Mobility Fund Phase I auctions, should a wireless provider awarded an 
unserved/underserved bidding credit be required to provide a certain 
level of service (e.g., 3G or 4G) by a certain time frame (e.g., two or 
three years) in order to retain the benefit of the bidding credit?
    70. The Commission also seeks comment on whether the Commission 
should offer a bidding credit to winning bidders that will use their 
licensed spectrum to deploy service to persistent poverty counties. As 
defined by the Department of Agriculture's Economic Research Service 
(ERS), a county is persistently poor if 20 percent or more of its 
population was living in poverty over the last 30 years. According to 
the ERS, ``there are currently 353 persistently poor counties in the 
United States (comprising 11.2 percent of all U.S. counties).'' The ERS 
further explains that ``[t]he large majority (301 or 85.3 percent) of 
the persistent-poverty counties are nonmetro, accounting for 15.2 
percent of all nonmetro counties. Persistent poverty also demonstrates 
a strong regional pattern, with nearly 84 percent of persistent-poverty 
counties in the South, comprising of more than 20 percent of all 
counties in the region.'' The ERS information is available on the ERS 
Web site under ``Geography of Poverty,'' at http://www.ers.usda.gov/topics/rural-economy-population/rural-poverty-well-being/geography-of-poverty.aspx. If the Commission adopts such a bidding credit, should it 
impose strict performance requirements on providers awarded bidding 
credits for licenses covering persistent poverty counties similar to 
those required of winning bidders awarded Tribal land bidding credits? 
Should this type of bidding credit only apply to licenses covering 
persistent poverty counties that are only served by two or fewer 
wireless service providers?
    71. If the Commission adopts unserved/underserved area and/or 
persistent poverty county bidding credits, should the bidding credits 
be available only to small businesses and/or other DEs, or to any 
applicant? How would the Commission calculate the credit amount where 
the unserved or underserved area or targeted counties cover a portion 
of a license area? Should the bidding credit be applied to the total 
amount of the winning bid for a license, or should it be applied to a 
portion of the winning bid based on a percentage of population or 
square miles of the license area covered by the unserved/underserved 
area or identified counties or some other metric? What size bidding 
credit would be appropriate for either an unserved/underserved area 
bidding credit or a persistent poverty county bidding credit? If an 
applicant qualifies for both bidding credits, should the Commission 
limit the amount of the combined credit? Similarly, if an applicant 
qualifies for one of these credits in addition to a small business 
bidding credit, should the credits be cumulative and, if so, should 
there be a limit on the amount of the aggregate bidding credit 
provided? Should any limit be an amount greater than the maximum small 
business bidding credit to allow DEs eligible for the highest bidding 
credit tier to receive an increased benefit for also providing service 
to an unserved/underserved area and/or persistent poverty county? 
Commenters supporting cumulative bidding credits should provide data or 
support justifying the need for higher bidding credits in unserved/
underserved and/or persistent poverty areas. Alternatively, are issues 
relating to lack of deployment or low levels of deployment of wireless 
services in rural and poor areas better addressed through means other 
than the Commission's bidding credit program, such as through service-
specific build-out requirements or reliance on incentives through its 
Mobility Fund and other universal service programs?
    72. The Commission seeks comment on its authority to implement 
these types of bidding preferences. The Commission notes that it has 
previously implemented bidding credits based on other criteria than 
business size in order to facilitate service to Tribal lands. See In 
the Matter of Extending Wireless Telecommunications Services to Tribal 
Lands, 65 FR 47366, May 2, 2003 (Tribal Lands Report and Order). In 
that proceeding, the Commission found that the objectives and 
requirements of section 309(j) of the Act, which the Commission must 
consider in designing competitive bidding systems, authorized it to 
grant bidding credits targeted specifically to entities that commit to 
bringing much needed wireless telecommunications services to Tribal 
lands. Specifically, in the Tribal Lands Report and Order, the 
Commission found that Tribal Land bidding credits further the objective 
of section 309(j)(3)(A) to ensure ``the development and rapid 
deployment of new technologies, products, and services for the benefit 
of the public, including those residing in rural areas. . . .'' and the 
objective of section 309(j)(3)(D) of promoting ``efficient and 
intensive use of the electromagnetic spectrum.'' The Commission also 
found that there is no indication in section 309(j)(4)(D) or in its 
legislative history that the Commission's authority to award bidding 
preferences is limited to small businesses, rural telephone companies, 
and businesses owned by members of minority groups and women. As such, 
the Commission tentatively concludes that section 309(j) of the Act 
similarly authorizes the Commission to provide bidding credits for 
service to unserved/underserved areas and persistent poverty counties. 
The Commission seeks comment on its tentative conclusion.
c. Overcoming Disadvantages Preference
    73. In view of renewed interest raised in the BIA proceeding, the 
Commission also seeks additional comment on the 2010 Recommendation by 
the FCC's Advisory Committee on Diversity for Communications in the 
Digital Age (2010 Recommendation) to implement a bidding preference for 
persons or entities who have overcome substantial disadvantage 
(referred to herein as an overcoming disadvantages preference or ODP). 
In that 2010 Recommendation, the Committee proposed that the Commission 
should provide an auction bidding credit for otherwise qualified 
persons or entities that have overcome substantial disadvantages, to 
allow them to compete on equal footing with other applicants. The 
Committee stated that an ODP would provide a fair opportunity for 
highly qualified applicants to compete for spectrum licenses, thereby 
expanding the pool of eligible bidders in an auction. The 2010 
Recommendation is available at http://www.fcc.gov/DiversityFAC/meeting101410.html. The Media and Wireless Telecommunications Bureaus 
subsequently issued a public notice seeking comment on additional 
information that would be helpful in evaluating whether and how to 
pursue the Committee's proposal: The Overcoming Disadvantage Preference 
Public Notice, 75 FR 81274, Dec. 27, 2010.
    74. Commenters should specifically address the Commission's 
statutory authority to adopt such a preference and how such a 
preference could be crafted to meet the relevant standards of judicial 
review. Would a preference for those who have overcome a substantial 
disadvantage be subject to a ``rational basis'' constitutional 
standard, as the 2010 Recommendation indicates? Additionally, the 
Commission seeks detailed comment on how the

[[Page 68185]]

preference would provide additional opportunities not available under 
the current bidding credit program, particularly if the current program 
is amended as proposed in the Competitive Bidding NPRM.
    75. The Commission also asks for input on how it might 
systematically collect and maintain data in order to implement and 
administer an ODP. What legal basis does it have to collect data, and 
what precise data would the Commission need to support such a proposal?
    76. The Commission asks commenters to address how eligibility for 
an ODP could be demonstrated, providing specific information as to what 
definitions of disadvantages could qualify individuals or entities for 
the preference. How would it measure when any particular disadvantage 
had been overcome? The 2010 Recommendation provides a non-exhaustive 
list that includes disadvantages such as physical disabilities or 
psychological disorders that rendered professional or business 
advancement substantially more difficult than for most individuals. How 
could the Commission avoid subjective determinations and implement and 
apply an ODP on a neutral basis? The Commission asks commenters to 
discuss how it could establish eligibility for the preference 
objectively. How could the Commission render eligibility determinations 
for an ODP without appearing arbitrary? How could it safeguard any such 
benefits to ensure they are awarded only to eligible persons or 
entities?
    77. The Commission also seeks detailed comment on how it could 
administer an ODP. Commenters should identify the costs and benefits 
associated with such a program, addressing matters such as how reviews 
would be conducted, and the nature of the demonstration applicants 
seeking a preference would be required to make, as well as how 
individualized evaluation for the preference would be incorporated into 
a time-sensitive short-form application process or whether alternatives 
such as pre-qualification would be necessary.
    78. As acknowledged by the Advisory Committee, its ODP proposal 
raises a number of issues that need to be refined and resolved in order 
to design and implement such a preference, and comment provided to date 
has not provided sufficient basis or justification for doing so. 
Therefore, commenters that continue to support the adoption of an ODP 
are encouraged to provide as detailed and specific suggestions as 
possible regarding the Commission's authority to establish the ODP and 
its objectives in doing so, as well as eligibility for, and 
administration of, the preference, to assist the Commission in 
determining a legal, neutral, and efficient way in which it could 
implement an ODP. Alternatively, the Commission asks commenters to 
consider whether the proposals the Commission has made to amend its 
existing DE program would obviate the need for the adoption of such a 
preference.

D. DE Reporting Requirements

    79. Background. Section 1.2110(n) requires DE licensees to file an 
annual report with the Commission that includes, at a minimum, a list 
and summaries of all agreements and arrangements, extant or proposed, 
that relate to eligibility for DE benefits. The list must include the 
parties (including affiliates, controlling interests, and affiliates of 
controlling interests) to each agreement or arrangement, as well as the 
dates on which the parties entered into each agreement or arrangement. 
DEs are required to file a report for each of their licenses no later 
than, and up to five business days before, the anniversary of the date 
of license grant.
    80. Discussion. The Commission proposes to repeal this reporting 
requirement. The information DEs are required to include in their 
annual reports is duplicative of information that they provide in their 
auction and license applications. See 47 CFR 1.2110(j), 
1.2112(b)(2)(iii). In addition, before entering into leases or other 
agreements that might affect their eligibility, DEs must seek 
Commission approval and must list and summarize those agreements, 
including the parties to and the dates of the agreements. See 47 CFR 
1.2114. Moreover, for licensees with multiple auction licenses, each 
having a different grant date, the burden of the annual reporting 
requirement is exacerbated by the obligation to file multiple reports 
each year. For these reasons, the Commission tentatively concludes that 
the value of the information provided in these annual reports may no 
longer outweigh the reporting burden that they impose on DEs.
    81. The Commission seeks comment on its proposal. In particular, 
commenters are invited to address whether there are any benefits to 
retaining the annual reporting requirement that the Commission has 
failed to consider. Does this reporting requirement in any way help the 
Commission identify agreements between parties relating to small 
business eligibility that might otherwise escape attention? Commenters 
should specifically address how other rules render this reporting 
requirement duplicative and how other rules adequately ensure that the 
Commission is aware of all agreements between parties relating to small 
business eligibility. Will relieving DEs of this annual reporting 
requirement reduce their regulatory burdens to any measurable degree? 
Without this reporting requirement, will the Commission continue to 
have the necessary tools to safeguard DE benefits from unjustly 
enriching ineligible entities? If the Commission adopts this proposal 
to eliminate this annual reporting requirement, should the Commission 
amend the requirement in 47 CFR 1.2114 that a small business list and 
summarize all existing agreements to provide context each time it 
reports a new eligibility event?

E. MMTC's White Paper Requests

    82. Background. In February 2014, MMTC submitted a White Paper 
detailing several policy recommendations to advance minority and women 
spectrum license ownership. In addition to requesting the elimination 
of the AMR, an increase in bidding credits, and a substantive review of 
proposed DE rules, the White Paper requests Commission action in the 
following areas: (1) Reinstitute select DE-only closed spectrum 
auctions; (2) Incorporate diversity and inclusion in the Commission's 
public interest analysis of mergers and acquisitions (M&As) and 
secondary market spectrum transactions; (3) Conduct ongoing 
recordkeeping of DE performance; (4) Complete the Adarand Studies, 
updating the section 257 studies released in 2000; (5) Regularize 
procedural requirements; and (6) Support increased funding for and 
statutory amendments regarding the Telecommunications Development Fund. 
The Commission notes that MMTC's above request with respect to 
``ongoing recordkeeping of DE performance'' refers to retaining 
specific information about minority- and woman-owned business 
enterprise bidders, in addition to the small business status.
    83. Discussion. The Commission seeks comment on the proposals that 
are not otherwise addressed in the NPRM, and to the extent that they 
relate to its competitive bidding rules. The Commission observes that 
certain proposals appear to be outside the scope of this proceeding and 
others may not be needed in light of other changes proposed herein. 
Toward that end, the Commission tentatively concludes that the 
following MMTC proposals are

[[Page 68186]]

outside the scope of this proceeding, which is focused on its 
competitive bidding rules, and thus will not be addressed here: (1) 
Incorporating diversity and inclusion in the Commission's public 
interest analysis of mergers and acquisitions and secondary market 
spectrum transactions; and (2) supporting increased funding for and 
statutory amendments regarding the Telecommunications Development Fund. 
The Commission seeks comment on MMTC's additional requests, including 
discussion regarding the relative costs and benefits of each proposal. 
Are the proposals that the Commission describes elsewhere in the NPRM, 
including the elimination of the AMR rule, sufficient to address the 
concerns identified by MMTC regarding the participation of businesses 
owned by members of minority groups and women in the provision of 
spectrum-based services?

III. Other Part 1 Considerations

    84. In advance of an auction that could hold historic potential for 
interested applicants to acquire licenses for below-1-GHz spectrum, the 
Commission also explores the need for other revisions to its general 
part 1 competitive bidding rules to improve the transparency and 
efficiency of the auction and its processes. The Commission proposes 
changes to its former defaulter rule that seek to balance commenters' 
concerns that the current rules are overly broad with its continued 
need to ensure that auction bidders are financially reliable. The 
Commission also proposes to codify an existing competitive bidding 
procedure that prohibits the same individual or entity from filing more 
than one short-form application to participate in an auction and it 
proposes a new rule that would prevent entities that are exclusively 
controlled by a single individual or set of individuals from becoming 
qualified to bid on the basis of more than one short-form application 
in a specific auction. Both proposals seek to prevent duplicative 
filings and to avert anticompetitive bidding behavior at auction. 
Regarding the joint bidding rules, the Commission seeks comment on, 
among other issues, its tentative conclusions that it would be in the 
public interest to retain the current rules governing joint bidding 
arrangements among non-nationwide providers and to prohibit joint 
bidding arrangements among nationwide providers. Additionally, the 
Commission provides notice of its intention to resolve long standing 
petitions for reconsideration and proposes necessary clean-up revisions 
to its part 1 competitive bidding rules.

A. Former Defaulter Rule

    85. Background. Each potential participant in a Commission auction 
must certify on its pre-auction short-form application whether or not 
the applicant, its affiliates, its controlling interests, and the 
affiliates of its controlling interests have ever been in default on 
any Commission license or have ever been delinquent on any non-tax debt 
owed to any federal agency. With the exception of the Commission's 
upcoming auction for AWS-3 licenses (Auction 97) for which it recently 
granted a limited blanket waiver, an applicant is considered to be a 
``former defaulter'' if the applicant, including any of its affiliates, 
its controlling interests, or any of the affiliates of its controlling 
interests, has defaulted on any Commission license or been delinquent 
on any non-tax debt owed to any federal agency, but has since remedied 
all such defaults and cured all of its outstanding non-tax 
delinquencies. Former defaulters are eligible to bid in a Commission 
auction provided they are otherwise qualified, but are required to pay 
upfront payments that are 50 percent more than the normal upfront 
payment amounts.
    86. In the Part 1 Fifth Report and Order, the ``former defaulter'' 
policies were incorporated into the Commission's part 1 general 
competitive bidding rules. See Amendment of Part 1 of the Commission's 
Rules--Competitive Bidding Procedures, 65 FR 52323, Aug. 29, 2000 (Part 
1 Fifth Report and Order). 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. Thus, while cure of an outstanding federal 
default or delinquency enables the former defaulter to participate in 
an auction, the rules require the former defaulter to make a larger 
upfront payment. Other than in the recent waiver for Auction 97, the 
former defaulter rule has been applied without any limitation as to age 
or scope of an applicant's prior default or delinquency.
    87. On August 29, 2014, in response to unopposed requests from 
wireless industry parties, the Commission granted a limited blanket 
waiver to narrow the circumstances under which an applicant for Auction 
97 would be considered a former defaulter and required to submit a 
larger upfront payment to qualify to bid. The Commission concluded that 
the underlying purpose of the upfront payment and former defaulter 
rules would not be served by their broad application in the AWS-3 
auction, and that a limited waiver served the public interest. 
Specifically, for Auction 97, the Commission waived the former 
defaulter rule for applicants to exclude any cured default or 
delinquency for which any of the following criteria were met: (1) The 
notice of the final payment deadline or delinquency was received more 
than seven years before the Auction 97 short-form application deadline 
of September 12, 2014; (2) the amount of the default or delinquency 
falls below $100,000; (3) the default or delinquency was paid within 
two quarters (i.e., 6 months) after receiving the notice of the final 
payment deadline or delinquency; or (4) the default or delinquency was 
the subject of a legal or arbitration proceeding that was cured upon 
resolution of the proceeding. See Petition of DIRECTV Group, Inc. and 
EchoStar LLC (collectively, DIRECTV/EchoStar) for Expedited Rulemaking 
to Amend Section 1.2105(a)(2)(xi) and 1.2106(a) of the Commission's 
Rules and/or for Interim Condition Waiver; Auction of Advanced Wireless 
Services (AWS-3) Licenses Scheduled for November 13, 2014 (Auction 97), 
RM-11395; AU Docket No. 14-78, Order, FCC 14-130, para. 1 (rel. Aug. 
29, 2014) (Auction 97 Former Defaulter Waiver Order). Pursuant to the 
Auction 97 Former Defaulter Waiver Order, only applicants that have had 
a cured default or delinquency that falls outside of these exclusions 
would have to certify to being a ``former defaulter'' and submit a 
larger upfront payment in Auction 97. The Auction 97 Former Defaulter 
Waiver Order noted that the Commission's limited grant of the blanket 
waiver for Auction 97 was without prejudice to its further examination 
and disposition, based on a complete record, of the issues surrounding 
the former defaulter rule through a rulemaking proceeding.
    88. Discussion. Although the former defaulter rule serves an 
important and necessary function to ensure that bidders are capable of 
meeting their financial commitments, the Commission tentatively 
concludes that the rule may be too far-reaching and impose unnecessary 
costs and burdens on auction participants. The Commission proposes a 
more tailored approach by balancing concerns that the current 
application of the rule is overbroad with its continued need to ensure 
that auction bidders are financially reliable. The Commission seeks 
comment on revising the rule to narrow the scope of

[[Page 68187]]

the defaults and delinquencies that will be considered in determining 
whether or not an auction participant is a former defaulter. 
Specifically, the Commission proposes to exclude any cured default on 
any Commission license or delinquency on any non-tax debt owed to any 
federal agency for which any of the following criteria are met: (1) The 
notice of the final payment deadline or delinquency was received more 
than seven years before the relevant short-form application deadline; 
(2) the default or delinquency amounted to less than $100,000; (3) the 
default or delinquency was paid within two quarters (i.e., 6 months) 
after receiving the notice of the final payment deadline or 
delinquency; or (4) the default or delinquency was the subject of a 
legal or arbitration proceeding that was cured upon resolution of the 
proceeding. The Commission seeks comment on limiting the individuals 
and entities that an applicant must consider when determining its 
status as a former defaulter.
    89. In offering these proposals to limit the former defaulter rule, 
the Commission keeps in mind the underlying purposes of the upfront 
payment rule generally, and the increased upfront payment required of 
former defaulters. The Commission typically requires auction 
participants to provide upfront payments in order to qualify to bid in 
an auction. Upfront payments help prevent frivolous or insincere 
bidding and provide the Commission with a source of funds from which to 
collect payments owed at the close of auction. In adopting an upfront 
payment requirement, the Commission also recognized that it was 
balancing the goal of encouraging bidders to submit serious, qualified 
bids with the desire to simplify the bidding process and minimize 
implementation costs that will be imposed on bidders. The original 
former defaulter rule appeared in the Commission's part 24 Broadband 
PCS rules in the wake of financial difficulties of participants in the 
C Block auctions. The Commission subsequently incorporated the part 24 
former defaulter policies into the part 1 general competitive bidding 
rules, noting that the rule's purpose was to preserve the integrity of 
the auction process and ensure that bidders are capable of meeting 
their financial commitments to the Commission. As the Commission noted 
in the Auction 97 Former Defaulter Waiver Order, in the 14 years since 
that Commission action, its auctions program has matured and the mobile 
wireless industry has grown into a major segment of the nation's 
economy. Accordingly, the Commission considers in the Competitive 
Bidding NPRM whether the current broad rule continues to strike the 
right balance to promote the goals of its upfront payment and former 
defaulter rule.
    90. The parties that requested waiver of the former defaulter rule 
also suggest that the Commission modify the rule. For instance, in 
their petition, DIRECTV/EchoStar argue that, as currently written, the 
former defaulter rule applies too broadly to effectively advance the 
Commission's goal of ensuring that auction bidders are financially 
reliable. In their joint filing, CCA, CEA, CTIA and NTCA (the Four 
Associations) mirror that sentiment and suggest that the scope of the 
rule is unnecessary to achieve its purpose, particularly when the 
former defaults or delinquencies are in a relatively small amount or 
were cured years prior. These parties offer a variety of ways to limit 
the scope of the former defaulter inquiry, but all consistently contend 
that the rule is unnecessarily broad to serve its underlying purpose. 
The Commission seeks comment on its specific proposals to narrow the 
scope of the defaults and delinquencies that would trigger an auction 
applicant's former defaulter status and asks commenters to address 
whether, if such proposals are adopted, the Commission can still 
promote the important protective functions of its upfront payment and 
former defaulter rules.
    91. Parties urge first that prior delinquencies and defaults more 
than a certain number of years old should be excluded from the scope of 
the former defaulter rule. In the Auction 97 Former Defaulter Waiver 
Order, the Commission excluded from consideration under the former 
defaulter rule any cured default or delinquency for which the notice of 
the final payment deadline or delinquency was received more than seven 
years before the Auction 97 short-form application deadline of 
September 12, 2014. The Commission concluded that the rule's current 
unlimited time period may capture former defaults and delinquencies 
that have lost their relevance to a bidder's current capability to meet 
its financial commitments to the Commission, and thus may no longer 
warrant a larger upfront payment for Auction 97. Initially, advocates 
seeking a more limited time frame for the rule's application argued 
that a three year period would correspond to certain Federal tax 
statute of limitations. In seeking a waiver for Auction 97, CCA, CTIA 
and NTCA (the Three Associations) suggested that the Commission should 
define former defaulters to include only those applicants who have 
received notice of defaults or delinquencies within seven years before 
the Auction 97 short-form application deadline. In the Auction 97 
Former Defaulter Waiver Order, the Commission noted that while federal 
tax laws have a three-year statute of limitations to determine if 
certain forms of additional tax are owed, the period of limitations to 
determine whether income was under-reported is six years and the 
Internal Revenue Service has a seven-year period to review a claim for 
a loss from worthless securities or a bad debt deduction. Likewise, the 
Commission acknowledged that the Fair Credit Reporting Act limits many 
types of reporting by consumer credit agencies for a period of seven 
years. In light of these longer federal limitations periods, the 
Commission tentatively concludes that the purposes of the upfront 
payment and former defaulter rules may be furthered more precisely if 
the Commission excludes any cured default on a Commission license or a 
delinquency on a non-tax debt owed to a federal agency where the notice 
of the final payment deadline or delinquency was received more than 
seven years before the short-form application deadline. In doing so, 
the Commission notes that the determination of a notice of a final 
payment deadline or delinquency depends on the origin of the federal 
non-tax debt giving rise to a default or delinquency and such notice 
may be express or implied. To the extent that the rules providing for 
payment of a specific federal debt permit payment after an original 
payment deadline accompanied by late fee(s), such debts would not be in 
default or delinquent for purposes of applying the former defaulter 
rules until after the late payment deadline. For the purposes of the 
certifications required on a short-form auction application, notice 
provided by Commission staff assessing a default payment arising out of 
a default on a winning bid constitutes notice of the final payment 
deadline with respect to a default on a Commission license. The 
Commission seeks comment on all aspects of this proposal--the number of 
years specified (seven), the triggering event (upon receipt of the 
notice of the final payment deadline or delinquency), and the point at 
which the counting of the age of the triggering event is cut off (the 
short-form application deadline). To the extent commenters advocate a 
different length of time, an alternate triggering event, or another way 
of calculating how long ago the triggering event

[[Page 68188]]

occurred, the Commission urges them to be specific as to why their 
proposal is more appropriate given the policies behind its rule. Should 
the length of time it took the defaulter to cure the debt, or how 
recently the cure occurred, be a factor?
    92. Those favoring modification of the rule also suggest excluding 
former defaults or delinquencies that fall below a certain amount. The 
Auction 97 Former Defaulter Waiver Order excluded from consideration 
under the former defaulter rule for Auction 97 any former default or 
delinquency for which the amount of the resolved debt or delinquency 
fell below $100,000. Parties initially suggested excluding defaults or 
delinquencies of what they defined as de minimis in nature, and 
specifically suggested that the Commission should ignore any former 
default or delinquency totaling less than the lesser of $100,000 or 0.1 
percent of the average annual revenues of the applicant, as computed by 
its competitive bidding rules. The Three Associations later suggested 
that the Commission exclude from the definition of former defaulter any 
cured defaults on a Commission license or delinquencies on a non-tax 
debt owed to a federal agency in an amount of less than $100,000. In 
the Auction 97 Former Defaulter Waiver Order, the Commission noted the 
$100,000 amount is used in other contexts to distinguish between less 
significant or material issues and more significant ones and the 
Commission concluded that for the purposes of Auction 97, requiring a 
larger upfront payment based on any cured default or delinquency that 
is less than $100,000 could discourage participation in Auction 97 
without appreciably ameliorating the risk of bidder defaults, and 
thereby undermine the underlying purposes of its upfront payment and 
former defaulter rules.
    93. For clarity and efficiency of the administration of the former 
defaulter rule from both the Commission's and applicants' perspectives, 
the Commission now proposes to adopt for future auctions generally the 
same bright-line standard established in the Auction 97 Former 
Defaulter Waiver Order that would exclude from the rule any former 
default on a Commission license or delinquency on a non-tax debt owed 
to a federal agency where the amount of the resolved debt falls below 
$100,000. The Commission tentatively concludes that such an exclusion 
will simplify the application process and minimize implementation costs 
imposed on applicants by excluding former defaults and delinquencies 
for which consideration is no longer necessary to ensure bidders in a 
more mature wireless industry submit serious, qualified bids. The 
$100,000 threshold aligns with Commission precedent and is used in 
other contexts to determine the materiality or significance of various 
issues. See Auction 97 Former Defaulter Waiver Order at para. 18. If 
commenters disagree with the amount proposed, the Commission encourages 
them to provide specific examples of how former defaults or 
delinquencies of a different amount would better reflect an auction 
applicant's financial reliability. The Commission also seeks comment on 
whether its proposal adequately weighs its need to consider debts of a 
serious nature that are indicative of a bidder's poor federal track 
record with the burdens faced by many applicants in complying with the 
current rule, which might be considered open-ended in scope.
    94. To address situations where, due to incorrect addresses, 
delivery problems, or internal issues, applicants may not timely pay 
obligations, but cure such debts when discovered, the Three 
Associations also contend that the Commission should for the purposes 
of the former defaulter rule exclude certain additional resolved debts. 
For Auction 97 applicants, the Commission waived the former defaulter 
rule to exclude any cured default or delinquency where the debt was 
paid within two quarters (i.e., 6 months) after receiving the notice of 
final payment deadline or delinquency. There, the Commission concluded 
that the prompt cure of such a default or delinquency sufficiently 
demonstrated an applicant's financial wherewithal, that therefore it 
was unnecessary to require a larger upfront payment from the applicant, 
and that a waiver under such circumstances served the public interest 
by encouraging prompt payment of debts owed to the government. The 
Commission now proposes to modify the former defaulter rule generally 
to exclude a default or delinquency that was paid within two quarters 
(i.e., 6 months) after receiving the notice of the final payment 
deadline or delinquency for the same reasons articulated in the Auction 
97 Former Defaulter Waiver Order. The Commission seeks comment on 
whether this exclusion will allow it to appropriately balance the 
practicalities that may affect the applicants' ability to timely 
resolve their debts with the need to ensure that bidders are capable of 
meeting their financial commitments to the Commission. The Commission 
also invites commenters to address whether payment within some other 
time period might better strike that balance, and whether receipt of 
the notice of the final payment deadline or delinquency is the 
appropriate triggering event for this exclusion.
    95. Similarly, the Three Associations also suggest for the purposes 
of modifying the former defaulter rule that an applicant should not be 
considered to be in default if any debt is the subject of a good faith 
dispute or a pending legal or arbitration proceeding. In the Auction 97 
Former Defaulter Waiver Order, the Commission included this suggestion 
in part, and concluded that where the default or delinquency was the 
subject of a legal or arbitration proceeding and was cured upon 
resolution of the proceeding, an applicant has demonstrated sufficient 
financial credibility so that it was not necessary to require a larger 
upfront payment from it in Auction 97. The Commission determined that 
waiver under such circumstances served the public interest by 
encouraging prompt resolution of debts associated with legal or 
arbitration proceedings. The Commission declined, however, to waive the 
larger upfront payment requirement for debts that are subject to a 
``good faith dispute'' because it reasoned that such a provision, even 
for cured debts, would be too ambiguous to be efficiently applied 
during the auction short-form application process. The Commission 
proposes to modify the former defaulter rule generally to exclude a 
default or delinquency that was the subject of a legal or arbitration 
proceeding and was cured upon resolution of the proceeding. As in the 
Auction 97 Former Defaulter Waiver Order, the Commission does not 
intend to include within the scope of this exclusion any proceedings 
based on requests for waiver of a rule requiring payment of a debt or 
delinquency. The Commission seeks comment on whether its proposed 
exclusion addresses parties' concerns that debts such as these are not 
indicative of an applicant's financial credibility such that they 
should require an applicant to submit a larger upfront payment. Should 
the Commission also exclude debts cured after resolution of a ``good 
faith dispute,'' and if so, how could such ``good faith disputes'' be 
verified during the short-form application process, if necessary? Is 
the proposed general exclusion for debts cured upon resolution of a 
legal or arbitration proceeding necessary? In the alternative, should 
the Commission expect financially reliable applicants to pay 
outstanding defaults on Commission licenses, or delinquencies on any 
non-

[[Page 68189]]

tax debt owed to any federal agency, while legal or arbitration 
proceedings are pending, even if the applicant's liability or the 
amount of the debt is in dispute?
    96. In their petition, DIRECTV/EchoStar also maintain that the 
former defaulter rule should apply only to auction participants and 
those individuals or entities that are in a position to affect whether 
such applicants meet their auction-related financial responsibilities 
and urge the exclusion of debts/delinquencies relating to personal 
obligations of officers or directors of entities that are not the 
auction applicant, e.g., excluding personal obligations of officers and 
directors of the applicant's parent companies. More recent requests to 
amend the former defaulter rule do not include any suggestion to limit 
the scope of individuals and entities that an applicant needs to 
consider in evaluating its former defaulter status.
    97. In implementing the former defaulter provisions, the Commission 
has included the applicant's affiliates, its controlling interests, and 
affiliates of its controlling interests in determining if an applicant 
is a former defaulter. The Commission recognizes, however, that some of 
the individuals and entities that fall within these definitions may 
play no role in the applicant's general financial responsibilities and 
may not affect an applicant's ability to meet its financial obligations 
arising from an auction. Therefore, the Commission seeks comment on 
possible ways to amend the former defaulter provisions to apply only to 
individuals and entities that play a role in the applicant's financial 
responsibilities. If the Commission were to adopt DIRECTV/EchoStar's 
proposal to include only individuals or entities that are in a position 
to affect whether such applicants meet their auction-related financial 
responsibilities, how could it verify who would fit within such a 
category? In their request for waiver, DIRECTV/EchoStar suggest 
specifically not applying the rule to officers and directors of parent 
entities. Under such an option, however, what would prevent applicants 
from evading the rule by simply creating a shell company to be the 
auction applicant?
    98. Another option would be to limit the former defaulter inquiry 
to those individuals or entities that an applicant must disclose on its 
short-form application pursuant to 47 CFR 1.2112. For non-DEs, this 
would limit the inquiry to the applicant and disclosable interest 
holders under 47 CFR 1.2112(a). For DEs, the Commission could, under 
this option, continue to include those individuals and entities that 
are attributable to the applicant under 47 CFR 1.2112(b)(iv) in any 
consideration of an applicant's form defaulter status. As such, the 
Commission recognizes that, while such an option may exclude some 
individuals and entities not directly related to an applicant's auction 
finances, it could also expand the scope of individuals or entities 
that must be considered in some respects. The Commission could limit 
the inquiry to, for example, the real party or parties in interest in 
the applicant or application, which must be disclosed pursuant to 47 
CFR 1.2112(a)(1). Would this option capture the individuals and 
entities that are in a position to affect whether an applicant meets 
its auction-related financial responsibilities? Would excluding 
officers and directors not otherwise covered by 47 CFR1.2112(a)(1) be 
inconsistent with the Commission's policy to attribute them for 
purposes of evaluating eligibility for designated entity bidding 
credits in light of their potential ability to influence the management 
or operation of the applicant?
    99. Finally, the Commission seeks comment as to other possible ways 
to limit the scope of the former defaulter rule. For example, the 
Commission could define the rules to include only defaults or 
delinquencies related to its auction payments, or defaults or 
delinquencies on debt owed only to the Commission as opposed to those 
owed on other government non-tax debt, such as student loans. The 
Commission notes, however, that such further limitations may not be 
necessary given the other limitations that it proposes.

B. Commonly Controlled Entities

    100. The Commission proposes to codify an established competitive 
bidding procedure that prohibits the same individual or entity from 
filing more than one short-form application. Additionally, the 
Commission proposes a new rule that would prevent entities that are 
exclusively controlled by a single individual or set of individuals 
from qualifying to bid on licenses in the same or overlapping 
geographic areas in a specific auction on more than one short-form 
application.
    101. Background. The Commission's competitive bidding procedures 
have long prohibited the same individual or entity from submitting 
multiple short-form applications in any auction. This restriction 
prevents duplicative filings and may avert anticompetitive bidding 
behavior.
    102. There is currently no similar procedure for commonly 
controlled entities. The competitive bidding rules and procedures 
currently contain no explicit prohibition on commonly controlled 
entities participating in the same auction and bidding on the same 
licenses. Several years ago, the Commission declined to set aside the 
results of an auction based on allegations relating to the 
participation of separate applicants that were commonly controlled. In 
that decision, the Commission acknowledged that auction participation 
by commonly controlled applicants could serve legitimate business 
purposes if such entities have different business plans, financing 
requirements, or marketing needs; however, it noted that there could be 
risks inherent in allowing commonly controlled bidders to participate 
in an auction. See Petition for Reconsideration and Motion for Stay of 
Paging Systems, Inc., Memorandum Opinion and Order, 25 FCC Rcd 4036 
(2010).
    103. Discussion. The Commission proposes to amend its competitive 
bidding rules to codify its restriction on the filing of multiple 
auction applications by the same individual or entity and to adopt a 
new rule that would prevent entities that are controlled exclusively by 
the same single individual or set of individuals from qualifying to bid 
based on multiple auction applications for the same or overlapping 
geographic license areas. By proposing these amendments to its Part 1 
competitive bidding rules, the Commission seeks to improve the 
transparency and efficiency of the auction process, by making clearer 
who the qualified bidders actually are and ensuring against the 
potential for anticompetitive auction behavior.
    104. Duplicate auction applications. The Commission proposes to 
amend 47 CFR 1.2105 to prohibit the same individual or entity from 
filing more than one short-form application for an auction. The 
Commission observes that in contexts other than competitive bidding, 
its rules already limit repetitious or conflicting applications. 
Prohibiting the same individual or entity from filing multiple 
applications to participate in an auction protects the Commission 
against the burden of duplicative, repetitious or conflicting 
applications. Moreover, in this context, such applications raise 
potential concerns that duplicate filers may be able to manipulate the 
auction process--using, for example, identical bids or multiple 
activity waivers--to pursue potentially anticompetitive ends. The 
Commission seeks comment on this proposal. Are there any specific 
reasons the Commission should allow for the filing of more than a 
single short-form

[[Page 68190]]

application from the same individual or entity? Commenters should 
describe any public interest benefits to support their positions.
    105. Applications by entities exclusively controlled by the same 
individual or set of individuals. The Commission also proposes to adopt 
a new rule to provide that where entities are under the common, 
exclusive control of a single individual or set of individuals (i.e., a 
single individual or same set of individuals is the exclusive 
controlling interest of more than one entity) only one short-form 
application from such entities could become qualified to participate 
with respect to any particular geographic license area or overlapping 
areas. In defining the entities that would be subject to this rule, the 
Commission proposes to use the concepts of ``control'' or ``controlling 
interest'' from 47 CFR 1.2110, which also applies by its terms to DEs. 
Even when applicants are not identical, if more than one applicant is 
under the exclusive control of a single individual or set of 
individuals, such common control may allow the controlling individual 
or set of individuals to attempt to gain advantages in the bidding 
process based on certain coordinated bidding actions (e.g., tied bids, 
activity waivers). While such entities may have different business 
plans, financing, accounting, non-controlling interest holders or 
minority investors, if they are under exclusive control of a single 
individual or set of individuals, under the Commission's proposal those 
entities could not become qualified to bid in an auction with respect 
to the same or overlapping geographic license areas. The Commission 
seeks comment on this proposal and on specific alternatives to address 
its concerns.
    106. Multiple applicants under the common control of a single 
individual or set of individuals may coordinate their bidding actions 
in ways not available to a single bidder, and may, in some cases, 
derive some advantage from doing so. For example, such multiple 
applicants would have more activity waivers to use to ensure that the 
auction remains open, or would be able to submit identical bids on a 
license in ways intended to exploit auction bidding procedures. In 
addition, such multiple applicants could potentially coordinate their 
bidding to gain some advantage in the context of random tie-breakers or 
through increasing the bidding activity on a single license in order to 
raise minimum acceptable bids more quickly through application of the 
exponential smoothing formula.
    107. Further, the mere presence of commonly controlled applicants 
making identical bids in a single auction may damage the transparency 
of the auction process. For example, the placing of multiple identical 
bids by commonly controlled applicants may mislead other bidders about 
the extent of bidding competition, especially in an anonymous bidding 
auction where competitors are unable to discern whether bids are placed 
by commonly controlled applicants or independent competitors. The 
Commission anticipates that these and other potentially problematic 
behaviors could be curbed by requiring such applicants to participate 
as a single applicant with respect to any particular geographic license 
area or overlapping areas.
    108. Do commenters share the Commission's concern that the 
participation of commonly controlled applicants in an auction 
potentially undermines evenhandedness and transparency in the auction 
process? Commenters opposing the Commission's proposals should indicate 
how codifying its existing auction procedure and/or adopting its new 
proposed rule would harm the efficiency or undermine the 
competitiveness of the Commission's current auction process. The 
Commission notes that to the extent that the commonly controlled 
entities have an interest in holding licenses won at auction 
separately, such entities might consider assigning the licenses to 
related entities in the secondary market. Are there legitimate business 
reasons for filing these types of applications that the Commission has 
failed to consider that could be undermined by its proposal?

C. Joint Bidding

    109. The Commission initiates a review of its rules and policies 
governing joint bidding and other arrangements in order to ensure that 
they fulfill its statutory objectives, given the changes in the mobile 
wireless marketplace since the Commission's initial adoption of its 
bidding rules two decades ago, and the increasing importance of 
spectrum for service providers to meet consumer demand for mobile 
wireless services. The Commission's goal in reviewing these rules and 
policies is to ensure that they preserve and promote competition in the 
mobile wireless marketplace and facilitate competition among bidders at 
auction, while providing potential bidders with greater clarity 
regarding the types of joint bidding arrangements that would be 
permissible.
    110. Consistent with the Commission's commitment in the Mobile 
Spectrum Holdings Report and Order, it seeks to develop a record on how 
joint bidding and other arrangements affect competition in the mobile 
wireless marketplace, and the appropriate policies and procedures for 
substantive competitive review of joint bidding. Policies Regarding 
Mobile Spectrum Holdings; Expanding the Economic and Innovation 
Opportunities of Spectrum Through Incentive Auctions, 79 FR 39977, Jul. 
11, 2014 (Mobile Spectrum Holdings Report and Order). In that regard, 
the Commission notes that the scope of its inquiry here--unlike its 
other proposals in the NPRM applies only to joint bidding and other 
arrangements in auctions of licenses likely to be used for mobile 
telephony/mobile broadband services.
    111. To best serve the public interest and preserve and promote 
robust competition, the Commission also proposes to adopt policies 
tailored to the characteristics of joint bidding and other arrangements 
and the likely competitive effects on the mobile wireless marketplace. 
Specifically, the Commission tentatively concludes that it would best 
serve the public interest to retain the current rules governing joint 
bidding arrangements among non-nationwide providers and to prohibit 
joint bidding arrangements among nationwide providers. In addition, the 
Commission seeks comment on whether it should revise any of its current 
rules as applied to arrangements between nationwide providers and other 
entities, including its rules governing short-form applications. 
Further, the Commission seeks comment on whether any revisions to its 
rules governing long-form applications are necessary in light of its 
consideration of the potential harms and benefits of joint bidding and 
other arrangements.
    112. Background. Rules and Policies Governing Joint Bidding. In 
1994, the Commission adopted rules to serve the objectives of the Act 
by preventing parties, especially the largest firms, from agreeing in 
advance to bidding strategies that divide the market according to their 
strategic interests and disadvantage other bidders. See Implementation 
of Section 309(j) of the Communications Act--Competitive Bidding, 59 FR 
22980, May 4, 1994 (Competitive Bidding Second Report and Order). The 
Commission also sought to help ensure that the government receives a 
fair market price for the use of the spectrum. In the Competitive 
Bidding Second Report and Order, the Commission further concluded that 
adopting safeguards to prevent collusive behavior

[[Page 68191]]

among bidders would help ensure prompt delivery of services (including 
to rural areas), rapid deployment of new services and technologies, 
development of competitive markets, and wide access to a variety of 
services. Moreover, the Commission observed that collusive conduct 
among bidders could prevent the formation of a competitive post-auction 
market structure. At the same time, the Commission recognized that if 
anticollusion rules are too strict or are not sufficiently clear, they 
could prevent the formation of efficiency enhancing bidding consortia 
that pool capital and expertise and reduce entry barriers for small 
firms and other entities that might not otherwise be able to compete in 
the auction process.
    113. The Commission concluded that, in most cases, the number of 
bidders likely to participate in the auction, auction design 
safeguards, and existing antitrust law would effectively deter 
collusion. However, the Commission also adopted certain measures to 
help ensure collusion would not jeopardize the competitiveness of the 
auction process. Importantly, the Commission found these safeguards 
sufficient in the context of other competition-related determinations 
it had made regarding the initial licensing of Broadband PCS licenses 
through competitive bidding. Specifically, the Commission had set a 
limit on the amount of broadband PCS spectrum that the incumbent 
cellular licensees in each market could acquire at the upcoming PCS 
auctions as well as a separate limit on the amount of such spectrum 
that any bidder could acquire at the upcoming Broadband PCS auctions. 
In 1991, the Commission had adopted a cellular cross-interest rule that 
substantially limited any affiliation between the two cellular 
licensees in an area.
    114. With relatively minor changes adopted since 1994, the 
Commission's current rules allow potential participants in a Commission 
auction, prior to the short-form application deadline, to enter into 
various kinds of agreements related to the licenses being auctioned as 
long as the applicants disclose on the short-form application on both 
the existence (but not the terms and conditions) of any joint bidding 
arrangements and the real-parties-in-interest to the application. After 
the short-form application deadline, applicants may not enter into any 
additional arrangements regarding the amount of bids, bidding 
strategies or particular licenses on which they will or will not bid, 
subject to certain limited exceptions, and may not communicate bidding 
information to other applicants for licenses in any of the same 
geographic areas unless those other applicant(s) were identified on the 
short-form application. Post-auction, winning bidders must disclose on 
the long-form application the specific terms, conditions, and parties 
involved in any agreement into which the applicant has entered, and the 
winning bidder must be the same entity that files the long-form 
application.
    115. The Commission notes that it has always made clear with 
respect to its rules and policies governing joint bidding that conduct 
that is permissible under the Commission's Rules may be prohibited by 
the antitrust laws, review under which is subject to other and 
differing standards under the Sherman and Clayton Acts. Specifically, 
joint bidding arrangements under section 1 of the Sherman Act are 
prohibited if they constitute a ``contract, combination . . ., or 
conspiracy, in restraint of trade,'' whereas joint bidding arrangements 
subject to section 7 of the Clayton Act are prohibited if their effect 
``may be substantially to lessen competition, or to tend to create a 
monopoly.'' The Commission's auction procedures public notices for 
specific auctions caution that compliance with the disclosure 
requirements of 47 CFR 1.2105(c) will not insulate a party from 
enforcement of the antitrust laws. Bidders who are found to have 
violated the antitrust laws or the Commission's rules in connection 
with their participation in the competitive bidding process may be 
subject to forfeiture, prohibition from auction participation, and 
other sanctions.
    116. Evolution of the Mobile Wireless Marketplace. The Commission 
adopted these joint bidding rules 20 years ago when the mobile wireless 
industry was at a nascent stage: For example, at the end of 1994, the 
nationwide penetration rate for mobile wireless service was 
approximately 9 percent, compared to 106 percent at the end of 2011. 
Moreover, when the Commission adopted its joint bidding rules in 1994, 
it had yet to hold even the first of the numerous auctions it has 
conducted in its history of licenses likely to be used for mobile 
telephony/mobile broadband services.
    117. The Commission's competitive bidding rules, as adopted in 
1994, reflected the developing nature of the mobile wireless industry, 
as the Commission sought to promote economic growth in the ``new 
wireless services'' and to enhance access to telecommunication services 
by encouraging broad participation in the provision of spectrum-based 
services and ensuring that spectrum-based services are available to a 
wide range of consumers. In 1998, the Commission observed again that 
much of the mobile telephone market was still in its infancy.
    118. Since 1994, and particularly in the past decade, the 
marketplace has changed significantly. It is no longer nascent. 
Consumer demand for wireless services has exploded, with the industry 
focus changing from the provision of mobile voice services to the 
provision of mobile broadband services. The adoption of smartphones and 
tablet computers, and the widespread use of mobile applications, 
combined with the increasing deployment of high-speed 3G and now 4G 
technologies, is driving significantly more intensive use of mobile 
networks and increasing providers' need for spectrum. In addition, 
during the past decade, the wireless marketplace has undergone 
significant consolidation, with a reduction from six to four nationwide 
providers, an increase in the market share of the major providers, and 
a smaller number of regional and local providers. Indeed, by December 
2013, the top four facilities-based nationwide providers had combined 
market share of approximately 97 percent of subscribers. See UBS 
Investment Research, US Wireless 411: Version 51, Mar. 18, 2014, Figure 
21 at 14.
    119. Consistent with the evolution of the mobile wireless 
marketplace and the Commission's statutory directives and policy goals, 
it continues to strive to adopt policies to preserve and promote 
consumer choice and competition among multiple service providers, 
promote the efficient and intensive use of spectrum, maximize economic 
opportunity, and foster the deployment of innovative technologies. For 
instance, the Commission recently concluded in the Mobile Spectrum 
Holdings Report and Order that any mobile spectrum limit on the initial 
licensing of a spectrum band through competitive bidding should be 
articulated and applied prior to the start of the auction in order to 
provide bidders greater certainty regarding how many licenses they 
would be permitted to acquire.
    120. In the Mobile Spectrum Holdings Report and Order, the 
Commission established a market-based spectrum reserve for the 
Incentive Auction of up to 30 megahertz in each license area, 
recognizing that the Incentive Auction represents a once-in-a-
generation opportunity to auction significant amounts of greenfield 
low-band spectrum. The Commission limited nationwide providers from 
bidding on reserved spectrum in Partial Economic Areas (PEAs) where 
they hold 45 megahertz or more of suitable and

[[Page 68192]]

available below-1-GHz spectrum. By contrast, the Commission permitted 
regional and local service providers to bid on reserved spectrum in all 
PEAs, observing that non-nationwide service providers present a 
significantly lower risk of effectively denying their rivals access to 
low band spectrum to foreclose competition or to raise rivals' costs 
because of their relative lack of resources. At the same time, in the 
Mobile Spectrum Holdings Report and Order, the Commission placed no 
limitation on the amount of spectrum that bidders could acquire in the 
AWS-3 auction.
    121. In the Mobile Spectrum Holdings Report and Order, the 
Commission also stated it would consider in a further notice of 
proposed rulemaking possible changes to certain auction rules relating 
to joint bidding arrangements and strategies in the Incentive Auction. 
The Commission here undertakes a reexamination of its auction rules on 
these issues, including but not limited to their application in the 
Incentive Auction.
    122. Discussion. In light of the changes in the mobile wireless 
marketplace since the Commission adopted the current joint bidding 
rules 20 years ago, the Commission reviews its rules on joint bidding 
and other arrangements to ensure that the potential competitive harms 
that may arise out of such arrangements do not outweigh any public 
interest benefits. To best serve the public interest and preserve and 
promote robust competition into the foreseeable future, the Commission 
seeks to further its statutory objectives by adopting policies tailored 
to the type of arrangement and its likely competitive effect on the 
conduct of the auction and on the mobile wireless marketplace. 
Specifically, the Commission tentatively concludes that it would serve 
the public interest to retain the current rules governing joint bidding 
and other arrangements among non-nationwide providers, but to prohibit 
certain joint bidding and other arrangements among nationwide 
providers. In addition, the Commission seeks comment on whether the 
Commission should revise any of its current rules as applied to 
arrangements between nationwide providers and other entities, including 
its rules governing short-form applications. Further, the Commission 
seeks comment on whether any revisions to its rules governing long-form 
applications are necessary in light of its consideration of the 
potential harms and benefits of joint bidding and other arrangements.
    123. For purposes of this proceeding, the Commission defines 
``joint bidding and other arrangements'' to include any bidding 
consortia, joint venture, partnership, or agreement, understanding, or 
other arrangement entered into relating to the competitive bidding 
process, including any agreement relating to post-auction market 
structure or operation. In light of the Commission's focus on promoting 
and preserving competition, it considers this definition to include not 
only arrangements among entities that apply to bid in an auction, but 
also arrangements between entities that apply to bid in an auction and 
those entities that do not, insofar as such arrangements have the 
potential to affect competition in the mobile wireless telephony/mobile 
broadband marketplace.
    124. Competitive Effects of Joint Bidding and Other Arrangements. 
When assessing the competitive effects of joint bidding and other 
arrangements, the Commission must ensure that its policies and rules 
facilitate access to spectrum in a manner that promotes competition to 
the benefit of consumers. As the Commission has found in the Mobile 
Spectrum Holdings Report and Order, in order for there to be robust 
competition, multiple competing service providers must have access to 
or hold sufficient spectrum to be able to enter the marketplace or 
expand output rapidly in response to any price increase, reduction in 
quality, or other competitive change that would harm consumer welfare.
    125. Joint conduct or competitor collaboration that is more limited 
in scope and does not result in a full integration of economic activity 
does not end all competition between participants post bidding and is 
analyzed differently from joint ventures that fully integrate the 
participants downstream competition. The latter, in certain 
circumstances, may be properly analyzed as a merger. Either type of 
competitor collaboration however may result in procompetitive benefits 
and/or anticompetitive effects.
    126. Because some joint bidding and other competitor collaborations 
contemplate competition among participants post auction, they raise the 
risk that the spectrum acquired through a winning bid will be allocated 
among the joint venture participants in a manner that could harm the 
public interest. Because the joint venture may be comprised of same 
market competitors, the arrangement may require proper safeguards to 
prevent the exchange of competitively sensitive price and output 
information, ensure independent decision making or otherwise avoid 
lessening competition among the participants in the downstream mobile 
wireless marketplace.
    127. Joint bidding and other arrangements, however, also have the 
potential to result in procompetitive benefits if they enable 
participation in auctions by those otherwise without sufficient 
financial resources to bid, or otherwise reduce entry costs into a 
geographic area or enable the joint bidders to compete more robustly 
against other competitors in the marketplace. For example, the pooling 
of capital resources could allow smaller providers to better exploit 
financial economies of scale and enter into bidding for geographic 
areas that otherwise would not have been accessible, which may be 
particularly important given the high capital costs of network 
deployment and spectrum acquisition.
    128. The Commission seeks comment on the foregoing analysis. The 
Commission's public interest review of applications for assignment of 
licenses through competitive bidding generally encompasses a review of 
the competitive effects of such assignments. In light of the changing 
marketplace and consistent with the Commission's recent emphasis in the 
Mobile Spectrum Holdings proceeding on the need for clearly-defined 
rules prior to the auction on the licenses a bidder would be permitted 
to acquire, the Commission seeks comment on how best to conduct its 
competitive review of joint bidding arrangements going forward.
    129. Given the potential benefits and harms of different types of 
arrangements, the Commission seeks comment on the rules and procedures 
that should govern its review of joint bidding and other arrangements 
entered into relating to the competitive bidding process, including any 
agreement relating to post-auction market structure or operation. In 
addition, the Commission seeks comment on whether the distinctions as 
to arrangements among non-nationwide providers, among nationwide 
providers, and between nationwide providers and other entities--provide 
an effective framework for addressing the relative harms and benefits 
of joint bidding arrangements in light of its goal of providing 
clearly-defined rules for potential bidders in auctions. Further, the 
Commission seeks comment on whether these rules or procedures should 
differ in instances in which it has adopted a mobile spectrum holding 
limit for the initial licensing of a particular spectrum band through 
competitive bidding and, if so, how the type of mobile spectrum holding 
limit

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and the statutory goals applicable to the particular auction should 
affect these rules and procedures.
    130. For purposes of the joint bidding rules, the Commission 
proposes to define ``nationwide'' providers to include the providers in 
the U.S. with networks that cover a majority of the population and land 
area of the country--currently, Verizon Wireless, AT&T, Sprint and T-
Mobile--with other providers being considered ``non-nationwide'' 
providers. The Commission seeks comment on how this definition of 
nationwide providers should take into account entities partially owned 
by Verizon Wireless, AT&T, Sprint and T-Mobile. Should the definition 
include entities that are ``affiliates'' (as that term is defined in 
its rules for attributing revenues to small businesses) of the four 
providers, entities with spectrum holdings that would be attributable 
to these four providers (as defined by its mobile spectrum holdings 
rules), or a category of entities defined in some other manner?
    131. Arrangements among Non-Nationwide Providers. Considering the 
current competitive landscape and the need for access to spectrum by 
non-nationwide providers, the Commission tentatively concludes that its 
current rules are sufficient to prevent any potential competitive harm 
from outweighing the likely public interest benefits associated with 
allowing joint bidding and other arrangements among non-nationwide 
providers. For example, joint bidding and other arrangements among non-
nationwide providers can better overcome the challenging capital costs 
of license acquisition to maintain or increase their competitive 
presence to the benefit of American consumers. In light of the 
relatively small size and scope of non-nationwide providers following 
substantial consolidation since the Commission's current rules were 
adopted, and the increased costs of spectrum and other capital 
expenditures necessary to provide mobile broadband service over large 
license areas, the Commission believes it is highly unlikely in most 
circumstances that such arrangements would lead to competitive harm or 
otherwise harm the public interest. Moreover, in the Mobile Spectrum 
Holdings Report and Order, the Commission observed that non-nationwide 
service providers presented a significantly lower risk of effectively 
denying their rivals access to spectrum in order to foreclose 
downstream competition or to raise rivals' costs because of their 
relative lack of resources. The Commission seeks comment on these views 
in connection with the competitive impact of joint bidding and other 
arrangements.
    132. Commenters proposing any changes to the Commission's joint 
bidding rules for arrangements among non-nationwide providers should 
discuss why such changes are necessary to address particular 
competitive concerns and whether, on balance, such changes would ensure 
that the procompetitive benefits and bidding flexibility arising out of 
its current rules remain in place. In addition, the Commission seeks 
comment on whether any types of arrangements between non-nationwide 
service providers and potential new entrants would warrant closer 
examination of the competitive effects and, if so, whether any changes 
to its joint bidding rules are necessary to address any such scenarios.
    133. Arrangements among Nationwide Providers. In contrast, the 
Commission tentatively concludes that joint bidding arrangements 
between or among nationwide providers likely would raise competitive 
concerns, as these arrangements would have the potential to serve as a 
vehicle for anticompetitive conduct by altering post auction incentives 
to compete, and thus, would outweigh any public interest benefits from 
such arrangements such as the attainment of scale or scope economies. 
As the Commission noted in the Mobile Spectrum Holdings Report and 
Order, the mobile wireless marketplace today is characterized by 
factors--such as high market concentration, high margins and high 
barriers to entry--that increase the potential for anticompetitive 
conduct. In particular, by year end 2013, the top four facilities-based 
nationwide providers had a combined market share, as measured by the 
number of subscribers or mobile wireless service revenues, of at least 
97 percent.
    134. Moreover, in light of these factors, joint bidding 
arrangements among nationwide providers would reduce the participants' 
ability or incentive to compete independently, which would lessen 
competition in the downstream mobile wireless marketplace and could 
harm American consumers by increasing the price or reducing the quality 
of mobile wireless services. Because of these greater risks of public 
interest harms, the Commission believes it is unlikely that the 
potential benefits of joint bidding arrangements among nationwide 
providers would outweigh these risks. The Commission seeks comment on 
this analysis.
    135. Further, as the Commission has emphasized recently, it is 
important to provide bidders with certainty and clarity in advance of 
the start of an auction regarding whether any limitations on their 
ability to acquire licenses would apply. In that regard, the Commission 
observes that post-auction enforcement of antitrust law--envisioned as 
a safeguard by the Commission in 1994--may not be as well suited to 
preventing anti-competitive joint bidding arrangements as the bright-
line prohibition the Commission proposes herein. In addition, the 
Commission notes that, while in 1994 bright-line prohibitions on 
certain types of bidding arrangements might not have been ideally 
suited for an industry at a nascent stage, the mobile wireless industry 
today is much more mature than it was in 1994. Moreover, the limit set 
by the Commission at that time on the amount of broadband PCS spectrum 
that the two incumbent cellular licensees in each market could acquire 
at the auctions effectively eliminated the incentives of those 
providers to enter into joint bidding arrangements, which would have 
raised significant competitive concerns.
    136. Accordingly, the Commission tentatively concludes that it 
would best serve the public interest at this time to have a bright-line 
rule that would prohibit joint bidding and other arrangements among 
nationwide providers, including agreements to participate in an auction 
through a newly formed joint entity, given that such arrangements have 
a greater potential to harm the public interest by negatively affecting 
the competitive bidding process and downstream competition in the 
provision of mobile wireless services. The Commission seeks comment on 
the costs and benefits of prohibiting applications to participate in an 
auction that involve joint bidding and other arrangements, such as a 
new joint venture, between two or more nationwide providers. The 
Commission notes that its tentative conclusion to prohibit joint 
bidding and other arrangements between two nationwide providers would 
also include prohibiting arrangements among two nationwide providers, 
together with other entities.
    137. Arrangements between a Nationwide Provider and Other Entities. 
The Commission seeks comment on what policies and procedures should 
apply to bidding arrangements between a single nationwide provider and 
other entities, either non-nationwide providers or potential new 
entrants, in order to promote competition. Under what circumstances 
would these arrangements raise competitive concerns? Under what 
circumstances

[[Page 68194]]

would these arrangements likely result in public interest benefits, 
such as the expansion of mobile wireless services in additional 
geographic areas and increasing access to capital by more applicants to 
acquire spectrum? Should any limits apply to these types of 
arrangements, or should the Commission continue to review these types 
of arrangements on a case-by-case basis?
    138. If the Commission reviews these types of arrangements on a 
case-by-case basis, what process and factors should it use in assessing 
the competitive implications? The Commission's current approach for 
reviewing joint ventures in the context of assignment or transfer of 
licenses involves the determination of the appropriate market 
definitions and the likelihood of public interest harm from the 
incentive and ability of the joint venture to act anticompetitively, 
either unilaterally or in concert with other service providers. Should 
a similar approach apply to its competitive review of joint bidding 
arrangements? How should a case-by-case approach to review joint 
bidding arrangements be designed to provide clarity to potential 
bidders? What are the costs and benefits of Commission review of joint 
bidding arrangements on a case-by-case basis, including the 
administrative cost and burden to make such a case-by-case 
determination prior to the start of an auction?
    139. To make case-by-case determinations regarding arrangements 
between nationwide providers and other entities, should the Commission 
modify any of its current rules that apply to the pre-auction review 
process? In particular, should the terms and conditions of such joint 
bidding arrangements be disclosed prior to the auction, in the short-
form application, or even prior to the filing of that application? If 
so, are there changes to its rules or procedures that would be 
necessary to protect any confidential information? If the deadline for 
disclosure of terms and conditions is in advance of the short-form 
application deadline, how would this process be affected by the rules 
prohibiting certain types of communications? Commenters on this issue 
should include any costs or benefits to changing the rules and 
procedures regarding the disclosure of a joint bidding requirement.
    140. If the Commission were to make a determination that the 
potential harms associated with a particular joint bidding arrangement 
outweigh the potential benefits, what remedies should it impose either 
at the short-form application stage or the long-form application stage? 
For example, should the Commission find that a short-form application 
is unacceptable or incomplete and bar the applicant from bidding in the 
auction? Should it find that an applicant at the long-form stage is 
unqualified to hold the license and deemed in default? Commenters 
proposing particular remedies should discuss the costs and benefits of 
such remedies.
    141. Other Issues. The Commission's current rules require the 
entity that filed the short-form application to be the same entity that 
files the long-form application seeking consent to acquire a new 
license. The Commission's public interest review of long-form 
applications generally encompasses a review of the competitive effects 
of such assignments, as would its review of a secondary market 
transaction to disseminate licenses from a joint entity to its 
individual members. The Commission seeks comment on whether it is 
necessary to modify its current joint bidding rules, standards, and 
procedures that apply to the post-auction review of long-form 
applications or review of a secondary market transaction to disseminate 
licenses from a joint entity to its individual members, in order to 
promote competition in the mobile wireless marketplace.
    142. Further, the Commission proposes to clarify a provision under 
47 CFR 1.2107(g) which permits DEs to participate in an auction as a 
non-legally-recognizable consortium, with a requirement that each 
member of the consortium file separate applications for licenses 
covered by the winning bids of the consortium. This provision is 
applicable only in the DE context, where there are special provisions 
regarding the attribution of revenues for purposes of qualifying for 
bidding credits. The Commission seeks comment on this clarification.

D. Miscellaneous Part 1 Revisions

    143. Background. Part 1, Subpart Q, of the Commission's rules 
generally governs competitive bidding proceedings to assign spectrum 
licenses. The Commission proposes changes to two of its part 1, Subpart 
Q, rules, 47 CFR 1.2111 and 1.2112. The Commission also intends, when 
it resolves the issues raised in the Competitive Bidding NPRM, to 
resolve long standing petitions for reconsideration to its part 1 
competitive bidding rules.
    144. Discussion. 47 CFR 1.2111. The Commission proposes to repeal 
the first two paragraphs of 47 CFR 1.2111. It proposes to repeal 47 CFR 
1.2111(a), under which applicants for assignments or transfers during 
the first three years of a license term must provide the Commission 
with detailed contract and marketing information. The Commission 
believes that this requirement places a burden on licensees without a 
corresponding benefit to the Commission or the public. The Commission 
also proposes to repeal 47 CFR 1.2111(b), a never-used unjust 
enrichment payment requirement for broadband PCS C and F block set-
aside licenses.
    145. 47 CFR 1.2112. The Commission's proposed changes to this rule 
would clarify the auction application requirements for reporting an 
entity's percentage ownership in the applicant and in FCC-regulated 
entities. The Commission proposes further changes to specify 
application requirements for bidding consortia. Finally, the Commission 
proposes to correct two errors in the rule caused by the inadvertent 
substitution of an incorrect paragraph in the Code of Federal 
Regulations publication of the rule for the correct one published in 
the Federal Register summary of the DE Second Report and Order. Compare 
71 FR 26245, 26253, May 4, 2006, with 47 CFR 1.2112, Oct. 1, 2006. The 
first error was the addition of a requirement that DE short-form 
applicants list and summarize all their agreements that support their 
DE eligibility, a requirement that the Commission intended to apply 
only to long-form applicants. The Commission proposes to delete the 
requirement with respect to the short form. The second error was the 
deletion of a requirement that DE short-form applicants list the 
parties with which they have lease or resale arrangements for any of 
the DE applicants' spectrum licenses. The Commission proposes to 
reinstate this requirement.
    146. The Commission seeks comment on these proposals.

E. Initial Regulatory Flexibility Analysis

    147. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) concerning the possible significant 
economic impact on small entities by the policies and rules proposed in 
the Competitive Bidding NPRM. Written public comments are requested for 
this IRFA. Comments to the IRFA must be identified as responses to the 
IRFA and filed by the deadlines for comments on the Competitive Bidding 
NPRM in the Dates section. The Commission will send a copy of the 
Competitive Bidding NPRM, including the IRFA, to the Chief

[[Page 68195]]

Counsel for Advocacy of the Small Business Administration.
1. Need for, and Objectives of, the Proposed Rules
    148. The NPRM proposes to: (1) Provide small businesses greater 
opportunity to participate in the provision of a wide range of 
spectrum-based services by modifying the Commission's eligibility 
requirements, updating the standardized schedule of small business 
sizes, and eliminating duplicative reporting requirements, while also 
seeking comment on strengthening the Commission's rules to prevent the 
unjust enrichment of ineligible entities; (2) Amend the Commission's 
former defaulter rule to balance concerns that the current rule is 
overly broad with the Commission's continued need to ensure that 
auction bidders are financially reliable; (3) Codify an established 
competitive bidding procedure that prohibits the same individual or 
entity from becoming qualified to bid on the basis of more than one 
short-form application in a specific auction; (4) Prevent entities that 
are exclusively controlled by a single individual or set of individuals 
from becoming qualified to bid on overlapping licenses based on more 
than one short-form application in a specific auction; and, (5) Retain 
the current rules governing joint bidding arrangements among non-
nationwide providers and prohibit joint bidding arrangements among 
nationwide providers. The NPRM also provides notice of the Commission's 
intention to resolve long standing petitions for reconsideration and 
proposes necessary clean-up revisions to the Commission's part 1 
competitive bidding rules.
    149. With respect to small businesses, the Commission's proposals 
seek to update its rules to reflect that small businesses need greater 
opportunities to gain access to capital so that they may have an 
opportunity to participate in the provision of spectrum-based services 
in today's communications marketplace. In the past decade, the rapid 
adoption of smartphones and tablet computers and the widespread use of 
mobile applications, combined with the increasing deployment of high-
speed 3G and now 4G technologies, have driven significantly more 
intensive use of mobile networks. This progression from the provision 
of mobile voice services to the provision of mobile broadband services 
has increased the need for access to spectrum. In addition, in the past 
decade, the number of small and regional mobile wireless service 
providers has significantly decreased, yet regional and local service 
providers continue to offer consumers additional choices in the areas 
they serve. The Commission anticipates that by revising its rules to 
allow small businesses to take advantage of the same opportunities to 
utilize their spectrum capacity and gain access to capital as those 
afforded to larger licensees, the Commission can better achieve its 
statutory directives. Nonetheless, the Commission remains mindful of 
its obligation to prevent unjust enrichment of ineligible entities.
2. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Will Apply
    150. The RFA directs the Commission to provide a description of 
and, where feasible, an estimate of the number of small entities that 
will be affected by the proposed rules, if adopted. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
government jurisdiction.'' In addition, the term ``small business'' has 
the same meaning as the term ``small business concern'' 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) satisfies any additional criteria established by the 
SBA.
    151. Small Businesses, Small Organizations, and Small Governmental 
Jurisdictions. If adopted, the NPRM's proposals may, over time, affect 
small entities that are not easily categorized at present. The 
Commission therefore describes three comprehensive, statutory small 
entity size standards under 5 U.S.C. 601(4). First, nationwide, there 
are a total of approximately 27.5 million small businesses, according 
to the SBA. In addition, a ``small organization'' is generally ``any 
not-for-profit enterprise which is independently owned and operated and 
is not dominant in its field.'' Nationwide, as of 2007, there were 
approximately 1,621,315 small organizations. Finally, the term ``small 
governmental jurisdiction'' is defined generally as ``governments of 
cities, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau (hereinafter, Census Bureau or Census) data for 2011 indicate 
that there were 89,476 local governmental jurisdictions in the United 
States. The Commission estimates that, of this total, as many as 88,506 
entities may qualify as ``small governmental jurisdictions.'' Thus, the 
Commission estimates that most governmental jurisdictions are small.
    152. Licenses Assigned by Auction. The changes and additions to the 
Commission's rules proposed in the NPRM are of general applicability to 
all auctionable services. Accordingly, the IRFA provides a general 
analysis of the impact of the proposals on small businesses rather than 
a service-by-service analysis. The number of entities that may apply to 
participate in future Commission spectrum auctions is unknown. 
Moreover, the number of small businesses that have participated in 
prior spectrum auctions has varied. As a general matter, the number of 
winning bidders that qualify as small businesses at the close of an 
auction does not necessarily represent the number of small businesses 
currently in service. Also, the Commission does not generally track 
subsequent business size unless, in the context of changes in control, 
changes in material relationships or assignments or transfers, unjust 
enrichment issues are implicated.
    153. Wireless Telecommunications Carriers (except satellite). The 
Census Bureau defines this category to include establishments engaged 
in operating and maintaining switching and transmission facilities to 
provide communications via the airwaves. Establishments in this 
industry have spectrum licenses and provide services using that 
spectrum, such as cellular phone services, paging services, wireless 
Internet access, and wireless video services. The SBA has developed a 
small business size standard for Wireless Telecommunications Carriers 
(except satellite). Under the SBA's standard, a business is small if it 
has 1,500 or fewer employees. For this category, Census data for 2007 
show that there were 1,383 firms that operated for the entire year. Of 
this total, 1,368 firms (approximately 99%) had employment of 999 or 
fewer employees and only 15 (approximately 1%) had employment of 1,000 
employees or more. Thus under this category and the associated small 
business size standard, the Commission estimates that the majority of 
wireless telecommunications carriers (except satellite) are small 
entities that may be affected by the NPRM's proposed actions.
    154. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (MDS) and Multichannel Multipoint Distribution 
Service (MMDS) systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the

[[Page 68196]]

Broadband Radio Service (BRS) and Educational Broadband Service (EBS) 
(previously referred to as the Instructional Television Fixed Service 
(ITFS)). In connection with the 1996 BRS auction, the Commission 
established a small business size standard as an entity that had annual 
average gross revenues of no more than $40 million in the previous 
three calendar years. The BRS auction resulted in 67 successful bidders 
obtaining licensing opportunities for 493 Basic Trading Areas (BTAs). 
Of the 67 auction winners, 61 met the definition of a small business. 
BRS also includes licensees of stations authorized prior to the 
auction. At this time, based on the Commission's review of licensing 
records, it estimates that of the 61 small business BRS auction 
winners, 48 remain small business licensees. In addition to the 48 
small businesses that hold BTA authorizations, there are approximately 
86 incumbent BRS licensees that are considered small entities (18 
incumbent BRS licensees do not meet the small business size standard). 
After adding the number of small business auction licensees to the 
number of incumbent licensees not already counted, there are currently 
approximately 133 BRS licensees that are defined as small businesses 
under either the SBA or the Commission's rules. In 2009, the Commission 
conducted Auction 86, the sale of 78 licenses in the BRS areas. The 
Commission established three small business size standards that were 
used in Auction 86: (i) An entity with attributed average annual gross 
revenues that exceeded $15 million and do not exceed $40 million for 
the preceding three years was considered a small business; (ii) an 
entity with attributed average annual gross revenues that exceeded $3 
million and did not exceed $15 million for the preceding three years 
was considered a very small business; and (iii) an entity with 
attributed average annual gross revenues that did not exceed $3 million 
for the preceding three years was considered an entrepreneur. Auction 
86 concluded in 2009 with the sale of 61 licenses. Of the 10 winning 
bidders, two bidders that claimed small business status won four 
licenses; one bidder that claimed very small business status won three 
licenses; and two bidders that claimed entrepreneur status won six 
licenses. The Commission notes that, as a general matter, the number of 
winning bidders that qualify as small businesses at the close of an 
auction does not necessarily represent the number of small businesses 
currently in service.
    155. In addition, the SBA's placement of Cable Television 
Distribution Services in the category of Wired Telecommunications 
Carriers is applicable to cable-based educational broadcasting 
services. Since 2007, the Census Bureau has defined Wired 
Telecommunications Carriers as follows: ``This industry comprises [of] 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies.'' 
Establishments in this industry use the wired telecommunications 
network facilities that they operate to provide a variety of services, 
such as wired telephony services, including VoIP services; wired 
(cable) audio and video programming distribution; and wired broadband 
Internet services. By exception, establishments providing satellite 
television distribution services using facilities and infrastructure 
that they operate are included in this industry. The SBA has developed 
a small business size standard for this category, which is: All such 
firms having 1,500 or fewer employees. Census data for 2007 shows that 
there were 3,188 firms that operated for the duration of that year. Of 
those, 3,144 had fewer than 1,000 employees, and 44 firms had more than 
1,000 employees. Thus under this category and the associated small 
business size standard, the majority of such firms can be considered 
small. In addition to Census data, the Commission's Universal Licensing 
System indicates that as of July 2014, there are 2,006 active EBS 
licenses. The Commission estimates that of these 2,006 licenses, the 
majority are held by non-profit educational institutions and school 
districts, which are by statute defined as small businesses.
    156. Television Broadcasting. As defined by the Census Bureau, this 
category ``comprises [of] establishments primarily engaged in 
broadcasting images together with sound. These establishments operate 
television broadcasting studios and facilities for the programming and 
transmission of programs to the public.'' The SBA has created the 
following small business size standard for Television Broadcasting 
firms: those having $38.5 million or less in annual receipts. The 
Commission has estimated the number of licensed commercial television 
stations to be 1,387. In addition, according to Commission staff review 
of the BIA/Kelsey, LLC's Media Access Pro Television Database on July 
30, 2014, about 1,276 of an estimated 1,387 commercial television 
stations (or approximately 92 percent) had revenues of $38.5 million or 
less. The Commission therefore estimates that the majority of 
commercial television broadcasters are small entities.
    157. The Commission notes, however, that in assessing whether a 
business concern qualifies as small, business (control) affiliations 
must be included. The Commission's estimates, therefore, likely 
overstates the number of small entities that might be affected by the 
NPRM's proposals because the revenue figure on which it is based does 
not include or aggregate revenues from affiliated companies. In 
addition, an element of the definition of ``small business'' is that 
the entity not be dominant in its field of operation. The Commission is 
unable at this time to define or quantify the criteria that would 
establish whether a specific television station is dominant in its 
field of operation. Accordingly, the estimate of small businesses to 
which rules may apply does not exclude any television station from the 
definition of a small business on this basis and is therefore possibly 
over-inclusive to that extent.
    158. In addition, the Commission has estimated the number of 
licensed noncommercial educational (NCE) television stations to be 395. 
These stations are non-profit, and therefore considered to be small 
entities.
    159. There are also 2,460 LPTV stations, including Class A 
stations, and 3,838 TV translator stations. Given the nature of these 
services, the Commission will presume that all of these entities 
qualify as small entities under the above SBA small business size 
standard.
    160. Radio Broadcasting. The SBA defines a radio broadcast station 
as a small business if such station has no more than $38.5 million in 
annual receipts. As defined by the Census Bureau, business concerns in 
this industry are those ``primarily engaged in broadcasting aural 
programs by radio to the public.'' According to review of the BIA/
Kelsey, LLC's Media Access Pro Radio Database as of July 30, 2014, 
about 11,332 (or about 99.9 percent) of 11,343 commercial radio 
stations have revenues of $38.5 million or less and thus qualify as 
small entities under the SBA definition. The Commission notes, however, 
that, in assessing whether a business concern qualifies as small, 
business (control) affiliations must be included. This estimate, 
therefore, likely overstates the number of small entities

[[Page 68197]]

that might be affected, because the revenue figure on which it is based 
does not include or aggregate revenues from affiliated companies.
    161. In addition, an element of the definition of ``small 
business'' is that the entity not be dominant in its field of 
operation. The Commission is unable at this time to define or quantify 
the criteria that would establish whether a specific radio station is 
dominant in its field of operation. Accordingly, the estimate of small 
businesses to which rules may apply does not exclude any radio station 
from the definition of a small business on this basis and therefore may 
be over-inclusive to that extent. Also, as noted, an additional element 
of the definition of ``small business'' is that the entity must be 
independently owned and operated. The Commission notes that it is 
difficult at times to assess these criteria in the context of media 
entities and the estimates of small businesses to which they apply may 
be over-inclusive to this extent.
3. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    162. Eligibility for Bidding Credits. The NPRM proposes changes to 
the Commission's process for evaluating small business eligibility for 
bidding credits. In particular, the NPRM proposes to repeal the AMR 
rule and tentatively concludes that the Commission should re-examine 
the need for the related decade-old policy that has limited small 
businesses seeking bidding credits to providing primarily retail, 
facilities-based service directly to the public with each of their 
licenses. Under the AMR, a small business applicant or licensee must 
automatically attribute to itself the gross revenues of any entity with 
which it has an ``attributable material relationship.'' An applicant or 
licensee has an AMR when it has one or more agreements with any 
individual entity for the lease (under either spectrum manager or de 
facto transfer leasing arrangements) or resale (including under a 
wholesale arrangement) of, on a cumulative basis, more than 25 percent 
of the spectrum capacity of any individual license held by the 
applicant or licensee. The NPRM seeks comment on the proposal to repeal 
the AMR rule, and the Commission's tentative conclusions regarding its 
need to re-evaluate its small business policy. Alternatively, the NPRM 
also seeks comment on retaining the Commission's small business policy 
and/or some variation of the AMR rule. For instance, the NPRM seeks 
comment on whether the Commission should adopt a rule with some other 
spectrum capacity use limit that would render an applicant ineligible 
for all current and future benefits.
    163. The NPRM also proposes to adopt a more flexible approach under 
which the Commission would evaluate small business eligibility on a 
license-by-license basis, using a two-pronged test. The first prong 
would evaluate whether an applicant meets the applicable small business 
size standard and is therefore eligible for benefits. To evaluate small 
business eligibility, the NPRM proposes to apply the Commission's 
existing controlling interest standard and affiliation rules to 
determine whether, an entity should be attributable based on whether 
that entity has de jure or de facto control of, or is affiliated with, 
the applicant's overall business venture. Once the first prong has been 
met, the Commission would evaluate eligibility under the second prong. 
Under the second prong, the NPRM proposes to determine an entity's 
eligibility to retain small business benefits on a license-by-license 
basis, based on whether it has maintained de jure and de facto control 
of the license. Under this proposed license-by-license approach, an 
entity will not necessarily lose its eligibility for all current and 
future small business benefits solely because of a decision associated 
with any particular license. Instead, while a small business might 
incur unjust enrichment obligations if it relinquishes de jure or de 
facto control of any particular license for which it claimed benefits, 
so long as the revenues of its attributable interest holders (i.e., the 
DE's affiliates, its controlling interests, and the affiliates of its 
controlling interests) continue to qualify under the relevant small 
business size standard, it could still retain its eligibility to retain 
current and future benefits on existing and future licenses. The NPRM 
seeks comment on the proposed two-pronged approach to evaluate 
attribution and establish eligibility for small business benefits.
    164. The NPRM also proposes to modify the Commission's secondary 
market rules to comport with the Commission's proposed approach to 
assessing small business eligibility. Specifically, the NPRM proposes 
to modify the language in 47 CFR 1.9020(d)(4) to remove the conflicting 
reference to the control standard of 47 CFR 1.2110 in order to make 
clear that small business lessors are fully subject to the same de 
facto control standard for spectrum manager leasing that applies to all 
other licensees. This modification should clarify that 47 CFR 1.9010 
alone defines whether a licensee, including a small business, retains 
de facto control of the spectrum that it leases to a spectrum lessee in 
the context of spectrum manager leasing.
    165. The NPRM seeks comment on whether any changes are appropriate 
to the Commission's unjust enrichment rules that provide additional 
safeguards by requiring repayment of small business benefits where an 
applicant loses eligibility for any reason. Specifically, the NPRM 
invites comment on, among other things, whether to adjust the 
Commission's current five year unjust enrichment schedule either in 
terms of the duration of the requirements or the percentages of the 
repayment schedule. The NPRM also seeks comment on how best the 
Commission can continue to scrutinize applications and proposed 
transactions to ensure that only eligible entities receive benefits, 
while not undermining the Act's directive to ensure that DEs are given 
the opportunity to participate in the provision of spectrum-based 
services. Specifically, the NPRM seeks comment on adopting a 10 year 
unjust enrichment repayment schedule similar to the one it adopted in 
2006, but vacated by the Third Circuit for lack of notice.
    166. Bidding Credits. The NPRM examines the primary way that the 
Commission facilitates participation by small businesses at auction 
through its bidding credit program. Bidding credits operate as a 
percentage discount on the winning bid amounts of a qualifying small 
business. By making the acquisition of spectrum licenses more 
affordable for new and existing small businesses, bidding credits 
facilitate their access to needed capital. The Commission establishes 
eligibility for bidding credits for each auctionable service, adopting 
one or more definitions of the small businesses that will be eligible. 
The Commission's small business definitions have been based on an 
applicant's average annual gross revenues over a three-year period. The 
NPRM proposes to increase the general schedule of size standards in its 
part 1 rules, measured by gross revenues, for purposes of determining 
an entity's eligibility for a bidding preference. Specifically, the 
NPRM proposes to revise the standardized schedule in 47 CFR 1.2110(f) 
as follows: (1) Businesses with average annual gross revenues for the 
preceding three years not exceeding $4 million would be eligible for a 
35 percent bidding credit; (2) Businesses with average annual gross 
revenues for the preceding three years not exceeding $20 million would 
be eligible for a 25 percent bidding credit; and (3) Businesses with 
average annual gross

[[Page 68198]]

revenues for the preceding three years not exceeding $55 million would 
be eligible for a 15 percent bidding credit. The NPRM also asks about 
alternative methods for setting new gross revenues thresholds.
    167. The NPRM seeks comment on whether to adopt a small business 
size standard based on criteria other than gross revenues, and proposes 
to continue the Commission's practice of evaluating which small 
business definitions will apply on a service-by-service basis, based 
upon associated capital requirements for a particular service. In 
addition, the NPRM seeks comment on whether to increase the bidding 
credit percentages (i.e., discount amounts) applicable to associated 
small business categories. The NPRM also seeks comment on whether any 
revisions the Commission adopts in this proceeding to its part 1 
schedule of small business size standards and associated bidding credit 
percentage levels should apply to the specific small business 
definitions and bidding credit percentages the Commission previously 
adopted for specific services, and, if so, how such revisions would be 
implemented. The NPRM proposes that any new rules adopted in this 
proceeding would apply to the 600 MHz band spectrum licenses to be 
offered in the BIA. In the BIA proceeding, the Commission adopted a 15 
percent bidding credit for small businesses (defined as entities with 
average annual gross revenues for the preceding three years not 
exceeding $40 million) and a 25 percent bidding credit for very small 
businesses (defined as entities with average annual gross revenues for 
the preceding three years not exceeding $15 million). Accordingly, the 
NPRM proposes to adopt, for the 600 MHz band, increases in the gross 
revenues thresholds associated with the 25 percent and 15 percent 
bidding credits that are consistent with the increased gross revenues 
thresholds proposed in the NPRM for the standardized schedule in the 
Commission's part 1 competitive bidding rules. The NPRM also seeks 
comment on whether the Commission should adopt a third small business 
bidding credit tier for the 600 MHz band that would provide a 35 
percent bidding credit to businesses with average gross revenues for 
the preceding three years not exceeding $4 million.
    168. Further, the NPRM seeks comment on the Commission's ability to 
consider bidding preferences for other types of DEs, entities that 
serve unserved/underserved areas or areas with persistent poverty, as 
well as persons or entities that have overcome disadvantages. The NPRM 
asks commenters to specifically address the statutory authority and 
judicial scrutiny issues that may limit the Commission's ability to 
entertain recommendations to alter the focus of its current bidding 
preferences by offering bidding preferences to entities based on other 
criteria than business size.
    169. The Commission expects that the questions raised in the NPRM 
will provide a meaningful opportunity to evaluate whether its bidding 
credit program continues to achieve the Commission's objectives. To 
facilitate the Commission's review, the NPRM seeks concrete, specific, 
data-driven feedback by commenters. In addition, the NPRM invites 
commenters to suggest other creative ideas that would promote the 
Commission's statutory objectives, but emphasizes that for any such 
proposals it is imperative to provide ample supporting evidence.
    170. DE Reporting Requirements. The NPRM proposes to eliminate the 
DE annual reporting requirement in 47 CFR 1.2110(n) and questions 
whether the value of the information provided in those reports 
outweighs the regulatory burden that the reporting obligation places on 
small businesses. The NPRM seeks comment on this proposal. Among other 
things, the NPRM asks if the Commission adopts the proposal to 
eliminate this annual reporting requirement, whether it should amend 
its rule for reporting eligibility events to require that a small 
business must list and summarize all existing agreements to provide 
context each time it reports a new eligibility event.
    171. MMTC White Paper Requests. In February 2014, MMTC submitted a 
White Paper detailing several policy recommendations to advance 
licensing of spectrum to minority- and women-owned businesses. The NPRM 
raises and addresses several of these issues and seeks comments on the 
other proposals that are not otherwise addressed in the NPRM, and to 
the extent that they relate to the Commission's competitive bidding 
rules. The NPRM observes that certain proposals appear to be outside 
the scope of this proceeding and others may not be needed in light of 
other changes proposed in the NPRM. Toward that end, the NPRM 
tentatively concludes that the following MMTC proposals are outside the 
scope of this proceeding, which is focused on the Commission's 
competitive bidding rules, and thus will not be addressed in the NPRM: 
(1) Incorporating diversity and inclusion in the Commission's public 
interest analysis of mergers and acquisitions and secondary market 
spectrum transactions; and (2) supporting increased funding for and 
statutory amendments regarding the Telecommunications Development Fund.
    172. Former Defaulter Rule. The NPRM proposes changes to the 
Commission's former defaulter rule to balance concerns that the current 
rule is overly broad with the Commission's continued need to ensure 
that auction bidders are financially reliable. The NPRM seeks comment 
on revising the rule to narrow the scope of the defaults and 
delinquencies that will be considered in determining whether or not an 
auction participant is a former defaulter. Specifically, the NPRM 
proposes to exclude any cured default on any Commission license or 
delinquency on any non-tax debt owed to any federal agency for which 
any of the following criteria are met: (1) The notice of the final 
payment deadline or delinquency was received more than seven years 
before the relevant short-form application deadline; (2) the default or 
delinquency amounted to less than $100,000; (3) the default or 
delinquency was paid within two quarters (i.e., 6 months) after 
receiving the notice of the final payment deadline or delinquency; or 
(4) the default or delinquency was the subject of a legal or 
arbitration proceeding that was cured upon resolution of the 
proceeding. Additionally, the NPRM seeks comment on limiting the 
individuals and entities that an applicant must consider when 
determining its status as a former defaulter.
    173. Commonly Controlled Entities. The NPRM proposes to codify an 
established competitive bidding procedure that prohibits the same 
individual or entity from filing more than one short-form application 
to participate in an auction. The NPRM also proposes a new rule that 
would prevent entities that are exclusively controlled by a single 
individual or set of individuals from qualifying to bid on licenses in 
the same or overlapping geographic areas in a specific auction on more 
than one short-form application. These proposals seek to improve the 
transparency and efficiency of the auction process, by making clearer 
who the qualified bidders actually are and ensuring against the 
potential for anticompetitive auction behavior. The NPRM seeks comment 
on these proposals and on specific alternatives to address the 
Commission's concern that common control may allow the controlling 
individual or set of individuals to attempt to gain advantages in the 
bidding process based

[[Page 68199]]

on certain coordinated bidding actions (e.g., tied bids, activity 
waivers).
    174. Joint Bidding. The NPRM initiates a review of the Commission's 
rules and policies governing joint bidding and other arrangements in 
order to ensure that they fulfill the Commission's statutory 
objectives, given the changes in the mobile wireless marketplace since 
the initial adoption of the bidding rules two decades ago, and the 
increasing importance of spectrum for service providers to meet 
consumer demand for mobile wireless services. The NPRM seeks comment on 
the Commission's tentative conclusions that it would be in the public 
interest to retain the current rules governing joint bidding 
arrangements among non-nationwide providers and to prohibit joint 
bidding arrangements among nationwide providers. Additionally, the NPRM 
seeks comment on whether the Commission should revise any of its 
current rules as applied to arrangements between nationwide providers 
and other entities, including its rules governing short-form 
applications. Further, the NPRM seeks comment on whether any revisions 
to the Commission's rules governing long-form applications are 
necessary in light of the Commission's consideration of the potential 
harms and benefits of joint bidding and other arrangements.
    175. Miscellaneous Part 1 Revisions. In addition to changes that 
would implement the foregoing proposals, the NPRM proposes changes to 
two of the Commission's part 1, Subpart Q, rules, 47 CFR 1.2111 and 
1.2112. 47 CFR 1.2111--The NPRM proposes to eliminate two provisions of 
this rule: (1) 47 CFR 1.2111(a), under which applicants for assignments 
or transfers during the first three years of a license term must 
provide the Commission with detailed contract and marketing 
information, and (2) 47 CFR 1.2111(b), a never-used unjust enrichment 
payment requirement for broadband PCS C and F block set-aside licenses. 
47 CFR 1.2112--The NPRM's proposed changes to this rule clarify the 
auction application requirements for reporting an entity's percentage 
ownership in the applicant and in FCC-regulated entities. The NPRM 
proposes further changes to specify application requirements for 
bidding consortia. The NPRM also proposes to correct two errors in the 
rule caused by the inadvertent substitution of an incorrect paragraph 
in the Code of Federal Regulations publication of the rule for the 
correct one published in the Federal Register summary of the DE Second 
Report and Order. The first error was the addition of a requirement 
that DE short-form applicants list and summarize all their agreements 
that support their DE eligibility, a requirement that the Commission 
intended to apply only to long-form applicants. The NPRM proposes to 
delete the requirement with respect to the short-form. The second error 
was the deletion of a requirement that DE short-form applicants list 
the parties with which they have lease or resale arrangements for any 
of the DE applicants' spectrum. The NPRM proposes to reinstate this 
requirement.
    176. The NPRM seeks comments on these proposals. In addition, the 
NPRM notes that the Commission intends, when it resolves the issues 
raised in the NPRM, to resolve long standing petitions for 
reconsideration to the Commission's part 1 competitive bidding rules.
4. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    177. 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.
    178. If adopted, the NPRM's proposed approach to evaluating 
attribution and establishing small business eligibility could provide 
small businesses with greater opportunities to participate in the 
provision of spectrum-based services. Moreover, insofar as the NPRM's 
proposals should allow small businesses greater flexibility to engage 
in business ventures that include increased forms of leasing and other 
spectrum use arrangements, the Commission anticipates that the combined 
intent of the proposals should increase the potential sources of 
revenue for the small business and decrease the likelihood that it 
would be subject to undue influence by any particular user of a single 
license. The NPRM's proposed two-pronged approach to establishing small 
business eligibility would also ensure that a licensee retains control 
of all licenses for which it seeks bidding credits, while providing 
greater flexibility for any acquired without such benefits. Further, 
the proposal to eliminate the AMR rule and to clarify how spectrum 
manager leasing rules apply to DEs should allow small businesses 
greater certainty to participate in secondary markets transactions.
    179. The NPRM's proposed increases in the gross revenues thresholds 
that define the three tiers of small businesses in the part 1 schedule 
by which the Commission provides the corresponding available bidding 
credits would encourage small business participation in spectrum 
license auctions. The proposed gross revenues thresholds are intended 
to more accurately reflect what constitutes a ``small business'' in 
today's marketplace, taking into consideration the relative size of the 
large, national providers. This proposal will provide an economic 
benefit to small entities by making it easier to acquire spectrum 
licenses. Moreover, the NPRM's proposal to repeal the DE reporting 
requirement would eliminate the burden on DEs to submit annual reports.
    180. The proposed changes to the part 1 rules will apply to all 
entities in the same manner the Commission will apply these changes 
uniformly to all entities that choose to participate in spectrum 
license auctions. The Commission believes that applying the same rules 
equally to all entities in these contexts promotes fairness. The 
Commission does not believe that the limited costs and/or 
administrative burdens associated with the rule revisions will unduly 
burden small entities. In fact, many of the proposed rule revisions 
clarify the Commission's competitive bidding rules, including short-
form application requirements, as well as reduce reporting 
requirements.
    181. Finally, the NPRM's joint bidding proposals are intended to 
preserve and promote robust competition in the mobile wireless 
marketplace and facilitate competition among bidders at auction, 
including small entities. These proposals provide potential bidders 
with greater clarity regarding the types of joint bidding arrangements 
that would be permissible. In addition, the NPRM's proposal to retain 
its current rules for joint bidding arrangements among non-nationwide 
providers would maintain flexibility for small businesses to enter into 
such arrangements.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure.

47 CFR Part 27

    Communications common carriers, Radio.


[[Page 68200]]


Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR Parts 1 and 27 as 
follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 225, 227, 303(r), 309, 1403, 1404, 1451, and 1452.

0
2. Section 1.2105 is amended by revising paragraphs (a)(2)(xi) and 
(b)(1) to read as follows:


Sec.  1.2105  Bidding application and certification procedures; 
prohibition of certain communications.

* * * * *
    (a) * * *
    (2) * * *
    (xi) An attached statement made under penalty of perjury indicating 
whether or not the applicant has been in default on any Commission 
license or has been delinquent on any non-tax debt owed to any Federal 
agency. For purposes of this certification, an applicant may exclude 
from consideration as a former default any default on a Commission 
license or delinquency on non-tax debt to any Federal agency that has 
been resolved and meets any of the following criteria:
    (A) The notice of the final payment deadline or delinquency was 
received more than seven years before the short-form application 
deadline;
    (B) The default or delinquency amounted to less than $100,000;
    (C) The default or delinquency was paid within two quarters (i.e., 
6 months) after receiving the notice of the final payment deadline or 
delinquency; or
    (D) The default or delinquency was the subject of a legal or 
arbitration proceeding that was cured upon resolution of the 
proceeding.
* * * * *
    (b) Modification and Dismissal of Short-Form Application (FCC Form 
175).
    (1)(i) Any short-form application (FCC Form 175) that does not 
contain all of the certifications required pursuant to this section is 
unacceptable for filing and cannot be corrected subsequent to the 
applicable filing deadline. The application will be deemed incomplete, 
the applicant will not be found qualified to bid, and the upfront 
payment, if paid, will be returned.
    (ii) If (A) An individual or entity submits multiple applications 
in a single auction; or
    (B) Entities commonly controlled by the same individual or same set 
of individuals submit applications for any set of licenses in the same 
or overlapping geographic areas in a single auction; then only one of 
such applications may be deemed complete, and the other such 
application(s) will be deemed incomplete, such applicants will not be 
found qualified to bid, and the associated upfront payment(s), if paid, 
will be returned.
* * * * *
0
3. Section 1.2106 is amended by revising paragraph (a) to read as 
follows:


Sec.  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, pursuant 
to Sec.  1.2105(a)(2)(xi), certifies that it is a former defaulter 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.
* * * * *
0
4. Amend Sec.  1.2110 as follows:
0
A. Revise paragraph (b)(1)(i) and (ii);
0
B. Remove paragraph (b)(3)(iv);
0
C. Revise paragraphs (f)(2) and (j);
0
D. Remove paragraph (n);
0
E. Redesignate paragraphs (o) and (p) as paragraphs (n) and (o)
    The additions and revisions read as follows:


Sec.  1.2110  Designated entities.

* * * * *
    (b) * * *
    (1) * * *
    (i) The gross revenues of the applicant (or licensee), its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests shall be attributed to the applicant (or 
licensee) 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, very small business, or entrepreneur, 
as those terms are defined in the service-specific rules. An applicant 
seeking status as a small business, very small business, or 
entrepreneur, as those terms are defined in the service-specific rules, 
must disclose on its short- and long-form applications, separately and 
in the aggregate, the gross revenues for each of the previous three 
years of the applicant (or licensee), its affiliates, its controlling 
interests, and the affiliates of its controlling interests.
    (ii) If applicable, pursuant to Sec.  24.709 of this chapter, the 
total assets of the applicant (or licensee), its affiliates, its 
controlling interests, and the affiliates of its controlling interests 
shall be attributed to the applicant (or licensee) and considered on a 
cumulative basis and aggregated for purposes of determining whether the 
applicant (or licensee) is eligible for status as an entrepreneur. An 
applicant seeking status as an entrepreneur must disclose on its short- 
and long-form applications, separately and in the aggregate, the gross 
revenues for each of the previous two years of the applicant (or 
licensee), its affiliates, its controlling interests, and the 
affiliates of its controlling interests.
* * * * *
    (f) * * *
    (2) Size of bidding credits. A winning bidder that qualifies as a 
small business may use the following bidding credits corresponding to 
its respective average gross revenues for the preceding 3 years:
    (i) Businesses with average gross revenues for the preceding 3 
years not exceeding $4 million are eligible for bidding credits of 35 
percent;
    (ii) Businesses with average gross revenues for the preceding 3 
years not exceeding $20 million are eligible for bidding credits of 25 
percent; and
    (iii) Businesses with average gross revenues for the preceding 3 
years not exceeding $55 million are eligible for bidding credits of 15 
percent.
* * * * *
    (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, spectrum leasing arrangements, spectrum resale (including 
wholesale) arrangements, and all other agreements including oral 
agreements, establishing as applicable, de facto or de jure control of 
the entity. Designated entities also must provide the date(s) on which 
they entered into of the agreements listed. In addition, designated 
entities must file with their long-form applications a copy of each 
such agreement. In order to enable the Commission to audit designated 
entity eligibility on an ongoing basis, designated entities that are 
awarded eligibility must, for the term of the license, maintain at 
their facilities or with their designated agents the lists, summaries, 
dates and copies of

[[Page 68201]]

agreements required to be identified and provided to the Commission 
pursuant to this paragraph and to Sec.  1.2114.
* * * * *
0
5. Section 1.2111 is revised to read as follows:


Sec.  1.2111  Assignment or transfer of control: unnjust enrichment.

    (a) Unjust enrichment payment: installment financing.
    (1) If a licensee that utilizes installment financing under this 
section seeks to assign or transfer control of its license to an entity 
not meeting the eligibility standards for installment payments, the 
licensee must make full payment of the remaining unpaid principal and 
any unpaid interest accrued through the date of assignment or transfer 
as a condition of approval.
    (2) If a licensee that utilizes installment financing under this 
section seeks to make any change in ownership structure that would 
result in the licensee's losing eligibility for installment payments, 
the licensee shall first seek Commission approval and must make full 
payment of the remaining unpaid principal and any unpaid interest 
accrued through the date of such change as a condition of approval. A 
licensee's (or other attributable entity's) increased gross revenues or 
increased total assets due to nonattributable equity investments, debt 
financing, revenue from operations or other investments, business 
development or expanded service shall not be considered to result in 
the licensee losing eligibility for installment payments.
    (3) If a licensee seeks to make any change in ownership that would 
result in the licensee's qualifying for a less favorable installment 
plan under this section, the licensee shall seek Commission approval 
and must adjust its payment plan to reflect its new eligibility status. 
A licensee may not switch its payment plan to a more favorable plan.
    (b) Unjust enrichment payment: bidding credits.
    (1) A licensee that utilizes a bidding credit, and that during the 
initial term seeks to assign or transfer control of a license to an 
entity that does not meet the eligibility criteria for a bidding 
credit, will be required to reimburse the U.S. Government for the 
amount of the bidding credit, plus interest based on the rate for ten 
year U.S. Treasury obligations applicable on the date the license was 
granted, as a condition of Commission approval of the assignment or 
transfer. If, within the initial term of the license, a licensee that 
utilizes a bidding credit seeks to assign or transfer control of a 
license to an entity that is eligible for a lower bidding credit, the 
difference between the bidding credit obtained by the assigning party 
and the bidding credit for which the acquiring party would qualify, 
plus interest based on the rate for ten year U.S. treasury obligations 
applicable on the date the license is granted, must be paid to the U.S. 
Government as a condition of Commission approval of the assignment or 
transfer. If, within the initial term of the license, a licensee that 
utilizes a bidding credit makes any ownership change or enters into any 
agreement that would result in the licensee's losing eligibility for a 
bidding credit (or qualifying for a lower bidding credit), the amount 
of the bidding credit (or the difference between the bidding credit 
originally obtained and the bidding credit for which the licensee would 
qualify after restructuring or under the agreement), plus interest 
based on the rate for ten year U.S. treasury obligations applicable on 
the date the license is granted, must be paid to the U.S. Government as 
a condition of Commission approval of the assignment or transfer or of 
a reportable eligibility event (see Sec.  1.2114).
    (2) Payment schedule.
    (i) The amount of payments made pursuant to paragraph (b)(1) of 
this section will be reduced over time as follows:
    (A) A loss of eligibility in the first two years of the license 
term will result in a forfeiture of 100 percent of the value of the 
bidding credit (or in the case of very small businesses transferring to 
small businesses, 100 percent of the difference between the bidding 
credit received by the former and the bidding credit for which the 
latter is eligible);
    (B) A loss of eligibility in year 3 of the license term will result 
in a forfeiture of 75 percent of the value of the bidding credit (or in 
the case of eligibility changing to qualify for a lower bidding credit, 
75 percent of the difference between the bidding credit received and 
the bidding credit for which it is eligible);
    (C) A loss of eligibility in year 4 of the license term will result 
in a forfeiture of 50 percent of the value of the bidding credit (or in 
the case of eligibility changing to qualify for a lower bidding credit, 
50 percent of the difference between the bidding credit received and 
the bidding credit for which it is eligible);
    (D) A loss of eligibility in year 5 of the license term will result 
in a forfeiture of 25 percent of the value of the bidding credit (or in 
the case of eligibility changing to qualify for a lower bidding credit, 
25 percent of the difference between the bidding credit received and 
the bidding credit for which it is eligible); and
    (E) For a loss of eligibility in year 6 or thereafter, there will 
be no payment.
    (ii) These payments will have to be paid to the United States 
Treasury as a condition of approval of the assignment, transfer, 
ownership change or reportable eligibility event (see Sec.  1.2114).
    (c) Unjust enrichment: partitioning and disaggregation--
    (1) Installment payments. Licensees making installment payments, 
that partition their licenses or disaggregate their spectrum to 
entities not meeting the eligibility standards for installment 
payments, will be subject to the provisions concerning unjust 
enrichment as set forth in this section.
    (2) Bidding credits. Licensees that received a bidding credit that 
partition their licenses or disaggregate their spectrum to entities not 
meeting the eligibility standards for such a bidding credit, will be 
subject to the provisions concerning unjust enrichment as set forth in 
this section.
    (3) Apportioning unjust enrichment payments. Unjust enrichment 
payments for partitioned license areas shall be calculated based upon 
the ratio of the population of the partitioned license area to the 
overall population of the license area and by utilizing the most recent 
Census data. Unjust enrichment payments for disaggregated spectrum 
shall be calculated based upon the ratio of the amount of spectrum 
disaggregated to the amount of spectrum held by the licensee.
0
6. Section 1.2112 is amended by revising paragraphs (a)(7), (b)(1)(iii) 
and (iv); adding paragraph (b)(1)(v); and revising paragraph 
(b)(2)(ii), (iii) and (v) to read as follows:


Sec.  1.2112  Ownership disclosure requirements for applications.

    (a) * * *
    (7) List any FCC-regulated entity or applicant for an FCC license, 
in which the applicant or any of the parties identified in paragraphs 
(a)(1) through (a)(5) of this section holds a 10 percent or greater 
ownership interest, regardless of the type of business entity, 
including both active and passive interests. 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 (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) * * *

[[Page 68202]]

    (1) * * *
    (iii) List all parties with which the applicant has entered into 
arrangements for the spectrum lease or resale (including wholesale 
arrangements) of any of the capacity of any of the applicant's 
spectrum.
    (iv) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  1.2110, for each of the following: 
The applicant, its affiliates, its controlling interests, and the 
affiliates of its controlling interests; and if a consortium of small 
businesses, the members comprising the consortium.
    (v) If applying as a consortium under Sec.  1.2110(b)(3)(i), 
provide the information in paragraphs (b)(1)(i) through (iv) separately 
for each member of the consortium.
    (2) * * *
    (ii) List any FCC-regulated 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 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 by-
laws, partnership agreements, shareholder agreements, voting or other 
trust agreements, management agreements, franchise agreements, spectrum 
leasing arrangements, spectrum resale (including wholesale) 
arrangements, and any other relevant agreements (including letters of 
intent), oral or written;
* * * * *
    (v) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  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; and
* * * * *
0
7. Section 1.9020 is amended by revising paragraph (d)(4) to read as 
follows:


Sec.  1.9020  Spectrum manager leasing arrangements.

* * * * *
    (d) * * *
    (4) Designated entity/entrepreneur rules. A licensee that holds a 
license pursuant to small business and/or entrepreneur provisions (see 
Sec.  1.2110 and Sec.  24.709 of this chapter) and continues to be 
subject to unjust enrichment requirements (see Sec.  1.2111 and Sec.  
24.714 of this chapter) and/or transfer restrictions (see Sec.  24.839 
of this chapter) may enter into a spectrum manager leasing arrangement 
with a spectrum lessee, regardless of whether the spectrum lessee meets 
the Commission's designated entity eligibility requirements (see Sec.  
1.2110) or its entrepreneur eligibility requirements to hold certain C 
and F block licenses in the broadband personal communications services 
(see Sec.  1.2110 and Sec.  24.709 of this chapter), so long as the 
spectrum manager leasing arrangement does not result in the spectrum 
lessee's becoming a ``controlling interest'' or ``affiliate'' (see 
Sec.  1.2110) of the licensee such that the licensee would lose its 
eligibility as a designated entity or entrepreneur.
* * * * *

PART 27--MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

0
8. The authority citation for part 27 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302a, 303, 307, 309, 332, 336, 
337, 1403, 1404, 1451, and 1452, unless otherwise noted.

0
9. Section 27.1301 is amended by removing the undesignated introductory 
text and revising paragraph (a) to read as follows:


Sec.  27.1301  Designated entities in the 600 MHz band.

    (a) Eligibility for small business provisions.
    (1) A small business is an entity that, together with its 
affiliates, its controlling interests, the affiliates of its 
controlling interests, and the entities with which it has an 
attributable material relationship, has average gross revenues not 
exceeding $55 million for the preceding three (3) years.
    (2) A very small business is an entity that, together with its 
affiliates, its controlling interests, the affiliates of its 
controlling interests, and the entities with which it has an 
attributable material relationship, has average gross revenues not 
exceeding $20 million for the preceding three (3) years.
* * * * *
[FR Doc. 2014-26924 Filed 11-13-14; 8:45 am]
BILLING CODE 6712-01-P


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