FCC 1.2110 Revised as of October 1, 2014
Goto Year:2013 |
2015
§ 1.2110 Designated entities.
(a) Designated entities are small businesses, businesses owned by
members of minority groups and/or women, and rural telephone companies.
(b) Eligibility for small business and entrepreneur provisions--(1)
Size attribution. (i) The gross revenues of the applicant (or
licensee), its affiliates, its controlling interests, the affiliates of
its controlling interests, and the entities with which it has an
attributable material relationship 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, the affiliates of its controlling interests, and the
entities with which it has an attributable material relationship.
(ii) If applicable, pursuant to § 24.709 of this chapter, the total
assets of the applicant (or licensee), its affiliates, its controlling
interests, the affiliates of its controlling interests, and the
entities with which it has an attributable material relationship 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, the affiliates of
its controlling interests, and the entities with which it has an
attributable material relationship.
(2) Aggregation of affiliate interests. Persons or entities that hold
interests in an applicant (or licensee) that are affiliates of each
other or have an identity of interests identified in
§ 1.2110(c)(5)(iii) will be treated as though they were one person or
entity and their ownership interests aggregated for purposes of
determining an applicant's (or licensee's) compliance with the
requirements of this section.
Example 1 to paragraph (b)(2): ABC Corp. is owned by individuals, A, B
and C, each having an equal one-third voting interest in ABC Corp. A
and B together, with two-thirds of the stock have the power to control
ABC Corp. and have an identity of interest. If A&B invest in DE Corp.,
a broadband PCS applicant for block C, A and B's separate interests in
DE Corp. must be aggregated because A and B are to be treated as one
person or entity.
Example 2 to paragraph (b)(2): ABC Corp. has subsidiary BC Corp., of
which it holds a controlling 51 percent of the stock. If ABC Corp. and
BC Corp., both invest in DE Corp., their separate interests in DE Corp.
must be aggregated because ABC Corp. and BC Corp. are affiliates of
each other.
(3) Exceptions--(i) Consortium. Where an applicant to participate in
bidding for Commission licenses or permits is a consortium either of
entities eligible for size-based bidding credits an/or for closed
bidding based on gross revenues and/or total assets, the gross revenues
and/or total assets of each consortium member shall not be aggregated.
Each consortium member must constitute a separate and distinct legal
entity to qualify for this exception. Consortia that are winning
bidders using this exception must comply with the requirements of
§ 1.2107(g) of this chapter as a condition of license grant.
(ii) Applicants without identifiable controlling interests. Where an
applicant (or licensee) cannot identify controlling interests under the
standards set forth in this section, the gross revenues of all interest
holders in the applicant, and their affiliates, will be attributable.
(iii) Rural telephone cooperatives. (A)(1) An applicant will be exempt
from § 1.2110(c)(2)(ii)(F) for the purpose of attribution in
§ 1.2110(b)(1), if the applicant or a controlling interest in the
applicant, as the case may be, meets all of the following conditions:
(i) The applicant (or the controlling interest) is organized as a
cooperative pursuant to state law;
(ii) The applicant (or the controlling interest) is a "rural telephone
company" as defined by the Communications Act; and
(iii) The applicant (or the controlling interest) demonstrates either
that it is eligible for tax-exempt status under the Internal Revenue
Code or that it adheres to the cooperative principles articulated in
Puget Sound Plywood, Inc. v. Commissioner of Internal Revenue, 44 T.C.
305 (1965).
(2) If the condition in paragraph (b)(3)(iii)(A)(1)(i) above cannot be
met because the relevant jurisdiction has not enacted an organic
statute that specifies requirements for organization as a cooperative,
the applicant must show that it is validly organized and its articles
of incorporation, by-laws, and/or other relevant organic documents
provide that it operates pursuant to cooperative principles.
(B) However, if the applicant is not an eligible rural telephone
cooperative under paragraph (a) of this section, and the applicant has
a controlling interest other than the applicant's officers and
directors or an eligible rural telephone cooperative's officers and
directors, paragraph (a) of this section applies with respect to the
applicant's officers and directors and such controlling interest's
officers and directors only when such controlling interest is either:
(1) An eligible rural telephone cooperative under paragraph (a) of this
section or
(2) controlled by an eligible rural telephone cooperative under
paragraph (a) of this section.
(iv) Applicants or licensees with material relationships--(A)
Attributable material relationships. An applicant or licensee must
attribute the gross revenues (and, if applicable, the total assets) of
any entity, (including the controlling interests, affiliates, and
affiliates of the controlling interests of that entity) with which the
applicant or licensee has an attributable material relationship. An
applicant or licensee has an attributable material relationship when it
has one or more arrangements with any individual entity for the lease
or resale (including under a wholesale agreement) of, on a cumulative
basis, more than 25 percent of the spectrum capacity of any one of the
applicant's or licensee's licenses.
(B) Grandfathering--(1) Licensees. An attributable material
relationship shall not disqualify a licensee for previously awarded
benefits before April 25, 2006, based on spectrum lease or resale
(including wholesale) arrangements entered into before April 25, 2006.
(2) Applicants. An attributable material relationship shall not
disqualify an applicant seeking eligibility in an application for a
license, authorization, assignment, or transfer of control or for
partitioning or disaggregation filed before April 25, 2006, based on
spectrum lease or resale (including wholesale) arrangements entered
into before April 25, 2006. Any applicant seeking eligibility in an
application for a license, authorization, assignment, or transfer of
control or for partitioning or disaggregation filed after April 25,
2006, or in an application to participate in an auction in which
bidding begins on or after June 5, 2006, need not attribute the
material relationship(s) of those entities that are its affiliates
based solely on paragraph (c)(5)(i)(C) of this section if those
affiliates entered into such material relationship(s) before April 25,
2006, and are subject to a contractual prohibition preventing them from
contributing to the applicant's total financing.
Example to paragraph (b)(3)(iv)(C)(2): Newco is an applicant seeking
designated entity status in an auction in which bidding begins after
the effective date of the rules. Investor is a controlling interest of
Newco. Investor also is a controlling interest of Existing DE. Existing
DE previously was awarded designated entity benefits and has
impermissible material relationships based on leasing agreements
entered into before April 25, 2006, with a third party, Lessee, that
were in compliance with the Commission's designated eligibility
standards prior to April 25, 2006. In this example, Newco would not be
prohibited from acquiring designated entity benefits solely because of
the existing impermissible material relationships of its affiliate,
Existing DE. Newco, Investor, and Existing DE, however, would need to
enter into a contractual prohibition that prevents Existing DE from
contributing to the total financing of Newco.
(c) Definitions--(1) Small businesses. The Commission will establish
the definition of a small business on a service-specific basis, taking
into consideration the characteristics and capital requirements of the
particular service.
(2) Controlling interests. (i) For purposes of this section,
controlling interest includes individuals or entities with either de
jure or de facto control of the applicant. De jure control is evidenced
by holdings of greater than 50 percent of the voting stock of a
corporation, or in the case of a partnership, general partnership
interests. De facto control is determined on a case-by-case basis. An
entity must disclose its equity interest and demonstrate at least the
following indicia of control to establish that it retains de facto
control of the applicant:
(A) The entity constitutes or appoints more than 50 percent of the
board of directors or management committee;
(B) The entity has authority to appoint, promote, demote, and fire
senior executives that control the day-to-day activities of the
licensee; and
(C) The entity plays an integral role in management decisions.
(ii) Calculation of certain interests. (A) Fully diluted requirement.
(1) Except as set forth in paragraph (c)(2)(ii)(A)(2) of this section,
ownership interests shall be calculated on a fully diluted basis; all
agreements such as warrants, stock options and convertible debentures
will generally be treated as if the rights thereunder already have been
fully exercised.
(2) Rights of first refusal and put options shall not be calculated on
a fully diluted basis for purposes of determining de jure control;
however, rights of first refusal and put options shall be calculated on
a fully diluted basis if such ownership interests, in combination with
other terms to an agreement, deprive an otherwise qualified applicant
or licensee of de facto control.
Note to paragraph (c)(2)(ii)(A): Mutually exclusive contingent
ownership interests, i.e., one or more ownership interests that, by
their terms, are mutually exclusive of one or more other ownership
interests, shall be calculated as having been fully exercised only in
the possible combinations in which they can be exercised by their
holder(s). A contingent ownership interest is mutually exclusive of
another only if contractual language specifies that both interests
cannot be held simultaneously as present ownership interests.
(B) Partnership and other ownership interests and any stock interest
equity, or outstanding stock, or outstanding voting stock shall be
attributed as specified.
(C) Stock interests held in trust shall be attributed to any person who
holds or shares the power to vote such stock, to any person who has the
sole power to sell such stock, and to any person who has the right to
revoke the trust at will or to replace the trustee at will. If the
trustee has a familial, personal, or extra-trust business relationship
to the grantor or the beneficiary, the grantor or beneficiary, as
appropriate, will be attributed with the stock interests held in trust.
(D) Non-voting stock shall be attributed as an interest in the issuing
entity.
(E) Limited partnership interests shall be attributed to limited
partners and shall be calculated according to both the percentage of
equity paid in and the percentage of distribution of profits and
losses.
(F) Officers and directors of the applicant shall be considered to have
a controlling interest in the applicant. The officers and directors of
an entity that controls a licensee or applicant shall be considered to
have a controlling interest in the licensee or applicant. The personal
net worth, including personal income of the officers and directors of
an applicant, is not attributed to the applicant. To the extent that
the officers and directors of an applicant are affiliates of other
entities, the gross revenues of the other entities are attributed to
the applicant.
(G) Ownership interests that are held indirectly by any party through
one or more intervening corporations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that if the ownership
percentage for an interest in any link in the chain exceeds 50 percent
or represents actual control, it shall be treated as if it were a 100
percent interest.
(H) Any person who manages the operations of an applicant or licensee
pursuant to a management agreement shall be considered to have a
controlling interest in such applicant or licensee if such person, or
its affiliate, has authority to make decisions or otherwise engage in
practices or activities that determine, or significantly influence:
(1) The nature or types of services offered by such an applicant or
licensee;
(2) The terms upon which such services are offered; or
(3) The prices charged for such services.
(I) Any licensee or its affiliate who enters into a joint marketing
arrangement with an applicant or licensee, or its affiliate, shall be
considered to have a controlling interest, if such applicant or
licensee, or its affiliate, has authority to make decisions or
otherwise engage in practices or activities that determine, or
significantly influence:
(1) The nature or types of services offered by such an applicant or
licensee;
(2) The terms upon which such services are offered; or
(3) The prices charged for such services.
(3) Businesses owned by members of minority groups and/or women. Unless
otherwise provided in rules governing specific services, a business
owned by members of minority groups and/or women is one in which
minorities and/or women who are U.S. citizens control the applicant,
have at least greater than 50 percent equity ownership and, in the case
of a corporate applicant, have a greater than 50 percent voting
interest. For applicants that are partnerships, every general partner
must be either a minority and/or woman (or minorities and/or women) who
are U.S. citizens and who individually or together own at least 50
percent of the partnership equity, or an entity that is 100 percent
owned and controlled by minorities and/or women who are U.S. citizens.
The interests of minorities and women are to be calculated on a fully
diluted basis; agreements such as stock options and convertible
debentures shall be considered to have a present effect on the power to
control an entity and shall be treated as if the rights thereunder
already have been fully exercised. However, upon a demonstration that
options or conversion rights held by non-controlling principals will
not deprive the minority and female principals of a substantial
financial stake in the venture or impair their rights to control the
designated entity, a designated entity may seek a waiver of the
requirement that the equity of the minority and female principals must
be calculated on a fully-diluted basis. The term minority includes
individuals of Black or African American, Hispanic or Latino, American
Indian or Alaskan Native, Asian, and Native Hawaiian or Pacific
Islander extraction.
(4) Rural telephone companies. A rural telephone company is any local
exchange carrier operating entity to the extent that such entity--
(i) Provides common carrier service to any local exchange carrier study
area that does not include either:
(A) Any incorporated place of 10,000 inhabitants or more, or any part
thereof, based on the most recently available population statistics of
the Bureau of the Census, or
(B) Any territory, incorporated or unincorporated, included in an
urbanized area, as defined by the Bureau of the Census as of August 10,
1993;
(ii) Provides telephone exchange service, including exchange access, to
fewer than 50,000 access lines;
(iii) Provides telephone exchange service to any local exchange carrier
study area with fewer than 100,000 access lines; or
(iv) Has less than 15 percent of its access lines in communities of
more than 50,000 on the date of enactment of the Telecommunications Act
of 1996.
(5) Affiliate. (i) An individual or entity is an affiliate of an
applicant or of a person holding an attributable interest in an
applicant if such individual or entity--
(A) Directly or indirectly controls or has the power to control the
applicant, or
(B) Is directly or indirectly controlled by the applicant, or
(C) Is directly or indirectly controlled by a third party or parties
that also controls or has the power to control the applicant, or
(D) Has an "identity of interest" with the applicant.
(ii) Nature of control in determining affiliation.
(A) Every business concern is considered to have one or more parties
who directly or indirectly control or have the power to control it.
Control may be affirmative or negative and it is immaterial whether it
is exercised so long as the power to control exists.
Example. An applicant owning 50 percent of the voting stock of another
concern would have negative power to control such concern since such
party can block any action of the other stockholders. Also, the bylaws
of a corporation may permit a stockholder with less than 50 percent of
the voting stock to block any actions taken by the other stockholders
in the other entity. Affiliation exists when the applicant has the
power to control a concern while at the same time another person, or
persons, are in control of the concern at the will of the party or
parties with the power to control.
(B) Control can arise through stock ownership; occupancy of director,
officer or key employee positions; contractual or other business
relations; or combinations of these and other factors. A key employee
is an employee who, because of his/her position in the concern, has a
critical influence in or substantive control over the operations or
management of the concern.
(C) Control can arise through management positions where a concern's
voting stock is so widely distributed that no effective control can be
established.
Example. In a corporation where the officers and directors own various
size blocks of stock totaling 40 percent of the corporation's voting
stock, but no officer or director has a block sufficient to give him or
her control or the power to control and the remaining 60 percent is
widely distributed with no individual stockholder having a stock
interest greater than 10 percent, management has the power to control.
If persons with such management control of the other entity are persons
with attributable interests in the applicant, the other entity will be
deemed an affiliate of the applicant.
(iii) Identity of interest between and among persons. Affiliation can
arise between or among two or more persons with an identity of
interest, such as members of the same family or persons with common
investments. In determining if the applicant controls or has the power
to control a concern, persons with an identity of interest will be
treated as though they were one person.
Example. Two shareholders in Corporation Y each have attributable
interests in the same PCS application. While neither shareholder has
enough shares to individually control Corporation Y, together they have
the power to control Corporation Y. The two shareholders with these
common investments (or identity in interest) are treated as though they
are one person and Corporation Y would be deemed an affiliate of the
applicant.
(A) Spousal affiliation. Both spouses are deemed to own or control or
have the power to control interests owned or controlled by either of
them, unless they are subject to a legal separation recognized by a
court of competent jurisdiction in the United States. In calculating
their net worth, investors who are legally separated must include their
share of interests in property held jointly with a spouse.
(B) Kinship affiliation. Immediate family members will be presumed to
own or control or have the power to control interests owned or
controlled by other immediate family members. In this context
"immediate family member" means father, mother, husband, wife, son,
daughter, brother, sister, father- or mother-in-law, son- or
daughter-in-law, brother- or sister-in-law, step-father or -mother,
step-brother or -sister, step-son or -daughter, half brother or sister.
This presumption may be rebutted by showing that the family members are
estranged, the family ties are remote, or the family members are not
closely involved with each other in business matters.
Example. A owns a controlling interest in Corporation X. A's
sister-in-law, B, has an attributable interest in a PCS application.
Because A and B have a presumptive kinship affiliation, A's interest in
Corporation Y is attributable to B, and thus to the applicant, unless B
rebuts the presumption with the necessary showing.
(iv) Affiliation through stock ownership. (A) An applicant is presumed
to control or have the power to control a concern if he or she owns or
controls or has the power to control 50 percent or more of its voting
stock.
(B) An applicant is presumed to control or have the power to control a
concern even though he or she owns, controls or has the power to
control less than 50 percent of the concern's voting stock, if the
block of stock he or she owns, controls or has the power to control is
large as compared with any other outstanding block of stock.
(C) If two or more persons each owns, controls or has the power to
control less than 50 percent of the voting stock of a concern, such
minority holdings are equal or approximately equal in size, and the
aggregate of these minority holdings is large as compared with any
other stock holding, the presumption arises that each one of these
persons individually controls or has the power to control the concern;
however, such presumption may be rebutted by a showing that such
control or power to control, in fact, does not exist.
(v) Affiliation arising under stock options, convertible debentures,
and agreements to merge. Except as set forth in paragraph
(c)(2)(ii)(A)(2) of this section, stock options, convertible
debentures, and agreements to merge (including agreements in principle)
are generally considered to have a present effect on the power to
control the concern. Therefore, in making a size determination, such
options, debentures, and agreements are generally treated as though the
rights held thereunder had been exercised. However, an affiliate cannot
use such options and debentures to appear to terminate its control over
another concern before it actually does so.
Example 1 to paragraph (c)(5)(v). If company B holds an option to
purchase a controlling interest in company A, who holds an attributable
interest in a PCS application, the situation is treated as though
company B had exercised its rights and had become owner of a
controlling interest in company A. The gross revenues of company B must
be taken into account in determining the size of the applicant.
Example 2. If a large company, BigCo, holds 70% (70 of 100 outstanding
shares) of the voting stock of company A, who holds an attributable
interest in a PCS application, and gives a third party, SmallCo, an
option to purchase 50 of the 70 shares owned by BigCo, BigCo will be
deemed to be an affiliate of company A, and thus the applicant, until
SmallCo actually exercises its option to purchase such shares. In order
to prevent BigCo from circumventing the intent of the rule which
requires such options to be considered on a fully diluted basis, the
option is not considered to have present effect in this case.
Example 3. If company A has entered into an agreement to merge with
company B in the future, the situation is treated as though the merger
has taken place.
Note to paragraph (c)(5)(v): Mutually exclusive contingent ownership
interests, i.e., one or more ownership interests that, by their terms,
are mutually exclusive of one or more other ownership interests, shall
be calculated as having been fully exercised only in the possible
combinations in which they can be exercised by their holder(s). A
contingent ownership interest is mutually exclusive of another only if
contractual language specifies that both interests cannot be held
simultaneously as present ownership interests.
(vi) Affiliation under voting trusts. (A) Stock interests held in trust
shall be deemed controlled by any person who holds or shares the power
to vote such stock, to any person who has the sole power to sell such
stock, and to any person who has the right to revoke the trust at will
or to replace the trustee at will.
(B) If a trustee has a familial, personal or extra-trust business
relationship to the grantor or the beneficiary, the stock interests
held in trust will be deemed controlled by the grantor or beneficiary,
as appropriate.
(C) If the primary purpose of a voting trust, or similar agreement, is
to separate voting power from beneficial ownership of voting stock for
the purpose of shifting control of or the power to control a concern in
order that such concern or another concern may meet the Commission's
size standards, such voting trust shall not be considered valid for
this purpose regardless of whether it is or is not recognized within
the appropriate jurisdiction.
(vii) Affiliation through common management. Affiliation generally
arises where officers, directors, or key employees serve as the
majority or otherwise as the controlling element of the board of
directors and/or the management of another entity.
(viii) Affiliation through common facilities. Affiliation generally
arises where one concern shares office space and/or employees and/or
other facilities with another concern, particularly where such concerns
are in the same or related industry or field of operations, or where
such concerns were formerly affiliated, and through these sharing
arrangements one concern has control, or potential control, of the
other concern.
(ix) Affiliation through contractual relationships. Affiliation
generally arises where one concern is dependent upon another concern
for contracts and business to such a degree that one concern has
control, or potential control, of the other concern.
(x) Affiliation under joint venture arrangements. (A) A joint venture
for size determination purposes is an association of concerns and/or
individuals, with interests in any degree or proportion, formed by
contract, express or implied, to engage in and carry out a single,
specific business venture for joint profit for which purpose they
combine their efforts, property, money, skill and knowledge, but not on
a continuing or permanent basis for conducting business generally. The
determination whether an entity is a joint venture is based upon the
facts of the business operation, regardless of how the business
operation may be designated by the parties involved. An agreement to
share profits/losses proportionate to each party's contribution to the
business operation is a significant factor in determining whether the
business operation is a joint venture.
(B) The parties to a joint venture are considered to be affiliated with
each other. Nothing in this subsection shall be construed to define a
small business consortium, for purposes of determining status as a
designated entity, as a joint venture under attribution standards
provided in this section.
(xi) Exclusion from affiliation coverage. For purposes of this section,
Indian tribes or Alaska Regional or Village Corporations organized
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et
seq.), or entities owned and controlled by such tribes or corporations,
are not considered affiliates of an applicant (or licensee) that is
owned and controlled by such tribes, corporations or entities, and that
otherwise complies with the requirements of this section, except that
gross revenues derived from gaming activities conducted by affiliate
entities pursuant to the Indian Gaming Regulatory Act (25 U.S.C. 2701
et seq.) will be counted in determining such applicant's (or
licensee's) compliance with the financial requirements of this section,
unless such applicant establishes that it will not receive a
substantial unfair competitive advantage because significant legal
constraints restrict the applicant's ability to access such gross
revenues.
(6) Consortium. A consortium of small businesses, very small
businesses, or entrepreneurs is a conglomerate organization composed of
two or more entities, each of which individually satisfies the
definition of a small business, very small business, or entrepreneur,
as those terms are defined in the service-specific rules. Each
individual member must constitute a separate and distinct legal entity
to qualify.
(d) The Commission may set aside specific licenses for which only
eligible designated entities, as specified by the Commission, may bid.
(e) The Commission may permit partitioning of service areas in
particular services for eligible designated entities.
(f) Bidding credits. (1) The Commission may award bidding credits
(i.e., payment discounts) to eligible designated entities. Competitive
bidding rules applicable to individual services will specify the
designated entities eligible for bidding credits, the licenses for
which bidding credits are available, the amounts of bidding credits and
other procedures.
(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 years, 3
years not exceeding $3 million are eligible for bidding credits of 35
percent;
(ii) Businesses with average gross revenues for the preceding years, 3
years not exceeding $15 million are eligible for bidding credits of 25
percent; and
(iii) Businesses with average gross revenues for the preceding years, 3
years not exceeding $40 million are eligible for bidding credits of 15
percent.
(3) Bidding credit for serving qualifying tribal land. A winning bidder
for a market will be eligible to receive a bidding credit for serving a
qualifying tribal land within that market, provided that it complies
with § 1.2107(e). The following definition, terms, and conditions shall
apply for the purposes of this section and § 1.2107(e):
(i) Qualifying tribal land means any federally recognized Indian
tribe's reservation, Pueblo, or Colony, including former reservations
in Oklahoma, Alaska Native regions established pursuant to the Alaska
Native Claims Settlement Act (85 Stat. 688), and Indian allotments,
that has a wireline telephone subscription rate equal to or less than
eighty-five (85) percent based on the most recently available U.S.
Census Data.
(ii) Certification. (A) Within 180 days after the filing deadline for
long-form applications, the winning bidder must amend its long-form
application and attach a certification from the tribal government
stating the following:
(1) The tribal government authorizes the winning bidder to site
facilities and provide service on its tribal land;
(2) The tribal area to be served by the winning bidder constitutes
qualifying tribal land; and
(3) The tribal government has not and will not enter into an exclusive
contract with the applicant precluding entry by other carriers, and
will not unreasonably discriminate among wireless carriers seeking to
provide service on the qualifying tribal land.
(B) In addition, within 180 days after the filing deadline for
long-form applications, the winning bidder must amend its long-form
application and file a certification that it will comply with the
construction requirements set forth in paragraph (f)(3)(vii) of this
section and consult with the tribal government regarding the siting of
facilities and deployment of service on the tribal land.
(C) If the winning bidder fails to submit the required certifications
within the 180-day period, the bidding credit will not be awarded, and
the winning bidder must pay any outstanding balance on its winning bid
amount.
(iii) Bidding credit formula. Subject to the applicable bidding credit
limit set forth in § 1.2110(f)(3)(iv), the bidding credit shall equal
five hundred thousand (500,000) dollars for the first two hundred (200)
square miles (518 square kilometers) of qualifying tribal land, and
twenty-five hundred (2500) dollars for each additional square mile
(2.590 square kilometers) of qualifying tribal land above two hundred
(200) square miles (518 square kilometers).
(iv) Bidding credit limit. If the high bid is equal to or less than one
million (1,000,000) dollars, the maximum bidding credit calculated
pursuant to § 1.2110(f)(3)(iii) shall not exceed fifty (50) percent of
the high bid. If the high bid is greater than one million (1,000,000)
dollars, but equal to or less than two million (2,000,000) dollars, the
maximum bidding credit calculated pursuant to § 1.2110(f)(3)(iii) shall
not exceed five hundred thousand (500,000) dollars. If the high bid is
greater than two million (2,000,000) dollars, the maximum bidding
credit calculated pursuant to § 1.2110(f)(3)(iii) shall not exceed
thirty-five (35) percent of the high bid.
(v) Bidding credit limit in auctions subject to specified reserve
price(s). In any auction of eligible frequencies described in section
113(g)(2) of the National Telecommunications and Information
Administration Organization Act (47 U.S.C. 923(g)(2) with reserve
price(s) and in any auction with reserve price(s) in which the
Commission specifies that this provision shall apply, the aggregate
amount available to be awarded as bidding credits for serving
qualifying tribal land with respect to all licenses subject to a
reserve price shall not exceed the amount by which winning bids for
those licenses net of discounts the Commission takes into account when
reporting net bids in the Public Notice closing the auction exceed the
applicable reserve price. If the total amount that might be awarded as
tribal land bidding credits based on applications for all licenses
subject to the reserve price exceeds the aggregate amount available to
be awarded, the Commission will award eligible applicants a pro rata
tribal land bidding credit. The Commission may determine at any time
that the total amount that might be awarded as tribal land bidding
credits is less than the aggregate amount available to be awarded and
grant full tribal land bidding credits to relevant applicants,
including any that previously received pro rata tribal land bidding
credits. To determine the amount of an applicant's pro rata tribal land
bidding credit, the Commission will multiply the full amount of the
tribal land bidding credit for which the applicant would be eligible
excepting this limitation ((f)(3)(v)) of this section by a fraction,
consisting of a numerator in the amount by which winning bids for
licenses subject to the reserve price net of discounts the Commission
takes into account when reporting net bids in the Public Notice closing
the auction exceed the reserve price and a denominator in the amount of
the aggregate maximum tribal land bidding credits for which applicants
for such licenses might have qualified excepting this limitation
((f)(3)(v)) of this section. When determining the aggregate maximum
tribal land bidding credits for which applicants for such licenses
might have qualified, the Commission shall assume that any applicant
seeking a tribal land bidding credit on its long-form application will
be eligible for the largest tribal land bidding credit possible for its
bid for its license excepting this limitation ((f)(3)(v)) of this
section. After all applications seeking a tribal land bidding credit
with respect to licenses covered by a reserve price have been finally
resolved, the Commission will recalculate the pro rata credit. For
these purposes, final determination of a credit occurs only after any
review or reconsideration of the award of such credit has been
concluded and no opportunity remains for further review or
reconsideration. To recalculate an applicant's pro rata tribal land
bidding credit, the Commission will multiply the full amount of the
tribal land bidding credit for which the applicant would be eligible
excepting this limitation ((f)(3)(v)) of this section by a fraction,
consisting of a numerator in the amount by which winning bids for
licenses subject to the reserve price net of discounts the Commission
takes into account when reporting net bids in the Public Notice closing
the auction exceed the reserve price and a denominator in the amount of
the aggregate amount of tribal land bidding credits for which all
applicants for such licenses would have qualified excepting this
limitation ((f)(3)(v)) of this section.
(vi) Application of credit. A pending request for a bidding credit for
serving qualifying tribal land has no effect on a bidder's obligations
to make any auction payments, including down and final payments on
winning bids, prior to award of the bidding credit by the Commission.
Tribal land bidding credits will be calculated and awarded prior to
license grant. If the Commission grants an applicant a pro rata tribal
land bidding credit prior to license grant, as provided by paragraph
(f)(3)(v) of this section, the Commission shall recalculate the
applicant's pro rata tribal land bidding credit after all applications
seeking tribal land biddings for licenses subject to the same reserve
price have been finally resolved. If a recalculated tribal land bidding
credit is larger than the previously awarded pro rata tribal land
bidding credit, the Commission will award the difference.
(vii) Post-construction certification. Within fifteen (15) days of the
third anniversary of the initial grant of its license, a recipient of a
bidding credit under this section shall file a certification that the
recipient has constructed and is operating a system capable of serving
seventy-five (75) percent of the population of the qualifying tribal
land for which the credit was awarded. The recipient must provide the
total population of the tribal area covered by its license as well as
the number of persons that it is serving in the tribal area.
(viii) Performance penalties. If a recipient of a bidding credit under
this section fails to provide the post-construction certification
required by paragraph (f)(3)(vii) of this section, then it shall repay
the bidding credit amount in its entirety, plus interest. The interest
will be based on the rate for ten-year U.S. Treasury obligations
applicable on the date the license is granted. Such payment shall be
made within thirty (30) days of the third anniversary of the initial
grant of its license. Failure to repay the bidding credit amount and
interest within the required time period will result in automatic
termination of the license without specific Commission action.
Repayment of bidding credit amounts pursuant to this provision shall
not affect the calculation of amounts available to be awarded as tribal
land bidding credits pursuant to (f)(3)(v) of this section.
(g) Installment payments. The Commission may permit small businesses
(including small businesses owned by women, minorities, or rural
telephone companies that qualify as small businesses) and other
entities determined to be eligible on a service-specific basis, which
are high bidders for licenses specified by the Commission, to pay the
full amount of their high bids in installments over the term of their
licenses pursuant to the following:
(1) Unless otherwise specified by public notice, each eligible
applicant paying for its license(s) on an installment basis must
deposit by wire transfer in the manner specified in § 1.2107(b)
sufficient additional funds as are necessary to bring its total
deposits to ten (10) percent of its winning bid(s) within ten (10) days
after the Commission has declared it the winning bidder and closed the
bidding. Failure to remit the required payment will make the bidder
liable to pay a default payment pursuant to § 1.2104(g)(2).
(2) Within ten (10) days of the conditional grant of the license
application of a winning bidder eligible for installment payments, the
licensee shall pay another ten (10) percent of the high bid, thereby
commencing the eligible licensee's installment payment plan. If a
winning bidder eligible for installment payments fails to submit this
additional ten (10) percent of its high bid by the applicable deadline
as specified by the Commission, it will be allowed to make payment
within ten (10) business days after the payment deadline, provided that
it also pays a late fee equal to five percent of the amount due. When a
winning bidder eligible for installment payments fails to submit this
additional ten (10) percent of its winning bid, plus the late fee, by
the late payment deadline, it is considered to be in default on its
license(s) and subject to the applicable default payments. Licenses
will be awarded upon the full and timely payment of second down
payments and any applicable late fees.
(3) Upon grant of the license, the Commission will notify each eligible
licensee of the terms of its installment payment plan and that it must
execute a promissory note and security agreement as a condition of the
installment payment plan. Unless other terms are specified in the rules
of particular services, such plans will:
(i) Impose interest based on the rate of U.S. Treasury obligations
(with maturities closest to the duration of the license term) at the
time of licensing;
(ii) Allow installment payments for the full license term;
(iii) Begin with interest-only payments for the first two years; and
(iv) Amortize principal and interest over the remaining term of the
license.
(4) A license granted to an eligible entity that elects installment
payments shall be conditioned upon the full and timely performance of
the licensee's payment obligations under the installment plan.
(i) Any licensee that fails to submit its quarterly payment on an
installment payment obligation (the "Required Installment Payment") may
submit such payment on or before the last day of the next quarter (the
"first additional quarter") without being considered delinquent. Any
licensee making its Required Installment Payment during this period
(the "first additional quarter grace period") will be assessed a late
payment fee equal to five percent (5%) of the amount of the past due
Required Installment Payment. The late payment fee applies to the total
Required Installment Payment regardless of whether the licensee
submitted a portion of its Required Installment Payment in a timely
manner.
(ii) If any licensee fails to make the Required Installment Payment on
or before the last day of the first additional quarter set forth in
paragraph (g)(4)(i) of this section, the licensee may submit its
Required Installment Payment on or before the last day of the next
quarter (the "second additional quarter"), except that no such
additional time will be provided for the July 31, 1998 suspension
interest and installment payments from C or F block licensees that are
not made within 90 days of the payment resumption date for those
licensees, as explained in Amendment of the Commission's Rules
Regarding Installment Payment Financing for Personal Communications
Services (PCS) Licensees, Order on Reconsideration of the Second Report
and Order, WT Docket No. 97-82, 13 FCC Rcd 8345 (1998). Any licensee
making the Required Installment Payment during the second additional
quarter (the "second additional quarter grace period") will be assessed
a late payment fee equal to ten percent (10%) of the amount of the past
due Required Installment Payment. Licensees shall not be required to
submit any form of request in order to take advantage of the first and
second additional quarter grace periods.
(iii) All licensees that avail themselves of these grace periods must
pay the associated late payment fee(s) and the Required Installment
Payment prior to the conclusion of the applicable additional quarter
grace period(s). Payments made at the close of any grace period(s) will
first be applied to satisfy any lender advances as required under each
licensee's "Note and Security Agreement," with the remainder of such
payments applied in the following order: late payment fees, interest
charges, installment payments for the most back-due quarterly
installment payment.
(iv) If an eligible entity obligated to make installment payments fails
to pay the total Required Installment Payment, interest and any late
payment fees associated with the Required Installment Payment within
two quarters (6 months) of the Required Installment Payment due date,
it shall be in default, its license shall automatically cancel, and it
will be subject to debt collection procedures. A licensee in the PCS C
or F blocks shall be in default, its license shall automatically
cancel, and it will be subject to debt collection procedures, if the
payment due on the payment resumption date, referenced in paragraph
(g)(4)(ii) of this section, is more than ninety (90) days delinquent.
(h) The Commission may establish different upfront payment requirements
for categories of designated entities in competitive bidding rules of
particular auctionable services.
(i) The Commission may offer designated entities a combination of the
available preferences or additional preferences.
(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
or the presence or absence of attributable material relationships.
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 agreements required to be identified and provided to the
Commission pursuant to this paragraph and to § 1.2114.
(k) The Commission may, on a service-specific basis, permit consortia,
each member of which individually meets the eligibility requirements,
to qualify for any designated entity provisions.
(l) The Commission may, on a service-specific basis, permit
publicly-traded companies that are owned by members of minority groups
or women to qualify for any designated entity provisions.
(m) Audits. (1) Applicants and licensees claiming eligibility shall be
subject to audits by the Commission, using in-house and contract
resources. Selection for audit may be random, on information, or on the
basis of other factors.
(2) Consent to such audits is part of the certification included in the
short-form application (FCC Form 175). Such consent shall include
consent to the audit of the applicant's or licensee's books, documents
and other material (including accounting procedures and practices)
regardless of form or type, sufficient to confirm that such applicant's
or licensee's representations are, and remain, accurate. Such consent
shall include inspection at all reasonable times of the facilities, or
parts thereof, engaged in providing and transacting business, or
keeping records regarding FCC-licensed service and shall also include
consent to the interview of principals, employees, customers and
suppliers of the applicant or licensee.
(n) Annual reports. Each designated entity licensee must file with the
Commission an annual report within five business days before the
anniversary date of the designated entity's license grant. The annual
report shall include, at a minimum, a list and summaries of all
agreements and arrangements (including proposed agreements and
arrangements) that relate to eligibility for designated entity
benefits. In addition to a summary of each agreement or arrangement,
this 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. Annual reports will be filed no later
than, and up to five business days before, the anniversary of the
designated entity's license grant.
(o) Gross revenues. Gross revenues shall mean all income received by an
entity, whether earned or passive, before any deductions are made for
costs of doing business (e.g., cost of goods sold), as evidenced by
audited financial statements for the relevant number of most recently
completed calendar years or, if audited financial statements were not
prepared on a calendar-year basis, for the most recently completed
fiscal years preceding the filing of the applicant's short-form (FCC
Form 175). If an entity was not in existence for all or part of the
relevant period, gross revenues shall be evidenced by the audited
financial statements of the entity's predecessor-in-interest or, if
there is no identifiable predecessor-in-interest, unaudited financial
statements certified by the applicant as accurate. When an applicant
does not otherwise use audited financial statements, its gross revenues
may be certified by its chief financial officer or its equivalent and
must be prepared in accordance with Generally Accepted Accounting
Principles.
(p) Total assets. Total assets shall mean the book value (except where
generally accepted accounting principles (GAAP) require market
valuation) of all property owned by an entity, whether real or
personal, tangible or intangible, as evidenced by the most recently
audited financial statements or certified by the applicant's chief
financial offer or its equivalent if the applicant does not otherwise
use audited financial statements.
[ 63 FR 2343 , Jan. 15, 1998; 63 FR 12659 , Mar. 16, 1998, as amended at
63 FR 17122 , Apr. 8, 1998; 65 FR 47355 , Aug. 2, 2000; 65 FR 52345 , Aug.
29, 2000; 65 FR 68924 , Nov. 15, 2000; 67 FR 16650 , Apr. 8, 2002; 67 FR 45365 , July 9, 2002; 68 FR 23422 , May 2, 2003; 68 FR 42996 , July 21,
2003; 69 FR 61321 , Oct. 18, 2004; 70 FR 57187 , Sept. 30, 2005; 71 FR 6227 , Feb. 7, 2006; 71 FR 26251 , May 4, 2006; 77 FR 16470 , Mar. 21,
2012]
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