Request for Further Comment on Issues Related to Competitive Bidding Proceeding; Updating Competitive Bidding Rules, 22690-22700 [2015-09489]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 80, Number 78 (Thursday, April 23, 2015)]
[Proposed Rules]
[Pages 22690-22700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09489]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[WT Docket Nos. 14-170, 05-211, GN Docket No. 12-268, RM-11395; FCC 15-
49]


Request for Further Comment on Issues Related to Competitive 
Bidding Proceeding; Updating Competitive Bidding Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule; comment request.

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SUMMARY: In this Updating Part 1 Competitive Bidding Rules Additional 
Request for Comment, the Federal Communications Commission (Commission) 
seeks additional comment on changes to the Commission's Competitive 
Bidding rules suggested by commenters in response to the questions and 
proposals set forth in the Updating Part 1 Competitive Bidding Rules 
Notice of Proposed Rulemaking (Part 1 NPRM). This Updating Part 1 
Competitive Bidding Rules Additional Request for Comment will be 
referred to as the Part 1 Request for Comment.

DATES: Comments are due on or before May 14, 2015, and reply comments 
are due on or before May 21, 2015.

ADDRESSES: Interested parties may submit comments to the Part 1 Request 
for Comment, WT Docket Nos. 14-170, 05-211, GN Docket No. 12-268, RM-
11395, by any of the following methods:
     FCC's Web site: Federal Communication Commission's 
Electronic Comment Filing System (ECFS): https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting comments.
     Mail: FCC Headquarters, 445 12th Street SW., Room TW-A325, 
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 FCC504@fcc.gov or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (TTY).
    For detailed instructions for submitting comments, see the 
SUPPLEMENTARY INFORMATION section of this document.
    Initial Paperwork Reduction Act of 1995 (PRA) Analysis:
    This Part 1 Request for Comment contains proposed new or modified 
information collection requirements and seeks PRA comment. The Part 1 
NPRM sought comment from the general public and the Office of 
Management and Budget on the information collection requirements 
contained therein, 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, 44 U.S.C. 3506(c)(4), 
the Commission seeks specific comment on how it may ``further reduce 
the information collection burden for small business concerns with 
fewer than 25 employees'' in the light of the alternative proposals set 
forth in the Part 1 Request for Comment.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: Leslie Barnes at (202) 418-0660; 
Spectrum and Competition Policy Division (for questions related to 
joint bidding arrangements): Michael Janson at (202) 418-1310.

SUPPLEMENTARY INFORMATION: This is a summary of the Part 1 Request for 
Comment in GN Docket No. 12-268, WT Docket Nos. 14-170, 05-211, FCC 15-
49, released on April 17, 2015. The complete text of this document, 
including any attachment, is available for public inspection and 
copying from 8 a.m. to 4:30 p.m. Eastern Time (ET) Monday through 
Thursday or from 8 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 Part 1 Request for Comment and related 
documents also are available on the

[[Page 22691]]

Internet at the Commission's Web site: https://wireless.fcc.gov, or by 
using the search function for WT Docket No. 14-170 on the Commission's 
ECFS Web page at https://www.fcc.gov/cgb/ecfs/.
    All filings in response to the Part 1 Request for Comment 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 Part 
1 Request for Comment that adhere to the organization and structure of 
the document.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the Federal Communication Commission's 
Electronic Comments Filing System (ECFS): https://www.fcc.gov/cgb/ecfs/. 
Follow the instructions for submitting comments.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. 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 Attn: WTB/ASAD, Office of the 
Secretary, Federal Communications Commission (FCC). All hand-delivered 
or messenger-delivered paper filings for the Commission's Secretary 
must be delivered to the 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. ET. 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.
    Initial Paperwork Reduction Act of 1995 (PRA) Analysis:
    This Part 1 Request for Comment contains proposed new or modified 
information collection requirements and seeks PRA comment. The Part 1 
NPRM sought comment from the general public and the Office of 
Management and Budget on the information collection requirements 
contained therein, 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, 44 U.S.C. 3506(c)(4), 
the Commission seeks specific comment on how it may ``further reduce 
the information collection burden for small business concerns with 
fewer than 25 employees'' in the light of the alternative proposals set 
forth in the Part 1 Request for Comment.

I. Introduction

    1. The Part 1 Request for Comment seeks additional comment on a 
number of proposed changes to the Commission's part 1 competitive 
bidding rules offered by commenters in response to the questions and 
proposals set forth in the Part 1 NPRM, 79 FR 68172, November 14, 2014. 
Specifically, the Commission seeks further, more detailed input on 
alternative proposals as well as questions posed and issues raised by 
commenters on how the Commission can meet its statutory obligation to 
ensure that small businesses, rural telephone companies, and businesses 
owned by members of minority groups and women (collectively, designated 
entities or DEs) have an opportunity to participate in the provision of 
spectrum-based services, while at the same time ensuring that there are 
adequate safeguards to protect against unjust enrichment to ineligible 
entities. The Commission also seeks further comment on commenters' 
other suggestions for amending the competitive bidding rules governing 
auction participation by former defaulters, commonly controlled 
entities, and entities with joint bidding arrangements in response to 
proposals advanced in the Part 1 NPRM. Soliciting further input on 
alternative proposals and exploring other issues raised in the record 
to date will provide a more complete record for the Commission to 
evaluate and act upon, as appropriate, the concerns raised in the Part 
1 NPRM.

II. Background

    2. In the Part 1 NPRM, the Commission emphasized that ``it remain 
mindful of its responsibility to ensure that benefits are provided only 
to qualifying entities,'' and asked whether its proposals ``provide 
adequate safeguards against unjust enrichment to ensure that bidding 
credits are awarded only to qualifying small businesses.'' In 
discussing the Commission's proposed two-prong approach to evaluate 
attribution and establish eligibility for small business benefits, the 
Commission asked whether it should ``take additional steps to assure 
that ineligible entities cannot exercise undue influence over a small 
business,'' and also asked commenters to ``offer any other suggestions 
the Commission should consider to revise its rules and reform its small 
business policies.''
    3. After the Part 1 NPRM was released in October 2014, the 
Commission conducted an auction for 1,614 Advanced Wireless Service 
licenses in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz bands 
(Auction 97), which closed on January 29, 2015. In order to allow 
interested parties an opportunity to take into account any ``lessons 
learned'' from Auction 97, the Wireless Telecommunications Bureau (WTB) 
extended the comment deadline for the Part 1 NPRM three times. Twenty-
one parties submitted comments and fourteen parties submitted reply 
comments. Based on the issues raised in the Part 1 NPRM, several 
commenters offered alternative proposals, and suggested other policy 
considerations the Commission should weigh before amending its Part 1 
rules. The Part 1 Request for Comment seeks additional comment on those 
proposals and suggestions.

III. Eligibility for Bidding Credits

A. Attribution Rules and Small Business Policies

    4. In the Part 1 NPRM, the Commission sought comment on ``find[ing] 
a reasonable balance between the competing goals of affording 
[designated] 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.'' The Part 1 NPRM proposed to modify the eligibility standard 
for small business benefits to provide small businesses greater 
opportunities to participate in a wide range of spectrum based 
services. Among other issues, the Part 1 NPRM sought comment on 
repealing the attributable material relationship (AMR) rule which, for 
the purposes of determining an entity's eligibility for small business 
benefits, attributes to the DE applicant the revenues of any entity 
with which it has one or more agreements for the lease or resale of, on 
a cumulative basis, more than 25 percent of the spectrum capacity of 
any individual license it holds. Likewise, the Part 1 NPRM revisited 
the policy underlying the AMR rule. In lieu of a bright-line test, the 
Commission proposed a more focused two-pronged approach to evaluate an 
entity's eligibility for benefits using its longstanding controlling 
interest and affiliation rules to determine whether an applicant: (1) 
Meets the applicable small business size standard, and (2) retains 
control over the spectrum associated with the licenses for which it 
seeks small business benefits. The Commission also proposed to modify 
the secondary market rules to make

[[Page 22692]]

clear that DEs may fully benefit from the same de facto control 
standard for spectrum manager leasing as is applied to non-DE lessors.
    5. Several commenters support the Commission's proposal to modify 
the DE eligibility standard by eliminating the AMR rule, stating that 
it will allow small businesses the flexibility needed to obtain the 
capital necessary to participate in the provision of spectrum-based 
services. Those commenters note, among other things, that the proposal 
relies on well-established Commission standards to evaluate de jure and 
de facto control with which licensees are familiar, and is coupled with 
effective unjust enrichment provisions to safeguard against abuse of 
small business benefits. The Commission invites additional comment on 
this proposal and related concerns. Specifically, parties supporting 
the elimination of the AMR rule should explain how eliminating or 
loosening the restriction will promote competition and ensure small 
business participation in spectrum-based services, while guarding 
against ineligible entities' acquiring small business benefits. Several 
other parties oppose the Commission's proposal to eliminate the AMR 
rule to replace it with a two-pronged control analysis, arguing that 
doing so would increase the likelihood that DE benefits might unfairly 
flow to ineligible entities or spectrum ``speculators'' in 
contravention of Congressional intent. Commenters advocating for 
alternative rule amendments for the DE eligibility rules and the award 
of benefits should specifically address how the Commission should 
consider relationships with and investment in a DE applicant, 
particularly in connection with any use of spectrum acquired with 
benefits.
    6. Other parties argue that the AMR rule should not only be 
retained, but strengthened. For instance, some advocate that a DE 
should be prohibited from leasing more than 25 percent of its spectrum 
in the aggregate across one or more licenses. Another commenter argues 
that, if the AMR rule is retained, a DE should not be allowed to lease 
more than 25 percent of its total spectrum to any one wireless 
operator. In light of these and similar comments, the Commission seeks 
further comment on how much of a DE's spectrum it should be able to 
lease or resell without having to attribute the revenues of its lessees 
or resellers. Is there a different percentage threshold, either higher 
or lower, that would better serve the Commission's statutory goals? 
Should the Commission instead reinstate an absolute limit on the 
percentage of a DE's spectrum that it may lease or resell? If so, what 
should that limit be and why? Should any such limit affect DE 
eligibility as to any license, or only on a license-by-license basis? 
Should the Commission have different rules for licenses acquired by DEs 
without bidding credits? Should the Commission's rules regarding 
spectrum use agreements with DE's differ for those that have an equity 
interest in the DE? Commenters should also address how any proposed 
rule amendments for DE eligibility would impact the Commission's goal 
of providing small businesses with greater access to capital.
    7. Further, some parties suggest that the Commission should 
consider whether to distinguish between pure spectrum leasing 
arrangements and network facilities-based wholesale arrangements when 
evaluating whether to retain the AMR rule. The Commission seeks further 
comment on this distinction and asks whether and how it should treat 
wholesale and resale agreements differently from lease arrangements for 
purposes of attributing revenues to a DE applicant. Commenters are also 
requested to discuss how the Commission should define ``resale'' and 
``wholesale agreements'' for purposes of any such distinction, as well 
as for any other rule modifications it might consider, including if the 
Commission ultimately choose to retain the AMR rule, and the policy of 
requiring facilities-based service underlying the rule. Are there any 
potential advantages of distinguishing between agreements on the basis 
of the provision of facilities-based service? Are there any potential 
negative effects of such a distinction such that, on balance, it is 
preferable to retain the current AMR rule?
    8. Some parties suggest that the AMR rule be retained, but modified 
to allow DEs to lease spectrum to rural carriers or other DEs without 
attribution and allow DEs that have acquired licenses without bidding 
credits to lease those licenses without attribution. In particular, 
Blooston Rural proposes that the AMR be retained with respect to 
spectrum licenses that are both acquired with bidding credits and 
leased to nationwide wireless providers. The Commission seeks comment 
on these proposals. Commenters are specifically invited to address how 
the proposed modifications will achieve the Commission's goals of 
facilitating small business participation in spectrum-based services 
and enhancing competition, while preventing ineligible entities from 
acquiring small business benefits and unjust enrichment. Is there a 
limit on the overall amount of spectrum that a DE should be permitted 
to lease to another DE or rural carrier? Should any such limit affect 
DE eligibility as to any license, or only on a license-by-license 
basis? Commenters are also invited to address whether the proposals 
regarding modifications to the DE eligibility rules and award of DE 
bidding credits negatively or positively affect auction revenues, and 
the extent to which 47 U.S.C. 309(j) permits consideration of any such 
effects.
    9. With regard to the policy underlying the AMR rule, a number of 
parties suggest, however, that the Commission should continue to 
encourage DEs to provide facilities-based service. For instance, one 
party supports the elimination of the AMR rule, but states that DEs 
should be required to be facilities-based providers. Some commenters 
contend that any rule changes related to eligibility for small business 
benefits must continue to require an applicant seeking to utilize those 
benefits to be primarily a facilities-based provider. Other commenters 
support the Commission's proposal to reconsider requiring DEs to 
primarily provide facilities-based service directly to the public, and 
favor the elimination of the policy. The Commission invites further 
comment on the proposed change to this policy, including whether such a 
change would comply with the statute's directive that the Commission 
prescribes ``ensur[ing] 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.'' Commenters are requested to discuss how a policy 
favoring facilities-based service affects the Commission's ability to 
prevent warehousing and unjust enrichment, and ensure that small 
business benefits flow to eligible entities. For instance, should the 
Commission automatically treat an entity that manages a DE's spectrum 
license utilization for provisioning services as a controlling interest 
of the DE? Additionally, the Commission seeks comment as to ways in 
which the Commission can implement the policy that DEs provide 
facilities-based services if the AMR rule is eliminated.
    10. The record also includes numerous additional proposals that 
expand or offer alternative proposals for evaluating DE eligibility. 
The Commission seeks comment on the specific suggestions raised in the 
record and set forth below, and asks interested parties to provide 
specific details on how any proposed rule amendment would further its 
policy objectives of

[[Page 22693]]

providing small businesses opportunities and preventing unjust 
enrichment of ineligible entities: (1) Modify the applicable 
attribution, controlling interest or affiliation rule to alter the 
types of equity arrangements available to a DE applicant, by: (i) 
``Attribut[ing] to a DE the revenues and spectrum of any spectrum 
holding entity that holds an interest, direct or indirect, equity or 
non-equity of more than 10 percent,'' consistent with the spectrum 
attribution rules used to consider spectrum aggregation, (ii) 
Restricting larger nationwide and regional carriers, entities with a 
certain number of end-user customers, and/or other large companies from 
providing a material portion of the total capitalization of DE 
applicants or otherwise exercising control over such applicants as part 
of the definition of `material relationship;' (iii) ``[A]dopting a 
rebuttable presumption that equity interests of 50 percent or more 
represent de facto control of the [DE] company;'' (2) Adopt a 25 
percent minimum equity requirement for DEs to ``ensure that controlling 
interests are properly invested in their companies,'' and provide that 
``any loans to achieve minimum equity thresholds should be negotiated 
at arms-length;'' (3) Limit the total dollar amount of DE benefits that 
any DE (or group of affiliated DEs) may claim during any given auction, 
based on some multiple of its annual revenues, or a set cap of $32.5 
million to ``ensure that DEs cannot acquire spectrum in a manner that 
is wildly disproportionate to the concept of a small business;'' (4) 
Limit the overall amount that a small business can bid in order to 
ensure that a DE is not able to ``bid at levels that undercut the 
purpose of the DE program'' and base such cap on some multiple of a 
small business gross revenue threshold in the Part 1 schedule, such as 
ten times the annual gross revenues; (5) Rather than capping DE 
benefits, adopt another limiting metric such as population, to tie 
bidding credits more closely to a typical business plan of a small 
business. Under this proposal, a DE applicant bidding on licenses 
covering a relatively small number of pops, such as in rural areas, 
would not be subject to a cap, but nationwide licenses or licenses 
covering high-value, metropolitan areas would be limited; (6) Narrow 
the scope of the affiliation rules to exclude individuals and entities 
whose revenues are currently attributable to a DE, such as directors 
and certain family members, including in-laws, siblings, step-siblings, 
and half-siblings, if they are unlikely to exercise control over the 
applicant entity unless the applicant has more than incidental business 
relationships with a particular relation; and (7) ``[C]larify the 
affiliation rules to prevent rural telephone companies from losing [DE] 
status because they hold a fractional interest in a cellular 
partnership,'' where the rural telephone company has no ability to 
control the partnership's day-to-day operations and/or strategy in any 
significant way.
    11. In addressing proposals proffered in the record, commenters are 
requested to provide specific comment about how the proposals could be 
implemented and whether there are any alternative thresholds that would 
better meet the Commission's goals. For example, commenters should 
address whether and how any relevant terms should be defined and how 
the proposals should apply to existing DEs and those that will apply 
for benefits in the future. Are the existing standards for disclosable 
interest holders and affiliates appropriate for evaluating DE 
eligibility consistent with the Commission's policy objectives, or 
should the Commission modify its rules to include other non-controlling 
interests in a DE that may potentially cause unjust enrichment of 
ineligible entities or enable ineligible entities to exercise undue 
influence over a DE? Should there be a cap on the overall amount of 
money that non-controlling interests can contribute to a DE? Should 
there be a cap on, or a prohibition of, a non-controlling interest 
holder's use of spectrum for a license that has been acquired with DE 
benefits? For attribution purposes, is the revenue information the 
Commission uses to determine DE eligibility appropriate, or should the 
Commission consider other revenues such as sources of personal income? 
To what extent should an interest holder's revenues be attributed to a 
DE, for instance, should the attribution of revenues be based on the 
correlating percentage of the interest holder's equity contribution to 
the DE rather than all gross revenues? In advocating for particular 
changes, commenters should discuss how such changes or any resulting 
disclosure requirements could be implemented in the auction process, 
including the short-form application stage. To the extent that the 
proposals recommend incorporating specific percentages, thresholds, or 
procedures into the Commission's DE eligibility rules, commenters 
should explain how these approaches, or any other alternatives, would 
improve the Commission's DE program and better serve its statutory 
goals. Additionally, how should the Commission factor in the rising 
cost of acquiring spectrum licenses into any rule amendments that it 
consider?
    12. On February 26, 2015, United States Senator Claire McCaskill 
sent a letter to Chairman Wheeler requesting that the Commission 
eliminate the ``preferential'' treatment for Alaska Native Corporations 
(ANCs) that do not meet the standard definition of a small business 
under the Commission's attribution rules. Under 47 CFR 
1.2110(c)(5)(xi), small businesses affiliated with Indian tribes or 
ANCs are not required to include revenues of those Indian tribes or 
ANCs, other than gaming revenues, into their gross revenues for 
purposes of determining eligibility as a small business. In adopting 
this exemption, the Commission sought to ensure that its rules remained 
consistent with other Federal laws, policies, and regulations, and most 
notably the affiliation rules of the Small Business Administration. The 
Commission seeks comment on whether ANC revenues should be treated the 
same way as attributable revenues for purposes of DE eligibility. 
Additionally, the Commission seeks comment on whether its rules 
concerning Indian tribes or ANCs remain consistent with other Federal 
policies and practices, and whether and how to amend them. The 
Commission also seeks comment on whether its rules pertaining to ANCs 
increase the risk of unjust enrichment to some entities.

B. Unjust Enrichment

    13. In the Part 1 NPRM, the Commission also sought comment on what 
safeguards it should consider to ensure that bidding credits are 
extended only to qualifying small businesses, noting that ``[unjust 
enrichment] provisions will be as important as ever and that strong 
enforcement of [the Commission's] rules is critical.'' The Commission 
sought comment on whether any changes were needed to strengthen the 
unjust enrichment rules and how best it can continue to scrutinize 
applications and proposed transactions to ensure that only eligible 
entities receive benefits, while not undermining the statutory 
directive to ensure that DEs are given the opportunity to participate 
in the provision of spectrum-based services.
    14. Commenters are divided on whether the existing rules provide a 
sufficient safeguard to protect against unjust enrichment, while 
ensuring that DEs have an opportunity to participate in the provision 
of spectrum-based services. Several parties urge the Commission to 
retain the existing rules, noting that a longer unjust enrichment 
period would ``hamper or eliminate the

[[Page 22694]]

ability of DEs to raise and retain capital or operate their businesses 
with flexibility comparable to businesses in the rest of the 
industry.''
    15. Other commenters urge the Commission to adopt stronger rules to 
provide a more meaningful deterrent to speculation and abuse. T-Mobile, 
for example, advocates that the unjust enrichment rules should be 
adjusted to: ``(1) encompass the entire license term; and (2) require 
licensees that profit from the sale of a license obtained at a discount 
to repay that windfall profit [the sales price of the licenses above 
and beyond the auction bid price], plus interest.'' T-Mobile further 
notes that, ``in cases where spectrum is not available for use in the 
near term due to Federal Government or commercial incumbents, the 
Commission's existing holding periods . . . do not correspond with any 
rational benchmark for licensees to engage in a legitimate business.'' 
To ensure that spectrum resources are made available to the public in a 
timely manner, T-Mobile advocates that the Commission should require 
DEs to show some evidence of build-out activity within one year of 
acquiring the license or upon clearing spectrum incumbents. In 
addition, Taxpayer Advocates urges the Commission to require a DE to 
pay back all or part of its bidding credit if it chooses to ``lease or 
sell a significant portion of spectrum within the first five years of 
ownership.'' Other commenters contend that more stringent requirements 
like these proposals will further impede small businesses' ability to 
acquire access to capital.
    16. The Commission seeks comment on these alternative viewpoints. 
Specifically, the Commission seeks additional comment on whether to 
extend the unjust enrichment period for a specified number of years 
(e.g., 10 years), the entire license term or to link it to an interim 
construction milestone. Are there other alternatives the Commission 
should consider? For example, should the Commission revisit the 
percentage amounts associated with its unjust enrichment repayment 
schedule? Alternatively, should the Commission enhance its unjust 
enrichment rules as T-Mobile suggests to address concerns that the 
current unjust enrichment repayment rules are viewed as a ``mere cost 
of doing business'' by requiring repayment of any profit or some 
multiple of the bidding credit received? Commenters are also invited to 
address whether the DE benefits associated with any and all of a DE's 
licenses should be forfeited if it loses DE eligibility as to any one 
license. Finally, the Commission seeks comment on whether it should 
consider the proposal in the record to impose additional build-out and 
reporting obligations on DEs by requiring them to demonstrate 
``tangible steps toward deployment'' within one year of acquiring 
license(s) or clearing incumbent spectrum users. Is one year an 
appropriate timeframe or should the Commission require demonstrations 
at additional benchmarks? Are there any other options the Commission 
should consider to prevent spectrum warehousing and promote expeditious 
build-out, e.g., require repayment of some percentage of a bidding 
credit if a DE fails to meet a benchmark? The Commission asks 
commenters to address any trade-offs related to these proposals, 
including the extent to which any implemented rule amendments would 
restrict a DE's ability to access capital, deter participation of 
ineligible entities in the DE program, and prevent unjust enrichment.

C. Bidding Credits

    17. In the Part 1 NPRM, the Commission proposed to increase the 
gross revenues thresholds for defining the three tiers of small 
businesses, in order to reflect the changing nature of the wireless 
industry, including the overall increase in the size of wireless 
networks and the increasing capital costs to deploy them. Based upon 
the percentage increase in the Gross Domestic Product (GDP) price index 
from when the small business definitions were first adopted, the 
Commission proposed to adjust the three-year gross revenues thresholds 
from $3 million to $4 million for businesses potentially eligible for a 
35 percent bidding credit; from $15 million to $20 million for business 
potentially eligible for a 25 percent bidding credit; and from $40 
million to $55 million for businesses potentially eligible for a 15 
percent bidding credit. The Commission also sought comment regarding 
the following: increasing the percentage amounts of bidding credits 
available to small businesses in 47 CFR 1.2110(f); adding additional 
small business definitions and associated tiers of bidding credit 
amounts; and offering bidding preferences based on criteria other than 
business size.
1. Small Business Bidding Credits
    18. Many commenters support increasing the gross revenues 
thresholds by the proposed increments, citing the lack of DE 
participation in recent auctions, changes in capital markets, and the 
long period of time since the current thresholds were set. Some 
commenters further advocate that the Commission increase the revenue 
thresholds even more than proposed in the Part 1 NPRM. Several 
commenters support the continued use of gross revenues as the basis for 
analyzing business size, referring to the administrative workability of 
this metric. ARC proposes indexing the gross revenue tiers to the costs 
of auctioned spectrum on a MHz per pop basis. With respect to the 
credit percentages themselves, many commenters support increasing the 
credit percentages generally or across the board, and several support 
specific increases for the lowest threshold tier (the largest credit). 
On the other hand, CAGW opposes increasing the bidding credit 
percentages, arguing that such an increase ``could lead to even more 
questionable affiliations between large and small companies.'' Others 
suggest that bidding credit increases and expanding the eligibility for 
the DE program should not be implemented until the rules are revised 
and there is surety that ineligible entities will not benefit from 
bidding credits. How does this suggestion align with the Commission's 
proposals to address all issues at the same time in this proceeding?
    19. The Commission invites comment on these views. Commenters 
should address implementation issues associated with any alternate 
approaches, and provide concrete data and analysis to demonstrate 
whether and how such approaches will better meet the Commission's 
statutory goals.
2. Other Bidding Preferences/Types of Credits
    20. A number of commenters urge the Commission to consider bidding 
credits based on criteria other than business size. Several parties, 
for example, encourage the Commission to implement a bidding credit for 
rural telephone companies, ranging from 25 to 35 percent, to be awarded 
in addition to any small business bidding credit for which an applicant 
may qualify. Another commenter urged the Commission to re-examine its 
rules concerning the tribal land bidding credit. Other parties request 
that the Commission adopt bidding credits or other preference for 
parties that commit to serve rural, unserved and underserved areas. In 
addition at least one party advocates that the Commission's rules 
should remain focused on small businesses.
    21. The Commission seeks specific, data-driven comment regarding 
these alternative suggestions, including associated implementation 
issues. Commenters are also requested to

[[Page 22695]]

discuss how such proposals would advance the Commission's statutory 
objectives and why they would be preferable to other proposals.
    22. The Commission specifically invites comment on the threshold 
percentages proposed with regard to the adoption of a bidding credit 
reserved for rural telephone companies, as well as the suggestion that 
such a bidding credit be cumulative with any small business bidding 
credit for which a rural telephone company may also qualify, possibly 
exceeding 50 percent. To what extent would a rural telephone company 
bidding credit better enable these entities to compete successfully for 
licenses at auction? Are the higher costs of service and lower 
population densities already reflected in the winning bid price for 
rural markets? In addition to the data submitted by Blooston Rural, 
commenters are invited to provide additional analyses to demonstrate 
the need for a rural bidding credit. Does the possibility of cumulating 
small business and rural telephone company bidding credits increase the 
risk of unjust enrichment or cause concern regarding other statutory 
provisions? Commenters are requested to address the extent to which a 
rural bidding credit may be duplicative of other Commission and Federal 
government programs designed to facilitate network expansion into 
rural, unserved, and underserved communities. Is there any way to 
properly monitor any targeted program or other programs run by the 
Commission or other agencies to prevent potential abuse? Should the 
Commission consider any additional obligations or responsibilities for 
entities that benefit from both a small business and rural bidding 
credit?

D. Alternatives To Promote Small Business Participation in the Wireless 
Sector

    23. In the Part 1 NPRM, the Commission sought comment on 
suggestions that would enable the DE program to remain a viable 
mechanism for small businesses to gain flexibility to access capital, 
compete in auctions, and participate in new and innovative ways to 
provision services in a mature wireless industry. Several commenters 
provided suggestions in response to the Commission's inquiry stating 
that a review of alternatives is necessary to ascertain whether the 
current DE program is helpful or harmful to its intended beneficiaries. 
Many parties advocate for alternatives they contend would facilitate 
small business access to benefits in both the auction and secondary 
market contexts. For instance, AT&T suggests that providing 
``incentives for secondary market transactions or virtual networks,'' 
may offer a more direct path for more valuable small businesses in the 
telecommunications industry and may be more effective than facilitating 
participation in auctions due to the cost of licenses and capital 
needed to build networks. Other incentives may include Blooston Rural's 
proposal which advocates for a change that would allow a winning bidder 
to deduct from the auction purchase price the pro rata portion of its 
winning bid payment of any area that is partitioned to a rural 
telephone company or cooperative. ARC would expand Blooston Rural's 
proposal to DEs and argues that this change would ``benefit DEs by 
providing incentives for partitioning and promoting secondary market 
transactions.'' Additionally, would strengthening the Commission's 
build-out requirements and improving processes to reclaim licenses 
provide opportunities for small businesses to gain access to spectrum 
and increase diversity of license holders? Interested parties should 
provide specific instances where they think improvements could be made 
and options the Commission could pursue.
    24. The Commission seeks comment on these proposals. In particular, 
commenters should address whether and how Blooston Rural's proposal 
could be implemented in light of the Commission's rules prohibiting 
certain communications and payment timeframes. Are there alternative 
frameworks that the Commission should consider to promote a diverse 
telecommunications ecosystem, including incentives for secondary market 
transactions or virtual networks that could provide a more direct path 
into the industry for all entities, including DEs? Pursuant to the 
Commission's statutory objectives, what role(s) can and should small 
businesses play in the ``provision of spectrum-based services'' in 
today's telecommunications industry?

IV. Other Part 1 Considerations

A. Former Defaulter Rule

    25. The Part 1 NPRM proposed to tailor the former defaulter rule by 
balancing concerns that the current application of the rule is 
overbroad against the Commission's continued need to ensure that 
auction bidders are financially reliable. Specifically, consistent with 
the terms of a general waiver it granted for Auction 97, the Commission 
proposed 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 and was cured upon resolution of the proceeding.
    26. Nearly all of the commenters support the Commission's proposal, 
some with modest additions, noting that the proposed former defaulter 
rule strikes the right balance between ensuring that winning bidders 
are capable of meeting their financial obligations and limiting costly 
and overbroad application of the rule. AT&T suggests that the 
Commission should also ``include an exemption based on an applicant's 
credit-rating,'' because ``applicants with an investment grade credit 
rating pose no meaningful risk of defaulting on a Commission obligation 
and thus should not be required to submit an additional 50 percent 
upfront payment penalty.'' NTCH, however, suggests that the Commission 
eliminate the former defaulter rule altogether because it is 
ineffective, unneeded, and counterproductive. The Commission seeks 
comment on these alternative proposals. To the extent commenters 
support the proposal to eliminate the former defaulter rule altogether, 
the Commission seeks specific comment on how it can adequately ensure 
that bidders are capable of meeting their financial commitments.

B. Commonly Controlled Entities

    27. The Part 1 NPRM proposed to codify the Commission's 
longstanding competitive bidding procedure that prohibits the same 
individual or entity from filing more than one short-form application, 
and to establish a new rule to prohibit 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 based on more than one short-form application. 
Commenters addressing this issue largely support the Commission's 
proposals, although some encourage the Commission to take a step 
further and consider whether to apply the proposals to entities with 
common, non-controlling interests. T-Mobile notes, for example, that 
``it is critical

[[Page 22696]]

that the Commission also address the potential for coordinated bidding 
behavior by bidders that are linked by common attributable interests,'' 
noting that otherwise these entities would ``have unfair advantages in 
an auction and [could] manipulate bidding to the detriment of other 
participants and the public.'' For example, Spectrum Financial implies 
that allowing an entity with ownership in more than one bidder which 
exceeds a certain percentage (e.g., 50% or more) to participate in an 
auction promotes collusion. To address this concern, one commenter 
recommends that the Commission ``adopt a requirement in addition to its 
existing [47 CFR 1.2105's] rules [prohibiting certain communications] 
that individuals or entities listed as disclosable interest [ ] holders 
on more than one short-form application certify that they are not, and 
will not be, privy to, or involved in, the bidding strategy of more 
than one auction participant.'' AT&T proposes that ``each applicant 
should certify that it has not entered into any agreements with [any] 
other applicant regarding their bids or bidding strategy, and that they 
are not privy to any other applicant's bids or bidding strategy'' in 
lieu of the current disclosure requirements under the Commission's 
rules. Commenters also suggest that applicants be limited in holding 
ownership interests in multiple auction applicants. If the Commission 
were to set an ownership limit, what is the appropriate limit? Should 
entities be restricted from having an interest (direct or indirect) in 
more than one applicant for a license in a geographic license area? 
Alternatively, would establishing a limit on financial investments that 
an entity may make in other auction participants address commenters' 
concerns? Should such entities be restricted from directing or 
participating directly in the bidding of more than one applicant, 
regardless of whether there is common control? The Commission seeks 
comment on these concerns and suggestions and any alternatives. In 
particular, commenters are invited to address what attribution 
standards the Commission should use in the context of any such rule. 
Finally, the Commission observes that the adoption of some of the 
alternatives by commenters may directly or indirectly conflict with 
other Part 1 competitive bidding rules. For instance, one commenter 
proposed an additional certification on certain prohibited 
communications for disclosable interest holders, which may conflict 
with an exception in the Commission's current rules on prohibiting 
certain communications. The Commission seeks comment on these potential 
conflicts and how to harmonize the proposals with its competitive 
bidding rules, while fulfilling its statutory goals.

C. Joint Bidding Arrangements

    28. In light of the evolution of the mobile wireless marketplace 
since the Commission last adopted joint bidding rules in 1994, the Part 
1 NPRM proposed to prohibit joint bidding and other arrangements among 
nationwide providers, including agreements to participate in an auction 
through a newly formed joint entity. For purposes of the Commission's 
joint bidding rules, it proposed to distinguish nationwide providers 
from non-nationwide providers because of the increased likelihood that 
joint bidding arrangements between nationwide providers would lead to 
competitive harm or otherwise harm the public interest. In contrast, 
the Commission observed a reduced likelihood for competitive harm if 
non-nationwide providers entered into joint bidding agreements with 
other non-nationwide providers. Accordingly, the Commission tentatively 
concluded that it should continue to permit joint bidding arrangements 
among non-nationwide providers and asked commenters proposing any 
changes to the joint bidding rules for arrangements among non-
nationwide providers to discuss why such changes are necessary. 
Additionally, the Commission sought comment on the policies and 
procedures that should apply to bidding arrangements between nationwide 
and non-nationwide providers. Finally, the Commission also sought 
comment on its analysis of the harms and benefits of joint bidding 
arrangements generally, and on whether its proposals ``provide an 
effective framework for addressing the[se] relative harms and 
benefits.''
    29. Commenters are divided on these proposals, with some offering 
additional recommendations. Sprint opposes prohibiting bidding 
arrangements between nationwide providers because such a rule would not 
account for differences in the relative market power of the four 
current nationwide providers. T-Mobile opposes instituting bright-line 
rules at all, advocating for adherence to the Commission's existing 
practice of addressing all bidding agreements on a case-by-case basis. 
RWA, ARC, and CCA support continuing to allow joint bidding by non-
nationwide providers, with ARC arguing that such arrangements ``can 
enable smaller companies to pool their resources and compete 
effectively for licenses that they would be unable to acquire on their 
own.'' Likewise, RWA contends that ``joint bidding arrangements can 
provide some small and rural wireless carriers with opportunities that 
might otherwise be unavailable due to limited financial resources.''
    30. AT&T, Taxpayer Advocates, and T-Mobile contend that the 
Commission should place greater limitations on joint bidding than 
proposed in the Part 1 NPRM based upon perceived negative effects of 
non-nationwide providers using joint bidding arrangements in Auction 
97. These commenters argue that certain bidders exploited the 
Commission's rules to the detriment of other bidders and the public 
interest. Accordingly, some of these commenters submit alternative 
proposals, which they believe are less likely to lead to competitive 
harm or otherwise harm the public interest. The Commission seeks 
comment on these alternative proposals: (1) Prohibit all joint bidding 
agreements between DEs and non-DEs; (2) Prohibit all joint bidding 
arrangements and require instead that entities seeking to coordinate 
their bidding activities form a bidding consortium or joint venture and 
divide the licenses acquired after the auction is over; (3) Prohibit 
all joint bidding arrangements between commonly controlled or 
affiliated entities; (4) Generally prohibit parties that are privy to 
others' bidding information during the auction from placing multiple 
coordinated bids on a common license; (5) Prohibit an individual from 
serving as an authorized bidder for more than one auction participant; 
(6) Permit bidding agreements between all providers in rural Partial 
Economic Areas where the providers involved have less than 45 MHz*pops 
of below-1-GHz spectrum; (7) Modify the definition of ``joint bidding 
and other arrangements'' to include only arrangements that are directly 
related to the coordination of bidding strategies or mechanics; (8) 
Require a more comprehensive certification concerning bidding 
agreements and bidding strategies in addition to, or in lieu of, 
current disclosure requirements, such as a requirement that all 
disclosable interest holders on more than one application certify that 
they do not have knowledge of the bidding strategy of more than one 
applicant; and (9) Implement a prior approval process for joint bidding 
arrangements before the short-form deadline, including how to implement 
the process in an efficient manner.
    31. In addition, the Commission seeks to expand the record and 
request comment on the following proposals: (1)

[[Page 22697]]

Prohibit parties to a joint bidding agreement from bidding separately 
on licenses in the same market; (2) Prohibit communications among joint 
bidders when bidding on licenses in any of the same markets; and (3) 
Prohibit any individual or entity from serving on more than one bidding 
committee.
    32. The Commission requests comment on whether and how all of the 
proposals offered above would better protect against anti-competitive 
behavior--such as preserving bidding eligibility, and limiting bid 
exposure and distortion of demand--or other harms to the public 
interest. Commenters are also requested to address specifically how 
such proposals could be implemented to preserve auction integrity.

IV. Procedural Matters

A. Ex Parte Presentations

    33. Requests for Ex Parte Meetings. This matter shall be treated as 
a ``permit-but-disclose'' proceeding in accordance with the ex parte 
rules, as set forth in paragraph 145 of the Part 1 NPRM. Persons making 
oral ex parte presentations are reminded that memoranda summarizing the 
presentations must contain summaries of the substance of the 
presentations and not merely a listing of the subjects discussed. More 
than a one- or two-sentence description of the views and arguments 
presented generally is required. Other requirements pertaining to oral 
and written presentations are set forth in 47 CFR 1.1206(b).

B. Supplement to Initial Regulatory Flexibility Analysis

    34. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Part 1 NPRM included an Initial Regulatory 
Flexibility Analysis (IRFA) exploring the potential impact on small 
entities of the Commission's proposals. 47 U.S.C. Section 309(j)(4)(D) 
of the Communications 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 member of minority groups and women are given the 
opportunity to participate in the provision of spectrum-based 
services.'' Consistent with this statutory objective, the Commission 
sought written public comment on the proposals in the Part 1 NPRM, 
including comment on the IRFA. Though numerous responses were directed 
at the small business aspects of the Part 1 NPRM, the Commission 
received no comments in direct response to the IRFA. This supplemental 
IRFA addresses the possible incremental significant economic impact on 
small entities of the alternative proposals in the Part 1 Request for 
Comment. Interested parties are invited to submit written public 
comments on this supplemental analysis. Any such comments must be filed 
in accordance with the same filing deadlines reflected in the ``Dates'' 
section of this publication and have a separate and distinct heading 
designating them as responses to this supplemental analysis. The 
Commission will send a copy of the Part 1 Request for Comment, 
including this supplemental IRFA, to the Chief Counsel for Advocacy of 
the Small Business Administration. In addition, the Part 1 Request for 
Comment and supplemental IRFA (or summaries thereof) will be published 
in the Federal Register.
    35. Need for, and Objectives of, the Proposed Competitive Bidding 
Procedures. The Part 1 Request for Comment seeks additional comment on 
a number of specific changes to the Commission's Part 1 competitive 
bidding rules suggested by commenters in response to the questions and 
proposals set forth in the Part 1 NPRM. Specifically, it seeks comment 
on alternative proposals for evaluating DE eligibility for bidding 
credits and for updating other Part 1 competitive bidding rules 
governing auction participation by former defaulters, commonly 
controlled entities, and entities with joint bidding arrangements. The 
Part 1 Request for Comment continues to advance the Commission's 
statutory directive to ensure that small businesses, rural telephone 
companies, and businesses owned by members of minority groups and women 
(collectively, DEs) are given the opportunity to participate in the 
provision of spectrum-based services, and fulfill the commitment made 
in the BIA Report & Order. Soliciting further input on these 
alternative proposals will provide a more complete record to evaluate 
and act upon the concerns raised in the Part 1 NPRM.
    36. The Part 1 Request for Comment seeks comment on the following 
alternative proposals that would modify the Commission's rules 
concerning DE eligibility: (1) Modify the attributable material 
relationship (AMR) rule to distinguish between pure spectrum leasing 
arrangements and network-based wholesale arrangements and/or to allow 
DEs to lease spectrum to rural carriers or other DEs without 
attribution; (2) Retain or eliminate the AMR rule and continue to 
require DEs to provide facilities-based service; (3) Eliminate the 
requirement that DEs provide facilities-based service; (4) Strengthen 
the AMR rule by prohibiting DEs from leasing more than 25 percent of 
their spectrum in the aggregate, across one or more licenses or to any 
one wireless operator; (5) Modify the applicable attribution, 
controlling interest, or affiliation rule to alter the types of equity 
arrangements available to a DE applicant, by: (i) attributing to a DE 
the revenues and spectrum of any spectrum holding entity that holds an 
interest, direct or indirect, equity or non-equity of more than 10 
percent; (ii) restricting larger nationwide and regional carriers, 
entities with a certain number of end-user customers, and/or other 
large companies from providing a material portion of the total 
capitalization of DE applicants or otherwise exercising control over 
such applicants as part of the definition of ``material relationship;'' 
and (iii) adopting a rebuttable presumption that equity interests of 50 
percent or more represent de facto control of the DE company; (6) Adopt 
a 25 percent minimum equity requirement for DEs and ensure that any 
loans to achieve minimum equity thresholds should be negotiated at 
arms-length; (7) Limit the total dollar amount of DE benefits that any 
DE (or group of affiliated DEs) may claim during any given auction, 
based on some multiple of its annual revenues, or a set cap of $32.5 
million; alternatively, base this limit on some multiple times the 
applicable small business definition in the Part 1 schedule, or another 
metric like population to tie bidding credits more closely to a typical 
small business plan; (8) Narrow the scope of affiliation rules to 
exclude individuals and entities whose revenues are currently 
attributable to a DE if they are unlikely to exercise control over the 
applicant entity, such as directors and certain family members, 
including in-laws, siblings, step-siblings, and half-siblings, unless 
the applicant has more than incidental business relationships with a 
particular relation; (9) Clarify the affiliation rules to prevent rural 
telephone companies from losing DE status by holding a fractional 
interest in a cellular partnership where the rural telephone company 
has no control over the partnership's day-to-day operations and/or 
strategy; (10) Treat the revenues of Alaska Native Corporations the 
same way as attributable revenues for purposes of DE eligibility under 
the Commission's rules; (11) Retain the existing unjust enrichment 
rules or strengthen the rules by: (i) changing the unjust enrichment 
period to encompass the entire license term, for a specified

[[Page 22698]]

number of years, or linking it to an interim construction milestone; 
and (ii) requiring licensees that profit from the sale of a license 
obtained at a discount to repay that windfall profit, plus interest, in 
addition to the bidding credit discount; (12) Require DEs to show some 
evidence of build-out activity within one year of acquiring the license 
or upon clearing spectrum incumbents and require repayment of some 
percentage of its bidding credit discount if it fails to meet the 
build-out milestone; (13) Adjust the percentage amounts associated with 
the Commission's unjust enrichment repayment schedule; (14) Require DEs 
to pay back all or part of its bidding credit if it chooses to lease or 
sell a significant portion of spectrum within the first five years of 
ownership; (15) Adjust the percentage amounts associated with the 
Commission's unjust enrichment repayment schedule; (16) Decline to 
increase the Part 1 NPRM's proposed gross revenue thresholds defining 
the three tiers of small business bidding credits and to increase the 
scale of the DE program prior to reform; (17) Modify the definition of 
small business for acquiring bidding credits by: (i) Increasing the 
gross revenue thresholds above the original proposed amounts in the 
Part 1 NPRM; (ii) indexing the gross revenue tiers to the costs of 
auctioned spectrum on a MHz per pop basis (rather than using the Gross 
Domestic Product price index); and (iii) increasing the bidding credit 
percentages across all three tiers or solely for the lowest tier (the 
largest credit); (18) Consider the adoption or review of other bidding 
preferences/types of credits by: (i) Adopting a bidding credit for 
rural telephone companies to be awarded in addition to any small 
business bidding credit for which an applicant may qualify; (ii) 
adopting a bidding credit for parties that commit to serve unserved and 
underserved areas; (iii) reviewing the tribal land biding credit; (iv) 
establishing a mechanism for a winning bidder to deduct from its 
auction purchase price the pro rata portion of its winning bid payment 
of any area partitioned to a rural telephone company or cooperative or 
any DE; and (v) adopting a ``localism'' bidding credit for any DE 
applicant with an 10% or greater interest holder that has been a 
resident of an unserved, underserved, or persistent poverty area for 
more than a year; and (19) Provide incentives for secondary market 
transactions or virtual networks.
    37. The Part 1 Request for Comment also seeks comment on 
alternatives proposed for other Part 1 competitive bidding rules 
relating to former defaulters, commonly controlled entities, and 
entities with joint bidding arrangements. Specifically, these 
alternative proposals would: (1) Modify the former defaulter rule to 
include an exemption based on an applicant's investment grade rating or 
eliminate the former defaulter rule altogether; (2) Apply also, common, 
non-controlling entities to the Part 1 NPRM's proposed rule to prohibit 
commonly controlled entities from qualifying to bid on licenses in the 
same or overlapping geographic areas based on more than one short-form 
application; (3) Limit the ownership interests or financial investments 
an auction applicant may have in other auction applicants; (4) Adopt a 
requirement in addition to the Commission's existing 47 CFR 1.2105's 
rules that individuals or entities listed as disclosable interest 
holders on more than one short-form application certify that they are 
not, and will not be, privy to, or involved in, the bidding strategy of 
more than one auction participant; (5) Modify the Commission's rules 
governing the treatment of joint bidding arrangements by: (i) 
Prohibiting all joint bidding agreements between DEs and non-DEs and 
between commonly controlled or affiliated entities; (ii) prohibiting 
all joint bidding arrangements and requiring instead that entities 
seeking to coordinate their bidding activities form a bidding 
consortium or a joint venture and divide the licenses acquired after 
the auction is over; (iii) permitting bidding agreements between all 
providers in rural Partial Economic Areas where the providers involved 
have less than 45 MHz*pops of below-1-GHz spectrum; (iv) modifying the 
definition of ``joint bidding and other arrangements'' to include only 
arrangements that are directly related to the coordination of bidding 
strategies or mechanics; and (v) prohibiting parties to a joint bidding 
agreement from bidding separately on licenses in the same market and 
from communicating about bidding information when bidding on licenses 
in any of the same markets; (6) Prohibit parties that are privy to 
others' bidding information during the auction from placing multiple 
coordinated bids on a common license; (7) Prohibit an individual from 
serving as an authorized bidder for more than one auction participant; 
(8) Prohibit any individual or entity from serving on more than one 
bidding committee; and (9) Implement a prior approval process for joint 
bidding arrangements before the short-form deadline, including how to 
implement the process in an efficient manner.
    38. Legal Basis for Proposed Rules. The Part 1 Request for Comment 
is adopted pursuant to sections 1, 4(i), 303(r), 309(j), 316 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 303(r), 
309(j), 316.
    39. Description and Estimate of the Number of Small Entities to 
which the Proposed Rules Will Apply. The RFA directs agencies to 
provide a description of and, where feasible, an estimate of the number 
of small entities that may be affected by rules proposed in that 
rulemaking proceeding, if adopted. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
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. If adopted, 
the alternative proposals in the Part 1 Request for Comment may, over 
time, affect small entities that are not easily categorized at present. 
However, the alternative proposals described in the Part 1 Request for 
Comment will affect the same individuals and entities described in 
paragraphs 7 through 17 of the IRFA associated with the underlying Part 
1 NPRM.
    40. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities. The Part 1 Request for 
Comment seeks additional comment on a number of rule changes proposed 
by commenters that will affect reporting, recordkeeping, and other 
compliance requirements for small entities. However, the majority of 
these alternatives are outgrowths of the Part 1 NPRM's proposals and 
policies in which a description was previously provided under 
paragraphs 19 through 33 of the IRFA. To the extent the alternative 
proposals discussed in the Part 1 Request for Comment differ from the 
Part 1 NPRM, the Commission discusses these changes.
    41. Eligibility for Bidding Credits. The proposals advanced by 
commenters in the proceeding would distinguish for purposes of 
establishing DE qualifications between pure spectrum leasing and 
network-based wholesale arrangements. Other new proposals would modify 
the attribution rules to restrict the types of equity arrangements 
available to a DE applicant, limit the amount of DE benefits that a DE 
may claim or the overall amount that a small

[[Page 22699]]

business can bid, narrow the entities whose revenues are attributable 
to a DE, prevent certain rural telephone companies from losing DE 
status, treat ANC revenues the same way as attributable revenues, 
lengthen the unjust enrichment period, require licensees that profit 
from the sale of a DE license to repay such profit with interest, 
require forfeiture of DE benefits for all licenses if a DE forfeits DE 
eligibility for one license, and require DEs to show some evidence of 
build-out under the DE annual reporting requirement within one year of 
acquiring the license or upon clearing spectrum incumbents.
    42. Bidding Credits. The Part 1 Request for Comment also seeks 
comments on alternative proposals that would include additional bidding 
credits for rural telephone companies, for companies committed to 
providing service to unserved or underserved areas, and for any DE 
applicant with a 10 percent or greater interest holder that has been a 
resident of an unserved, underserved, or persistent poverty area for 
more than a year. Another suggestion would establish an auction 
mechanism which would allow a winning bidder to deduct from its auction 
purchase price the pro rata portion of its winning bid payment of any 
area partitioned to a rural telephone company or cooperative, or any 
DE.
    43. Other Part 1 Rules. In the Part 1 Request for Comment the 
Commission seeks comment on alternative suggestions to modify other 
Part 1 competitive bidding rules concerning former defaulters, commonly 
controlled entities, and entities with joint bidding agreements. With 
respect to the former defaulter rule, one commenter suggested that the 
Commission adopt an exemption based on an applicant's investment grade 
rating, while another commenter suggested eliminating the former 
defaulter rule altogether. In regards to the Part 1 NPRM's proposal 
concerning commonly controlled entities, several commenters urged the 
Commission to apply its proposal to entities with common, non-
controlling interests as well. One commenter proposed that the 
Commission adopt a certification to prohibit certain communications on 
the Commission's short-form application, while another commenter 
submitted a similar proposal but would use the certification in lieu of 
the Commission's disclosure requirements.
    44. The Commission received several alternative suggestions 
concerning joint bidding agreements and other arrangements. Several 
commenters opposed the Commission's proposal to prohibit bidding 
arrangements between nationwide providers; instead, these commenters 
advocated for adherence to the Commission's existing practice of 
analyzing bidding arrangements on a case-by-case basis. Other 
commenters urged the Commission to adopt proposals that would: (1) 
Prohibit joint bidding agreements between DEs and non-DEs and between 
commonly controlled or affiliated entities; (2) prohibit all joint 
bidding arrangements and require instead the formation of a bidding 
consortium or a joint venture which would divide the licenses acquired 
after the auction is over; (3) permitting bidding agreements between 
all providers in rural PEAs where the providers involved have less than 
45 MHz*pops of below-1-GHz spectrum; (4) narrow the definition of 
``joint bidding agreement and other arrangements'' to arrangements 
directly related to coordination of bidding strategies or mechanics; 
(5) prohibit parties to a joint bidding agreement from bidding 
separately on licenses in the same market and from communicating about 
bidding information when bidding on licenses in any of the same 
markets; (6) prohibit parties that are privy to others' bidding 
information during the auction from placing multiple coordinated bids 
on a common license; (7) prohibit an individual from serving as an 
authorized bidder for more than one auction participant; (8) prohibit 
any individual or entity from serving on more than one bidding 
committee; (9) implement a prior approval process for joint bidding 
arrangements before the short-form deadline, including how to implement 
the process in an efficient manner; and (10) limit an auction 
applicant's ownership interest or financial investment in other auction 
applicants.
    45. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. The RFA requires an 
agency to describe any significant alternatives beneficial to small 
entities considered in reaching a proposed approach, which may include 
the following four alternatives (among others): (1) Establishment of 
differing compliance or reporting requirements or timetables that take 
into account the resources available to small entities; (2) 
clarification, consolidation, or simplification for small entities of 
compliance and reporting requirements; (3) use of performance, rather 
than design, standards; and (4) an exemption for small entities.
    46. Most of the alternative proposals in Part 1 Request for Comment 
correlate to the Part 1 NPRM's proposals and policies for modifying the 
Commission's Part 1 competitive bidding rules. As such, a description 
of the steps taken to minimize the significant economic impact and the 
alternatives considered for these proposals can be found under 
paragraphs 34 through 38 of the Part 1 NPRM's IRFA. To the extent that 
some of the alternative proposals may be distinguishable from the Part 
1 NPRM, the Commission seeks additional comment on these suggestions to 
fully evaluate the alternatives raised in the record to date. In doing 
so, the Commission remains mindful of its statutory obligations which 
require the Commission 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 statute also directs the Commission 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.''
    47. In Part 1 Request for Comment the Commission continues to 
explore alternative proposals for establishing DE eligibility and 
modifying other Part 1 competitive bidding rules. With respect to the 
DE rules concerning attribution and unjust enrichment, the Commission 
seeks to provide small businesses with the flexibility to engage in 
business ventures that include increased forms of leasing and other 
spectrum use agreements. In pursuing these goals, however, the 
Commission also remains mindful of its responsibility to ensure that DE 
benefits are provided only to qualifying entities. Accordingly, the 
Commission also aims to employ adequate safeguards against unjust 
enrichment.
    48. As part of this proceeding, the Commissions took a fresh look 
at its bidding credit program since its inception in 1997 to ensure 
that it continues to be a viable mechanism for small businesses in 
light of the current wireless marketplace. The Commission's bidding 
credit program is the primary way it facilitates participation by small 
businesses at auction. As a general matter, most of the alternative 
proposals would provide small businesses with an economic benefit by 
providing a percentage discount on auction winning bids and therefore 
make it easier for small businesses to compete in auction and acquire 
spectrum licenses.

[[Page 22700]]

    49. To clarify and streamline the Commission competitive bidding 
rules in advance of BIA, the Commission also explored the need for 
other revisions to its Part 1 competitive bidding rules to improve 
transparency and efficiency of the auction process. As noted in the 
Part 1 NPRM, most of the proposed changes to the Part 1 rules would 
apply to all entities in the same manner as the Commission would apply 
these changes uniformly to all entities that choose to participate in 
spectrum license auctions. Applying the same rules equally in this 
context provides consistently and predictability to the auction 
process, and minimizes administrative burdens for all auction 
participants including small businesses. In fact, many of the proposed 
rule revisions clarify the Commission's competitive bidding rules, 
including short-form application requirements. For instance, nearly all 
commenters supported the Commission's proposal to modify the former 
defaulter rule by balancing concerns that the current application of 
the rule is overbroad with the Commission's continued need to ensure 
that auction bidders are financially responsible. Finally, the 
Commission continues to focus its attention on joint bidding agreements 
and other arrangements to preserve and promote robust competition in 
the mobile wireless marketplace and facilitate competition among 
bidders at auction, including small entities.
    50. Federal Rules Which Duplicate, Overlap, or Conflict With the 
Proposed Rules.
    None.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2015-09489 Filed 4-22-15; 8:45 am]
BILLING CODE 6712-01-P