Updating Competitive Bidding Rules, 56763-56817 [2015-21950]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Rules and Regulations]
[Pages 56763-56817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21950]



[[Page 56763]]

Vol. 80

Friday,

No. 181

September 18, 2015

Part IV





Federal Communications Commission





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47 CFR Parts 1 and 27





Updating Competitive Bidding Rules; Final Rule

Federal Register / Vol. 80 , No. 181 / Friday, September 18, 2015 / 
Rules and Regulations

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[GN Docket No. 12-268, WT Docket Nos. 14-170, 05-211, RM-11395; FCC 15-
80]


Updating Competitive Bidding Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission modernizes and reforms its 
competitive bidding rules to provide greater flexibility to small 
businesses and rural service providers and bring greater choices to 
consumers.

DATES: Effective November 17, 2015, except for Sec. Sec.  1.2105(a)(2), 
1.2105(a)(2)(iii) through (vi), (viii) through (x), and (xii), 
1.2105(c)(3) through (4), 1.2110(j), 1.2110(n), 1.2112(b)(1)(iii) 
through (vi), 1.2112(b)(2)(iii), (v), and (vii) through (viii), 
1.2114(a)(1), and 1.9020(e) which contain new or modified information 
collection requirements that require approval by the Office of 
Management and Budget (OMB). The Commission will publish a document in 
the Federal Register announcing the effective date of those sections.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: Leslie Barnes at (202) 418-0660. 
For further information concerning the Paperwork Reduction Act 
information collection requirements contained in this document, contact 
Cathy Williams at (202) 418-2918, or via the Internet at PRA@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Report and Order; 
Order on Reconsideration of the First Report and Order; Third Order on 
Reconsideration of the Second Report and Order; Third Report and Order 
(Part 1 Report & Order), RM-11395, GN Docket No. 12-268, WT Docket Nos. 
05-211 and 14-170, FCC 15-80, adopted on July 16, 2015 and released on 
July 21, 2015. This summary also reflects the Commission's Erratum, DA 
15-959, released on August 25, 2015, to correct typographical errors in 
the text of the decision and make ministerial conforming amendments to 
the rules attached as APPENDIX A to the Part 1 Report and Order that 
correct typographical errors and update cross-references within the 
part 1 rules and cross-references to those part 1 rules in other 
service-specific rule parts. The complete text of this document is 
available for public inspection and copying from 8:00 a.m. to 4:30 p.m. 
Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30 
a.m. ET on Fridays in the FCC Reference Information Center, 445 12th 
Street SW., Room CY-A257, Washington, DC 20554. The complete text is 
available on the Commission's Web site at https://wireless.fcc.gov, or 
by using the search function on the ECFS Web page at https://www.fcc.gov/cgb/ecfs/. Alternative formats are available to persons 
with disabilities by sending an email to FCC504@fcc.gov or by calling 
the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY).

Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act of 1980, the 
Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) 
of the possible significant economic impact on small entities of the 
policies and rules adopted in this document. The FRFA is set forth in 
Appendix B of the Part 1 Report and Order. The Commission's Consumer 
and Governmental Affairs Bureau, Reference Information Center, will 
send a copy of this Part 1 Report and Order, including the FRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration (SBA).

Paperwork Reduction Act

    The Part 1 Report and Order contains new and modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. They will be submitted to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the new and modified information collection 
requirements contained in this proceeding.

Congressional Review Act

    The Commission will send a copy of this Part 1 Report and Order in 
a report to be sent to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act (CRA), see 5 U.S.C. 
801(a)(1)(A).

I. Introduction and Background

    1. The Part 1 Report and Order modernizes and reforms the 
Commission's part 1 competitive bidding rules to reflect profound 
changes in the wireless industry over the last decade. In modernizing 
the part 1 rules, the Commission provides greater flexibility to 
smaller companies to build wireless businesses that can spur additional 
investment in businesses and bring greater choices to consumers. The 
Commission also provides--for the first time--a bidding credit to 
eligible rural service providers to help them compete for spectrum 
licenses more effectively and to provide consumers in rural areas with 
competitive offerings. Through these changes, and in furtherance of its 
statutory obligations, the Commission recommits and refocuses its 
efforts to providing meaningful opportunities to bona fide small 
businesses and rural service providers, including businesses owned by 
members of minority groups and women (collectively designated entities, 
or DEs) to participate in auctions and in the provision of spectrum-
based services, and in providing such opportunities, to prevent unjust 
enrichment.
    2. The reforms the Commission adopts reflect that the wireless 
market is vastly different than when its rules were first adopted 
nearly two decades ago--and since they were last comprehensively 
revised in 2006. Consumer demand is exploding, data usage is growing 
exponentially, and faster 4G networks enable ever more data services. 
Although this kind of growth should naturally lead to greater 
opportunities for businesses of all sizes and types, small businesses 
and rural service providers have faced significant challenges to 
entering the market and competing against larger carriers. The 
Commission's rules have not kept pace with the dynamic changes in the 
market.
    3. When the DE rules were first adopted, the wireless industry was 
in its infancy. The rules governing a nascent industry, and even rules 
adopted ten years ago, could not have envisioned the changes that have 
occurred in the industry. The wireless market has matured significantly 
since that time, and today more than 98 percent of mobile subscribers 
are served by the top four national providers. In recent years, even 
new large-scale wireless providers, backed by well-capitalized 
corporations have struggled to develop successful business models to 
compete in today's wireless marketplace. If major corporations cannot 
enter the market as new providers and deploy facilities-based services 
to consumers, it is wholly unrealistic to expect small businesses to do 
so.
    4. Therefore, the rules the Commission adopts provide greater 
flexibility for small businesses to gain an on-ramp into the wireless 
industry by leveraging leasing and other spectrum use agreements to 
gain access to capital and operational experience. The Commission 
anticipates that, with

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experience in operations and investment, smaller companies may 
ultimately engage in more robust competition, including as facilities-
based providers in certain markets, which has been--and remains--a goal 
of the Commission. Likewise, the Commission expects that a new bidding 
credit targeted toward eligible rural service providers will both 
encourage their greater participation in future auctions, and increase 
their provision of wireless broadband services to unserved and 
underserved communities, including persistent poverty areas. Ensuring 
that multiple rural service providers have the ability to compete 
effectively to acquire spectrum licenses is crucial to promoting 
consumer choice and competition throughout rural America, as well as to 
fostering innovation in the marketplace.
    5. The Commission undertakes these rule revisions with an 
understanding that the opportunity to acquire low-band spectrum 
licenses in the upcoming Broadcast Television Spectrum Incentive 
Auction (Incentive Auction) will not be replicated in the foreseeable 
future. The growth in consumer demand for mobile broadband has led to a 
growing need for spectrum. But not all spectrum is created equal. Low-
band spectrum has distinct propagation advantages for network 
deployment over long distances and is likely to be necessary for 
existing providers that wish to expand their coverage in rural areas, 
as well as for new providers that wish to provide service in a rural 
market. The rule changes the Commission adopts specifically address the 
difficulties that small businesses and rural service providers confront 
in today's marketplace, including raising capital to compete in an 
auction, securing the far greater financial resources necessary to 
support the construction and operation of a wireless broadband network, 
and developing a successful business model based on current market 
structures and consumer needs. The Commission anticipates that these 
changes will allow bona fide small businesses and eligible rural 
service providers a greater opportunity to participate in spectrum 
auctions and in the provision of wireless services.
    6. At the same time, the Commission adopts common sense reforms 
that recognize that with increased flexibility comes additional 
responsibility. The Commission remains mindful of its obligation to 
ensure that the benefits it provides through DE bidding credits flow 
only to those intended by Congress. The Part 1 Report and Order 
establishes a cap on the total value of bidding credits that the 
Commission will award to an eligible applicant in a Commission auction. 
The Commission also adopts targeted measures to ensure that bona fide 
small businesses and eligible rural service providers are ``calling the 
shots,'' by limiting the amount of spectrum capacity that a disclosable 
interest holder in a DE applicant or licensee may use on a license-by-
license basis during the unjust enrichment period and by clarifying the 
types of agreements that will require particularly close scrutiny 
during its evaluation of DE eligibility. Taken together, and based on 
experience gained by administering the Commission's auctions program, 
the Commission believes these measures will ensure that benefits are 
provided only to eligible DEs. This rulemaking therefore marks another 
chapter in the Commission's more than twenty-year effort to achieve a 
proper balance between the parallel goals of affording DEs reasonable 
flexibility to obtain the necessary resources to participate in 
auctions and in the wireless industry while also effectively preventing 
the unjust enrichment of entities that would be ineligible to receive 
DE benefits in their own right.
    7. In the Part 1 Report and Order, the Commission also modifies its 
competitive bidding processes and compliance rules to increase 
transparency and efficiency, as well as to protect the integrity of the 
Commission auction process. Chief among these modifications is its 
prohibition of joint bidding, with limited exceptions, and related 
changes the Commission makes to its rules regarding multiple 
applications by commonly controlled entities and prohibited 
communications. These changes will still afford opportunities for non-
nationwide providers and DEs to pool their resources but will update 
the Commission's rules to promote more robust competition in future 
auctions and in today's evolving mobile wireless marketplace, 
especially when anonymous bidding is utilized. The Commission also 
amends its rules governing former defaulters to simplify the auction 
process and minimize administrative and implementation costs for 
bidders. Taken together, the Commission expects that these rule changes 
will improve the competitive bidding process for all participants.
    8. Accordingly, in the Part 1 Report and Order, the Commission: (1) 
modifies its eligibility requirements for small business benefits, and 
updates the standardized schedule of small business sizes, including 
the gross revenues thresholds used to determine eligibility; (2) 
establishes a new bidding credit for eligible rural service providers; 
(3) implements a cap on the overall amount of bidding credits available 
for eligible entities in any one auction; (4) strengthens and targets 
attribution rules to prevent the unjust enrichment of ineligible 
entities; (5) retains and clarifies DE reporting requirements; (6) 
revises the former defaulter rule, consistent with the waiver the 
Commission granted in Auction 97; (7) adopts rules prohibiting joint 
bidding arrangements with limited exceptions, and makes related updates 
to its rules on prohibited communications; and (8) adopts rules 
prohibiting the same individual or entity as well as entities that have 
controlling interests in common from becoming qualified to bid on the 
basis of more than one short-form application in a specific auction, 
with a limited exception for certain rural wireless partnerships and 
individual members of such partnerships.

II. Eligibility for Bidding Credits

A. Attribution Rules and Small Business Policies

    9. Background. The Commission revisits its DE eligibility rules in 
an effort to address the difficulties that small businesses and rural 
service providers confront in a dynamic, rapidly evolving wireless 
marketplace. In establishing the Commission's auction authority, 
Congress vested the Commission with broad discretion to balance a 
number of competing objectives. Among these are special provisions to 
ensure that DEs, including small businesses and rural service 
providers, have the opportunity to participate in competitive bidding 
and in the provision of spectrum-based services. 47 U.S.C. 
309(j)(3)(B), 309(j)(4)(D). For such purposes, Congress granted the 
Commission the ability to consider the use of bidding preferences. 47 
U.S.C. 309(j)(3)-(4). At the same time, the Congress directed the 
Commission to prevent unjust enrichment as a result of the methods it 
employs to issue licenses. 47 U.S.C. 309(j)(3)(C), (4)(E). Congress 
also directed the Commission, through its auction design, to seek to 
promote several other objectives, including the following: The 
development and rapid deployment of new technologies, products, and 
services without administrative delays; economic opportunity and 
competition through the dissemination of licenses among a wide variety 
of applicants, including DEs; recovery for the public of a portion of 
the value of the public spectrum resource made available for commercial 
use; and efficient and intensive use of

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the electromagnetic spectrum. 47 U.S.C. 309(j)(3)(A)-(D). Over the 
course of the auctions program, the Commission has periodically re-
evaluated its rules to strike the right balance among these competing 
statutory objectives.
    10. As the Commission's principal means of fulfilling its statutory 
objectives for DEs, it offers auction bidding credits to eligible small 
businesses whose gross revenues, in combination with those of its 
``attributable'' interest holders, fall below applicable service-
specific size limits. 47 CFR 1.2110. (A bidding credit operates as a 
percentage discount on the winning bid amount of a qualifying small 
business. See 47 CFR 1.2110(f)(1)). Since 2000, the Commission has 
applied a ``controlling interest'' standard in all services when making 
these attribution determinations for small business eligibility. Under 
this standard, the Commission measures an applicant's size by 
attributing to it the gross revenues of the applicant, its controlling 
interests, its affiliates, and the affiliates of the applicant's 
controlling interests. In 2006, the Commission added a bright-line test 
to require a small business applicant or licensee to automatically 
attribute to itself the gross revenues of any entity with which it has 
an ``attributable material relationship'' (AMR). An applicant or 
licensee has an AMR when it has one or more agreements with any 
individual entity for the lease (under either spectrum manager or de 
facto transfer leasing arrangements) or resale (including wholesale 
arrangements) of, on a cumulative basis, more than 25 percent of the 
spectrum capacity of any individual license held by the applicant or 
licensee. 47 CFR 1.2110(b)(3)(iv)(A).
    11. Since the adoption of the AMR rule, small businesses have 
asserted that it impedes their ability to compete successfully in the 
wireless industry. In the Part 1 Notice of Proposed Rulemaking (Part 1 
NPRM or NPRM), 79 FR 68172, November 14, 2014, the Commission discussed 
the significant industry changes that have occurred over the past two 
decades and in particular during the ten years since it last undertook 
a major update of the DE eligibility requirements. During this time, 
the marketplace for mobile wireless services has evolved significantly, 
both in terms of consumer demand for services and in market structure. 
According to UBS Investment Research, the total estimated number of 
wireless customer connections in the United States reached 376.2 
million at the end of 1Q 2015, up from 352.5 million at the end of 
2014, an increase of 23.7 million connections. The deployment of next 
generation networks has contributed to an increase of more than 200,000 
percent in the number of long-term evolution (LTE) subscribers alone, 
from approximately 70,000 in 2010 to over 140 million in 2014. 
Consumers today expect to be able to use mobile wireless services--
especially mobile broadband--at home, at work, and while on the go. The 
marketplace has seen the rapid and widespread adoption of smartphones 
and tablet computers and an increase in the use of mobile applications, 
as well as in the deployment of high-speed 3G and 4G technologies, the 
combination of which has led to more intensive use of mobile networks. 
For instance, according to providers responding to the most recent CTIA 
survey, active smartphones topped 208 million in 2014, up 19 percent 
from 175 million in 2013, and 35.4 million active wireless-enabled 
tablets and laptops were reported (up 40.5 percent year-over-year) in 
the same time period. Consequently, mobile data traffic has grown 
dramatically, increasing from 388 billion MB in 2010 to 4.06 trillion 
megabytes (MB) at the end of 2014, which represents a greater than ten 
times increase in the volume of data that was reported just four years 
ago. Despite technological improvements that have led to more efficient 
use of existing spectrum and increased investment in infrastructure, 
this skyrocketing consumer demand for high-speed data has increased 
providers' need for spectrum at an unprecedented rate.
    12. Additionally, the wireless market structure continues to 
evolve. While the mobile wireless marketplace once consisted of six 
near-nationwide providers and a substantial number of regional and 
small providers, over the last ten years there has been consolidation, 
leaving four nationwide providers and fewer small and regional mobile 
wireless service providers. More than 98 percent of mobile subscribers 
are served by the top four providers, which combined serve more than 
375 million consumers. This concentration of mobile service providers 
contributes to the difficulties experienced by small businesses in the 
wireless marketplace. Moreover, the costs of spectrum and network 
deployment--especially for small businesses--have increased in the last 
20 years. These market realities require DEs to have increased 
flexibility to gain access to capital in order to acquire licenses and 
benefit from the different opportunities available to participate in 
the provision of spectrum-based services. Interested parties therefore 
urged the Commission to re-examine its rules and policies to provide 
small businesses with more operational flexibility to enable them to 
grow their operations and to develop new and innovative products and 
services. As noted in the NPRM, the SBA's Office of Advocacy raised 
similar concerns.
    13. To address these concerns and changing conditions, the 
Commission sought comment in the Part 1 NPRM on whether to eliminate 
the AMR rule and revisit the policy that has required that small 
businesses seeking bidding credits to directly provide facilities-based 
service for the benefit of the public with each of their licenses. The 
Commission also sought comment on standards for evaluating small 
business eligibility, and on revising the rules for spectrum manager 
leasing by DE licensees. During the initial comment cycle, several 
parties suggested alternate approaches to its proposals, others offered 
additional suggestions, and some raised questions beyond those covered 
in the NPRM. Accordingly, to assure a more complete record, the 
Commission released a public notice in April 2015 seeking additional 
comment on these proposals, suggestions, and questions, as well as on 
other associated issues.
    14. In the Part 1 Public Notice (Part 1 PN), 80 FR 22690, April 23, 
2015, the Commission acknowledged that it had received comments both in 
favor of and against the Commission's proposed repeal of the AMR rule, 
and it sought further comment on various methods of modifying its DE 
eligibility rules. The Commission asked, for example, whether, instead 
of repealing the AMR rule, the Commission should retain it, in either 
its existing or a modified form. The Commission sought additional 
comment on whether it should continue to require DE lessors to provide 
primarily facilities-based service. The Commission asked whether it 
should distinguish between types of secondary market arrangements (such 
as wholesale and resale agreements) entered into by DEs. The Commission 
sought comment on whether the rules that it applies to secondary market 
arrangements between DEs and nationwide wireless providers should be 
different from the ones that it applies to arrangements between DEs and 
other lessees. The Commission solicited input on whether to have any 
limit on the amount of spectrum that a DE would be permitted to lease 
to another DE or a rural carrier. And, among other possibilities, the 
Commission sought comment on whether it should reconsider a bright-line 
test for determining who is considered a controlling investor in a DE.

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    15. Based on the entirety of the record, including the comments 
filed both in the initial comment cycle and in response to the Part 1 
PN, the Commission believes that the revised rules it adopts will 
increase the ability of small businesses to become spectrum licensees. 
Together, these changes update its eligibility rules to take into 
account current market realities, namely that DEs need increased 
flexibility to gain access to capital and, in turn, have greater 
opportunities to participate in the provision of spectrum-based 
services. The Part 1 Report and Order addresses the specific obstacles 
these participants face, including raising the capital necessary to 
compete in an auction; finding sufficient financial resources to 
support network construction and business operations; and developing a 
business model based on market needs. It responds to concerns voiced by 
licensees and potential licensees that the Commission's DE rules have 
not kept pace with today's environment. And, of equal importance, it 
updates its rules to ensure that only bona fide small businesses 
qualify for and benefit from the designated entity program. With these 
rules, the Commission allows small businesses to take advantage of 
opportunities available under its rules to utilize their spectrum 
capacity and gain access to capital similar to those afforded to larger 
licensees.
    16. The record demonstrates that, while commenters are divided on 
the best approach to implement its DE program, they are nonetheless in 
agreement that it is time for the Commission to recalibrate its rules 
to achieve an improved statutory balance. The fundamental changes in 
the market coupled with the evolution of DE participation in the 
Commission's auctions since 2006, have led it to conclude that it is 
time to revise its rules and revisit their statutory underpinnings. 
First, the Commission eliminates the AMR rule. Second, the Commission 
adopts a two-pronged test to determine eligibility for the award and 
retention of small business benefits, largely as proposed in the NPRM. 
This test retains the foundation of the controlling interest standard, 
including the attribution and affiliation requirements of 47 CFR 
1.2110, but applies these requirements in a more precise manner, based 
upon a careful review of all of a DE's relevant relationships and 
agreements. Under this test, the Commission will apply existing rules 
requiring attribution of the controlling interests in, and the 
affiliates of, a small business venture to determine whether the 
applicant: (1) Meets the applicable small business size standard, and 
(2) retains control over the spectrum associated with the individual 
licenses for which it seeks benefits. Pursuant to this more tailored 
review, eligibility for small business benefits will be determined, as 
the Commission proposed in the NPRM, on a license-by-license basis to 
ensure that the small business makes independent decisions about its 
business operations.
    17. To better ensure that only eligible entities enjoy the valuable 
bidding credits that the Commission awards DEs, it adopts an additional 
attribution requirement under which during the five-year unjust 
enrichment period, the gross revenues (or the subscribers, in the case 
of a rural service provider) of a disclosable interest holder in a DE 
applicant or licensee will become attributable, on a license-by-license 
basis, for any license acquired with a bidding credit and still subject 
to unjust enrichment requirements of which the disclosable interest 
holder uses (or has an agreement to use) more than 25 percent of the 
spectrum capacity. Lastly, the Commission relies on the language of 
section 309(j), as opposed to the Commission's prior interpretation of 
its legislative history, to conclude that there is no statutory 
requirement for DEs to provide facilities-based service directly to the 
public with each license they hold. Together, these changes will permit 
DEs the same flexibility as other licensees under its rules to avail 
themselves of a wider range of the opportunities to participate in the 
provision of spectrum-based services. For these same reasons, the 
Commission modifies the language of 47 CFR 1.9020 as it proposed doing 
to make clear that DE lessors may fully engage in spectrum manager 
leasing under the same de facto control standard as non-DE lessors.
i. AMR Rule
    18. The Commission eliminates the AMR rule, which required a per se 
bright-line attribution of revenues to a DE applicant, even in 
circumstances where there may have been no control of the DE's overall 
operations or the DE's spectrum by the spectrum user. Instead, the 
Commission employs a totality-of-the-circumstances analysis to evaluate 
an entity's eligibility for, and retention of, small business benefits. 
Further, the Commission adds a more targeted, license-by-license rule, 
to ensure that DE benefits do not flow to ineligible entities.
    19. Throughout the course of this proceeding, the Commission has 
received comments that variously advocate keeping, eliminating, or 
modifying the AMR rule. Many commenters, however, agree with the 
Commission's proposal to repeal the AMR rule, stating that repeal of 
the rule will afford small businesses the flexibility needed to obtain 
the capital necessary to participate in the provision of spectrum-based 
services. These commenters note that the proposal to adopt a two-
pronged standard for evaluating the eligibility for small business 
benefits relies on well-established Commission standards for evaluating 
de jure and de facto control and can be coupled with stronger unjust 
enrichment provisions to better prevent the abuse of small business 
benefits. In asking the Commission to eliminate the AMR rule, ARC, for 
example, indicates that a return to a case-by-case analysis of 
eligibility using the Commission's control and affiliation standards 
will align the Commission's policy with marketplace realities. ARC 
notes that by allowing relationships between DEs and ``large, 
successful entities, including mobile wireless incumbents,'' DEs will 
be able to acquire the capital needed to win licenses and ``participate 
in the provision of spectrum-based services.'' According to ARC, DEs 
can have such relationships without relinquishing control of their 
businesses. Similarly, Tristar maintains that the Commission should 
``allow DEs to engage in any activities with its licenses that are 
available to non-DEs, without limit,'' suggesting that a limitation is 
contrary to the ``plain language'' of section 309(j). CCA also supports 
eliminating the AMR rule in favor of de jure and de facto control 
standards but cautions that repeal of the rule must be accompanied by 
safeguards to protect against abuse. In addition, USCC argues that 
setting any absolute limit on the amount of spectrum that a DE may 
lease or resell will continue to have negative consequences.
    20. Other parties oppose the repeal of the AMR rule. T-Mobile 
argues that doing so will increase the likelihood that DE benefits 
could flow to ineligible entities or spectrum ``speculators'' in 
contravention of Congressional intent, and others express similar 
concerns. Further, some commenters argue that the AMR rule should not 
only be retained but strengthened. For example, T-Mobile and C Spire 
advocate that the Commission prohibit a DE from leasing more than 25 
percent of its spectrum in the aggregate across one or more licenses. C 
Spire also 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.

[[Page 56768]]

    21. Although the Commission acknowledges the concerns of parties 
who urge the Commission to retain or strengthen the AMR rule, the 
Commission concludes that its collective rule revisions, including the 
adoption of a more targeted attribution rule that limits the ability of 
a disclosable interest holder in a DE to use spectrum awarded with a 
bidding credit decreases the likelihood that DE benefits will flow to 
ineligible entities in contravention of Congress's intent. Moreover, 
because the Commission's revised approach utilizes its existing 
controlling interest and affiliation standards to determine what 
revenues are attributable to an applicant based upon a rigorous review 
of all relevant relationships and agreements on a license-by-license 
basis, the Commission concludes that it no longer needs a bright-line, 
across-the-board, attribution rule to ensure that a small business 
makes independent decisions about its business operations. Based on the 
Commission's auction experience, and in light of the totality of the 
record in this proceeding, it is persuaded that the AMR rule is 
overbroad.
    22. Eliminating the AMR rule, and replacing it with a more targeted 
license-by-license attribution rule, will allow small businesses 
greater flexibility to engage in business ventures that include 
increased forms of leasing and other spectrum use arrangements, while 
still having the ability to attract capital investment, even from large 
providers. DEs, like other licensees, will enjoy greater flexibility to 
adopt more individualized business models for each license they hold--
some that include DE benefits and potentially some that do not. The 
Commission anticipates that small businesses will, as a result, gain 
greater access to capital, and in turn, increase their likelihood of 
participating in auctions and in the provision of spectrum-based 
services. Under the license-by-license approach for a DE's acquisition 
and retention of bidding credits that the Commission adopts, a DE will 
not necessarily lose its eligibility for all current and future small 
business benefits solely because of a decision associated with any 
particular license.
    23. Although the Commission agrees that its rules must prevent 
ineligible entities from thwarting the spirit of the DE program and 
benefitting from bidding credits intended for small businesses, it 
disagrees that the continuation of the AMR rule achieves that goal. 
Rather than employing the overly broad attribution standard that has 
been applied since the adoption of the AMR rule, the Commission 
concludes that it can balance its competing statutory objectives more 
effectively and at the same time better empower small businesses to 
acquire spectrum and operate in today's wireless marketplace. The 
Commission adopted the AMR rule in 2006 with the goal of preventing 
unjust enrichment to ineligible entities and ensuring that DEs had 
opportunities to become independent, facilities-based service providers 
with each of their licenses. Thus, the AMR rule, in contrast with the 
other provisions of the Commission's DE eligibility rules, established 
a bright-line test for triggering the attribution of revenues where a 
lease was for more than 25 percent of the spectrum capacity of any 
individual license, regardless of whether the DE retained control of 
its overall operations or its spectrum. The Commission was concerned 
about a lessee's ``potential to significantly influence'' the DE 
applicant. It also noted ``the potential'' for the relationship to 
impede a DE's ``ability to become a facilities-based provider,'' and 
sought to avoid a relationship that was ``ripe for abuse.'' The bright-
line application of the AMR rule was therefore a tool that the 
Commission chose to implement in its effort to balance its statutory 
objectives. Yet commenters in this proceeding have argued that, based 
on experience, the Commission's current rules, which include the AMR 
rule, may not be effective in limiting the award of bidding credits to 
bona fide small businesses.
    24. The Commission further notes that the adoption of the AMR rule 
was a departure from its earlier, more comprehensive analysis of how a 
DE's relationships might lead to attribution of gross revenues, as well 
as its initial approach to evaluating how much leasing was permissible 
for DEs at the outset of its secondary market policies. Over the last 
ten years, industry developments have demonstrated that this regulatory 
adjustment to prevent unjust enrichment, may have operated to the 
detriment of the Commission's other equally important statutory 
objectives, and may not be achieving the goals for which it was 
adopted. By re-examining the statutory underpinnings of its rules and 
policies and refining its eligibility rules to reflect current market 
realities, including the niche roles DEs may play in a mature wireless 
industry, the Commission can better promote the statutory goal of 
disseminating licenses among a wide variety of applicants, including 
small businesses, while also following its competing statutory 
obligations. Moreover, the revised rules the Commission adopts here 
refocuses its efforts to thwart speculation by narrowly tailoring the 
attribution of revenues of those that control the DE's business, 
control the DE's spectrum, or have an interest in the DE and an 
agreement to use a spectrum license.
    25. Based on the Commission's most recent auction experience, the 
changes in the wireless marketplace, and the comments and other 
submissions filed in the record, the Commission agrees with those 
commenters that contend that the Commission cannot realistically 
continue to expect DEs to compete successfully at auction or in the 
marketplace against their larger counterparts while, unlike those 
competitors, being subject to an across the board, all or nothing rule 
that limits their ability to make rational, business-based decisions on 
how best to utilize their licensed spectrum capacity. Absent additional 
flexibility to gain access to capital through increased secondary 
market opportunities, on terms similar to their better-financed and 
more-experienced competitors, it is the Commission's predictive 
judgment that DEs will not be able to build viable, competitive 
wireless businesses. The decisions the Commission reaches collectively 
recognize that permitting DEs to make independent business judgments on 
how to best provide service--either on their own, directly or 
indirectly, or in connection with others--will better ensure that DEs 
themselves are the driving forces of their business operations. Thus, 
provided that a DE remains fully in control of its primary business and 
complies with all of the provisions of 47 CFR 1.2110, as amended, the 
Commission concludes that the degree to which a small business engages 
in a spectrum use agreement on any particular license need not, without 
more, presumptively require the bright-line attribution of revenues of 
the user to the DE in all circumstances.
    26. In addition, the Commission relies on the express language of 
section 309(j) to conclude that there is no statutory requirement for 
DEs to directly provide facilities-based service to the public with 
each license they hold. As the Commission noted in the NPRM, that 
policy arose from the Commission's analysis of a part of the 
legislative history of section 309(j) that explained that anti-
trafficking restrictions and unjust enrichment payment obligations were 
needed to deter ``participation in the licensing process by those who 
have no intention of offering service to the public.'' As the 
Commission recognized in the NPRM, there are other more narrowly 
tailored methods that it can

[[Page 56769]]

adopt, and do in fact implement, to prevent unjust enrichment and 
accomplish that same goal. More important, as the Commission also noted 
in the NPRM, ``[i]n interpreting statutes, ``[a]nalysis of the 
statutory text, aided by established principles of interpretation, 
controls.'' Section 309(j) does not refer to any requirement of 
``offering service to the public,'' much less the provision of 
facilities-based telecommunications services directly to the public. 
Nor does it specify what measures the Commission must implement to 
address unjust enrichment concerns. Rather, it leaves to the Commission 
the design of auction rules to include those ``as may be necessary.'' 
Pursuant to the specific language of section 309(j), the Commission has 
broad discretion to balance many factors.
    27. In this regard, the Commission disagrees with the concerns of 
CAGW and others regarding the retention of the prior policy of direct 
facilities-based service to the public by licensees that were awarded 
bidding credits. Specifically, CAGW argues that by ``allowing non-
facilities-based entities to qualify for the DE discounts, smaller 
facilities-based carriers will find it more difficult to obtain the 
necessary spectrum required to expand their coverage and service.'' To 
the contrary, the Commission finds that in light of the combined rule 
modifications it adopted, a singular focus on requiring DEs to provide 
primarily facilities-based service directly to the public with each and 
every license they hold is not necessary to prevent unjust enrichment, 
operates as an impediment to the competing statutory goals, and hinders 
the ability of small businesses to participate effectively in the 
provision of spectrum-based services.
    28. As the Commission explains, although it eliminates the AMR 
rule, it emphasizes that it fully preserves its ability to assess 
whether the terms of any particular spectrum use agreement with a DE, 
or any other aspect of a relationship between a DE and another party, 
requires the attribution of that party's gross revenues to the DE 
generally or on a license-by-license basis under 47 CFR 1.2110, as 
amended. Contrary to a bright-line application of the AMR rule, this 
approach should better reflect the nature of the relationship between 
DEs and the parties with which they are securing financing and/or 
engaging in spectrum use agreements. The AMR rule was overly broad 
insofar as it foreclosed DEs from the business flexibility afforded to 
other licensees and yet was also overly narrow insofar as it did not 
foreclose other possible misuses of the bidding credits awarded DEs. 
Accordingly, the Commission revises its rules to determine more 
precisely what entities have the ability to dictate the DE's business 
and spectrum use decisions such that their gross revenues should be 
attributed to the DE applicant for purposes of determining its 
eligibility for and retention of small business benefits.
    29. Two-Pronged Standard for Evaluating Eligibility for Small 
Business Benefits. To assess more accurately an applicant's size for 
determining eligibility for DE benefits, the Commission adopts a two-
pronged standard. Under this test, the Commission will use its existing 
controlling interest and affiliation rules to determine whether an 
applicant (or licensee): (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.
    30. Under the first prong of the standard, the Commission will 
apply its existing controlling interest and affiliation rules to 
determine the gross revenues attributable to a DE. This analysis must 
determine those that have de jure or de facto control of, or are 
affiliated with, the applicant's overall business venture. 47 CFR 
1.2110. De jure control is typically evidenced by the holding of 
greater than 50 percent of the voting stock of a corporation or, in the 
case of a partnership, general partnership interests. 47 CFR 1.2110(c). 
De facto control is assessed on a case-by-case basis to determine 
whether the licensee has actual control over its business. 47 CFR 
1.2110(c). Pursuant to 47 CFR 1.2110, control and affiliation may also 
arise through, among other things, ownership interests, voting 
interests, management and other operating agreements, or the terms of 
any other types of agreements--including spectrum lease agreements--
that independently or together create a controlling, or potentially 
controlling, interest in the DE's business as a whole. See, e.g., 47 
CFR 1.2110(c)(5)(vii) through (x). (As discussed below, except under 
the limited provisions provided for spectrum manager lessors, the 
decision to discontinue the Commission's policy requiring DE licensees 
to operate as primarily facilities-based providers of service directly 
to the public does not alter the rules that require the Commission to 
consider whether facilities sharing and other agreements confer control 
of or create affiliation with the applicant). By separating the issue 
of who controls, or has the potential to control, the DE in regard to 
its overall business from the inquiry into who uses or controls the 
license(s) acquired with DE benefits for any particular license, the 
Commission can more accurately determine the extent to which these 
benefits are unjustly enriching an ineligible entity. In this way, the 
Commission can continue to fulfill its statutory objectives by 
facilitating the ability of small businesses to acquire licenses and 
participate in the provision of spectrum-based services to the public, 
while also promoting its competing statutory objectives.
    31. This reformed approach received the endorsement of most 
commenters specifically addressing the two-pronged standard. Under this 
approach, the Commission will rely on its existing controlling interest 
and affiliation standards to determine which revenues are attributable 
to an applicant based upon a careful review of all of its relevant 
relationships and agreements to ensure that small businesses make 
independent decisions about their business operations. See, e.g., 47 
CFR 1.2110(c)(5)(vii) through (x). (The Commission notes, for example, 
that standard passive investor protections generally do not give cause 
for concern but that provisions that limit the DE's use, deployment, 
operation, or transfer of its spectrum license(s) or business may 
warrant closer scrutiny). The Commission's existing attribution rules 
examine the extent to which a small business may combine its efforts, 
property, money, skill, and knowledge with another party. Further, 
where there is an agreement to share profits and losses in proportion 
to each party's contribution to the business operation, the existing 
rules allow it to consider this in determining whether to attribute the 
revenues of parties to that agreement to the applicant. The rules the 
Commission adopts, taken together, will continue to apply a totality-
of-the-circumstances approach to allow it to evaluate where an 
agreement or relationship warrants the attribution of revenues for the 
purposes of evaluating eligibility. This approach will better enable 
the Commission to evaluate the various investors in a DE, both 
controlling and non-controlling, to ensure that a DE remains in command 
of its business. The Commission emphasizes that this review process 
will therefore provide it the ability to determine, pursuant to its 
existing rules, whether an entity with a non-controlling interest in 
more than one DE has created a relationship of affiliation between 
applicants for bidding credits such that the revenues of one need to be

[[Page 56770]]

attributable to the other. The Commission will also evaluate whether 
participation of a non-controlling interest holder in more than one 
applicant renders it an affiliate of both (or multiple) applicants such 
that the revenues of the non-controlling interest holder (as well as 
those of its controlling interests, its affiliates, and the affiliates 
of its controlling interests) should be considered attributable, with 
respect to either, both, or multiple applicants for purposes of 
determining eligibility for bidding credits on any particular license 
or as a general matter. See, e.g., 47 CFR 1.2110(c)(5)(vii)-(x). For 
instance, where a party has a non-controlling interest in more than one 
DE applicant or licensee, the Commission will carefully review its 
investments in, and agreements with, the applicants to evaluate 
overlapping interests with respect to issues like the use of licensed 
spectrum capacity, jointly used facilities, shared office space, 
managerial authority, operational contracts, as well as how the parties 
may generally be combining their efforts, capital, skill and knowledge. 
Thus, whether DEs are affiliated with each other or with a common 
investor, for example, could be informed by the nature of their 
relationships with that common investor.
    32. As in the past, the Commission will carefully review an 
applicant's claim of eligibility for bidding credits on a case-by-case 
basis. In so doing, the Commission will examine the facts in the 
context of both the specific eligibility standards set forth in its 
rules, and the totality of the circumstances and facts presented by the 
applicant. While no two cases are the same and each case must be judged 
on its own facts, the Commission emphasizes that some management, loan, 
and organizational documents, such as limited liability company 
agreements, and other types of operational agreements could raise 
concerns that warrant particular scrutiny as part of its application 
review. These include agreements and arrangements in which a 
disclosable interest holder, lender, spectrum lessee, or other interest 
holder has a role in the day-to-day operations and business of a DE 
applicant or licensee, as well as provisions that would, taken together 
or separately, limit the DE's use, deployment, operation, or transfer 
of its license(s) or business, extending the role of these entities 
beyond the standard and typical role of a passive investor. While the 
Commission will look at the totality of the circumstances in each 
particular case, the Commission also continues to ``emphasize that its 
concerns are greatly increased when a single entity provides most of 
the capital and management services and is the beneficiary of the 
investor protections.''
    33. If an entity qualifies as a DE under the first prong, the 
Commission will evaluate whether it is eligible for benefits on a 
license-by-license basis under the second prong. Under the second 
prong, the Commission will evaluate whether a small business is 
entitled to benefits based on whether it will maintain de jure and de 
facto control of the particular license at issue under the terms of any 
use agreements for each license. For instance, if a DE has a network 
sharing agreement on a particular license that calls into question 
whether, under affiliation rules, the user's revenues should be 
attributed to the DE for that particular license, rather than for its 
overall business operations, the Commission may conclude that the DE is 
ineligible to acquire or retain benefits with respect to that 
particular license. Under this more targeted review, an entity will not 
necessarily lose its eligibility for all current and future small 
business benefits, as it did under the application of the AMR rule, 
solely because of a decision associated with any particular license. 
Instead, while a small business will lose DE eligibility (and possibly 
incur unjust enrichment obligations) if it relinquishes de jure or de 
facto control of any particular license for which it claimed benefits, 
the DE could maintain its eligibility for benefits on its other 
existing and future licenses so long as the DE continues to meet the 
relevant small business size standard. Thus, an applicant need not be 
eligible for small business benefits on each of the spectrum licenses 
it holds in order to demonstrate its overall eligibility for such 
benefits.
    34. As the Commission emphasized in the NPRM, under the new 
standard, small businesses, like all Commission licensees, will remain 
subject to section 310(d) of the Communications Act, as well as its 
rules prohibiting unauthorized transfers of control of license 
authorizations. Accordingly, if a DE executes a spectrum use agreement 
that does not comply with the Commission's relevant standard of de 
facto control, it will be subject to unjust enrichment obligations for 
the benefits associated with that particular license, as well as the 
penalties associated with any violation of section 310(d) of the 
Communications Act and related regulations. See 47 CFR 1.9010 (de facto 
control for spectrum leasing arrangements); see also Intermountain 
Microwave, 12 FCC 2d 559, 559-60 (1963) (Intermountain Microwave) (de 
facto control for non-leasing situations); 47 CFR 1.2110(c) (de facto 
control for DEs); Part 1 Fifth Report and Order, 65 FR 52323, August 
29, 2000 (incorporating the Intermountain Microwave principles of 
control into 47 CFR 1.2110 of the Commission's rules. If that spectrum 
use agreement (either alone or in combination with the DE controlling 
interest and attribution rules), goes so far as to confer control of 
the DE's overall business, the gross revenues of the additional 
interest holders will be attributed to the DE, which could render the 
DE ineligible for all current and future small business benefits on all 
licenses. Except where the leasing standard of de facto control applies 
under 47 CFR 1.9010 and 1.9020 of the secondary market rules, the 
criteria of Intermountain Microwave and Ellis Thompson continue to 
apply to every Commission licensee for purposes of assessing whether it 
can demonstrate that it retains de facto control of its business 
venture and spectrum license.
    35. Standard for Evaluating DE Leasing. For the same policy reasons 
the Commission also adopts its proposal to apply to DE spectrum manager 
lessors the same de facto control standard that it applies to non-DE 
spectrum manager lessors, and modifies 47 CFR 1.9020 of its rules 
accordingly.
    36. The limited comment the Commission received on this issue was 
generally supportive of adopting the rule modifications proposed in the 
NPRM. The DE Coalition, USCC, and WISPA all support the proposed 
modifications of the rules to clarify that DE lessors may fully engage 
in spectrum leasing under the same de facto control standard and to the 
same extent as non-DE lessors under a spectrum manager lease. WISPA 
further states that a uniform standard makes the application process 
for spectrum leases more predictable, eliminates the need for special 
filings, and reduces administrative burdens. WISPA also maintains that 
the proposal will enable small businesses to enter into leasing 
arrangements that are well understood and utilized within the 
marketplace, and will ensure that small business licensees retain 
control over certain obligations, preventing any sham arrangements or 
unjust enrichment for non-small business entities. Blooston Rural, 
however, argues that, while some relaxation of the leasing restrictions 
is in order, its NPRM proposals will invite abuse of the bidding credit 
program by allowing the largest carriers to invest in a DE, and then 
use spectrum leases to gain full access to spectrum obtained with the 
small business benefits.

[[Page 56771]]

    37. In order to allow DEs the ability to make independent business 
judgments about how to best utilize the spectrum capacity of each of 
their licenses, the Commission revises 47 CFR 1.9020(d)(4) of its rules 
to remove the conflicting reference to the control standard of 47 CFR 
1.2110, as it proposed to do in the NPRM. The Commission agrees with 
WISPA that this modification will enable small businesses to enter into 
leasing arrangements that are well understood and utilized within the 
marketplace, and ensure that small business licensees retain sufficient 
control of their overall operations and regulatory obligations to 
safeguard the award of bidding credits.
    38. Pursuant to this modification, a DE will, like any other 
spectrum manager lessor, be considered to have de facto control over 
the portion of a spectrum license for which it, as lessor, has a 
spectrum manager lease provided that it: (1) Maintains an active, 
ongoing oversight role in ensuring that the lessee complies with 
Commission rules and policies; (2) retains responsibility for all 
interactions with the Commission required under the license related to 
the use of the leased spectrum; and (3) remains primarily and directly 
accountable to the Commission for any lessee violation of these 
policies and rules. (A DE's ongoing control over any non-leased portion 
of a license for which it has benefits is evaluated according to 47 CFR 
1.2110 and the criteria set forth in Intermountain Microwave and Ellis 
Thompson). The Commission stresses however, that it will not allow 
spectrum manager leases of licenses subject to DE benefits to 
automatically go into effect under the Commission's 21-day processing 
period. Instead, staff will carefully review DEs' requests to engage in 
spectrum manager leasing, and review such requests as necessary to 
determine whether the terms of the spectrum management lease agreement 
include provisions that confer de jure or de facto control of the DE 
lessor's business venture. These rule modifications will allow a DE to 
participate in the secondary market under the same control standard as 
other wireless licensees.
    39. The Commission nonetheless recognizes Blooston Rural's concerns 
and agrees that in relaxing its rules with respect to leasing 
generally, the Commission must counterbalance such modifications to 
ensure that ineligible entities cannot invest in a DE and then use 
spectrum leases to gain full access to spectrum obtained with the small 
business benefits. Accordingly, to address the scenario raised by 
Blooston Rural, the Commission adopts a specific attribution rule that 
will serve to limit the amount of spectrum capacity a disclosable 
interest holder in a DE applicant or licensee will be able to utilize 
during the five-year unjust enrichment period under any use agreement.
ii. Attribution Rules
    40. In the Part 1 PN, the Commission sought comment on various 
recommendations from commenters for modifying its attribution rules to 
better ensure that only bona fide small businesses qualify for bidding 
credits. These recommendations include, among other things, 
modifications to the applicable attribution, controlling interest or 
affiliation rule to alter the types of equity arrangements available to 
a DE applicant by (a) attributing to a DE the revenues and spectrum of 
any entity holding certain interests of more than ten percent, (b) 
restricting certain large carriers or companies from providing a 
certain amount of capital or otherwise exercising control over a DE, 
and (c) adopting a rebuttable presumption that equity interest of 50 
percent or more represents de facto control of the DE. The Commission 
also invited comment on other suggestions by commenters regarding DE 
eligibility for benefits, such as: (1) Adopting a 25 percent minimum 
equity requirement for DEs; (2) limiting the total dollar amount of DE 
benefits that any DE (or group of affiliated DEs) may claim during any 
given auction, based on particular criteria; (3) limiting the overall 
amount that a small business can bid based on a revenues or population-
based metric; (4) narrowing 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; and 
(5) clarifying the affiliation rules to prevent rural telephone 
companies from losing DE status because they hold a fractional interest 
in a cellular partnership if the rural telephone company has no ability 
to control the partnership's day-to-day operations and/or strategy.
    41. After review of the comments submitted in response to its 
inquiry, the Commission adopts a new attribution rule to establish a 
limit on how much spectrum capacity a disclosable interest holder in a 
DE applicant or licensee (which for the purposes of this rule the 
Commission defines as any party holding ten percent or greater interest 
of any kind in the DE, including but not limited to, a ten percent or 
greater interest in any class of stock, warrants, options or debt 
securities in the applicant or licensee) can use in any particular 
license awarded with DE benefits, and reject the remaining suggestions.
    42. Limitation on Spectrum Use by a Disclosable Interest Holder in 
a DE. To ensure that DE benefits are awarded to only eligible, bona 
fide small businesses, the Commission adopts a new attribution rule 
that will serve as an additional safeguard to prevent the circumvention 
of the Commission's rules during the unjust enrichment period for any 
license awarded with bidding credits. Specifically, the Commission 
adopts an additional attribution requirement under which, during the 
five-year unjust enrichment period, the gross revenues (or the 
subscribers in the case of a rural service provider) of a disclosable 
interest holder in a DE applicant or licensee will become attributable, 
on a license-by-license basis, for any license in which the disclosable 
interest holder uses, in any manner, more than 25 percent of the 
spectrum capacity of a DE's license awarded with bidding credits.
    43. A number of commenters suggested that the Commission restrict 
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. In responding to its inquiry on 
this matter, several commenters offer various suggestions on whether 
and to what extent the Commission should implement such a restriction. 
Blooston Rural, for instance, supports a restriction on leasing 
spectrum to nationwide carriers that have invested in the applicant/
licensee, along with large regional carriers and other large companies. 
Tristar argues that some restriction on DE financing arrangements 
involving other participants and incumbent service providers is 
merited. In support of a new restriction, AT&T reasons that, given the 
capital costs for deploying a service, the cost of the licenses should 
be a small fraction of a DE's operational fund; thus, if a DE has the 
financial wherewithal to compete in urban markets and fulfill the 
Commission's performance benchmarks, ``it seems unlikely that the [DE] 
is the type of business that any rational small business program is 
meant to assist.'' At the same time, AT&T/Rural Carriers caution that 
any new restrictions should include an exception for arms-length 
commercial loans to bidding entities.
    44. Other commenters also opine that a restriction should also be 
imposed on

[[Page 56772]]

entities utilizing the rural service provider bidding credit. Among 
these commenters, Blooston Rural supports the adoption of some 
restriction that would limit the ability of a DE to lease spectrum that 
is acquired with the rural service provider bidding credit to an 
investor, provided that the Commission carve out an exception for an 
investor that is ``a rural telephone company or rural telco subsidiary/
affiliate with wireless or wireline presence in the original license 
area (as established by its existing ETC designation), or to an 
independent wireless ETC that is certif[ied] in the original license 
area and that has fewer than 100,000 subscribers.'' RWA/NTCA agrees 
with Blooston Rural's restriction, including the exception, but would 
also apply the restriction to nationwide wireless carriers who are not 
investors of the DE and impose the restriction for the initial license 
term.
    45. Based on the common theme in commenters' proposals, the 
Commission incorporates into 47 CFR 1.2110 a new attribution rule under 
which, during the five-year unjust enrichment period, the gross 
revenues (or the subscribers in the case of a rural service provider) 
of a disclosable interest holder in a DE applicant or licensee will 
become attributable, on a license-by-license basis, for any license in 
which the disclosable interest holder uses, in any manner, more than 25 
percent of the spectrum capacity of a DE's license awarded with bidding 
credits. For the purposes of this rule, the Commission defines a 
disclosable interest holder as any party holding a ten percent or 
greater interest of any kind in the DE, including, but not limited to, 
a ten percent or greater interest in any class of stock, warrants, 
options, or debt securities in the applicant or licensee. Despite 
receiving a number of the alternative proposals from commenters, the 
Commission declines to specifically restrict financing or agreements 
with large or regional carriers, because doing so may impede a DE's 
ability to raise capital and gain operational experience. Instead, the 
rule the Commission adopts should safeguard the award of valuable 
bidding credits by carefully targeting the concerns of commenters, 
which generally seek to ensure ineligible entities don't improperly 
benefit from DE bidding credits by gaining full unrestricted access to 
use the spectrum license.
    46. For DEs that acquire licenses with the new rural service 
provider bidding credit, however, the Commission will include an 
exception to this new attribution rule, similar to that suggested by 
Blooston Rural, to apply to any disclosable interest holder that would 
independently qualify for a rural service provider bidding credit. 
Pursuant to this exception, a rural service provider may have spectrum 
license use agreements with a disclosable interest holder, without 
having to attribute the disclosable interest holder's subscribers, so 
long as (a) the disclosable interest holder is independently eligible 
for a rural service provider credit and (b) the use agreement is 
otherwise permissible under its existing rules. This exception should 
ensure that rural service providers can work in concert to provide 
service to rural areas.
    47. In adopting this new attribution rule, the Commission disagrees 
with commenters who oppose the adoption of limitations on the ability 
for an investor to engage in certain transactions with a designated 
entity concerning licenses acquired with bidding credits. Specifically, 
Council Tree argues that such restrictions would contravene 
Congressional intent and impede the ability of DEs to acquire the 
necessary capital to compete with incumbents who already have a 
distinct operational advantage in the wireless marketplace. Council 
Tree also maintains that ``the adoption of any of these [Part 1 PN] 
proposals to restrict the size and impact of DEs in spectrum auctions 
[serves] the private financial interests of the largest, most 
entrenched incumbents.'' CCA voices concern that the limitations would 
be too restrictive and create significant disincentives to investment. 
USCC asserts generally that most of the proposals violate the 
principles of simplicity and avoiding different classes of licenses--
and begs the question of why the Commission does not use Intermountain 
Microwave--as the ultimate test. Moreover, USCC opines that ``when 
individual, properly constituted DEs win auctions, that is not an abuse 
of the rules; [r]ather, it carries their intent.''
    48. While the Commission recognizes the concerns echoed by various 
commenters that investor use limitations could restrict the ability for 
DEs raise capital, the Commission concludes that this carefully 
targeted rule, applied on a license-by-license basis during the five-
year unjust enrichment period, is necessary to fulfill its 
responsibility of ensuring that DE benefits flow only to those intended 
by Congress. The Commission therefore adopts this rule to balance the 
increased flexibility the Commission has granted to DEs to raise 
capital against its obligation to prevent investors from benefitting 
from bidding credits indirectly through their use of a DE's discounted 
license. The rule is also consistent with its two-pronged analysis of 
small business eligibility, allowing a DE to monetize individual 
licenses without losing its overall eligibility, while ensuring that 
the DE remains independent and in control of its business as a whole. 
Moreover, the Commission disagrees with USCC that such a rule is 
unnecessary because the application of the criteria in Intermountain 
Microwave sufficiently mitigates the additional risks of unjust 
enrichment and undue influence that may arise after the elimination of 
the AMR rule and relaxation of the Commission's facilities-based 
service requirements. Rather, by establishing this targeted rule to 
focus only on the intersection of a disclosable interest in a DE and 
the disclosable interest holder's use of 25 percent or more of the 
spectrum capacity of a license awarded with DE benefits, the Commission 
can alleviate commenters' concerns regarding unjust enrichment and, at 
the same time, provide DEs with more transparency and predictability in 
the auctions and licensing process.
    49. Because the Commission is implementing this 25 percent use 
limit for disclosable interest holders in a DE, the Commission will not 
incorporate into its rules any of the alternative attribution 
restrictions for which it sought comment. For instance, the Commission 
will not modify its rules to require a DE to attribute the revenues and 
spectrum of any entity that holds more than a ten percent interest in 
any type of DE and will instead adopt the more targeted rule, 
evaluating on a license-by-license basis. Most commenters generally 
oppose the proposal that would attribute 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 ten percent. Some of 
these commenters assert that the proposal is too restrictive and 
impedes the ability of a DE to raise capital to compete successfully in 
spectrum auctions. NTCH further opposes the notion that non-equity debt 
financing should be considered for determining DE eligibility because 
it would disadvantage small businesses who must often rely on non-
institutional sources of debt financing. The Commission agrees with 
these commenters, and declines to accept the positions of those like C 
Spire that support a more restrictive proposal. The Commission also 
agrees with T-Mobile, which suggests that the ten-percent proposal, 
while a ``step in the right direction, may be too restrictive.''

[[Page 56773]]

Accordingly, the Commission concludes that its more targeted 
attribution rule achieves the proper balance of its numerous policy 
goals.
    50. Nor will the Commission adopt a rebuttable presumption that 
equity interests of 50 percent or more represent de facto control of a 
DE, which would run counter to its overall policy goal of providing 
additional sources of access to capital. The Commission notes that 
commenters are divided in response to the establishment of a rebuttable 
presumption that equity interests of 50 percent or more represent de 
facto control of a DE. Some commenters, including Blooston Rural and 
Tristar, support this proposal, with some changes. Blooston Rural would 
support the rebuttable presumption, provided that ``properly insulated 
passive investors'' are not ``lumped together to determine a 50% or 
greater interest.'' Tristar would also establish a rebuttable 
presumption that any provider of financial support of 25 percent or 
more, direct or indirect, should be considered a controlling interest 
of the DE. T-Mobile argues that this proposal is a compromise position 
and is consistent with the Commission's existing standards for 
evaluating de jure control. Opponents of the rebuttable presumption 
argue that such a provision may not withstand judicial scrutiny and 
would create a ``logistical nightmare'' for small businesses and 
Commission staff. Additionally, USCC argues that, like the minimum 
equity requirement, this policy would limit DEs' flexibility to attract 
financing and undercut the underlying policies of the DE program. The 
Commission agrees with commenters that this type of restriction would 
impede a DE's access to capital without any counter-balancing benefits 
that cannot otherwise be achieved by its new targeted rule. Moreover, 
for similar reasons the Commission believes that the attribution rule 
it adopted will address the concerns underpinning this type of proposal 
in a directed, practical, and effective way.
    51. The Commission also rejects the suggestion to adopt a rule that 
would require a DE to provide, without outside investment, a minimum of 
25 percent of the equity of its business, as such a requirement could 
be unachievable for many small businesses and rural service providers, 
particularly in capital intensive auctions. For instance, in opposing 
this suggestion, KSW contends that ``very few entities have 25 percent 
or more held by a single entity,'' and that ``the result would be less 
DE funding, and far fewer and much smaller DEs.'' Also rejecting this 
suggestion, USCC notes that the Commission previously declined to adopt 
a minimum equity requirement because ``it would subject DEs to 
unnecessary competitive harms and conflict with the Commission's goal 
of providing DEs with `maximum flexibility' in attracting financing.'' 
CCA, however, reasons that a minimum equity requirement could be 
reasonable but that the suggested 25 percent requirement is too high. 
The Commission has historically declined to adopt a minimum equity 
requirement for the controlling interests of a DE applicant, and it 
continues to do so here because it concluded it would be counter-
productive to its efforts to afford DE applicants greater flexibility 
to gain access to capital.
    52. The Commission notes that each of the proposals it declines to 
adopt attempts to limit the ability of ineligible entities to 
circumvent its rules and reap the benefits of DE discounts through 
their investments in, and business involvements with, DEs. After 
reviewing the record in this proceeding, and taking into account the 
Commission's experience in administering the bidding credits program, 
it concludes that the rule it adopts will best achieve the ends these 
commenters seek without the associated drawbacks in furtherance of its 
statutory obligation to balance dual directives.
    53. Implementation of the New Eligibility Test and Attribution 
Rule. The Commission will implement its new eligibility test and 
attribution rule on a prospective basis, including for licenses in the 
600 MHz band. Additionally, the Commission will apply this rule 
prospectively, so as to apply to all determinations of eligibility for 
designated entity benefits with respect to: Any application filed to 
participate in auctions in which bidding begins after the effective 
date of the rules; all applications for a license authorization, 
assignment, or transfer of control; and any spectrum leases or reports 
of events affecting a designated entity's ongoing eligibility filed on 
or after the release date of the Part 1 Report and Order. In light of 
the changes that the Commission is making to its eligibility and 
attribution rules, it will require additional information from 
applicants and licensees in order to ensure compliance with the 
policies and adopted rules. The Commission will therefore modify its 
FCC forms and the Universal Licensing System (ULS) to implement these 
new rule changes.
    54. Attribution of Revenues Where the Applicant Holds an Interest 
in a Cellular General Partnership. In the Part 1 PN, the Commission 
invited comment on whether it should modify its affiliation rules to 
prevent an applicant from losing eligibility for small business bidding 
credits because it holds an interest in a cellular partnership that was 
established as part of the cellular B Block settlement process that 
applied to wireline companies in the mid to late 1980s. Commenters have 
noted that despite being a partner, a rural telephone company typically 
holds only a fractional ownership interest in these partnerships and 
thus has no ability to control the partnership's day-to-day operations. 
Commenters therefore request that the Commission not attribute the 
revenues of the partnership to such an applicant when it is seeking 
eligibility for a small business bidding credit.
    55. While the Commission understands that some rural telephone 
companies may not be eligible for a small business bidding credit 
because they hold an attributable interest in a cellular general 
partnership, the Commission must make every effort to ensure that its 
DE benefits inure only bona fide eligible entities. Accordingly, the 
Commission declines to adopt a rule that would exempt an applicant that 
is a controlling interest, or an affiliate of a cellular partnership, 
from attributing the revenues of the partnership for the purposes of 
complying with the size standards for eligibility for small business 
bidding credits. However, the Commission has adopted a bidding credit 
for eligible rural service providers based upon the number of 
subscribers of the applicant (as well as its controlling interests, 
affiliates and the affiliates of its controlling interest), and for 
that bidding credit the Commission has created an exception to its 
attribution rules for existing rural partnerships.
    56. Attribution of Immediate Family Members and of Officers and 
Directors. The Commission also declines to adopt changes to two of its 
other attribution rules. In the Part 1 PN, the Commission sought 
comment on whether it should narrow the scope of two of its attribution 
requirements where an immediate family member or a particular officer 
or director is unlikely to exercise control over the applicant. Under 
the kinship affiliation requirement, immediate family members are 
rebuttably presumed to ``own or control or have the power to control 
interests owned or controlled by other immediate family members.'' 47 
CFR 1.2110(c)(5)(iii)(B). Under the officer/director attribution 
requirement, officers and directors of an applicant (or of an entity 
that controls an applicant or licensee) are considered to have a 
controlling interest in the applicant (or licensee). 47 CFR 
1.2110(c)(2)(ii)(F).

[[Page 56774]]

    57. Both NTCH and Tristar propose relaxing the kinship affiliation 
requirement, arguing that the existing rule is too broad and requires 
attribution of the revenues of family members who are unlikely to have 
involvement with the applicant. NTCH also contends that the Commission 
must narrow the officer/director attribution requirement, claiming that 
it encompasses officers ``who have no executive authority whatsoever.'' 
Blooston Rural, on the other hand, advises caution before the 
Commission narrows either rule, noting that officers and directors of 
privately held companies often have significant control and pointing 
out that the kinship affiliation presumption is, by its terms, 
rebuttable.
    58. The Commission finds its current rules help ensure that only 
bona fide small businesses receive small business bidding credits. 
Accordingly, the Commission will leave both rules intact. There is 
minimal record support for eliminating or modifying these rules, 
particularly the officer/director attribution requirement. Moreover, 
the Commission has found the kinship affiliation rule to be effective 
in forcing the attribution of revenues of close relatives who are 
likely to exercise control over an applicant. Thus, the rule continues 
to serve the purpose for which the Commission first adopted it in 1994 
for broadband PCS. The Commission explained then that the reason for 
the rule is twofold, to ensure that entities receiving DE benefits are 
actually in need of special financial assistance and to prevent 
otherwise ineligible entities from circumventing the rules by funding 
family members who purport to be eligible applicants. The Commission 
further explained that it was adopting bright-line tests for 
determining when the financial interests of spouses and other family 
members should be attributed, because, as a practical matter, it would 
not be able to resolve all questions pertaining to the individual 
circumstances of particular applicants for an auction before bidding 
began.
    59. At the same time, the Commission acknowledged that a non-
spousal family relationship may not carry the same potential for abuse 
that a relationship between spouses does. Accordingly, while the 
Commission adopted spousal attribution of revenues as a non-rebuttable 
standard (unless the spouses are legally separated) (see 47 CFR 
1.2110(c)(5)(iii)(A)), it implemented the kinship rule as a rebuttable 
presumption. Now, as then, a winning bidder may rebut the presumption 
by showing that close family members cannot exercise control over the 
business, i.e., 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.'' The Commission therefore concludes 
that the rule is not overly broad and continues to serve a specific 
necessary purpose.
    60. Likewise, the Commission believes that defining officers and 
directors as controlling interests of a DE applicant or licensee 
similarly helps ensure that ``only those entities truly meriting small 
business status qualify for its small business provisions.'' NTCH 
argues that the attribution rule discourages individuals from taking 
seats on an applicant's board of directors, because their ``private 
revenue information'' would have to be disclosed. Contrary to NTCH's 
concerns, personal net worth, including personal income, of the 
officers and directors need not be disclosed. 47 CFR 
1.2110(c)(2)(ii)(F). More important, the revenue information of 
officers and directors need be disclosed only if their company is 
seeking a substantial public benefit by applying for a bidding credit. 
Finally, NTCH has provided no specific examples of instances where it 
thinks that the rule should not have been applied and has therefore not 
convinced the Commission that changing the rule is in the public 
interest. The Commission reminds NTCH and all interested parties that 
if an applicant considers a waiver of the rule to be warranted in its 
case, it may seek one under 47 CFR 1.925.
    61. Tribal Exclusion from affiliation coverage. In the Part 1 PN, 
the Commission sought comment on a request that it ``eliminate the 
preferential treatment for [Alaska Native Corporations (``ANCs'')] that 
do not meet the standard definition of small business under its 
attribution rules.'' Under the Commission's small business attribution 
rules, applicants or licensees affiliated with Indian tribes or ANCs 
are not required to include revenues of those tribes or ANCs, other 
than gaming revenues, in their gross revenues for purposes of 
determining their eligibility for bidding credits. When the Commission 
adopted this exclusion from the affiliation requirements in 1994, it 
sought to ensure that its rules remained consistent with other federal 
laws, policies, and regulations, most notably the affiliation rules of 
the Small Business Administration (SBA). The Commission asked in the 
Part 1 PN whether it should now eliminate the exclusion, whether the 
rules concerning Indian tribes or ANCs remain consistent with other 
federal policies, and whether these rules increase the risk of unjust 
enrichment. The Commission also asked commenters to tell it whether and 
how it should amend the rules.
    62. The Commission has received no record support for this 
proposal. Fourteen commenters, all tribes or tribal organizations, 
oppose elimination of the affiliation exclusion. NCAI emphasizes ``the 
unique legal relationship that exists between the federal government 
and Indian Tribal governments, as reflected in the Constitution of the 
United States, treaties, federal statutes, Executive orders, and 
numerous court decisions,'' amounting to a fiduciary trust 
relationship. NCAI also explains that the Commission's preservation of 
the tribal attribution exclusion is essential because of the economic 
disparities that exist on tribal lands and the well-documented 
challenges of deploying communications infrastructure there. Several of 
the tribal entities explain that they still lack high-speed and 
dependable telecommunications services and face daunting barriers to 
obtaining spectrum licenses for the provision of commercial mobile 
wireless services on tribal lands. Under these circumstances, the 
commenters tell the Commission, access to capital is crucial. As one 
commenter asserts, any adverse modification of the affiliation 
exclusion will effectively nullify the Commission goal that 
telecommunications services be deployed to tribal communities.
    63. Native Public observes that ``[t]he Commission has repeatedly 
found that Native Americans have had less access to telecommunications 
services than any other segment of the population[,]'' adding that the 
Commission's DE tribal policies ``advance the interests of an 
underserved minority population group, those of the Tribal governments 
which have a sovereign right to set their own communications policies 
and goals for the welfare of their members.'' And Nez Perce encourages 
the Commission to retain its ``well established and rooted policies to 
bolster a tribe's resources to deploy wireless services on their land 
to serve the communication needs of their population.'' Other 
commenters all express similar views.
    64. When the Commission decided to include this exclusion under its 
definition of the term ``affiliate,'' it concluded that the exclusion 
would ensure that Indian tribes and Alaska Regional or Village 
Corporations have a meaningful opportunity to participate in spectrum-
based services from which they would otherwise be precluded, and that 
such an exclusion for these specified entities would not entitle them 
to an unfair advantage over entities that are otherwise eligible for 
small business

[[Page 56775]]

status. The affiliation exclusion for ANCs is based on their ``unique 
legal constraints'' imposed by statute that are inapplicable to other 
businesses. These constraints preclude ANCs from ``utilizing two 
important means of raising capital: (1) The ability to pledge the stock 
of the company against ordinary borrowings, and (2) the ability to 
issue new stock or debt securities.'' In addition, land holdings held 
by Indian tribes cannot be used as collateral for purposes of raising 
capital, ``because the land holdings are owned in trust by the federal 
government or are subject to a restraint on alienation in the 
government's favor.'' The exception was carefully tailored so as not to 
extend it to gaming revenues, which are not subject to the same 
constraints. The Commission has also not been presented with any 
evidence that its rule is no longer consistent with other federal laws, 
policies, and regulations, most notably the affiliation rules of the 
SBA such that the Commission should revisit the exclusion. In light of 
commenters' significant opposition and the absence of a record 
supporting the elimination or modification of this attribution 
exclusion, the Commission retains the exclusion in its current form.

B. Bidding Credits

    65. In the NPRM, the Commission took a fresh look at its bidding 
credit program to ensure that it remains a viable avenue for DEs to 
meaningfully participate in auctions and thereby create additional 
competition and investment in the wireless marketplace. The 
Commission's bidding credit program was adopted in 1994 and is the 
primary way it facilitates participation by designated entities in 
auctions. Section 309(j)(4)(D) of the Act states that the Commission 
must consider using bidding preferences when prescribing regulations 
for acquiring service-specific licenses through competitive bidding. A 
bidding credit provides a percentage discount on winning bids for 
eligible DEs. The Commission defines bidding credit eligibility 
requirements for DEs on a service-specific basis, taking into account 
the capital requirements and other characteristics of each particular 
service.
    66. After reviewing the record, the Commission revises its rules 
for its bidding credit program. Specifically, the Commission updates 
its small business eligibility requirements to better reflect the 
capital-intensive nature of the wireless industry, while retaining its 
overall three-tiered approach that links the percentage of the small 
business bidding credit to the size of the business. The Commission 
also adopts a new bidding credit for eligible rural service providers 
to increase their participation in auctions and provide greater 
opportunities for bringing crucial wireless voice and broadband 
services to rural areas, including underserved and unserved areas and 
areas of persistent poverty. By adopting this new bidding credit, the 
Commission facilitates greater access by multiple entities to valuable, 
low-band spectrum, thereby fulfilling its statutory goals of promoting 
competition and ensuring the efficient use of spectrum. As a further 
step to ensure these benefits continue to flow only those intended 
beneficiaries, the Commission also adopts a reasonable limitation or 
cap on the total amount of benefits that a small business or rural 
service provider can receive in any particular auction.
    67. The Commission adopts these rule changes specifically for the 
600 MHz service, for which licenses will be offered in the Incentive 
Auction, to provide eligible small businesses and rural service 
providers with additional tools to compete meaningfully for low-band 
spectrum and to promote overall competition in auctions and in the 
wireless marketplace. On a prospective basis, the Commission will 
determine the award of bidding credits for small businesses and rural 
service providers on a service-specific basis taking into account the 
capital requirements and other characteristics of each particular 
service, as the Commission currently does.
    68. The Commission declines to adopt at this time specific bidding 
preferences for other types of entities, including those that serve 
unserved/underserved areas or areas with persistent poverty, as well as 
those that have overcome disadvantages. The Commission expects, 
however, that such parties should benefit from the changes it makes to 
its bidding credit program for small businesses and rural service 
providers. Finally, the Commission declines to consider any 
modification of the tribal lands bidding credit because the record does 
not support revisions to its current policies for the award of this 
benefit.
i. Small Business Bidding Credit
    69. Background. The Commission's small business bidding credit 
program consists of a three-tiered schedule of bidding credits 
corresponding to small business size definitions that are based on an 
applicant's average annual gross revenues for the preceding three 
years. Applicants with average gross revenues not exceeding $3 million 
are potentially eligible for a 35 percent bidding credit; applicants 
with average gross revenues not exceeding $15 million are potentially 
eligible for a 25 percent bidding credit; and applicants with average 
gross revenues not exceeding $40 million are potentially eligible for a 
15 percent bidding credit. In order to qualify for a small business 
bidding credit, an applicant must demonstrate that its average annual 
gross revenues, in combination with those of its ``attributable'' 
interest holders, fall below the applicable financial thresholds. The 
Commission takes into account the capital requirements and other 
characteristics of a particular service in establishing which small 
business definitions to apply to a specific service.
    70. In the Part 1 NPRM, the Commission sought comment on whether 
its small business bidding credit program continues to align with the 
operational demands of small businesses that acquire spectrum and build 
out services in a formidable wireless marketplace. The Commission 
invited comment on whether to increase the gross revenue thresholds for 
defining the small business sizes for bidding credits, using the price 
index for the U.S. Gross Domestic Product (GDP price index) as the 
standard for measuring the increase of the thresholds. Specifically, 
the Commission proposed to increase the average annual gross revenues 
thresholds from $3 million to $4 million for applicants potentially 
eligible for a 35 percent bidding credit; from $15 million to $20 
million for applicants potentially eligible for a 25 percent bidding 
credit; and from $40 million to $55 million for applicants potentially 
eligible for a 15 percent bidding credit. The Commission also sought 
comment on alternative indices, criteria, or methods that may better 
reflect the development and relevant range of economic activity in the 
wireless industry.
    71. The Commission invited comment on whether to modify the current 
bidding credit percentages and whether to add additional tiers of 
bidding credits. The Commission also asked whether the Commission 
should continue to evaluate the definition of a small business on a 
service-by-service basis. Moreover, the Commission sought comment on 
whether any adopted changes to its part 1 rules should be incorporated 
into the 600 MHz service rules. In addition, the Commission asked 
whether it should apply its revised Part 1 rules to re-auctioned 
licenses for existing services. Based on comments received in response 
to the Part 1 NPRM, the Commission sought additional comment in the 
Part 1 PN on

[[Page 56776]]

alternative proposals that would increase the gross revenue thresholds 
based on other standards, increase the small business bidding credit 
percentages for all or some of the tiers, and decline to make any 
changes to the small business bidding credit program until the 
Commission addressed perceived DE eligibility issues stemming from 
Auction 97.
    72. Discussion. The Commission adopts its proposal in the Part 1 
NPRM to increase the gross revenues thresholds that define the three 
tiers of small business bidding credits and to retain the existing 
percentage levels of the small business bidding credits. See Part 1 
NPRM, 79 FR at 68181-82. Consistent with past practice, the Commission 
will select, on a service-by-service basis, the small business bidding 
credits and corresponding definitions that will be available for the 
applicable auction based on the capital requirements of a particular 
service. For the Incentive Auction, the Commission will continue to 
utilize the 25 percent and 15 percent bidding credits, but the 
Commission will apply the increased gross revenue thresholds that it 
adopts to the small business size definitions for those bidding 
credits. The Commission expects that these measures will advance its 
statutory goals by providing small businesses with an opportunity to 
remain competitive in an evolving wireless marketplace by facilitating 
participation in auctions and in the provision of spectrum-based 
services.
    73. Updating the Standardized Schedule of Small Business Sizes. The 
Commission retains its existing three-tiered schedule for determining 
eligibility for bidding credits, but updates the gross revenues 
thresholds to reflect the capital challenges small business face in the 
current wireless industry. The Commission has previously found that 
robust competition depends critically upon the availability of spectrum 
for provisioning services. Given the ever-increasing competitive nature 
of the wireless marketplace, several commenters advocate for 
modifications to its bidding credit program in order to facilitate a 
higher rate of participation in auctions by small businesses that might 
otherwise find it difficult to acquire sufficient capital to compete in 
spectrum auctions. In this regard, many commenters favor increasing the 
gross revenue thresholds, with some advocating for higher increases 
than those proposed in the Part 1 NPRM. RWA, for instance, supports the 
Commission's proposal but also urges it to increase the threshold for 
the lowest tier from $40 million to $100 million. Council Tree and 
Blooston Rural also favor using annual gross revenues as the basis for 
defining the small business sizes for bidding credits.
    74. The Commission finds that its three-tiered system for providing 
small business bidding credits, when properly tailored and implemented, 
serves the underlying policy interests of its bidding credit program. 
Therefore, the Commission modifies 47 CFR 1.2110(f) to increase the 
three tiers of gross revenue thresholds defining eligibility for each 
small business bidding credit to the following: (1) Businesses with 
average annual gross revenues for the preceding three years not 
exceeding $4 million would be eligible for a 35 percent bidding credit; 
(2) Businesses with average annual gross revenues for the preceding 
three years not exceeding $20 million would be eligible for a 25 
percent bidding credit; and (3) Businesses with average annual gross 
revenues for the preceding three years not exceeding $55 million would 
be eligible for a 15 percent bidding credit.
    75. In considering how much to adjust the gross revenues thresholds 
in the small business definitions, the Commission proposed to use as a 
guide the price index for the U.S. Gross Domestic Product (``GDP price 
index'') published by the U.S. Department of Commerce on a quarterly 
basis as part of its National Income and Product Accounts. See 
generally BEA, Interactive Data, https://www.bea.gov/itable. The 
Commission adjusted the current gross revenues thresholds with the 
percentage change in the GDP price index between 1997 and 2013. The 
Commission determined that the GDP price index increased by 36.4 
percent from 1997 to 2013. Based on this 36.4 percent increase, the 
Commission proposed new gross revenues thresholds that were obtained by 
multiplying the current thresholds by 1.364 and rounding to the nearest 
million.
    76. Consistent with the Commission's statutory objectives, it finds 
that increasing the gross revenue thresholds will enhance the ability 
of small businesses to acquire and retain capital thereby facilitating 
their ability to compete meaningfully in today's auctions. At the same 
time, the Commission avoids setting the small business size thresholds 
at a level that may be over inclusive and result in DE benefits flowing 
to entities for which such credits are not necessary. In so doing, the 
Commission agrees with commenters in favor of using the GDP price index 
as the basis for calculating the increase for each tier defining the 
small business size for purposes of the bidding credit. As noted in the 
Part 1 NPRM, the currently available wireless industry price indices do 
not reflect the dramatic shift from a voice-centric to a data-centric 
wireless industry, along with the tremendous growth of mobile broadband 
data services. Moreover, the SBA recently used the GDP price index to 
adjust its receipts-based industry size standards as part of its size 
standards review.
    77. In adopting this methodology for increasing the gross revenue 
thresholds for defining small business eligibility for bidding credits, 
the Commission declines to adopt alternative proposals for adjusting 
the small business size definitions. For example, ARC would adjust the 
small business size definition to the cost of auctioned spectrum on a 
MHz per pop basis. CCA opposes ARC's proposal, noting that it would 
create uncertainty for DEs as the value of spectrum varies by band and 
market conditions. The Commission agrees with CCA's assessment and 
further finds that ARC's proposal would be administratively burdensome 
to implement without providing a meaningful corresponding benefit. 
Rather, by using the GDP price index, the Commission establishes a 
simple bright-line standard to improve the efficiency of the auction 
process, serve the public interest, and avoid additional implementation 
costs for small businesses.
    78. Additionally, the Commission will not disturb its earlier 
decision declining to adopt SBA's employee-based business size standard 
for adjusting its small business size definitions. Council Tree states 
that the SBA's standard is too inclusive for purposes of establishing 
DE eligibility. However, CCA promotes the use of SBA's employee-based 
standard because ``expanding eligibility, rather than shrinking it, may 
be warranted given the increasing disparity between the largest 
carriers . . . and all other carriers.'' As noted in the Part 1 NPRM, 
the Commission previously concluded that by adopting the SBA's 
standard, the Commission would allow many large carriers to take 
advantage of DE benefits not intended for them. See Part 1 NPRM, 71 FR 
at 68182. Additionally, the Commission notes that there is no data in 
the record to support reconsideration of its previous conclusion. The 
Commission will therefore rely on the GDP price index for establishing 
the small business size definitions to reflect the increased 
operational costs for small businesses and the need to foster 
competition in spectrum auctions and in the wireless marketplace.

[[Page 56777]]

    79. The Commission also declines to adopt proposals favoring a 
single bidding credit in lieu of the current three-tiered system. AT&T/
Rural Carriers, for instance, advocate for the creation of a new 25 
percent single bidding credit for small businesses with average gross 
revenues of less than $55 million. AT&T also notes that this proposal 
would fulfill the DE program's original vision and safeguard against 
gamesmanship. Opponents of the single bidding credit argue that the 
proposal is too limiting and is inconsistent with the Commission's 
statutory mandates. The Commission finds that AT&T/Rural Carriers' 
proposal ignores the various sizes and types of small businesses that 
participate in Commission auctions. Because not all small businesses 
are alike in the wireless marketplace, the Commission adopted its 
three-tiered bidding credit system in 1997 so that as a small business 
grew, it would receive reduced benefits from its DE program. In doing 
so, its graduated approach allows for other new small businesses to 
gain a foothold in the marketplace using additional DE benefits. The 
Commission finds that this approach continues to be relevant and 
complements its policy for defining bidding credits on a service-by-
service basis in order to tailor small business bidding preferences to 
the capital requirements of a particular service. Thus, the Commission 
refrains from disturbing its long-standing policy.
    80. With respect to the percentage levels of the small business 
bidding credits, the Commission declines to increase any of the current 
percentages as proposed by some commenters. These commenters, including 
ARC, WISPA, KSW, and the DE Coalition, assert that it should increase 
the bidding credit percentages across all or specific tiers. ARC, for 
instance, would increase the percentages of all three bidding credit 
tiers, from the largest to the smallest tier, to 25 percent, 35 
percent, and 40 percent respectively. WISPA recommends adjusting the 
maximum bidding credit up to 45 percent and increasing the other tiers 
proportionately. Moreover, KSW seeks to change the bidding credit 
percentages to 40 percent for applicants below the $15 million 
threshold and 25 percent for applicants below the $40 million 
threshold.
    81. The Commission believes that its decision to eliminate the AMR 
rule and to increase the gross revenues thresholds for its small 
business size definitions will sufficiently enhance the benefits of the 
DE program by helping small businesses obtain access to capital and 
thereby increase participation and competition in auctions. The 
Commission is, however, concerned about expanding the scope of DE 
benefits to a level that may incentivize gamesmanship of the program in 
the current wireless marketplace. Rather, in light of all the other 
changes the Commission is making to its rules, it will proceed with 
care, so that it may assess the impact of its changes to the rules. In 
this regard, the Commission will revisit these rules as may be 
necessary in light of its future auction experience. In declining to 
adopt those proposals to increase the bidding credit percentages, the 
Commission concludes that the use of the small business size standards 
and credits set forth in its updated part 1 schedule, when coupled with 
its other changes, align with its statutory objectives. They also 
provide a simple, consistent, and predictable avenue for facilitating 
small business participation in auctions and in today's wireless 
marketplace.
    82. The Commission also declines to adopt PK's proposal for a new 
entrant bidding credit. Under PK's suggested policy, a new entrant 
bidding credit would be explicitly designed to attract ``new and 
innovative technologies,'' noting that ``nothing in the [Act] precludes 
the use of bidding credits to large businesses to achieve [the 
Commission's] statutory goals.'' Thus, PK's proposal could provide a 
bidding preference to well-financed entities that would not otherwise 
qualify for a bidding credit under its adopted small business size 
definitions. Tristar submits that well-financed new entrants, among 
others, should be entitled to some benefits in the upcoming Incentive 
Auction, but not the same benefits that are available to DEs. CCA 
opposes this proposal, arguing that ``[it] would be complicated to 
administer and could lead to unintended consequences and possible 
gaming.'' The Rural-26 Coalition submits that large, well-financed 
companies, like an Apple or a Google, ``do not need a helping hand from 
the American taxpayer'' to be competitive in spectrum auctions. The 
Commission agrees with commenters that the proposal would conflict with 
its principles against the unjust enrichment of ineligible entities. 
Deciding the eligibility criteria for a new entrant would also be 
difficult to administer and may undercut the underlying policies of the 
DE program by exacerbating the challenges current DEs face to compete 
meaningfully in spectrum auctions. The Commission also notes that PK 
did not offer any details regarding how such a proposal could be 
implemented. Although the Commission declines to adopt PK's proposal it 
expects that its new rules for the small business bidding credit 
program will also help new entrants face the capital challenges of 
entering the wireless marketplace, provided that they meet the 
eligibility standards for the bidding credit.
    83. Finally, the revisions the Commission has made to modernize and 
improve its part 1 competitive bidding rules generally respond to the 
calls by commenters urging it to avoid implementing any bidding credit 
increases until there is surety that ineligible entities will not 
benefit from its bidding credit program. The Commission anticipates 
that the collective rule changes it has made will provide such 
safeguards. The Commission therefore concludes that the time is ripe to 
update its standardized Part 1 bidding credit schedule prior to the 
Incentive Auction. The Commission's actions reflect the current nature 
of the wireless marketplace and renews its commitment to providing DEs 
with the opportunity to participate meaningfully in Commission 
auctions. Further, the Commission adopts targeted measures to ensure 
that valuable bidding credits are available only to those Congress 
intended.
    84. Implementation of the Revised Standardized Schedule of Small 
Business Sizes. The Commission's rule changes to the Part 1 schedule 
for small business bidding credits will be available to any particular 
auction prospectively, including for 600 MHz licenses in the Incentive 
Auction. See Incentive Auction Report and Order (Incentive Auction 
R&O), 79 FR 48441, 48504-06, August 15, 2014. Specifically, these rules 
changes will apply to all Commission auctions in which the short-form 
deadline falls on or after the release date of the Part 1 Report and 
Order. Moreover, applicants claiming any small business bidding credits 
will continue to be subject to the Commission's DE rules under 47 CFR 
1.2110, as amended herein.
    85. NTCH supports the incorporation of its rule changes to the 
Incentive Auction, with Council Tree and WISPA arguing for the adoption 
of a 35 percent bidding credit (the lowest tier) for the Incentive 
Auction as well. The Commission declines to reconsider its previous 
decision in the Incentive Auction R&O not to adopt a 35 percent bidding 
credit for the Incentive Auction. Because of the similarities between 
the 600 MHz and 700 MHz bands, in the Incentive Auction proceeding, the 
Commission determined that licensees utilizing the 600 MHz band may 
face

[[Page 56778]]

challenges similar to licensees utilizing the 700 MHz, including issues 
and costs related to developing markets, technologies, and services. In 
light of the similar characteristics and capital requirements for both 
services, the Commission affirms its prior conclusion that it is 
appropriate to offer the same two bidding credit percentages in the 
Incentive Auction proceeding as in the 700 MHz auction. Additionally, 
by increasing the gross revenue thresholds for this schedule, entities 
that previously exceeded the legacy thresholds may now fall within the 
new thresholds, and thus become eligible for small business bidding 
credits. Similarly, the Commission notes that bidders that previously 
exceeded the legacy thresholds as a result of the AMR rule may now be 
eligible for a bidding credit under the current thresholds. By adopting 
its revised three-tiered schedule, the Commission aims to better 
reflect the potential capitalization costs for new entrants and small 
businesses in the wireless marketplace and encourage a greater level of 
participation and competition by small businesses in an auction that 
offers a significant opportunity for interested applicants to acquire 
licenses for below-1-GHz spectrum.
    86. Consistent with the Commission's current practices it will 
continue evaluating the definition of small business on a service-by-
service basis, determined by the associated characteristics and capital 
requirements of each service. See 47 CFR 1.2110(c)(1). Thus, the 
Commission will resolve, on a service-by-service basis, the DEs 
eligible for bidding credits, the licenses for which bidding credits 
are available, the amount of the bidding credits, and other procedures. 
Moreover, the Commission will apply the small business size definitions 
and associated bidding credits to any spectrum licenses in that service 
assigned through subsequent auctions, absent further action by the 
Commission. The Commission did not receive any comments squarely 
addressing these matters, except that WISPA would apply all three tiers 
of bidding credits to every spectrum auction, including the Incentive 
Auction. However, WISPA fails to provide data detailing the benefit of 
a blanket application of the rule in comparison to using a tailored, 
service-by-service approach. The Commission concludes that a service-
specific proceeding is the appropriate avenue for evaluating the 
capital costs and technical challenges associated with the deployment 
of a service which will, in turn, drive the selection of the 
appropriate small business size definition and bidding credit. In 
taking a service-by-service approach, the Commission will better serve 
the public interest by promoting the rapid deployment of wireless 
services. The Commission also intends to review its small business 
definitions on a more regular basis in the future to ensure that the DE 
program continues to align with the strategic and operational demands 
of small businesses in the wireless marketplace.
ii. Rural Service Provider Bidding Credit
    87. Background. Under section 309(j), Congress mandated that the 
Commission design auctions to ``include safeguards to protect the 
public interest in the use of the spectrum,'' including the objectives 
to disseminate licenses ``among a wide variety of applicants,'' 
including rural telephone companies, and to promote the deployment of 
new technologies, products, and services to ``those residing in rural 
areas.'' Section 309(j)(4) also directs the Commission to ``ensure'' 
that various entities--again, specifically including rural telephone 
companies--``are given the opportunity to participate in the provision 
of spectrum-based services.'' To this end, it requires the Commission 
to ``consider the use of . . . bidding preferences'' and other 
procedures. Historically, the Commission has concluded that section 
309(j)(4)(D) does not warrant adoption of an independent bidding credit 
for rural telephone companies because such entities had not 
demonstrated that they had experienced significant barriers to raising 
capital, particularly when compared to other DEs, like small 
businesses. In the Incentive Auction R&O, the Commission found that the 
record in that proceeding did not provide a sufficient basis to revisit 
those prior determinations nor sufficient support for adoption of a 
rural bidding credit.
    88. The Commission recognized in the Part 1 NPRM that the 
marketplace for wireless services has evolved significantly since it 
last comprehensively updated its DE eligibility rules in 2006. Based on 
this industry-wide evolution, the Part 1 NPRM asked commenters to 
provide data demonstrating whether rural telephone companies lack 
access to capital or face barriers to formation similar to those faced 
by other DEs. In response to the Part 1 NPRM, several commenters 
highlighted the fact that rural service providers had difficulty 
obtaining licenses in Auction 97 and urged the Commission to adopt a 
bidding credit for rural telephone companies for future auctions. The 
Part 1 PN then sought comment on a number of issues related to whether 
it should establish a bidding credit for rural telephone companies, 
including whether a bidding credit would better enable rural telephone 
companies to compete more successfully at auction. Subsequently, in 
response to the Part 1 PN, AT&T/Rural Carriers submitted a joint 
proposal that urged adoption of a rural service provider bidding 
credit. Other stakeholders also offered alternative suggestions for 
structuring the credit.
    89. Discussion. The Commission adopts a 15 percent bidding credit 
for eligible rural service providers that provide commercial 
communications services to a customer base of fewer than 250,000 
combined wireless, wireline, broadband, and cable subscribers and serve 
primarily rural areas. The Commission agrees with commenters that a 
targeted bidding credit will better enable rural service providers to 
compete for spectrum licenses at auction, thereby speeding the 
availability of wireless voice and broadband services in rural areas. 
Based on the record established in this proceeding, the Commission 
anticipates that providing eligible rural service providers with a 
meaningful opportunity to compete for spectrum licenses will be 
particularly important in the upcoming Incentive Auction, which will 
offer multiple blocks of licenses for low-band spectrum. The 
Commission's action is thereby consistent with other efforts it took in 
the Incentive Auction R&O to facilitate competition in rural areas. The 
Commission will only permit an eligible small and rural entity to claim 
one bidding credit though, rather than benefit from both a small 
business and a rural service provider bidding credit. The Commission 
believes that the rural service provider bidding credit it adopts will 
allow a diversity of service providers to compete more effectively for 
spectrum licenses in rural areas, in furtherance of statutory 
objectives, while also preventing unjust enrichment of ineligible 
entities.
    90. The Commission's decision today incorporates many of the 
suggestions offered by commenters, though it declines to adopt in full 
any single proposal offered by stakeholders for establishing a rural 
service provider bidding credit. For instance, the AT&T/Rural Carriers 
Joint Proposal recommended that in order to be eligible for the credit, 
an applicant must be in the business of providing commercial 
communications services to a customer base of fewer than 250,000 
combined wireless and wireline

[[Page 56779]]

customers. Under their particular proposal, however, eligible auction 
applicants would be permitted to claim a credit of 25 percent, but the 
credit would be capped at $10 million per bidding entity. Other 
commenters support the adoption of a rural bidding credit, but under 
different terms. For example, RWA/NTCA jointly propose a ``Rural Telco 
Bidding Credit'' of 25 percent that is capped at $10 million and is 
``available only to rural telephone companies (or their affiliates/
subsidiaries) that seek spectrum in an area in which they are 
designated as an eligible telecommunications carrier.'' Under the RWA/
NTCA proposal, the bidding credit would be separate from, and in 
addition to, any small business bidding credit for which an applicant 
would qualify. The Commission notes that this proposal is also 
supported by other rural stakeholders, such as the Blooston Rural 
Carriers and the Rural Carrier Coalition. Cerberus proposes a 35 
percent bidding credit for rural telephone companies, in addition to 
any small business bidding credit for which an applicant would qualify.
    91. Council Tree, however, claims that rural telephone companies do 
not have ``the same access to capital issues as other DEs, especially 
New Entrant DEs.'' Accordingly, Council Tree urges that the Commission 
not ``elevate'' rural providers ``to a special class of DEs superior to 
any other DE class.'' CCA ``does not support proposals for the 
establishment of a separate rural telephone company bidding credit,'' 
because of ``administrative complexity.'' Accordingly, it urges the 
Commission to keep a ``simple and straightforward approach of 
maintaining small business as the touchstone of any bidding credit 
mechanism.''
    92. The Need for a Rural Service Provider Bidding Credit. Based 
upon the record established in this proceeding and its experience 
garnered over the history of the auctions program, including Auction 
97, the Commission now concludes that creating a 15 percent rural 
service provider bidding credit will better enable eligible rural 
service providers to compete for spectrum licenses at auction and speed 
the availability of wireless voice and broadband services to rural 
areas, consistent with its statutory objectives. See 47 U.S.C. 
309(j)(3)(A)-(B). In the past, the Commission has noted that due to 
certain traditional financing programs, rural providers ``may have 
greater ability than other designated entities to attract capital.'' 
While the Commission does not believe that rural service providers 
warrant as great a bidding credit as other DEs, several factors 
demonstrate that they face obstacles to wireless deployment that are 
more challenging in their service areas. First, the evidence confirms 
these difficulties, which are reflected in their inability to provide 
service that competes with larger providers in rural areas. See 17th 
Mobile Wireless Competition Report, 29 FCC Rcd at 15334 para. 48, 15335 
para. 51. Second, the Commission observes that the wireless industry 
has undergone significant consolidation during the past decade and that 
concentration in the market share of the major providers has also 
increased during that time period. Additionally, many rural service 
providers, although relatively small, are not eligible for small 
business bidding credits under its size standards to assist them in 
competing against larger carriers at auction. The record also 
demonstrates that rural service providers have encountered challenges 
in their efforts to obtain financing because the rural areas they seek 
to serve are not as profitable as more densely-populated markets. In a 
recent NTCA survey, for example, sixty-two percent of survey 
respondents characterize the process of obtaining financing for 
wireless projects as ``somewhat difficult'' or ``very difficult,'' and 
roughly half reported that their ability to obtain spectrum at auction 
was a concern.
    93. Furthermore, commenters have argued that the challenges that 
rural service providers face in competing for spectrum were reflected 
in the results of Auction 97, which postdated the Commission's review 
of this question in the Incentive Auction R&O. In Auction 97, 38 
qualified bidders were rural telephone companies, or rural telephone 
company affiliates, and only 28.9 percent of those entities won 
licenses. Contrary to Council Tree's assertion that the reason many 
rural telephone companies were unsuccessful in Auction 97 was due to 
their reduced interest in spectrum and unwillingness to bid 
competitively in the auction, rural service providers have asserted 
that they did not bid more aggressively in the auction because many 
were unable to qualify as DEs under its rules and thus competed against 
DEs and well-funded national carriers without the benefit of bidding 
credits.
    94. Based on the Commission's review of the record, along with the 
results of Auction 97, it concludes that a rural service provider 
bidding credit may have assisted such entities to acquire spectrum 
suitable for mobile broadband services had a bidding credit been 
available. Rural service provider commenters have provided evidence 
illustrating recent increased challenges in securing traditional 
financing which has resulted in difficulties in competing successfully 
in auctions. In view of the record and the Commission's experience in 
running its competitive bidding program, it is convinced that a bidding 
credit for eligible rural service providers is warranted to ensure that 
designated entities of all types have the opportunity to acquire 
spectrum and participate in spectrum based services. The Commission 
therefore adopts a rural service provider credit for the first time.
    95. Under the rules the Commission adopts today, rural service 
providers will be able to demonstrate eligibility for a 15 percent 
bidding credit if they serve fewer than 250,000 subscribers and serve 
predominantly rural areas. The Commission declines to adopt a specific 
threshold for the proportion of an applicant's customers who are 
located in rural areas, but puts prospective applicants on notice that 
it is the Commission's intent that in order for an applicant to be 
eligible for a rural service provider bidding credit, the primary focus 
of its business activity must be the provision of services to rural 
areas. Accordingly, this rule change will provide an incentive for 
rural service providers to participate more vigorously in upcoming 
spectrum auctions, including the Incentive Auction. Further, as the 
Rural-26 Coalition notes, the Commission anticipates that ``more rural 
companies, including Rural-26 members, likely will participate in the 
upcoming Incentive Auction than participated in Auction 97, given the 
favorable propagation characteristics of the 600 MHz spectrum and the 
opportunity for rural providers to use this spectrum to provide mobile 
and fixed wireless broadband services in rural markets.''
    96. This bidding credit is particularly important in advance of the 
Incentive Auction, a once-in-a-generation opportunity for small and 
rural providers to gain access to below-1-GHz spectrum. Spectrum below 
1 GHz, referred to as ``low-band'' spectrum, has distinct propagation 
advantages for network deployment over long distances and is therefore 
particularly well-suited for deployment in rural areas. Today, two 
nationwide carriers control the vast majority of this low-band 
spectrum. Given the limited supply of this spectrum, the continued 
concentration of low-band spectrum will have a pronounced effect on 
competition and consumers in rural areas. Indeed, currently, 92 percent 
of non-rural consumers, but only 37 percent of rural consumers, are 
covered by at least four

[[Page 56780]]

3G or 4G mobile wireless providers' networks.
    97. The Commission's adoption of the rural service provider bidding 
credit is consistent with many of the actions the Commission took in 
the Incentive Auction R&O that were designed to facilitate competition 
in rural areas. For example, the Incentive Auction R&O reserved a 
modest amount of low-band spectrum in each market for providers that 
lack low-band capacity. It also adopted Partial Economic Areas (PEAs) 
to encourage entry by providers that contemplate offering wireless 
broadband service on a more localized basis. The Commission concluded 
in the Incentive Auction R&O that licensing on a PEA basis is 
consistent with the requirements of section 309(j) because it will 
promote spectrum opportunities for carriers of different sizes, 
including small businesses and rural telephone companies. Finally, the 
Commission required handset interoperability to ``promote rapid 
deployment of the 600 MHz band, particularly in rural areas.'' These 
policy decisions reflect its commitment to address the challenges that 
rural providers face in competing for spectrum and ensure that 
consumers in rural areas have access to wireless voice and broadband 
services. The bidding credit the Commission adopts will build on these 
policies and support its statutory objectives to disseminate licenses 
among a wide variety of applicants, ensure that rural telephone 
companies have an opportunity to participate in the provision of 
spectrum-based services, and promote the availability of innovative 
services to rural America.
    98. The Commission does not adopt Blooston Rural's proposal to 
permit a winning bidder to deduct from its auction purchase price the 
pro rata value of any area partitioned to a rural telephone company, 
where the area includes all or a portion of the rural telephone 
company's service area. Under this proposal, the larger carrier ``would 
be compensated twice for making spectrum available in rural areas--a 
discount on its final auction payment, plus whatever payment it 
negotiates with the rural carrier.'' ARC supports this proposal and 
argues that the rule would ``benefit DEs by providing incentives for 
partitioning and promote secondary market transactions, which further 
the prospect of rural telcos obtaining licenses for rural and other 
underserved/unserved areas where they have an excellent service 
record.'' The Commission finds that the Blooston Rural proposal would 
be overly burdensome and challenging to implement. Not only would it 
require the Commission to review post-auction transactions to determine 
how much of a discount to apply, but it would also require it to modify 
its short-form applications to accommodate larger carriers' that intend 
to receive bidding credits for areas that they partition to rural 
service providers. Moreover, the Commission notes that it would provide 
a benefit to carriers for choosing not to serve rural areas, which is 
inconsistent with its goals. Notably, the Commission did not receive 
any feedback from larger carriers on Blooston Rural's proposal, thus it 
appears that larger carriers lack interest in participating in such a 
complex undertaking. While CCA was generally supportive of this 
proposal in its response to the Part 1 NPRM, it reverses course in its 
response to the Part 1 PN and states that ``the nuances of determining 
which areas should qualify for such credits would introduce undue 
complexity into already-complex auction processes.''
    99. Eligibility for a Rural Service Provider Bidding Credit. For 
purposes of the Commission's rules, as amended, it defines designated 
entities to include eligible rural service providers. To be eligible 
for a rural service provider bidding credit, an applicant must be in 
the business of providing commercial communications services to a 
customer base of fewer than 250,000 combined wireless, wireline, 
broadband, and cable subscribers and must also serve predominantly 
rural areas. A provider may count any subscriber as a single subscriber 
even if that subscriber receives more than once service. That is, a 
subscriber receiving both wireline telephone service and broadband 
would be counted only as a single subscriber. The Commission notes that 
there is broad consensus in the record to support a benchmark of fewer 
than 250,000 combined subscribers, which should encompass carriers that 
provide a variety of services to rural areas, while excluding larger 
entities that do not have the same demonstrated need for a bidding 
credit. Moreover, by establishing the eligibility threshold for a rural 
service provider bidding credit as those with fewer than 250,000 
subscribers, rather than 100,000 access lines or less, the Commission 
selected a criterion that is large enough to permit rural service 
providers to seek spectrum licenses at auction, expand their coverage 
areas, grow their subscriber base, and continue to be eligible for 
bidding credits in future spectrum auctions. Based on the record in 
this proceeding, the Commission finds that a benchmark of fewer than 
250,000 combined subscribers will best ensure that only smaller rural 
service providers that serve predominantly rural areas receive the 
bidding credit.
    100. To determine whether a provider has fewer than 250,000 
subscribers, the Commission will follow an approach similar to how it 
attributes revenues in the small business bidding credit context, and 
will determine eligibility by attributing the subscribers of the 
applicant, its controlling interests, its affiliates, and the 
affiliates of its controlling interests. See 47 CFR 
1.2110(f)(2)(i)(4)(C), as adopted herein. As with the Commission's 
existing small business bidding credits, it anticipates that this 
approach for establishing eligibility will ensure that applicants are 
bona fide in nature and that a rural service provider credit is only 
awarded to a designated entity, as Congress intended. Thus, like small 
businesses, affiliates of rural service provider applicants include 
entities or individuals that directly or indirectly control or have the 
power to control the applicant, directly or indirectly are controlled 
by a third party that also controls the applicant, or have an 
``identity of interest'' with the applicant.'' Likewise, controlling 
interests include those that have de jure or de facto control of the 
applicant.
    101. Blooston Rural, RWA, and NTCA argue that the Commission should 
not aggregate the subscribers attributed to an applicant seeking a 
rural service provider bidding credit in the same manner as it 
aggregates the gross revenues of a small business seeking a sized-based 
bidding credit. Instead, they contend that it should award a rural 
service provider bidding credit when the applicant, and its controlling 
interests and affiliates each independently demonstrate eligibility for 
the credit. The Commission disagrees, and concludes that rather than 
creating greater parity among designated entities, adopting such a 
method to determine eligibility for a rural service provider bidding 
credit would undercut its existing small business bidding credit 
program. In sum, the approach recommended by commenters would permit an 
applicant that far exceeds the size standard the Commission has 
established to be an eligible rural service provider, potentially in 
exponential amounts, to obtain and control spectrum licenses awarded 
with a bidding credit. Such an applicant would also likely have access 
to the financial resources of its controlling interests and affiliates 
and thus granting it a 15 percent bidding credit would be inequitable 
and contrary to its policy of providing a bidding credit to those 
designated

[[Page 56781]]

entities that have difficulty in obtaining access to capital. 
Accordingly, the Commission denies this request.
    102. The Commission's rules provide options for several parties to 
combine resources and participate in an auction. Like small businesses 
seeking eligibility for bidding credits, the Commission will allow 
rural service providers to form a consortium for this purpose. Under 
the rules for a rural service provider consortium, the Commission will 
not aggregate the subscribers of each of the members of the consortium, 
but will instead determine the eligibility of each individual member 
for the bidding credit. If the consortium wins a license at auction, 
either an individual member of the consortium or a new legal entity 
comprising of two or more individual consortium members may apply for 
the license(s). Moreover, contrary to the concerns of commenters the 
Commission is not limiting rural service providers to bidding through a 
consortium model and stresses that applicants seeking a rural service 
provider bidding credit have many options to structure their businesses 
in a manner that complies with its eligibility rules.
    103. The Commission also recognizes the concerns of commenters that 
attributing subscribers of rural service providers in the same manner 
as it does for the revenues of small businesses will unfairly 
disadvantage existing rural partnerships, including those that were 
structured under cellular settlements with numerous controlling 
interests, yet as a policy matter, still warrant a bidding credit to 
create greater parity among designated entities. Accordingly, in order 
not to penalize rural partnerships that were formed for purposes having 
nothing to do with participation in competitive bidding and to promote 
more fully the increased participation of rural service providers 
generally in upcoming auctions, the Commission adopts an exception to 
its attribution rules for existing rural partnerships. Specifically, 
for rural partnerships providing service as of the date of the adoption 
of this decision, the Commission will determine eligibility for the 15 
percent rural service provider bidding credit by evaluating whether the 
members of the rural wireless partnership each individually have fewer 
than 250,000 subscribers, and for those types of rural partnerships, 
the subscribers will not be aggregated. Thus we would essentially 
evaluate eligibility for an existing rural wireless partnership on the 
same basis as we would for an applicant applying for a bidding credit 
as a rural service provider consortium. See 47 CFR 1.2110(b)(3)(i). 
This exception will permit eligible rural service providers to receive 
the benefit of a bidding credit without having to interrupt their 
existing business relationships or the provision of service to 
consumers.
    104. Notably, because each member of the rural partnership must 
individually qualify for the bidding credit, by definition a 
partnership that includes a nationwide provider as a member will not be 
eligible for the benefit. Similar to attribution in the small business 
revenue context, the Commission stresses that applicants, including 
rural wireless partnerships, that do not have an identifiable 
controlling interest will have all of the subscribers of all of their 
interest holders evaluated for the purposes of determining eligibility 
for the bidding credit. The Commission does clarify, as commenters 
request, that members of such partnerships may also apply as individual 
applicants or as members of a consortium to the extent it is otherwise 
permissible to do so under the rules as amended in this decision, and 
seek eligibility for a rural service provider bidding credit.
    105. In regard to the definition of ``rural area,'' while the 
Communications Act does not include a statutory definition of what 
constitutes a rural area, the Commission has used a ``baseline'' 
definition of rural as a county with a population density of 100 
persons or fewer per square mile. Facilitating the Provision of 
Spectrum-Based Services to Rural Areas and Promoting Opportunities for 
Rural Telephone Companies To Provide Spectrum-Based Services, Report 
and Order, 69 FR 75144, 75146, December 15, 2004. The Commission will 
use this same definition for purposes of determining whether a carrier 
serves predominantly rural areas. To qualify for a rural service 
provider bidding credit, an applicant must certify in its short-form 
application that it serves predominantly rural areas.
    106. Several commenters argue that the Commission should limit the 
rural service provider bidding credit's eligibility to geographic 
licenses where the applicant, or one of its members, or affiliates, has 
Eligible Telecommunications Carrier (ETC) status to provide wireline 
service. Blooston Rural argues that ``ETC status is an objective and 
easily-verifiable criterion for determining those geographic markets 
where the bidder or one of its members has `presence,' while at the 
same time preventing the credit from being used to reduce bid price for 
large urban PEAs.'' The Commission finds that limiting a rural service 
provider bidding credit to an area where the provider has been 
certified for ETC status would be overly restrictive and challenging to 
implement. While the Commission envisions rural service providers will 
bid primarily on geographic licenses that overlap with their service 
area, the Commission does not want to restrict small rural service 
providers from being able to expand their service area by bidding on 
licenses that are outside of their service area.
    107. The Commission recognizes the consumer benefits that stem from 
multiple providers being able to utilize the unique and highly valuable 
characteristics of low-band spectrum. It is therefore the Commission's 
goal to encourage significant competition in the Incentive Auction for 
licenses in rural areas. The Commission finds that the bidding credit 
cap will protect against a provider using a rural service provider 
bidding credit to win a license in a major metropolitan area. As 
Council Tree notes, ``[i]n Auction 97, 87 percent of the licenses sold 
were valued at more than $40 [million]'' and ``[s]uch caps effectively 
preclude DEs from acquiring medium- and large-sized urban markets.'' 
Moreover, the Commission finds that it would be overly cumbersome to 
implement a bidding credit that would vary on a provider-by-provider 
and market-by-market basis. Consistent with the Commission's overall 
goals in this proceeding, it sought to streamline and simplify the 
implementation of its rural service provider bidding credit where 
possible. For these reasons, the Commission does not limit a rural 
service provider bidding credit to an area where the service provider 
has been certified for ETC status.
    108. Rural Service Provider Bidding Credit. The Commission's 
current rules provide a schedule of small business definitions and 
corresponding bidding credits. 47 CFR 1.2110(f). The bidding credits 
range from a 15 percent bidding credit to a 35 percent bidding credit. 
These bidding credits are based on the businesses' average annual gross 
revenues, and not the number of subscribers, or the number or 
percentage of rural counties served. AT&T, the Rural-26 Coalition, and 
several other rural entities propose a rural service provider bidding 
credit of 25 percent. Some commenters argue that the Commission should 
adopt a rural service provider bidding credit equal to the average 
credit available to small businesses--currently 25 percent--and argue 
that ``the funds saved by a 25% bid credit would enable rural carriers 
to use more of their scarce resources on build out and upgrading of 
their existing networks, rather than spectrum

[[Page 56782]]

acquisition, thereby ensuring better and faster service to rural 
consumers.'' The Commission notes, however, that rural service 
providers are already eligible to receive funding for network build-out 
through various Commission and Federal government programs, such as the 
Universal Service Fund. Moreover, rural service providers generally 
have greater access to capital and infrastructure than other small 
businesses or new entrants. Accordingly, the Commission establishes a 
rural service provider bidding credit of 15 percent. The Commission 
believes that a bidding credit of 15 percent will strike the right 
balance between its existing DE system where rural service providers 
are often unable to receive a bidding credit at all and the requested 
25 percent bidding credit that may provide an existing rural service 
provider with an unnecessary advantage in certain markets.
    109. Small Business and Rural Service Provider Bidding Credits Will 
Not Be Cumulative. An applicant is permitted to claim a rural service 
provider bidding credit or a small business bidding credit, but not 
both. While several rural stakeholders argue that the rural service 
provider bidding credit should be cumulative with a small business 
credit, the Commission does not believe that a cumulative rural bidding 
credit is necessary or appropriate at this time. Both of these credits 
are designed to be tailored to the circumstances appropriate for 
eligible bidders. While the Commission finds that the adoption of a 
rural service provider bidding credit will serve the public interest by 
fostering competition in rural areas, it does not believe that a 
provider should be permitted to ``double-dip'' and benefit from both a 
small business bidding credit and a rural service provider bidding 
credit. Indeed, many of the service providers that are now eligible for 
the rural service provider bidding credit have well over $55 million in 
annual revenues and thus have far greater access to capital than most 
small businesses. The Commission therefore declines to adopt a bidding 
credit higher than 15 percent because it is mindful of concerns of 
small businesses that granting higher credits could serve to undercut 
the effectiveness of its existing small business bidding credit 
program. For similar reasons, the Commission also declines to adopt a 
tiered approach for rural service providers. There is no evidence in 
the record to support a tiered credit, or that smaller rural service 
providers face significantly unique or different challenges than larger 
ones. Moreover, to the extent a smaller rural service provider would 
qualify as a small business, the Commission anticipates that it would 
elect to claim a small business bidding credit, rather than a rural 
service provider bidding credit. Accordingly, the Commission agrees 
with the AT&T and Rural-26 Joint Proposal that the rural service 
provider bidding credit should not be cumulative with the small 
business bidding credit. Therefore, an applicant must choose between 
one bidding credit and the other.
iii. Small Business and Rural Service Provider Bidding Credit Caps
    110. Background. In the Part 1 NPRM, the Commission sought comment 
on various proposed changes to its DE program designed to realize more 
effectively the goals of providing meaningful opportunities for bona 
fide small businesses and eligible rural service providers to 
participate at auction, without compromising its responsibility to 
prevent unjust enrichment. The Commission asked whether, in an effort 
to achieve that balance, it should consider reducing the level of 
bidding credits it awards in light of its proposals to increase a DE's 
flexibility in other respects, including eliminating the AMR rule and 
increasing small business size standards. Several parties submitted 
additional proposals that expand the criteria for, or offer 
alternatives to, how the Commission evaluates DE eligibility, including 
proposals to limit the total dollar amount of DE bidding credits that 
any DE (or DE consortium) can claim in an auction through a cap on the 
total benefits awarded, or through another limiting metric that would 
tie bidding credits more closely to a typical business plan of a bona 
fide small business or eligible rural service provider. Based on the 
comments and proposals received in response to the NPRM, the Commission 
sought additional comment in the Part 1 PN on various options, 
including a bidding credit cap that would limit the amount of bidding 
credits that a DE could receive in an auction.
    111. Discussion. The Commission received a range of comments on 
this issue in response to the NPRM and the Part 1 PN. Although some 
commenters oppose the imposition of any sort of limit on the amount of 
DE bidding credits that a DE may be awarded in an auction, several 
parties support adopting a cap or limit on the overall amount that may 
be awarded to any applicant or group of applicants. Moreover, some of 
the commenters opposing the imposition of a cap on the award of bidding 
credits appear to be more concerned by the appropriate level of any 
such cap than a cap as a general matter. The Commission adopts a cap on 
the monetary amount of DE bidding credits it will award in future 
auctions.
    112. The Commission agrees with commenters that contend that the 
imposition of a cap, if properly designed, will help the very entities 
that it sought to benefit, as well as provide some level of assurance 
that bidding activity by small businesses and rural service providers 
is consistent with their relative business size and plans. AT&T notes, 
for example, that a cap ``could help to ensure that the amounts DEs are 
bidding are consistent with the smaller size and revenues of a small 
business.'' This approach is also consistent with the approach that 
other federal agencies have taken. The SBA, for example, limits the 
total dollar value of sole-source contracts that an individual 
participant in its 8(a) business development program may receive.
    113. Commenters also argue that the implementation of a bidding 
credit cap may discourage entities that seek to game the Commission's 
rules at taxpayer expense. As Blooston Rural notes, a cap ``would serve 
as a substantial disincentive to truly large entities that may be 
tempted to configure an applicant that is designed to qualify for a 
small business status.'' The Rural-26 Coalition agrees, stating that a 
cap will ``deter large entities backed with Wall Street capital from 
gaming the rules and denying the U.S. taxpayers billions in revenues.'' 
The Commission notes that, as the cost of spectrum continues to grow, 
the incentives for structuring transactions to obtain bidding discounts 
increases significantly. Thus, while the Commission remains committed 
to strict enforcement of its DE rules, it believes that by imposing a 
bright-line cap on the overall amount of bidding credits it will award 
to a bona fide small business or eligible rural service provider, it 
will provide an important additional safeguard--or backstop--that will 
prevent misconduct in a manner that is simple and straightforward to 
implement, if set appropriately will not impose an artificial 
restriction on the amount DEs are likely to bid. The Commission 
therefore concurs with Tristar that ``[a]n aggregate limitation . . . 
does not frustrate the purposes of section 309(j), but instead assists 
in protecting the integrity of the DE program and the auction itself.''
    114. In adopting an overall limit on the amount of bidding credits 
the Commission will award to any DE

[[Page 56783]]

applicant, it acknowledges that the effectiveness of a cap will depend, 
in significant measure, on how high--or low--it is set for any 
particular auction. To establish an appropriate amount generally, it is 
guided by its statutory directives to promote the ``development and 
rapid deployment of new . . . services for the benefit of the public, 
including those residing in rural areas;'' ``disseminat[e] licenses 
among a wide variety of applicants;'' and ensure the ``efficient and 
intensive use of the electromagnetic spectrum.'' 47 U.S.C. 
309(j)(3)(A)-(B) and (D). Finally, the Commission notes that small 
businesses and rural service providers generally have different 
business plans and associated capital requirements that must also be 
considered in setting its cap amounts. In balancing these objectives 
and concerns, the Commission concludes that it can establish a cap on 
an auction specific basis in a manner that will allow bona fide small 
businesses and eligible rural service providers to participate in 
spectrum auctions and in the provision of service in a meaningful and 
measured way.
    115. After carefully considering the record on this issue, and 
taking into account the changes the Commission makes to increase a DE's 
flexibility in other respects, it adopts a process for establishing a 
reasonable monetary limit or cap on the total amount of bidding credits 
that an eligible small business or rural service provider may be 
awarded in any particular auction. As a general matter, the Commission 
establishes the parameters to implement a bidding credit cap for all 
future auctions on an auction-by-auction basis, based on an evaluation 
of the expected capital requirements presented by the particular 
service being auctioned, and the inventory of licenses to be auctioned. 
The Commission resolves that the amount of the bidding credit cap for a 
small business in any particular auction will not be less than $25 
million, and the bidding credit cap for the total amount of bidding 
credits that a rural service provider may be awarded will not be less 
than $10 million. Given the potential number of licenses and their 
expected value in the Incentive Auction, the Commission does not 
foresee it likely that any subsequent auction would include a bidding 
cap that exceeds the one establish for previous auctions.
    116. In establishing the aggregate bidding credit cap floor for any 
particular auction at $25 million for each eligible small business, and 
$10 million for each eligible rural service provider, the Commission 
uses data from Auctions 66, 73, and 97 as a starting point. The 
Commission observes that a $25 million cap would have allowed the vast 
majority of small businesses to take full advantage of the Commission's 
bidding credit program. The Commission also notes that there is support 
in the record that a $25 million cap for a small business would still 
provide ``a significant benefit to the vast majority of small 
businesses and entrepreneurs participating in a spectrum auction, since 
it would represent a 25% discount on bids of up to $100 million.''
    117. Likewise, the Commission notes that rural service providers 
have collectively advocated for a $10 million cap on the newly-
established rural service provider bidding credit, which they claim 
will assist in their ability to participate successfully in competitive 
bidding and ensure that DE benefits are used for spectrum acquisition 
in rural markets. Additionally, based on past auction data for Auctions 
66, 73, and 97, the Commission finds that if a 15 percent bidding 
credit had been offered in each of those auctions, each winning bidder 
self-identifying as a rural telephone company would not have been 
affected by the $10 million cap as applied to their respective gross 
winning bids. Indeed, RWA/NTCA also conclude that a ``[bidding] credit 
up to $10 million as proposed is sufficient and appropriate,'' based on 
its own review of past auction data. As such, the Commission finds that 
the smaller cap requested by the rural service providers reflects their 
more targeted approach to bidding generally, which is usually focused 
on competing for a few select license areas that align with their 
existing service territories or adjacent areas.
    118. Given the different nature of their business plans and 
financial resources, the Commission concludes that different bidding 
credit caps, and the methodology for implementing them in the Incentive 
Auction, are warranted for small businesses and rural service 
providers. Rural service providers generally have targeted business 
plans focused primarily on a smaller number of license areas within 
their established service areas. Moreover, the Commission observes that 
some rural service providers may have greater access to capital than 
small businesses, including access to universal service funds and other 
forms of federal support. At the same time, the Commission notes that a 
cap would limit the benefits that a rural service provider could obtain 
in a service area that is predominantly urban, particularly if it seeks 
multiple licenses in the auction (and thereby has its bidding credits 
apportioned over those licenses). This point is largely offset by the 
fact that the substantial majority of the licenses available in the 
Incentive Auction include significant amounts of spectrum in rural 
areas.
    119. The Commission disagrees with entities that believe that 
adoption of a cap ``would essentially end the DE program'' and could 
significantly limit a DE's ability to obtain spectrum in more than one 
market. USCC, for instance, explained that a bidding credit cap ``could 
prevent DEs from operating with sufficient scale to sustain itself in 
the industry.'' As a general matter, the Commission finds that taking 
an auction-by-auction approach for establishing bidding credit caps 
will enable it to look carefully at, among other challenges, the 
capitalization costs for a particular service that DEs may face in 
order to compete in that auction and provide service to the public. 
Using this process will also provide commenters with the flexibility to 
provide specific, data-driven arguments in support of the bidding 
credit caps for that particular service. The Commission also notes that 
its rule changes will not foreclose the ability for designated entities 
to participate in auctions when their auction bids fall above the cap; 
rather, such entities may still receive a bidding credit discount of up 
to designated cap for that auction and then pay the excess above that 
amount. Nor has USCC provided any basis for the scenario in which non-
DEs will outbid the cap simply to deprive DEs of the licenses. First, 
because the cap is an aggregate one, rather than a per-license one, 
such a strategy would appear to be impracticable, particularly in 
auctions where anonymous bidding is utilized. More important, there is 
no basis for concluding that non-DEs would exceed an aggregate cap (on 
whatever licenses they may seek) unless they believe the licenses' 
value exceeds the cap--in which case doing so would promote section 
309(j)'s goal of efficient and intensive use of the spectrum.
    120. The Commission also disagrees with various comments that, in 
sum, argue that the implementation of bidding credit caps is 
inconsistent with the Commission's statutory mandates. The Commission 
finds no merit in these arguments. The Commission is vested with broad 
discretion when balancing various statutory objectives. Additionally, 
the Commission has consistently determined that section 309(j) does not 
charge the Commission with providing entities with generalized economic 
assistance or a path to success, but rather with the

[[Page 56784]]

responsibility and the discretion to provide opportunities for small 
businesses while preventing the unjust enrichment of ineligible 
entities. See Order on Reconsideration of the DE Second Report and 
Order, 71 FR 34272, 34276-77, June 14, 2006; Secondary Markets Second 
Report and Order, 69 FR 77522, 77529, December 27, 2004. The Commission 
further notes that the statutory goal cited by commenters requiring it 
to promote economic opportunity and competition by a wide dissemination 
of licenses is ``subject to a variety of reasonable interpretations,'' 
and must be balanced against a number of other competing statutory 
objectives. In striking that balance, ``only the Commission may decide 
how much precedence particular policies will be granted when several 
are implicated in a single decision.'' The Commission finds that 
appropriate bidding credit caps will protect the integrity of the DE 
program by providing opportunities for qualified designated entities, 
while mitigating the incentives for abuse, consistent with its 
statutory mandates.
    121. Finally, the Commission declines to adopt other proposals that 
would restrict the amount a small business can bid at auction, or that 
would base a bidding credit cap on another metric such as population. 
The Commission believes that such proposals would be unduly burdensome 
on DEs to implement and might negatively affect competition, unlike 
those the Commission adopts. Indeed, as Blooston Rural notes, placing a 
limit on bid amounts is arbitrary and establishing standards based on 
population contravenes the long-standing economic principle that ``a 
license available for auction should go to the entity that values it 
the most.''
    122. The bidding credit caps the Commission adopts will enable 
small businesses and rural service providers to attract capital and 
participate in the Incentive Auction, as well as future Commission 
auctions, in a meaningful way, consistent with their business plans. 
The Commission adopts these bidding credit caps based on its experience 
in administering its auctions program, and based on data regarding 
bidding credits DEs have utilized to date. By establishing parameters 
significant enough to assist eligible entities to have the opportunity 
to compete at auction, but reasonable enough to ensure that ineligible 
entities are not encouraged to undercut its rules, the Commission 
concludes that it achieves its dual statutory goals of benefitting DEs 
and at the same time preventing unjust enrichment.
    123. Adoption of DE Bidding Credit Caps for the Incentive Auction. 
Given the significant advantages of the low-band spectrum licenses 
being auctioned, and the associated capital requirements, the 
Commission establishes a higher cap on the total amount of bidding 
credits that a small business may receive for the Incentive Auction 
than what it anticipates in other future auctions. Specifically, the 
Commission establishes a $150 million cap for small businesses and 
maintains a $10 million cap for rural service providers on the total 
amount of bidding credits that a winning bidder may receive. The 
Commission finds that these cap amounts are appropriate given the 
unique characteristics of the 600 MHz spectrum being auctioned, its 
analysis of past auction data, and record evidence. Further, for the 
purposes of the upcoming Incentive Auction, the Commission also employs 
a market-based differential for how the cap will be imposed on a 
winning DE bidder in both larger and smaller markets. Taken together, 
the Commission believes that these cap amounts will allow small 
businesses and rural service providers to attract capital and compete 
in the Incentive Auction in an equitable and meaningful way, consistent 
with their respective business plans.
    124. The Commission finds that a significant upwards adjustment 
from the $25 million baseline for small businesses is warranted in 
light of the significant value of the 600 MHz spectrum to be auctioned 
and associated capital requirements. As the Commission indicated in the 
Mobile Spectrum Holdings Report and Order, 79 FR 39977, July 11, 2014, 
low-band spectrum is known to have superior propagation characteristics 
to mid- or high-band spectrum. Low-band spectrum is also less costly to 
deploy and provides higher coverage quality. As noted by T-Mobile, 
``[t]he the 600 MHz spectrum is particularly valuable because it 
penetrates buildings more readily and covers a much wider geographic 
area with fewer transmitters than higher-band spectrum.'' According to 
CostQuest, the cost of deploying networks using mid-band spectrum (1900 
MHz) would require nearly 300 percent more in total investment than a 
comparable network deployed using low-band spectrum (700 MHz). The 
Commission therefore finds that a $150 million cap is warranted given 
the significant difference in value between low-band and higher-band 
spectrum. This will ensure that smaller businesses are not 
disadvantaged vis-[agrave]-vis larger bidders and have the opportunity 
to compete in a meaningful way.
    125. Based on past auction data, the Commission also finds that a 
$150 million cap would accommodate the bidding thresholds of a higher 
percentage of small business participants than the $25 million baseline 
would. The Commission observes, for example, that in Auctions 66, 73, 
and 97, nearly all of the small businesses that claimed bidding 
credits--for licenses in both large and small markets--would have 
fallen under a $150 million cap amount. In addition, the Commission 
notes that when applying Auction 97 prices to 10-megahertz PEA licenses 
(the same configuration as in the Incentive Auction), a $150 million 
cap would not affect a 15 percent or 25 percent bidding credit discount 
for any individual license bid except in the top two markets (NY and 
LA). The Commission therefore expects that a $150 million cap would 
give small businesses a meaningful opportunity to compete for a wide 
variety of licenses in both large and small market areas, consistent 
with their overall business plans.
    126. While USCC suggests that the use of past auction data for 
determining the bidding credit cap is not an accurate reflection of the 
ever-increasing cost of spectrum, the Commission does not find this 
argument to be persuasive. Commenters, such as AT&T and RWA/NTCA, have 
used past auction data to support their proposed caps for the Incentive 
Auction. In addition, Council Tree has used past auction data to 
support their advocacy for certain policy positions. Moreover, as part 
of determining what DE benefits to adopt for a particular service, the 
Commission traditionally reviews the service rules for spectrum bands 
that have similar propagation characteristics. In the Incentive Auction 
for instance, the Commission determined the appropriate small business 
size definitions and associated bidding credits based in part on its 
service rules for the licenses in the 700 MHz band. Therefore, 
consistent with its past practices and the approach taken by several 
commenters in this proceeding, past auction data will be a factor, 
among others, in establishing a reasonable cap for DE benefits in the 
Incentive Auction.
    127. Capping the rural service provider bidding credit at $10 
million for the Incentive Auction is also appropriate based on a 
similar examination of past auction data and is supported by the 
majority of rural service providers. Assuming that these same entities 
will participate in the Incentive Auction, the Commission

[[Page 56785]]

expects that its bidding credit limits will capture nearly all of the 
gross winning bids of these entities thereby minimizing any negative 
impact on DEs in general. By establishing these caps, the Commission 
intends to provide bona fide small businesses and eligible rural 
service providers with sufficient flexibility to obtain the necessary 
capital to compete in spectrum auctions and achieve the appropriate 
size and scale to operate in the wireless marketplace and serve the 
public interest.
    128. Implementation of the DE Bidding Credit Caps, Based on Market 
Population, for the Incentive Auction. To create parity in the 
Incentive Auction among small businesses and eligible rural service 
providers competing against each other in smaller markets, the 
Commission establishes a ceiling on the overall amount of bidding 
credits that any winning DE bidder may receive in connection with 
winning licenses in markets with a population of 500,000 or less, i.e., 
PEAs 118 through 416. See Wireless Telecommunications Bureau Provides 
Details about Partial Economic Areas, PEAs PN, 79 FR 52653, September 
4, 2014. Specifically, no winning DE bidder will be able to obtain more 
than $10 million in bidding credits for licenses won in PEAs 118-416, 
with the exception of PEA 412 (Puerto Rico), which exceeds the 500,000 
pop threshold. To the extent a small business does not claim the full 
$10 million in bidding credits in the smaller markets, it may apply the 
remaining balance to its winning bids on larger licenses, up to the 
aggregate $150 million cap for small businesses.
    129. The Commission expects that this approach will provide small 
businesses the flexibility to pursue a variety of business models that 
may include bidding in both large and small markets, while ensuring 
they compete on equal footing with rural service providers in smaller 
markets. The Commission also notes that this flexible approach is 
generally consistent with alternative proposals put forth by commenters 
and agree that it strikes a measured and reasonable balance to help 
protect against potential abuse of the DE program while also allowing 
larger DEs a higher cap in larger service areas.
    130. The Commission determines that a market threshold based on a 
license area with 500,000 or less pops is consistent with record 
evidence, an analysis of past auction data, and its experience in 
auctions and licensing matters. The Commission also finds that the 
500,000 population threshold provides an objective and easily 
administrable delineation between larger urban and smaller rural 
markets.
    131. Several commenters strongly advocated for placing a ceiling on 
the amount of bidding credits that could be applied in those areas with 
a population of 500,000 or less. These commenters note that, in light 
of record support for a larger cap in urban markets, it may be 
advantageous to vary the cap levels for larger urban and smaller rural 
markets. The RWA/NTCA/Blooston Rural and Rural-26 Coalition, for 
example, propose using a 500,000 threshold to differentiate between 
such markets. The Commission concurs that a 500,000 threshold is a 
reasonable benchmark to distinguish between larger and smaller license 
areas. The Commission notes, for example, that the population density 
of PEAs with population of 500,000 or less correlates more closely with 
that of rural areas, as well as the average population of a Cellular 
Market Area (CMA), a smaller geographic license area favored by small 
and rural carriers. Specifically, the average population density of 
PEAs with a population greater than 500,000 (PEAs 1-117 and 412) is 333 
pops/mile, whereas the average population density for the smaller PEAs 
(PEAs 118-416), except for 412--Puerto Rico) is 76 pops/mile. 
Additionally, the Commission observes that 76 pops/mile roughly 
corresponds with the 100 pops/mile approach it takes in defining rural 
areas. Given these characteristics, the Commission notes that these 
smaller markets are ones where rural service providers are most likely 
to offer service and where an opportunity to compete on equal footing 
is of particular importance. In addition, based on the results of 
Auction 97, the Commission estimates that the cap for any entity 
eligible with a 15 percent bidding credit or larger would not be 
exhausted in any these areas. In light these considerations, the 
Commission finds that 500,000 is a reasonable threshold and provides 
DEs with sufficient flexibility to adjust their strategic and 
capitalization demands in order to compete meaningfully in the 
Incentive Auction. The Commission therefore declines to implement the 
proposal recommended by ARC in its late-filed ex parte to divide the 
markets into thirds and to implement a $10 million cap for PEAs in the 
bottom third tier (i.e., PEA 278 and below) or alternatively to 
implement a $10 million cap for PEAs with populations below 100,000. 
The Commission notes that ARC makes no showing as to why this 
alternative approach is superior or better serves the Commission's goal 
of establishing parity for small and rural providers competing in the 
smallest markets.
iv. Other Bidding Preferences/Types of Credit
    132. The Part 1 NPRM sought comment on whether to extend bidding 
preferences to entities based on criteria other than business size. 
Specifically, the Commission sought comment on the possibility of 
offering credits to members of the groups named in the statute besides 
small businesses--i.e., rural telephone companies and businesses owned 
by minority groups and women. The Commission also sought comment on 
whether to extend bidding preferences based on the provision of service 
to unserved/underserved areas and areas of persistent poverty, as well 
as to entities owned by persons who have overcome substantial 
disadvantages. The Commission noted that its ability to implement other 
types of bidding credits is constrained by both its statutory authority 
and standards of judicial review, and sought specific comment on how 
any alternative proposals could overcome such limitations. In response 
to suggestions submitted in response to the Part 1 NPRM, the Commission 
sought comment in the Part 1 PN on whether it should offer other 
bidding preferences or types of credits such as those ``based on 
criteria other than business size.''
    133. With the exception of the rural service provider bidding 
credit, the Commission declines to adopt bidding preferences or credits 
based on criteria other than business size at this time. The limited 
record support for any of the proposals beyond the rural service 
provider bidding credit is insufficient to justify departure from its 
existing DE program. The Commission believes that repeal of the AMR 
rule, the expanded size standards for eligibility for the DE program, 
and new rural service provider bidding credit will help to address the 
challenges that such groups face today, including: raising capital to 
compete in an auction; finding a revenue stream to support network 
construction and business expansion; and developing a business model 
based on market needs.
a. Minority- and Women-Owned Businesses
    134. Background. The Commission's ability to target bidding credits 
to certain types of entities is constrained by its statutory authority 
and constitutional standards of judicial review. Following the Supreme 
Court's decisions establishing judicial standards for government 
programs based upon gender and race, it has been the

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Commission's policy to employ gender- and race-neutral provisions, 
offering credits instead to businesses based on the size of the 
business. The Commission has long recognized that many minority- and 
women-owned businesses are eligible for a small business bidding 
credit. However, the Commission has never foreclosed on the possibility 
of finding additional ways to directly or indirectly support 
opportunities for participation by minorities and women in auctions and 
the wireless marketplace within the bounds of its authority. In the 
Part 1 NPRM, the Commission sought comment on whether its current small 
business provisions are sufficient to promote participation by 
businesses owned by minorities and women and, if not, how additional 
provisions to ensure participation by minority- or women-owned 
businesses could be crafted to meet the relevant standards of judicial 
review. While commenters did not advocate for preferences targeted 
specifically toward minority- and women-owned businesses, several urged 
the Commission to adopt race- and gender-neutral updates to the DE 
rules that would aid all eligible entities, including minorities and 
women.
    135. Discussion. The Commission declines to adopt a bidding credit 
for minority- and women-owned businesses. The Commission notes that no 
party advocated for such a preference, nor provided evidence to 
demonstrate that such a credit could meet the constitutional standards 
for review. Instead, the Commission agrees with commenters that 
updating its DE rules should provide small businesses--including 
enterprises owned by minorities and women--a better on-ramp into the 
wireless business.
b. Unserved/Underserved Areas and Persistent Poverty Preferences
    136. Background. The Commission sought comment in the Part 1 NPRM 
on whether the Commission should extend bidding credits to winning 
bidders that deploy facilities and provide service to unserved or 
underserved areas, or to those that provide service to persistent 
poverty counties. The Commission also sought comment on its tentative 
conclusion that section 309(j) of the Act authorizes it to offer 
bidding credits using these criteria. Further, the Commission 
encouraged commenters to offer data-driven suggestions and address any 
potential implementation issues.
    137. Discussion. The Commission declines to adopt specific 
additional bidding credits on the basis of whether the license area 
correlates with unserved/underserved areas or persistent poverty 
counties at this time. Some commenters support a bidding credit for 
persistent poverty areas. Others argue for a bidding credit in 
conjunction with addressing unserved/underserved areas, or that the 
Commission should focus on strengthening its current DE program, rather 
than considering the adoption of new bidding credits. It remains a goal 
of the Commission, through its various universal service and other 
programs and policies, to promote the deployment of broadband 
facilities and services to unserved and underserved areas and 
persistent poverty counties. The Commission furthers those goals by 
adopting a rural service provider bidding credit and repealing the AMR 
rule. According to the Department of Agriculture's Economic Research 
Service (ERS), a large portion of unserved or underserved areas and 
persistent poverty counties are located in rural areas. Thus, the rural 
service provider bidding credit the Commission adopts is intended to 
better ensure that consumers in unserved/underserved areas and 
persistent poverty counties have access to more competition and 
improved services. Nevertheless, the Commission will continue to 
monitor the effectiveness of the proposals it adopts in advancing the 
deployment of spectrum-based services in unserved/underserved and 
persistent poverty areas. To the extent the policies the Commission 
adopts is not sufficient, it encourages parties to provide it with 
contrary evidence so that it may reexamine these policies based on a 
more complete record.
c. Overcoming Disadvantages Preference
    138. Background. In response to renewed interest raised in the 
Incentive Auction proceeding, the Part 1 NPRM sought further comment on 
a recommendation by the Commission's Advisory Committee on Diversity 
for Communications in the Digital Age (Advisory Committee) to implement 
a bidding preference for persons or entities who have overcome 
substantial disadvantage (referred to as an overcoming disadvantages 
preference or ODP). The Commission sought detailed and specific comment 
on its statutory authority to adopt such a preference and the benefits 
of doing so, as well as eligibility for, and administration of, the 
preference. The Commission also noted that the Advisory Committee's 
proposal raised a number of challenges to be resolved before any ODP 
could be designed and implemented. The Commission received only two 
comments on this issue, which are divided on the desirability and 
feasibility of an ODP.
    139. Discussion. The Commission declines to adopt the Advisory 
Committee's ODP proposal. The Part 1 NPRM reflects the Commission's 
uncertainties about how eligibility for such a preference could be 
defined and/or administered in the auction context. The comments the 
Commission received in response to the Part 1 NPRM did not alleviate 
any of its concerns about the complexity in implementing such a 
preference. In addition, the policy decisions adopted--including the 
repeal of the AMR rule, the expansion of the small business bidding 
credit thresholds, and the new rural service provider bidding credit--
will benefit those persons or entities who have overcome substantial 
disadvantage. These decisions are intended to promote the provision of 
spectrum-based services by all bona fide small businesses and eligible 
rural service providers, including those that have overcome a 
substantial disadvantage. The Commission also believes that this 
approach is simpler than adoption of the Advisory Committee's ODP 
proposal. While the ODP Recommendation provided a non-exhaustive list 
of disadvantages, it is not clear what proof should be required from 
those individuals or entities seeking to receive such a preference and 
how to apply the ODP on a neutral basis. The Commission is also 
concerned that its review of such a claim would involve a costly and 
lengthy process. Accordingly, the Commission declines to adopt the 
Advisory Committee's ODP proposal.
d. Tribal Lands Bidding Credit
    140. Background. NTCH urges the Commission to consider ending its 
tribal lands bidding credit, and the Commission sought additional 
comment on this topic in the Part 1 PN. The tribal lands bidding credit 
program awards a discount to a winning bidder for serving qualifying 
tribal land that has a wireline telephone subscription rate equal to or 
less than 85 percent based on Census data. NTCH argues that tribal 
lands may not merit per se qualification as a disadvantaged category 
because some tribes have multiple business enterprises and some receive 
subsidies from grant programs to target telecommunications deficits. 
NTCH provides no citation or reference to empirical data to 
substantiate its position. NTCH suggests instead that the Commission 
determines the need for a tribal lands bidding credit on a case-by-case 
basis to avoid granting bidding credits that may be ``unnecessary and

[[Page 56787]]

actually unfair to others,'' but does not explain specifically how such 
an individualized qualification process might be administered. Several 
tribal entities involved in the telecommunications industry detail the 
chronic lack of wireless services on tribal lands, explain that tribal 
entities may encounter unique challenges in participating in spectrum 
auctions, and oppose any changes to the tribal lands bidding credit 
program.
    141. Discussion. The Commission declines to adopt any modifications 
to its tribal lands bidding credit in this proceeding. A substantial 
number of comments and reply comments from various tribes and tribal 
entities uniformly oppose NTCH's suggestion. Several tribal entities 
involved in the telecommunications industry detail the chronic lack of 
wireless services on tribal lands, explain that tribal entities may 
encounter unique challenges in participating in spectrum auctions, and 
oppose any changes to the tribal lands bidding credit program. Numerous 
reply comments voice support for these comments and asked that NTCH's 
suggestion be rejected. The Commission has been presented with no 
evidence or information suggesting that its policy of providing tribal 
lands bidding credits has been rendered unnecessary or does not further 
its objective in promoting further deployment and use of spectrum over 
tribal lands. Thus, the Commission declines to make any alterations to 
the established tribal lands bidding credits here.

C. Unjust Enrichment

    142. Background. Under the Commission's rules, a DE seeking 
approval of a transfer of control or an assignment of a license 
acquired with a bidding credit to a non-DE within five years after its 
initial issuance must reimburse the government a portion of the bidding 
credit. This reimbursement obligation is governed by a five-year unjust 
enrichment schedule, with the amount of repayment decreasing over time.
    143. As part of its effort to balance the policy objectives for the 
DE program, the Commission sought comment in the Part 1 NPRM on whether 
any changes are needed to strengthen its unjust enrichment rules. The 
Commission invited comment on whether the existing five-year unjust 
enrichment period and repayment schedule continue to provide sufficient 
safeguards against potential misuse, or whether there is a need to 
extend the schedule to ten years or some other time period. In 
addition, the Commission sought comment on the ability of a small 
business to raise capital and participate at auction, and to provide 
service, if the Commission were to repeal the AMR rule, as proposed in 
the NPRM, and also tighten the unjust enrichment rules--particularly 
when compared to the existing unjust enrichment rule. The Commission 
also asked whether there are other unjust enrichment provisions it 
should consider, such as requiring full repayment of benefits if a 
small business loses eligibility prior to meeting the applicable 
construction requirement, and whether a different reimbursement 
percentage (i.e., less than 100 percent) is preferable.
    144. In the Part 1 PN, the Commission sought comment on some of the 
alternative viewpoints expressed by parties in response to the Part 1 
NPRM. The Commission asked for additional comment on whether the unjust 
enrichment period should be extended to apply for a specified number of 
years (e.g., ten years), to the entire license term, or linked to an 
interim construction milestone. The Commission also asked if there are 
other alternatives it should consider, such as revisiting the 
percentage amounts associated with the unjust enrichment schedule. In 
addition, the Commission requested comment on whether it should, as T-
Mobile suggests, require the repayment of any profit or some multiple 
of the bidding credit received, and invited commenters to discuss 
whether the DE benefits associated with any and all of a DE's licenses 
should be forfeited if a DE loses its eligibility. The Commission 
invited comment on whether it should consider T-Mobile's proposal to 
impose additional build-out and reporting obligations specific to DEs 
that would require them to determine ``tangible steps toward 
development'' and, if so, what the appropriate timeframe(s) for such a 
requirement would be. The Commission also asked whether there are any 
other options it should consider to prevent spectrum warehousing and 
encourage expeditious spectrum build-out, such as requiring repayment 
of some percentage of a bidding credit if a DE fails to meet a 
construction benchmark. Finally, the Commission asked commenters to 
address any tradeoffs related to these proposals, including the extent 
to which they would restrict a DE's ability to access capital, prevent 
abuse of the designated entity program, and avoid unjust enrichment.
    145. The Commission received a range of comments in response to its 
proposals in both the Part 1 NPRM and Part 1 PN. Most parties oppose 
any extension of the unjust enrichment period, with many maintaining 
that the existing five-year period sufficiently protects against unjust 
enrichment while at the same time providing small businesses with the 
flexibility to obtain access to capital. Several of these parties also 
highlight the potentially adverse impact that extending the unjust 
enrichment period could have on their ability to retain capital to 
operate their businesses. RWA and WISPA, for example, warn that an 
extended unjust enrichment period locks DEs into business plans and 
hinders new entrants. Council Tree maintains that extending the period 
to ten years ``would be debilitating for investors and effectively end 
DE bidding at higher levels.'' M/C Partners submits that ``[t]he 
practical effect of extending the unjust enrichment period beyond five 
years and removing the payback tiers would be to discourage venture 
capital investments in DEs,'' while Columbia Capital notes that 
``limiting a DE's flexibility to transfer or assign licenses during the 
entire term likely would rule out investments in DEs by such funds.'' 
MMTC similarly states that ``in a rapidly changing industry, no one 
will invest in a company from which exit is impossible . . . for a 
decade.'' MMTC further notes that an extension of the unjust enrichment 
period to ten years would further hamper or eliminate a DE's ability to 
raise and retain capital and operate its business with the same level 
of flexibility afforded to other businesses in the wireless industry. 
M/C Partners and Columbia Capital maintain that extending the unjust 
enrichment period to ten years would effectively foreclose private 
equity investments in DEs because most venture capital and private 
equity funds have a ten-year investment horizon, with investments 
typically occurring in the first few years, average realization periods 
of three to seven years from the time of initial investment, and the 
last few years devoted to planning an exit. The DE Coalition, RWA, 
WISPA, KSW, and Atelum likewise express concern that an extension of 
the unjust enrichment period could limit a small business' access to 
capital. As KSW states in opposing a ten-year unjust enrichment period, 
``ten years is a lifetime in wireless, and financial institutions are 
far less willing to provide money for a ten-year period.'' CCA 
recognizes the need for strong unjust enrichment protections, but 
opposes proposals to extend the unjust enrichment penalties to apply 
throughout the entire license term because it could cause DEs to 
experience difficulties in attracting and

[[Page 56788]]

obtaining outside investment which would constrain small business 
participation in auctions. CCA submits that ``adopting a rigorous two-
pronged eligibility combined with the current five-year unjust 
enrichment restriction and payment schedule represents a sensible 
calibration of policy objectives that strikes a balance between 
increasing participation of small businesses in auctions and promoting 
the deployment of spectrum-based services.'' RWA similarly states that 
a five-year period ``nicely balances the competing goals of preventing 
unjust enrichment to ineligible entities with small and rural carriers' 
need for flexibility and access to capital.''
    146. A few parties, however, support making certain adjustments to 
strengthen its unjust enrichment rules. T-Mobile and Native Public 
support extending the unjust enrichment period to the full license 
term. T-Mobile also advocates requiring licensees to repay the windfall 
profit, plus interest, from the sale of a license obtained with a 
bidding credit, while Taxpayer Advocates supports requiring a DE that 
leases or sells a significant portion of spectrum acquired with a 
bidding credit within the first five years to pay back all or part of 
the discount it received. Native Public supports allowing a license 
acquired with a bidding credit to be sold during the license term only 
by repaying the bidding credit used to obtain the license or selling 
the licenses to the tribe or ANC whose DE eligibility was used to 
obtain the credit. T-Mobile also supports adopting a build-out 
requirement that is uniquely applicable to DEs or tethered to service-
specific performance requirements to prevent spectrum warehousing and 
to promote facilities-based service. Specifically, T-Mobile asks that 
the Commission require DEs to show some evidence of build-out activity 
within one year after acquiring a license or clearing incumbent users.
    147. Most commenters, however, strongly oppose any build-out 
requirements that are uniquely applicable to DEs. Council Tree argues 
that if a unique build-out restriction is imposed on DEs, the 
associated licenses would be less valuable and investor capital would 
be more difficult to obtain, while KSW maintains that it would be 
``counter-productive to require enhanced build-out showings from those 
who are least equipped to do so'' and that there is no reason to apply 
a heightened standard to DEs in this regard. Rural Telcos maintain that 
the Commission's rules should prevent DE program abuse before licenses 
are granted, rather than imposing additional regulatory burdens on bona 
fide DEs (i.e., rural telephone companies) that can least afford them. 
Although CCA supports the concept of requiring DEs to ensure they are 
utilizing their spectrum in order to deter speculators from using 
bidding credits to acquire and warehouse spectrum, it cautions against 
adopting any requirements that would hamstring small carriers' ability 
to compete or raise capital for the auction, or create undue burdens 
for DEs that are legitimately using spectrum. CCA therefore urges the 
Commission to avoid impairing smaller competitors through accelerated 
build-out schedules or expansive coverage requirements that are 
disproportionately onerous for smaller entities. USCC states that, in 
addition to imposing burdensome obligations exclusively on those that 
are least equipped to deal with them, treating DEs differently in this 
manner could also lead to other harms. USCC notes, for example, that 
based on the currently anticipated schedule for the Incentive Auction, 
the 600 MHz band will be cleared about one to two years before the 
expected rollout of 5G; a non-DE licensee could delay construction 
until 5G becomes available, however, if a DE is required to demonstrate 
some level of build-out within a year after clearing, it would be 
forced to begin building out prior to the rollout of 5G even though, 
without the participation of the rest of the industry, 4G equipment for 
the band would not be available. USCC submits that as a result, DE 
licensees would not be able to comply with an accelerated build-out 
despite their best efforts. Tristar, on the other hand, maintains that 
DEs that are not rural telephone companies should not be held to the 
same build-out standards as non-DEs and should instead be given a much 
longer build-out timeframe and the ability to ``save'' all licenses 
through build-outs over some portion of the aggregate population of 
their licenses.
    148. Proponents of a rural service provider bidding credit support 
applying the same unjust enrichment rules adopted for small business 
bidding credits to any adopted rural service provider bidding credit 
with some modest changes. Specifically, Blooston Rural, Rural 
Coalition, and RWA/NTCA support requiring an unjust enrichment payment 
if a rural service provider licensee assigns or transfers a license 
acquired with a bidding credit to a non-eligible entity within the 
unjust enrichment period. These parties maintain, however, that neither 
an unjust enrichment payment nor the prohibition should apply to a 
license recipient that is (1) another rural telephone company or rural 
telco subsidiary/affiliate with a wireless or wireline presence in the 
applicable license area, or (2) an independent wireless ETC certified 
in the original license area with fewer than 100,000 subscribers.
    149. Discussion. After a careful review of the record, the 
Commission concludes that its existing rules provide a sufficient 
safeguard to ensure that designated entity benefits are provided only 
to bona fide small businesses and eligible rural service providers. The 
Commission therefore declines to make any adjustments to the unjust 
enrichment period and repayment schedule. The Commission agrees with 
commenters that increasing the unjust enrichment period will impede the 
ability of DEs to both access capital and participate in auctions. As 
WISPA notes, investors in the telecommunications industry typically 
want to recover their investments within five years. RWA also notes 
that a five-year unjust enrichment period allows small businesses and 
rural carriers to quickly respond to rapid industry changes, changing 
business models, and capital demands, thereby providing them with the 
necessary flexibility to compete against larger carriers. Overall, the 
record does not provide the Commission with sufficient evidence to 
demonstrate that an extension of the current unjust enrichment period 
will yield greater protections without causing undue harm to bona fide 
small businesses and eligible rural service providers. To the contrary, 
the record is replete with evidence from the numerous parties that 
oppose extending the unjust enrichment period that it will impede DEs' 
ability to raise and retain capital and successfully participate in 
auctions.
    150. The Commission's current unjust enrichment rules--in 
combination with the other actions it takes--balances commenters' 
concerns regarding the unjust enrichment of ineligible entities with 
the need to provide increased operational flexibility to DEs given the 
evolving wireless marketplace. Specifically, its adoption of a 
totality-of-the-circumstances approach in evaluating the eligibility of 
DEs will allow the Commission to consider all the agreements and 
relationships that a DE maintains with its investors. In addition, its 
decision to limit the ability of a DE's disclosable interest holders to 
use the spectrum in any way during the five-year unjust enrichment 
period where the nexus of use is more than 25 percent and the interest 
in the DE is ten percent or greater will prevent the benefits of the 
program from flowing to

[[Page 56789]]

the financial investors in a DE. As its revised rules demonstrate, the 
Commission will remain vigilant in undertaking a careful review of all 
applications by entities seeking to acquire or retain bidding credits. 
In so doing, the Commission expects to properly execute its statutory 
responsibility to continue to prevent unjust enrichment of ineligible 
entities.
    151. The Commission also declines to adopt T-Mobile's proposal that 
impose additional build-out and reporting obligations specific to DEs. 
There is very limited support for such a requirement in the record, and 
the few parties that support it offer no evidence of the benefit it 
would provide or the harm that will result in the absence of any such 
requirement. Conversely, the record contains ample evidence from the 
numerous parties that oppose such a requirement that it is likely to be 
burdensome, both administratively and in terms of their ability to 
raise capital. After weighing how the proposal may affect a small 
business's ability to access capital, prevent abuse of the designated 
entity program, and avoid unjust enrichment, the Commission is 
persuaded that any potential benefit that might be gained from adopting 
such a requirement a would be outweighed by the harms it would cause. 
The Commission agrees with commenters opposing such a requirement that 
a construction requirement specifically targeted to DEs would likely 
impose unnecessary administrative and operational burdens with no 
demonstrated benefit. This requirement could also have the effect of 
hindering initiatives to spur additional marketplace competition by 
bona fide small businesses and eligible rural service providers. 
Accordingly, the Commission does not adopt any DE-specific construction 
requirements.
    152. Application of Unjust Enrichment Rules to Recipients of Rural 
Service Provider Bidding Credit. The Commission will apply its existing 
unjust enrichment rules to licensees that take advantage of the new 
rural service provider bidding credit. Therefore, a licensee that 
assigns or transfers a license acquired with a rural service provider 
bidding credit to an entity that meets the eligibility requirements for 
such credit will not be required to make an unjust enrichment payment. 
But if the licensee assigns or transfers a license acquired with a 
rural service provider bidding credit to an entity that is not eligible 
for such a credit within the unjust enrichment period, an unjust 
enrichment payment will be required.

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

    153. 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 
offered alternatives they contend the Commission could pursue to 
facilitate small business access to benefits in both the auction and 
secondary market contexts. AT&T suggests that providing incentives for 
secondary market transactions or virtual networks may offer a more 
direct path to including more valuable small businesses in the 
telecommunications industry and may be a more effective mechanism for 
DE participation in wireless markets than facilitating participation in 
auctions due to the cost of licenses and capital needed to build 
networks. Blooston Rural advocates allowing a winning bidder to deduct 
from the auction purchase price the pro rata portion of its winning bid 
payment for any area that is partitioned to a rural telephone company 
or cooperative to provide another avenue for rural service providers to 
obtain licenses for smaller areas that correspond to their existing 
service areas. CCA and ARC agree that Blooston Rural's proposal would 
benefit DEs by providing incentives for partitioning and promoting 
secondary market transactions, but ARC states that the incentives would 
be even greater if the winning bidder received a 125 percent credit for 
partitioning to any DE, not just a rural telco. NTCH states that 
diverse ownership has been shown to enhance competition, spur 
innovation in services, permit local-based service to customers, and 
spread the benefits of spectrum to a broader segment of the population, 
and proposes giving a 50 percent ``diversity credit'' to bidders who 
can deliver this important diversity benefit by acquiring licenses. ARC 
agrees that such a credit would promote wide dissemination of licenses 
as required by the Communications Act.
    154. Based on the comments received in response to the NPRM, the 
Commission sought comment in the Part 1 PN on these alternatives. The 
Commission also asked whether strengthening its 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, and whether there are alternative frameworks that it 
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. RWA/NTCA support Blooston Rural's rural 
partitioning bidding credit proposal, submitting that it would 
encourage larger carriers to facilitate rural carrier participation in 
the provision of wireless services. MMTC proposes that the Commission 
consider a variety of options that would add to a reformed DE program, 
among them, consideration of secondary market transactions as a factor 
in evaluating market competition and in reviewing waiver requests 
relating to ownership (including in the mergers and acquisitions and IP 
transition contexts), restoration of its former tax certificate policy, 
and establishment of a new bidding credit or installment payment 
program for entities that engage in secondary market transactions. The 
National Urban League suggests that any carrier that participates in 
secondary market transactions with designated entities could be 
provided a bidding credit for future auctions. NTCH suggests that the 
concentration of spectrum in a handful of companies can be reduced by 
offering significant discounts to entities that hold less than 20 
megahertz of spectrum in a given market and that are not also counted 
as nationwide providers as defined by the Commission in the Part 1 
NPRM, and reiterates its earlier proposal to provide a 50 percent 
``diversity credit'' to such entities. CCA asks the Commission to 
consider supplemental measures to small business bidding credits that 
address the challenges smaller carriers face in the secondary market 
for spectrum, and proposes that it provide incentives in the secondary 
market by offering carriers a license term extension in exchange for 
partitioning or disaggregating unused portions of their spectrum to 
small carriers or to serve rural areas.
    155. Based on the record, the Commission declines at this time to 
adopt any of the alternatives recommended by interested parties.
    156. Rural Partitioning Bidding Credit. The Commission declines to 
adopt a rural partitioning bidding credit for entities that partition 
their licenses area to a rural telephone company or cooperative. The 
Commission notes that none of the commenters supporting this approach 
provided any details about how such a proposal could be implemented, 
and it is concerned that

[[Page 56790]]

the proposal would be complicated to implement without providing any 
meaningful benefit. Moreover, the Commission concludes that the policy 
concern the proposal seeks to address, which relates to facilitating 
access to spectrum by rural service providers, is sufficiently 
addressed by its adoption of a rural service provider bidding credit.
    157. Diversity Bidding Credit. To avoid having an excessive 
concentration of licenses held by a small number of providers, NTCH 
proposes a 50 percent ``diversity credit'' for entities that hold less 
than 20 megahertz of spectrum in the market at issue and who are not 
also counted as nationwide providers. The Commission notes that in the 
Mobile Spectrum Holdings Report and Order, it considered and rejected 
requests to offer bidding credits based on the level of spectrum 
holdings. The Commission finds that the very limited record in this 
proceeding offers no new evidence to support disturbing its prior 
conclusion.
    158. Enhanced Build-Out Rules. Based on the record, the Commission 
declines to adopt any enhanced build-out rules to give smaller 
providers an opportunity to obtain spectrum that has not been built out 
by a licensee. The Commission acknowledges the importance of its build-
out rules; however, it did not receive any specific comments on this 
question in response to its inquiry and, therefore, concludes that the 
record is not sufficiently developed to warrant any the adoption of any 
enhanced build-out rules at this time.
    159. Incentives for Secondary Market Transactions or Virtual 
Networks. AT&T suggested in its comments on the NPRM 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. However AT&T did not offer any specific 
proposals in connection with this suggestion, and did not further 
comment on this topic in response to the Part 1 PN. MMTC suggested in 
response to the Part 1 PN that the Commission consider a variety of 
options to augment a reformed DE program. The Commission declines to 
adopt MMTC's recommendation that it consider secondary market 
transactions as a factor in deciding whether to grant a carrier rule 
waivers relating to ownership. In its Mobile Spectrum Holdings 
proceeding, the Commission addressed commenters' recommendations that 
it adopt a similar consideration in the spectrum holdings context, 
namely, that elements of a proposed transaction that facilitate 
diversity be considered in balancing the benefits and harms of the 
transaction. The Commission declined in the Mobile Spectrum Holdings 
Report and Order to adopt a formal set of guidelines, noting that it 
retains the authority to consider all factors that could affect the 
likely competitive impact of a proposed transaction. The Commission 
finds that the limited record in this proceeding does not provide 
sufficient justification to support adopting such a requirement, and 
therefore declines to adopt MMTC's recommendation. The Commission notes 
again that it retains the right to consider such factors in evaluating 
specific future transactions, as it has ``encouraged the use of 
secondary market transactions . . . to transition unused spectrum to 
more efficient use and allow network providers to obtain access to 
needed spectrum for broadband deployment.'' The Commission also 
declines to adopt MMTC's recommendation that it consider secondary 
market transactions as a factor in determining whether to report to 
Congress that the wireless marketplace is competitive. The Commission 
notes that the Wireless Telecommunications Bureau recently sought 
comment on the role of secondary market transactions in a public notice 
in connection with the annual report on the state of competition in 
mobile wireless. Accordingly, the Commission will address the issue of 
secondary market transactions as a factor in determining whether access 
to sufficient spectrum exists for multiple service providers to be able 
to provide robust competition in the context of that proceeding. With 
regard to MMTC's other recommendations, MMTC did not offer any specific 
details about how they might be implemented, nor did the Commission 
receive any comment from other commenters on this topic or on MMTC's 
recommendations. Moreover, the Commission observes that MMTC's 
recommendation that it restore its previous tax certificate policy 
appears to be outside the scope of its authority. The Commission 
therefore concludes that the record is not sufficiently developed to 
allow it to act on this suggestion.
    160. License Term Extension in Exchange for Partitioning. The 
Commission declines to adopt CCA's proposal that it provide licensees 
with a license term extension in exchange for partitioning or 
disaggregating unused portions of their spectrum to small carriers or 
to serve rural areas. The Commission notes that CCA did not offer any 
details about how such a proposal could be implemented. Moreover, the 
Commission did not receive comments from other any party on this 
proposal. The Commission therefore concludes that the record is not 
sufficiently developed to allow it to act on CCA's proposal.

E. DE Reporting Requirements

    161. Background. Pursuant to 47 CFR 1.2110(n), the Commission 
requires DE licensees to file an annual report with the Commission that 
includes, at a minimum, a list and summaries of all agreements and 
arrangements, extant or proposed, that relate to eligibility for DE 
benefits. The list must include the parties (including affiliates, 
controlling interests, and affiliates of controlling interests) to each 
agreement or arrangement, as well as the dates on which the parties 
entered into each agreement or arrangement. DEs are required to file a 
report for each of their licenses no later than, and up to five 
business days before, the anniversary of the date of license grant.
    162. In the Part 1 NPRM, the Commission proposed to repeal the 
annual DE reporting requirement, stating that the information that DEs 
are required to include in their annual reports is duplicative of 
information that DEs provide in their auction and license applications. 
The Commission also observed that for licensees with multiple auction 
licenses, each having a different grant date, the burden of the annual 
reporting requirement is exacerbated by the obligation to file multiple 
reports each year.
    163. Discussion. In light of the increased flexibility the 
Commission grants to DEs in this proceeding, it concludes that its 
ability to oversee the award of DE benefits, and its responsibility to 
prevent unjust enrichment, will be better served by retaining the 
annual reporting requirement, as modified and clarified. While the 
reporting requirement of 47 CFR 1.2110(n) is similar to other 
requirements in its competitive bidding rules, it is not identical to 
any of them. See 47 CFR 1.2110(j), 1.2112(b), 1.2114. Moreover, the 
changes the Commission adopts will eliminate the reporting redundancies 
that two commenters mentioned. The Commission is also cognizant of the 
comments filed by the DE Coalition and MMTC, urging it to rely on its 
reporting requirements as part of an effective system of checks and 
balances on waste, fraud, and abuse in the DE program.
    164. In deciding to retain the annual reporting requirement, the 
Commission

[[Page 56791]]

has carefully evaluated the concerns of Blooston Rural and RWA, both of 
which support repeal of the annual DE reporting requirement. The 
objections of Blooston Rural and RWA are twofold--that licensees with 
multiple auction licenses, each having a different grant date, must 
file multiple annual reports numerous times per year, and that the 
information provided under the annual reporting requirement is 
duplicative of information required to be reported by other Commission 
rules. To resolve these concerns, the Commission amends the annual DE 
reporting requirement and provides four clarifications.
    165. To eliminate the burden for some DEs of having to file more 
than one annual report at various times of the year, the Commission 
will modify its annual reporting requirement to require that all annual 
reports be filed no later than September 30 of each calendar year. This 
annual report will reflect the status of each individual license 
subject to unjust enrichment requirements that is held by a particular 
licensee as of August 31 of that same calendar year including all 
proposed or executed agreements or arrangements affecting DE benefit 
eligibility. This September 30 deadline will apply regardless of the 
grant date of an individual license. This rule modification will reduce 
the administrative and related burdens that the annual reporting 
requirement might pose for certain small businesses or rural service 
providers without undermining its ability to obtain the information 
contained in the DE reports.
    166. The Commission also specifies the following transition from 
its current annual report filing process to the newly-adopted modified 
requirement. Any designated entity licensee that would have had a 
report due between the release date of this order and the applicable 
effective date of the amended rule may defer filing its annual report 
until September 30, 2016. This transition will enable the Commission to 
balance the goal of minimizing the administrative burden on DEs with 
its objective of having current DE information on file.
    167. In addition, the Commission modifies its rules to reduce the 
administrative burden on DEs and address questions that the Commission 
has received in the past from DEs. First, the 47 CFR 1.2110(n) annual 
reporting requirement applies only to licenses acquired with a DE 
bidding credit and still held subject to unjust enrichment obligations. 
See 47 CFR 1.2111. Second, when a DE assigns or transfers a license to 
another DE, the DE that holds the license on September 30 of the year 
in which the application for the transaction is filed is responsible 
for complying with 47 CFR 1.2110(n). Finally, filers need not list 
agreements and arrangements otherwise required to be reported under 47 
CFR 1.2110(n) so long as they have already filed that information with 
the Commission and the information on file remains current. In such a 
situation, the filer must include in its annual report both the ULS 
file number of the report or application containing the current 
information and the date on which that information was filed. The 
Commission also clarifies that the annual DE reporting requirement, and 
all DE reporting requirements, will, on the effective date of the rules 
it adopts apply to rural service providers as well as to other DEs.
    168. Finally, the Commission stresses that, in light of the 
increased flexibility and benefits available to DEs under the rules it 
adopts, it will continue to rely on the information produced pursuant 
to the DE reporting requirement to help it monitor the eligibility of 
those awarded DE bidding credits. Accordingly, the Commission reminds 
DEs that it expects them to comply fully with the annual reporting 
requirement, as modified and clarified herein. DEs also remain 
obligated to provide the Commission with all of the information 
relevant to their initial and ongoing eligibility to acquire and retain 
DE benefits under its other reporting requirements, in a timely and 
accurate manner, which will be particularly important given the 
flexibility it has afforded them to determine eligibility for 
designated entity benefits on a license-by-license basis. Toward that 
end, the Commission reminds DEs that they have an ongoing obligation to 
provide information regarding any agreements entered into after the 
license grant(s) that, had they been in existence, would have had to be 
disclosed at the long-form application stage to demonstrate DE 
eligibility, including, for example, agreements between a DE and its 
investors that are relevant for evaluating control or spectrum use 
agreements that are relevant for compliance with its newly-adopted 
attribution rules. See 47 CFR 1.2110(j), 1.2112(b), 1.2114.

F. MMTC's White Paper Requests

    169. Background. In February 2014, MMTC submitted a White Paper 
detailing several policy recommendations to advance minority and women 
spectrum license ownership. In addition to requesting the elimination 
of the AMR rule, an increase in bidding credits, and a substantive 
review of proposed DE rules, the White Paper requested that the 
Commission take action in several additional areas. In the Part 1 NPRM, 
the Commission sought comment on MMTC's additional proposals, including 
its tentative conclusion that some of them are outside the scope of 
this proceeding, including: (1) Incorporating diversity and inclusion 
in the Commission's public interest analysis of mergers and 
acquisitions and secondary market spectrum transactions; and (2) 
supporting increased funding for and statutory amendments to the 
Telecommunications Development Fund (TDF). The Commission notes that 
MMTC's request with respect to ``ongoing recordkeeping of DE 
performance'' refers to ``retain[ing] specific information about the 
[minority-owned business enterprises] and [woman-owned business 
enterprises] status of bidders, in addition to the small business 
status.'' The Commission has sought comment in WT Docket No. 13-135 on 
the need to collect information on the participation of minority and 
women-owned enterprises in the mobile wireless industry, pursuant to 
similar MMTC requests.
    170. Discussion. Outside of the request to eliminate the AMR rule 
as discussed elsewhere, the Commission declines to adopt MMTC's other 
proposals. Besides the comments regarding the repeal of the AMR rule, 
the Commission received two comments on the other proposals including 
in MMTC's White Paper. The DE Coalition urged the Commission to adopt 
MMTC's proposals to incorporate diversity and inclusion into the 
Commission's public interest analysis of mergers and acquisitions and 
secondary market spectrum transactions, complete the Adarand studies 
updating the section 257 studies released in 2000, and finally 
regularize procedural requirements. The National Urban League argues 
that the Commission should use proceeds from the incentive auction to 
``reinvigorate and fully underwrite the Telecommunications Development 
Fund.'' The Commission adopts its proposal to repeal the AMR rule and 
replaces it with a two-pronged analysis. The lack of a record on MMTC's 
proposals other than repeal of the AMR rule suggests that this is the 
key proposal in MMTC's White Paper and the Commission believes that 
repeal of the AMR rule and replacement with a two-pronged analysis 
adequately addresses MMTC's concerns regarding minority and women 
spectrum license ownership. The Commission is committed to providing 
innovative,

[[Page 56792]]

bona fide small businesses--including minority- and women-owned 
businesses--the opportunity to participate meaningfully in the 
Incentive Auction, and to spur additional competition, investment and 
consumer choice in the wireless marketplace. The Commission believes 
that the other decisions being made here will promote the overall 
objectives that are the goals of MMTC within the bounds of its 
authority. Accordingly, except for repeal of the AMR rule, the 
Commission declines to adopt MMTC's proposals.

III. Other Part 1 Considerations

    171. The Commission continues to standardize and streamline its 
competitive bidding rules in advance of the Incentive Auction by 
adopting other revisions to its Part 1 competitive bidding rules. These 
revisions will improve transparency and efficiency of the auctions 
process, as well as ensure that appropriate safeguards are in place to 
maintain the integrity of the auctions process. Specifically, the 
Commission revises the former defaulter rule consistent with the relief 
granted to applicants for Auction 97, codifies a prohibition on 
multiple auction applications by the same entities, and imposes limits 
on the filing of applications by commonly-controlled entities. The 
Commission also prohibits joint bidding arrangements, while permitting 
certain pre-existing operational, business, and pro-competitive 
relationships and makes related modifications to the rule prohibiting 
certain communications. Finally, the Commission harmonizes the 
modifications adopted with the Part 1 competitive bidding rules adopted 
in past proceedings.

A. Former Defaulter Rule

    172. Background. In the Part 1 NPRM, the Commission proposed to 
modify its former defaulter rule. The former defaulter rule requires an 
applicant that has defaulted on any Commission license or has been 
delinquent on any non-tax owed to any federal agency, but has since 
remedied all such defaults and delinquencies, to pay an upfront payment 
that is 50 percent more than the normal upfront payment amount in order 
to be eligible to bid in an auction, provided that the applicant is 
otherwise qualified. The Commission tentatively concluded that, given 
the tremendous growth of the wireless industry since the inception of 
the rule, the time was ripe to modify it. Consistent with the 
provisions in the Former Defaulter Waiver Order adopted for applicants 
in Auction 97, the Part 1 NPRM proposed to narrow the reach of the 
Commission's former defaulter rule by codifying four exclusions from 
the general rule that were first announced in the Former Defaulter 
Waiver Order. See Part 1 NPRM, 79 FR at 68186.
    173. The Commission also sought comment in the Part 1 NPRM on 
several approaches to limit the scope of individuals and entities that 
an auction applicant must consider when determining its status as a 
former defaulter. See Part 1 NPRM, 79 FR at 68188-89. In the subsequent 
Part 1 NPRM, the Commission asked for comment on additional viewpoints 
and suggestions from commenters, specifically whether to adopt an 
additional exclusion based on an applicant's credit rating, as 
suggested by AT&T or, alternatively, whether to eliminate the former 
defaulter rule entirely, as originally proposed by NTCH and Sprint. 
Nearly all commenters support the NPRM's proposal to codify the four 
exclusions articulated in the Former Defaulter Waiver Order. Some, such 
as AT&T and Chugach, request modest changes, such as the adoption of 
another exclusion based on an applicant's ``investment grade'' credit 
or to index the proposed $100,000 threshold for inflation. Moreover, 
AT&T, CCA, CTIA, and Chugach contend that the current rule sweeps too 
broadly and imposes unnecessary and disproportionate financial burdens 
on auction applicants.
    174. Discussion. In an effort to simplify the auction process and 
minimize the administrative and implementation costs for bidders, the 
Commission adopts the NPRM's proposed changes to the former defaulter 
rule, none of which any party opposes. Specifically, the Commission 
excludes any cured default on a Commission license or delinquency on a 
non-tax debt owed to a 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 (Notice to a debtor may include notice 
of a final payment deadline or notice of delinquency and may be express 
or implied, and for purposes of the certifications required on a short-
form auction application, a debt will not be deemed to be in default or 
delinquent until after the expiration of a final payment deadline. See, 
e.g., Letter to Cheryl A. Tritt, Esq., from Margaret W. Wiener, Chief, 
Auctions and Spectrum Access Division, Wireless Telecommunications 
Bureau, 19 FCC Rcd 22907 (2004)); (2) the default or delinquency 
amounted to less than $100,000; (3) the default or delinquency was paid 
within two quarters (i.e., six months) after receiving the notice of 
the final payment deadline or delinquency (on which the date of receipt 
of the notice of a final default deadline or delinquency by the 
intended party or debtor is the triggering mechanism for verifying 
receipt of notice); or (4) the default or delinquency was the subject 
of a legal or arbitration proceeding and was cured upon resolution of 
the proceeding. This approach aims to balance commenters' concerns that 
the rule is overly broad with the Commission's long-standing goals of 
ensuring that auction participants are financially responsible. 
Additionally, the Commission will implement its revised rules on a 
prospective basis, including for the Incentive Auction. See generally 
Incentive Auction R&O, 79 FR 48442.
    175. The Commission declines to adopt AT&T's proposal to exempt an 
applicant from former defaulter status if it has an ``investment 
grade'' credit rating by a credit agency such as Moody's and Standard 
and Poor's, or to accept letters of credit from a Federal Deposit 
Insurance Corporation member institution for those businesses that do 
not have a credit rating. No commenters squarely addressed these ideas. 
Investment credit ratings, standing alone, are not necessarily 
indicative of an entities' financial wherewithal to participate in a 
Commission auction. Moreover, as a practical matter, the Commission 
concludes that implementing the AT&T proposal, as part of its time-
limited auction application review process, would be administratively 
burdensome and unnecessary given the additional flexibility the 
Commission provides with the changes. Inevitably, the Commission 
recognizes there may be unique or unusual circumstances that may not 
squarely fall under one of the exclusions the Commission adopts. 
Consistent with the waiver standard of 47 CFR 1.925, the Commission 
will therefore consider requests for clarification and/or waiver of 
former defaulter status under its rules.
    176. The Commission adopts in part commenters' proposals to narrow 
the scope of the individuals and entities considered for purposes of 
the former defaulter rule. CCA contends that the scope should be 
limited to those that are in a position to affect whether the applicant 
meets its auction-related financial responsibilities. NTCH would narrow 
the scope of the rule to controlling shareholders or executive officers 
of the former defaulter or affiliate thereof. No commenters,

[[Page 56793]]

however, oppose tailoring the scope of the individuals and entities 
evaluated under the rule. The Commission agrees that the relevant 
inquiry should be limited to those individuals and entities that have 
positions of control over the auction applicant or licensee and may be 
able to influence the ability of that entity to fulfill its auction-
related financial obligations. The Commission will therefore adopt a 
controlling interest definition for purposes of the certifications 
required under 47 CFR 1.2105(a)(2) including the certification as to 
whether an applicant has ever been in default on any Commission license 
or been delinquent on non-tax debt owed to any Federal agency. See 47 
CFR 1.2105(a)(4)(i), as adopted herein. Under the definition for this 
rule, a ``controlling interest'' includes individuals or entities with 
positive or negative de jure or de facto control of the licensee. Under 
this new rule, the defaults or delinquencies of certain individuals and 
entities will no longer be attributed to the auction applicant for 
purposes of any former defaulter determination. By narrowing the scope 
of the former defaulter rule to attribute only defaults or 
delinquencies of controlling interests, the Commission will ensure that 
the underlying purposes of the rule are met, while minimizing costs for 
auction applicants.
    177. Finally, the Commission rejects calls of NTCH, Sprint, and 
AT&T to eliminate the former defaulter rule. NTCH and Sprint reason 
that the rule is ``ineffective'' and ``counterproductive,'' and point 
to a lack of evidence to support any material benefit of the rule. AT&T 
suggests that the Commission could use other existing mechanisms in 
lieu of the rule, such as the Commission's Red Light Display System 
database. While the Commission recognizes that the former defaulter 
rule was adopted during the nascent stages of the auction program and 
mobile wireless industry, the Commission believes that the underlying 
policy reasons for the rule continues to be relevant given the 
importance of ensuring that auction participants are financially 
responsible. Because the integrity of the auctions program and the 
licensing process dictates requiring a more stringent financial showing 
from former defaulters, the Commission declines to revisit these long-
standing policies.

B. Joint Bidding Prohibition

    178. Consistent with Congressional directives and the Commission's 
policy goals, the Commission has adopted policies regarding joint 
bidding to promote competition in the mobile wireless marketplace and 
between bidders in auctions. These rules and policies sought to provide 
additional safeguards designed to reinforce existing laws and 
facilitate detection of harmful anticompetitive conduct without being 
unduly burdensome so that they hinder parties from gaining access to 
the capital necessary to participate in Commission auctions. The 
current joint bidding rules were adopted at the time when the mobile 
wireless industry was nascent. Since that time, and particularly in the 
past decade, the wireless marketplace has changed significantly. After 
consideration of the record, the Commission amends its rules to 
prohibit joint bidding. The Commission seeks to prohibit certain 
arrangements involving auction applicants and relating to the licenses 
being auctioned that address or communicate bids or bidding strategies, 
including arrangements regarding price and specific licenses on which 
to bid, as well as any such arrangements relating to the post-auction 
market structure. The Commission excludes from the prohibition certain 
agreements, including those that are solely operational and those the 
Commission finds will promote competition. These changes will provide 
additional clarity for potential applicants while affording 
opportunities for non-nationwide providers and DEs to pool their 
resources to promote more robust competition in future auctions and in 
today's evolving mobile wireless marketplace.
    179. In the NPRM, the Commission observed that joint bidding and 
other arrangements have the potential to promote competition by 
enabling greater participation in auctions. However, the Commission 
recognized that because some joint bidding and other competitor 
collaborations could reduce competition between participants post-
auction, they raise the risk that spectrum licenses acquired at auction 
could be distributed in a manner that could harm the public interest. 
Therefore, the Commission tentatively concluded that joint bidding 
arrangements between nationwide providers likely would raise 
competitive concerns that would outweigh any public interest benefits 
from such arrangements. In contrast, the Commission tentatively 
concluded that joint bidding arrangements between non-nationwide 
providers were far less likely to lead to competitive harm or otherwise 
harm the public interest. The Commission sought comment on the policies 
and procedures that should apply to bidding arrangements between a 
single nationwide provider and other entities. Specifically, the 
Commission sought comment on whether any limits should apply to these 
types of arrangements or whether the Commission should continue to 
review such arrangements on a case-by-case basis.
    180. In the Part 1 PN, the Commission sought further comment on 
specific, alternative proposals offered into the record in response to 
the NPRM. The Commission also sought to expand the record on its 
proposals in the NPRM to prohibit parties to a joint bidding agreement 
from bidding separately on licenses in the same market, prohibit 
communications between joint bidders when bidding on licenses in the 
same market, and prohibit any individual or entity from serving on more 
than one bidding committee.
    181. Discussion. Promoting Competition in Auctions and in the 
Marketplace. In the NPRM, the Commission stated that when assessing the 
competitive effects of joint bidding and other arrangements, it must 
ensure that its policies and rules facilitate access to spectrum 
licenses in a manner that promotes competition within auctions and in 
the current wireless marketplace. In light of the changes in the 
structure of the wireless marketplace in recent years, the Commission 
generally agrees with commenters that updates to its joint bidding 
rules are necessary to promote more robust competition in future 
auctions and in today's evolving mobile wireless marketplace. In 
addition, joint bidding arrangements among separate applicants in an 
auction generally raise the risk of undesirable strategic bidding 
during auctions, such as by means of ``bid stacking.'' By ``bid 
stacking,'' the Commission refers to coordinated bidding activity among 
bidders to place multiple bids on the same licenses in an auction 
round. In light of the evolution of the marketplace and the potential 
future risks of undesirable strategic and/or anticompetitive behavior, 
the Commission takes this opportunity to refine the definition of joint 
bidding arrangements, prohibit joint bidding arrangements generally, 
and adopt certain bright-line rules to promote competition. More 
specifically, the Commission prohibits joint bidding arrangements 
between applicants (including any party that controls or is controlled 
by, such applicants), regardless of whether the applicants are 
nationwide or non-nationwide providers. In addition, the Commission 
prohibits joint bidding arrangements involving two or more nationwide 
providers as well as joint bidding arrangements involving a nationwide 
and non-nationwide provider, where

[[Page 56794]]

any one of the parties is an applicant for auction.
    182. The Commission notes that it has always made clear with 
respect to its rules and policies governing joint bidding that 
``conduct that is permissible under the Commission's Rules may be 
prohibited by the antitrust laws,'' review under which is subject to 
other and differing standards under the Sherman and Clayton Acts. The 
Commission's auction procedures public notices for specific auctions 
caution that ``[c]ompliance with the disclosure requirements of 47 CFR 
1.2105(c) will not insulate a party from enforcement of the antitrust 
laws.'' Auction applicants that are found to have violated the 
antitrust laws or the Commission's rules in connection with their 
participation in the competitive bidding process may be subject to 
forfeiture, prohibition from auction participation, and other 
sanctions.
    183. Joint Bidding Arrangements Between Nationwide Providers. 
Consistent with its tentative conclusion in the NPRM, the Commission 
finds that joint bidding arrangements between any two or more 
nationwide providers, of which there are currently four, have a 
potential to harm the public interest by negatively affecting the 
competitive bidding process during an auction as well as downstream 
competition in the provision of mobile wireless services. The 
Commission notes that, while not all parties advocate the same 
responsive measures, the record does not include significant 
disagreement with its analysis of the underlying risk factors present 
in today's marketplace--high degrees of concentration, high barriers to 
entry, and high margins. Collaboration between nationwide providers 
raises the risk of reduced competition in the greatest number of 
markets both during an auction and afterwards. In light of the record 
before it, and the underlying risk factors present in the marketplace 
today, the Commission prohibits joint bidding arrangements between 
nationwide providers. For purposes of the Commission's competitive 
bidding rules, the entities that qualify as nationwide providers will 
generally be identified in procedures public notices released before 
each auction.
    184. AT&T, Verizon Wireless, King Street Wireless, Tristar, and 
Spectrum Financial argue that the Commission should prohibit joint 
bidding arrangements altogether, including between nationwide 
providers, because such a restriction would be the most effective way 
to prevent anticompetitive bidding coordination in auctions. In 
contrast, Sprint and T-Mobile argue that joint bidding arrangements 
between some nationwide providers can promote post-auction competition 
and have the potential to increase consumer welfare. Apparently focused 
on the upcoming Incentive Auction, Sprint specifically proposes that 
joint bidding arrangements should be permitted in areas in which 
parties to an agreement collectively hold less than 45 megahertz of 
sub-1 GHz spectrum. T-Mobile argues that the Commission should not 
adopt any bright-line restrictions on joint bidding, and should instead 
address all joint bidding arrangements on a case-by-case basis. T-
Mobile additionally comments that if the Commission would limit joint 
bidding arrangements in some form, then T-Mobile supports Sprint's 
proposal to permit joint bidding arrangements where parties to an 
agreement hold less than 45 megahertz of sub-1 GHz spectrum. This 
proposal, in effect, would allow joint bidding between Sprint and T-
Mobile, the two nationwide providers currently without significant low-
band spectrum holdings. CCA and T-Mobile support the proposal to 
prohibit parties to a joint bidding agreement from bidding separately 
on licenses in the same market.
    185. As the Commission stated in the NPRM and based upon the record 
before it, the Commission finds that joint bidding arrangements between 
nationwide providers present significant risks by enabling market 
competitors to reduce competition within auctions in a large number of 
geographic areas. Nationwide providers, whether or not they have 
significant low-band spectrum holdings, all have significant resources 
and actively compete against one another across the country. Joint 
bidding among nationwide providers, who are the entities most likely to 
bid in auctions for licenses across the entire country, could 
significantly reduce rivalry within auctions to the detriment of the 
Commission's objectives for auctions, and increases the risk of 
facilitating anticompetitive behavior by dividing markets on a national 
scale, thus reducing competition in numerous markets.
    186. The Commission has recognized the significance of access to 
low-band spectrum for promoting competition in the marketplace, as 
argued by Sprint and T-Mobile, but the Commission disagrees with their 
arguments that allowing them to enter into joint bidding arrangements 
with each other to obtain low-band spectrum is a necessary or 
appropriate response to promote competition. The Commission is mindful 
of the anticompetitive risk factors present in the marketplace today, 
but it finds that the risks of anticompetitive behavior by joint 
bidding between any nationwide providers outweigh the potential 
benefits that might come from allowing Sprint and T-Mobile, or any 
other nationwide providers that lack significant low-band spectrum 
holdings, to bid jointly. Therefore, the Commission adopts its proposal 
to prohibit nationwide providers from entering into joint bidding 
arrangements in auctions.
    187. The Commission also finds that the risk of anticompetitive 
behavior, including market division, from these arrangements is not 
limited to circumstances where both nationwide providers are applicants 
in an auction. Accordingly, the prohibition against joint bidding 
between nationwide providers extends to bidding arrangements in which 
one (or more) of the nationwide providers is not itself an applicant in 
an auction.
    188. Joint Bidding Arrangements Between Non-Nationwide Providers. 
In the NPRM, the Commission tentatively concluded that the benefits of 
joint bidding between non-nationwide providers outweighed the risks of 
public interest harms, given the structure of the wireless marketplace, 
the current distribution of spectrum, and the lesser ability of non-
nationwide providers to engage in anticompetitive behavior. After 
review of the record before it, the Commission prohibits joint bidding 
arrangements between non-nationwide providers as separate applicants in 
an auction, given the risk of undesirable strategic bidding during 
auctions, but allows the use of joint ventures and consortia as single 
applicants. For these purposes, ``non-nationwide provider'' refers to a 
provider of communications services that is not a ``nationwide 
provider.''
    189. In response to the NPRM and the Part 1 PN, CCA, NCTA, ARC, and 
RWA emphasize the challenges faced by small and rural providers and 
these parties contend that joint bidding arrangements between non-
nationwide providers are generally pro-competitive. Several commenters 
note the financial difficulty that smaller rural providers face in 
bidding on larger geographic areas on their own, and argue that given 
the high cost of spectrum, joint bidding arrangements between non-
nationwide providers can enable smaller companies to compete 
effectively for licenses that they would otherwise be unable to acquire 
on their own.
    190. By contrast, as with joint bidding arrangements between 
nationwide providers, AT&T, Verizon Wireless, King Street Wireless, 
Tristar, and Spectrum Financial argue that the

[[Page 56795]]

Commission should prohibit joint bidding arrangements among non-
nationwide providers because of the risk of undesirable strategic 
behavior. Some of these parties argue that if smaller providers want to 
pool resources, they can do so by forming joint ventures or bidding 
consortia and bidding through those entities.
    191. The Commission recognizes both the need to prohibit 
arrangements between multiple bidders to coordinate bidding during an 
auction, and the potential benefits, with relatively small risks, from 
non-nationwide providers working together to pool resources or 
otherwise realize financial economies of scale in its auctions. The 
Commission also recognizes, as some commenters point out, that joint 
ventures and bidding consortia allow smaller providers to combine 
resources, thus promoting competition in the mobile wireless 
marketplace and facilitating competition between bidders at auction. In 
the Commission's judgment, these arrangements can be an effective means 
of allowing smaller entities to compete in auctions, and, ultimately, 
promote post-auction competition. The Commission finds that joint 
ventures and consortia can capture the benefits sought by smaller 
providers wishing to combine resources while not risking the potential 
for anticompetitive behavior during the course of an auction. 
Accordingly, while the Commission prohibits joint bidding arrangements 
among non-nationwide providers as separate applicants in an auction, it 
will allow the use of joint ventures and consortia in light of the 
potential for smaller providers to use consortia and joint ventures to 
realize the benefits of pooling resources that are sometimes associated 
with some kinds of joint bidding arrangements. For purposes of 
competitive bidding, consortium and joint ventures are defined in 47 
CFR 1.2105(a)(4), as adopted herein. In addition, the Commission does 
not prohibit joint bidding arrangements between non-nationwide 
providers where only one of the non-nationwide parties is the entity 
filing an auction application and other(s) are non-applicants.
    192. Joint Bidding Arrangements Between Nationwide and Non-
Nationwide Providers. In the NPRM, the Commission sought comment on 
possible policies and procedures that could enable joint bidding 
between nationwide and non-nationwide providers to be in the public 
interest and suggested that it might consider these arrangements on a 
case-by-case basis. After review of the record, the Commission 
prohibits joint bidding arrangements between nationwide and non-
nationwide providers, rather than attempting to review such 
arrangements on a case-by-case basis.
    193. In this proceeding, some commenters agree that the Commission 
should adopt a case-by-case approach to reviewing arrangements between 
nationwide and non-nationwide providers, but also stress the importance 
of providing pre-auction clarity to bidders regarding the 
permissibility of such agreements. A number of commenters urge the 
Commission to adopt bright-line rules to protect the integrity of 
auctions, promote efficient pre-auction application review, and avoid 
undue delay of auctions. The Commission agrees with commenters that 
providing pre-auction certainty to bidders regarding permissible joint 
bidding arrangements will facilitate competitive auctions. However, 
because the Commission would need to determine with finality during 
pre-auction application review whether any particular joint bidding 
arrangement should be permitted during the auction, it finds that a 
case-by-case review of all such arrangements as part of that review 
process runs an unacceptable risk of significantly delaying auctions 
and therefore would not be in the public interest.
    194. In adopting bright-line rules governing joint bidding 
arrangements between nationwide and non-nationwide providers, the 
Commission first observes that such arrangement among separate 
applicants raise the same concerns with respect to the risk of 
undesirable strategic bidding during auctions. Accordingly, the 
Commission prohibits joint bidding arrangements between nationwide and 
non-nationwide providers when parties to the arrangements are filing 
separate applications. Further, as with the prohibition against joint 
bidding between nationwide providers, the Commission's prohibition here 
extends to joint bidding arrangements that include providers that are 
not themselves an applicant in an auction. In particular, joint bidding 
arrangements that involve a nationwide provider could significantly 
reduce rivalry within auctions to the detriment of the Commission's 
objectives for auctions.
    195. In addition, unlike its determination with respect to 
arrangements between non-nationwide providers, the Commission does not 
permit nationwide and non-nationwide providers to participate in 
auctions through a joint venture. While the Commission recognizes that 
joint ventures formed between nationwide providers and non-nationwide 
providers could provide additional opportunities for those entities to 
participate in auctions, the potential for reduced rivalry within the 
auction outweighs any such benefits.
    196. Implementation of Joint Bidding Prohibition. To promote 
clarity and certainty and to achieve its stated goals, the Commission 
clarifies that ``joint bidding arrangements'' for these purposes 
include arrangements relating to the licenses being auctioned that 
address or communicate, directly or indirectly, bidding at the auction, 
bidding strategies, including arrangements regarding price or the 
specific licenses on which to bid, and any such arrangements relating 
to the post-auction market structure. Due to the potential benefits to 
smaller providers and for promoting post-auction competition, the 
Commission is permitting DEs to join in bidding consortia and non-
nationwide providers to form certain joint ventures to apply to 
participate at auction as a single entity. The Commission notes that 
``non-nationwide provider'' refers to any provider of communications 
services that is not a ``nationwide provider.'' The Commission also 
makes clear that the prohibition does not encompass agreements that are 
solely operational in nature, that is, agreements that address 
operational aspects of providing a mobile service, such as agreements 
for roaming, spectrum leasing and other spectrum use arrangements, or 
device acquisition, as well as agreements for assignment or transfer of 
licenses, provided that any such agreement does not both relate to the 
licenses at auction and address or communicate, directly or indirectly, 
bidding at auction (including specific prices to be bid) or bidding 
strategies (including the specific licenses on which to bid or not to 
bid) or post-auction market structure. Consistent with its new approach 
to joint bidding agreements, the Commission also revises its rule 
prohibiting communications relating to bids or bidding strategies. To 
provide transparency, the Commission retains its long-standing 
requirement regarding disclosure of agreements to which auction an 
applicant is party, but revises it to more effectively monitor its new 
prohibition on joint bidding agreements.
    197. As spelled out in the revised rules, each auction applicant 
must certify on behalf of itself and any party that controls, or is 
controlled by, such applicants, that it has not entered and will not 
enter into a joint bidding arrangement with any other applicant(s), 
with any nationwide provider that is not an applicant, or, if the 
applicant is a nationwide provider,

[[Page 56796]]

with any non-nationwide provider that is not an applicant, other than 
agreements that fall within the limited exceptions the Commission 
provides. Under 47 CFR 1.2105, as adopted herein, the Commission's 
rules will now contain a definition of ``controlling interest'' that 
includes all individuals or entities with positive or negative de jure 
or de facto control of the licensee. The Commission recognizes that 
certain agreements and relationships may exist prior to an auction as 
well as that communications of information other than bids and bidding 
strategies may be permitted to continue during an auction if made 
pursuant to and within the scope of specified types of agreements that 
are excluded from the general prohibition and disclosed in the relevant 
short-form application(s). Under the Commission's revised prohibited 
communications rule, parties to these specific kinds of agreements may 
communicate during this ``quiet period'' provided that any 
communications are within the scope of the pre-existing agreement that 
is disclosed on the applicants' short-form auction applications and do 
not convey specific bids or the substance of an applicant's bidding 
strategy.
    198. The Commission does not include within its definition of 
prohibited joint bidding arrangements any agreement that is solely 
operational in nature, including agreements relating to roaming, 
spectrum leasing and other spectrum use arrangements, or device 
acquisition, as well as any agreements for assignment or transfer of 
licenses, provided that any such agreement expressly does not both 
relate to the licenses at auction and address or communicate directly 
or indirectly bidding at auction (including prices) or bidding 
strategies (including the specific licenses on which to bid) or post-
auction market structure. Thus, when an applicant certifies to its 
compliance with its competitive bidding rules, it is certifying that 
any operational agreement that it may have does not involve a shared 
bidding strategy and therefore is solely operational. Similarly, any 
agreement for the transfer or assignment of licenses existing at the 
deadline for filing short-form applications will not be regarded as a 
prohibited arrangement, provided that it does not both relate to the 
licenses at auction and include terms or conditions regarding a shared 
bidding strategy and expressly does not communicate bids or bidding 
strategies. Further, the Commission notes that agreements between an 
applicant and another entity solely for funding purposes, i.e., with no 
agreements with regard to bids, bidding strategies, or post-auction 
market structure relating to the licenses at auction, are not 
prohibited joint bidding arrangements.
    199. The prohibition on joint bidding agreements does not prevent 
certain agreements to form consortia or joint ventures, which result in 
one party applying to participate in an auction. In particular, to 
promote competition within auctions and in the marketplace, the 
Commission continues to allow DEs to form and use consortia and are 
allowing non-nationwide providers to form joint ventures to bid in 
auctions. Eligible entities may use a consortium or joint venture to 
pool resources and realize financial economies of scale to compete more 
effectively in its auctions, and, ultimately, in the marketplace. In 
order to address the potential for undesirable strategic bidding 
through the use of these vehicles, the Commission specifies that: (1) 
DEs can participate in only one consortium in an auction, which shall 
be the exclusive bidding vehicle for its members in that auction, and 
(2) non-nationwide providers may participate in an auction through only 
one joint venture, which also shall be the exclusive bidding vehicle 
for its members in that auction. These provisions should effectively 
ensure that each auction participant, whether bidding individually, or 
through consortium or joint venture, has one bid per license per round.
    200. The Commission also revises its rule prohibiting certain 
communications in light of its new rules prohibiting joint bidding 
agreements. Its revised prohibition on communications prohibits an 
applicant from communicating bids or bidding information, either 
directly or indirectly, with any other auction applicant, with any 
nationwide provider that is not an applicant, or, if the applicant is a 
nationwide provider, with any non-nationwide provider that is not an 
applicant. The revised rule provides limited exceptions for 
communications within the scope of any arrangement consistent with the 
exclusions from its rule prohibiting joint bidding, provided such 
arrangement is disclosed on the applicant's short-form. An applicant 
may continue to communicate pursuant to any pre-existing agreements, 
arrangements, or understandings that are solely operational or that 
provide for a transfer or assignment of licenses, provided that such 
agreements, arrangements or understandings do not involve the 
communication or coordination of bids (including amounts), bidding 
strategies, or the particular licenses on which to bid and provided 
that such agreements, arrangements or understandings are disclosed on 
its application. Moreover, as discussed elsewhere, if an applicant has 
a non-controlling interest with respect to more than one application, 
the Commission requires the applicants to certify that it has 
established internal control procedures to preclude any person acting 
on behalf of the applicant from possessing information about the bids 
or bidding strategies of more than one applicant or communicating such 
information with respect to either applicant to another person acting 
on behalf of and possessing such information regarding another 
applicant. The Commission cautions, however, that, as with 
certifications submitted to it in other contexts, submission of such 
certification in an application will not outweigh specific evidence 
that a communication violating its rules has occurred, nor will it 
preclude the initiation of an investigation when warranted.
    201. Authorized Bidders. On a separate but related issue, the 
Commission sought comment in the Part 1 PN on a proposal to prohibit an 
individual from serving as an authorized bidder for more than one 
auction applicant. Commenters generally agree with this proposal, and 
the Commission adopts it here. This prohibition ensures that an 
individual is not in a position to be privy to bidding strategies of 
more than one entity in the auction, and therefore not a conduit, 
intentional or not, for bidding information between auction applicants.
    202. Non-Controlling Interests. The Commission recognizes that in 
some circumstances entities may have non-controlling interests in other 
entities and both entities may wish to bid in the auction. In so far as 
there is no overlap between the employees in both entities that leads 
to the sharing of bidding information, such an arrangement may not 
implicate its concerns over joint bidding among separate applicants. 
Such an arrangement, however, could allow for the non-controlling 
interest or shared employee to act as a conduit for communication of 
bidding information unless the applicants establish internal controls 
to ensure that bidding information would not flow between them. To 
address this possibility and ensure that such arrangements do not serve 
or appear as conduits for information, the Commission adopts a rule 
requiring all applicants to certify that they are not, and will not be, 
privy to, or involved in, in any way the bids or bidding strategy of 
more than one auction applicant. Commenters generally agree with the 
proposal to

[[Page 56797]]

require a more comprehensive certification process. The Commission's 
new rules provide that an applicant can certify that it has established 
procedures to preclude its agents, employees, or related parties, from 
possessing information about the bids or bidding strategies of more 
than one applicant or communicating such information regarding another 
applicant. The Commission cautions, however, that submission of such 
certification by an applicant will not outweigh specific evidence that 
a communication violating its rules has occurred, nor will it preclude 
the initiation of an investigation when warranted.

C. Prohibition on Applications By Commonly Controlled Entities

    203. Background. The Commission has long had a practice of 
prohibiting the same individual or entity from submitting multiple 
short-form applications in any Commission auction. In the Part 1 NPRM, 
the Commission proposed to codify this established procedure and sought 
comment on its proposal. The Commission noted that the prohibition 
protects against the burden of duplicative, repetitious, or conflicting 
filings. The Part 1 NPRM expressed concern that the same individual or 
entity could potentially use multiple short-form applications to engage 
in anticompetitive bidding activity by manipulating elements of the 
auction process. The Part 1 NPRM invited comment on the related issue 
of whether to permit the filing of short-form applications by commonly 
controlled entities that could bid on any of the same licenses. In 
doing so, the Commission acknowledged that auction participation by 
commonly controlled applicants potentially could serve legitimate 
business purposes while also presenting possible risks to the auction 
process.
    204. In the Part 1 PN, the Commission solicited input on 
commenters' proposals suggesting that applicants should be limited in 
holding ownership interests in multiple auction applicants. 
Specifically the Commission sought comment on how to define any such 
ownership limits or limits on financial investments by one entity in 
other auction applicants, including what attribution standards might be 
implemented in such a context.
    205. Several commenters note that where an investor holds non-
controlling interests in multiple auction applicants, such an 
arrangement could facilitate undesirable strategic bidding at auction. 
T-Mobile asserts that entities sharing non-controlling cognizable 
interests could engage in problematic behavior and argues that the 
Commission should address the potential for coordinated behavior by 
bidders that are linked by common attributable interests. C Spire 
points out that ``an applicant that bids on a standalone basis but that 
also has multiple non-controlling investments in other applicants may 
be privy to and participate in the financing and bidding strategy of 
multiple applicants.'' KSW favors a ``reasonable'' prohibition on 
multiple auction entries by related parties and proposes to prohibit 
parties from holding equity in multiple auction applicants, but would 
allow the holding of interests in multiple applicants where such 
interest does not exceed a ``reasonable'' threshold and in cases 
``where the party at issue is pulled into the auction and has no 
awareness or participation of bidding strategies.'' Spectrum Financial 
proposed an ownership limit on cross-owned bidders of something ``much 
less than controlling interest, certainly less than 50 percent.'' The 
Commission addresses concerns about applicants with shared non-
controlling interests above through its prohibition on joint bidding 
and its revisions to its prohibited communications rule.
    206. Discussion. Duplicate auction applications. The Commission 
confirms its long-standing prohibition on the filing of more than one 
auction application by the same individual or entity. That is, if a 
party submits multiple short-form applications for any license(s) in a 
particular auction, only one of its applications can be found to be 
complete when reviewed for completeness and compliance with the 
Commission's rules. This prohibition will minimize unnecessary burdens 
on the Commission's resources by eliminating the need to process 
duplicative, repetitious, or conflicting applications. This rule will 
also protect against a party manipulating the auction by placing bids 
through two bidding entities. Accordingly, the Commission concludes 
that its decision to codify its long-standing prohibition is in the 
public interest.
    207. Applications by entities controlled by the same individual or 
set of individuals. Consistent with its prohibition on joint bidding 
agreements the Commission will generally permit any entity to 
participate in a Commission spectrum auction only through a single 
bidding entity. This means that the Commission will no longer permit 
the filing of applications by entities controlled by the same 
individual or set of individuals. The Commission has previously 
recognized that the participation of commonly controlled entities in an 
auction may serve legitimate business purposes because such entities 
may have different business plans, financing requirements, or marketing 
needs, while acknowledging such situations might create risk to the 
competitiveness of the auction process. The Commission notes, however, 
that such determination was made in the context of an auction conducted 
without the use of anonymous bidding where the identities of competing 
bidders were identified in each bidding round. Under the limited 
information procedures the Commission has used in more recent auctions, 
certain information on bidder interests, bids, and bidder identities 
that typically had been revealed prior to and during prior Commission 
auctions are withheld until after the close of the auction. The 
approach the Commission adopts is consistent with the views of 
commenters that broadly supported the NPRM's proposal to prohibit the 
filing of short-form applications by entities under the common control 
of a single individual or set of individuals in a particular geographic 
license area or overlapping areas. Sprint notes that this change should 
enhance the transparency of Commission auctions and minimize anti-
competitive bidding activity. Some commenters, however, suggest that 
this approach does not go far enough because the rule does not address 
situations when applicants with lesser degrees of shared ownership 
agree to coordinate bids. The Commission disagrees because these 
concerns are now addressed by the prohibition on joint bidding 
agreements. The prohibition on a single party, or commonly controlled 
parties, from filing multiple applications is designed to ensure that 
auction participants bid in a straightforward manner. Consistent with 
its newly-adopted prohibition on joint bidding agreements, this 
restriction will apply across all short-form applications in a 
particular auction without regard to the licenses or geographic areas 
selected.
    208. The Commission will determine common control for purposes of 
this prohibition using the controlling interest principle set out in 47 
CFR 1.2105(a)(4)(i), as adopted herein. Under this newly adopted 
definition, a ``controlling interest'' includes individuals or entities 
with positive or negative de jure or de facto control of the licensee. 
This new rule will allow an applicant that has a disclosable non-
controlling interest holder in another applicant to participate 
separately in an auction provided each applicant certifies that it has 
established internal

[[Page 56798]]

control procedures to preclude any person acting on behalf of the 
applicant from possessing information about the bids or bidding 
strategies of more than one applicant or communicating such information 
with respect to either applicant to another person another person 
acting on behalf of and possessing such information regarding another 
applicant. The Commission cautions, however, that, as with 
certifications submitted to it in other contexts, submission of such 
certification in an application will not outweigh specific evidence 
that a communication violating its rules has occurred, nor will it 
preclude the initiation of an investigation when warranted.
    209. The Commission concludes that implementation of the principle 
that an entity may generally participate in bidding only through a 
single auction applicant will promote transparency in Commission 
auctions and will promote straightforward bidding activity by separate 
bidding entities. A transparent process will promote participation and 
competition in its future auctions, which is vital to ensuring the 
Commission meets its statutory goals. The Commission finds therefore 
that this prohibition is in the public interest.
    210. Limited Exception to Commonly Controlled Entity Limitation for 
Existing Rural Partnerships. The Commission establishes a limited 
exception to the general prohibition on multiple applications by 
commonly controlled entities for existing rural partnerships. A broad 
set of rural interests have expressed concern that this prohibition 
could adversely impact rural telephone companies that may have an 
ownership interest in more than one licensee in a particular market. As 
the Rural-26 Coalition explains, ``historic B Block cellular 
partnerships are a readily identifiable group of entities that were 
created as part of the cellular settlement process for rural wireline 
carriers established by the Commission in CC Docket No. 85-388.'' 
Without such an exception, its new rule could limit participation in 
auctions by such partnerships and the rural telephone companies that 
comprise those rural wireless partnerships. The Rural-26 Coalition 
points out that an ``issue arises primarily with rural telcos that have 
telephone exchange areas in more than one Rural Service Area (RSA), and 
therefore ended up a part of more than one cellular RSA partnership as 
a result of the cellular B Block settlement process that applied to 
wireline companies in the mid to late 1980s.'' Such settlements 
provided that each telephone carrier operating in a particular RSA 
would hold a partnership interest in a partnership to operate the B 
Block cellular license. Often such rural wireless partnerships were 
structured with each partner holding a general partnership interest 
with one of the general partners serving as managing partner. Because a 
rural telephone company may have operated telephone exchanges in more 
than one RSA, such company may be a partner in multiple rural wireless 
partnerships. The Commission recognizes that such long-standing 
partnerships and their component rural telephone companies may each 
seek to participate in Commission auctions with different bidding 
objectives and that the unique ownership structures of such 
partnerships should not be an obstacle to these entities separate 
participation, particularly where, the Commission believes that the 
anticompetitive concerns underlying the general prohibition are 
unlikely to be implicated.
    211. Under this limited exception to its governing commonly 
controlled entities rule for existing rural partnerships, each 
qualifying rural wireless partnership and its individual members will 
be permitted to participate separately in an auction. For purposes of 
this rule, a qualifying rural wireless partnership is one that was 
established as a result of the cellular B block settlement process 
established by the Commission in CC Docket No. 85-388 in which no 
nationwide provider is a managing partner or a managing member of the 
management committee, and partnership interests have not materially 
changed as of the effective date of the Part 1 Report and Order. The 
Commission's use of ``materially changed'' in regard to any changes 
over time in the composition of the rural wireless partnership is 
intended to allow this exception to apply even if the partnership has 
undertaken de minimis changes or partners have dropped out. A 
partnership member would qualify if it is a partner or successor-in-
interest to a partner in a qualifying partnership that does not have 
day-to-day management responsibilities in the partnership and holds 25 
percent or less ownership interest, and certifies that it will insulate 
itself from the bidding process of the cellular partnership and any 
other members of the partnership (other than expressing prior to the 
deadline for resubmission of short-form applications the maximum it is 
willing to spend as a partner). Such individual qualifying members of a 
rural wireless partnership may bid separately at auction, in addition 
to the rural wireless partnership itself.

D. Miscellaneous Part 1 Revisions

    212. Background. In the NPRM, the Commission proposed changes to 47 
CFR 1.2111 and 1.2112, both of which are in Part 1, Subpart Q, of its 
rules, the subpart that generally governs competitive bidding 
proceedings to assign spectrum licenses. The Commission received no 
comments on these proposals.
    213. Discussion. 47 CFR 1.2111. The Commission proposed to repeal 
the first two paragraphs of 47 CFR 1.2111. The Commission proposed to 
repeal 47 CFR 1.2111(a), under which applicants for assignments or 
transfers during the first three years of a license term must provide 
the Commission with detailed contract and marketing information. As the 
Commission discussed in the NPRM, this requirement appears to burden 
licensees without providing a corresponding benefit to the Commission 
or the public. The Commission also proposed to repeal 47 CFR 1.2111(b), 
a never-used unjust enrichment payment requirement for broadband PCS C 
and F block set-aside licenses. In the absence of opposition to either 
of these proposals, the Commission adopts them both.
    214. 47 CFR 1.2112. The Commission proposed to modify 47 CFR 1.2112 
to clarify the auction application requirements for reporting an 
entity's percentage ownership in the applicant and in FCC-regulated 
entities. The Commission proposed further changes to specify 
application requirements for bidding consortia. Finally, the Commission 
proposed to correct two errors in the rule caused by the inadvertent 
substitution of an incorrect paragraph in the Code of Federal 
Regulations publication of the rule for the correct one published in 
the Federal Register summary of the DE Second Report and Order, 71 FR 
26245, May 4, 2006. The first error was the addition of a requirement 
that DE short-form applicants list and summarize all their agreements 
that support their DE eligibility, a requirement that the Commission 
had intended to apply only to long-form applicants. The Commission 
proposed to repeal this requirement for the short-form application. The 
second error was the deletion of a requirement that DE short-form 
applicants list the parties with which they have lease or resale 
arrangements for any of the DE applicants' spectrum licenses. The 
Commission proposed to reinstate this requirement. In the absence of 
opposition to any of these proposed

[[Page 56799]]

changes to 47 CFR 1.2112, the Commission adopts them all.

IV. Order on Reconsideration of the First Report and Order in WT Docket 
No. 05-211

    215. Background. In this and the next two sections, the Commission 
addresses pending matters in WT Docket No. 05-211. In this Order on 
Reconsideration of the CSEA and Competitive Bidding Report and Order, 
the Commission resolves two petitions for reconsideration filed in 
response to the 2006 amendments to its consortium exception to the 
attribution requirements of 47 CFR 1.2110. Prior to 2006, the rules 
were silent as to whether consortium members would continue to enjoy 
the attribution exception when filing a long-form applications and 
being granted licenses. Under the Commission rules for determining 
eligibility for size-based bidding credits, the Commission allows 
parties that individually qualify as small businesses to form consortia 
and to apply for and participate in spectrum auctions together without 
being required to attribute their gross revenues to one another. 47 CFR 
1.2110(b)(3)(i).
    216. In the 2006 CSEA and Competitive Bidding Report and Order, 71 
FR 6214, February 7, 2006, the Commission modified the consortium 
exception to its attribution rules for determining an applicant's 
eligibility for small business bidding credits. After receiving no 
opposition to its proposals offered in the 2005 CSEA and Competitive 
Bidding NPRM, 70 FR 43372, July 27, 2005, the Commission adopted all 
three of the modifications discussed in its notice. Thus, the 
Commission amended its rules to require that (1) consortium members 
file individual long-form applications for their respective, mutually 
agreed-upon license(s), following an auction in which the consortium 
has won one or more licenses; (2) two or more consortium members 
seeking to be licensed together for the same license(s), or the 
disaggregated or partitioned portions thereof, form a legal business 
entity, such as a corporation, partnership, or limited liability 
company, to hold the license(s); and (3) any such business entity to 
comply with the applicable financial limits for eligibility. The 
Commission explained that a newly formed legal entity comprising two or 
more consortium members that did not qualify for as large a sized-based 
bidding credit as that claimed by the consortium on its short-form 
application would be awarded a bidding credit, if at all, based on the 
entity's eligibility for such credit at the long-form filing deadline. 
The Commission also clarified that the consortium exception is 
available only to short-form applicants and not to prospective 
licensees, assignees, or transferees.
    217. In adopting the changes, the Commission observed that the 
consortium exception had seldom been used, perhaps in part because of 
insufficient direction from the Commission as to how members of 
consortia that win licenses could be formally organized and how they 
could hold their licenses. The Commission also explained that the rule 
changes should ``invest the consortium exception with greater 
transparency, thereby promoting clearer planning by smaller entities, 
while continuing to allow them to enhance their competitiveness with 
efficiencies of scale and strategy.'' The Commission noted as well that 
ensuring that licenses are granted only to legal business entities 
would facilitate enforcement of the Communications Act and of 
Commission rules and policies, particularly in the event of a 
disagreement among consortium members.
    218. Discussion. The Commission denies the two petitions for 
reconsideration filed in response to the 2006 amendments to the 
consortium exception, one by NTCA and the other by Blooston Rural, and 
retain the rule modifications. While neither party filed comments in 
response to the CSEA and Competitive Bidding NPRM, both claimed in 2006 
that the adopted rule modifications would limit the consortium 
exception's usefulness (and use) by preventing small entities that 
wished to be licensed as consortia from pooling their resources.
    219. In its petition, NTCA declares that previously unavailable 
information--the results of a late fall 2005 survey that NTCA conducted 
of its members--led to NTCA's petition for reconsideration. According 
to NTCA, 62 percent of its survey respondents found it difficult to 
obtain financing for wireless projects, and 27 percent were concerned 
about their ability to obtain spectrum at auction. The Commission 
rejects this position, however, because NTCA does not connect the 
survey to its concern with the consortium exception. Indeed, neither 
NTCA nor the NTCA 2005 Wireless Survey Report indicates that the 
survey, conducted several months after the Commission sought comment on 
possible changes to the consortium exception, considered the consortium 
exception.
    220. Blooston Rural states that it did not comment in 2005 on 
possible changes to the consortium exception, because the effect of the 
changes put out for comment was unclear. Blooston Rural also complains 
that the import of the possible modifications was obscured by the fact 
that they were part of a rulemaking focused on CSEA matters. Blooston 
Rural argues further that the Commission did not make clear that a 
licensee comprising consortium members would have to meet the 
designated entity financial caps. It contends that the Commission's 
clarification regarding the consortium exception with respect to the 
secondary market was not put out for comment in the CSEA and 
Competitive Bidding NPRM and is ``contrary to prior statements and 
practices of the Commission in dealing with small business consortia.'' 
Finally, Blooston Rural submits that notice of all consortium exception 
rule changes was inadequate because the Commission did not provide text 
of the proposed rule.
    221. The Commission concludes that these objections are without 
merit. The CSEA and Competitive Bidding NPRM addressed non-CSEA matters 
at least as much as it did matters concerning the CSEA. A separate 
section of the non-CSEA portion of the item, identified as such in the 
table of contents, dealt solely with possible changes to the consortium 
exception. Moreover, the Commission articulated in the CSEA and 
Competitive Bidding NPRM all of the primary elements of the rule 
changes ultimately adopted. The Commission sought comment, for example, 
on whether it ``should adopt a new requirement that each member of the 
consortium file an individual long-form application for its respective, 
mutually agreed-upon license(s), following an auction in which a 
consortium has won one or more licenses,'' explaining that, ``[t]o 
comply with this requirement, consortium members would, prior to filing 
their short-form application, have reached an agreement as to how they 
would allocate among themselves any licenses (or disaggregated or 
partitioned portions of licenses) they might win.''
    222. Blooston Rural also claims that the Commission's NPRM did not 
articulate what would happen to a consortium at the licensing stage. 
The Commission disagrees. The Commission sought comment on ``whether, 
in order for two or more consortium members to be licensed together for 
the same license(s) (or disaggregated or partitioned portions thereof), 
they should be required to form a legal business entity, such as a 
corporation, partnership, or limited liability company, after having 
disclosed this

[[Page 56800]]

intention on their short-form and long-form applications.'' In 
particular, the Commission asked for comment on ``whether such new 
entities would have to meet [the] small business or entrepreneur 
financial limits and whether allowing these entities to exceed the 
limits would be consistent with [the] existing designated entity and 
broadband PCS entrepreneur rules, as well as [the Commission's] 
obligations under the Communications Act.''
    223. Thus the notice was sufficient to apprise even a casual reader 
of all the specific rule changes ultimately adopted. Further, 
notwithstanding Blooston Rural's intimations otherwise, there is no 
requirement in the Administrative Procedure Act (APA) that the specific 
wording of a proposed rule be provided in the notice. Rather, an agency 
must notify the public of ``either the terms or substance of the 
proposed rule or a description of the subjects and issues involved.'' 5 
U.S.C. 553(b)(3). Accordingly, the consortium exception provisions put 
out for comment in the CSEA and Competitive Bidding NPRM fulfilled the 
notice requirements of the APA.
    224. Addressing Blooston Rural's procedural and substantive 
objection to the Commission's clarification that the consortium 
exception does not apply in secondary market transactions, the 
Commission concludes that the clarification was an interpretive rule 
and thus exempt from APA notice requirements. 5 U.S.C. 553(b)(3)(A); 
see also Perez v. Mortgage Bankers Ass'n., 135 S. Ct. 1199, 1204 & n.1 
(2015). As modified, the consortium exception provides a benefit 
beginning with the short-form filing and continuing throughout the 
course of an auction to facilitate the pooling of resources for auction 
preparation and bidding. Given that participants in secondary market 
transactions are, by definition, not engaged in auction preparation or 
bidding, there is no rationale for assignees, transferees, or spectrum 
lessees (or their assignors, transferors, or spectrum lessors) to use 
the exception. And, while Blooston Rural claims that this clarification 
is contrary to prior Commission statements and practices, it provides 
no examples to support the claim. Accordingly, the clarification will 
stand.
    225. The Commission also finds the petitioners' substantive 
objections to the primary rule modifications to be without merit. Both 
Blooston Rural and NTCA argue that the rule changes will reduce use of 
the consortium exception, contrary to the statutory mandate that the 
Commission promote the involvement of small businesses in the provision 
of spectrum-based services. NTCA contends, moreover, that under the 
modified exception small businesses will find spectrum financing more 
difficult than before, because they will not be able to ``pool their 
resources and enhance the value of their bidding credits.''
    226. Petitioners' unsubstantiated claims have not convinced the 
Commission that the 2006 clarifications to the consortium exception 
have either limited its proper use--i.e., to facilitate the pooling of 
resources for auction preparation and bidding--or negatively affected 
spectrum financing for small businesses. The consortium exception was 
so rarely employed before the 2006 rule changes took effect that any 
benefit from its prior use should, at best, be characterized as 
negligible. In the absence of evidence to the contrary, the Commission 
continues to believe that the rule changes have not adversely affected 
small businesses and that the changes instead prevent many of the 
structural and contractual pitfalls to which members of a consortium 
lacking a legally enforceable organizational structure could be 
vulnerable, particularly should any members file for bankruptcy 
protection.
    227. Equally important, the modifications to the consortium 
exception strengthen the Commission's ability to enforce its rules by 
allowing it to identify and maintain legal access to those parties 
receiving license grants. The result is more efficient regulation, 
which ultimately benefits both licensees and the public. The Commission 
also finds that the rule modifications help ensure that small 
businesses and now rural service providers are not able to use the 
consortium exception as a means of evading the requirements for 
designated entity eligibility. The Commission therefore affirms its 
2006 CSEA and Competitive Bidding Report and Order rule modifications 
to the consortium exception to the attribution rules for determining an 
applicant's eligibility for small business bidding credits.

V. Third Order on Reconsideration of the Second Report and Order in WT 
Docket No. 05-211

    228. In the Third Order on Reconsideration of the DE Second Report 
and Order, the Commission resolves two remaining petitions for 
reconsideration received in response to the 2006 DE Second Report and 
Order, the Blooston Rural June 2, 2006 Petition and the Cook Inlet June 
5, 2006 Petition. The Commission dismisses the Blooston Rural June 2, 
2006 Petition because all of the issues raised in that petition were 
either resolved in 2010 by the Third Circuit's Council Tree decision or 
have been rendered moot by other adopted rule changes. In the interest 
of thoroughness, however, the Commission nonetheless provide the 
clarification requested by Cook Inlet.
    229. Background. As detailed in its Part 1 NPRM, in its 2006 DE 
Second Report and Order, the Commission adopted two bright-line 
``material relationship'' attribution rules--the AMR rule and the 
``impermissible material relationship'' (IMR) rule--for the leasing or 
resale of spectrum held by designated entities. At the same time, the 
Commission lengthened the unjust enrichment period from five to ten 
years and adopted new DE reporting requirements, including an annual 
reporting requirement, to ensure compliance with its rules and 
policies.
    230. The Commission received three petitions for reconsideration of 
the DE Second Report and Order, one opposition to the petitions, and 
one reply to the opposition. Council Tree, the Minority Media 
Telecommunications Council, and Bethel Native Corporation 
(collectively, the ``Joint Petitioners'') together filed a petition for 
expedited reconsideration before the Commission adopted, on its own 
motion, on June 1, 2006, the Order on Reconsideration of the DE Second 
Report and Order, 71 FR 34272, June 14, 2006. The Blooston Rural June 
2, 2006 Petition and the Cook Inlet June 5, 2006 Petition were received 
by the Commission after its adoption of the Order on Reconsideration of 
the DE Second Report and Order.
    231. The Commission addressed many of the arguments raised in these 
filings in the Order on Reconsideration of the DE Second Report and 
Order. The Commission denied the petition filed by the Joint 
Petitioners in the DE Second Order on Reconsideration of the Second 
Report and Order. Other arguments were subsequently resolved by the 
litigation initiated by the Joint Petitioners against the Commission in 
the United States Court of Appeals for the Third Circuit. The 
litigation culminated in 2010 with the Third Circuit's Council Tree 
decision in which the court vacated the IMR rule and the ten-year 
unjust enrichment period, holding that both provisions had been adopted 
with insufficient notice and opportunity for comment under the APA. 
While the court upheld the AMR rule the Commission has eliminated it. 
The Commission has also addressed objections to the annual DE reporting 
requirement and resolved the relevant aspect of Blooston Rural's June 
2, 2006 Petition accordingly.

[[Page 56801]]

    232. Discussion. With respect to the arguments that were still 
pending from the Blooston Rural June 2, 2006 Petition after the Council 
Tree decision, the Commission concludes that the actions it takes in 
this Part 1 Report and Order render these remaining arguments moot. In 
particular, the Blooston Rural June 2, 2006 Petition raised objections 
to the adequacy of notice and opportunity for comment on the 
Commission's AMR rule, as well as certain substantive objections about 
the rules' effectiveness. Further, Blooston Rural objected to aspects 
of the DE annual reporting requirement. Because the Commission has 
eliminated the AMR rule in the Part 1 Report and Order, Blooston 
Rural's June 2, 2006 objections to the rule are now moot.
    233. Blooston Rural also objected to the DE annual reporting 
requirement. It criticized the rule on two bases: first, that the rule 
was unduly burdensome in that licensees with multiple auction licenses, 
each having a different grant date, would have to file multiple annual 
reports numerous times per year, and, second, that the requirement was 
duplicative of the DE reporting requirements of other Commission rules. 
The Commission has retained the annual DE reporting requirement, 
finding that it does not duplicate any of its other DE reporting 
requirements and continues to serve an important purpose, particularly 
in light of the additional flexibility it is affording DEs. Thus, the 
Commission denies Blooston Rural's request that it eliminate the 
requirement. Nevertheless, the Commission concludes that, while it has 
not repealed the annual DE reporting requirement, the Commission has 
eliminated any basis for Blooston Rural's objections to complying with 
the rule. For example, the Commission has greatly reduced the burden on 
DEs by modifying the annual reporting requirement to give all filers 
the same deadline for all licenses of September 30 of each calendar 
year. The Commission has further reduced the filing burden on DEs, and 
eliminated any redundancy caused by the annual reporting requirement, 
by clarifying that filers need not report agreements and arrangements 
otherwise required to be reported under 47 CFR 1.2110(n), so long as 
the current information is already on file in ULS and the filers 
provide in their annual reports the applicable ULS file number and 
filing date of the report containing the current information. Thus, the 
Commission concludes that, insofar Blooston Rural's June 2, 2006 
Petition addresses the annual DE reporting requirement, it is, in part, 
denied and is otherwise moot.
    234. The Cook Inlet June 5, 2006 Petition, in contrast, maintained 
that an issue raised in the Commission's Order on Reconsideration of 
the DE Second Report and Order required further clarification. Cook 
Inlet asserted that the consideration of DE status in the context of an 
assignment or transfer is unfair and discourages DEs from participating 
in the secondary market.
    235. Simply stated, the Commission did not previously, and will not 
as a result of any of its rule changes, evaluate the eligibility of a 
DE for benefits when that DE is a transferor or assignor in a secondary 
market transaction. Instead, in the context of such transactions, the 
Commission evaluates the eligibility, if any, of the transferee or 
assignee of a license. Accordingly, the Commission concludes that Cook 
Inlet's arguments concerning retroactive consideration of DE status and 
47 CFR 309(j)(3)(E)(ii) are without foundation.

VI. Third Report and Order in WT Docket No. 05-211

    236. Finally, in this DE Third Report and Order, the Commission 
terminates consideration of proposals issued in a 2006 DE Second 
Further Notice of Proposed Rule Making (DE Second FNPRM), 71 FR 50379, 
August 25, 2006, in which it asked whether it should adopt any 
additional small business eligibility rules. The majority of commenters 
responding to the DE Second FNPRM opposed any additional modification 
of the DE eligibility requirements. The Commission concludes that this 
inquiry has been overtaken by the significant passage of time, the 
litigation regarding the rules adopted in the DE Second Report and 
Order, and its efforts to amend the Part 1 competitive bidding rules. 
Moreover, there was no record support for any of the changes the 
Commission was considering. The Commission therefore declines to adopt 
any of the proposals raised in the 2006 DE Second FNPRM.
    237. Background. The DE Second FNPRM sought comment on additional 
proposals for eligibility restrictions on the relationships of DEs with 
certain other entities. In particular, the Commission sought comment on 
whether additional eligibility restrictions should apply to the 
relationships of DEs with members of a certain entity class or classes, 
the use of a financial threshold to define the class of entity 
triggering such restrictions, applying a particular spectrum interest 
type to define an entity class, and the possible adoption of an in-
region component for the definition of relationships that should be 
subject to further eligibility restrictions.
    238. In addition to these class-based restrictions, the Commission 
sought comment on whether it should adopt additional rule changes 
restricting the award of small business benefits under certain 
circumstances and in connection with relationships with certain 
entities. The Commission also requested comment on whether the 
relationships between DE applicants, or licensees, and other entities 
should be treated differently depending on the nature of the specific 
entity and the surrounding circumstances. The Commission further sought 
comment on the adoption of a personal net worth test for DE eligibility 
determinations.
    239. Ten parties filed comments in response to the DE Second FNPRM, 
and five parties filed reply comments. The majority of commenters 
argued that the Commission should not adopt any further measures beyond 
the then-newly revised 2006 rules.
    240. Discussion. The Commission concludes that it will not adopt 
any designated entity eligibility rules based on the record acquired in 
the DE Second FNPRM, and the Commission hereby closes that inquiry. In 
the DE Second FNPRM, the Commission requested guidance on whether it 
``should adopt additional rule changes that would restrict the award of 
designated entity benefits'' in certain circumstances and for 
relationships with certain types of entities. The Commission also 
sought comment on the possible use of a personal net worth test in 
determinations of DE eligibility, citing a proposal to restrict 
individuals with a net worth of $3 million or more from having a 
controlling interest in a designated entity.
    241. Commenters offered limited support for additional eligibility 
restrictions based upon the possibility of adopting further 
restrictions related to class type and/or financial and operational 
agreements. Most commenters, including Council Tree, the original 
proponent of the rule changes, urged the Commission to refrain from 
adopting additional eligibility restrictions based on the relationships 
of a designated entity applicant or licensee with a particular class of 
entities. Most commenters also responded negatively to the potential 
use of an in-region component in any further material relationship 
restrictions. The record compiled in 2006 therefore indicated little 
support for the adoption of any additional restrictions such as those 
contemplated

[[Page 56802]]

in the DE Second FNPRM, and provides no basis upon which to adopt 
rules.
    242. Similarly, no commenter, including Council Tree, the original 
proponent of a personal net worth test, supported the adoption of such 
a restriction. Several commenters in 2006 argued strongly that a 
personal net worth test would be unnecessary and ineffective. The 
Commission therefore concludes that the widespread opposition to such a 
restriction reinforces the Commission's previous conclusions on this 
matter. The Commission has previously observed that personal net worth 
limits can be difficult to apply and to enforce. Accordingly, the 
Commission declines to adopt any personal net worth test for 
determining small business eligibility.
    243. In light of the many policy and rule modifications the 
Commission adopts regarding designated entity eligibility, as well as 
the general lack of support by commenters, the Commission closes the 
record compiled in response to the 2006 DE Second FNPRM, and terminates 
the inquiry.

VII. Procedural Matters

A. Delegation To Correct Rules.

    244. The Commission delegates authority to the Wireless 
Telecommunications Bureau, as appropriate, to make corrections to the 
rules set forth in Appendix A as necessary to conform them to the text 
of the Part 1 Report and Order. The Commission notes that any entity 
that disagrees with a rule correction made on delegated authority will 
have the opportunity to file an Application for Review by the full 
Commission.

B. Final Regulatory Flexibility Act Analysis

    245. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Final Regulatory 
Flexibility Analysis (FRFA) of the possible significant economic impact 
on small entities by the policies and rules adopted in the Part 1 
Report and Order. The Commission will send a copy of the Part 1 Report 
and Order, including this FRFA, to the Chief Counsel for Advocacy of 
the Small Business Administration (``SBA''). In addition, the Part 1 
Report and Order and the FRFA (or summaries thereof) will be published 
in the Federal Register.
    246. As required by the RFA, an Initial Regulatory Flexibility 
Analysis (IRFA) was incorporated in the NPRM and a Supplemental Initial 
Regulatory Flexibility Analysis (``Supplemental IRFA) was incorporated 
in the Part 1 PN. The Commission sought written public comment on the 
proposals in the NPRM and Part 1 PN, including comment on the IRFA and 
Supplemental IRFA. The Commission received one written ex parte letter 
addressing the IRFA or Supplemental IRFA. The Office of Advocacy, U.S. 
Small Business Administration (SBA Office of Advocacy) supports the 
Commission's repeal of the attributable material relationship (AMR) 
rule and its decision allowing small businesses, rural telephone 
companies, and businesses owned by members of minority groups and women 
more flexibility in their ability to lease spectrum. The SBA Office of 
Advocacy argues against ``arbitrary caps'' on DEs, saying that such 
caps would limit a small business's ability to grow. It also warns 
against expanding the DE program to include some large businesses, 
explaining that large businesses do not need another advantage over 
small entities. Because the Commission amends the rules in the Part 1 
Report and Order it has included this FRFA which conforms to the RFA.
A. Need for, and Objectives of, the Order
    247. Given the prolific changes witnessed in the wireless industry 
over the last decade, this Part 1 Report and Order adopts revisions to 
certain of the Part 1 competitive bidding rules in advance of an 
auction that holds historic potential for interested applicants to 
acquire licenses for below 1-GHz spectrum in the Broadcast Television 
Spectrum Incentive Auction (Incentive Auction). The Part 1 Report and 
Order therefore reforms some of the Commission's general Part 1 rules 
governing competitive bidding for spectrum licenses to reflect changes 
in the marketplace, including the challenges faced by new entrants. The 
Part 1 Report and Order new rules also advance the statutory directive 
to ensure that designated entities are given the opportunity to 
participate in the provision of spectrum-based services while 
preventing unjust enrichment, and fulfill the commitment made in the 
Incentive Auction R&O. Together these revisions will assure that the 
Commission's part 1 rules continue to promote the Commission's 
fundamental statutory objectives.
    248. Specifically, the Part 1 Report and Order adopts revisions 
that: (1) Modify its eligibility requirements for small business 
benefits, and update the standardized schedule of small business sizes, 
including the gross revenues thresholds used to determine eligibility; 
(2) establish a new bidding credit for eligible rural service 
providers; (3) implement a cap on the overall amount of bidding credits 
available for eligible designated entities in any one auction; (4) 
strengthen and target attribution rules to prevent the unjust 
enrichment of ineligible entities; (5) modify its DE reporting 
requirements; (6) revise the former defaulter rule, consistent with the 
waiver the Commission granted in Auction 97; (7) adopt rules 
prohibiting joint bidding arrangements with limited exceptions, and 
make related updates to its rule on prohibited communications; and (8) 
adopt rules prohibiting the same individual or entity as well as 
entities that have controlling interests in common from becoming 
qualified to bid on the basis of more than one short-form application 
in a specific auction, with a limited exception for certain rural 
wireless partnerships and individual members of such partnerships.
    249. The Part 1 Report and Order also resolves long standing 
petitions for reconsideration and adopts necessary clean up revisions 
to the Commission's Part 1 competitive bidding rules.
    250. With respect to small businesses, the Part 1 Report and 
Order's revisions to the Commission's rules reflect that small 
businesses need greater opportunities to gain access to capital so that 
they may have an opportunity to participate in the provision of 
spectrum-based services in today's communications marketplace. In the 
past decade, the rapid adoption of smartphones and tablet computers and 
the widespread use of mobile applications, combined with the increasing 
deployment of high-speed 3G and now 4G technologies, have driven 
significantly more intensive use of mobile networks. This progression 
from the provision of mobile voice services to the provision of mobile 
broadband services has increased the need for access to spectrum. In 
addition, in the past decade, the number of small and regional mobile 
wireless service providers has significantly decreased, yet regional 
and local service providers continue to offer consumers additional 
choices in the areas they serve. The Commission anticipates that by 
revising its rules to allow small businesses to take advantage of the 
same opportunities to utilize their spectrum capacity and gain access 
to capital as those afforded to larger licensees, it can better achieve 
its statutory directives. Nonetheless, the Commission remains mindful 
of its obligation to prevent unjust enrichment of ineligible entities.
B. Legal Basis
    251. The action is authorized under sections 1, 4(i), 303(r), 
309(j), and 316 of

[[Page 56803]]

the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 
303(r), 309(j), and 316.
C. Summary of Significant Issues Raised by Public Comments in Response 
to the IFRA or Supplemental IFRA
    252. No commenters directly responded to the IRFA or Supplemental 
IRFA. The SBA Office of Advocacy raised concerns regarding the analysis 
contained within the earlier IRFAs. Having reviewed both the initial 
IRFA and the supplemental IRFA the Commission concludes that the 
analyses satisfy the requirements of 5 U.S.C. 603, as further specified 
in 5 U.S.C. 607. The IRFAs sufficiently describe the impact of the 
rules the Commission proposed. The Commission provides further detail 
in this FRFA below on the impact of the rules the Commission adopts in 
this order, the steps the Commission has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of the Communications Act, and an analysis of why 
these rules were adopted herein and other significant alternatives that 
were considered and rejected. Additionally, a number of commenters 
raised concerns about the impact on small businesses of various 
auction-related issues. The Commission has nonetheless addressed these 
concerns in the FRFA.
D. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply
    253. The RFA directs the Commission to provide a description of 
and, where feasible, an estimate of the number of small entities that 
will be affected by the proposed rules, if adopted. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
government jurisdiction.'' In addition, the term ``small business'' has 
the same meaning as the term ``small business concern'' under the Small 
Business Act. A small business concern is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
SBA.
    254. Small Businesses, Small Organizations, and Small Governmental 
Jurisdictions. The Part 1 Report and Order's revisions may, over time, 
affect small entities that are not easily categorized at present. The 
Commission therefore describes here, at the outset, three 
comprehensive, statutory small entity size standards. First, 
nationwide, there are a total of approximately 28.2 million small 
businesses, according to the SBA. In addition, a ``small organization'' 
is generally ``any not-for-profit enterprise which is independently 
owned and operated and is not dominant in its field.'' Nationwide, as 
of 2007, there were approximately 1,621,315 small organizations. 
Finally, the term ``small governmental jurisdiction'' is defined 
generally as ``governments of cities, towns, townships, villages, 
school districts, or special districts, with a population of less than 
fifty thousand.'' Census Bureau data for 2011 indicate that there were 
89,476 local governmental jurisdictions in the United States. The 
Commission estimates that, of this total, as many as 88,506 entities 
may qualify as ``small governmental jurisdictions.'' Thus, the 
Commission estimates that most governmental jurisdictions are small.
    255. Licenses Assigned by Auction. The changes and additions to the 
Commission's rules in the Part 1 Report and Order are of general 
applicability to all auctionable services. Accordingly, this FRFA 
provides a general analysis of the impact of the proposals on small 
businesses rather than a service-by-service analysis. The number of 
entities that may apply to participate in future Commission spectrum 
auctions is unknown. Moreover, the number of small businesses that have 
participated in prior spectrum auctions has varied. As a general 
matter, the number of winning bidders that qualify as small businesses 
at the close of an auction does not necessarily represent the number of 
small businesses currently in service. Also, the Commission does not 
generally track subsequent business size unless, in the context of 
changes in control, or assignments or transfers, unjust enrichment 
issues are implicated.
    256. Wireless Telecommunications Carriers (except satellite). The 
Census Bureau defines this category to include ``establishments engaged 
in operating and maintaining switching and transmission facilities to 
provide communications via the airwaves. Establishments in this 
industry have spectrum licenses and provide services using that 
spectrum, such as cellular phone services, paging services, wireless 
Internet access, and wireless video services.'' The SBA has developed a 
small business size standard for Wireless Telecommunications Carriers 
(except satellite). Under the SBA's standard, a business is small if it 
has 1,500 or fewer employees. For this category, Census data for 2007 
show that there were 1,383 firms that operated for the entire year. Of 
this total, 1,368 firms (approximately 99 percent) had employment of 
999 or fewer employees and only 15 (approximately 1 percent) had 
employment of 1,000 employees or more. Similarly, according to 
Commission data, 413 carriers reported that they were engaged in the 
provisions of wireless telephony, including cellular service, PCS, and 
Specialized Mobile Radio (SMR) Telephony services. Of these, an 
estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Consequently, the Commission estimates that 
approximately half or more of these firms can be considered small. Thus 
under this category and the associated small business size standard, 
the Commission estimates that the majority of wireless 
telecommunications carriers (except satellite) are small entities that 
may be affected by the NPRM's proposed actions.
    257. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (MDS) and Multichannel Multipoint Distribution 
Service (MMDS) systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (BRS) and Educational Broadband Service (EBS) (previously 
referred to as the Instructional Television Fixed Service (ITFS)). In 
connection with the 1996 BRS auction, the Commission established a 
small business size standard as an entity that had annual average gross 
revenues of no more than $40 million in the previous three calendar 
years. The BRS auction resulted in 67 successful bidders obtaining 
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 
auction winners, 61 met the definition of a small business. BRS also 
includes licensees of stations authorized prior to the auction. At this 
time, based on its review of licensing records, the Commission 
estimates that of the 61 small business BRS auction winners, 48 remain 
small business licensees. In addition to the 48 small businesses that 
hold BTA authorizations, there are approximately 86 incumbent BRS 
licensees that are considered small entities (18 incumbent BRS 
licensees do not meet the small business size standard). After adding 
the number of small business auction licensees to the number of 
incumbent licensees not already counted, there are currently 
approximately 133 BRS licensees that are defined as small businesses 
under either the SBA or the Commission's rules. In 2009, the Commission

[[Page 56804]]

conducted Auction 86, the sale of 78 licenses in the BRS areas. The 
Commission established three small business size standards that were 
used in Auction 86: (i) An entity with attributed average annual gross 
revenues that exceeded $15 million and do not exceed $40 million for 
the preceding three years was considered a small business; (ii) an 
entity with attributed average annual gross revenues that exceeded $3 
million and did not exceed $15 million for the preceding three years 
was considered a very small business; and (iii) an entity with 
attributed average annual gross revenues that did not exceed $3 million 
for the preceding three years was considered an entrepreneur. Auction 
86 concluded in 2009 with the sale of 61 licenses. Of the 10 winning 
bidders, two bidders that claimed small business status won four 
licenses; one bidder that claimed very small business status won three 
licenses; and two bidders that claimed entrepreneur status won six 
licenses. The Commission notes that, as a general matter, the number of 
winning bidders that qualify as small businesses at the close of an 
auction does not necessarily represent the number of small businesses 
currently in service.
    258. In addition, the SBA's placement of Cable Television 
Distribution Services in the category of Wired Telecommunications 
Carriers is applicable to cable-based educational broadcasting 
services. Since 2007, Wired Telecommunications Carriers have been 
defined as follows: ``This industry comprises establishments primarily 
engaged in operating and/or providing access to transmission facilities 
and infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired telecommunications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies.'' Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services; wired (cable) audio and video programming 
distribution; and wired broadband Internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry. The SBA has developed a small business size standard for 
this category, which is: All such firms having 1,500 or fewer 
employees. Census data for 2007 shows that there were 3,188 firms that 
operated for the duration of that year. Of those, 3,144 had fewer than 
1,000 employees, and 44 firms had more than 1,000 employees. Thus under 
this category and the associated small business size standard, the 
majority of such firms can be considered small. In addition to Census 
data, the Commission's Universal Licensing System indicates that as of 
July 2014, there are 2,006 active EBS licenses. The Commission 
estimates that of these 2,006 licenses, the majority are held by non-
profit educational institutions and school districts, which are by 
statute defined as small businesses.
    259. Television Broadcasting. This economic census category 
``comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television 
broadcasting studios and facilities for the programming and 
transmission of programs to the public.'' The SBA has created the 
following small business size standard for Television Broadcasting 
firms: Those having $38.5 million or less in annual receipts. The 
Commission has estimated the number of licensed commercial television 
stations to be 1,387. In addition, according to Commission staff review 
of the BIA/Kelsey, LLC's Media Access Pro Television Database on July 
30, 2014, about 1,276 of an estimated 1,387 commercial television 
stations (or approximately 92 percent) had revenues of $38.5 million or 
less. The Commission therefore estimates that the majority of 
commercial television broadcasters are small entities.
    260. The Commission notes, however, that in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. Its estimate, 
therefore, likely overstates the number of small entities that might be 
affected by the Part 1 Report and Order's rules because the revenue 
figure on which it is based does not include or aggregate revenues from 
affiliated companies. In addition, an element of the definition of 
``small business'' is that the entity not be dominant in its field of 
operation. The Commission is unable at this time to define or quantify 
the criteria that would establish whether a specific television station 
is dominant in its field of operation. Accordingly, the estimate of 
small businesses to which rules may apply does not exclude any 
television station from the definition of a small business on this 
basis and is therefore possibly over-inclusive to that extent.
    261. In addition, the Commission has estimated the number of 
licensed noncommercial educational television stations to be 395. These 
stations are non-profit, and therefore considered to be small entities.
    262. There are also 2,460 LPTV stations, including Class A 
stations, and 3,838 TV translator stations. Given the nature of these 
services, the Commission will presume that all of these entities 
qualify as small entities under the above SBA small business size 
standard.
    263. Radio Broadcasting. The SBA defines a radio broadcast station 
as a small business if such station has no more than $38.5 million in 
annual receipts. Business concerns included in this industry are those 
``primarily engaged in broadcasting aural programs by radio to the 
public.'' According to review of the BIA/Kelsey, LLC's Media Access Pro 
Radio Database as of July 30, 2014, about 11,332 (or about 99.9 
percent) of 11,343 commercial radio stations have revenues of $38.5 
million or less and thus qualify as small entities under the SBA 
definition. The Commission notes, however, that, in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. This estimate, 
therefore, likely overstates the number of small entities that might be 
affected, because the revenue figure on which it is based does not 
include or aggregate revenues from affiliated companies.
    264. Cable and Other Subscription Programming. This industry 
comprises establishments primarily engaged in operating studios and 
facilities for the broadcasting of programs on a subscription or fee 
basis. The broadcast programming is typically narrowcast in nature 
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own 
facilities or acquire programming from external sources. The 
programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. Since 2007, the prior but now discontinued service involving 
distribution of programming via cable television was placed within the 
broad economic census category of Wired Telecommunications Carriers. 
The SBA has developed a small business size standard for this category, 
which consists of all such firms with gross annual receipts of 38.5 
million dollars or less. Census data for 2007, when data about Wired 
Telecommunications Carriers were used for Cable and Other Program 
Distribution, show that there were 3,188 Wired Telecommunications 
Carrier firms that operated for the entire year. Of this total, 3,144 
had fewer than 1,000 employees. Thus under this size

[[Page 56805]]

standard, the majority of firms offering cable and other subscription 
programming can be considered small.
    265. In addition, an element of the definition of ``small 
business'' is that the entity not be dominant in its field of 
operation. The Commission is unable at this time to define or quantify 
the criteria that would establish whether a specific radio station is 
dominant in its field of operation. Accordingly, the estimate of small 
businesses to which rules may apply does not exclude any radio station 
from the definition of a small business on this basis and therefore may 
be over-inclusive to that extent. Also, as noted, an additional element 
of the definition of ``small business'' is that the entity must be 
independently owned and operated. The Commission notes that it is 
difficult at times to assess these criteria in the context of media 
entities and the estimates of small businesses to which they apply may 
be over-inclusive to this extent.
E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    266. The updated reporting, recordkeeping, and other compliance 
requirements resulting from the Part 1 Report and Order will apply to 
all entities in the same manner. The Commission believes that these 
rules assist it meeting its statutory goals by providing DEs more 
flexibility in finding the capital needed for acquisition and 
provisions of spectrum-based services while ensuring that designated 
entity benefits go to bona fide small businesses and eligible rural 
service providers. The Commission does not believe that the costs and/
or administrative burdens associated with the rules will unduly burden 
small entities. The Part 1 Report and Order makes a number of rule 
changes that will affect reporting, recordkeeping, and other compliance 
requirements. Each of these changes is described below.
    267. Eligibility for Bidding Credits. The Part 1 Report and Order 
makes changes to the Commission's process for evaluating small business 
eligibility for bidding credits. In particular, the Part 1 Report and 
Order repeals the AMR rule and replaces it with a more flexible 
approach under which the Commission would evaluate small business 
eligibility on a license-by-license basis, using a two-pronged test. 
The first prong would evaluate whether an applicant meets the 
applicable small business size standard and is therefore eligible for 
benefits. To evaluate small business eligibility, the Part 1 Report and 
Order applies the Commission's existing controlling interest standard 
and affiliation rules to determine whether an entity should be 
attributable based on whether that entity has de jure or de facto 
control of, or is affiliated with, the applicant's overall business 
venture. Once the first prong has been met, the Commission would 
evaluate eligibility under the second prong. Under the second prong, 
the Part 1 Report and Order determines an entity's eligibility to 
retain small business benefits on a license-by-license basis, based on 
whether it has maintained de jure and de facto control of the license. 
Under this license-by-license approach, an entity will not necessarily 
lose its eligibility for all current and future small business benefits 
solely because of a decision associated with any particular license. 
Instead, while a small business might incur unjust enrichment 
obligations if it relinquishes de jure or de facto control of any 
particular license for which it claimed benefits, so long as the 
revenues of its attributable interest holders (i.e., the DE's 
affiliates, its controlling interests, and the affiliates of its 
controlling interests) continue to qualify under the relevant small 
business size standard, it could still retain its eligibility to retain 
current and future benefits on existing and future licenses. The Part 1 
Report and Order determines, on the basis of the express language of 
section 309(j), that there is no statutory requirement for DEs to 
directly provide primarily facilities-based service to the public with 
each license.
    268. The Part 1 Report and Order also modifies the Commission's 
secondary market rules to comport with the Commission's proposed 
approach to assessing small business eligibility. Specifically, the 
Part 1 Report and Order amends the language in 47 CFR 1.9020(d)(4) to 
remove the conflicting reference to the control standard of 47 CFR 
1.2110 in order to make clear that small business lessors are fully 
subject to the same de facto control standard for spectrum manager 
leasing that applies to all other licensees. This modification should 
clarify that 47 CFR 1.9010 alone defines whether a licensee, including 
a small business, retains de facto control of the spectrum that it 
leases to a spectrum lessee in the context of spectrum manager leasing.
    269. Attribution Rules. The Part 1 Report and Order adopts an 
additional attribution requirement under which, during the five-year 
unjust enrichment period, the gross revenues (or the subscribers in the 
case of a rural service provider) of a disclosable interest holder in a 
DE applicant or licensee will become attributable, on a license-by-
license basis, for any license in which the disclosable interest holder 
uses, in any manner, more than 25 percent of the spectrum capacity of a 
DE's license awarded with bidding credits. Under this rule, a 
disclosable interest holder is defined as any party holding a ten 
percent or greater interest of any kind in the DE, including but not 
limited to, a ten percent or greater interest in any class of stock, 
warrants, options or debt securities in the applicant or licensee. 
However, for DEs that acquire licenses with the new rural service 
provider bidding credit, this new attribution rule will not apply to 
any disclosable interest holder that would independently qualify for a 
rural service provider bidding credit.
    270. The Part 1 Report and Order declines to make any adjustments 
to the Commission's unjust enrichment rules and applies these rules to 
the new rural service provider bidding credit.
    271. Bidding Credits. The Part 1 Report and Order refines the 
primary way that the Commission facilitates participation by small 
businesses at auction through its bidding credit program. Bidding 
credits operate as a percentage discount on the winning bid amounts of 
a qualifying small business. By making the acquisition of spectrum 
licenses more affordable for new and existing small businesses, bidding 
credits facilitate their access to needed capital. The Commission 
establishes eligibility for bidding credits for each auctionable 
service, adopting one or more definitions of the small businesses that 
will be eligible. The Commission's small business definitions have been 
based on an applicant's average annual gross revenues over a three-year 
period. The Part 1 Report and Order retains the existing three-tiered 
schedule for determining eligibility for bidding credits but utilizes 
the GDP price index to increase the general schedule of size standards 
in its part 1 rules, measured by gross revenues, for purposes of 
determining an entity's eligibility for a bidding preference. 
Specifically, the Part 1 Report and Order revises the standardized 
schedule in 47 CFR 1.2110(f) as follows: (1) Businesses with average 
annual gross revenues for the preceding three years not exceeding $4 
million would be eligible for a 35 percent bidding credit; (2) 
Businesses with average annual gross revenues for the preceding three 
years not exceeding $20 million would be eligible for a 25 percent 
bidding credit; and (3) Businesses with average annual gross revenues 
for the preceding three years not exceeding $55 million would be 
eligible for a 15 percent bidding credit.

[[Page 56806]]

    272. The rules adopted in the Part 1 Report and Order will apply to 
the 600 MHz band spectrum licenses to be offered in the Incentive 
Auction and all Commission auctions in which the short-form deadline 
falls on or after the release date of the Part 1 Report and Order. In 
the Incentive Auction proceeding, the Commission adopted a 15 percent 
bidding credit for small businesses (defined as entities with average 
annual gross revenues for the preceding three years not exceeding $40 
million) and a 25 percent bidding credit for very small businesses 
(defined as entities with average annual gross revenues for the 
preceding three years not exceeding $15 million). Accordingly, the Part 
1 Report and Order adopts for the 600 MHz band increases in the gross 
revenues thresholds associated with the 25 percent and 15 percent 
bidding credits that are consistent with the increased gross revenues 
thresholds in the Part 1 Report and Order for the standardized schedule 
in its part 1 competitive bidding rules.
    273. The Part 1 Report and Order adopts a 15 percent bidding credit 
for qualifying service providers that provide commercial communications 
services to a customer base of fewer than 250,000 combined wireless, 
wireline, broadband, and cable subscribers and serve primarily rural 
areas. To determine whether a provider has fewer than 250,000 combined 
subscribers, the Commission will attribute the subscribers of all the 
provider's affiliates. The Commission will apply its existing 
definition of rural, a county with a population density of 100 persons 
or fewer per square mile. To qualify for a rural service provider 
bidding credit, an applicant must certify in its short-form application 
that it serves predominantly rural areas. An applicant will be 
permitted to claim a rural service provider bidding credit or a small 
business bidding credit, but not both.
    274. The Part 1 Report and Order adopts a limit or cap on the total 
amount of that a small business or rural service provider can receive 
in any particular auction, to be determined on an auction-by-auction 
basis. Specifically, the Part 1 Report and Order establishes a cap 
floor for any particular auction at $25 million for each eligible small 
business, and $10 million for each eligible rural service provider. 
Additionally, the Part 1 Report and Order sets the caps for the 
upcoming incentive auction at $150 million for a small business and $10 
million for a rural service provider. For markets with a population of 
500,000 or less, a DE bidder may not receive more than $10 million in 
bidding credits. To the extent a small business does not claim the full 
$10 million in bidding credits in the smaller markets, it may apply the 
remaining balance to its winning bids on larger licenses, up to the 
aggregate $150 million cap for small businesses.
    275. DE Reporting Requirements. The Part 1 Report and Order 
modifies the DE annual reporting requirement in 47 CFR 1.2110(n) 
require that all annual reports be filed no later than September 30 of 
each calendar year, reflecting the status of each license subject to 
unjust enrichment requirements held by a particular licensee as of 
August 31 of that same calendar year. Any licensee required to file a 
report between the release date of the Part 1 Report and Order and the 
effective date of the amended rule may defer filing its annual report 
until September 30, 2016. The new rule only applies to licenses 
acquired with DE benefits and still held subject to unjust enrichment 
obligations. If a license is transferred from a DE to a DE, the 
licensee who holds the license on September 30 of that year is 
responsible for filing the annual report. The annual report does not 
need to list agreements and arrangements that otherwise are included in 
the report if the information has already been filed with the 
Commission and the information is current. Instead the filer must 
provide both the ULS file number of the report containing such 
information and the date that the report was filed. These new DE 
reporting requirements will be applied to the new rural service 
provider bidding credit.
    276. Former Defaulter Rule. The Part 1 Report and Order adopts 
changes to the Commission's former defaulter rule to narrow the scope 
of the defaults and delinquencies that will be considered in 
determining whether or not an auction participant is a former 
defaulter. Specifically, the Part 1 Report and Order excludes any cured 
default on any Commission license or delinquency on any non-tax debt 
owed to any Federal agency for which any of the following criteria are 
met: (1) The notice of the final payment deadline or delinquency was 
received more than seven years before the relevant short-form 
application deadline; (2) the default or delinquency amounted to less 
than $100,000; (3) the default or delinquency was paid within two 
quarters (i.e., 6 months) after receiving the notice of the final 
payment deadline or delinquency; or (4) the default or delinquency was 
the subject of a legal or arbitration proceeding that was cured upon 
resolution of the proceeding. This rule will be applied on a 
prospective basis, including for the Incentive Auction.
    277. Joint Bidding. The Part 1 Report and Order prohibits joint 
bidding arrangements between nationwide providers and between 
nationwide and non-nationwide providers. The Part 1 Report and Order 
also prohibits joint bidding arrangements between non-nationwide 
providers who are separate auction applicants but allows the use of 
joint ventures and consortia. The Part 1 Report and Order defines 
``joint bidding arrangements'' as arrangements that involve a shared 
strategy for bidding in auction. This definition does not include 
agreements that are solely operational in nature, like agreements for 
roaming and leasing, which continue to be permitted. The Commission are 
permitting non-nationwide providers to form consortia and joint 
ventures. However, the Commission specify that: (1) DEs can participate 
in only one consortium in an auction, which shall be the exclusive 
bidding vehicle for its members in that auction, and (2) non-nationwide 
providers may participate in an auction through only one joint venture, 
which also shall be the exclusive bidding vehicle for its members in 
that auction. The Part 1 Report and Order also adopts a rule 
prohibiting individuals from serving as an authorized bidder for more 
than one auction applicant. The Part 1 Report and Order adopts a rule 
requiring all applicants to certify that they are not, and will not be, 
privy to, or involved in, in any way the bids or bidding strategy of 
more than one auction applicant. An applicant is also allowed to 
certify that it has established internal controls to preclude any 
person serving as an agent or employee for an applicant from having 
information about the bids or bidding strategies of more than one 
applicant or communicating such information to either applicant. The 
Part 1 Report and Order modifies its prohibited communications rule to 
prohibit an applicant from communicating bids or bidding information 
with any other applicant or any nationwide provider but provides 
limited exceptions for any arrangements that are solely operational in 
nature and are disclosed on an applicant's short-form application.
    278. Commonly Controlled Entities. The Part 1 Report and Order 
codifies an established competitive bidding procedure that prohibits 
the same individual or entity from filing more than one short-form 
application to participate in an auction. The Part 1 Report and Order 
also adopts a new rule

[[Page 56807]]

that would prevent entities that are controlled by a single individual 
or set of individuals from qualifying to bid on licenses in the same or 
overlapping geographic areas in a specific auction on more than one 
short-form application. The Part 1 Report and Order adopts a limited 
exception to this general prohibition for existing rural partnerships. 
Under this exception, a qualifying wireless partnership and their 
individual rural telephone company members will be permitted to 
participate separately in an auction. The Part 1 Report and Order 
defines ``controlling interest'' as individuals or entities with 
positive or negative de jure or de facto control of the licensee.
    279. Miscellaneous Part 1 Revisions. In addition to changes that 
would implement the foregoing proposals, the Part 1 Report and Order 
amends two of the Commission's Part 1, Subpart Q, rules, 47 CFR 1.2111 
and 1.2112.
    280. The Part 1 Report and Order eliminates two provisions of 47 
CFR 1.2111: (1) 47 CFR 1.2111(a), under which applicants for 
assignments or transfers during the first three years of a license term 
must provide the Commission with detailed contract and marketing 
information, and (2) 47 CFR 1.2111(b), a never-used unjust enrichment 
payment requirement for broadband PCS C and F block set-aside licenses.
    281. The Part 1 Report and Order clarifies the auction application 
requirements for reporting an entity's percentage ownership in the 
applicant and in FCC-regulated entities under 47 CFR 1.2112. The Part 1 
Report and Order further changes the rule to specify application 
requirements for bidding consortia. The Part 1 Report and Order also 
corrects two errors in the rule caused by the inadvertent substitution 
of an incorrect paragraph in the Code of Federal Regulations 
publication of the rule for the correct one published in the Federal 
Register summary of the DE Second Report and Order. The first error was 
the addition of a requirement that DE short-form applicants list and 
summarize all their agreements that support their DE eligibility, a 
requirement that the Commission intended to apply only to long-form 
applicants. The Part 1 Report and Order deletes the requirement with 
respect to the short-form. The second error was the deletion of a 
requirement that DE short-form applicants list the parties with which 
they have lease or resale arrangements for any of the DE applicants' 
spectrum. The Part 1 Report and Order reinstates this requirement.
F. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    282. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    283. The Part 1 Report and Order repeals the AMR rule and replaces 
it with a two-pronged analysis. This approach to evaluating attribution 
and establishing small business eligibility should provide small 
businesses with greater opportunities to participate in the provision 
of spectrum-based services. Moreover, insofar as the Part 1 Report and 
Order should allow small businesses greater flexibility to engage in 
business ventures that include increased forms of leasing and other 
spectrum use arrangements, the Commission anticipates that the combined 
intent of the updated rules should increase the potential sources of 
revenue for the small business and decrease the likelihood that it 
would be subject to undue influence by any particular user of a single 
license. The Part 1 Report and Order's two-pronged approach to 
establishing small business eligibility would also ensure that a 
licensee retains control of all licenses for which it seeks bidding 
credits, while providing greater flexibility for any acquired without 
such benefits. Further, the elimination of the AMR rule and 
clarification of how spectrum manager leasing rules apply to DEs should 
allow small businesses greater certainty to participate in secondary 
markets transactions.
    284. The Commission's determination that section 309(j) does not 
require a DE to directly provide primarily facilities-based service to 
the public removes one barrier facing small businesses in providing 
spectrum-based services. The Part 1 Report and Order retains the focus 
of the facilities-based requirement, specifically to prevent unjust 
enrichment, by strengthening other aspects of its rules, like its 
attribution and unjust enrichment provisions. A facilities-based 
requirement would operate as an impediment, while the Commission's 
adjustments are narrowly tailored to better strike the balance between 
the Commission's statutory goals. In eliminating this requirement, DEs 
now have more flexibility in how they may utilize their licenses won 
with bidding credits.
    285. The Part 1 Report and Order's new attribution rule is an 
additional safeguard to ensure that benefits are award only to 
eligible, bona fide entities. The Commission declines a number of 
alternative proposals focusing on restricting financing or agreements 
with large or regional carriers due to concerns that these proposals 
would impede a DE's ability to raise capital and gain operational 
experience. The Commission also declines proposals for an exception to 
its attribution rules for rural service provides who hold a minority 
interest in a cellular general partnership and to relax attribution 
rule in regards to immediate family members and of officers and 
directors. The Commission declines proposals to modify or eliminate its 
tribal exclusion to the attribution rule. The attribution rule is 
carefully tailored to ensure that DE benefits are not awarded to 
ineligible entities, while not being overly broad. The declined 
proposals would have affected the balance of the attribution rule, and 
in doing so, weaken the Commission's safeguards against the flow of DE 
benefits to ineligible entities.
    286. The Part 1 Report and Order retains the Commission's three-
tiered structure of small business bidding credits while increasing the 
gross revenues thresholds that define the three tiers of small 
businesses in the Part 1 schedule by which the Commission provides the 
corresponding available bidding credits would encourage small business 
participation in spectrum license auctions. The gross revenues 
thresholds, based on the GDP index, are intended to more accurately 
reflect what constitutes a ``small business'' in today's marketplace, 
taking into consideration the relative size of the large, national 
providers. This update to the thresholds will provide an economic 
benefit to small entities by making it easier to acquire spectrum 
licenses. The Part 1 Report and Order declines other bidding credit 
percentages proposed by commenters and the use of a MHz per pop 
methodology for setting thresholds at levels that would be over 
inclusive. It also declines proposals favoring a single bidding credit 
in lieu of the current three-tier system, and the creation of a new 
entrant bidding credit. The three-tiered system gives it flexibility to 
adjust the bidding credits available to reflect

[[Page 56808]]

the spectrum being offered at auction. Furthermore, the current 
percentages will enable those who qualify to compete in a Commission 
auction while not giving an unfair advantage against auction 
participants who do not qualify for a bidding credit.
    287. The Part 1 Report and Order's new rural service provider 
bidding credit is designed to better enable rural service providers to 
compete for spectrum at auction and increase the availability of mobile 
voice and broadband services in rural areas. The new rural service 
provider bidding credit is 15 percent. The Commission rejected 
proposals for a 25 percent rural service provider bidding credit. The 
Commission believes that a bidding credit of 15 percent is the proper 
amount. While this new bidding credit will promote the provision of 
service in rural areas, many of the service providers that are eligible 
for the rural service provider bidding credit have well over $55 
million in annual revenues and thus have far greater access to capital 
than most small businesses. The 15 percent bidding credit strikes the 
right balance between its existing DE system where rural providers are 
often unable to win a license covering their service areas limiting an 
unnecessary advantage received by an existing rural provider in certain 
markets. The Commission also declines the proposal to allow a winning 
bidder to deduct from its auction purchase price the pro rata value of 
any area partitioned to a rural telephone company, where the area 
includes all or a portion of the rural telephone company's service 
area. This proposal was declined because it would be overly burdensome 
and benefit those choosing not to serve rural areas. The Commission 
also declines proposals to make the small business and rural service 
provider bidding credits cumulative because cumulative bidding credits 
would provide an unnecessary advantage in certain markets.
    288. The Part 1 Report and Order adopts bidding caps for the small 
business and rural service provider bidding credits. These caps will be 
determined for all future spectrum auctions on an auction-by-auction 
basis. The Part 1 Report and Order sets the cap floor for any 
particular auction at $25 million for the small business bidding credit 
and $10 million for the rural service provider bidding credit. The Part 
1 Report and Order also set the bidding credit caps for the upcoming 
incentive auction at $150 million for the small business bidding credit 
and $10 million for the rural service provider bidding credit. 
Additionally, the Part 1 Report and Order limits the amount of bidding 
credits a bidder in the upcoming Incentive Auction may obtain to $10 
million in markets with a population of 500,000 or less. If the full 
$10 million is not claimed, a bidder may apply its remaining balance to 
winning bids on larger licenses, up to $150 million. The Commission 
declines proposals advocating for no caps and for set caps of varying 
amounts. The caps will assist DEs by providing some level of assurance 
of bidding activity. Additionally, the caps will protect the integrity 
of the Commission's auction process by discouraging those who may try 
to game the DE system. While caps limit the amount of assistance a DE 
may receive, the Commission has the flexibility to calibrate the caps 
to the spectrum being offered in a particular auction. Based on past 
auction data, the Part 1 Report and Order adopts caps for the upcoming 
incentive auction. In the most recent auctions of CMRS spectrum, the 
$150 million cap would have allowed the vast majority of the bidding 
credits awarded to DEs. The 500,000 population threshold provides an 
easily administrable delineation between larger urban and smaller rural 
markets and the average population density for markets with a 
population of 500,000 or less roughly corresponds with its approach in 
defining rural areas. Additionally, a $10 million cap on the rural 
service provider bidding credit is the appropriate amount to stimulate 
rural service while not giving the larger companies who don't qualify 
for a small business bidding credit an unnecessary advantage.
    289. The Part 1 Report and Order declines to adopt bidding 
preferences or credits based on criteria other than business size, 
except for the new rural service provider bidding credit. The repeal of 
the AMR rule, expanded eligibility for the DE program, and new rural 
service provider bidding credit are more than sufficient to address the 
challenges new entrants, minority- and women-owned companies, 
individuals who have overcome significant disadvantages, and service 
providers in areas that are unserved or underserved, areas of 
persistent poverty, and in tribal lands face today. The Part 1 Report 
and Order also declines proposals in the MMTC white paper, except for 
the proposal to repeal the AMR rule which was adopted. These additional 
proposed bidding credits or preferences, along with the other 
alternatives proposed to promote small business participation in the 
wireless sector, would add unnecessary complexity, which in turn could 
negatively affect the Commission's auction process.
    290. The Part 1 Report and Order's modification of the Commission's 
DE reporting requirements reduces a significant regulatory burden 
placed on a DE by eliminating the requirement on DEs to provide 
information multiple times. Updating the deadline of the report reduces 
the administrative and related burdens on DEs. The DE reporting 
requirements provide a safeguard helping to prevent unjust enrichment. 
Additionally, the modifications adopted in the Part 1 Report and Order 
reduce administrative difficulties the Commission has in managing the 
information. The Part 1 Report and Order declines to eliminate the DE 
reporting rule altogether because other decisions, like the elimination 
of the AMR rule, have reduced the safeguards preventing unjust 
enrichment.
    291. The Part 1 Report and Order's joint bidding rules are intended 
to preserve and promote robust competition in the mobile wireless 
marketplace and facilitate competition among bidders at auction, 
including small entities. These rules provide potential bidders with 
greater clarity regarding the types of joint bidding arrangements that 
would be permissible. In addition, the Part 1 Report and Order's rule 
to allow consortia and joint ventures among non-nationwide providers 
would maintain flexibility for small businesses to enter into such 
arrangements
    292. Finally, the additional changes to the part 1 rules will apply 
to all entities in the same manner as the Commission will apply these 
changes uniformly to all entities that choose to participate in 
spectrum license auctions. The Commission believes that applying the 
same rules equally to all entities in these contexts promotes fairness. 
The Commission does not believe that the limited costs and/or 
administrative burdens associated with the rule revisions will unduly 
burden small entities. In fact, many of the proposed rule revisions 
clarify the Commission's competitive bidding rules, including short-
form application requirements, as well as a reduction of reporting 
requirements.
G. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Final Rules
    293. None.
H. Report to Congress
    294. The Commission will send a copy of the Part 1 Report and 
Order, including this FRFA, in a report to be

[[Page 56809]]

sent to Congress and the Government Accountability Office pursuant to 
the Congressional Review Act.
I. Report to Small Business Administration
    295. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, will send a copy of this Part 1 Report 
and Order, including this FRFA, to the Chief Counsel for Advocacy of 
the SBA.

VIII Ordering Clauses

    296. It is ordered that, pursuant to sections 1, 4(i), 303(r), and 
309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154(i), 303(r), and 309(j), the Part 1 Report and Order is adopted.
    297. It is further ordered that, pursuant to sections 1, 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 303(r), and 309(j), the petitions for 
reconsideration of the Order on Reconsideration of the First Report and 
Order in WT Docket No. 05-211, filed by Blooston, Mordkofsky, Dickens, 
Duffy & Pendergast, LLP, and by the National Telecommunications 
Cooperative Association are denied.
    298. It is further ordered that, pursuant to sections 1, 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 303(r), and 309(j), the petition for partial 
reconsideration and/or clarification of the Second Report and Order and 
Second Further Notice of Proposed Rule Making in WT Docket No. 05-211 
filed by Blooston, Mordkofsky, Dickens, Duffy & Pendergast, LLP, is, to 
the extent described herein, denied and otherwise is dismissed as moot.
    299. It is further ordered that, pursuant to sections 1, 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 303(r), and 309(j), the petition for 
reconsideration and clarification of the Second Report and Order and 
Second Further Notice of Proposed Rule Making in WT Docket No. 05-211 
filed by Cook Inlet Region, Inc., is, to the extent described herein, 
denied, and otherwise is dismissed as moot.
    300. It is further ordered that, pursuant to sections 1, 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 303(r), and 309(j), consideration of the Second 
Further Notice of Proposed Rule Making in WT Docket No. 05-211 is 
terminated.
    301. It is further ordered that the Commission's rules are hereby 
amended as set forth in Appendix A of the Part 1 Report and Order.
    302. It is further ordered that the rules adopted herein will 
become effective November 17, 2015, except for Sec. Sec.  1.2105(a)(2), 
1.2105(a)(2)(iii) through (vi), (viii) through (x), and (xii), 
1.2105(c)(3) through (4), 1.2110(j), 1.2110(n), 1.2112(b)(1)(iii) 
through (vi), 1.2112(b)(2)(iii), (v), and (vii) through (viii), 
1.2114(a)(1), and 1.9020(e) which contain new or modified information 
collection requirements that require approval by the Office of 
Management and Budget (OMB). The Commission will publish a document in 
the Federal Register announcing the effective date of those sections.
    303. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Part 1 Report and Order, including the Final Regulatory 
Flexibility Analysis to the Chief Counsel for Advocacy of the Small 
Business Administration.
    304. It is further ordered that the Commission shall send a copy of 
the Part 1 Report and Order in WT Docket Nos. 14-170 and 05-211, GN 
Docket No. 12-268, in a report to be sent to Congress and the 
Government Accountability Office pursuant to the Congressional Review 
Act, see 5 U.S.C. 801(a)(1)(A).

List of Subjects

47 CFR Part 1

    Administrative practice and procedures.

47 CFR Part 27

    Communications common carriers. Radio.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1 and 27 as follows:

PART 1--PRACTICE AND PROCEDURE

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

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 160, 201, 225, 227, 303, 309, 332, 1403, 1404, 1451, 1452, 
and 1455.

0
1. Section 1.1910 is amended by revising paragraph (b)(3)(ii) to read 
as follows:


Sec.  1.1910  Effect of insufficient fee payments, delinquent debts, or 
debarment.

* * * * *
    (b) * * *
    (3) * * *
    (ii) The provisions of paragraphs (b)(2) and (b)(3) of this section 
will not apply where more restrictive rules govern treatment of 
delinquent debtors, such as 47 CFR 1.2105(a)(2)(xi) and (xii).
* * * * *

0
2. Section 1.2104 is amended by revising paragraph (j)(2) to read as 
follows:


Sec.  1.2104  Competitive bidding mechanisms

* * * * *
    (j) * * *
    (2) Apportioned package bid. The apportioned package bid on a 
license is an estimate of the price of an individual license included 
in a package of licenses in an auction with combinatorial (package) 
bidding. Apportioned package bids shall be determined by the Commission 
according to a methodology it establishes in advance of each auction 
with combinatorial bidding. The apportioned package bid on a license 
included in a package shall be used in place of the amount of an 
individual bid on that license when the bid amount is needed to 
determine the size of a designated entity bidding credit (see Sec.  
1.2110(f)(1), (f)(2), and (f)(4)), a new entrant bidding credit (see 
Sec.  73.5007 of this chapter), a bid withdrawal or default payment 
obligation (see Sec.  1.2104(g)), a tribal land bidding credit limit 
(see Sec.  1.2110(f)(3)), or a size-based bidding credit unjust 
enrichment payment obligation (see Sec.  1.2111(b), (c)(2) and (c)(3)), 
or for any other determination required by the Commission's rules or 
procedures.


0
3. Section 1.2105 is revised to read as follows:


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

    (a) Submission of Short-Form Application (FCC Form 175). In order 
to be eligible to bid, an applicant must timely submit a short-form 
application (FCC Form 175), together with any appropriate upfront 
payment set forth by Public Notice. All short-form applications must be 
filed electronically.
    (1) All short-form applications will be due:
    (i) On the date(s) specified by public notice; or
    (ii) In the case of application filing dates which occur 
automatically by operation of law, on a date specified by public notice 
after the Commission has reviewed the applications that have been filed 
on those dates and

[[Page 56810]]

determined that mutual exclusivity exists.
    (2) The short-form application must contain the following 
information, and all information, statements, certifications and 
declarations submitted in the application shall be made under penalty 
of perjury:
    (i) Identification of each license, or category of licenses, on 
which the applicant wishes to bid.
    (ii)(A) The applicant's name, if the applicant is an individual. If 
the applicant is a corporation, then the short-form application will 
require the name and address of the corporate office and the name and 
title of an officer or director. If the applicant is a partnership, 
then the application will require the name, citizenship and address of 
all general partners, and, if a partner is not a natural person, then 
the name and title of a responsible person should be included as well. 
If the applicant is a trust, then the name and address of the trustee 
will be required. If the applicant is none of the above, then it must 
identify and describe itself and its principals or other responsible 
persons; and
    (B) Applicant ownership and other information, as set forth in 
Sec.  1.2112.
    (iii) The identity of the person(s) authorized to make or withdraw 
a bid. No person may serve as an authorized bidder for more than one 
auction applicant;
    (iv) If the applicant applies as a designated entity, a 
certification that the applicant is qualified as a designated entity 
under Sec.  1.2110.
    (v) Certification that the applicant is legally, technically, 
financially and otherwise qualified pursuant to section 308(b) of the 
Communications Act of 1934, as amended;
    (vi) Certification that the applicant is in compliance with the 
foreign ownership provisions of section 310 of the Communications Act 
of 1934, as amended. The Commission will accept applications certifying 
that a request for waiver or other relief from the requirements of 
section 310 is pending;
    (vii) Certification that the applicant is and will, during the 
pendency of its application(s), remain in compliance with any service-
specific qualifications applicable to the licenses on which the 
applicant intends to bid including, but not limited to, financial 
qualifications. The Commission may require certification in certain 
services that the applicant will, following grant of a license, come 
into compliance with certain service-specific rules, including, but not 
limited to, ownership eligibility limitations;
    (viii) Certification that the applicant has provided in its 
application a brief description of, and identified each party to, any 
partnerships, joint ventures, consortia or other agreements, 
arrangements or understandings of any kind relating to the licenses 
being auctioned, including any agreements that address or communicate 
directly or indirectly bids (including specific prices), bidding 
strategies (including the specific licenses on which to bid or not to 
bid), or the post-auction market structure, to which the applicant, or 
any party that controls as defined in paragraph (a)(4) of this section 
or is controlled by the applicant, is a party.
    (ix) Certification that the applicant (or any party that controls 
as defined in paragraph (a)(4) of this section or is controlled by the 
applicant) has not entered and will not enter into any partnerships, 
joint ventures, consortia or other agreements, arrangements, or 
understandings of any kind relating to the licenses being auctioned 
that address or communicate, directly or indirectly, bidding at auction 
(including specific prices to be bid) or bidding strategies (including 
the specific licenses on which to bid or not to bid), or post-auction 
market structure with: any other applicant (or any party that controls 
or is controlled by another applicant); with a nationwide provider that 
is not an applicant (or any party that controls or is controlled by 
such a nationwide provider); or, if the applicant is a nationwide 
provider, with any non-nationwide provider that is not an applicant (or 
with any party that controls or is controlled by such a non-nationwide 
provider), other than:
    (A) Agreements, arrangements, or understandings of any kind that 
are solely operational as defined under paragraph (a)(4) of this 
section;
    (B) Agreements, arrangements, or understandings of any kind to form 
consortia or joint ventures as defined under paragraph (a)(4) of this 
section;
    (C) Agreements, arrangements or understandings of any kind with 
respect to the transfer or assignment of licenses, provided that such 
agreements, arrangements or understandings do not both relate to the 
licenses at auction and address or communicate, directly or indirectly, 
bidding at auction (including specific prices to be bid), or bidding 
strategies (including the specific licenses on which to bid or not to 
bid), or post-auction market structure.
    (x) Certification that if applicant has an interest disclosed 
pursuant to Sec.  1.2112(a)(1) through (6) with respect to more than 
one short-form application for an auction, it will implement internal 
controls that preclude any individual acting on behalf of the applicant 
as defined in paragraph (c)(5) of this section from possessing 
information about the bids or bidding strategies (including post-
auction market structure), of more than one party submitting a short-
form application or communicating such information with respect to a 
party submitting a short-form application to anyone possessing such 
information regarding another party submitting a short-form 
application.
    (xi) Certification that the applicant is not in default on any 
Commission licenses and that it is not delinquent on any non-tax debt 
owed to any Federal agency.
    (xii) A certification indicating whether the applicant has ever 
been in default on any Commission license or has ever been delinquent 
on any non-tax debt owed to any Federal agency. For purposes of this 
certification, an applicant may exclude from consideration as a former 
default any default on a Commission license or delinquency on a non-tax 
debt to any Federal agency that has been resolved and meets any of the 
following criteria:
    (A) The notice of the final payment deadline or delinquency was 
received more than seven years before the short-form application 
deadline;
    (B) The default or delinquency amounted to less than $100,000;
    (C) The default or delinquency was paid within two quarters (i.e., 
6 months) after receiving the notice of the final payment deadline or 
delinquency; or
    (D) The default or delinquency was the subject of a legal or 
arbitration proceeding that was cured upon resolution of the 
proceeding.
    (xiii) For auctions required to be conducted under Title VI of the 
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) 
or in which any spectrum usage rights for which licenses are being 
assigned were made available under 47 U.S.C. 309(j)(8)(G)(i), 
certification under penalty of perjury that the applicant and all of 
the person(s) disclosed under paragraph (a)(2)(ii) of this section are 
not person(s) who have been, for reasons of national security, barred 
by any agency of the Federal Government from bidding on a contract, 
participating in an auction, or receiving a grant. For the purposes of 
this certification, the term ``person'' means an individual, 
partnership, association, joint-stock company, trust, or corporation, 
and the term ``reasons of national security'' means matters relating to 
the national defense and foreign relations of the United States.
    (3) Limit on filing applications. In any auction, no individual or 
entity may file

[[Page 56811]]

more than one short-form application or have a controlling interest in 
more than one short-form application. In the case of a consortium, each 
member of the consortium shall be considered to have a controlling 
interest in the consortium. In the event that applications for an 
auction are filed by applicants with overlapping controlling interests, 
pursuant to paragraph (b)(1)(ii) of this section, both applications 
will be deemed incomplete and only one such applicant may be deemed 
qualified to bid. This limit shall not apply to any qualifying rural 
wireless partnership and individual members of such partnerships. A 
qualifying rural wireless partnership for purposes of this exception is 
one that was established as a result of the cellular B block settlement 
process established by the Commission in CC Docket No. 85-388 in which 
no nationwide provider is a managing partner or a managing member of 
the management committee, and partnership interests have not materially 
changed as of the effective date of the Report and Order in WT Docket 
No. 14-170, FCC 15-80. A partnership member for purposes of this 
exception is a partner or successor-in-interest to a partner in a 
qualifying partnership that does not have day-to-day management 
responsibilities in the partnership and holds 25% or less ownership 
interest, and provides a certification in its short-form application 
that it will implement internal controls to insulate itself from the 
bidding process of the cellular partnership and any other members of 
the partnership, except that it may, prior to the deadline for 
resubmission of short-form applications, express to the partnership the 
maximum it is willing to spend as a partner.
    (4) Definitions. For purposes of the certifications required under 
paragraph (a)(2) of this section:
    (i) The term controlling interest includes individuals or entities 
with positive or negative de jure or de facto control of the applicant. 
De jure control includes holding 50 percent or more of the voting stock 
of a corporation or holding a general partnership interest in a 
partnership. Ownership interests that are held indirectly by any party 
through one or more intervening corporations may 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 meets or 
exceeds 50 percent or represents actual control, it may be treated as 
if it were a 100 percent interest. De facto control is determined on a 
case-by-case basis. Examples of de facto control include constituting 
or appointing 50 percent or more of the board of directors or 
management committee; having authority to appoint, promote, demote, and 
fire senior executives that control the day-to-day activities of the 
licensee; or playing an integral role in management decisions. In the 
case of a consortium, each member of the consortium shall be considered 
to have a controlling interest in the consortium.
    (ii) The term consortium means an entity formed to apply as a 
single applicant to bid at auction pursuant to an agreement by two or 
more separate and distinct legal entities that individually are 
eligible to claim the same designated entity benefits under Sec.  
1.2110, provided that no member of the consortium may be a nationwide 
provider;
    (iii) The term joint venture means a legally cognizable entity 
formed to apply as a single applicant to bid at auction pursuant to an 
agreement by two or more separate and distinct legal entities, provided 
that no member of the joint venture may be a nationwide provider;
    (iv) The term solely operational agreement means any agreement, 
arrangement, or understanding of any kind that addresses operational 
aspects of providing a mobile service, including but not limited to 
agreements for roaming, device acquisition, and spectrum leasing and 
other spectrum use arrangements, so long as the agreement does not both 
relate to the licenses at auction and address or communicate, directly 
or indirectly, bidding at auction (including specific prices to be bid) 
or bidding strategies (including the specific licenses on which to bid 
or not to bid), or post-auction market structure.

    Note to paragraph (a): The Commission may also request 
applicants to submit additional information for informational 
purposes to aid in its preparation of required reports to Congress.

    (b) Modification and Dismissal of Short-Form Application (FCC Form 
175). (1) (i) Any short-form application (FCC Form 175) that does not 
contain all of the certifications required pursuant to this section is 
unacceptable for filing and cannot be corrected subsequent to the 
applicable filing deadline. The application will be deemed incomplete, 
the applicant will not be found qualified to bid, and the upfront 
payment, if paid, will be returned.
    (ii) If:
    (A) An individual or entity submits multiple applications in a 
single auction; or
    (B) Entities commonly controlled by the same individual or same set 
of individuals submit applications for any set of licenses in the same 
or overlapping geographic areas in a single auction; then only one of 
such applications may be deemed complete, and the other such 
application(s) will be deemed incomplete, such applicants will not be 
found qualified to bid, and the associated upfront payment(s), if paid, 
will be returned.
    (2) The Commission will provide bidders a limited opportunity to 
cure defects specified herein (except for failure to sign the 
application and to make certifications) and to resubmit a corrected 
application. During the resubmission period for curing defects, a 
short-form application may be amended or modified to cure defects 
identified by the Commission or to make minor amendments or 
modifications. After the resubmission period has ended, a short-form 
application may be amended or modified to make minor changes or correct 
minor errors in the application. Major amendments cannot be made to a 
short-form application after the initial filing deadline. Major 
amendments include changes in ownership of the applicant that would 
constitute an assignment or transfer of control, changes in an 
applicant's size which would affect eligibility for designated entity 
provisions, and changes in the license service areas identified on the 
short-form application on which the applicant intends to bid. Minor 
amendments include, but are not limited to, the correction of 
typographical errors and other minor defects not identified as major. 
An application will be considered to be newly filed if it is amended by 
a major amendment and may not be resubmitted after applicable filing 
deadlines.
    (3) Applicants who fail to correct defects in their applications in 
a timely manner as specified by public notice will have their 
applications dismissed with no opportunity for resubmission.
    (4) Applicants shall have a continuing obligation to make any 
amendments or modifications that are necessary to maintain the accuracy 
and completeness of information furnished in pending applications. Such 
amendments or modifications shall be made as promptly as possible, and 
in no case more than five business days after applicants become aware 
of the need to make any amendment or modification, or five business 
days after the reportable event occurs, whichever is later. An

[[Page 56812]]

applicant's obligation to make such amendments or modifications to a 
pending application continues until they are made.
    (c) Prohibition of certain communications. (1) After the short-form 
application filing deadline, all applicants are prohibited from 
cooperating or collaborating with respect to, communicating with or 
disclosing, to each other or any nationwide provider that is not an 
applicant, or, if the applicant is a nationwide provider, any non-
nationwide provider that is not an applicant, in any manner the 
substance of their own, or each other's, or any other applicants' bids 
or bidding strategies (including post-auction market structure), or 
discussing or negotiating settlement agreements, until after the down 
payment deadline, unless such communications are within the scope of an 
agreement described in paragraphs (a)(2)(ix)(A) through (C) of this 
section that is disclosed pursuant to paragraph (a)(2)(viii) of this 
section.
    (2) Any party submitting a short-form application that has an 
interest disclosed pursuant to Sec.  1.2112(a)(1) through (6) with 
respect to more than one short-form application for an auction must 
implement internal controls that preclude any individual acting on 
behalf of the applicant as defined for purposes of this paragraph from 
possessing information about the bids or bidding strategies of more 
than one party submitting a short-form or communicating such 
information with respect to a party submitting a short-form application 
to anyone possessing such information regarding another party 
submitting a short-form application. Implementation of such internal 
controls will not outweigh specific evidence that a prohibited 
communication has occurred, nor will it preclude the initiation of an 
investigation when warranted.
    (3) An applicant must modify its short-form application to reflect 
any changes in ownership or in membership of a consortium or a joint 
venture or agreements or understandings related to the licenses being 
auctioned.
    (4) A party that makes or receives a communication prohibited under 
paragraphs (c)(1) or (6) of this section shall report such 
communication in writing immediately, and in any case no later than 
five business days after the communication occurs. A party's obligation 
to make such a report continues until the report has been made. Such 
reports shall be filed as directed in public notices detailing 
procedures for the bidding that was the subject of the reported 
communication. If no public notice provides direction, the party making 
the report shall do so in writing to the Chief of the Auctions and 
Spectrum Access Division, Wireless Telecommunications Bureau, by the 
most expeditious means available, including electronic transmission 
such as email.
    (5) For purposes of this paragraph:
    (i) The term applicant shall include all controlling interests in 
the entity submitting a short-form application to participate in an 
auction (FCC Form 175), as well as all holders of partnership and other 
ownership interests and any stock interest amounting to 10 percent or 
more of the entity, or outstanding stock, or outstanding voting stock 
of the entity submitting a short-form application, and all officers and 
directors of that entity. In the case of a consortium, each member of 
the consortium shall be considered to have a controlling interest in 
the consortium; and
    (ii) The term bids or bidding strategies shall include capital 
calls or requests for additional funds in support of bids or bidding 
strategies.
    Example: Company A is an applicant in area 1. Company B and Company 
C each own 10 percent of Company A. Company D is an applicant in area 
1, area 2, and area 3. Company C is an applicant in area 3. Without 
violating the Commission's Rules, Company B can enter into a consortium 
arrangement with Company D or acquire an ownership interest in Company 
D if Company B certifies either:
    (1) That it has communicated with and will communicate neither with 
Company A or anyone else concerning Company A's bids or bidding 
strategy, nor with Company C or anyone else concerning Company C's bids 
or bidding strategy, or
    (2) that it has not communicated with and will not communicate with 
Company D or anyone else concerning Company D's bids or bidding 
strategy.
    (6) Prohibition of certain communications for the broadcast 
television spectrum incentive auction conducted under section 6403 of 
the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-
96).
    (i) For the purposes of the prohibition described in paragraphs 
(c)(6)(ii) and (iii) of this section, the term forward auction 
applicant is defined the same as the term applicant is defined in 
paragraph (c)(5) of this section, and the terms full power broadcast 
television licensee and Class A broadcast television licensee are 
defined the same as those terms are defined in Sec.  1.2205(a)(1).
    (ii) Except as provided in paragraph (c)(6)(iii) of this section, 
in the broadcast television spectrum incentive auction conducted under 
section 6403 of the Middle Class Tax Relief and Job Creation Act of 
2012 (Pub. L. 112-96), beginning on the short-form application filing 
deadline for the forward auction and until the results of the incentive 
auction are announced by public notice, all forward auction applicants 
are prohibited from communicating directly or indirectly any incentive 
auction applicant's bids or bidding strategies to any full power or 
Class A broadcast television licensee.
    (iii) The prohibition described in paragraph (c)(6)(ii) of this 
section does not apply to communications between a forward auction 
applicant and a full power or Class A broadcast television licensee if 
a controlling interest, director, officer, or holder of any 10 percent 
or greater ownership interest in the forward auction applicant, as of 
the deadline for submitting short-form applications to participate in 
the forward auction, is also a controlling interest, director, officer, 
or governing board member of the full power or Class A broadcast 
television licensee, as of the deadline for submitting applications to 
participate in the reverse auction.

    Note 1 to Paragraph (c): For the purposes of paragraph (c), 
``controlling interests'' include individuals or entities with 
positive or negative de jure or de facto control of the licensee. De 
jure control includes holding 50 percent or more of the voting stock 
of a corporation or holding a general partnership interest in a 
partnership. Ownership interests that are held indirectly by any 
party through one or more intervening corporations may 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 meets 
or exceeds 50 percent or represents actual control, it may be 
treated as if it were a 100 percent interest. De facto control is 
determined on a case-by-case basis. Examples of de facto control 
include constituting or appointing 50 percent or more of the board 
of directors or management committee; having authority to appoint, 
promote, demote, and fire senior executives that control the day-to-
day activities of the licensee; or playing an integral role in 
management decisions.


    Note 2 to Paragraph (c): The prohibition described in paragraph 
(c)(6)(ii) of this section applies to controlling interests, 
directors, officers, and holders of any 10 percent or greater 
ownership interest in the forward auction applicant as of the 
deadline for submitting short-form applications to participate in 
the forward auction, and any additional such parties at any 
subsequent point prior to the announcement by public

[[Page 56813]]

notice of the results of the incentive auction. Thus, if, for 
example, a forward auction applicant appoints a new officer after 
the short-form application deadline, that new officer would be 
subject to the prohibition in paragraph (c)(6)(ii) of this section, 
but would not be included within the exception described in 
paragraph (c)(6)(iii) of this section.


0
4. Section 1.2106 is amended by revising paragraph (a) to read as 
follows:


Sec.  1.2106  Submission of upfront payments.

    (a) The Commission may require applicants for licenses subject to 
competitive bidding to submit an upfront payment. In that event, the 
amount of the upfront payment and the procedures for submitting it will 
be set forth in a Public Notice. Any auction applicant that, pursuant 
to Sec.  1.2105(a)(2)(xii), certifies that it is a former defaulter 
must submit an upfront payment equal to 50 percent more than the amount 
that otherwise would be required. No interest will be paid on upfront 
payments.
* * * * *

0
5. Section 1.2107 is amended by revising the first sentence in 
paragraph (g)(1)(i) to read as follows:


Sec.  1.2107  Submission of down payment and filing of long-form 
applications.

* * * * *
    (g)(1)(i) A consortium participating in competitive bidding 
pursuant to Sec.  1.2110(b)(4)(i) that is a winning bidder may not 
apply as a consortium for licenses covered by the winning bids. * * *
* * * * *

0
6. Section 1.2110 is amended Amend Sec.  1.2110 by:
0
A. Redesignating paragraphs (b)(3) as (b)(4);
0
B. Revising paragraphs (a), (b)(1)(i) and (ii), newly redesignated 
paragraph (b)(4)(i), and paragraphs (c)(6), (f)(2), (j) and (n);
0
C. Adding a new paragraph (b)(3), (c)(2)(ii)(J), and (f)(4); and
0
D. Removing newly redesignated paragraph (b)(4)(iv).


Sec.  1.2110  Designated entities.

    (a) Designated entities are small businesses (including businesses 
owned by members of minority groups and/or women), rural telephone 
companies, and eligible rural service providers.
    (b) * * *
    (1) Size attribution. (i) The gross revenues of the applicant (or 
licensee), its affiliates, its controlling interests, and the 
affiliates of its controlling interests shall be attributed to the 
applicant (or licensee) and considered on a cumulative basis and 
aggregated for purposes of determining whether the applicant (or 
licensee) is eligible for status as a small business, very small 
business, or entrepreneur, as those terms are defined in the service-
specific rules. An applicant seeking status as a small business, very 
small business, or entrepreneur, as those terms are defined in the 
service-specific rules, must disclose on its short- and long-form 
applications, separately and in the aggregate, the gross revenues for 
each of the previous three years of the applicant (or licensee), its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests.
    (ii) If applicable, pursuant to Sec.  24.709 of this chapter, the 
total assets of the applicant (or licensee), its affiliates, its 
controlling interests, and the affiliates of its controlling interests 
shall be attributed to the applicant (or licensee) and considered on a 
cumulative basis and aggregated for purposes of determining whether the 
applicant (or licensee) is eligible for status as an entrepreneur. An 
applicant seeking status as an entrepreneur must disclose on its short- 
and long-form applications, separately and in the aggregate, the gross 
revenues for each of the previous two years of the applicant (or 
licensee), its affiliates, its controlling interests, and the 
affiliates of its controlling interests.
* * * * *
    (3) Standard for evaluating eligibility for small business 
benefits. To be eligible for small business benefits:
    (i) An applicant must meet the applicable small business size 
standard in paragraphs (b)(1) and (2) of this section, and
    (ii) Must retain de jure and de facto control over the spectrum 
associated with the license(s) for which it seeks small business 
benefits. An applicant or licensee may lose eligibility for size-based 
benefits for one or more licenses without losing general eligibility 
for size-based benefits so long as it retains de jure and de facto 
control of its overall business.
    (4) Exceptions--(i) Consortium. Where an applicant to participate 
in bidding for Commission licenses or permits is a consortium of 
entities eligible for size-based bidding credits and/or 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. Where 
an applicant to participate in bidding for Commission licenses or 
permits is a consortium of entities eligible for rural service provider 
bidding credits pursuant to paragraph (f)(4) of this section, the 
subscribers 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 Sec.  1.2107(g) of 
this chapter as a condition of license grant.
* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *
    (J) In addition to the provisions of paragraphs (b)(1)(i) and 
(f)(4)(i)(C) of this section, for purposes of determining an 
applicant's or licensee's eligibility for bidding credits for 
designated entity benefits, the gross revenues (or, in the case of a 
rural service provider under paragraph (f)(4) of this section, the 
subscribers) of any disclosable interest holder of an applicant or 
licensee are also attributable to the applicant or licensee, on a 
license-by-license basis, if the disclosable interest holder uses, or 
has an agreement to use, more than 25 percent of the spectrum capacity 
of a license awarded with bidding credits. For purposes of this 
provision, a disclosable interest holder in a designated entity 
applicant or licensee is defined as any individual or entity holding a 
ten percent or greater interest of any kind in the designated entity, 
including but not limited to, a ten percent or greater interest in any 
class of stock, warrants, options or debt securities in the applicant 
or licensee. This rule, however, shall not cause a disclosable interest 
holder, which is not otherwise a controlling interest, affiliate, or an 
affiliate of a controlling interest of a rural service provider to have 
the disclosable interest holder's subscribers become attributable to 
the rural service provider applicant or licensee when the disclosable 
interest holder has a spectrum use agreement to use more than 25 
percent of the spectrum capacity of a license awarded with a rural 
service provider bidding credit, so long as
    (1) The disclosable interest holder is independently eligible for a 
rural service provider bidding credit, and;
    (2) The disclosable interest holder's spectrum use and any spectrum 
use agreements are otherwise permissible under the Commission's rules.
* * * * *
    (6) Consortium. A consortium of small businesses, very small 
businesses, entrepreneurs, or rural service providers is a conglomerate 
organization composed of two or more entities, each of which 
individually satisfies the definition of a small business, very

[[Page 56814]]

small business, entrepreneur, or rural service provider as those terms 
are defined in this section and in applicable service-specific rules. 
Each individual member must constitute a separate and distinct legal 
entity to qualify.
* * * * *
    (f) * * *
    (2) Small business bidding credits.
    (i) Size of bidding credits. A winning bidder that qualifies as a 
small business, and has not claimed a rural service provider bidding 
credit pursuant to paragraph (f)(4) of this section, may use the 
following bidding credits corresponding to its respective average gross 
revenues for the preceding 3 years:
    (A) Businesses with average gross revenues for the preceding 3 
years not exceeding $4 million are eligible for bidding credits of 35 
percent;
    (B) Businesses with average gross revenues for the preceding 3 
years not exceeding $20 million are eligible for bidding credits of 25 
percent; and
    (C) Businesses with average gross revenues for the preceding 3 
years not exceeding $55 million are eligible for bidding credits of 15 
percent.
    (ii) Cap on winning bid discount. A maximum total discount that a 
winning bidder that is eligible for a small business bidding credit may 
receive will be established on an auction-by-auction basis. The limit 
on the discount that a winning bidder that is eligible for a small 
business bidding credit may receive in any particular auction will be 
no less than $25 million. The Commission may adopt a market-based cap 
on an auction-by-auction basis that would establish an overall limit on 
the discount that a small business may receive for certain license 
areas.
* * * * *
    (4) Rural service provider bidding credit--(i) Eligibility. A 
winning bidder that qualifies as a rural service provider and has not 
claimed a small business bidding credit pursuant to paragraph (f)(2) of 
this section will be eligible to receive a 15 percent bidding credit. 
For the purposes of this paragraph, a rural service provider means a 
service provider that--
    (A) Is in the business of providing commercial communications 
services and together with its controlling interests, affiliates, and 
the affiliates of its controlling interests as those terms are defined 
in paragraphs (c)(2) and (c)(5) of this section, has fewer than 250,000 
combined wireless, wireline, broadband, and cable subscribers as of the 
date of the short-form filing deadline; and
    (B) Serves predominantly rural areas, defined as counties with a 
population density of 100 or fewer persons per square mile.
    (C) Size attribution. (1) The combined wireless, wireline, 
broadband, and cable subscribers of the applicant (or licensee), its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests shall be attributed to the applicant (or 
licensee) and considered on a cumulative basis and aggregated for 
purposes of determining whether the applicant (or licensee) is eligible 
for the rural service provider bidding credit.
    (2) Exception. For rural partnerships providing service as of July 
16, 2015, the Commission will determine eligibility for the 15 percent 
rural service provider bidding credit by evaluating whether the 
individual members of the rural partnership individually have fewer 
than 250,000 combined wireless, wireline, broadband, and cable 
subscribers, and for those types of rural partnerships, the subscribers 
will not be aggregated.
    (ii) Cap on winning bid discount. A maximum total discount that a 
winning bidder that is eligible for a rural service provider bidding 
credit may receive will be established on an auction-by-auction basis. 
The limit on the discount that a winning bidder that is eligible for a 
rural service provider bidding credit may receive in any particular 
auction will be no less than $10 million. The Commission may adopt a 
market-based cap on an auction-by-auction basis that would establish an 
overall limit on the discount that a rural service provider may receive 
for certain license areas.
* * * * *
    (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, spectrum use agreements, and all other 
agreements including oral agreements, establishing as applicable, de 
facto or de jure control of the entity. Designated entities also must 
provide the date(s) on which they entered into each 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 Sec.  1.2114.
* * * * *
    (n) Annual reports. (1) Each designated entity licensee must file 
with the Commission an annual report no later than September 30 of each 
year for each license it holds that was acquired using designated 
entity benefits and that, as of August 31 of the year in which the 
report is due (the ``cut-off date''), remains subject to designated 
entity unjust enrichment requirements (a ``designated entity 
license''). The annual report must provide the information described in 
paragraph (n)(2) of this section for the year ending on the cut-off 
date (the ``reporting year''). If, during the reporting year, a 
designated entity has assigned or transferred a designated entity 
license to another designated entity, the designated entity that holds 
the designated entity license on September 30 of the year in which the 
application for the transaction is filed is responsible for filing the 
annual report.
    (2) 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.
    (3) A designated entity need not list and summarize on its annual 
report the agreements and arrangements otherwise required to be 
included under paragraphs (n)(1) and (n)(2) of this section if it has 
already filed that information with the Commission, and the information 
on file remains current. In such a situation, the designated entity 
must instead include in its annual report both the ULS file number of 
the report or application containing the current information and the 
date on which that information was filed.
* * * * *

0
7. Section 1.2111 is amended by removing paragraphs (a) and (b); 
redesignating paragraphs (c), (d), and (e) as paragraphs (a), (b), and 
(c); and revising newly redesignated paragraphs (a)(2), (a)(3), and 
(b)(1) to read as follows:

[[Page 56815]]

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

    (a) * * *
    (2) If a licensee that utilizes installment financing under this 
section seeks to make any change in ownership structure that would 
result in the licensee losing eligibility for installment payments, the 
licensee shall first seek Commission approval and must make full 
payment of the remaining unpaid principal and any unpaid interest 
accrued through the date of such change as a condition of approval. A 
licensee's (or other attributable entity's) increased gross revenues or 
increased total assets due to nonattributable equity investments, debt 
financing, revenue from operations or other investments, business 
development or expanded service shall not be considered to result in 
the licensee losing eligibility for installment payments.
    (3) If a licensee seeks to make any change in ownership that would 
result in the licensee qualifying for a less favorable installment plan 
under this section, the licensee shall seek Commission approval and 
must adjust its payment plan to reflect its new eligibility status. A 
licensee may not switch its payment plan to a more favorable plan.
* * * * *
    (b) Unjust enrichment payment: bidding credits. (1) A licensee that 
utilizes a bidding credit, and that during the initial term seeks to 
assign or transfer control of a license to an entity that does not meet 
the eligibility criteria for a bidding credit, will be required to 
reimburse the U.S. Government for the amount of the bidding credit, 
plus interest based on the rate for ten year U.S. Treasury obligations 
applicable on the date the license was granted, as a condition of 
Commission approval of the assignment or transfer. If, within the 
initial term of the license, a licensee that utilizes a bidding credit 
seeks to assign or transfer control of a license to an entity that is 
eligible for a lower bidding credit, the difference between the bidding 
credit obtained by the assigning party and the bidding credit for which 
the acquiring party would qualify, plus interest based on the rate for 
ten year U.S. Treasury obligations applicable on the date the license 
is granted, must be paid to the U.S. Government as a condition of 
Commission approval of the assignment or transfer. If, within the 
initial term of the license, a licensee that utilizes a bidding credit 
seeks to make any ownership change that would result in the licensee 
losing eligibility for a bidding credit (or qualifying for a lower 
bidding credit), the amount of the bidding credit (or the difference 
between the bidding credit originally obtained and the bidding credit 
for which the licensee would qualify after restructuring), plus 
interest based on the rate for ten year U.S. Treasury obligations 
applicable on the date the license is granted, must be paid to the U.S. 
Government as a condition of Commission approval of the assignment or 
transfer or of a reportable eligibility event (see Sec.  1.2114).
* * * * *
0
8. Section 1.2112 is amended by revising paragraph (b) to read as 
follows:


Sec.  1.2112  Ownership disclosure requirements for applications.

* * * * *
    (b) Designated entity status. In addition to the information 
required under paragraph (a) of this section, each applicant claiming 
eligibility for small business provisions or a rural service provider 
bidding credit shall disclose the following:
    (1) On its application to participate in competitive bidding (i.e., 
short-form application (see 47 CFR 1.2105)):
    (i) List the names, addresses, and citizenship of all officers, 
directors, affiliates, and other controlling interests of the 
applicant, as described in Sec.  1.2110, and, if a consortium of small 
businesses or consortium of very small businesses, the members of the 
conglomerate organization;
    (ii) List any FCC-regulated entity or applicant for an FCC license, 
in which any controlling interest of the applicant owns a 10 percent or 
greater interest or a total of 10 percent or more of any class of 
stock, warrants, options or debt securities. This list must include a 
description of each such entity's principal business and a description 
of each such entity's relationship to the applicant;
    (iii) List all parties with which the applicant has entered into 
agreements or arrangements for the use of any of the spectrum capacity 
of any of the applicant's spectrum;
    (iv) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  1.2110, for each of the following: 
The applicant, its affiliates, its controlling interests, and the 
affiliates of its controlling interests; and if a consortium of small 
businesses, the members comprising the consortium;
    (v) If claiming eligibility for a rural service provider bidding 
credit, provide all information to demonstrate that the applicant meets 
the criteria for such credit as set forth in Sec.  1.2110(f)(4); and
    (vi) If applying as a consortium of designated entities, provide 
the information in paragraphs (b)(1)(i) through (v) of this section 
separately for each member of the consortium.
    (2) As an exhibit to its application for a license, authorization, 
assignment, or transfer of control:
    (i) List the names, addresses, and citizenship of all officers, 
directors, and other controlling interests of the applicant, as 
described in Sec.  1.2110;
    (ii) List any FCC-regulated entity or applicant for an FCC license, 
in which any controlling interest of the applicant owns a 10 percent or 
greater interest or a total of 10 percent or more of any class of 
stock, warrants, options or debt securities. This list must include a 
description of each such entity's principal business and a description 
of each such entity's relationship to the applicant;
    (iii) List and summarize all agreements or instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility as 
a small business under the applicable designated entity provisions, 
including the establishment of de facto or de jure control. Such 
agreements and instruments include articles of incorporation and by-
laws, partnership agreements, shareholder agreements, voting or other 
trust agreements, management agreements, franchise agreements, spectrum 
leasing arrangements, spectrum resale (including wholesale) 
arrangements, and any other relevant agreements (including letters of 
intent), oral or written;
    (iv) List and summarize any investor protection agreements, 
including rights of first refusal, supermajority clauses, options, veto 
rights, and rights to hire and fire employees and to appoint members to 
boards of directors or management committees;
    (v) List separately and in the aggregate the gross revenues, 
computed in accordance with Sec.  1.2110, for each of the following: 
the applicant, its affiliates, its controlling interests, and 
affiliates of its controlling interests; and if a consortium of small 
businesses, the members comprising the consortium;
    (vi) List and summarize, if seeking the exemption for rural 
telephone cooperatives pursuant to Sec.  1.2110, all documentation to 
establish eligibility pursuant to the factors listed under Sec.  
1.2110(b)(4)(iii)(A).
    (vii) List and summarize any agreements in which the applicant has 
entered into arrangements for the use of any of the spectrum capacity 
of the license that is the subject of the application; and

[[Page 56816]]

    (viii) If claiming eligibility for a rural service provider bidding 
credit, provide all information to demonstrate that the applicant meets 
the criteria for such credit as set forth in Sec.  1.2110(f)(4).

0
9. Section 1.2114 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  1.2114  Reporting of eligibility event.

    (a) * * *
    (1) Any spectrum lease (as defined in Sec.  1.9003) or any other 
type of spectrum use agreement with one entity or on a cumulative basis 
that might cause a licensee to lose eligibility for installment 
payments, a set-aside license, or a bidding credit (or for a particular 
level of bidding credit) under Sec.  1.2110 and applicable service-
specific rules.
* * * * *

0
10. Section 1.2205 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  1.2205  Prohibition of certain communications.

    (a) * * *
    (2) For the purposes of this section, the term forward auction 
applicant is defined the same as the term applicant is defined in Sec.  
1.2105(c)(5).
* * * * *

0
11. Section 1.9020 is amended by revising paragraphs (d)(4) and (e) to 
read as follows:


Sec.  1.9020  Spectrum manager leasing arrangements.

* * * * *
    (d) * * *
    (4) Designated entity/entrepreneur rules. A licensee that holds a 
license pursuant to small business, rural service provider, and/or 
entrepreneur provisions (see Sec.  1.2110 and Sec.  24.709 of this 
chapter) and continues to be subject to unjust enrichment requirements 
(see Sec.  1.2111 and Sec.  24.714 of this chapter) and/or transfer 
restrictions (see Sec.  24.839 of this chapter) may enter into a 
spectrum manager leasing arrangement with a spectrum lessee, regardless 
of whether the spectrum lessee meets the Commission's designated entity 
eligibility requirements (see Sec.  1.2110 of this chapter) or its 
entrepreneur eligibility requirements to hold certain C and F block 
licenses in the broadband personal communications services (see Sec.  
1.2110 and Sec.  24.709 of this chapter), so long as the spectrum 
manager leasing arrangement does not result in the spectrum lessee's 
becoming a ``controlling interest'' or ``affiliate'' (see Sec.  1.2110 
of this chapter) of the licensee such that the licensee would lose its 
eligibility as a designated entity or entrepreneur.
* * * * *
    (e) Notifications regarding spectrum manager leasing arrangements. 
A licensee that seeks to enter into a spectrum manager leasing 
arrangement must notify the Commission of the arrangement in advance of 
the spectrum lessee's commencement of operations under the lease. 
Unless the license covering the spectrum to be leased is held pursuant 
to the Commission's designated entity rules and continues to be subject 
to unjust enrichment requirements and/or transfer restrictions (see 
Sec. Sec.  1.2110 and 1.2111, and Sec. Sec.  24.709, 24.714, and 24.839 
of this chapter), the spectrum manager lease notification will be 
processed pursuant to either the general notification procedures or the 
immediate processing procedures, as set forth herein. The licensee must 
submit the notification to the Commission by electronic filing using 
the Universal Licensing System (ULS) and FCC Form 608, except that a 
licensee falling within the provisions of Sec.  1.913(d) of this 
chapter may file the notification either electronically or manually. If 
the license covering the spectrum to be leased is held pursuant to the 
Commission's designated entity rules, the spectrum manager lease will 
require Commission acceptance of the spectrum manager lease 
notification prior to the commencement of operations under the lease.
* * * * *

0
12. Section 1.9030 is amended by revising the first two sentences in 
paragraphs (d)(4)(iii) and (iv) to read as follows:


Sec.  1.9030  Long-term de facto transfer leasing arrangements.

* * * * *
    (d) * * *
    (4) * * *
    (iii) The amount of any unjust enrichment payment will be 
determined by the Commission as part of its review of the application 
under the same rules that apply in the context of a license assignment 
or transfer of control (see Sec.  1.2111 and Sec.  24.714 of this 
chapter). If the spectrum leasing arrangement involves only part of the 
license area and/or part of the bandwidth covered by the license, the 
unjust enrichment obligation will be apportioned as though the license 
were being partitioned and/or disaggregated (see Sec.  1.2111(c) and 
Sec.  24.714(c) of this chapter). * * *
    (iv) A licensee that participates in the Commission's installment 
payment program (see Sec.  1.2110(g)) may enter into a long-term de 
facto transfer leasing arrangement without triggering unjust enrichment 
obligations provided that the lessee would qualify for as favorable a 
category of installment payments. A licensee using installment payment 
financing that seeks to lease to an entity not meeting the eligibility 
standards for as favorable a category of installment payments must make 
full payment of the remaining unpaid principal and any unpaid interest 
accrued through the effective date of the spectrum leasing arrangement 
(see Sec.  1.2111(a)). * * *
* * * * *

PART 27--MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

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

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


0
14. Section 27.1002 is amended by revising paragraph (a) to read as 
follows:


Sec.  27.1002  Designated entities in the 1915-1920 MHz and 1995-2000 
MHz bands.

* * * * *
    (a)(1) A small business is an entity that, together with its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, has average gross revenues not exceeding $40 
million for the preceding three years.
    (2) A very small business is an entity that, together with its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, has average gross revenues not exceeding $15 
million for the preceding three years.
* * * * *

0
15. Section 27.1104 is amended by revising paragraph (a) to read as 
follows:


Sec.  27.1104  Designated Entities in the 2000-2020 MHz and 2180-2200 
MHz bands.

* * * * *
    (a) Small business. (1) A small business is an entity that, 
together with its affiliates, its controlling interests, and the 
affiliates of its controlling interests, has average gross revenues not 
exceeding $40 million for the preceding three years.
    (2) A very small business is an entity that, together with its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, has average gross revenues not exceeding $15 
million for the preceding three years.
* * * * *

0
16. Section 27.1106 is amended by revising paragraph (a) to read as 
follows:

[[Page 56817]]

Sec.  27.1106  Designated Entities in the 1695-1710 MHz, 1755-1780 MHz, 
and 2155-2180 MHz bands.

* * * * *
    (a) Small business. (1) A small business is an entity that, 
together with its affiliates, its controlling interests, and the 
affiliates of its controlling interests, has average gross revenues not 
exceeding $40 million for the preceding three (3) years.
    (2) A very small business is an entity that, together with its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, has average gross revenues not exceeding $15 
million for the preceding three (3) years.
* * * * *

0
17. Revise Sec.  27.1301 to read as follows:


Sec.  27.1301  Designated entities in the 600 MHz band.

    (a) Small business. (1) A small business is an entity that, 
together with its affiliates, its controlling interests, and the 
affiliates of its controlling interests, has average gross revenues not 
exceeding $55 million for the preceding three (3) years.
    (2) A very small business is an entity that, together with its 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, has average gross revenues not exceeding $20 
million for the preceding three (3) years.
    (b) Eligible rural service provider. For purposes of this section, 
an eligible rural service provider is an entity that meets the criteria 
specified in Sec.  1.2110(f)(4) of this chapter.
    (c) Bidding credits. (1) A winning bidder that qualifies as a small 
business as defined in this section or a consortium of small businesses 
may use the bidding credit specified in Sec.  1.2110(f)(2)(i)(C) of 
this chapter. A winning bidder that qualifies as a very small business 
as defined in this section or a consortium of very small businesses may 
use the bidding credit specified in Sec.  1.2110(f)(2)(i)(B) of this 
chapter.
    (2) An entity that qualifies as eligible rural service provider or 
a consortium of rural service providers may use the bidding credit 
specified in Sec.  1.2110(f)(4) of this chapter.

[FR Doc. 2015-21950 Filed 9-17-15; 8:45 am]
BILLING CODE 6712-01-P