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A. 1. a.(1)(a) i) a)#)a [ PmQ)P# ## b, oT9 !#)^ `> XinQ)X#Advanced Legal WordPerfect Learning Guide   #)a [ PoQ)P# ## b, oT9 ! I. A. 1. a.(1)(a) i) a)#)a [ PpQ)P# ## b, oT9 !#)^ `> XiqQ)X#   Copyright  Portola Systems, Inc. 1987, 1988`e%APage  #)a [ PrQ)P# ## b, oT9 ! I. A. 1. a.(1)(a) i) a)#)a [ PsQ)P# ## b, oT9 !#)^ `> XitQ)X#   Page `e%*Copyright  Portola Systems, Inc. 1987, 1988 Style 8'G@6FInitial Codes for BeginningB*%- 'G.EIJ#)a [ PuQ)P# dn  ## b, oT9  [ #)a [ PvQ)P# ## b, oT9  I. A. 1. a.(1)(a) i) a)#)a [ PwQ)P# ## b, oT9 #)^ `> XixQ)X#`e%*Beginning Legal WordPerfect Learning Guide   #)a [ PyQ)P# ## b, oT9  I. A. 1. a.(1)(a) i) a)#)a [ PzQ)P# ## b, oT9 #)^ `> Xi{Q)X#Beginning Legal WordPerfect Learning Guide   #)a [ P|Q)P# ## b, oT9  I. A. 1. a.(1)(a) i) a)#)a [ P}Q)P# ## b, oT9 #)^ `> Xi~Q)X#   Copyright  Portola Systems, Inc. 1987, 1988`e%APage  #)a [ PQ)P# ## b, oT9  I. 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"x/c81,` c PE37P z-b81,iub&_ x7X8wC;,`|Xw PE37XPV"G($,`}hG PE37hP[oa,9i\  P6G;P\b#E,',%KE*f9 xr G;X6jC:,<̃Xj9 xOG;X<r5ddd,XNd6X@`7@Dy.f81,yf_ pi7D7zC;,yEXz_ pi7X|+c81,Yc*0 x]7;sH?,1Us\  P6G;P;wH?,tw4  pG;\9qH?,%:q*f9 xr G;X;sH?,<s9 xOG;=H@,`u0 PE37PD<H@,yO_ pi76uC;,iE;Xu&_ x7XX4wC;,Xw*0 x]7X@|ND,_|\  P6G;P@ND,4  pG; ?xxx,Ρx6Nhez7XH<R&HHH,X~!,H6X@`7h@?xxx,x `7X X-  y% X-  Federal Communications Commission FCC 97413 Ě I. A. 1. a.(1)(a) i) a) 1. A. 1. a.(1)(a) i) a) ` `  X01Í ÍX01Í Íhh,Vpp  xx- l  X-J+ Before the [ FEDERAL COMMUNICATIONS COMMISSION  X-Washington, DC 20554 ĐlU   XH-In the Matter of  hh,V)  X1-` `  hh,V)  X -Amendment of Part 1 of thehh,V) WT Docket No. 9782 xx-  X -Commission's Rules hh,V) pp  X -Competitive Bidding Procedureshh,V) ` `  hh,V)  X -Allocation of Spectrum Belowhh,V)ET Docket No. 9432  X -5 GHz Transferred fromhh,V)  X-Federal Government Usehh,V) ` `  hh,V)  Xb-4660!4685 MHz hh,V)  XK-  X-l G THIRD REPORT AND ORDER AND  X-SECOND FURTHER NOTICE OF PROPOSED RULE MAKING  X-l l  X-lUX` hp x (#%'0*,.8135@8:2 X4-ԍ #X\  P6G;ɒP#Amendment of Parts 20 and 24 of the Commission's Rules, Report and Order, WT Docket No. 9659,  {O-11 FCC Rcd 7824, 7891,  141 (1996) ("D, E, and F Block Report and Order"); 47 C.F.R.  24.720(f).> We sought comment on whether we should incorporate this practice into our general auction rules and thereby permit future applicants in all auctionable services to use either fiscal or calendar years and unaudited  Xv-financial statements to support statements of gross revenues.i3vC Xj -ԍ #X\  P6G;ɒP#Notice at  24.i  XH-k22. Discussion. All commenters addressing the issue support the Commission's proposal  X1-in the Notice to adopt a uniform definition of gross revenues for all auctionable services.41 X-ԍ #X\  P6G;ɒP#See CII Comments at 7; ISTA Comments at 1; Airadigm Comments at 3; AMTA Comments at 5; NextWave Reply Comments at 3. We believe that a uniform definition of gross revenues, as the essential element of our small business definitions, furthers our goal of establishing uniform definitions and is administratively efficient. Thus, we adopt a uniform definition of gross revenues in our Part 1 rules.  X -k23. Various commenters addressed specific aspects of our proposed definition of gross  X-revenues. CII supports our proposal that applicants be permitted to use either fiscal year or  X}-calendar year figures for calculation purposes.c5}m X-ԍ #X\  P6G;ɒP#CII Comments at 7.c No commenters opposed this proposal. We  Xf-are persuaded that, just as we concluded in the D, E, and F Block Report and Order, permitting use of either of these figures will assist applicants in providing the most current  X:-information available on their applications.6:  X -ԍ #X\  P6G;ɒP#D, E, and F Block Report and Order, at 134, 141. We conclude that our general gross revenue definition should permit applicants to support their gross revenue calculations using either fiscal or calendar years.  X-k24. Several commenters responded to our tentative conclusion in the Notice to accept the use of unaudited financial statements where audited financial statements are unavailable, if prepared in accordance with Generally Accepted Accounting Principles, for gross revenue calculations by auction applicants seeking to qualify for small business status. A majority of these commenters supported our tentative conclusion that where audited financial statements" 60*&&aa2"  X-are not available, they should not be required.7 Xy-ԍ #X\  P6G;ɒP#See AMTA Comments at 56; CII Comments at 7, 1112; Airadigm Reply Comments at 9, 1112; NPCS Reply Comments at 4. In particular, these commenters argue that any strict requirement that financial statements be audited is unduly burdensome for most  X-small business applicants.[8A X-ԍ #X\  P6G;ɒP#Id. [ In addition, AMTA contends that the certification requirement already present on the shortform (FCC Form 175) application is sufficient to ensure that small business applicants submit only accurate information, both financial and otherwise, as  X-part of their applications.d9 X0 -ԍ #X\  P6G;ɒP#AMTA Comments at 6.d Only two commenters, ISTA and PageNet advocate that  Xv-applicants use audited financial statements in order to qualify for small business status.:v X -ԍ #X\  P6G;ɒP#See ISTA Comments at 1; PageNet Comments at 9. After review of the comments on this issue, we conclude that such a requirement would be onerous to small business. We also agree with AMTA's observation that the certification requirement on our FCC Form 175 acts to ensure that applicants submit accurate information.  X -Furthermore, as discussed below (see Section III.C.5, infra), we also will retain the authority to audit applicants individually if there is any question concerning small business status. We therefore decline to require all applicants to use audited financial statements to support their gross revenue calculations. Audited financial statements, however, are necessary if they exist.  X -We also note that, consistent with the Small Business Act,; T X-ԍ #X\  P6G;ɒP# See 15 U.S.C.  632(c)(ii)(II). where an entity has been in existence for less than three years, the entity's gross revenues should be averaged for the relevant number of years the entity, or its predecessor in interest (affiliate), has been in existence.  XM-k25. Accordingly, as proposed in the Notice, and consistent with our broadband PCS  X8-rules,r<8  X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.720(f). r we will define gross revenues for all auctionable services as: ,kall income received by an entity, whether earned or passive, before any deductions are  X-made for costs of doing business (e.g., cost of goods sold), as evidenced by audited financial statements for the three (3) most recent calendar years or, if audited financial statements were not prepared on a calendaryear basis, for the most recently completed fiscal years preceding the filing of the applicant's shortform (FCC Form 175). If an entity was not in existence for all or part of the relevant period, gross revenues shall be evidenced by the audited financial statements of the entity's predecessorininterest or, if" <0*&&aaP" there is no identifiable predecessorininterest, unaudited financial statements certified by the applicant as accurate. When an applicant does not have audited financial statements, its gross revenues must be certified by its chief financial officer or its equivalent and must be prepared in accordance with Generally Accepted Accounting Principles.(#  X-k 3. Definition of Affiliate  X_-k26. Background. We sought comment in the Notice on our definition of "affiliate." In seeking comment on this uniform Part 1 definition, we asked, for example, whether we should amend our definition of affiliate to provide an exception for Indian tribes and Alaska Regional  X -or Village Corporations, as we did for broadband PCS and LMDS.=  X -ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.720(l)(11), 101.1112(h)(11). We a lso recognized that in August of 1996, the Small Business Administration amended and simplified its regulations  X -governing small business size standards, including its definition of the term "affiliate",^>{ y X-ԍ #X\  P6G;ɒP#See Small Business Administration, Amendment of Small Business Size Standards, Final Regulations,  {O-61 Fed. Reg. 3177 (January 31, 1996); Corrected Final Regulations, 61 Fed. Reg. 41496 (August 9, 1996) (amending 13 C.F.R. Part 121).^ and asked whether we should consider making similar changes to our rules.  X -k27. Discussion. We adopt our proposal to adopt a uniform definition of the term  X-"affiliate" for all future auctions. As we discussed in the Notice, the term "affiliate" is defined by our Part 1 rules as an individual or entity that directly or indirectly controls or has the power to control the applicant; is directly or indirectly controlled by the applicant; is directly or indirectly controlled by a third person(s) that also controls or has the power to control the  X8-applicant; or has an "identity of interest" with the applicant.|?8 X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(b)(4), 24.839(d).| We have found that this definition, which also contains detailed discussion and examples of relevant terms such as "control" and "identity of interest," has proven workable and is broad enough to address a wide variety of business structures. In particular, this definition has helped to ensure that businesses seeking small business status are truly small. We also believe that this definition,  X-by focusing on "indicia of control," is consistent with our proposal in the Second Further  X-Notice of Proposed Rulemaking (See Section IV, infra).  X-k28. CIRI requests that we include in our general definition of the term "affiliate" an exemption for Indian tribes and Alaska Regional or Village Corporations, as we did for  XV-broadband PCS,x@Vm Xt$-ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.720(l)(11).x and more recently, for LMDS.|AV  X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  101.1112(h)(11).| We agree with CIRI that entities owned"VyA0*&&aa" and controlled by Indian tribes and Alaska Regional or Village Corporations should be eligible to bid in future auctions as small businesses, notwithstanding their affiliation with other entities owned by tribes or Alaska Native Corporations whose gross revenues cause the combined average gross revenues of the entity and its affiliates to exceed the general limits for eligibility for bidding as such a business. As we stated in support of a similar exemption from our affiliation rules in LMDS, this exception will ensure that these entities will have a meaningful opportunity to participate in spectrum-based services from which they would  X_-otherwise be precluded.B_y X -ԍ #X\  P6G;ɒP#See Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate the 29.5-30.0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services Petitions for Reconsideration of the Denial of Applications for Waiver of the Commission's Common Carrier Point-to-Point  {O -Microwave Radio Service Rules; Suite 12 Group Petition for Pioneer Preference, CC Docket No. 92297, Order  {O-on Reconsideration (rel. September 12, 1997) ("LMDS Order on Reconsideration") at  10.  Furthermore, we do not believe that this exemption for the specified entities will entitle them to an unfair advantage over entities that are otherwise  X1-eligible for small business status.ZC1 X-ԍ #X\  P6G;ɒP#Id.Z  X - k29. We also take this opportunity to clarify our Part 1 definition of affiliate. Our Part 1 rules provide that parties to a joint venture are considered to be affiliated with each other for purposes of determining the gross revenues of an applicant seeking to qualify for status as a  X -small business.zD  X6-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2110(b)(4)(x).z In the past, however, the term "consortium" has been defined on a servicebyservice basis as "a conglomerate organization formed as a joint venture between or among mutually independent business firms, each of which individually satisfies the definition of a  Xy-very small business, small business or entrepreneur."Eyx  X-ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  101.1112(f) (defining the term "consortium" for LMDS). This results in each member of a consortium being defined as an affiliate of each other member. The resulting attribution of gross revenues of each member of the consortium is inconsistent with our intention to permit small or very small businesses to form consortia as a means of increasing the capital available to participate in our auctions, while still being eligible for status as a small business.  X-k30. We therefore amend Section 1.2110(b)(4)(x) to provide that a "consortium" as defined on a servicebyservice basis for purposes of determining status as a designated entity will not be treated as a "joint venture" under our attribution standards. As a result, when two or more entities form an association that meets the servicespecific definition of a "consortium," the gross revenues of each entity will not be attributed to each entity in determining eligibility for") E0*&&aa3" designated entity status. We believe that this clarification to the general definition of the term "affiliate" will enhance the ability of small businesses to form associations that will permit them to bid for licenses that would be too expensive for them individually. Auction winners have successfully used consortium structures to acquire licenses and "spinoff" licenses post X-auction, and we wish to continue to make this option available.(F X-ԍ #X\  P6G;ɒP#See "Rural Success Stories" in FCC Report to Congress on Spectrum Auctions, WT Docket No. 97150,  {O-Report, FCC 97353 (rel. October 9, 1997) ("Report to Congress") at 26. (  Xv-k 4. Definition of Rural Telephone Company  XH-k31. Background. Our current Part 1 rules define "rural telephone company" (or "rural  X1-telco") as any local exchange carrier, including affiliates, with 100,000 access lines or fewer.nG1C X% -ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(b)(3). n We noted at the time this definition was adopted that it comported with the definition that had  X -been adopted for broadband PCS.H  X-ԍ #X\  P6G;ɒP#Competitive Bidding Second Memorandum Opinion and Order, 9 FCC Rcd at 7245, 7257. In the Notice, however, we noted that we have revised the definition of rural telephone company contained in our broadband PCS rules to conform with that contained in the Communications Act, as amended by the Telecommunications Act  X -of 1996 ("1996 Act").MI  X-ԍ #X\  P6G;ɒP#Pub. L. No. 104104,  3 110 Stat. 56 (1996) ("1996 Act"); codified at 47 U.S.C.  153 (37). See also  {O-47 C.F.R.  24.720(e) and D, E, and F Block Report and Order, 11 FCC Rcd at 7855,  62.M We tentatively concluded that the definition of rural telco set forth in the 1996 Act should apply to all auctionable services.  X{-k32. Discussion. The National Telephone Cooperative Association ("NTCA") and the Rural Telecommunications Group ("RTG"), commented in support of our proposal in the  XM-Notice to adopt the definition of a rural telephone company contained in the Telecommunications Act of 1996 as the single definition of the term to be used in all  X!-auctionable services.J!  X-ԍ #X\  P6G;ɒP# See NTCA Comments at 2; RTG Reply Comments at 13.ĕ No commenters opposed our proposal. As we noted in the Notice, when we amended the broadband PCS rule, we stated that using the definition contained in  X-the 1996 Act would likely expedite the delivery of advanced services to rural areas.K  Xw!-ԍ #X\  P6G;ɒP#See D, E, and F Block Report and Order, 11 FCC Rcd at 7855,  66. We also noted that adopting the 1996 Act definition would promote uniformity of regulations and is therefore consistent with the mandate of that legislation to ease regulatory burdens and  X-eliminate unnecessary regulation.ZL  X%-ԍ #X\  P6G;ɒP#Id.Z We believe that the same reasons for amending this"3L0*&&aa" definition in the broadband PCS rules justify amending the definition in Part 1 for all services subject to competitive bidding.  X-k 33. Thus, we amend Section 1.2110(b)(3) to define the term "rural telephone company" as a local exchange carrier operating entity to the extent that such entity (A) provides common carrier service to any local exchange carrier study area that does not include either (i) any incorporated place of 10,000 inhabitants or more, or any part thereof, based on the most recently available population statistics of the Bureau of the Census, or (ii) any territory, incorporated or unincorporated, included in an urbanized area, as defined by the Bureau of the Census as of August 10, 1993; (B) provides telephone exchange service, including exchange access, to fewer than 50,000 access lines; (C) provides telephone exchange service to any local exchange carrier study area with fewer than 100,000 access lines; or (D)had less than 15 percent of its access lines in communities of more than 50,000 on the date of enactment of the Telecommunications Act of 1996.  X - k5. Installment Payments  Xy-k!34. Background. Section 309(j) of the Communications Act encourages participation by small businesses and other "designated entities" in the Commission's competitive bidding  XK-process.vMK X-ԍ #X\  P6G;ɒP#47 U.S.C.  309(j)(4)(A), (D).v Among other methods, allowing winning bidders to pay for their licenses using installment plans has been one method we have used to encourage small business involvement  X-in the wireless marketplace. In the Competitive Bidding Second Report and Order, we adopted a framework for establishing installment payment plans that we believed would be an effective way to promote the participation of small businesses in the provision of spectrumbased telecommunications services and an effective tool for efficiently distributing licenses  X-and services among geographic areas.Ny X-ԍ #X\  P6G;ɒP#Competitive Bidding Second Report and Order, 9 FCC Rcd at 2391,  240. Our general competitive bidding rules currently allow small businesses to pay a substantial amount of their high bids in installments over the term  X-of their licenses.jO* Xp-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(e).j We observed in the Notice that small businesses have been successful  X-bidders in the auctions in which installment payment plans were offered.P X !-ԍ #X\  P6G;ɒP#See Notice at  34. See also Report to Congress at 27. In the Notice, we sought comment on a variety of proposals regarding our installment payment program intended to improve the ability of small businesses to participate successfully in future  X=-auctions. We also sought comment on whether we should offer higher bidding credits in lieu of installment payments. "P0*&&aay"Ԍ X-k"35. In considering several petitions for reconsideration of the LMDS Second Report and  X-Order, we recently eliminated installment payment provisions in LMDS and indicated that we would reexamine our installment payment rules in considering the general proposals regarding  X-installment payments in this proceeding. QC X8-ԍ #X\  P6G;ɒP#See LMDS Second Order on Reconsideration. See also, Petitions for Reconsideration of the LMDS  {O!-Second Report and Order filed by CellularVision USA, Inc. ("CellularVision"), WebCel Communications, Inc. ("WebCel"), Cook Inlet Region, Inc. ("Cook Inlet"), LBC Communications, Inc. ("LBC"), the Rural Telecommunications Group ("RTG"), the Independent Alliance, and Sierra Digital Communications, Inc.  Similarly, we eliminated installment payment  X-provisions in the upper 200 channels of the 800 MHz SMR service,R X, -ԍ #X\  P6G;ɒP#See 800 MHz Memorandum Opinion and Order and Order on Reconsideration at  130. and deferred until this proceeding our decision on whether to make an installment payment plan available for the  Xz-auction of the lower 80 and General Category channels in the 800 MHz SMR service.aS{z X -ԍ #X\  P6G;ɒP#See Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR  {O-Systems in the 800 MHz Frequency Band, PR Docket No. 93144, Second Report and Order, FCC 97223 (rel. July 10, 1997) at  279. a  XL-k#36. Earlier this year, the Commission received several requests, from both C and F block  X5-licensees, for relief associated with the installment payment program.T5  X-ԍ #X\  P6G;ɒP#See Installment Payment Public Notice. See also Letter from Thomas Gutierrez, Esq., et al to Michele C. Farquhar, Esq., Chief, Wireless Telecommunications Bureau (March 13, 1997). On March 31, 1997, in response to a joint request from several C block licensees seeking to modify their installment payment obligations, and because of other debt collection issues, the Bureau  X -suspended the deadline for payment of installment payments for all C block licensees.U @  X-ԍ#X\  P6G;ɒP# See Installment Payments for PCS Licenses, Order, DA 97649 (rel. March 31, 1997). On  X -April 28, 1997, the Bureau extended the suspension to F block licensees.V  X{-ԍ#X\  P6G;ɒP# See "FCC Announces Grant of Broadband Personal Communications Services D, E, and F Block  {Od-Licenses," Public Notice, DA 97-883 (rel. April 28, 1997) at 2.  X -k$37. On June 2, 1997, the Bureau, explaining that it had received several proposals from C block licensees regarding alternative financing arrangements and a petition for rule making  X}-regarding the issue of broadband PCS C block installment payments, issued the Installment  Xh-Public Notice seeking comment on these proposals and invited any "additional proposals for  XS-addressing the C and F block broadband PCS financing terms." WGSl Xp#-ԍ  #X\  P6G;ɒP#Installment Payment Public Notice. Several parties also filed petitions for reconsideration in the Commission's paging proceeding, in which they requested that the Commission reconsider its adoption of  {O#%-installment payment plans for small businesses. See Revision of Part 22 and Part 90 of the Commission's Rules  {O%-to Facilitate Future Development of Paging Systems, Petitions for Reconsideration, filed by Paging Network, Inc."%V0*&&&" and Personal Communications Industry Association, April 11, 1997.  The Bureau also sought"SXW0*&&aag"  X-comment on whether C block licensees should be permitted to prepay their installment debt.XX X -ԍ #X\  P6G;ɒP#The Bureau also conducted an "FCC Public Forum" on June 30, 1997, to discuss broadband PCS C and F block installment payment issues. In addition, the Commission established an FCC Task Force which included representatives from the Bureau, the Office of Plans and Policy, the Office of General Counsel, and the Office of Communications Business Opportunities. This Task Force was charged with evaluating the C block installment payment program, considering proposals for alternative financing arrangements submitted by licensees, and recommending to the Commission how to respond to those proposals. After consideration of the extensive record in this proceeding, the Commission adopted a menu of options to assist C block licensees experiencing financial difficulties under their  X-installment payment obligations.YG X] -ԍ #X\  P6G;ɒP#See Amendment of the Commission's Rules Regarding Installment Payment Financing for Personal  {OF -Communications Services (PCS) Licensees, Second Report and Order and Further Notice of Proposed Rule  {O-Making, WT Docket No. 9782, 62 Fed Reg 55348 (rel. October 16, 1997) ("Second Report and Order and  {O-Further Notice of Proposed Rule Making"). Citing the difficulties encountered in the past, the Commission proposed not to adopt an installment payment plan for the reauction of licenses  X-surrendered pursuant to these options.Z  X>-ԍ #X\  P6G;ɒP#Second Report and Order and Further Notice of Proposed Rule Making at  101.  Xv-  X_-k%38. Discussion. After careful review of the comments in response to our general Part 1  XH-rule making, the comments in response to the Installment Payment Public Notice, and our recent decisions in the broadband PCS C block, LMDS and 800 MHz SMR services, we have determined that installment payments should not be used in the immediate future as a means  X -of financing small business participation in our auction program.[  Xg-ԍ #X\  P6G;ɒP#See "FCC Announces Spectrum Auction Schedule for 1998," Public Notice, DA 972497 (rel. November 25, 1997), announcing the following upcoming auctions: LMDS, 220 MHz, broadband C block Reauction, 39 GHz, Paging, 800 MHz SMR (Lower 80 and General Category Channels), Location Monitoring Services (LMS),  {O-Public Coast Stations, Pending Analog Broadcast Licenses for Commercial Radio and Television Stations. See  {O-also "FCC Announces Auction Schedule for the General Wireless Communications Service," Public Notice, DA 972634 (rel. December 17, 1997).  As we indicated in the  X -Second Report and Order in this Docket, the Commission must balance competing objectives  X -in Section 309(j) that require, inter alia, that it promote the development and rapid deployment of new spectrumbased services and ensure that designated entities are given the  X -opportunity to participate in the provision of such services.\ N Y"-#Xw P7 |XP#э # c P7 P## X\  P6G;ɒP#See 47 U.S.C.  309(j)(3) and (4). We note that our experience has demonstrated that installment payments may not be necessary to ensure a meaningful opportunity for small businesses to participate successfully in our auction program. For example, in the cellular auction of licenses for unserved areas, which had no special bidding"h\0*&&aah" provisions, 36 percent of the licenses went to small or very small businesses. We also stated that in assessing the public interest, we must try to ensure that all the objectives of Section 309(j) are considered. The Commission has found, for example, that obligating licensees to pay for their licenses as a condition of receipt requires greater financial accountability from  X-applicants.] Y-#Xj\  P6G;ynXP#э#Xw PE37 |XP# # c P7 P## X\  P6G;ɒP#See 800 MHz Memorandum Opinion and Order at  130.   Xv-k&39. In addition, questions have been raised in bankruptcy litigation about whether the Commission can quickly reclaim licenses should a licensee declare bankruptcy (even though licenses are expressly conditioned upon payment and cancel automatically in the event of non X1-payment) resulting in significant delays in the provision of service to the public.^1z X\ -ԍ #X\  P6G;ɒP#Report to Congress at 39.  Ą While we are confident of prevailing in any litigation, until controlling precedent is established or legislation addressing the conflicting rights is enacted, such delays may occur. In this regard, the Commission has strongly urged Congress to adopt legislation that would clarify that provisions of the Bankruptcy Code (1) are not applicable to any FCC license for which a payment obligation is owed; (2) do not relieve any licensee from payment obligations; and (3) do not affect the Commission's authority to revoke, cancel, transfer or  X-assign such licenses._A+ Xl-ԍ #X\  P6G;ɒP#See Report to Congress at 39. See also Letters from the FCC Commissioners (1) to the Honorable Orrin G. Hatch and the Honorable Patrick J. Leahy; and (2) to the Honorable Henry J. Hyde and the Honorable John Conors, both dated September 18, 1997; Letter from FCC Chairman Reed E. Hundt to the Honorable Pete  yO-Domenici and the Honorable John R. Kasich, dated July 25, 1997. We also note that, in order to balance the impact on small businesses of our decision to discontinue the use of installment payments in the near future, we are  Xb-adopting higher bidding credits than those proposed in the Notice (see Section III.B.6, infra).  X6-k'40. Therefore, subject to our proposals in the Second Further Notice of Proposed Rule  X!-Making, Section IV, infra, we conclude that until further notice, installment payments should not be offered in auctions as a means of financing small businesses and other designated entities seeking to secure spectrum licenses. Consistent with this decision, we hereby eliminate installment payments in the auction of the lower 80 and General Category channels  X-in the 800 MHz SMR service.`4 X -ԍ #X\  P6G;ɒP#See 800 MHz Second Report and Order at  279. Although Merlin submits that the elimination of the Commission's installment payment provisions in any service would be contrary to the  X-Commission's conclusions in previous rule makings,fa  X/$-ԍ #X\  P6G;ɒP#Merlin Comments at 4.f we believe that this decision is consistent with suggestions of CIRI, as well as our general experience in examining the" a0*&&aa2"  X-success of the installment payment program to date.Rb Xy-ԍ #X\  P6G;ɒP#CIRI asserts that installment payment plans fueled speculation in the broadband PCS auctions, encouraged expectations of Commission relief from payment obligations, and saddled the Commission with difficult creditrelated tasks for which it has no experience. CIRI further argues that installment payment programs force the Commission to balance its duty to regulate the provision of wireless services with its  {O-sometimes conflicting obligation to manage the federal debt responsibly. See CIRI Comments at 11; Petition for Rule Making Regarding the Administration and Disposition of Competitive Bidding Installment Payment  {OL-Obligations filed by Cook Inlet Region, Inc. (May 7, 1997) ("CIRI Petition for Rule Making").R As we recently recognized in eliminating installment payments for LMDS licensees, Congress did not require the use of installment payments in all auctions, but rather recognized them as one means of promoting  X-the objectives of Section 309(j)(3) of the Communications Act.ccO - X -#Xj\  P6G;ynXP#э#X\  P6G;ɒP# #X\  P6G;ɒP#Specifically, Section 309(j)(4) of the Communications Act states that the Commission shall, in  {O -prescribing regulations pursuant to these objectives and others, "consider alternative payment schedules and methods of calculation, including lump sums or guaranteed installment payments, with or without royalty  {O-payments, or other schedules or methods that promote the objectives described in paragraph (3)(B) . . . ." See 47  {O-U.S.C.  309(j)(4)(A) (emphasis added). See also Omnibus Budget Reconciliation Act of 1993, Report of the Committee on the Budget, House of Representatives, to Accompany H.R. 2264, A Bill to Provide for Reconciliation Pursuant to Section 7 of the Concurrent Resolution of the Budget for Fiscal Year 1994, May 25, 1993, at p. 255:   While it is clear that, in many instances, the objectives of section 309(j) will be best served by a traditional, "cashonthebarrelhead" auction, it is important that the Commission employ different methodologies as appropriate. Under this subsection, the Commission has the flexibility to utilize any combination of techniques that would serve the public interest.c The Commission continues to experiment with different means of achieving its obligations under the statute, and has  X-offered installment payments to licensees in several auctioned wireless services.d D X-#Xj\  P6G;ynXP#э #X\  P6G;ɒP##X\  P6G;ɒP#See, e.g., Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP  {Ok-Docket No. 93253, Fourth Report and Order, 9 FCC Rcd 2330 (1994) (Interactive Video Data Services); Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253,  {O-Third Report and Order, 9 FCC Rcd 2941 (1994) ("Narrowband PCS Third Report and Order") (regional narrowband PCS); Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP  {O-Docket No. 93253, Fifth Report and Order, 9 FCC Rcd 5532 (1994) (broadband PCS); Implementation of Parts 21 and 74 of the Commission's Rules With Regard to Filing Procedures in the Multipoint Distribution Service  {O!-and in the Instructional Television Fixed Service, PP Docket No. 93253, Report and Order, 10 FCC Rcd 9589 (1995) (Multipoint Distribution Service); and Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896901 MHz and the 935940 MHz Bands Allotted to the Specialized Mobile Radio Pool, PR Docket No. 89553, Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253, Implementation of Sections  {O "-3(n) and 322 of the Communications Act, GN Docket No. 93252, Second Order on Reconsideration and  {O"-Seventh Report and Order, 11 FCC Rcd 2639 (1995) (900 MHz Specialized Mobile Radio ("SMR")). Installment payments are not the only tool available to assist small businesses. Indeed, we have"v)d0*&&aa"  X-conducted auctions without installment payments.3ek Xy-#Xw P7 |XP## Xj\  P6G;ynXP#э #X\  P6G;ɒP#Such as the auctions of licenses for the Wireless Communications Service ("WCS"), nationwide  {Ob-narrowband PCS, and cellular unserved areas. See, respectively, Amendment of the Commission's Rules to  {O,-Establish Part 27, the Wireless Communications Service ("WCS"), GN Docket No. 96228, Report and Order,  {O-FCC 9750, 62 Fed. Reg. 9636 (rel. February 19, 1997) ("WCS Report and Order"); Narrowband PCS Third  {O-Report and Order; and Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253, Amendment of Part 22 of the Commission's Rules to Provide for the Filing and Processing of Applications for Unserved Areas in the Cellular Service and to Modify Other Cellular Rules, CC Docket No.  {O-906, Ninth Report and Order, 11 FCC Rcd 14769 (1996).3 Moreover, Section 3007 of the Balanced Budget Act requires that the Commission conduct certain future auctions in a manner that ensures that all proceeds from such bidding are deposited in the U.S. Treasury not later than September 30, 2002. Although we seek comment on offering installment payment plans in  X-the future (see Section IV), we believe that Section 3007 may require that these auctions be  X-conducted without offering longterm installment payments.Uf Y;-#Xj\  P6G;ynXP#э#Xw PE37 |XP# # Xj\  P6G;ynXP##c P7 P## X\  P6G;ɒP#See Section 3001 of the Omnibus Consolidated Appropriations Act for 1997, P.L. 104208, 110 Stat.  {O%-3009 (1996) ("Omnibus Consolidated Appropriations Act"). See also the Balanced Budget Act of 1997. The Conference Report on the Balanced Budget Act of 1997 indicates that the deadline set forth in Section 3007 "applies to all competitive bidding provisions in this title of the conference agreement and any amendments to other law made in this title." Conference Report on H.R. 2015, Balanced Budget Act of 1997, Congressional Record House, Vol. 143, No. 109 Part II, at H6176.U  Xa-k (41. In this regard, we agree with commenters such as CIRI, that contend that increased bidding credits will allow responsible small bidders with appropriately tailored business plans  X3-to secure adequate private financing to be successful in future auctions.ug3  X{-ԍ #X\  P6G;ɒP#CIRI Petition for Rule Making.u Further, as we have already noted, Section 309(j) requires the Commission to consider alternative methods to allow for dissemination of licenses among designated entities, including small businesses. We  X -believe that the rules we adopt below (see Section III.B.6, infra) regarding the use of bidding credits for small business applicants in future auctions will both fulfill the mandate of Section 309(j) to provide small businesses with the opportunity to participate in auctions and ensure that new services are offered to the public without delay.  X}-k)42. Merlin contends that while significant bidding credits can be useful in helping smaller entities win licenses when they bid against larger companies, bidding credits alone do not help  XO-smaller entities access the capital required to build a spectrumbased service.fhOH XH"-ԍ #X\  P6G;ɒP#Merlin Comments at 5.f In addition, Merlin states that eliminating the installment payment plan would raise the cost of capital for small businesses which would be forced to borrow additional funds from commercial lenders"!h0*&&aa"  X-at higher interest rates.fi Xy-ԍ #X\  P6G;ɒP#Merlin Comments at 7.f Merlin also argues that because many small businesses have relied on the current installment plan terms in formulating business plans necessary to bid in upcoming auctions, any decision to eliminate the installment payment program could  X-effectively preclude small business participation in future auctions altogether.hjy X-ԍ #X\  P6G;ɒP#Merlin Comments at 56.h We disagree with Merlin's assertions. As we have discussed, we believe that the increased bidding credits we adopt below will help fulfill the mandate of Section 309(j)(4)(D) of the Communications Act to provide small businesses with the opportunity to participate in spectrumbased  X_-services.(kE_* X: -#Xj\  P6G;ynXP#э#X\  P6G;ɒP# 47 U.S.C.  309(j)(4)(D). Additionally, providing a sufficient period of time for potential small business bidders to formulate their business plans is important. Congress acknowledged this in the Balanced  {O -Budget Act, and this is an issue to which we are sensitive. See "LMDS Auction Postponed Until February 18,  {O-1998," Public Notice, DA 972352 (rel. November 10, 1997). ( As noted above, this approach was successful in enabling small businesses to participate in the WCS auction, in which we were unable to employ installment payments  X1-because of the statutory deadline for depositing auction revenues in the U.S. Treasury.lE17 X-#Xj\  P6G;ynXP#э#X\  P6G;ɒP# See Amendment of the Commission's Rules to Establish Part 27, the Wireless Communications Service  {O-("WCS"), GN Docket No. 96228, Notice of Proposed Rulemaking, FCC 96441, 61 Fed. Reg. 59048 (rel.  {O-November 12, 1996), at  63; and WCS Report and Order at  182. See also Section 3001 of the Omnibus Consolidated Appropriations Act. We also recently used this approach in establishing rules for the auction of licenses for 800 MHz  X -SMR and LMDS.2m D  X-#Xj\  P6G;ynXP#э #X\  P6G;ɒP#See 800 MHz MO&O. In the 800 MHz auction, 10 of the 14 bidders winning licenses qualified as either small or very small businesses. These bidders won 38 of 525 licenses offered. 2  X -k*43. We recognize that the Commission previously adopted rules for both the 220 MHz and paging services that permit eligible small businesses to pay for their licenses in  X -installments.,n  X-ԍ #X\  P6G;ɒP#See 220 MHz Third Report and Order, 12 FCC Rcd at 10943,  301; Paging Second Report and Order  {O-and Further Notice of Proposed Rule Making, 12 FCC Rcd at 281314,  184. , Several petitions for reconsideration have been filed in these proceedings that  X-remain pending before the Commission.oy8 Xy!-ԍ #X\  P6G;ɒP#See, e.g., Arch Communications, Inc., Petition for Partial Reconsideration and Request for Clarification (filed April 11, 1997); Paging Network, Inc., Petition for Reconsideration and Clarification (filed April 11, 1997); Personal Communications Industry Association, Petition for Reconsideration (filed April 11, 1997). The Commission will resolve these petitions separately in a manner consistent with our decision herein to suspend the use of installment payment plans at least until our rights to recover and reauction licenses in a timely fashion are established. "Kyo0*&&aa"Ԍ X-ԙk 6. Bidding Credits  X-k+44. Background. The current general competitive bidding rules provide for bidding  X-credits (i.e., payment discounts) for eligible designated entities and state that servicespecific rules will specify the designated entities eligible for bidding credits, the licenses for which  X-bidding credits are available, the amounts of bidding credits, and other procedures.jp X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(f).j Thus, the Commission has adopted separate rules governing bidding credits for various auctionable  Xa-services.vqay X -ԍ #X\  P6G;ɒP#See, e.g. 47 C.F.R  24.712.v We proposed in the Notice that our general competitive bidding rules be amended so that the levels of available bidding credits are defined and uniform for all auctionable services. We proposed a schedule of bidding credits that we believed would provide adequate opportunities for small businesses of varying sizes to participate in spectrum auctions. We also asked how limiting the use of installment payments should affect the levels of bidding credits that are offered.  X -k,45. Discussion. Although all commenters addressing the issue are largely supportive of the use of bidding credits as a means of ensuring the widest possible participation in future  X-auctions,bry* Xo-ԍ #X\  P6G;ɒP#See Airadigm Comments at 6; CIRI Comments at 1112; CII Comments at 13; PCIA Comments at 3; AMTA Comments at 1011; Merlin Comments at 1516 and Reply Comments at 3; Compu-DAWN Comments at 9; NTCA Comments at 23; RTG Reply Comments at 1, 6; NPCS Reply Comments at 5.b there is disagreement among commenters as to whether a standard schedule of bidding credits for small businesses is desirable. For example, CII supports our proposal to  Xf-standardize the sliding scale of bidding credits that is available to an applicant. Specifically, CII believes that granting businesses of different sizes different levels of bidding credits in different services threatens to result in inconsistent participation by small businesses in  X!-spectrum auctions.ds!k X=-ԍ #X\  P6G;ɒP#CII Comments at 13.d In contrast, some commenters oppose any set schedule of bidding credits, and believe that the Commission should specify appropriate bidding credits for each  X-auctionable service.t  X-ԍ #X\  P6G;ɒP#See PCIA Comments at 3; AMTA Comments at 1011; Compu-DAWN Comments at 9. Among these, PCIA and AMTA believe that the Commission should continue to examine what constitutes an effective bidding credit on a servicebyservice basis because the financing requirements of different spectrumbased services may necessitate use of different size bidding credits to provide the proper assurances that small businesses will be  X-able to effectively compete.}u  X%-ԍ #X\  P6G;ɒP#PCIA Comments at 3; AMTA Comments at 1011. } As we stated in the Notice, we believe that an approach in"~ u0*&&aaQ" which we provide certainty for future auctions about the size of available bidding credits will benefit small businesses because potential bidders will have more information well in advance  X-of the auction than previously about how such levels will be set.ov XK-ԍ #X\  P6G;ɒP#See supra at  3638.o Once a small business definition is adopted for a particular service, eligible businesses will benefit they are able to refer to a schedule in our Part 1 rules to determine the level of bidding credit available to them. We therefore adopt our proposal to create a standard schedule of bidding credits.  X_-k-46. In light of our decision (see Section III.B.5, supra) to suspend installment payment financing for the near future, we have determined that higher bidding credits than those  X3-proposed in the Notice would better effectuate our statutory mandate. Airadigm supports  X -larger bidding credits than those proposed by the Commission.w y XH -ԍ #X\  P6G;ɒP# Airadigm Comments at 6, Reply Comments at 9. Similarly, CIRI contends that unless the Commission is prepared to establish the creditworthiness of installment payment applicants, the Commission should offer substantial bidding credits to small  X -businesses in lieu of government financing.x * X-ԍ #X\  P6G;ɒP#CIRI Comments at 11 and Reply Comments at 23. We note that some commenters argue that, in relation to installment payment provisions, bidding credits are less effective in allowing  X -designated entities to participate in the Commission's auction program.}y  X7-ԍ #X\  P6G;ɒP#See, e.g., Merlin Reply Comments at 3.} For example, Pocket states that bidders often "bid through" bidding credits and that bidding credits tend to  X}-result in higher bids and, in general, higher auction prices.hz} X-ԍ #X\  P6G;ɒP#Pocket Comments at 45.h We believe that without installment payments, bidding credits, coupled with providing bidders sufficient time to raise financing, will enable small businesses to successfully compete in future auctions. Also, tiered bidding credits have proven to work well and provide for more competition between small business participants of different sizes. The use of tiered bidding credits was successful in enabling small businesses to participate in the WCS auction, in which we were unable to employ installment payments because of the statutory deadline for depositing auction revenues  X-in the U.S. Treasury.{=  X -ԍ #X\  P6G;ɒP#See WCS Report and Order, 12 FCC Rcd at 10785,  182. Finally, while we recognize Pocket's concerns about the possibility that bidders "bid through" bidding credits, we do not believe that this problem is significant where not all bidders are eligible for bidding credits, and the size of the bidding credit varies among those who are eligible.  Xi- k.47. Consistent with this reasoning, we adopt the following schedule of bidding credits for"i {0*&&aa1" use in future auctions in which provisions for designated entities are offered: O ddx !ddx<< O      Average Annual Gross Revenues Bidding Credits q  h  Not to exceed $3 millionh  35%q q  Not to exceed $15 millionuh  25%q   h  Not to exceed $40 million  15% u We recognize that these credits are higher than some previously adopted for specific  X -services.?|  t Xa -ԍ #X\  P6G;ɒP#For instance, a business with average gross revenues of not more than $3 million in the 900 MHz SMR  {OJ -auction received a 15% bidding credit rather than the 35% bidding credit we adopt. See 47 C.F.R.  90.814(b)(2). In contrast, our decision is consistent with our rules for the broadband PCS F block, in which a  {O-business with average gross revenues of not more than $15 million received a 25% bidding credit. See 47 C.F.R.  24.717(b).? Based on our past auction experience and the suspension of installment payments, however, we believe that the approach taken here will provide adequate opportunities for small businesses of varying sizes to participate in spectrum auctions.  X -k/48. We recognize that Merlin recommends providing higher bidding credits than those  Xu-which we adopt.j}ut X-ԍ #X\  P6G;ɒP#Merlin Comments at 1516.j Specifically, Merlin suggests that (1) businesses with average gross revenues for the preceding three years not exceeding $3 million be eligible for bidding credits of 40 percent; (2) businesses with average gross revenues for the preceding three years not exceeding $15 million be eligible for bidding credits of 35 percent; and (3) businesses with average gross revenues for the preceding three years not exceeding $40 million be eligible for  X-bidding credits of 25 percent.j~Nt X-ԍ #X\  P6G;ɒP#Merlin Comments at 1718.j As discussed above, we believe that higher bidding credits  X-than those proposed in the Notice are necessary now that our installment payment program is suspended. We believe that the schedule of bidding credits we adopt is reasonable in light of our decision to suspend installment payments for services auctioned in the immediate future, and expect that it will prove sufficient to enable small businesses to obtain spectrum licenses through our auction program. Thus, we decline to adopt Merlin's proposal. We also note  Xz-that we seek comment in this Second Further Notice of Proposed Rule Making on means other than bidding credits and installment payments by which the Commission might facilitate the participation of small businesses in our spectrum auction program.  X -k " ~0*&&aaE"  X-k7. Unjust Enrichment  X-k049. Background. In the Notice, we observed that unjust enrichment provisions in our general competitive bidding rules and servicespecific rules vary. Under our general competitive bidding rules, a licensee seeking Commission approval of a transfer of control or an assignment of a license acquired through the competitive bidding process utilizing installment payments is required to pay the remaining principal balance as a condition of the transfer. No payment is required, however, when the proposed transferee or assignee is qualified to obtain the same installment financing and assumes the applicant's installment  X3-payment obligations.j3t X -ԍ #X\  P6G;ɒP#47 C.F.R.  1.2111(c).j In the broadband PCS unjust enrichment rule, however, we specify that applicants seeking to assign or transfer control of a license to an entity not meeting the eligibility standards for installment payments must pay not only unpaid principal as a condition of Commission approval but also any unpaid interest accrued through the date of  X -assignment or transfer.m yt X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.716(d)(1).m This rule also provides that if a licensee utilizing installment financing seeks to make any change in its ownership structure that would result in the loss of eligibility for installment payments, it must pay the unpaid principal and accrued interest as a  X-condition of Commission approval of the change.m*t Xm-ԍ #X\  P6G;ɒP#47 C.F.R.  24.716(d)(2).m Finally, in recognition of the tiered installment payment plans offered to broadband PCS licensees, the rule provides that if a licensee seeks to make any change in ownership that would result in the licensee qualifying for a less favorable installment plan, it must seek Commission approval and adjust its payment  X6-plan to reflect its new eligibility status.m6t X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.716(d)(3).m A licensee, under this rule, may not switch its payment plan to a more favorable plan.  X-k150. Under our general competitive bidding rules, a licensee seeking Commission approval of a transfer of control or an assignment of a license acquired through the competitive bidding process utilizing bidding credits, or proposing to take any other action relating to ownership or control that will result in loss of eligibility for such bidding credits, is required to pay the  X-sum of the amount of the bidding credit plus interest as a condition of FCC approval.jt X!-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2111(d).j Under our broadband PCS rules, if, within the original term, a licensee applies 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 must be paid as a condition of approval of the"9 = 0*&&aaE"  X-assignment or transfer.t Xy-ԍ #X\  P6G;ɒP#47 C.F.R.  24.712(b)(2), 24.717(c)(2). We proposed to amend our general unjust enrichment rules to conform them to our broadband PCS rules.  X-k251. We also requested comment in the Notice on whether we should adopt a uniform unjust enrichment provision, and if so, whether it should be modeled on those we have recently adopted for some other services that provides a scale of decreasing payment liability  Xx-for licensees that received a bidding credit based on the number of years a license is held.xyt X -ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  90.810(b)(1) (SMR). We also requested comment on unjust enrichment rules as they apply to partitioning and  XJ-disaggregation.}J*t X% -ԍ #X\  P6G;ɒP#See Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services  {O-Licensees, Report and Order and Further Notice of Proposed Rule Making, 11 FCC Rcd 21831 at 21851,  31 {O-36, 55 (1996) ("Partitioning and Disaggregation Report and Order"). We asked whether, assuming we decide to adopt partitioning and disaggregation for various services, how the unjust enrichment rules should apply when the partitioner or disaggregator is the recipient of a bidding credit or is paying on an installment  X -payment plan. We also asked whether we should adopt for all auctionable services the same  X -provisions that we adopted for broadband PCS.Z ot X-ԍ #X\  P6G;ɒP#Id.Z  X -k352. Discussion. We adopt our proposal to conform our Part 1 unjust enrichment rules to the broadband PCS rules. We believe that effective unjust enrichment rules are necessary to ensure that meaningful small business participation in spectrumbased services is not thwarted  X{-by transfers of licenses to non-designated entities. As we stated in the Notice, the broadband PCS unjust enrichment rules are preferable to our current general unjust enrichment rules because they provide greater specificity about funds due at the time of transfer or assignment and specifically address changes in ownership that would result in loss of eligibility for installment payments, which the current general rules do not address. The broadband PCS rules also address assignments and transfers between entities qualifying for different tiers of installment payments or bidding credits, thus supplying clearer guidance for auctions in which tiered installment payment plans or bidding credits are provided. Commenters addressing this issue largely support this decision. For example, Pocket and Ericsson both argue that modified unjust enrichment rules would still deter transfers designed to subvert the Commission's rules, but would provide businesses with more flexibility in situations of financial distress and permit the transfer of individual licenses that no longer comport with  Xi-their business plans.i t X:%-ԍ #X\  P6G;ɒP#Pocket Comments at 6; Ericsson Reply Comments at 4. "i! 0*&&aaE"Ԍ X-ԙk453. Current as well as future licensees will be governed by the rules we adopt providing for unjust enrichment payments upon assignment, transfer, partitioning and disaggregation. While we did not receive significant comment on this issue, we note that in awarding licenses in the past, the Commission has emphasized that the terms associated with the continued grant of a license will be governed by current Commission rules and regulations. For example, in awarding licenses to C block licensees paying for their licenses in installments, the Commission indicated in the associated "Note" and "Security Agreement" that the terms of the installment plan would be governed by and construed in accordance with then-applicable Commission orders and regulations, as amended. Therefore, we conclude that the unjust enrichment rules we adopt apply to existing licensees, and supersede servicespecific rules  X -where applicable. Specifically, these rules will supersede existing unjust enrichment  X -provisions in the narrowband and broadband PCS , WCS, 900 MHz, and IVDS services. t X| -ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.309(f) (narrowband PCS), 24.711 (C block), 24.716(d) (F block), 27.209(d)(1), (2) (WCS), 90.812(b) (900 MHz), 95.816(e) (IVDS). As  X -discussed above (see Section III.B.5, supra), we suspend the use of installment payments for the immediate future as a means of financing small business participation in our auction program. As a result, our decision with regard to unjust enrichment payments as they relate to licensees paying for their licenses in installment payments will apply only to existing licensees, their transferees and assignees (until we reinstate installment payments).  Xd-k a. Installment Payments  X6-k554. For existing licensees who make use of Commission installment payment financing, we amend Section 1.2111(c) to conform to our broadband PCS rules. Specifically, if a licensee seeks to assign or transfer control of its license to an entity not meeting the eligibility standards for installment payments, the licensee must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of the assignment or transfer as a condition of Commission approval. Similarly, if the licensee seeks to make any change in ownership structure that would result in the licensee losing eligibility for installment payments, the licensee must first seek Commission approval and must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of such  Xg-change as a condition of approval.V gAt XY-ԍ #X\  P6G;ɒP#We note that, consistent with out broadband PCS rules, a licensee's (or other attributable entity's)  {OB -increased gross revenues or increased total assets due to nonattributable equity investments (i.e., from sources whose gross revenues and total assets are not considered under  24.709(b)), 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.V If a licensee seeks to make any change in ownership that would result in the licensee qualifying for a less favorable installment plan, the licensee "P"0*&&aaE" must seek Commission approval and must adjust its payment plan to reflect its new eligibility  X-status.t Xb-ԍ #X\  P6G;ɒP#A licensee may not switch its payment plan to a more favorable plan.  X-k b. Bidding Credits  X-k655. For existing and future licensees who qualified or qualify in the future for a bidding credit in paying for their winning bid, we also amend Section 1.2111(c) to provide for unjust enrichment payments similar to those contained in our broadband PCS rules. Specifically,  XH-during the term of the initial license grant, if a licensee seeks to assign or transfer control of its license to an entity not meeting the eligibility standards for bidding credits, or seeks to make any other change in ownership that would result in the licensee no longer qualifying for a bidding credit, the licensee must seek Commission approval and must reimburse the government for the amount of the bidding credit, plus interest based on the rate for U.S. Treasury obligations applicable on the date the license is granted, as a condition of the  X -approval of such assignment, transfer or other ownership change. yt X-ԍ #X\  P6G;ɒP#But see Second Report and Order and Further Notice of Proposed Rule Making. Similarly, if the licensee seeks to assign or transfer control of its license to an entity meeting the eligibility standards for lower bidding credits, or seeks to make any other change in ownership that would result in the licensee qualifying for a lower bidding credit under this section, the licensee must seek Commission approval and must pay to the United States Treasury the difference between the amount of the bidding credit obtained by the licensee and the bidding credit for which the assignee, transferee or licensee is eligible as a condition of the approval of such assignment, transfer or other ownership change. These provisions also will apply to licensees who partition or disaggregate their licenses.  X-k756. We also adopt our proposal in the Notice to provide for decreasing unjust enrichment payments for licensees that utilized a bidding credit when paying for their licenses and that make transfers and assignments occurring later in the license term. This decision also is  X-supported by the commenters.*t Xp-ԍ #X\  P6G;ɒP#See ISTA Comments at 2; CII Comments at 1314. In amending the rule in this manner, we ensure that our  X~-general rule resembles those rules the Commission has adopted in specific services (e.g., MDS, narrowband PCS, and 900 MHz SMR ) that reduce the amount of unjust enrichment  XR-payments due on transfer based upon the amount of time the initial license has been held.Rt X"-ԍ#Xj\  P6G;ynXP# #X\  P6G;ɒP#Ericsson Reply Comments at 45.  X;- Consistent with the rules that exist in these services,;t Xx%-ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  90.810(b)(1) (SMR). the amount of this payment will be";#= 0*&&aaE" reduced over time as follows: A transfer in the first two years of the license term will result in a forfeiture of 100 percent of the value of the bidding credit (or, in the case of very small businesses transferring to small businesses, 100 percent of the difference between the bidding credit received by the former and the bidding credit for which the latter is eligible); in year three of the license term the payment will be 75 percent; in year four the payment will be 50 percent; and in year five the payment will be 25 percent, after which there will be no payment. These assessments will have to be paid to the U.S. Treasury as a condition of approval of the assignment, transfer, or ownership change. All current and future licensees, with the exception of entrepreneur block licensees subject to restrictions on assignments and  X1-transfers of licenses,t1t X -ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.839(d).t will be governed by this modification to our general rules. We believe that our decision to maintain the original transfer restrictions for such licensees is proper in light of the special provisions which were made available for licensees in our entrepreneur  X -blocks.! yt X-ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  90.810(b)(1) (SMR). #X\  P6G;ɒP#But see Broadcast NPRM at  95 (seeking comment on somewhat different unjust enrichment provisions). !  X - kc. Unjust Enrichment and Partitioning and Disaggregation  X-k857. Also as proposed in the Notice, we will adopt a general rule modeled on our broadband PCS rules to determine the amount of unjust enrichment payments assessed for all  Xd-current and future licensees.dt X-ԍ #X\  P6G;ɒP#Notice at  43; Partitioning and Disaggregation Report and Order. Thus, we adopt a general unjust enrichment rule that treats partitioning and disaggregation by licensees in the same manner as the broadband PCS rule. Specifically, if the licensee seeks to partition any portion of its geographic service area, the amount of the unjust enrichment payment discussed above will be calculated based upon the  X-ratio of population in the partitioned area to the overall population of the licensed area.t X\-ԍ #X\  P6G;ɒP#Partitioning and Disaggregation Report and Order, 11 FCC Rcd at 21851,  3136. Similarly, if a licensee seeks to disaggregate spectrum, the amount of the unjust enrichment payment will be determined based upon the ratio of the amount of spectrum disaggregated to  X-the amount of spectrum held by the disaggregating licensee.Tt X -ԍ #X\  P6G;ɒP#Partitioning and Disaggregation Report and Order, 11 FCC Rcd at 21862,  55.  X- "~$ 0*&&aa2E"  X-C. Application Issues#Xj\  P6G;ynXP#  X-k1. Electronic Filing  X-k958. Background. Sections 1.2105(a) and 1.2107(c) of our rules govern the filing of  X-shortform and longform applications.t X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2105(a) and 1.2107(c). See also n.7. In recent auctions, we have allowed applicants to file their applications either manually or electronically and required applicants to submit exhibits to shortform and longform applications that were filed manually on a 3.5 inch diskette in ASCII text (.txt) format. Only applicants that have filed their shortform applications electronically have been allowed to bid electronically from remote locations;  X -applicants filing manually have been required to bid telephonically. In the Notice, we tentatively concluded that Sections 1.2105(a) and 1.2107(c) of our rules should be amended to require electronic filing of all shortform and longform applications, beginning January 1,  X -1998.i yt X-ԍ #X\  P6G;ɒP#NoticeĠat  46.i  X -k:59. Discussion. We believe that electronic filing of all shortform and longform applications for auctionable services is in the best interest of auction participants, as well as members of the public monitoring Commission auctions. Therefore, we amend Sections 1.2105(a) and 1.2107(c) of our rules to require electronic filing of all shortform and long XM-form applications, beginning January 1, 1999, unless it is not operationally feasible.|M*t X(-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2105(a) and 1.2107(c).|  X6-Although in the Notice we proposed to require electronic filing commencing January 1, 1998, we believe that this additional phasein period before the requirement becomes effective will  X -benefit potential bidders. The majority of the comments addressing the issue support the  X-decision to require electronic filing.t X-ԍ #X\  P6G;ɒP#See, e.g., AT&T Comments at 2; PageNet Comments at 16; AMTA Comments at 11. For example, PageNet contends that electronic filing promotes access to applications by competing bidders, as well as the general public, by making it possible to review and download applications without traveling to FCC headquarters  X-or contracting for photocopying of paper applications.ht X -ԍ #X\  P6G;ɒP#PageNet Comments at 16.h To facilitate public access, the Commission has developed userfriendly electronic filing software and Internet World Wide Web forms to give auction applicants the ability to conveniently file and review"%? 0*&&aa2E"  X-applications.t Xy-ԍ #X\  P6G;ɒP#We assess no fee for filing applications electronically but currently charge $2.30 a minute for reviewing  {Ob-or downloading applications of other parties on line. See Assessment and Collection of Charges for FCC Proprietary Remote Software Packages, Online Communications Service Charges and Bidder's Information  {O-Packages in Connection with Auctionable Services, Report and Order, No. 95308, 60 Fed. Reg. 38276 (July 26, 1995). The public can also download other auctions related documents for no charge from the FCC internet site (\http\www.fcc.gov). This software helps applicants ensure the accuracy of their applications as they are filling them out, and enables them to correct errors and omissions prior to submitting their applications. To assist the public, we provide technical support personnel to answer questions and work with callers using the electronic auction system. In addition, the Commission has demonstrated its auction software at conferences organized by potential bidders and members of the industry in order to familiarize interested parties with our recent software enhancements.  XH-k;60. AT&T is generally supportive of electronic filing, but proposes that the Commission create a waiver process whereby an applicant that has missed a filing deadline due to technical problems can obtain a waiver quickly or be permitted to submit a paper original of the  X -application by hand or mail the same day.d et X-ԍ #X\  P6G;ɒP#AT&T Comments at 2.d In addition, AT&T requests that a Commission staff member be provided with the authority to grant such a waiver in the event of electronic  X -filing difficulties.Z t X-ԍ #X\  P6G;ɒP#Id.Z We do not believe that a specific waiver provision is necessary. The Commission's existing waiver provisions, which specify the showing required for the grant of a waiver, provide adequate assurance that requests for waiver relating to the electronic filing  X-of applications will receive proper consideration.x t X-ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  24.819.x In addition, we emphasize that the Commission has typically responded rapidly to timesensitive waiver requests filed by auction  Xb-applicants, and we intend to continue to do so in the future.bx t X-ԍ #X\  P6G;ɒP#See, e.g., Letter to James Hillyard, Alaskan Choice Television, L.L.C., from Kathleen O'Brien Ham, Chief, Auctions Division, Wireless Telecommunications Bureau (April 23, 1997) (responding to Alaskan Choice  {O<-Television, L.L.C.'s Petition for Waiver of the Upfront Payment Deadline). See also Letter to Mr. John Prawat, DigiVox Telecom, Inc., from Kathleen O'Brien Ham, Chief, Auctions Division, Wireless Telecommunications Bureau, DA 97-730 (April 11, 1997) (responding to DigiVox Telecom, Inc.'s Request for Rule Waiver of the Upfront Payment Requirement in the WCS Auction).   X4-k<61. Only one commenter, Airadigm, opposes an electronic filing requirement. Airadigm states that the Commission experienced difficulties in processing electronic filings during the IVDS auction and argues that removing the option of manual filing could result in similar"&0*&&aaE"  X-problems in future auctions.ht Xy-ԍ #X\  P6G;ɒP#Airadigm Comments at 9.h We believe that the system enhancements discussed above, most of which were not in place during the IVDS auction, adequately respond to Airadigm's concerns. We also note that our experiences from recent auctions demonstrate that the electronic bidding system is reliable. For example, in the broadband PCS D, E, and F block auction, 94 percent of the qualified bidders filed their shortform applications electronically. In the recently completed 800 MHz SMR auction, 93 percent of the qualified bidders filed their shortform applications electronically. We did not experience problems with our electronic filing procedures.  X1-k=62. Finally, as we stated in the Notice, we recognize that there is a need for a period of time before a comprehensive electronic filing requirement becomes effective in order for  X -bidders to prepare and be completely comfortable with this process.j yt X/-ԍ #X\  P6G;ɒP#Notice at  46. j The effective date of  X -January 1, 1999, will provide potential bidders with adequate time in which to adapt to  X -electronic filing requirements.) *t X-ԍ #X\  P6G;ɒP#We note that this phasein period is similar to the approach taken by the Securities and Exchange  {O-Commission when it eliminated paper financial filings. See 17 C.F.R.  232.902(a).) Finally, although we conclude that electronic filing is the preferred filing method, we nevertheless reserve the right to provide for manual filing in the event of technical failure or other difficulties.  X{- k2. Shortform Application Amendments  XM-k>63. Background. Section 1.2105(b) of our rules addresses modifications and amendments to applicants' shortform (FCC Form 175) applications. Specifically, Section 1.2105(b)(2) provides that bidders may make minor changes or correct minor errors in the FCC Form 175 application, but that major amendments may not be submitted after the initial application  X-deadline.jt XG-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2105(b).j This section further provides that the Commission will classify all amendments as  X-major or minor pursuant to servicespecific rules.ZVt X-ԍ #X\  P6G;ɒP#Id.Z In the Notice, we proposed to amend our general auction rules to create a uniform definition for major amendments to FCC Form 175  X-for all auctionable services.i t Xf#-ԍ #X\  P6G;ɒP#Notice at  48.i We proposed at a minimum to consider any change in ownership that constitutes a change in control to be a major amendment. We also proposed to consider application amendments that show a change in an applicant's size which would affect"' 0*&&aaPE"  X-its eligibility for small business provisions as a major amendment.t Xy-ԍ #G\  P6G; مP## X\  P6G;ɒP#Id. Finally, we sought  X-comment on what other kinds of changes should be deemed major or minor.Zyt X-ԍ #X\  P6G;ɒP#Id.Z  X-k?64. We also indicated in the Notice that in previous auctions, applicants have claimed that they made mistakes in their license selection and have requested that the Commission allow  X-them to add or delete license selections during the resubmission period.y*t Xj -ԍ #X\  P6G;ɒP#Id. The Commission may provide a limited opportunity, after the deadline for filing shortform applications has passed, for applicants to correct minor defects and then resubmit their corrected applications. The decision as to whether to provide such a resubmission period is made on a servicebyservice basis.  While the Bureau has generally refused to grant these requests in order to prevent collusive conduct or gaming that would reduce the competitiveness of the auction, we recognized that there may be some circumstances in which the competitiveness of the auction might be enhanced by allowing applicants to add licenses to their FCC Form 175 applications. We sought comment on  X -whether an amendment to add licenses should be permissible as a minor amendment.Z kt X8-ԍ #X\  P6G;ɒP#Id.Z We also asked whether such an amendment should be permitted only until the deadline for submitting upfront payments, because after that point the risks of gaming in the auction  X -increase due to the availability of information concerning each bidder's eligibility.Z  t X-ԍ #X\  P6G;ɒP#Id.Z  X -k@65. Discussion. The majority of commenters support our proposal in the Notice to create a uniform definition of major and minor amendments to applicants' shortform (FCC Form  X}-175) applications for all future auctions.} t X-ԍ #X\  P6G;ɒP#See Airadigm Comments at 9; AT&T Comments at 23. However, commenters' opinions differ on what types of amendments the Commission should categorize as major or minor. For example, AT&T and ISTA argue that major amendments should include all changes in ownership that constitute a change in control, as well as all changes in size that would affect an applicant's  X!-eligibility for designated entity provisions.z!~ t XP!-ԍ #X\  P6G;ɒP#AT&T Comments at 23; ISTA Comments at 2.z In contrast, Metrocall contends that all changes  X -in ownership incidental to mergers and acquisitions, nonsubstantial pro forma changes, and  X-involuntary changes in ownership should be categorized as minor.k/t X$-ԍ #X\  P6G;ɒP#Metrocall Comments at 67.k Metrocall also states that an applicant should not be permitted to upgrade its designated entity status after the short"(0*&&aaE"  X-form filing deadline (i.e., go from a "small" to "very small" business), but should be permitted  X-to lose its designated entity status as a result of a minor change in control (i.e., exceed the  X-threshold for eligibility as a small business).`t XO-ԍ #X\  P6G;ɒP#Id. at 8.`  X-kA66. After careful consideration of the comments addressing the issue, we believe that a  X-definition of major and minor amendments similar to that provided in our PCS rules,gyt X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.822.g is appropriate. After the shortform filing deadline, applicants will be permitted to make minor amendments to their shortform applications both prior to and during the auction. However, applicants will not be permitted to make major amendments or modifications to their applications after the shortform filing deadline. Major amendments will include, but will not be limited to, changes in license areas designated on the shortform application, changes in ownership of the applicant which would constitute a change in control, and the addition of other applicants to any bidding consortia. Consistent with the weight of the comments  X -addressing the issue, *t X-ԍ #X\  P6G;ɒP#See AT&T Comments at 23; ISTA Comments at 2.  See also Metrocall Comments at 8.ij major amendments will also include any change in an applicant's size which would affect an applicant's eligibility for designated entity provisions. For example, if Company A, an applicant that qualified for special provisions as a small business, merges with Company B during the course of an auction, and if, as a result of this merger, the merged company would not qualify as a small business, the amendment reflecting the change in ownership of Company A would be considered a major amendment. Otherwise, the new entity could receive small business bidding credits and installment payments when it does not  X8-qualify for them. As is the case in our PCS rules, however, applicants will be permitted to amend their shortform applications to reflect the formation of bidding consortia or changes in ownership that do not result in a change in control of the applicant, provided that the parties forming consortia or entering into ownership agreements have not applied for licenses in any  X-of the same geographic license areas.tt Xh-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2105(c).t In contrast, minor amendments will include, but will not be limited to, the correction of typographical errors and other minor defects, and any amendment not identified as major.  X-  X-kB67. As noted above, the Commission has generally refused to grant requests to add or delete markets on an applicant's shortform application in order to prevent collusive conduct or gaming that would reduce the competitiveness of the auction. While we recognize that there may be some circumstances in which the competitiveness of the auction might be enhanced by allowing applicants to add markets to their shortform applications, we conclude that the risks of encouraging or facilitating conduct that negatively affects the competitiveness" )0*&&aayE" of the auction and the postauction market structure outweigh the benefits of categorizing such amendments as minor. Several commenters support this conclusion that the addition or deletion of markets on the shortform application should always be deemed a "major"  X-amendment.t X4-ԍ #X\  P6G;ɒP#See ISTA Comments at 2; PageNet Comments at 89. Specifically, PageNet states that because the only new information that an applicant could be deemed to possess at this stage would be licenses on which other applicants intend to bid, amendment of the shortform application in this regard could only  Xv-lead to auction abuses.gvyt X -ԍ #X\  P6G;ɒP#PageNet Comments at 8.g Those commenters supporting defining the addition or deletion of markets after the shortform filing deadline as a minor amendment argue that such an amendment should only be permitted prior to the upfront payment deadline or the release of  X1-the Public Notice announcing qualified bidders.1*t X -ԍ #X\  P6G;ɒP#SeeĠPCIA Comments at 34; AirTouch Comments at 56; Airadigm Comments at 910. After this point, the overall  X -competitiveness of the auction may be threatened. t X-ԍ #X\  P6G;ɒP#See, e.g., AirTouch Comments at 56 and Reply Comments at 6.  X -kC68. AT&T proposes that the deletion of markets to avoid specifying markets that overlap with another auction applicant (and thus preventing discussion on potentially nonauctionrelated matters such as interconnection, resale, and equipment orders that do not affect bids or  X -bidding strategies) be deemed a minor amendment.f t X-ԍ #X\  P6G;ɒP#AT&T Comments at 23.f We note that in previous auctions some applicants have inadvertently placed themselves at risk of violating the Commission's anticollusion rule by choosing to specify "all markets" on their shortform applications when they intended to bid only on a particular license or group of licenses. As a general matter, the anticollusion rule does not prohibit nonauctionrelated business negotiations between auction  X4-applicants that have applied for the same geographic service areas.4= t X"-ԍ #X\  P6G;ɒP#See Letter from Kathleen O'Brien Ham, FCC, to David L. Nace, DA 961566, Sept. 17, 1996, at 12. AT&T argues that the aspect of the rule prohibiting the addition or deletion of markets often has had the unfortunate result of discouraging nonauction, businessrelated discussions between auction applicants  X-who are not actually bidding for licenses in the same geographic license areas.f t X!-ԍ #X\  P6G;ɒP#AT&T Comments at 23.f Because of the potential anticompetitive results of allowing bidders to delete markets after the shortform filing deadline, however, we believe that this type of error can be more effectively addressed by other means, including increased awareness on the part of prospective auction applicants of "* 0*&&aaE" the consequences of choosing "all markets," as well as software enhancements that make specifying particular markets on the FCC Form 175 less burdensome.  X-kD69. We also emphasize that, pursuant to Section 1.65 of the Commission's rules, each auction applicant is required to assure the continuing accuracy and completeness of  X-information furnished in a pending application.et X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.65.e Each applicant is therefore under a continuing obligation to update its shortform and longform applications as appropriate to reflect any changes that would make a pending application inaccurate or incomplete, or that  XH-are necessary to determine that an applicant is in compliance with our rules.Hyt Xr -ԍ #X\  P6G;ɒP#See, e.g., Letter to Linda Feldmann from Kathleen O'Brien Ham, Chief, Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, DA 972261 (rel. October 24, 1997).  As in all prior auctions, an application that is amended by a major amendment will be considered newly  X -filed, and therefore will not be accepted after the shortform filing deadline.w t X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2105(b)(2).w We further  X -note that the Commission has waived its ex parte rules as they apply to the submission of amended shortform applications to maximize applicants' opportunities to seek the advice of Commission staff when making amendments at any time after the shortform filing  X -deadline.{ t X-ԍ #X\  P6G;ɒP#See Implementation of Section 309(j) of the Communications Act Competitive Bidding, Second  {O-Order on Reconsideration and Seventh Report and Order, PP Docket No. 93253, 11 FCC Rcd 2639, 2679,   {O-104 (1995), and "Commission Announces that Mutually Exclusive "ShortForm" Applications (Form 175) to  {O-Participate in the Competitive Bidding Process ("Auctions") Are Treated as Exempt for Ex Parte Purposes,"  {O[-Public Notice, 9 FCC Rcd 6760 (1994).{  X-kE70. Finally, we note that in the context of cellular unserved area licensing, WWC contends that the rules adopted in this proceeding addressing major and minor amendments to shortform applications should not apply to cellular unserved area applications filed in 1994 as these applications were to be governed by a "letterperfect" standard and applicants were  X6-given no opportunity to cure minor defects.e6| t Xc-ԍ #X\  P6G;ɒP#WWC Comments at 23.e While we have considered WWC's argument, we believe that it is inapplicable. WWC addresses the initial application procedures for cellular unserved area licenses, while the Part 1 rules, in contrast, address application procedures for participation in an auction once a finding of mutual exclusivity has been made.  X- k 3.  Ownership Disclosure Requirements  X-kF71. Background. Currently, our general competitive bidding rules do not set forth any"+- 0*&&aaQE" ownership disclosure requirements for auction applicants on their shortform applications. As  X-we recognized in the Notice, however, our servicespecific rules require varying degrees of  X-specific ownership information from applicants.qt XM-ԍ #X\  P6G;ɒP#Notice at  4950. q For example, in the 900 MHz SMR auction, an applicant claiming small business status was required to disclose on the shortform application the names of each affiliate and a gross revenues calculation. On the longform application, such an applicant was required to disclose an additional gross revenues calculation, any agreements that support small business status, and any investor protection  Xa-agreements .jayt X -ԍ #X\  P6G;ɒP#47 C.F.R.  90.815(b).j At the same time, both our narrowband PCS and broadband PCS rules require detailed ownership disclosure from all auction applicants that differ from each other and from the 900 MHz SMR requirement. Rules for narrowband and broadband PCS also impose additional requirements for applicants claiming small business status. Finally, although the broadband PCS disclosure requirements are very similar to those for narrowband PCS, we have recently amended the broadband PCS application requirements to make them less  X -burdensome on applicants.h *t X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.813. h  X -kG72. In the Notice, we sought comment on whether to adopt standard ownership disclosure requirements for all auctionable services in order to eliminate these inconsistencies from  X}-service to service.i}t X -ԍ #X\  P6G;ɒP#Notice at  51.i Specifically, we proposed to adopt standard disclosure requirements that are similar to our current rules for broadband PCS. We sought comment on what ownership  XO-information should be required.ZOt X-ԍ #X\  P6G;ɒP#Id.Z We also proposed to adopt a uniform reporting requirement for all applicants claiming small business status, and proposed to model this  X!-requirement on the 900 MHz SMR rules.!= t X-ԍ #X\  P6G;ɒP#900 MHz SMR Report and Order; Bidder Information Package for 900 MHz SMR (November 28, 1995).  X-kH73. Discussion. As we indicated in the Notice, we continue to believe that detailed ownership information is necessary to ensure that applicants claiming small business status qualify for such status, and to ensure compliance by all applicants with spectrum caps and  X-other ownership limits.i t X%-ԍ #X\  P6G;ɒP#Notice at  51.i Disclosure of ownership information also aids bidders by providing",g 0*&&aaE" them with information about their auction competitors and alerting them to entities subject to our anticollusion rules. Therefore, we adopt standard ownership disclosure requirements for all auctionable services that will avoid the variations found in our current servicespecific ownership disclosure requirements.  X-kI74. This decision is widely supported by the majority of comments in this proceeding. Most commenters addressing the issue of ownership disclosure support requiring some level of  X_-ownership information at the shortform application stage._t X-ԍ #X\  P6G;ɒP#See PCIA Comments at 4, ISTA Comments at 2; PageNet Comments at 23; Hughes Comments at 67. For example, PCIA believes that full disclosure of bidder ownership information is necessary if competing bidders are to  X1-accurately assess the legitimacy of their auction opponents and their respective bids.d1yt X[ -ԍ #X\  P6G;ɒP#PCIA Comments at 4.d PCIA contends that there can be no valid reason for legitimate bidders to hide their ownership. Such information, according to PCIA, is crucial for purposes of the Commission's anti X -collusion rules, spectrum caps, and other ownership limits. *t X-ԍ  #X\  P6G;ɒP#Id. at 4. See also ISTA Comments at 2. Similarly, PageNet contends that full ownership disclosure is important to aid bidders in compiling information about their auction competitors and, most importantly, to alert them to any conduct that might be a  X -violation of the Commission's anticollusion rules.i t X5-ԍ #X\  P6G;ɒP#PageNet Comments at 23.i In the satellite context, Hughes argues that the submission of detailed ownership information is essential because of the extreme costs  Xy-associated with the buildout of a satellite system.hyt X-ԍ #X\  P6G;ɒP#Hughes Comments at 67.h In contrast, only CII argues that the Commission's objectives with regard to the rules governing designated entity status, spectrum caps, and other ownership limitations would be fully satisfied by deferring the filing of  X4-comprehensive ownership information until the longform application stage.g4? t X$-ԍ #X\  P6G;ɒP#CII Comments at 1314.g  X-kJ75. For all future auctions, therefore, we will model our reporting requirements on the  X-general application requirements contained in our broadband PCS rules.q t X!-ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.813.q Under this standard, all auction applicants will be required to disclose the real party or parties in interest by including as an exhibit to their shortform applications detailed ownership information. Although our current Part 1 rules require auction applicants to list all owners of a five percent or greater interest in the applicant, we agree with commenters such as CII that argue that"- 0*&&aaE" applicants should not be required to list all holders of this small an interest in the applicant,  X-unless they are in a position of control by virtue of other factors (i.e., voting agreements,  X-management structure), or hold a significant passive ownership interest (i.e., 20 percent).gt XM-ԍ #X\  P6G;ɒP#CII Comments at 1415.g Thus, we amend our rules to require that applicants list controlling interests as well as all parties holding a 10 percent or greater interest in the applicant and any affiliates of these  X-interest holders.wyt X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2110(b)(4).w A 10 percent or greater interest reporting requirement is consistent with  Xz-the revised definition of the term "applicant" we adopt for purposes of the anticollusion rule  Xc-(See Section III.F, infra). We note that PageNet contends that the Commission should require disclosure of entities and individuals that own more than five percent of the applicant or who  X7-have provided more than five percent of the applicant's equity.`7*t X-ԍ  #X\  P6G;ɒP#Id. at 6.` However, as suggested above, we believe that the detailed reporting requirement we create today, in combination  X -with our comprehensive affiliation rules (see Section III.B.3, supra), permits us to determine  X -the "real party or parties in interest"t t X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  24.813(a).t when parties apply to participate in an auction.  X -kK76. Specifically, all auction applicants will be required to disclose: (1) a list of any FCCregulated business, 10 percent or more of whose stock, warrants, options or debt securities are owned by the applicant; (2) a list of any party holding a 10 percent or greater interest in the applicant, including the specific amount of the interest; (3) a list of any party holding a 10 percent or greater interest in any entity holding or applying for any FCCregulated business in which a 10 percent or greater interest is held by another party which holds a 10 percent or  X<-greater interest in the applicant (e.g., if company A owns 10% of company B (the applicant) and 10% of company C, a company holding or applying for an FCCregulated business, the companies A and C must be listed in company B's application); (4) the name, address and citizenship of any party holding 10 percent or more of each class of stock, warrants, options  X-or debt securities, together with the amount and percentage held;^-t X!-ԍ #X\  P6G;ɒP#For purposes of determining ownership interests, stock interests held in trust shall be attributed to (1) any person who holds or shares the power to vote such stock; (2) any person who has the sole power to sell such stock; and (3) in the case of stock held in trust, to any person who has the right to revoke the trust at will or to replace the trustee at will. If the trustee has a familial, personal, or extra-trust business relationship to the grantor or the beneficiary, the grantor or beneficiary, as appropriate, will be attributed with the stock interests held in  {O*#-trust (See 47 C.F.R.  20.6(d)(3)). Non-voting stock shall be attributed as an interest in the issuing entity if  {O#-equal to or greater than 20 percent of the value of the entity (See 47 C.F.R.  20.6(d)(4)). Debt and instruments such as warrants, convertible debentures, options, or other interests (except non-voting stock) with rights of conversion to voting interests must treated as if fully exercised.^ (5) the name, address and".0*&&aaE" citizenship of all controlling interests of the applicants, as this term is defined in Section 1.2110 of our rules; (6) if the applicant is a general partnership, the name, address and citizenship of each partner, and the share or interest participation in the partnership; (7) if the applicant is a limited partnership, the name, address and citizenship of each general partner and each limited partner whose interest in the applicant is equal to or greater than 10 percent (as calculated according to the percentage of equity paid in and the percentage of distribution of profits and losses); (8) if the applicant is a limited liability corporation, the name, address and citizenship of each of its members; and (9) a list of all parties holding indirect ownership interests in the applicant, as determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain, that equal 10 percent or more of the applicant, except that if the ownership percentage for an interest in any link in the chain exceeds 50 percent or represents actual control, it shall be treated and reported as if it were a  X -100 percent interest. t Xe -ԍ #X\  P6G;ɒP#See, e.g., 47 C.F.R.  20.6(d)(8). Ď  X -kL77. In addition, consistent with the reporting requirements set forth in the 900 MHz SMR  X -rules, yt X-ԍ #X\  P6G;ɒP#900 MHz SMR Report and Order; Bidder Information Package for 900 MHz SMR (November 28, 1995). we will require that applicants claiming small business status disclose on their shortform applications the names of each controlling interest and affiliate, as these terms are defined in this proceeding, and to provide gross revenues calculations for each. On their longform applications, such applicants will be required to disclose any additional gross revenues calculations, any agreements that support small business status, and any investor  X4-protection agreements . We believe that these reporting requirements will help to assure that only qualifying applicants obtain the benefits of our small business provisions, without being unduly burdensome.  X- kM78. Finally, in a related proposal, PageNet states that Commission should expressly  X-prohibit "blind bidding" (i.e., bidding in which auction participants do not know the identities or ownership information of the other bidders in the auction) in any pending and future auction because it (1) is unfair to auction participants; (2) encourages auction abuses; and (3)  X~-encourages speculation.~t X! -ԍ #Xj\  P6G;ynXP##G\  P6G; مP## X\  P6G;ɒP#Id. PageNet contends that these factors can have a significant impact  Xg-upon the competitiveness of the auction and the postauction marketplace.`gt X"-ԍ #X\  P6G;ɒP#Id. at 4.` In situations in which an incumbent has already met the Commission's buildout requirements and must still bid in an auction in which blind bidding is used, PageNet contends that a competitor is often able to bid up the price of a license that it never intends to win in order to force the""/T0*&&aaE" incumbent to buy the license at a higher price. PageNet further contends that this higher price is then reflected in higher rates for services, which in turn affect the incumbent's ability to  X-compete.Zt XK-ԍ #X\  P6G;ɒP#Id.Z As discussed above, we agree that it is important that auction applicants disclose certain ownership information prior to the start of an auction. At the same time, however, we believe that in certain circumstances, the competitiveness of an auction may be increased if  X-less bidder information is made available. In the Competitive Bidding Second Memorandum  Xx-Opinion and Order, we retained the flexibility to conceal bidder identities if further  Xc-experience showed that it would be desirable to do so.cyt X -ԍ #C\  P6QɒP#See Competitive Bidding Second Memorandum Opinion and Order, 9 FCC Rcd at 7252,  42. More recently, in the auction rules for geographic area paging licenses, the Commission concluded that the advantages of limiting information disclosed to bidders outweigh the disadvantages of this approach, and reserved the discretion to announce by Public Notice prior to the auction the precise information to be  X -revealed to bidders during that auction. *t X-ԍ #C\  P6QɒP#See Paging Second Report and Order and Further Notice of Proposed Rule Making, 12 FCC Rcd at 2803,  160. We believe that the uniform rules we adopt today provide us with the necessary flexibility to tailor the amount of bidder information made available to applicants to ensure the competitiveness of each auction. We therefore decline to adopt a provision prohibiting nondisclosure of bidder identities in all future auctions.  X- k4. Ownership Disclosure Filings  Xf-kN79. Background. Currently, the Commission's ownership disclosure rules require applicants to file specific ownership information in conjunction with their FCC Form 175  X8-applications prior to each auction.8t X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2105(a)(2). See also FCC Form 175  15, 810, certification and exhibit requirements (October 1995). Similarly, at the close of each auction, winning bidders  X!-are required to file ownership information on each longform application.! t X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2107(c) (d). See also, FCC Form 601  116, 2933, and 39 (January 1995). In the Notice, we tentatively concluded that we should permit applicants to file ownership information to apply for the first auction in which they participate, and we would store this information in a central  X-database which would be updated each time applicants participate in another auction.i t X\"-ԍ #X\  P6G;ɒP#Notice at  54.i We proposed that an applicant filing for a subsequent auction would either update the ownership  X-information in the database, or certify that there have been no changes in ownership status.Z~ t X%-ԍ #X\  P6G;ɒP#Id.Z "0/0*&&aaE"Ԍ X-ԙkO80. Discussion. We believe that permitting applicants to file ownership information when they apply for their first auction, which would then be stored in a central database and updated each time the information changes during or after the first auction and when applicants participate in a subsequent auction, will streamline our application processes and  X-minimize the burden on auction applicants. This concept is supported by the record.t X-ԍ #X\  P6G;ɒP#See AMTA Comments at 1112; Airadigm Comments at 10; Hughes Comments at 7; ISTA Comments at 2; CII Comments at 15. For example, CII and Airadigm argue that this approach will benefit auction applicants by reducing the time spent preparing auction applications, and will benefit the Commission by  X_-eliminating the need to review and analyze duplicative filings._At XQ -ԍ #G\  P6G; مP## X\  P6G;ɒP#See CII Comments at 15; Airadigm Comments at 11. We believe that by requiring ownership disclosure filings, we ensure that we receive all the information necessary to  X1-evaluate an applicant's qualifications. As we indicated in the Notice, however, these  X -requirements could result in duplicative filings.p t X-ԍ #X\  P6G;ɒP#Notice at  54. p For example, where licenses for a service are offered in a series of blocks, as in the case of broadband PCS, an entity may wish to participate in several auctions, and would be required to disclose the same information a  X -number of times. t X+-ԍ #X\  P6G;ɒP#47 C.F.R.  24.413, 24.709(c) and 24.813. Under the system we envision, when applying to participate in subsequent auctions, applicants will be permitted to update the database or certify that there have been no changes in ownership and that the information contained in the database remains correct. We will look to implement this process in the near future as part of our Universal  X{-Licensing System.{Tt X-ԍ #X\  P6G;ɒP# See generally "Wireless Telecommunications Bureau Universal Licensing System Registration Now  {Oi-Available," Public Notice (rel. November 4, 1997).   XM-k 5. Audits  X-kP81. Background. Under our broadband PCS auction rules, we have reserved the right to conduct random audits of auction applicants and licensees in order to verify information  X-provided regarding their eligibility for certain special provisions. t Xq!-ԍ #G\  P6G; مP## X\  P6G;ɒP#47 C.F.R.  24.709(d). These rules require that  X-entities certify their consent to such audits on their shortform applications.Z t X $-ԍ #X\  P6G;ɒP#Id.Z In the Notice, we proposed to explicitly reserve this right for all auctionable services. "130*&&aaE"Ԍ X-kQ82. Discussion. The only commenters to address this proposal, PageNet and Airadigm,  X-support this proposal.gt Xb-ԍ #X\  P6G;ɒP#PageNet Comments at 9.g Airadigm requests that applicants and licensees subject to audit be afforded sufficient time to provide information to the Commission and that the Commission  X-issue written findings following its examination.lyt X-ԍ #X\  P6G;ɒP#Airadigm Comments at 1112.l We therefore adopt our proposal, and will modify our rules governing status as a designated entity to expressly provide that applicants and licensees claiming eligibility for special provisions shall be subject to audits by the Commission. Such audits will be governed by the standards set forth in Sections 403 and  X_-308(b) of the Communications Act.p_*t X: -ԍ #X\  P6G;ɒP#47 U.S.C.  403, 308(b).p We believe that these provisions, as well as the general  XH-provisions of the Administrative Procedure Act,Ht X-ԍ #X\  P6G;ɒP#See 5 U.S.C.  551 et seq.Č will adequately address Airadigm's concerns, and we therefore decline at this time to adopt specific rules to govern audits of applicants and licensees conducted in the future.  X - D. Payment Issues  X -k 1. Determination of Upfront Payment Amount  Xy- kR83. Background. Section 1.2106 of our rules provides that the Commission may require applicants for licenses subject to competitive bidding to submit an upfront payment in order to  XK-be eligible to bid in an auction.Kt X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2106(a). See also 47 C.F.R.  1.2110(g).Ě Although not specifically addressed in the Notice, we received significant comment on the proper upfront payment to be required for participation in future auctions.  X-kS84. Discussion. In the Competitive Bidding Second Report and Order, we indicated that the upfront payment should be set using a formula based upon the amount of spectrum and  X-population (or "pops") covered by the license or licenses for which parties intend to bid.= t X!-ԍ #X\  P6G;ɒP#Competitive Bidding Second Report and Order, 9 FCC Rcd at 2377,  169. We reasoned that this method of determining the required upfront payment would enable  X-prospective bidders to tailor their upfront payment to their bidding strategies.Z t X6%-ԍ #X\  P6G;ɒP#Id.Z At the same"2 0*&&aaoE" time, however, we noted that determining an appropriate upfront payment involved balancing the goal of encouraging bidders to submit serious, qualified bids with the desire to simplify  X-the bidding process and minimize implementation costs imposed on bidders.ct XK-ԍ #X\  P6G;ɒP#Id. at 2378.c We concluded that the best approach would be to maintain the flexibility to determine the amount of the upfront payment on an auctionbyauction basis, because this balancing may yield different  X-results depending upon the particular licenses being auctioned.\yt X-ԍ #X\  P6G;ɒP#Id. \  X_-kT85. Many commenters make specific proposals regarding the proper size and terms for assessing upfront payments in future auctions. For example, PageNet and CII suggest that the Commission adopt a standard upfront payment rule requiring separate upfront payments for  X -each license identified in an applicant's shortform application.| *t X-ԍ #X\  P6G;ɒP#PageNet Comments at 11; CII Comments at 11.| CII contends that this  X -would reduce the number of "phantom" mutual exclusivities (i.e., theoretical frequency conflicts caused by the fact that the current auction rules create no financial disincentive to  X -list licenses in an application on which the applicant has no bona fide intention to bid).g t Xc-ԍ #X\  P6G;ɒP#CII Comments at 1112.g In contrast, Airadigm and NPCS argue that the Commission should not require a separate upfront payment for each license on which an entity elects to bid, as this would limit bidders' flexibility to change strategy and force them to reveal their bidding strategy prior to the start  X}-of the auction.}t X-ԍ #X\  P6G;ɒP#Airadigm Reply Comments at 7; #X\  P6G;ɒP#NPCS Reply Comments at 56. In an alternate proposal, AirTouch and CII suggest that the Commission require applicants to increase their upfront payments as an auction progresses to equal a  XO-percentage of their total bids.O= t X=-ԍ #X\  P6G;ɒP#AirTouch Comments at 6 and Reply Comments at 23; CII Comments at 1011. AirTouch argues that this requirement would reduce the risk of defaults and discourage parties from submitting "jump bids" where they have no intention  X!-of actually winning a particular license.! t X-ԍ #X\  P6G;ɒP#AirTouch Comments at 6 and Reply Comments at 23.#X\  P6G;ɒP#į Similarly, to reduce the risk of default, CII recommends that when an applicant's upfront payment drops below a specific percentage of its high bid amount, the Commission allow the applicant to increase its deposit to a certain  X-percentage of its high bid total within ten business days.g t X,$-ԍ #X\  P6G;ɒP#CII Comments at 1011.g In contrast to these two proposals, Airadigm opposes increasing the upfront payment requirement once a bidder's bid amount"3P0*&&aaE" exceeds a certain multiple of the original upfront payment amount because this would create a  X-significant barrier to small businesses.nt Xb-ԍ #X\  P6G;ɒP#Airadigm Reply Comments at 6.n  X-kU86. We agree with Airadigm and NPCS that it is unnecessary to adopt additional rules governing the amount of the upfront payment and the terms under which it is assessed. We  X-believe that our reasoning in the Competitive Bidding Second Report and Order remains valid, and that the required upfront payment should be tailored to the particular auction design and  Xa-to the characteristics of the licenses being auctioned.ayt X -ԍ #X\  P6G;ɒP#Competitive Bidding Second Report and Order, 9 FCC Rcd at 2377,  170. This determination can be made in a variety of ways and using a variety of techniques to estimate the value of the spectrum being auctioned; however, as a general rule we have required an upfront payment equal to $0.02 per  X -pop per megahertz. As discussed infra, under the current competitive bidding rules the Commission maintains the discretion to alter the amount of the required upfront payment or to  X -modify the terms under which the upfront payment is assessed. *t X-ԍ #X\  P6G;ɒP#See, e.g., LMDS Second Report and Order, 12 FCC Rcd at 12545,  330.Ĥ We believe that retaining this discretion provides the Commission with the greatest level of flexibility to determine the appropriate upfront payment amount on an auctionbyauction basis.  X- k2. Refund of Upfront Payments  X}-  Xf-kV87. Background. Section 309(j)(8)(C) of the Communications Act requires that any deposits the Commission may require for the qualification of any person to bid in an auction  X8-shall be deposited into an interest bearing account.8t X-ԍ #X\  P6G;ɒP#47 U.S.C.  309(j)(8)(C). This provision was added by the Telecommunications Act of 1996, Pub. L. No. 104104,  3, 110 Stat. 56 (1996). The Communications Act further requires that within 45 days of the auction's conclusion, the deposits of successful bidders shall be paid to the United States Department of Treasury ("Treasury"), the deposits of unsuccessful bidders shall be returned, and all accrued interest shall be transferred to the  X-Telecommunications Development Fund ("TDF").ZTt X-ԍ #X\  P6G;ɒP#Id.Z Prior to the enactment of this provision, auction proceeds were deposited in a noninterest bearing account with the U.S. Treasury. The Commission has permitted bidders who completely withdraw during the auction to receive a refund of their upfront payments prior to the close of the auction, upon written  X-request. In the Notice, we sought comment on whether this practice should be continued.i t X6%-ԍ #X\  P6G;ɒP#Notice at  57.i"4 0*&&aa2E"Ԍ X-ԙkW88. Discussion. After considering the issue in light of Congress's 1996 amendment to Section 309(j)(8)(C) and the comments received in this proceeding, we will continue our current practice of returning the upfront payments of bidders who have completely withdrawn from an auction prior to the conclusion of competitive bidding. As we suggested in the  X-Notice, it is unclear whether Congress intended, in amending Section 309(j)(8)(C), to require the Commission to change its practice of refunding upfront payments to bidders who  Xx-withdraw during the course of an auction.Zxt X-ԍ #X\  P6G;ɒP#Id.Z We continue to believe, however, that the prompt return of upfront payments is in the public interest, because it prevents unnecessary encumbrances on the funds of auction bidders, many of whom may be small businesses, after they have withdrawn from the auction. In addition, we believe that this practice minimizes the financial burdens of participating in an auction, because auction participants earn no interest on upfront payment funds on deposit with the Commission. Moreover, all  X -commenters addressing the issue support our proposal to continue this practice.2y yt X-ԍ #X\  P6G;ɒP#See AT&T Comments at 34; AirTouch Comments at 7; Airadigm Comments at 12 and Reply  yO-Comments at 8; AMTA Comments at 12; CII Comments at 1516; ISTA Comments at 2 and Reply Comments at 3.2 AirTouch proposes that the Commission retain an administrative fee based upon the number of rounds an applicant has remained in the auction when it refunds upfront payments to bidders who  X -have withdrawn.n t X-ԍ #X\  P6G;ɒP#AirTouch Comments at 7.n Airadigm and AT&T state that not returning upfront payments in a prompt manner in circumstances where a bidder has withdrawn is akin to a "fee" that Congress did not intend to authorize, and that may work to discourage participation in the  Xd-Commission's auction program.dkt X-ԍ #X\  P6G;ɒP#Airadigm Reply Comments at 89; AT&T Comments at 34. We agree with Airadigm and AT&T, and conclude that such a fee is inappropriate, and therefore, we reject AirTouch's proposal.  X- k3. Down Payment and Full Payment for Licenses k  X- ka. Level of Down Payments  X-kX89. Background. Previously, the Commission required a winning bidder to submit additional funds as necessary to bring its total deposits up to 20 percent of its high bid(s)  X-within five business days after being notified that it is a high bidder on a particular license.j t Xb#-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2107(b).j  X~-In the Order accompanying the Notice, we modified our rules to establish a due date for down payments of ten business days after the issuance of a Public Notice announcing winning"i5 0*&&aaE"  X-bidders.yt Xy-ԍ #X\  P6G;ɒP#See Notice   at  14.y In the Notice, we proposed to retain discretion to determine the down payment amount required for each service and to delegate this authority to the Bureau, which will  X-announce this amount in a Public Notice to be issued prior to the start of each auction.iyt X-ԍ #X\  P6G;ɒP#Notice at  59.i We also noted that in an effort to help to determine the appropriate down payment amount for a particular service, the Bureau will seek input from the public. We also sought comment on  X-whether the level of down payments used in the past should be raised for some services.Z*t Xj -ԍ #X\  P6G;ɒP#Id.Z  Xa-kY90. Discussion. We created the down payment requirement in the Competitive Bidding  XL-Second Report and Order, in which we concluded that at the conclusion of the auction, a bidder must tender a significant and nonrefundable down payment to the Commission over and above its upfront payment in order to provide further assurance that the winning bidder  X -will be able to pay the full amount of its winning bid. t X-ԍ #X\  P6G;ɒP#Competitive Bidding Second Report and Order, 9 FCC Rcd 2348, 2381,  18992. We believe that a substantial down payment is required to ensure that licensees have the financial capability to attract the capital necessary to deploy and operate their systems, and to protect against default. Because it is due soon after the close of the auction, the down payment is a valuable indicator of a license applicant's financial viability. In addition, we believe that it is important that we learn early on in the licensing process when an applicant might be unable to finance its winning bid or bids.  XQ-kZ91. Several commenters oppose any increase in the down payment beyond 20 percent of  X:-the high bid amount.:t Xw-ԍ #X\  P6G;ɒP#See CII Comments at 10. Merlin Comments at 12; AMTA Comments at 9; Airadigm Comments at 12; NPCS Reply Comments at 5. Airadigm opposes granting the Bureau the discretion to establish a down payment amount because it believes that the Bureau could unfairly disadvantage small businesses by requiring disproportionately large down payments for auctions of particularly  X-capitalintensive services.i t X -ԍ #X\  P6G;ɒP#Airadigm Comments at 12.i In addition, Airadigm states that granting the Bureau this discretion could complicate applicants' financing arrangements because down payment amounts could vary with each auction. After consideration of these comments, we conclude  X-that a standard down payment amount of 20 percent is appropriate. Finally, if unusual circumstances present themselves in the context of a particular service, the Commission  X-reserves the right to adopt a different amount by rule in that service. "6 0*&&aaPE"Ԍ X- ę  X- k b. Untimely Second Down Payments and Full Payments  X-k[92. Background. Section 1.2109(a) of the Commission's rulesjt X4-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2109(a).j provides that auction winners not eligible for installment payments are generally required to make final payment on their license(s) within a certain time following award of the license(s). Similarly, Section  Xv-1.2110(e) of the Commission's rulesjvyt X -ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(e).j provides that all winning bidders eligible for installment payments are required to submit a second down payment within a certain period after conditional license grant. These payment deadlines are announced by public notice when the Commission is prepared to grant the license(s). Where a winning bidder fails to make its final auction payment for the balance of its winning bid in a timely manner, it is considered  X -in default on its license(s) and subject to the applicable default payment.y *t X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2104(g), 1.2107(c).y In the Notice, we proposed to allow winning bidders to make their final payments or second down payments  X -within a short period after the applicable deadline, provided that they also pay a late fee.i t Xc-ԍ #X\  P6G;ɒP#NoticeĠat  61.i We also sought comment on our tentative conclusion that if a winning bidder misses the final payment or second down payment deadline and also fails to remit the required payment and the applicable late fee by the end of the late payment period, it would be declared in default  X{-and subject to the applicable default payments.[{t X-ԍ #X\  P6G;ɒP#Id. [ Additionally, we sought comment on whether a late payment of five percent of the amount due is an appropriate late payment fee, and asked that commenters proposing alternative late payment fee(s) provide a rationale for  X6-the alternative fee amount(s).f6= t X$-ԍ #X\  P6G;ɒP#Id. at  62.f Finally, we sought comment on the appropriate time period  X-to allow late second down payments and final payments.g t X-ԍ #X\  P6G;ɒP#Id. at  61. g  X-k\93. Discussion. We will amend Sections 1.2109(a) and 1.2110(e) of our rules to permit auction winners to make their second down payments or final payments within ten business days after the applicable deadline, provided that they also pay an appropriate late fee, without  X-being considered in default. As we recognized in the Notice, in past auctions there have been cases where a winning bidder missed the applicable second down payment deadline but"7 0*&&aaE" subsequently made its down payment and filed a request seeking a waiver of the deadline. In some of these cases, the Bureau granted the waivers, subject to payment of a five percent late fee. In granting the waivers, the Bureau recognized the licensee's good faith and ability to pay as evidenced by its timely remittance of all earlier payments and prompt action to cure  X-the delinquency.` 3t X-ԍ #X\  P6G;ɒP#See, e.g., RobertsRoberts & Associates, Request for Waiver of Section 24.711(a)(2) of the  {O-Commission's Rules Regarding Various BTA Markets, Order, DA 97252, (rel. February 4, 1997); Longstreet Communications International, Inc., Request for Waiver of Section 24.711(a)(2) of the Commission's Rules  {O-Regarding Market B012, Order, DA 97251 (rel. February 4, 1997). But see Styles Interactive, Inc. Application for Review of Denial of Petition for Reconsideration Seeking Waiver of IVDS Final Down Payment  {O* -Deadline, Memorandum Opinion and Order, FCC 97390 (rel. October 28, 1997) and Mountain Solutions LTD, Inc. Request for Waiver of Section 24.711(a)(2) of the Commission's Rules Regarding Market Nos. B053,  {O -B168, B172, B187, B188, B224, B247, B275, B366 and B381, Order, DA No 97891 (rel. April 28, 1997) recon  {O -pending (denying requests for waiver of the second down payment deadline). `  Xv-k]94. We recognize that applicants may encounter unexpected or unforeseeable difficulties when trying to arrange financing and make substantial payments under strict deadlines. In circumstances that may warrant favorable consideration of a waiver request or an extension of the payment date, we must also evaluate the fairness to other licensees who made their payments in a timely fashion. Two commenters, Mountain Solutions, Ltd. ("Mountain Solutions") and AirTouch, the only commenters to address this issue in detail, support our proposal to permit late payment subject to a standard late fee for any licensee not able to  X -make a timely payment.  t XI-ԍ #X\  P6G;ɒP#See Mountain Solutions Comments at 2 and Reply Comments at 23; AirTouch Comments at 78. We agree, and amend Section 1.2109(a) to permit winning bidders who are required to make final payment on their licenses within a certain period of time as announced by public notice, to submit their payment 10 business days after the payment deadline, provided that they also pay a late fee equal to five percent of the amount due. Although we suspend the use of installment payments for the immediate future, in the event the Commission once again offers installment payments, we also amend Section 1.2110(e) to permit auction winners paying for the licenses in installments to submit their second down payment 10 business days after the payment deadline, provided they also pay a late fee equal to five percent of the amount due.  X-k^95. As discussed above, our rules provide that winning bidders have ten business days to make timely payment following notification that their licenses are ready to be granted. We believe that in establishing this additional ten business day period, during which winning bidders will not be considered in default, we provide an adequate amount of time to permit winning bidders to adjust for any lastminute problems. We decline to provide for a lengthier late payment period because we believe that extensive relief from initial payment obligations could threaten the integrity, fairness, and efficiency of the auction process. As we observed  XN-in the Notice, a late fee of five percent is consistent with general commercial practice and"N8t 0*&&aaE" provides some recompense to the federal government for the delay and administrative or other  X-costs incurred. t Xb-ԍ #X\  P6G;ɒP#Notice at  62. See, e.g., Eldon H. Reiley, Guidebook to Security Interests in Personal Property, at  4.02(iii) (1989). In addition, we believe that a five percent fee is large enough to deter  X-winning bidders from making late payments and yet small enough so as not to be punitive. At X-ԍ #X\  P6G;ɒP#Mountain Solutions Comments at 2 and Reply Comments at 3. Therefore, applicants who do not submit the required final payment and five percent late fee within the 10day late payment period will be declared in default, and will be subject to the  X-default payment specified in Section 1.2104(g) of our rules.t t X0 -ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2104(g).t  X_-k_96. Finally, we emphasize that our decision to permit late payments is limited to payments owed by winning bidders who have submitted timely initial down payments. We continue to believe that the strict enforcement of payment deadlines enhances the integrity of the auction and licensing process by ensuring that applicants have the necessary financial  X -qualifications. In this connection, we believe that the bona fide ability to pay demonstrated by a timely initial down payment is essential to a fair and efficient auction process. Thus, we have not proposed to modify our approach of requiring timely submission of initial down payments that immediately follow the close of an auction. We did not propose to adopt a late payment period for down payments that are due soon after the close of the auction as we believe it is reasonable to expect that winning bidders timely remit their down payments, given that it is their first opportunity to demonstrate to the Commission their ability to make payments toward their licenses. Further, if a winning bidder defaults on its down payment on a license, the Commission can take action under Section 1.2109(b) relatively soon after the auction has closed, by, for example, reauctioning the license or offering it to the other highest bidders (in descending order) at their final bids. Similarly, we do not allow for any "9 0*&&aaE" late submission of upfront payments, as to do so would slow down the licensing process by delaying the start of an auction.  X- kc. Full Payment and Petitions to Deny  X-k`97. Background. In the Notice, we recognized that under our current rules, winning bidders not eligible for installment payments are not required to submit the balance of their winning bids until petitions to deny filed against them are dismissed or denied and their  XJ-licenses are ready to be granted.iJt X -ԍ #X\  P6G;ɒP#Notice at  64.i Similarly, winning bidders that are designated entities paying in installments are not required to pay their second down payments until petitions to deny filed against them are dismissed or denied and their licenses are ready to be granted. In the interim, winning bidders for the same auction with no petitions filed against them are required to submit the balance of their winning bids (or, in the case of designated entities,  X -their second down payments) earlier because their licenses are ready for grant. In the Notice, we sought comment on whether we should require all bidders that win licenses to make their full payments (or second down payments) at the same time.  X-  X}-ka98. Discussion. As discussed above (see Section III.B.5, supra), we suspend the use of installment payments as a means of financing small business participation in our auction program for the immediate future. As a result, all auction winners, including small businesses, will be required to submit the full payment owed on their winning bids shortly  X#-after a license is ready to be granted. As we suggested in the Notice, we recognize that in the past the filing of petitions to deny against a winning bidder's application(s) has often had the effect of significantly delaying the grant of the applicant's license(s), and as a result, the deadline for that applicant to submit the balance of its winning bid. However, in the Balanced Budget Act Congress granted the Commission the authority to shorten the petition to  X-deny period, and as a result, to grant licenses much more rapidly.cyt X-ԍ #X\  P6G;ɒP# Balanced Budget Act,  3008. This provision provides as follows: (# ,k,. . . [N]o application for an instrument of authorization for frequencies assigned under this title . . . shall be granted by the Commission earlier than 7 days following issuance of a public notice by the Commission of the acceptance for filing of such application or of any substantial amendment thereto . . . . [T]he Commission may specify a period (no less than 5 days following issuance of such public notice)  yO -for the filing of petitions to deny any application for an instrument of authorization for such frequencies.  {Ou!-Id.(# As an initial matter,  X-consistent with this legislation, we amend Sections 1.2108(b) and (c) of our ruless t X#-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2108(b), (c).s to provide that the Commission shall not grant a license earlier than seven days following issuance of a public notice by the Commission that longform applications have been accepted for filing. "m:U 0*&&aaE" Also consistent with the Balanced Budget Act, we amend this Section to provide that in all cases the period for filing petitions to deny shall be no shorter than five days. In this regard,  X-we seek comment in this Second Further Notice of Proposed Rule Making (see infra) on whether there are instances in which the Commission should provide for a longer period for  X-the filing of petitions to deny or for the grant of initial licenses in auctionable services.  Xx-kb99. In light of this change in our rules, we believe that the concerns discussed in the  Xa-Notice regarding delays in the granting of licenses and, as a result, in the deadline for full  XL-payment are substantially reduced. While applications that are the subject of petitions to deny  X5- ordinarily take longer to resolve than uncontested applications, we believe these changes in procedure will reduce the risk of frivolous petitions being filed solely for purposes of delay, and will enhance our ability to resolve petitions expeditiously. Finally, we believe that concerns regarding delayed payment are outweighed by the risk and uncertainty that would be imposed on an applicant if it were required to make its full auction payment while a petition against its application was still pending and could potentially result in denial of the application. As a result, we decline to amend our rules to require all winning bidders to make their full payments at the same time, regardless of whether petitions to deny their applications have been filed.  Xf- k4. Default Payments  X8-  X!-kc100. Background. Section 1.2104(g) of the Commission's rulesj!t X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2104(g).j provides that when a bidder withdraws, defaults, or is otherwise disqualified from a simultaneous multiple round auction, upfront and/or down payment amounts that the bidder has on deposit with the Commission will be applied first to the bid withdrawal and default payments owed to the  X-Commission.6  h yt X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2104 (g)(2); 1.2106(d),(e); 1.2107(b). Specifically, Section 1.2106(e) states: k(e) In accordance with the provisions of paragraph (d), in the event a penalty is assessed pursuant to   {O-1.2104 for bid withdrawal or default, upfront payments or down payments on deposit with the Commission will  {Oj-be used to satisfy the bid withdrawal or default penalty before being applied toward any additional payment obligations that the high bidder may have. Section 1.2106(d), cross-referenced above, states: k(d) The upfront payment(s) of a bidder will be credited toward any down payment required for licenses on which the bidder is the high bidder. Where the upfront payment amount exceeds the required deposit of a  {O"-winning bidder, the Commission may refund the excess amount after determining that no bid withdrawal  {O"-penalties are owed by that bidder. Section 1.2104, also cross-referenced above, at paragraph (g)(2) states: kIf a high bidder defaults or is disqualified after the close of such an auction, the defaulting bidder will be"@%0*&&%" subject to the penalty in subsection (1) plus an additional penalty equal to 3 percent of the subsequent winning bid. If the subsequent winning bid exceeds the defaulting bidder's bid amount, the 3 percent penalty will be  {O -calculated based on the defaulting bidder's bid amount. These amounts will be deducted from any upfront payments or down payments that the defaulting or disqualified bidder has deposited with the Commission.  {Oz-kFinally, Section 1.2107(b) refers to applying upfront and down payments to satisfy penalties. See  1.2107(b) ("a high bidder must submit to the Commission's lockbox bank such additional funds (the 'down  {O -payment') as are necessary to bring its total deposits (not including upfront payments applied to satisfy penalties) up to twenty (20) percent of its high bid(s). . . . Down payments will be held by the Commission until the high bidder has been awarded the license and has paid the remaining balance due on the license, in which case it will not be returned, or until the winning bidder is found unqualified to be a licensee or has defaulted, in which case  {O. -it will be returned, less applicable penalties").6 In the past, this rule has been interpreted to encompass upfront and/or down"; 0*&&aaE"  X-payment funds a bidder has on deposit for licenses won at the same auction.C t X -ԍ #X\  P6G;ɒP#Public Notice, "Wireless Telecommunications Bureau Will Strictly Enforce Default Payment Rules,"  {O -DA 96481 (April 6, 1996); Competitive Bidding Second Report and Order, 9 FCC Rcd 2382  195. See also, CH PCS, Inc, Request for Waiver of Section 24.711(a)(2) of the Commission's Rules, DA 96-1273, 11 FCC Rcd  yO$-9343 (rel. August 9, 1996). In the Notice, we proposed to delete the language "simultaneous multipleround" from Section 1.2104(g) of our rules because we believe that this means of satisfying bid withdrawal or default payments  X-should apply to other auction designs as well as simultaneous multipleround auctions.it Xq-ԍ #X\  P6G;ɒP#Notice at  67.i  X-kd101. Discussion. We adopt our proposal to delete the words "simultaneous multipleround" from Section 1.2104(g), and will apply the default/withdrawal payment procedure to all auction designs. Several commenters support this decision, maintaining that rigorous enforcement of the Commission's payment deadlines is critical to preserving the integrity of the auction and licensing process by ensuring that applicants possess the necessary financial  X -qualifications. t X-ԍ #X\  P6G;ɒP#See ISTA Comments at 3; CII Comments at 1617; Hughes Comments at 8; Airadigm Comments at 14. These commenters also suggest that default payments are an effective and necessary method of discouraging defaults and encouraging private market solutions to  X -licensee financing difficulties.Z et X-ԍ #X\  P6G;ɒP#Id.Z We believe that this modification to our general rules governing bidder default will help to maintain the integrity of the auction process by discouraging defaults on the part of bidders, encouraging bidders to make secondary or backup financial arrangements, and ensuring that default payments are made in a timely manner. We also believe that this modification will help to discourage insincere bidding and ensure that licenses end up in the hands of those parties that value them the most and have the"{<0*&&aaiE"  X-financial qualifications necessary to construct operational systems and provide service.tt Xy-ԍ #X\  P6G;ɒP#See 47 U.S.C.  309(j)(5).t  X-ke102. Our rules provide that where a winning bidder defaults on a license, the bidder becomes subject to a default payment equal to the difference between the amount bid and the winning bid the next time the license is offered by the Commission, plus a payment equal to  X-three percent of the subsequent winning bid or the amount bid, whichever is lower.wyt X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2104(g)(2).w In the  Xv-Competitive Bidding Fifth Report and Order, the Commission stated that where the default payment cannot be determined, the Commission may assess an initial default payment "of up  XJ-to 20 percent" of the defaulting bidder's winning bid.EJ*t X% -ԍ #X\  P6G;ɒP#See Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 5563, n. 51; Public Notice, "Wireless  {O-Telecommunications Bureau Will Strictly Enforce Default Payment Rules," DA 96481 (April 6, 1996). See also  {O-CHPCS, Inc., BTA No. B347, Frequency Block C, Order, DA 961825 (rel. November 4, 1996) (assessing an initial default deposit equal to three percent of the total default payment).  We adopt our proposal in the Notice to employ this practice for all auctionable services. No commenter addressed this issue. Although the Commission provided that this deposit amount will be up to 20 percent of the defaulted bid amount, we note that if a license is reauctioned for an amount greater than the defaulted bid for the license, the default payment due will be only three percent of the  X -defaulted bid. 7t X-ԍ#X\  P6G;ɒP##X\  P6G;ɒP##X\  P6G;ɒP#47 C.F.R.  24.704(a)(2). See also 47 C.F.R.  1.2104(g). Thus, in the future we will assess an initial default deposit of between three percent (3%) and twenty percent (20%) of the defaulted bid amount where a winning bidder or licensee defaults and the defaulted license has yet to be reauctioned. Once the license has been reauctioned by the Commission and the total default payment can be determined, the Commission will either assess the balance of the appropriate default payment, or refund any amounts due, as necessary.  X8-k 5. Installment Payments  X - k a. Late Payments  X-kf103. Background.  Section 1.2110(e)(4)(i) of our rules provides that if an entity paying for its licenses in installments is more than ninety (90) days delinquent in any payment it shall be in default. Section 1.2110(e)(4)(ii) provides that upon default or in anticipation of default on an installment payment, a licensee may request that the Commission grant a three to six X-month grace period, during which no installment payments need be made.q t X%-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(e)(4)(ii).q This rule states"= 0*&&aaE" that in considering whether to grant a request for a grace period, the Commission may consider, among other things, the licensee's payment history, including whether the licensee has defaulted before; how far into the license term the default occurs; the reasons for default; whether the licensee has met construction buildout requirements; the licensee's financial condition; and whether the licensee is seeking a buyer under an authorized distress sale  X-policy.Zt X-ԍ #X\  P6G;ɒP#Id.Z Under this rule, licensees are required to come before the Commission with a filing as well as financial information such as an income statement or balance sheet, in the case of financial distress, to provide the necessary information for the Commission to make its ruling. As a practical matter, licensees are then required to wait for a ruling by the Commission, or the Bureau on delegated authority, before knowing whether a grace period is granted or  X -denied. In order to simplify these grace period procedures, we proposed to maintain our initial 90day nondelinquency period, but to provide licensees with a subsequent automatic 90day grace period in which to make their required payment without being considered in default.  X -kg104. We also proposed in the Notice to adopt a late payment fee schedule similar to that employed for the broadband PCS F block auction. Under this system, licensees that are late in their scheduled installment payments are assessed a late payment fee equal to five percent  Xd-(5%) of the amount of the past due payment.jdyt X-ԍ #X\  P6G;ɒP#47 C.F.R.  24.716(c).j Specifically, we proposed to require that licensees taking advantage of the initial 90day nondelinquency period be assessed a late fee of five percent of the late payment, and that licensees taking advantage of the subsequent automatic 90day grace period be assessed a late fee of 10 percent (10%) of the late payment.  X-We further proposed that the consecutive 90day nondelinquency and grace periods (e.g., a total of 180 days in which to submit the required payment) be automatic, so that in the future licensees would not be required to file a grace period request and wait for the Commission, or the Bureau on delegated authority, to render a decision.  X-kh105. Finally, we proposed in the Notice to modify the method by which interest that accrues is amortized when a licensee fails to make a required installment payment. Section 1.2110(e)(4)(ii) of our rules provides that interest that accrues during a grace period will be  XT-amortized over the remaining term of the license.qT*t X/!-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2110(e)(4)(ii).q In the Notice, we recognized that amortizing interest in this way has the effect of changing the amount of all future payments and requiring the Commission, or its designee, to generate a new payment schedule for the license. Changing the amount of the installment payment has, in turn, created uncertainty about the interest schedule, and increased the administrative burden on the Commission by ">0*&&aa<E"Ԍ X-requiring formulation of a new amortization schedule.{t Xy-ԍ #X\  P6G;ɒP#See also, Second Report and Order and Further Notice of Proposed Rule Making, which provides for the payment of interest accrued during the period in which installment payments were suspended over eight  {O*-quarterly payments. Second Report and Order and Further Notice of Proposed Rule Making at  27. In order to avoid the potential problems associated with changing the amount of installment payments, we proposed to amend Section 1.2110(e)(4)(ii) to require that all current licensees who avail themselves of the automatic grace period pay the required late fee(s), all interest accrued during the nondelinquency period, and the appropriate scheduled payment with the first payment made following the conclusion of the nondelinquency period or grace period.  X_-ki106. Discussion. In order to add certainty to the installment payment process, we adopt  XH-our proposals from the Notice to modify our grace period provisions. As discussed above  X3-(see Section III.B.5, supra), we decline to use installment payments for the immediate future as a means of financing small business participation in our auction program. As a result, our decision with regard to late payment fees for installment payments effectively will apply only  X -to existing licensees who are currently paying for their licenses in installments. From this point forward, instead of considering individual grace period requests, the following system will apply: A licensee who does not make payment on an installment obligation will automatically have an additional 90 days in which to submit its required payment without being considered delinquent, but will be assessed a five percent late payment fee as discussed  X}-above. If the licensee fails to make the required payment at the close of this first 90day nondelinquency period, the licensee will automatically be provided a subsequent 90day grace period, this time subject to a second, additional late fee equal to ten percent of the initial required payment.  X -kj107. As proposed in the Notice, under this system, licensees will not be required to  X-submit a filing to take advantage of these provisions.  t X-ԍ #X\  P6G;ɒP#We further note that the late fee is to be paid at the time the regular quarterly installment payment is made. During this 90to180day period, the Commission or its designated collection agent will continue to pursue collection of pastdue  X-installments and fees.!t X-ԍ #X\  P6G;ɒP# See Debt Collection Improvement Act, Pub. L. No. 104134,  3100(j)(1), 110 Stat. 1321 (1996), codified at 31 U.S.C.  3711(a). Also during this time, the licensee will have the opportunity to raise necessary capital, continue service and construction efforts, or seek a buyer for its license(s) that will resume payments. These late payment provisions will apply independently to all installment payments. Therefore, the late payment provisions and accompanying late fees will not affect the payment schedule for future payments. Thus, even if a licensee elects to take advantage of the late payment provisions, the licensee will still be responsible for remitting all future installment payments in a timely manner, unless the licensee elects to take advantage of"=?!0*&&aaE" the late payment provisions for any future installment payment. The following example illustrates how this system will operate:  V-,kABC Corp. has a $100,000 installment interest payment due on March 1. If ABC Corp. is able to make its payment on March 1, then it must remit $100,000 to the Commission. If ABC Corp. makes its payment anytime from March 2 until May 30 (the end of the nondelinquency period), then ABC Corp. must remit $105,000 to the Commission to be considered current on its March 1 installment payment. If ABC Corp. does not make its March 1 payment by May 30, then it must remit $115,000 on or before August 28. If ABC Corp. does not remit the required $115,000 by August 29 (the end of the 90day grace period), then it will be considered in default and its license will automatically  X -cancel on August 30 without further action by the Commission.|" t X| -ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2110(e)(4)(iii).|(#  V -,kABC Company's June 1 installment payment of $100,000 remains due on June 1 regardless of the payment status of the March 1 payment. The late payment terms apply to June installment payment independently of the March payment. Thus, if ABC Company does not make its March 1 payment until June 1, the total amount due to the Commission on June 1 is $215,000 which consists of the March payment, the March 5% nondelinquency late fee, the March 10% grace period late fee and the June payment. Assuming the licensee remits the March 1 payment and accompanying March late fees of $115,000 to the Commission by August 29, then the total amount due to the Commission on September 1 will be $215,000 which consists of the June installment payment of $100,000, the June 5% nondelinquency late fee, the June 10% grace period late fee and  V-September installment payment of $100,000.(#  V-,kABC Company may elect to make late payments and pay the accompanying late fees on the March and June payments. However, ABC Company must remit $115,00 representing the required March payment and accompanying March late fees by August 29 (the end of March's 90day grace period) or it will be considered in default and its license will automatically cancel on August 30 without further action by the Commission. Furthermore, ABC Company must remit and additional $115,000 representing the required June payment and accompanying June late fees by November 29 (the end of June's 90day grace period) or it will be considered in default and its license will automatically cancel  V -on November 30 without further action by the Commission.(#  X-As we proposed in the Notice, the late fees we adopt will accrue on the next business day following the payment due date and will be payable with the next quarterly installment payment obligation. We emphasize that at the close of nondelinquency or grace period, a licensee must submit the required late fee(s), all interest accrued during the nondelinquency""@y"0*&&aa!E" period, and the appropriate scheduled payment with the first payment made following the conclusion of the nondelinquency period or grace period. Payments made at the close of any grace period will first be applied to satisfy any lender advances as required under each licensee's "Note and Security Agreement." Afterwards, payments will be applied in the following order: late charges, interest charges, principal payments. As part of our spectrum management responsibilities, we wish to ensure that spectrum is put to use as soon as possible. We also believe that licensees should be working to obtain the funds necessary to meet their payment obligations before they are due and, accordingly, that the nondelinquency and grace periods we adopt should be used only in extraordinary circumstances. Thus, as we  X1-emphasized in the Notice, a licensee who fails to make payment within 180 days sufficient to pay the late fees, interest, and principal, will be deemed to have failed to make full payment on its obligation and will be subject to license cancellation pursuant to Section 1.2104(g)(2) of the Commission's rules.  X -kk108. Several commenters support our efforts to provide licensees with predetermined non X -delinquency periods without requiring the submission of a formal grace period request. # t X"-ԍ #X\  P6G;ɒP#See AMTA Comments at 1213; CII Comments at 16; Pocket Comments at 78; Airtouch Comments at 8; Merlin Reply Comments at 4; Airadigm Reply Comments at 2; ISTA Reply Comments at 56.  In addition, many of the commenters addressing this issue, including AMTA, Hughes, AirTouch, Mountain Solutions and CII support the imposition of a late payment fee similar to that imposed in the broadband F block auction, in order to create a significant incentive for timely  XM-payment of installment obligations.$MAt X?-ԍ #X\  P6G;ɒP#See AMTA Comments at 13; Hughes Comments at 8; AirTouch Comments at 8; Mountain Solutions Comments at 3, CII Comments at 16. CII believes that modifying our current grace period procedures will provide licensees with knowledge in advance of the extent of any relief that  X-will be forthcoming from the Commission to a licensee who misses an installment payment.d%t X-ԍ #X\  P6G;ɒP#CII Comments at 16.d AirTouch believes that any licensee who fails to make payment within 180 days should face the automatic cancellation of its license. AirTouch contends that once a certain number of installment payments have been submitted late, the Commission should declare the licensee in  X-default and subject to the default payments proposed in the Notice.j&kt X-ԍ #X\  P6G;ɒP#AirTouch Comments at 89.j In contrast, only CIRI opposes this liberalization of the current grace period rules, requesting instead that grace period relief be made available only when a licensee can demonstrate that such relief is  X-warranted and the public debt will ultimately be satisfied.' t XM$-ԍ #X\  P6G;ɒP#CIRI Comments at 14 and Reply Comments at 23. Although Hughes recommends the imposition of a "significant" late fee to the extent that an applicant misses a payment"iA '0*&&aaE" deadline, Hughes believes that a five to ten percent late fee is large enough to discourage late payments and to ensure that the government is compensated for its administrative expenses in  X-recouping the payment.](t XK-ԍ #X\  P6G;ɒP#Id. ] As an alternative to our proposal in the Notice, GWI proposes that any such late payment fee should be prorated over the 90 day payment period instead of accruing all at once regardless of when the late payment is made, in order to provide an economic incentive for licensees who are overdue in their payment obligations to retire the payment quickly instead of waiting until the end of the payment period. In addition, GWI suggests that such a prorated payment is fairer to licensees who inadvertently miss a required  XJ-payment through administrative error or other unavoidable, unforeseen circumstances.i)Jyt Xt -ԍ #X\  P6G;ɒP#GWI Reply Comments at 8.i  X -kl109. As an alternative to our proposals in the Notice, Airadigm contends that following the first 90day nondelinquency period, licensees should be given a second 90day period with a five percent late fee, followed by a third 90day grace period with a 10 percent late  X -fee.n* *t X-ԍ #X\  P6G;ɒP#Airadigm Reply Comments at 2.n ISTA believes that a rule whereby any license is cancelled at the close of the second 90day grace period is draconian, and that such a "hardandfast" automatic cancellation rule  X -would doom many small businesses.j+ t X7-ԍ #X\  P6G;ɒP#ISTA Reply Comments at 7.j GWI opposes the imposition of an additional 10  X-percent late payment fee where licensees require an additional 90day late payment period.i,t X-ԍ #X\  P6G;ɒP#GWI Reply Comments at 9.i  X}-We decline to adopt these alternate proposals. As we indicated in the Notice, the grant of a grace period is an extraordinary remedy and we wish to encourage licensees to seek private market solutions to their capital problems before the payment due date. In this regard, we note that the Commission has an obligation under the Debt Collection Improvement Act  X#-("DCIA") to enforce payment obligations owed to the federal government.-#= t X-ԍ #X\  P6G;ɒP#See Debt Collection Improvement Act, Pub. L. No. 104134,  3100(j)(1), 110 Stat. 1321 (1996), codified at 31 U.S.C.  3711(a).  X-km110. We believe that the automatic grace period provisions we adopt today provide licensees with adequate financial incentives to make installment payments on time, while at the same time creating increased certainty that will help licensees pursue private market solutions to their financing difficulties. These provisions also will discourage licensees from attempting to maximize their cash flow at the government's expense by submitting a required"B -0*&&aaoE"  X-installment payment after it is due. Several commenters agree with this assessment..t Xy-ԍ #X\  P6G;ɒP#See, e.g., AMTA Comments at 13; Hughes Comments at 8; AirTouch Comments at 8. At the same time, these provisions will eliminate uncertainty for many licensees who are seeking to restructure other debt contingent upon the results of the Commission's installment payment provisions. In addition, this system will ease the burden on the Commission of considering individual grace period requests where Commission or its designee may not have the necessary resources to evaluate a licensee's financial condition, business plans, and capital structure proposals. We recognize that some commenters oppose the imposition of a late fee  X_-on overdue installment payment,/_yt X -ԍ #X\  P6G;ɒP#ISTA Comments at 1 and Reply Comments at 45; IVDS Enterprises Reply Comments at 3; Pocket Comments at 78; Merlin Reply Comments at 4. and in particular on the 90day nondelinquency period.0_t X -ԍ #X\  P6G;ɒP#Airadigm Comments at 14; IVDS Enterprises Reply Comments at 12. However, this approach is consistent with the standard commercial practice of establishing late payment fees and developing financial incentives for licensees to resolve capital issues before  X -payment due dates.1 t Xn-ԍ #X\  P6G;ɒP#See, e.g., Eldon H. Reiley, Guidebook to Security Interests in Personal Property, at  4.02(iii) (1989). This approach also is consistent with the provisions of the DCIA, which requires that the Commission notify the Secretary of the Treasury and commence debt collection procedures where a party is more than 180 days past due on any outstanding debt  X -owed to a federal agency.{2 Tt X-ԍ #X\  P6G;ɒP#See 31 C.F.R.  3711(g)(1). {  X -kn111. We recognize that a number of commenters oppose the application of these  X-provisions to current licensees.3 t XF-ԍ #X\  P6G;ɒP#See Mountain Solutions Reply Comments at 56; GWI Reply Comments at 7; IVDS Enterprises Reply Comments at 4. In particular, GWI and IVDS Enterprises argue that to the extent the Commission adopts a late payment fee, it should limit the imposition of such a fee  Xb-to licenses issued in future auctions.4b~ t X-ԍ #X\  P6G;ɒP#GWI Reply Comments at 7; IVDS Enterprises Reply Comments at 4. However, our recent experience with the installment payment program has shown the importance of ensuring that all licensees, including current licensees, have adequate financial incentives to make installment payments on time. We also note that in awarding licenses in the past to entities choosing to pay in installments, the Commission has emphasized that the terms of the installment payment program will be governed by current Commission rules and regulations, as amended. For example, in awarding licenses to C block licensees paying for their licenses in installments, the Commission indicated in the associated "Note and Security Agreement" that the terms of the installment plan would be governed by and construed in accordance with then-applicable"C/40*&&aaE" Commission orders and regulations, as amended. We also believe that these licensees should obtain the benefit of increased certainty that provisions for automatic grace periods provide. This decision is supported by Mountain Solutions, who requests that current licensees obtain  X-the benefits of any loosening of the late payment fee and grace period rules.z5t X4-ԍ #X\  P6G;ɒP#Mountain Solutions Reply Comments at 56.z  X-ko112. As provided in the Second Report and Order and Further Notice of Proposed Rule  Xx-Making, installment payments for C and F block licensees will resume effective March 31, 1998. Under our decision to reinstate installment payments for these licensees, we provided them with one automatic 60day nondelinquency period following the March 31, 1998, deadline, during which time they will not be considered delinquent in their payment  X -obligations. As we indicated in the Second Report and Order and Further Notice of Proposed  X -Rule Making, we will not entertain any requests for extension of the March 31, 1998 deadline beyond an automatic 60day nondelinquency period, so that for C and F block licensees all required payments must be submitted no later than May 30, 1998. Only those licensees  X -making a timely payment of all amounts due, as set forth in the Second Report and Order  X -will be permitted to take advantage of the late payment provisions we adopt today.q6 yt X-ԍ #X\  P6G;ɒP#See 47 C.F.R.  1.2110.q  X- kp113. In commenting on these modifications to the grace period provisions, CIRI also proposes that the Commission make public the terms of any workouts or debt relief provided  XU-to licensees.7U*t X0-ԍ #X\  P6G;ɒP#CIRI Reply Comments at 3.#X\  P6G;ɒP#ė CIRI notes that parties may request confidential treatment of sensitive financial information pursuant to Section 0.459 of the Commission's rules, and that such confidential treatment should be sufficient to safeguard the privacy interests of licensees,  X-while still making the terms of any workout available for public scrutiny.`8t X-ԍ #X\  P6G;ɒP#Id. at 4.` As an initial matter, because we adopt our proposals providing for automatic grace periods, we do not envision licensees filing grace period requests under normal circumstances from this point forward. As a result, we believe that CIRI's concerns about the Commission making public a licensee's request for grace period relief are moot. Moreover, because from this point forward a licensee's taking advantage of our late payment provisions will be an administrative matter processed by the Commission's loan servicer, and not a formal waiver request, aside from instances where a licensee is declared in default, there will be no public notice of a licensee's payment status. The license is cancelled automatically under such circumstances. In contrast, for licensees who have previously filed grace period requests consistent with our current rules and procedures, we will continue our current practice of making the request public when a decision is released granting or denying the request, except to the extent that"D80*&&aayE" any request by the licensee for confidential treatment is granted pursuant to Section 0.459 of  X-the Commission's rules.i9 t Xb-ԍ #X\  P6G;ɒP#See 47 C.F.R.  0.459. We note that several PCS C and F block licensees have filed requests for an extension of the deadline for making payments with the Bureau pursuant to 47 C.F.R.  1.2110(e)(4)(ii). In addition, two parties have filed requests for the restructuring of installment payment schedules, and several parties have filed requests for annual, as opposed to quarterly payment schedules. These requests will be addressed separately by the Bureau in a manner consistent with the procedures we have outlined. i We further clarify that such licensees are not deemed to be in default on these licenses until such time as the Bureau issues a decision on these grace period requests. Licensees whose requests for a grace period are denied will have ten (10) business  X-days to make the required payment or be considered in default.     Xv-k b. Defaults on Installment Payments k  XH-kq114. Background. In the Notice, we tentatively concluded that licensees that default on installment payment obligations should be subject to the default payment provisions outlined  X -in Section 1.2104(g) (i.e., the difference between the defaulting winner's bid and the subsequent winning bid plus 3 percent of the lesser of these amounts). Sections 1.2110(e)(1) and 1.2110(e)(2) of our rules provide that applicants eligible for installment payments will be  X -liable for such a payment if they fail to remit either their initial or final down payment.: t X#-Ѝ #X\  P6G;ɒP#47 C.F.R.  1.1220(e)(i) and 1.2110(e)(2). Section 1.2110(e)(4)(iii) provides that (1) following the expiration of any grace period without successful resumption of payment, (2) upon denial of a grace period request, or (3) upon default with no such request submitted, the license of an entity paying on an installment basis will be cancelled automatically and the Commission will initiate debt collection procedures  Xf-pursuant to Federal Claims Collection Standards and applicable laws.;fJt Xa-ԍ #X\  P6G;ɒP#47 C.F.R. 1.2110(e)(4)(iii); see 47 C.F.R. Part 1, Subpart O, 4 C.F.R. Parts 101105, and 31 U.S.C   {OJ-3701 et seq. This section of our rules does not clearly indicate, however, whether under these circumstances the licensee will be liable for the default payment set forth in Section 1.2104(g).  X -kr115. Discussion. We do not adopt our tentative conclusion to apply the default  X-provisions of Section 1.2104(g) to licensees who default on an installment payment. Most  X-commenters addressing the issue oppose this proposal.< t XR!-ԍ #X\  P6G;ɒP#See, e.g., Airadigm Comments at 16; Pocket Comments at 9. For example, Pocket submits that default payments assessed later in the license term become highly arbitrary and unduly burdensome. Pocket also contends that such payments are greater than those traditionally required for secured creditors and create substantial disincentives for investors and creditors"Ev <0*&&aa3E"  X-who might otherwise be interested in providing financing for licensees.f=t Xy-ԍ #X\  P6G;ɒP#Pocket Comments at 9.f Pocket also notes that any default payment assessed disadvantages a licensee's other creditors, which also makes  X-it more difficult for licensees to raise capital.Z>yt X-ԍ #X\  P6G;ɒP#Id.Z Finally, Pocket states that default payments assessed later in the license term have no deterrent effect as there is no basis to believe that  X-licensees that have paid substantial sums to the Treasury will willingly default.g?*t X -ԍ #X\  P6G;ɒP#Pocket Comments at 10.g In contrast, AirTouch supports our tentative conclusion that licensees that ultimately fail to fulfill their installment payment obligations despite the availability of a 90day nondelinquency period and a subsequent, automatic 90day grace period, should be declared in default, and in turn be  XH-made subject to the default payments proposed in the Notice.j@Ht X-ԍ #X\  P6G;ɒP#AirTouch Comments at 89.j  X3-  X -ks116. We have considered the comments of those who oppose the proposed assessment, and find that an additional payment requirement for licensees defaulting on installments is not necessary to achieve our stated objectives. Our current rules and installment payment terms are adequate to discourage defaults and encourage licensees to find private market solutions when they face financial difficulties. We also believe that the rules we adopt today providing for a 90day nondelinquency period followed by a subsequent, automatic 90day grace period, subject to appropriate late fees of five percent for the 90day nondelinquency period and 10% for automatic 90day grace period, payable at the conclusion of these periods serve these goals without substantially risking delays or disruption in service to the public. In particular, we believe that this certainty regarding the Commission's treatment of licensees needing extra time to make their installment payments will increase the likelihood that licensees and potential investors will find solutions to capital problems before a default occurs. The risk of losing its license should provide a licensee a strong incentive to avoid default. If, however, a default does occur, the conditions on the face of each license and the terms of the notes and security agreements executed by licensees provide the Commission appropriate remedies that will ensure that defaulted licenses are returned to the Commission for reauction and that all outstanding debts, as well as the Commission's costs, are recoverable.  Xg- kc. Cross Default in the Context of Installment Payments  X9-kt117. Background. As we indicated in the Notice, a number of parties have asked that we"9F@0*&&aaE"  X-address the issue of cross default in the context of installment payments.At Xy-ԍ #X\  P6G;ɒP#See, e.g., Letter to Michele C. Farquhar from Jay P. Urwitz, August 2, 1996. The Commission's rules currently provide that in the event of default, any default payment assessed will be deducted from any upfront payments or down payments a defaulting bidder  X-has deposited with the Commission.wByt X-ԍ #X\  P6G;ɒP#47 C.F.R.  1.2104(g)(2).  w The Commission has pursued a policy of cross default  X-for defaults on down payments.C{*t X -ԍ #X\  P6G;ɒP#See "Wireless Telecommunications Bureau Will Strictly Enforce Default Payment Rules," Public  {Oh -Notice, 11 FCC Rcd 10853 (1996). See also Letter to Kenneth Hobbs from Michele C. Farquhar, Chief, Wireless Telecommunications Bureau, Federal Communications Commission, DA 97260 (rel. February 4, 1997)  A cross default provision would specify that if a licensee defaults on one installment payment loan, it would also default on any other installment  Xv-payment loans it holds. These provisions are standard in creditrelated agreements.Dvmt X-ԍ #X\  P6G;ɒP#See Stephen R. Kruft, Cross Default Provisions in Financing and Derivatives Transactions, 113 Banking L.J. 216 (1996). We sought comment on whether the Commission should apply cross defaults to its installment payment plan loans. We also asked whether to apply a cross default provision across services. We asked, for example, whether the Commission should consider pursuing default remedies against all PCS and SMR licenses when a licensee with both SMR and broadband PCS licenses defaults on one of its PCS licenses. Alternatively, we asked whether we should pursue default remedies against the single license only. We also asked whether specific factors should influence our decision to pursue crossdefaults and whether cross defaults should be applied automatically or on a casebycase basis. Finally, we sought comment in general on what remedies are appropriate when licensees default on installment payments.  Xy-ku118. In response to the Installment Payment Public Notice, the Commission received  Xd-extensive comment on the issue of cross default in the context of defaults on installment payments. Several commenters urged the Commission not to adopt a cross default  X6-provision.E6 t X-ԍ #X\  P6G;ɒP#See e.g., BIA Capital Comments at 4; AmeriCall ex parte letter, July 11, 1997; Magnacom ex parte letter, August 13, 1997. In addition, some commenters urged the Commission to allow licensees to distribute their licenses among independent entities as a means of insulating against cross  X-default.Fa t X"-ԍ #X\  P6G;ɒP#See, e.g., ClearComm Reply Comments at 4. ć Such a decision, they contend, would allow potential financiers to invest in specific markets that meet their investment criteria without fear that a default in other markets would  X-threaten their investment.[Gt X%-ԍ#X\  P6G;ɒP# Id. [  Furthermore, some commenters specifically requested that the"GG0*&&aaE" Commission clarify its rules regarding cross default in the context of defaults on installment  X-payments if licenses are held by licensees with the same or overlapping control groups.Ht Xb-ԍ #X\  P6G;ɒP#See, e.g., ClearComm Reply Comments at 4; BIA Capital Comments at 4.  X-kv119. In the Second Report and Order in this docket, we concluded that we would not pursue cross default remedies against C block licensees who default on installment payments  X-with regard to other licenses in the C or F blocks.?I yt X-ԍ #X\  P6G;ɒP#See Second Report and Order at  7980. We explained, for example, that if a licensee defaults on a C block license and that licensee holds other C block licenses on which it is making its payments, we will not declare it to be in default on its debt associated with the other C block licenses. Similarly, if a licensee defaults on a C block license, and also holds F block licenses on which it is making its payments, we will not declare it to be in default on its F block debt.? We stated that our decision was warranted in light of our efforts to provide current C block licensees who are experiencing financing difficulties with options for meeting their financial obligations to the Commission. We deferred until completion of the Part 1 Rule Making our decision on whether to amend more comprehensively our policy of cross defaults. We also emphasized that existing installment payment default rules and license conditions would continue to apply for any C block licensees found to be in default after the March 31, 1998, date for resumption of C block installment payments.  X -kw120. Discussion. After consideration of the comments in this proceeding, we conclude that we will not pursue a policy of cross default (either within or across services) where licensees default on an installment payment. Because we eliminate the use of installment payments as a means of financing small business participation in our auction program for the  Xd-foreseeable future (see Section III.B.5, supra), we note that in practice this decision will apply only to existing licensees who are currently paying for their licenses in installments.  X!-kx121. Our decision not to pursue cross default remedies against current licensees who  X -default on an installment payment is supported by the majority of commenters.J Jt X-ԍ #X\  P6G;ɒP#See, e.g., Airadigm Comments at 16; Reply Comments at 5; Pocket Comments at 11, Merlin Reply Comments at 67; NPCS Reply Comments at 8; ISTA Reply Comments at 8; GWI Reply Comments at 4. For example, Airadigm contends that it is unfair to jeopardize an entire business because of a  X-default on one license.iK t XP!-ԍ #X\  P6G;ɒP#Airadigm Comments at 16.i Similarly, ISTA argues for separate treatment of separate services,  X-regardless of ownership, lest a failure in one business cause failure in unrelated businesses.jLt t X#-ԍ #X\  P6G;ɒP#ISTA Reply Comments at 8.j IVDS Enterprises proposes that licensees be able to discontinue installment payments on a"H% L0*&&aapE"  X-particular license and allow that license to be cancelled or revoked.vMt Xy-ԍ #X\  P6G;ɒP#IVDS Enterprises Reply Comments at 4.v IVDS Enterprises believes that such a decision should not affect the licensee's other licenses, whether in the  X-same or other services, where the licensee has made timely installment payments.xNyt X-ԍ #X\  P6G;ɒP#IVDS Enterprises Reply Comments at 45.x Alternatively, Pocket believes that the Commission should reserve the authority to impose  X-cross defaults on a casebycase basis only for licensees that have demonstrated bad faith.jO*t X -ԍ #X\  P6G;ɒP#Pocket Comments at 1213.j  Xv-ky122. We recognize that some commenters strongly advocate a policy of cross defaults in this context. These commenters suggest that such a policy (1) prevents speculation during the  XH-auction and cherrypicking (e.g., selectively defaulting on some licenses while keeping others)  X3-after the auction concludes,hP3t X-ԍ #X\  P6G;ɒP#CIRI Comments at 1516.h (2) encourages auction participants to find private market  X -solutions to financial shortfalls,|Q t XY-ԍ #X\  P6G;ɒP#PCIA Comments at 7; Airtouch Comments at 9.| and (3) is consistent with commercial lending policies.hR = t X -ԍ #X\  P6G;ɒP#AirTouch Comments at 9.h We believe, however, that the default provisions contained in Section 1.2104(g)(2) serve as an adequate incentive to discourage speculation and encourage licensees to pursue nondefault solutions to financial difficulties. We also emphasize that our decision on this matter only addresses default in the context of installment payments, and does not affect our policy with  X -regard to defaults on down payments.;S t XH-ԍ #X\  P6G;ɒP#See Section III.D.b, supra. See also BDPCS, Inc. Emergency Petition for Waiver of Section  {O1-24.711(a)(2) of the Commission's Rules, Memorandum Opinion and Order, 12 FCC Rcd 3230 (1997).; In addition, by making licensees who default on an installment payment subject to the default payment set forth in Section 1.2104(g)(2), we create an additional deterrent to licensees considering default as a solution to financing shortfalls. We believe that this policy will promote the goals of Section 309(j) by not punishing otherwise successful licensees for failures in one market, and will strike an  X6-appropriate balance between our conflicting roles as both "lender" and "regulator."tT6i t XP!-ԍ #X\  P6G;ɒP#See Report to Congress at 39.t Accordingly, upon default on an installment payment, a license will automatically cancel without further action by the Commission, the licensee will become subject to the default  X-payment set forth in Section 1.2104(g) of our rules (see Section III.D.5, supra), and the "IT0*&&aa E" Commission will initiate debt collection procedures against the licensee and accountable  X-affiliates.Ut Xb-ԍ #X\  P6G;ɒP##X\  P6G;ɒP#47 C.F.R.  1.2104(g), 1.2110(e)(4)(iii). See also 31 U.S.C. Chapter 37; 4 C.F.R. Parts 101105; 47 C.F.R. Part 1, Subpart O.  X-  X-E. Competitive Bidding Design, Procedure, and Timing Issues  Xv- k1. Balanced Budget Act of 1997 Notice and Comment Procedures  XH-kz123. Background. The Balanced Budget Act of 1997 provides that "before the issuance of bidding rules" the Commission must provide adequate time for parties to comment on proposed auction procedures, and that "after the issuance of bidding rules," the Commission must provide adequate time "to ensure that interested parties have sufficient time to develop  X -business plans, assess market conditions, and evaluate availability of equipment."V At X-ԍ #Xj\  P6G;ynXP##d6X@`7N@##X\  P6G;ɒP#Balanced Budget Act of 1997,  3002(a)(1)(B)(iv). In previous auctions, it has been our practice to permit the Bureau, on delegated authority, to  X -address a variety of issues related to the conduct of the auction and to announce these issues  X -by public notice subsequent to the adoption of servicespecific auction rules.WG t XJ-ԍ #X\  P6G;ɒP#See, e.g., "Auction of 800 MHz Specialized Mobile Radio Service Licenses," Public Notice, DA  {O3-97-1672 (rel. August 6, 1997) ("800 MHZ SMR PreAuction Public Notice); "Auction of Local Multipoint  {O-Distribution Service Licenses," Public Notice, DA 97-2081(rel. September 25, 1997) ("LMDS PreAuction Public  {O-Notice"). This practice has proven workable and efficient, and has enabled the Commission, through the involvement of the Bureau, to respond rapidly to a variety of daytoday operational concerns associated with the conduct of each auction.  X4-k{124. Discussion. We believe that in the past our servicespecific rule making process has served the purpose of adequately ensuring that interested parties have sufficient time to familiarize themselves with the rules and procedures to be employed in an auction prior to the application deadlines and start date of that auction. We nevertheless believe that this legislation requires that we provide an additional opportunity for input from potential bidders prior to the issuance of detailed auctionspecific information by the Bureau. To date, the Bureau has served as the primary point of contact with potential bidders and other parties  X-interested in issues relating to each upcoming auction, and this has worked well.XG t XE#-ԍ #X\  P6G;ɒP#For example, the Bureau has traditionally released a public notice announcing the licenses to be  {O.$-auctioned, the start date of the auction, relevant filing deadlines (e.g., the shortform application (FCC Form 175)  {O$-filing deadline and the deadline for submission of upfront payments) and dates for preauction events (e.g., X` hp x (#%'0*,.8135@8: APPENDIX C ă Initial Regulatory Flexibility Analysis  Y- (Second Further Notice of Proposed Rulemaking)  Y-kAs required by the Regulatory Flexibility Act (RFA),'y X -ԍ#X\  P6G;ɒP#See 5 U.S.C.  603. The RFA, see 5 U.S.C.  601 et seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) (CWAAA). Title II of CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the rules proposed in the Second Further Notice of Proposed Rulemaking (Notice) in WT Docket No. 9782. Written public comments are requested on the IRFA. Comments on the IRFA must have a separate and distinct heading designating them as responses to the IRFA and must be filed by the deadlines for comments on the Notice. The Commission will send a copy of the Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the Notice and IRFA (or summaries thereof) will be published in the Federal Register.  Y -A.,kNeed for, and objectives of, the proposed rules(# kThis Notice is being initiated to secure comment on additional issues relating to the general competitive bidding rules for all auctionable services that are necessary in light of the  YN-Balanced Budget Act of 1997.N  X-ԍ#X\  P6G;ɒP#Balanced Budget Act of 1997, Pub. Law 10533, 111 Stat. 251 (1997) (to be codified at 47 U.S.C.  309(j)(4)(F)). This Notice seeks comment on the use of installment payments for future auctions, the controlling interest standard as a general attribution rule, the appropriate petition to deny period for future auctions, and whether the Part 1 rules adopted in the Third Report and Order (Order) should apply to the auction of General Wireless Communications Services (GWCS) and supersede the previously adopted GWCS auction rules and procedures. The Commission believes that these proposals will further simplify and streamline the rules and regulations and increase the overall efficiency of the competitive bidding process.  Y-B.,kLegal basis(# kThis action is taken pursuant to Sections 4(i), 5(b), 5(c)(1), 303(r), and 309 (j) of the Communications Act of 1934, as amended, 47 U.S.C. Sections 154(i), 155(b), 155(c)(1), 303(r), and 309(j).  Y-C.,kDescription and estimate of the number of small entities to which the proposed rules will apply(# " +6(6(aa!E"ԌkThe Commission is required to provide a description of and, where feasible, an estimate  Y-of the number of small entities that may be affected by the proposed rules, if adopted.t Xb-ԍ#X\  P6G;ɒP#5 U.S.C.  603(b)(3).t The RFA generally defines the term "small entity" as having the same meaning as the terms  Y-"small business," "small organization," and "small governmental jurisdiction."my X-ԍ#X\  P6G;ɒP#5 U.S.C.  601(6).m In addition, the term "small business" has the same meaning as the term "small business concern" under  Y-Section 3 of the Small Business Act.* Xh -ԍ#X\  P6G;ɒP#5 U.S.C.  601(3) (incorporating by reference the definition of "small business concern" in 15 U.S.C.  632). 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) meets any additional criteria established by the Small Business  YH-Administration (SBA).kH X-ԍ#X\  P6G;ɒP#15 U.S.C.  632.k kThe rules proposed in this Notice would allow all entities, including existing cellular, PCS, paging, and other small communications entities to obtain licenses in auctionable services through competitive bidding. These rules apply to future auctions, but will not apply to the initial auctions of licenses in the paging, 220 MHz, 800 MHz Specialized Mobile Radio (SMR), and Local Multipoint Distribution (LMDS) services. In estimating the number of small entities who may participate in future auctions of wireless services, the Commission anticipates that the makeup of current wireless services licensees is representative of future auction winning bidders.  YK-kAs noted in the FRFA, supra, various wireless small entities may be affected by the rules in the Order. These same entities are included in this IRFA. Also, as noted, with a few exceptions, the Commission has not developed a precise definition of small entities for the various affected wireless services. Therefore, the applicable definition of small entity is the definition under the Small Business Administration (SBA) rules applicable to radiotelephone companies. This definition provides that a small entity is a radiotelephone company  Y-employing no more than 1,500 persons.T X -ԍ#X\  P6G;ɒP#13 C.F.R.  121.201, Standard Industrial Classification (SIC) Code 4812. The Commission hereby incorporates into this  Y-IRFA section the FRFA analysis and descriptions of potentially affected small entities, supra, regarding the cellular, narrowband PCS, 220 MHz, paging, airground, SMR, PLMR,  Y-aviation and marine, offshore radiotelephone services, and GWCS.  X6%-ԍ#X\  P6G;ɒP#See Appendix B at section C, supra. In addition, we  Yi-incorporate the more refined definitions described supra pertaining to the broadband PCS,"i +6(6(aaE"  Y-220 MHz, paging, and SMR services.a  Xy-ԍ#X\  P6G;ɒP#Id.a A small organization is generally "any notforprofit  Y-enterprise which is independently owned and operated and is not dominant in its field."u y X-ԍ#X\  P6G;ɒP#X5 U.S.C.  601(4).(#u  Y-Nationwide, there are 275,801 small organizations. * X-ԍ#X\  P6G;ɒP#X1992 Economic Census, U.S. Bureau of the Census, Table 6, (special tabulation of data under contract to Office of Advocacy of the U.S. Small Business Administration).(# "Small governmental jurisdiction" generally means "governments of cities, counties, towns, townships, villages, school  Y-districts, or special districts, with a population of less than 50,000."m  X -ԍ#X\  P6G;ɒP#5 U.S.C.  601(5).m As of 1992, there  Y-were 85,006 such jurisdictions in the United States. T X-ԍ#X\  P6G;ɒP#XU.S. Department of Commerce, Bureau of the Census, "1992 Census of Governments."(#ư  Y_-D.,kDescription of reporting, recordkeeping, and other compliance requirements(# kThere are no additional reporting, recordkeeping, or other compliance requirements as a result of the Notice.  Y -E.,kSteps taken to minimize significant economic impact on small entities, and significant alternatives considered(# kThe Commission proposes, pursuant to the Balanced Budget Act of 1997, to use competitive bidding for the award of any initial licenses or construction permits, unless excepted under Section 309(j)(2), when mutual exclusivity exists among applications that have been accepted for filing. The Commission proposes to employ various mechanisms such as eligibility restrictions, spectrum caps, size limits on service areas, and providing for partitioning of service areas and disaggregation of spectrum in order to provide opportunities for avoiding mutually exclusive license applications. These different mechanisms are intended to help ensure that the marketplace for the various services continue to promote economic opportunity, provide incentives for the development and rapid deployment of new technologies, and to achieve efficient and intensive use of this spectrum.  Y-kThe Commission observes that small businesses have been successful in the auctions in which installment payments plans were offered, and seeks comment on ways to provide an effective installment payment program while at the same time minimizing the concerns that have led to the decision to discontinue the use of installment payments for the present time. The Commission seeks comment on how to create an installment payment plan which fulfills the sometimes incongruent goals of encouraging only serious, financially qualified small business applicants to apply for licenses, ensuring the rapid provision of service to the"  +6(6(aaKE" public, and guaranteeing that the American public is reasonably compensated for the use of the spectrum being auctioned. The Commission also seeks comment on how to fashion an installment payment program that is consistent with the provision of the Balanced Budget Act of 1997 that requires that all proceeds from future competitive bidding be deposited in the United States Treasury not later than September 30, 2002. In addition, the Commission seeks comment on means other than bidding credits and installment payments to facilitate the participation of small businesses and other designated entities in the spectrum auction program. kWith respect to general attribution rules, the Commission proposes to adopt a "controlling interest" standard as the general attribution rule for all future auctions. Under this standard, determination of eligibility for small business provisions would be made by attributing the gross revenues only of principals of the applicant who exercise both "de jure" and "de facto" control, and their affiliates. The Commission seeks comment on whether the standard is sufficient to calculate size so that only those entities truly meriting small business status qualify for bidding credits, or whether alternate standards for attributing the gross revenues of investors and affiliates in an applicant would better meet the Commission's goal to facilitate the participation of small businesses and other designated entities in the spectrum auction program. In addition, the Commission seeks comment on whether the controlling interest standard would be strengthened by imposing a minimum equity requirement. kThe Commission believes that the provision in the Balanced Budget Act of 1997 requiring that interested parties have adequate time to develop business plans, assess market conditions and evaluate the availability of equipment necessary to make use of the specific spectrum to be auctioned is primarily intended to ensure that interested parties have adequate time to familiarize themselves with the rules and procedures to be employed in an auction prior to the application deadlines and start date of that auction. Nevertheless, it is unclear whether this legislation requires an additional opportunity for notice and comment prior to the issuance of detailed auctionspecific information by the Wireless Telecommunications Bureau (Bureau). In order to comply with this provision of the Balanced Budget Act of 1997, and to ensure that potential bidders have adequate time to familiarize themselves with the specific provisions that will govern the daytoday conduct of the auction, the Commission proposes to delegate to the Bureau the authority to seek comment on a variety of auctionspecific issues prior to the start of each auction. k kThe Commission proposes that the Bureau seek comment on specific mechanisms relating to daytoday bidding, the round structure, minimum opening bid/reserve prices, minimum acceptable bids, initial maximum eligibility for each bidder, activity requirements for each stage of the auction, activity rule waivers, criteria for determining reductions in eligibility, information regarding bid withdrawal and bid removal, the stopping rules to be employed, and information relating to auction delay, suspension, or cancellation. The Commission also  YQ%-proposes that the Bureau afford interested parties a reasonable time (e.g., seven days), in light of the start date of each auction and relevant preauction filing deadlines, to comment on these auctionspecific issues. Also, the Commission proposes that the Bureau announce,"%' +6(6(aaP(E" at any time in the weeks leading up to the start date of each auction, any amendment or clarifications to the information contained in the auctionrelated public notices or the Bidder Information Package. kThe Commission tentatively concludes that the Balanced Budget Act of 1997 establishes a presumption that a reserve price or minimum opening bid will be required for each auction, unless it is determines that such mechanisms are not in the public interest. Comment is sought on this conclusion. The Commission tentatively concludes that the new provision establishing reserve prices or a minimum opening bid does not call for traditional reserve prices; rather, it calls for an added protection that licenses will not be assigned at unacceptably low prices. The Commission also seeks comment on suggested methods by which a reserve price or minimum bid can be established in future auctions, in light of the tentative conclusion above. k The Commission believes that in light of Congress' directive in the Balanced Budget Act, a shortened time period for the grant of initial licenses in auctionable services, as well as a shortened petition to deny period, is generally appropriate for future auctions. The Commission seeks comment on the appropriate length of a petition to deny period in light of this legislation, and in particular, whether auctions for specific services require longer periods for the grant of initial licenses or for the filing of petitions to deny. kSection 309(j) of the Communications Act directs the Commission to disseminate licenses among a wide variety of applicants, including small businesses and other designated  Y-entities.t Xh-ԍ#X\  P6G;ɒP#47 U.S.C.  309(j)(3)(B).t Section 309(j) also requires that the Commission ensure the development and rapid deployment of new technologies, products, and services for the benefit of the public, and recover for the public a portion of the value of the public spectrum resource made available  Y-for commercial use.}y X-ԍ#X\  P6G;ɒP#47 U.S.C.  309(j)(3)(A), (C).} The Commission believes these provisions in the Notice help meet those goals and promote efficient competition while maintaining fairness and efficiencies of process in the Commission's rules.  YN-F.,kFederal rules which overlap, duplicate, or conflict with these rules(# kNone." *+6(6(aaE"  X-  > òAPPENDIX D  X-FFinal Rules Đ Y-lU   Parts 1, 21, 24, 27, 90 and 95 of Title 47 of the Code of Federal Regulations are amended to  Y-read as follows:  Yw-  XI- PART 1 PRACTICE AND PROCEDURE 1. The authority citation for Part 1 continues to read as follows:  X -  Y - Authority: 47 U.S.C. 151, 154, 207, 303 and 309(j), unless otherwise noted.  Y- 2. Section 1.2101 is revised to read as follows:  Xz-  1.2101 Purpose.  YL-   The provisions of this subpart implement Section 309(j) of the Communications Act of 1934,   as added by the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66) and the   Balanced Budget Act of 1997 (Public Law 105-33), authorizing the Commission to employ   competitive bidding procedures to choose from among two or more mutually exclusive applications for certain initial licenses.  Y-k3. Section 1.2102 is amended by revising paragraphs (a) and (b) to read as follows:  X}-  1.2102 Eligibility of applications for competitive bidding.  Yf-  YO- (a) Mutually exclusive initial applications are subject to competitive bidding .    (b) The following types of license applications are not subject to competitive bidding procedures:    (1) Public safety radio services, including private internal radio services used by state and   local governments and nongovernment entities and including emergency road services provided  Y-by notforprofit organizations, that (i) Are used to protect the safety of life, health, or property; and (ii) Are not commercially available to the public;    (2) Initial licenses or construction permits for digital television service given to existing  Y#-terrestrial broadcast licensees to replace their analog television service licenses; or    (3) Noncommercial educational and public broadcast stations described under 47 U.S.C.  397(6). ";&+6(6(aa`'E"Ԍ EY-kNote to  1.2102: To determine the rules that apply to competitive bidding, specific service rules should also be consulted.  Y- EYjk4. Section 1.2103 is amended by revising paragraph (a) and adding paragraph (d) to read  Yv-as follows:  Y_-  1.2103 Competitive bidding design options .  Y2-   (a) The Commission will choose from one or more of the following types of auction designs for services or classes of services subject to competitive bidding: (1) Simultaneous multipleround auctions (using remote or on-site electronic bidding);    (2) Sequential multiple round auctions (using either oral ascending or remote and/or on-site electronic bidding);    (3) Sequential or simultaneous singleround auctions (using either sealed paper or remote and/or on-site electronic bidding); and (4) Combinatorial (package/contingent) bidding auctions. Z***** (d) The Commission may use real time bidding in all electronic auction designs.  Y- k3. Section 1.2104 is amended by revising paragraphs (d) and (g) to read as follows:  Y-  1.2104 Competitive bidding mechanisms. lR* * * * *  YP-   (d) Minimum Bid Increments, Minimum Opening Bids and Maximum Bid Increments.   The Commission may, by announcement before or during an auction, require minimum bid   increments in dollar or percentage terms. The Commission also may establish minimum opening bids and maximum bid increments on a service-specific basis. lR* * * * *  Y!-  y (g) Withdrawal, Default and Disqualification Payment. As specified below, when the  Y"-  Commission conducts an auction pursuant to  1.2103, the Commission will impose payments   + on bidders who withdraw high bids during the course of an auction, or who default on payments due after an auction closes or who are disqualified.    (1) Bid withdrawal prior to close of auction. A bidder who withdraws a high bid during the   course of an auction is subject to a payment equal to the difference between the amount bid and   hthe amount of the winning bid the next time the license is offered by the Commission. The bid"%'+6(6(aaP(E"   withdrawal payment is either the difference between the net withdrawn bid and the subsequent   net winning bid, or the difference between the gross withdrawn bid and the subsequent gross   Jwinning bid, whichever is less. No withdrawal payment is assessed if the subsequent winning   bid exceeds the withdrawn bid. This payment amount is deducted from any upfront payments or down payments that the withdrawing bidder has deposited with the Commission.   \ (2) Default or disqualification after close of auction. If a high bidder defaults or is   disqualified after the close of such an auction, the defaulting bidder will be subject to the   Zpayment in paragraph (g)(1) plus an additional payment equal to 3 percent of the subsequent   winning bid. If the subsequent winning bid exceeds the defaulting bidder's bid amount, the 3   percent payment will be calculated based on the defaulting bidder's bid amount. If either bid   Jamount is subject to a bidding credit, the 3 percent credit will be calculated using the same bid   iamounts and basis (net or gross bids) as in the calculation of the payment in paragraph (g)(1)   Yof this section. Thus, for example, if gross bids are used to calculate the payment in paragraph   (g)(1), the 3 percent will be applied to the gross amount of the subsequent winning bid, or the gross amount of the defaulting bid, whichever is less. lR* * * * * k4. Section 1.2105 is revised to read as follows:  Y-  1.2105 Bidding application and certification procedures; prohibition of collusion.  Y-  Y-  (a) Submission of ShortForm 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. Beginning January 1, 1999, all  Y-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  YO-   (ii) In the case of application filing dates which occur automatically by operation of law (see,  Y8-  ;e.g., 47 CFR 22.902), on a date specified by Public Notice after the Commission has reviewed the applications that have been filed on those dates and determined that mutual exclusivity exists.  Y - (2) The short-form application must contain the following information: (i) Identification of each license 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  Y;&-describe itself and its principals or other responsible persons; and (B) Applicant ownership information, as set forth in  1.2112. "$'+6(6(aaP(E"Ԍ (iii) The identity of the person(s) authorized to make or withdraw a bid; (iv) If the applicant applies as a designated entity pursuant to  1.2110, a statement to that effect and a declaration, under penalty of perjury, that the applicant is qualified as a designated entity under  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. The Commission will accept applications certifying that a request for waiver or other relief from the requirements of Section 310 is pending; (vi) Certification that the applicant is in compliance with the foreign ownership provisions of Section 310 of the Communications Act of 1934, as amended; (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) An exhibit, certified as truthful under penalty of perjury, identifying all parties with whom the applicant has entered into partnerships, joint ventures, consortia or other agreements, arrangements or understandings of any kind relating to the licenses being auctioned, including any such agreements relating to the post-auction market structure. (ix) Certification under penalty of perjury that it has not entered and will not enter into any explicit or implicit agreements, arrangements or understandings of any kind with any parties other than those identified pursuant to paragraph (a)(2)(viii) regarding the amount of their bids, bidding strategies or the particular licenses on which they will or will not bid; 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.  Y|-  Ye-(b) Modification and Dismissal of ShortForm Application (FCC Form 175). (1) Any  YN-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 dismissed with prejudice and the upfront payment, 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 shortform  Y!-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  Y#-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  YQ%- after the initial filing deadline. Major amendments include changes in ownership of the  Y:&-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"#'+6(6(aaP(E"  Y-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.  Y1-(c) Prohibition of collusion. (1) Except as provided in paragraphs (c)(2), (c)(3) and (c)(4) of this section, after the filing of short-form applications, all applicants are prohibited from cooperating, collaborating, discussing or disclosing in any manner the substance of their bids or bidding strategies, or discussing or negotiating settlement agreements, with other applicants until after the high bidder makes the required down payment, unless such applicants are members of a bidding consortium or other joint bidding arrangement identified on the bidder's short-form application pursuant to  1.2105(a)(2)(viii). (2) Applicants may modify their shortform applications to reflect formation of consortia or changes in ownership at any time before of during an auction, provided such changes do no result in a change in control of the applicant, and provided that the parties forming consortia or entering into ownership agreements have not applied for licenses in any of the same geographic license areas. Such changes will not be considered major modifications of the application. (3) After the filing of shortform applications, applicants may make agreements to bid jointly for licenses, provided the parties to the agreement have not applied for licenses in any of the same geographic license areas. (4) After the filing of short-form applications, a holder of a non-controlling attributable interest in an entity submitting a short-form application may acquire an ownership interest in, form a consortium with, or enter into a joint bidding arrangement with, other applicants for licenses in the same geographic license area, provided that: (i) the attributable interest holder certifies to the Commission that it has not communicated and will not communicate with any party concerning the bids or bidding strategies of more than one of the applicants in which it holds an attributable interest, or with which it has a consortium or joint bidding arrangement, and which have applied for licenses in the same geographic license area(s); and (ii) The arrangements do not result in any change in control of an applicant; or (iii) When an applicant has withdrawn from the auction, is no longer placing bids and has no further eligibility, a holder of a noncontrolling, attributable interest in such an applicant may obtain an ownership interest in or enter into a consortium with another applicant for a license in the same geographic service area, provided that the attributable interest holder certifies to the Commission that it did not communicate with the new applicant prior to the date that the original applicant withdrew from the auction. (5) Applicants must modify their shortform applications to reflect any changes in ownership or in membership of consortia or joint bidding arrangements. (6) For purposes of this paragraph:"#'+6(6(aaP(E"Ԍ (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; 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.  YK- k5. Section 1.2107 is amended by revising paragraphs (b) and (c) to read as follows:  Y-  1.2107 Submission of down payment and filing of long-form applications. lR* * * * * (b) Unless otherwise specified by Public Notice, within ten (10) business days after being notified that it is a high bidder on a particular license(s), a high bidder must submit to the Commission's lockbox bank such additional funds (the "down payment") as are necessary to bring its total deposits (not including upfront payments applied to satisfy bid withdrawal or default payments) up to twenty (20) percent of its high bid(s). (In single round sealed bid auctions conducted under  1.2103, however, bidders may be required to submit their down payments with their bids.) Unless otherwise specified by Public Notice, this down payment must be made by wire transfer in U.S. dollars from a financial institution whose deposits are insured by the Federal Deposit Insurance Corporation and must be made payable to the Federal Communications Commission. Down payments will be held by the Commission until the high bidder has been awarded the license and has paid the remaining balance due on the license or authorization, in which case it will not be returned, or until the winning bidder is found unqualified to be a licensee or has defaulted, in which case it will be returned, less applicable payments. No interest on any down payment will be paid to the bidders. (c) A high bidder that meets its down payment obligations in a timely manner must, within ten (10) business days after being notified that it is a high bidder, submit an additional application (the "long-form application") pursuant to the rules governing the service in which the applicant is the high bidder. Notwithstanding any other provision in title 47 of the Code of Federal Regulations to the contrary, high bidders need not submit an additional application"$'+6(6(aaP(E"  Y-filing fee with their long-form applications. Specific procedures for filing applications will  Y-be set out by Public Notice. Beginning January 1, 1999, all longform applications must be  Y-filed electronically. An applicant that fails to submit the required long-form application under this paragraph and fails to establish good cause for any late-filed submission, shall be deemed to have defaulted and will be subject to the payments set forth in  1.2104. lR* * * * *  Y - k6. Section 1.2108 is amended by revising paragraphs (b) and (c) to read as follows:  1.2108 Procedures for filing petitions to deny against long-form applications.  Y -lR * * * * * Ã  Y- (b) Within a period specified by Public Notice, and after the Commission by public notice announces that long-form applications have been accepted for filing, petitions to deny such applications may be filed. In all cases, the period for filing petitions to deny shall be no shorter than five (5) days. Any such petitions must contain allegations of fact supported by affidavit of a person or persons with personal knowledge thereof. (c) An applicant may file an opposition to any petition to deny, and the petitioner a reply to such opposition. Allegations of fact or denials thereof must be supported by affidavit of a person or persons with personal knowledge thereof. The time for filing such oppositions shall be at least five (5) days from the filing date for petitions to deny, and the time for filing replies shall be at least five (5) days from the filing date for oppositions. The Commission may grant a license based on any long-form application that has been accepted for filing. The Commission shall in no case grant licenses earlier than seven (7) days following issuance  Y}-of a public notice announcing long-form applications have been accepted for filing. lR* * * * *  Y!- k7. Section 1.2109 is amended by revising paragraphs (a), (b) and (c) to read as follows:  Y -  1.2109 License grant, denial, default, and disqualification. (a) Unless otherwise specified by Public Notice, auction winners are required to pay the  Y#-balance of their winning bids in a lump sum within ten (10) business days following the release of a Public Notice establishing the payment deadline. If a winning bidder fails to pay the balance of its winning bids in a lump sum by the applicable deadline as specified by the  Y<&-Commission, it will be allowed to make payment within ten (10) business days after the payment deadline, provided that it also pays a late fee equal to five percent of the amount"%'+6(6(aaP(E" due. When a winning bidder fails to pay the balance of its winning bid by the late payment deadline, it is considered to be in default on its license(s) and subject to the applicable default payments. Licenses will be awarded upon the full and timely payment of winning bids and any applicable late fees. (b) If a winning bidder withdraws its bid after the Commission has declared competitive  Y-bidding closed or fails to remit the required down payment within ten (10) business days after the Commission has declared competitive bidding closed, the bidder will be deemed to have defaulted, its application will be dismissed, and it will be liable for the default payment specified in  1.2104(g)(2). In such event, the Commission, at its discretion, may either re-auction the license to existing or new applicants or offer it to the other highest bidders (in descending order) at their final bids. The down payment obligations set forth in  1.2107(b) will apply. (c) A winning bidder who is found unqualified to be a licensee, fails to remit the balance of its winning bid in a timely manner, or defaults or is disqualified for any reason after having made the required down payment, will be deemed to have defaulted and will be liable for the payment set forth in  1.2104(g)(2). In such event, the Commission may either re-auction the license to existing or new applicants or offer it to the other highest bidders (in  Yy-descending order) at their final bids. lR* * * * * k8. Section 1.2110 is revised to read as follows:  Y-  1.2110 Designated entities. Z***** (b) ***  Y8-(3)  Rural telephone companies. A rural telephone company is any local exchange carrier operating entity to the extent that such entity (i) provides common carrier service to any local exchange carrier study area that does not include either (A) any incorporated place of 10,000 inhabitants or more, or any part thereof, based on the most recently available population statistics of the Bureau of the Census, or (B) any territory, incorporated or unincorporated, included in an urbanized area, as defined by the Bureau of the Census as of August 10, 1993; (ii) provides telephone exchange service, including exchange access, to fewer than 50,000 access lines; (iii) provides telephone exchange service to any local exchange carrier study area with fewer than 100,000 access lines; or ";&+6(6(aa`'E"Ԍ (iv)has less than 15 percent of its access lines in communities of more than 50,000 on the date of enactment of the Telecommunications Act of 1996. (4) Affiliate. (i) An individual or entity is an affiliate of an applicant or of a person holding an attributable interest in an applicant if such individual or entity-- (A) directly or indirectly controls or has the power to control the applicant, or (B) is directly or indirectly controlled by the applicant, or (C) is directly or indirectly controlled by a third party or parties that also controls or has the power to control the applicant, or (D) has an "identity of interest" with the applicant. (ii) Nature of control in determining affiliation. (A) Every business concern is considered to have one or more parties who directly or indirectly control or have the power to control it. Control may be affirmative or negative and it is immaterial whether it is exercised so long as the power to control exists. Example. An applicant owning 50 percent of the voting stock of another concern would have negative power to control such concern since such party can block any action of the other stockholders. Also, the bylaws of a corporation may permit a stockholder with less than 50 percent of the voting stock to block any actions taken by the other stockholders in the other entity. Affiliation exists when the applicant has the power to control a concern while at the same time another person, or persons, are in control of the concern at the will of the party or parties with the power to control. (B) Control can arise through stock ownership; occupancy of director, officer or key employee positions; contractual or other business relations; or combinations of these and other factors. A key employee is an employee who, because of his/her position in the concern, has a critical influence in or substantive control over the operations or management of the concern. (C) Control can arise through management positions where a concern's voting stock is so widely distributed that no effective control can be established. Example. In a corporation where the officers and directors own various size blocks of stock totaling 40 percent of the corporation's voting stock, but no officer or director has a block sufficient to give him or her control or the power to control and the remaining 60 percent is widely distributed with no individual stockholder having a stock interest greater than 10 percent, management has the power to control. If persons with such management control of the other entity are persons with attributable interests in the applicant, the other entity will be deemed an affiliate of the applicant. (iii) Identity of interest between and among persons. Affiliation can arise between or among two or more persons with an identity of interest, such as members of the same family"#'+6(6(aaP(E" or persons with common investments. In determining if the applicant controls or has the power to control a concern, persons with an identity of interest will be treated as though they were one person. Example. Two shareholders in Corporation Y each have attributable interests in the same PCS application. While neither shareholder has enough shares to individually control Corporation Y, together they have the power to control Corporation Y. The two shareholders with these common investments (or identity in interest) are treated as though they are one person and Corporation Y would be deemed an affiliate of the applicant. (A) Spousal Affiliation. Both spouses are deemed to own or control or have the power to control interests owned or controlled by either of them, unless they are subject to a legal separation recognized by a court of competent jurisdiction in the United States. In calculating their net worth, investors who are legally separated must include their share of interests in property held jointly with a spouse. (B) Kinship Affiliation. Immediate family members will be presumed to own or control or have the power to control interests owned or controlled by other immediate family members. In this context "immediate family member" means father, mother, husband, wife, son, daughter, brother, sister, father- or mother-in-law, son- or daughter-in-law, brother- or sister-in-law, step- father or -mother, step-brother or -sister, step-son or -daughter, half brother or sister. This presumption may be rebutted by showing that the family members are estranged, the family ties are remote, or the family members are not closely involved with each other in business matters. Example. A owns a controlling interest in Corporation X. A's sister-in-law, B, has an attributable interest in a PCS application. Because A and B have a presumptive kinship affiliation, A's interest in Corporation Y is attributable to B, and thus to the applicant, unless B rebuts the presumption with the necessary showing. (iv) Affiliation through stock ownership. (A) An applicant is presumed to control or have the power to control a concern if he or she owns or controls or has the power to control 50 percent or more of its voting stock. (B) An applicant is presumed to control or have the power to control a concern even though he or she owns, controls or has the power to control less than 50 percent of the concern's voting stock, if the block of stock he or she owns, controls or has the power to control is large as compared with any other outstanding block of stock. (C) If two or more persons each owns, controls or has the power to control less than 50 percent of the voting stock of a concern, such minority holdings are equal or approximately equal in size, and the aggregate of these minority holdings is large as compared with any other stock holding, the presumption arises that each one of these persons individually controls or has the power to control the concern; however, such presumption may be rebutted by a showing that such control or power to control, in fact, does not exist. ":&+6(6(aa`'E"Ԍ (v) Affiliation arising under stock options, convertible debentures, and agreements to merge. Stock options, convertible debentures, and agreements to merge (including agreements in principle) are generally considered to have a present effect on the power to control the concern. Therefore, in making a size determination, such options, debentures, and agreements are generally treated as though the rights held thereunder had been exercised. However, an affiliate cannot use such options and debentures to appear to terminate its control over another concern before it actually does so. Example 1. If company B holds an option to purchase a controlling interest in company A, who holds an attributable interest in a PCS application, the situation is treated as though company B had exercised its rights and had come owner of a controlling interest in company A. The gross revenues of company B must be taken into account in determining the size of the applicant. Example 2. If a large company, BigCo, holds 70% (70 of 100 outstanding shares) of the voting stock of company A, who holds an attributable interest in a PCS application, and gives a third party, SmallCo, an option to purchase 50 of the 70 shares owned by BigCo, BigCo will be deemed to be an affiliate of company A, and thus the applicant, until SmallCo actually exercises its option to purchase such shares. In order to prevent BigCo from circumventing the intent of the rule which requires such options to be considered on a fully diluted basis, the option is not considered to have present effect in this case. Example 3. If company A has entered into an agreement to merge with company B in the future, the situation is treated as though the merger has taken place. (vi) Affiliation under voting trusts. (A) Stock interests held in trust shall be deemed controlled by any person who holds or shares the power to vote such stock, to any person who has the sole power to sell such stock, and to any person who has the right to revoke the trust at will or to replace the trustee at will. (B) If a trustee has a familial, personal or extra-trust business relationship to the grantor or the beneficiary, the stock interests held in trust will be deemed controlled by the grantor or beneficiary, as appropriate. (C) If the primary purpose of a voting trust, or similar agreement, is to separate voting power from beneficial ownership of voting stock for the purpose of shifting control of or the power to control a concern in order that such concern or another concern may meet the Commission's size standards, such voting trust shall not be considered valid for this purpose regardless of whether it is or is not recognized within the appropriate jurisdiction. (vii) Affiliation through common management. Affiliation generally arises where officers, directors, or key employees serve as the majority or otherwise as the controlling element of the board of directors and/or the management of another entity. (viii) Affiliation through common facilities. Affiliation generally arises where one concern shares office space and/or employees and/or other facilities with another concern, particularly where such concerns are in the same or related industry or field of operations, or"#'+6(6(aaP(E" where such concerns were formerly affiliated, and through these sharing arrangements one concern has control, or potential control, of the other concern. (ix) Affiliation through contractual relationships. Affiliation generally arises where one concern is dependent upon another concern for contracts and business to such a degree that one concern has control, or potential control, of the other concern. (x) Affiliation under joint venture arrangements. (A) A joint venture for size determination purposes is an association of concerns and/or individuals, with interests in any degree or proportion, formed by contract, express or implied, to engage in and carry out a single, specific business venture for joint profit for which purpose they combine their efforts, property, money, skill and knowledge, but not on a continuing or permanent basis for conducting business generally. The determination whether an entity is a joint venture is based upon the facts of the business operation, regardless of how the business operation may be designated by the parties involved. An agreement to share profits/losses proportionate to each party's contribution to the business operation is a significant factor in determining whether the business operation is a point venture. g (B) The parties to a joint venture are considered to be affiliated with each other. Nothing in this subsection shall be construed to define a small business consortium, for purposes of determining status as a designated entity, as a joint venture under attribution standards provided in this section. (xi) Exclusion from affiliation coverage. For purposes of this section, Indian tribes or Alaska Regional or Village Corporations organized pursuant to the Alaska Native Claims  Y-Settlement Act (43 U.S.C. 1601 et seq.), or entities owned and controlled by such tribes or corporations, are not considered affiliates of an applicant (or licensee) that is owned and controlled by such tribes, corporations or entities, and that otherwise complies with the requirements of this section, except that gross revenues derived from gaming activities conducted by affiliate entities pursuant to the Indian Gaming Regulatory Act (25 U.S.C.  YN-2701 et seq.) will be counted in determining such applicant's (or licensee's) compliance with the financial requirements of this section, unless such applicant establishes that it will not receive a substantial unfair competitive advantage because significant legal constraints restrict the applicant's ability to access such gross revenues. (c) The Commission may set aside specific licenses for which only eligible designated entities, as specified by the Commission, may bid. (d) The Commission may permit partitioning of service areas in particular services for eligible designated entities. (e) Bidding credits.  Y:&-(1) The Commission may award bidding credits (i.e., payment discounts) to eligible designated entities. Competitive bidding rules applicable to individual services will specify"#'+6(6(aaP(E" the designated entities eligible for bidding credits, the licenses for which bidding credits are available, the amounts of bidding credits and other procedures. (2) Size of bidding credits. A winning bidder that qualifies as a small business or a consortium of small businesses may use the following bidding credits corresponding to their respective average gross revenues for the preceding 3 years: (i) Businesses with average gross revenues for the preceding years 3 years not exceeding $3 million are eligible for bidding credits of 35 percent; (ii) Businesses with average gross revenues for the preceding years 3 years not exceeding $15 million are eligible for bidding credits of 25 percent; and (iii) Businesses with average gross revenues for the preceding years 3 years not exceeding $40 million are eligible for bidding credits of 15 percent. (f) Installment payments. The Commission may permit small businesses (including small businesses owned by women, minorities, or rural telephone companies that qualify as small businesses) and other entities determined to be eligible on a service-specific basis, which are high bidders for licenses specified by the Commission, to pay the full amount of their high bids in installments over the term of their licenses pursuant to the following: (1) Unless otherwise specified by Public Notice, each eligible applicant paying for its license(s) on an installment basis must deposit by wire transfer in the manner specified in  1.2107(b) sufficient additional funds as are necessary to bring its total deposits to ten (10) percent of its winning bid(s) within ten (10) days after the Commission has declared it the winning bidder and closed the bidding. Failure to remit the required payment will make the bidder liable to pay a default payment pursuant to  1.2104(g)(2).  Y-(2) Within ten (10) days of the conditional grant of the license application of a winning bidder eligible for installment payments, the licensee shall pay another ten (10) percent of the high bid, thereby commencing the eligible licensee's installment payment plan. Failure to remit the required payment will make the bidder liable to pay default payments pursuant to  1.2104(g)(2). (3) Upon grant of the license, the Commission will notify each eligible licensee of the terms of its installment payment plan and that it must execute a promissory note and security agreement as a condition of the installment payment plan. Unless other terms are specified in the rules of particular services, such plans will: (i) impose interest based on the rate of U.S. Treasury obligations (with maturities closest to the duration of the license term) at the time of licensing; (ii) allow installment payments for the full license term; (iii) begin with interest-only payments for the first two years; and (iv) amortize principal and interest over the remaining term of the license. (4) A license granted to an eligible entity that elects installment payments shall be conditioned upon the full and timely performance of the licensee's payment obligations under the installment plan.  Yh$- (i) Any licensee that fails to submit payment on an installment obligation will automatically have an additional ninety (90) days in which to submit its required payment without being considered delinquent. Any licensee making its required payment during this period will be assessed a late payment fee equal to five percent (5%) of the amount of the"#'+6(6(aaP(E" past due payment. Late fees assessed under this paragraph will accrue on the next business day following the payment due date. Payments made at the close of any grace period will first be applied to satisfy any lender advances as required under each licensee's "Note and Security Agreement." Afterwards, payments will be applied in the following order: late charges, interest charges, principal payments. (ii) If any licensee fails to make the required payment at the close of the 90day period set forth in subsection (i) above, the licensee will automatically be provided with a subsequent 90day grace period. Any licensee making a required payment during this subsequent period will be assessed a late payment fee equal to ten percent (10%) of the amount of the past due payment. Licensees shall not be required to submit any form of request in order to take advantage of the initial 90day nondelinquency period and subsequent automatic 90day grace period. All licensees that avail themselves of the automatic grace period must pay the required late fee(s), all interest accrued during the nondelinquency and grace periods, and the appropriate scheduled payment with the first payment made following the conclusion of the grace period. (iii) If an eligible entity making installment payments is more than one hundred and  Y-eighty (180) days delinquent in any payment, it shall be in default .  Yy- (iv) Any eligible entity that submits an installment payment after the due date but fails to pay any late fee, interest or principal at the close of the 90day nondelinquency period and subsequent automatic grace period will be declared in default, its license will automatically  Y4-cancel, and will be subject to debt collection procedures. (g) The Commission may establish different upfront payment requirements for categories of designated entities in competitive bidding rules of particular auctionable services. (h) The Commission may offer designated entities a combination of the available preferences or additional preferences. (i) 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 effect designated entity status, such as partnership agreements, shareholder agreements, management agreements and other agreements,  Y -including oral agreements, which establish that the designated entity will have both de facto  Y -and de jure control of the entity. Such information must be maintained at the licensees' facilities or by their designated agents for the term of the license in order to enable the Commission to audit designated entity eligibility on an ongoing basis. (j) The Commission may, on a service-specific basis, permit consortia, each member of which individually meets the eligibility requirements, to qualify for any designated entity provisions. (k) The Commission may, on a service-specific basis, permit publicly-traded companies that are owned by members of minority groups or women to qualify for any designated entity provisions."#'+6(6(aaP(E"Ԍ  Y-(l) Audits. (1) Applicants and licensees claiming eligibility under this section shall be subject to audits by the Commission, using in-house and contract resources. Selection for audit may be random, on information, or on the basis of other factors. (2) Consent to such audits is part of the certification included in the short-form application (FCC Form 175). Such consent shall include consent to the audit of the applicant's or licensee's books, documents and other material (including accounting procedures and practices) regardless of form or type, sufficient to confirm that such applicant's or licensee's representations are, and remain, accurate. Such consent shall include inspection at all reasonable times of the facilities, or parts thereof, engaged in providing and transacting business, or keeping records regarding FCClicensed service and shall also include consent to the interview of principals, employees, customers and suppliers of the applicant or licensee.  Y -(m) Gross Revenues. Gross revenues shall mean all income received by an entity, whether  Y-earned or passive, before any deductions are made for costs of doing business (e.g., cost of goods sold), as evidenced by audited financial statements for the relevant number of most recently completed calendar years or, if audited financial statements were not prepared on a calendaryear basis, for the most recently completed fiscal years preceding the filing of the applicant's shortform (FCC Form 175). If an entity was not in existence for all or part of the relevant period, gross revenues shall be evidenced by the audited financial statements of the entity's predecessorininterest or, if there is no identifiable predecessorininterest, unaudited financial statements certified by the applicant as accurate. When an applicant does not otherwise use audited financial statements, its gross revenues may be certified by its chief financial officer or its equivalent. k9. Section 1.2111 is amended by revising paragraphs (c) and (d) and adding paragraph (e) to read as follows:  X -  1.2111 Assignment or transfer of control: unjust enrichment. lR* * * * *  Y -(c) Unjust Enrichment Payment: installment financing. (1) If a licensee that utilizes installment financing under this section seeks to assign or transfer control of its license to an entity not meeting the eligibility standards for installment payments, the licensee must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of assignment or transfer as a condition of approval. (2) If a licensee that utilizes installment financing under this section seeks to make any change in ownership structure that would result in the licensee losing eligibility for installment payments, the licensee shall first seek Commission approval and must make full"#'+6(6(aaP(E" 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.  Y - (d) 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 restructured licensee 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.  YP- (2) Payment Schedule. (i) The amount of payments made pursuant to paragraph (d)(1) of this section will be reduced over time as follows: (A) A transfer in the first two years of the license term will result in a forfeiture of 100 percent of the value of the bidding credit (or in the case of very small businesses transferring to small businesses, 100 percent of the difference between the bidding credit received by the former and the bidding credit for which the latter is eligible); (B) A transfer in year 3 of the license term will result in a forfeiture of 75 percent of the value of the bidding credit; (C) A transfer in year 4 of the license term will result in a forfeiture of 50 percent of the value of the bidding credit; (D) A transfer in year 5 of the license term will result in a forfeiture of 25 percent of the value of the bidding credit; and (E) for a transfer in year 6 or thereafter, there will be no payment. "%'+6(6(aaP(E"Ԍ (ii) These payments will have to be paid to the United States Treasury as a condition of approval of the assignment, transfer, or ownership change.  Y- (e) Unjust Enrichment: Partitioning and Disaggregation. (1) Installment Payments. Licensees making installment payments, that partition their licenses or disaggregate their spectrum to entities not meeting the eligibility standards for installment payments, will be subject to the provisions concerning unjust enrichment as set forth in this section. (2) Bidding Credits. Licensees that received a bidding credit that partition their licenses or disaggregate their spectrum to entities not meeting the eligibility standards for such a bidding credit, will be subject to the provisions concerning unjust enrichment as set forth in this section. (3) Apportioning Unjust Enrichment Payments. Unjust enrichment payments for partitioned license areas shall be calculated based upon the ratio of the population of the partitioned license area to the overall population of the license area and by utilizing the most recent census data. Unjust enrichment payments for disaggregated spectrum shall be calculated based upon the ratio of the amount of spectrum disaggregated to the amount of spectrum held by the licensee.  Y4- k10. Section 1.2112 is added to read as follows:  Y-  1.2112 Ownership disclosure requirements for short and longform applications.  Y- (a) Each application for a license or authorization or for consent to assign or transfer control of a license or authorization shall disclose fully the real party or parties in interest and must include in an exhibit the following information: (1) A list of any FCCregulated business 10 percent or more of whose stock, warrants, options or debt securities are owned by the applicant or an officer, director, attributable stockholder or key management personnel of the applicant. This list must include a description of each such business's principal business and a description of each such business's relationship to the applicant;  Y!- (2) A list of any party holding a 10 percent or greater interest in the applicant, including the specific amount of the interest;  Y- (3) A list of any party holding a 10 percent or greater interest in any entity holding or  Y-applying for any FCCregulated business in which a 1 0 percent or more interest is held by  Y -another party which holds a 10 percent or more interest in the applicant (e.g., If company A owns 10 percent of Company B (the applicant) and 10 percent of Company C then Companies A and C must be listed on Company B's application;  Y#- (4) A list of the names, addresses, and citizenship of any party holding 1 0 percent or more of each class of stock, warrants, options or debt securities together with the amount and percentage held; (5) A list of the names, addresses, and citizenship of all controlling interests of the applicants, as set forth in  1.2110;"$'+6(6(aaP(E"Ԍ (6) In the case of a general partnerships, the name, address and citizenship of each partner, and the share or interest participation in the partnership; (7) In the case of a limited partnerships, the name, address and citizenship of each limited partner whose interest in the applicant is equal to or greater than 10 percent (as calculated according to the percentage of equity paid in and the percentage of distribution of profits and losses); (8) In the case of a limited liability corporation, the name, address and citizenship of each of its members; and (9) A list of all parties holding indirect ownership interests in the applicant, as determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain, that equals 10 percent or more of the applicant, except that if the ownership percentage for an interest in any link in the chain exceeds 50 percent or represents actual control, it shall be treated and reported as if it were a 100 percent interest. (b) In addition to the information required under paragraph (a) of this section, each applicant for a license or authorization claiming status as a small business shall, as an exhibit to its longform application: (1) Disclose separately and in the aggregate the gross revenues, computed in accordance  Yy-with  1.2110, for each of the following: the applicant and its affiliates, the applicant's attributable investors, affiliates of its attributable investors, and, if a consortium of small businesses, the members comprising the consortium; (2) List and summarize all agreements or instruments (with appropriate references to specific provisions in the text of such agreements and instruments) that support the  Y-applicant's eligibility as a small business under the applicable designated entity provisions ,  Y-including the establishment of de facto and de jure control; such agreements and instruments include articles of incorporation and bylaws, shareholder agreements, voting or other trust agreements, franchise agreements, and any other relevant agreements (including letters of intent), oral or written; and (3) 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. k11. Section 1.2113 is added to read as follows:  X- Sec.1.2113 Construction prior to grant of application. Subject to the provisions of this section, applicants for licenses awarded by competitive bidding may construct facilities to provide service prior to grant of their applications, but must not operate such facilities until the FCC grants an authorization. If the conditions stated in this section are not met, applicants must not begin to construct facilities for licenses subject to competitive bidding.  YQ%- (a) When applicants may begin construction. An applicant may begin construction of a  Y:&-facility upon release of the Public Notice listing the postauction longform application for that facility as acceptable for filing."#'+6(6(aaP(E"Ԍ Y- (b) Notification to stop. If the FCC for any reason determines that construction should not be started or should be stopped while an application is pending, and so notifies the applicant, orally (followed by written confirmation) or in writing, the applicant must not begin construction or, if construction has begun, must stop construction immediately.  Y- (c) Assumption of risk. Applicants that begin construction pursuant to this section before receiving an authorization do so at their own risk and have no recourse against the United States for any losses resulting from: (1) Applications that are not granted; (2) Errors or delays in issuing Public Notices; (3) Having to alter, relocate or dismantle the facility; or (4) Incurring whatever costs may be necessary to bring the facility into compliance with applicable laws, or FCC rules and orders.  Y - (d) Conditions. Except as indicated, all pregrant construction is subject to the following conditions: (1) The application does not include a request for a waiver of one or more FCC rules; (2) For any construction or alteration that would exceed the requirements of 17.7 of this chapter, the licensee has notified the appropriate Regional Office of the Federal Aviation Administration (FAAForm74601), filed a request for antenna height clearance and obstruction marking and lighting specifications (FCCForm854) with the FCC, PRB,  YK-Support Services Branch, Gettysburg, PA 17325; (3) The applicant has indicated in the application that the proposed facility would not have a significant environmental effect, in accordance with 1.1301 through 1.1319; (4) Under applicable international agreements and rules in this part, individual coordination of the proposed channel assignment(s) with a foreign administration is not required; and (5) Any servicespecific restrictions not listed herein.  Xf- ` PART 21 DOMESTIC PUBLIC FIXED RADIO SERVICES ă  Y8- k1. The authority citation for Part 21 continues to read as follows:  X!-  Y - Authority: Secs. 1, 2, 4, 201205, 208, 215, 218, 303, 307, 313, 403, 404, 410, 602, 48 Stat. as amended, 1064, 1066, 10701073, 1076, 1077, 1080, 1082, 1083, 1087, 1094, 1098, 1102; 47 U.S.C. 151, 154, 201205, 208, 215, 218, 303, 307, 313, 314, 403, 404,  Y -602; 47 U.S.C. 552, 554, unless otherwise noted.  Y#- k2. Section 21.959(a)(2) is revised to read as follows:  YR%-  21.959 Withdrawal, default and disqualification . Z*****"%'+6(6(aaP(E"Ԍ(a) ***  Y-(2) Default or disqualification after close of auction. See  1.2104 (g)(2) of this chapter. Z***** k3. Section 21.960(b)(4) and (d)(1) are revised to read as follows:  X1-  21.960 Designated entity provisions for MDS. Z***** (b) ***  Y-(4) Conditions and obligations.  See  1.2110(f)(4) of this chapter. Z***** (d)***  Y-(1) Unjust enrichment. See  1.2111 of this chapter. Z*****  Y-k Đ X~-  PART 24 PERSONAL COMMUNICATIONS SERVICES ĐlU k1. The authority citation for Part 24 continues to read as follows:  Y"- Authority: 47 U.S.C. Sections 154, 301, 302, 303, and 332, unless otherwise noted. k2. Section 24.304(a)(2) is revised to read as follows:  Y!-  24.304 Withdrawal, default and disqualification penalties.  Yk$-l U(a) ***  Y=&-(2) Default or disqualification after close of auction.   See  1.2104(g)(2) of this chapter. "('+6(6(aaP(E"Ԍ Y-Rl * * * * *lU k3. Section 24.309 is amended by revising paragraphs (b) and (f) to read as follows:  Yv-  24.309 Designated entities  XI-l  Y2-Rl * * * * * j lU(b) Designated entities will be eligible for certain special narrowband PCS provisions as follows: (1) Installment payments. (i) Small businesses, including small businesses owned by members of minority groups and women, will be eligible to pay the full amount of their winning bids on any regional, MTA or BTA license in installments over the term of the license pursuant to the terms set forth in  1.2110(g) of this chapter. (ii) Businesses owned by members of minority groups and women that are winning bidders for the regional licenses indicated by an (**) in  24.129 may pay the full amount of their winning bids (less the applicable bidding credit and down payment) in installments with (A) Interest imposed based on the rate for tenyear U.S. Treasury obligations applicable on the date the license is granted, plus 2.5 percent; (B) Interestonly payments for the first two years; and (C) Principal and interest payments amortized over the remaining eight years of the license. (2) Bidding Credits. Businesses owned by member of minority groups and women, including small businesses owned by members of minority groups and women, will be eligible for a twenty-five (25) percent bidding credit when bidding on the following licenses: (i) The nationwide licenses on Channel 5, Channel 8 and Channel 11; and (ii) All MTA licenses on Channel 19, Channel 22, Channel 24; and (iii) All BTA licenses on Channel 26. This bidding credit will reduce by 25 percent the bid price that businesses owned by members of minority groups and women will be required to pay to obtain a license. Businesses owned by women and/or minorities, including small businesses owned by women and/or minorities will be eligible for a forty (40) percent bidding credit when bidding on all regional licenses on Channel 13 and Channel 17. In  24.129, the licenses that will be eligible for 25 percent bidding credits are indicated by an (*); the licenses that will be eligible for 40 percent bidding credits are indicated by an (**).  Y"- Z*****  YR%- (f)   Unjust Enrichment. Designated entities using installment payments, bidding credits or tax certificates to obtain a narrowband PCS license will be subject to the unjust enrichment provisions contained in  1.2111 of this chapter."&'+6(6(aaP(E"Ԍ  Y-k 5. Section 24.704(a)(2) is revised to read as follows:  X-  24.704 Withdrawal, default and disqualification penalties.  (a) * * *   Y1-(2) Default or disqualification after close of auction.  See  1.2104(g)(2) of this chapter. l Rl* * * * *lU k7. Section 24.711 is amended by revising paragraph (b) to read as follows:  X{-  24.711 Upfront payments, down payments and installment payments for licenses for frequency Blocks C.  YM- Rl* * * * *lU  Y- (b) Installment Payments. Each eligible licensee of frequency Block C or F may pay the remaining 90 percent of the net auction price for the license in installment payments pursuant to  1.2110(g) of this Chapter and under the following terms:  Y- (1) For an eligible licensee with gross revenues exceeding $75 million (calculated in accordance with  24.709(a)(2) and (b)) in each of the two preceding years (calculated in accordance with  24.720(f)), interest shall be imposed based on the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted, plus 3.5 percent; payments shall include both principal and interest amortized over the term of the license.  YP- (2) For an eligible licensee with gross revenues not exceeding $75 million (calculated in accordance with  24.709(a)(2) and (b)) in each of the two preceding years, interest shall be imposed based on the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted, plus 2.5 percent; payments shall include interest only for the first year and payments of interest and principal amortized over the remaining nine years of the license term. (3) For an eligible licensee that qualifies as a Small business or as a consortium of small businesses, interest shall be imposed based on the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted, plus 2.5 percent; payments shall include interest only for the first two years and payments of interest and principal amortized over the remaining eight years of the license term. (4) For an eligible licensee that qualifies as a business owned by members of minority groups and/or women, interest shall be imposed based on the rate for ten-year U.S. Treasury"<&+6(6(aa`'E" obligations applicable on the date the license is granted; payments shall include interest only for the first three years and payments of interest and principal amortized over the remaining seven years of the license term. (5) For an eligible licensee that qualifies as a small business owned by members of minority groups and/or women or as a consortium of small business owned by members of minority groups and/or women, interest shall be imposed based on the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted; payments shall include interest only for the first six years and payments of interest and principal amortized over the remaining four years of the license term.  Y1- (c) Unjust Enrichment. See  1.2111 of this chapter. k8. Section 24.712 is amended by revising paragraph (d) to read as follows:  X -  24.712 Bidding credits for licenses for frequency Blocks C.   Xy-Nl * * * * * ĐlU  YK- (d) Unjust Enrichment. See  1.2111 of this chapter. k9. Section 24.716 is amended by revising paragraph (c) and (d) to read as follows:  X-  24.716 Upfront payments, down payments, and installment payments for licenses for frequency Block F.  Y|-Rl * * * * *lU  YN-(c) Late Installment Payments. See  1.2110(f)(4) of this chapter.  Y -(d) Unjust Enrichment. See  1.2111 of this chapter. k10. Section 24.717 is amended by revising paragraph (c) to read as follows:  X"-  24. 717 Bidding credits for licenses for frequency Block F.  Yj$-Rl * * * * *lU  Y<&-(c) Unjust Enrichment. See  1.2111 of this chapter. "''+6(6(aaP(E"Ԍ  X-  Xr` hp x (#%'0*,.8135@8: