[Code of Federal Regulations]
[Title 47, Volume 2]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 47CFR24.709]

[Page 248-253]
 
                       TITLE 47--TELECOMMUNICATION
 
                    CHAPTER I--FEDERAL COMMUNICATIONS
                         COMMISSION (CONTINUED)
 
PART 24--PERSONAL COMMUNICATIONS SERVICES--Table of Contents
 
       Subpart H--Competitive Bidding Procedures for Broadband PCS
 
Sec. 24.709  Eligibility for licenses for frequency Blocks C or F.

    (a) General rule for licenses offered for closed bidding. (1) No 
application is acceptable for filing and no license shall be granted to 
a winning bidder in closed bidding for frequency block C or frequency 
block F, unless the applicant, together with its affiliates and persons 
or entities that hold interests in the applicant and their affiliates, 
have had gross revenues of less than $125 million in each of the last 
two years and total assets of less than $500 million at the time the 
applicant's short-form application (Form 175) is filed.
    (2) Any licensee awarded a license won in closed bidding pursuant to 
the eligibility requirements of this section (or pursuant to 
Sec. 24.839(a)(2)) shall maintain its eligibility until at least five 
years from the date of initial license grant, except that a licensee's 
(or other attributable entity's) 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 
paragraph (b) of this section), debt financing, revenue from operations 
or other investments, business development, or expanded service shall 
not be considered.
    (3) Tiers. (i) For purposes of determining spectrum to which the 
eligibility requirements of this section are applicable, the BTA service 
areas (see Sec. 24.202(b)) are divided into two tiers according to their 
population as follows:
    (A) Tier 1: BTA service areas with population equal to or greater 
than 2.5 million;
    (B) Tier 2: BTA service areas with population less than 2.5 million.
    (ii) For Auction No. 35, the population of individual BTA service 
areas will be based on the 1990 census. For auctions beginning after the 
start of Auction No. 35, the population of individual BTA service areas 
will be based on the most recent available decennial census.

[[Page 249]]

    (4) Application of eligibility requirements. (i) The following 
categories of licenses will be subject to closed bidding pursuant to the 
eligibility requirements of this section in auctions that begin after 
the effective date of this paragraph.
    (A) For Tier 1 BTAs, one of the 10 MHz C block licenses (1895-1900 
MHz paired with 1975-1980 MHz);
    (B) For Tier 2 BTAs, two of the 10 MHz C block licenses (1895-1900 
MHz paired with 1975-1980 MHz; 1900-1905 MHz paired with 1980-1985 MHz) 
and all 15 MHz C block licenses.
    (ii) Notwithstanding the provisions of paragraph (a)(4)(i) of this 
section, any C block license for operation on spectrum that has been 
offered, but not won by a bidder, in closed bidding in any auction 
beginning on or after March 23, 1999, will not be subject in a 
subsequent auction to closed bidding pursuant to the eligibility 
requirements of this section.
    (5) Special rule for licensees disaggregating or returning certain 
spectrum in frequency block C.
    (i) In addition to entities qualifying for closed bidding under 
paragraph (a)(1) of this section, any entity that was eligible for and 
participated in the auction for frequency block C, which began on 
December 18, 1995, or the reauction for frequency block C, which began 
on July 3, 1996, will be eligible to bid for C block licenses offered in 
closed bidding in any reauction of frequency block C spectrum that 
begins within two years of March 23, 1999.
    (ii) In cases of merger, acquisition, or other business combination 
of entities, where each of the entities is eligible to bid for C block 
licenses offered in closed bidding in any reauction of C block spectrum 
on the basis of the eligibility exception set forth in paragraph 
(a)(5)(i) of this section, the resulting entity will also be eligible 
for the exception specified in paragraph (a)(5)(i) of this section.
    (iii) In cases of merger, acquisition, or other business combination 
of entities, where one or more of the entities are ineligible for the 
exception set forth in paragraph (a)(5)(i) of this section, the 
resulting entity will not be eligible pursuant to paragraph (a)(5)(i) of 
this section unless an eligible entity possesses de jure and de facto 
control over the resulting entity.
    (iv) The following restrictions will apply for any reauction of 
frequency block C spectrum conducted after March 24, 1998:
    (A) Applicants that elected to disaggregate and surrender to the 
Commission 15 MHz of spectrum from any or all of their frequency block C 
licenses, as provided in Amendment of the Commission's Rules Regarding 
Installment Payment Financing for Personal Communications Services (PCS) 
Licensees, Second Report and Order and Further Notice of Proposed Rule 
Making, WT Docket No. 97-82, 12 FCC Rcd 16,436 (1997), as modified by 
the Order on Reconsideration of the Second Report and Order, WT Docket 
No. 97-82, FCC 98-46 (rel. Mar. 24, 1998), will not be eligible to apply 
for such disaggregated spectrum until 2 years from the start of the 
reauction of that spectrum.
    (B) Applicants that surrendered to the Commission any of their 
frequency block C licenses, as provided in Amendment of the Commission's 
Rules Regarding Installment Payment Financing for Personal 
Communications Services (PCS) Licensees, Second Report and Order and 
Further Notice of Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd 
16,436 (1997), as modified by the Order on Reconsideration of the Second 
Report and Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 1998), 
will not be eligible to apply for the licenses that they surrendered to 
the Commission until 2 years from the start of the reauction of those 
licenses if they elected to apply a credit of 70% of the down payment 
they made on those licenses toward the prepayment of licenses they did 
not surrender.
    (b) Exceptions to general rule. (1) Scope. The following provisions 
apply to licenses acquired in Auctions No. 5, 10, 11 or 22, or pursuant 
to Sec. 24.839(a)(2) or (a)(3) prior to October 30, 2000.
    (i) Small business consortia. Where an applicant (or licensee) is a 
consortium of small businesses, the gross revenues and total assets of 
each small business shall not be aggregated.
    (ii) Publicly-traded corporations. Where an applicant (or licensee) 
is a

[[Page 250]]

publicly traded corporation with widely dispersed voting power, the 
gross revenues and total assets of a person or entity that holds an 
interest in the applicant (or licensee), and its affiliates, shall not 
be considered.
    (iii) 25 Percent equity exception. The gross revenues and total 
assets of a person or entity that holds an interest in the applicant (or 
licensee), and its affiliates, shall not be considered so long as:
    (A) Such person or entity, together with its affiliates, holds only 
nonattributable equity equaling no more than 25 percent of the 
applicant's (or licensee's) total equity;
    (B) Except as provided in paragraph (b)(1)(v) of this section, such 
person or entity is not a member of the applicant's (or licensee's) 
control group; and
    (C) The applicant (or licensee) has a control group that complies 
with the minimum equity requirements of paragraph (b)(1)(v) of this 
section, and, if the applicant (or licensee) is a corporation, owns at 
least 50.1 percent of the applicant's (or licensee's) voting interests, 
and, if the applicant (or licensee) is a partnership, holds all of its 
general partnership interests.
    (iv) 49.9 Percent equity exception. The gross revenues and total 
assets of a person or entity that holds an interest in the applicant (or 
licensee), and its affiliates, shall not be considered so long as:
    (A) Such person or entity, together with its affiliates, holds only 
nonattributable equity equaling no more than 49.9 percent of the 
applicant's (or licensee's) total equity;
    (B) Except as provided in paragraph (b)(1)(vi) of this section, such 
person or entity is not a member of the applicant's (or licensee's) 
control group; and
    (C) The applicant (or licensee) has a control group that complies 
with the minimum equity requirements of paragraph (b)(1)(vi) of this 
section and, if the applicant (or licensee) is a corporation, owns at 
least 50.1 percent of the applicant's (or licensee's) voting interests, 
and, if the applicant (or licensee) is a partnership, holds all of its 
general partnership interests.
    (v) Control group minimum 25 percent equity requirement. In order to 
be eligible to exclude gross revenues and total assets of persons or 
entities identified in paragraph (b)(1)(iii) of this section, and 
applicant (or licensee) must comply with the following requirements:
    (A) Except for an applicant (or licensee) whose sole control group 
member is a preexisting entity, as provided in paragraph (b)(1)(v)(B) of 
this section, at the time the applicant's short-form application (Form 
175) is filed and until at least three years following the date of 
initial license grant, the applicant's (or licensee's) control group 
must own at least 25 percent of the applicant's (or licensee's) total 
equity as follows:
    (1) At least 15 percent of the applicant's (or licensee's) total 
equity must be held by qualifying investors, either unconditionally or 
in the form of options exercisable, at the option of the holder, at any 
time and at any exercise price equal to or less than the market value at 
the time the applicant files its short-form application (Form 175);
    (2) Such qualifying investors must hold 50.1 percent of the voting 
stock and all general partnership interests within the control group, 
and must have de facto control of the control group and of the 
applicant;
    (3) The remaining 10 percent of the applicant's (or licensee's) 
total equity may be owned, either unconditionally or in the form of 
stock options, by any of the following entities, which may not comply 
with Sec. 24.720(g)(1):
    (i) Institutional Investors;
    (ii) Noncontrolling existing investors in any preexisting entity 
that is a member of the control group;
    (iii) Individuals that are members of the applicant's (or 
licensee's) management; or
    (iv) Qualifying investors, as specified in Sec. 24.720(g)(3).
    (4) Following termination of the three-year period specified in 
paragraph (b)(1)(v)(A) of this section, qualifying investors must 
continue to own at least 10 percent of the applicant's (or licensee's) 
total equity unconditionally or in the form of stock options subject to 
the restrictions in paragraph (b)(1)(v)(A)(1) of this section. The 
restrictions specified in paragraphs (b)(1)(v)(A)(3)(i) through 
(b)(1)(v)(A)(3)(iv) of this section no longer apply to the remaining 
equity

[[Page 251]]

after termination of such three-year period.
    (B) At the election of an applicant (or licensee) whose control 
group's sole member is a preexisting entity, the 25 percent minimum 
equity requirements set forth in paragraph (b)(1)(v)(A) of this section 
shall apply, except that only 10 percent of the applicant's (or 
licensee's) total equity must be held in qualifying investors, and that 
the remaining 15 percent of the applicant's (or licensee's) total equity 
may be held by qualifying investors, or noncontrolling existing 
investors in such control group member or individuals that are members 
of the applicant's (or licensee's) management. These restrictions on the 
identity of the holder(s) of the remaining 15 percent of the licensee's 
total equity no longer apply after termination of the three-year period 
specified in paragraph (b)(1)(v)(A) of this section.
    (vi) Control group minimum 50.1 percent equity requirement. In order 
to be eligible to exclude gross revenues and total assets of persons or 
entities identified in paragraph (b)(1)(iv) of this section, an 
applicant (or licensee) must comply with the following requirements:
    (A) Except for an applicant (or licenses) whose sole control group 
member is a preexisting entity, as provided in paragraph (b)(1)(vi)(B) 
of this section, at the time the applicant's short-form application 
(Form 175) is filed and until at least three years following the date of 
initial license grant, the applicant's (or licensee's) control group 
must own at least 50.1 percent of the applicant's (or licensee's) total 
equity as follows:
    (1) At least 30 percent of the applicant's (or licensee's) total 
equity must be held by qualifying investors, either unconditionally or 
in the form of options, exercisable at the option of the holder, at any 
time and at any exercise price equal to or less than the market value at 
the time the applicant files its short-form application (Form 175);
    (2) Such qualifying investors must hold 50.1 percent of the voting 
stock and all general partnership interests within the control group and 
must have de facto control of the control group and of the applicant;
    (3) The remaining 20.1 percent of the applicant's (or licensee's) 
total equity may be owned by qualifying investors, either 
unconditionally or in the form of stock options not subject to the 
restrictions of paragraph (b)(1)(vi)(A)(1) of this section, or by any of 
the following entities which may not comply with Sec. 24.720(g)(1):
    (i) Institutional investors, either unconditionally or in the form 
of stock options;
    (ii) Noncontrolling existing investors in any preexisting entity 
that is a member of the control group, either unconditionally or in the 
form of stock options;
    (iii) Individuals that are members of the applicant's (or 
licensee's) management, either unconditionally or in the form of stock 
options; or
    (iv) Qualifying investors, as specified in Sec. 24.720(g)(3).
    (4) Following termination of the three-year period specified in 
paragraph (b)(1)(vi)(A) of this section, qualifying investors must 
continue to own at least 20 percent of the applicant's (or licensee's) 
total equity unconditionally or in the form of stock options subject to 
the restrictions in paragraph (b)(1)(vi)(A)(1) of this section. The 
restrictions specified in paragraph (b)(1)(vi)(A)(3)(i) through 
(b)(1)(vi)(A)(3)(iv) of this section no longer apply to the remaining 
equity after termination of such three-year period.
    (B) At the election of an applicant (or licensee) whose control 
group's sole member is a preexisting entity, the 50.1 percent minimum 
equity requirements set forth in paragraph (b)(1)(vi)(A) of this section 
shall apply, except that only 20 percent of the applicant's (or 
licensee's) total equity must be held by qualifying investors, and that 
the remaining 30.1 percent of the applicant's (or licensee's) total 
equity may be held by qualifying investors, or noncontrolling existing 
investors in such control group member or individuals that are members 
of the applicant's (or licensee's) management. These restrictions on the 
identity of the holder(s) of the remaining 30.1 percent of the 
licensee's total equity no longer apply after termination of the three-
year period specified in paragraph (b)(1)(vi)(A) of this section.

[[Page 252]]

    (vii) Calculation of certain interests. Except as provided in 
paragraphs (b)(1)(v) and (b)(1)(vi) of this section, ownership interests 
shall be calculated on a fully diluted basis; all agreements such as 
warrants, stock options and convertible debentures will generally be 
treated as if the rights thereunder already have been fully exercised, 
except that such agreements may not be used to appear to terminate or 
divest ownership interests before they actually do so, in order to 
comply with the nonattributable equity requirements in paragraphs 
(b)(1)(iii)(A) and (b)(1)(iv)(A) of this section.
    (viii) Aggregation of affiliate interests. Persons or entities that 
hold interest in an applicant (or licensee) that are affiliates of each 
other or have an identify of interests identified in 
Sec. 1.2110(c)(5)(iii) will be treated as though they were one person or 
entity and their ownership interests aggregated for purposes of 
determining an applicant's (or licensee's) compliance with the 
nonattributable equity requirements in paragraphs (b)(1)(iii)(A) and 
(b)(1)(iv)(A) of this section.

    Example 1 for paragraph (b)(1)(viii). ABC Corp. is owned by 
individuals, A, B, and C, each having an equal one-third voting interest 
in ABC Corp. A and B together, with two-thirds of the stock have the 
power to control ABC Corp. and have an identity of interest. If A & B 
invest in DE Corp., a broadband PCS applicant for block C, A and B's 
separate interests in DE Corp. must be aggregated because A and B are to 
be treated as one person.
    Example 2 for paragraph (b)(1)(viii). ABC Corp. has subsidiary BC 
Corp., of which it holds a controlling 51 percent of the stock. If ABC 
Corp. and BC Corp., both invest in DE Corp., their separate interests in 
DE Corp. must be aggregated because ABC Corp. and BC Corp. are 
affiliates of each other.

    (2) The following provisions apply to licenses acquired pursuant to 
Sec. 24.839(a)(2) or (a)(3) on or after October 30, 2000. In addition to 
the eligibility requirements set forth at 24.709(a) and (b), applicants 
and/or licensees seeking to acquire C and/or F block licenses pursuant 
to 24.839(a)(2) or (a)(3) will be subject to the controlling interest 
standard in 1.2110(c)(2) of this chapter for purposes of determining 
unjust enrichment payment obligations. See Sec. 1.2111 of this chapter.
    (c) Short-form and long-form applications: Certifications and 
disclosure.
    (1) Short-form application. In addition to certifications and 
disclosures required by part 1, subpart Q of this chapter, each 
applicant to participate in closed bidding for frequency block C or 
frequency block F shall certify on its short-form application (Form 175) 
that it is eligible to bid on and obtain such license(s), and (if 
applicable) that it is eligible for designated entity status pursuant to 
this section and Sec. 24.720, and shall append the following information 
as an exhibit to its Form 175:
    (i) For all applicants: The applicant's gross revenues and total 
assets, computed in accordance with paragraphs (a) of this section and 
Sec. 1.2110(b)(1) through (b)(2) of this chapter.
    (ii) For all applicants that participated in Auction Nos. 5, 10, 11, 
and/or 22:
    (A) The identity of each member of the applicant's control group, 
regardless of the size of each member's total interest in the applicant, 
and the percentage and type of interest held;
    (B) The status of each control group member that is an institutional 
investor, an existing investor, and/or a member of the applicant's 
management;
    (C) The identity of each affiliate of the applicant and each 
affiliate of individuals or entities identified pursuant to paragraphs 
(C)(1)(ii)(A) and (c)(1)(ii)(B) of this section;
    (D) A certification that the applicant's sole control group member 
is a preexisting entity, if the applicant makes the election in either 
paragraph (b)(1)(v)(B) or (b)(1)(vi)(B)of this section; and
    (E) For an applicant that is a publicly traded corporation with 
widely disbursed voting power:
    (1) A certified statement that such applicant complies with the 
requirements of the definition of publicly traded corporation with 
widely disbursed voting power set forth in Sec. 24.720(f);
    (2) The identity of each affiliate of the applicant.
    (iii) For each applicant claiming status as a small business 
consortium, the information specified in paragraph

[[Page 253]]

(c)(1)(ii) of this section, for each member of such consortium.
    (2) Long-form application. In addition to the requirements in 
subpart I of this part and other applicable rules (e.g., Secs. 20.6(e) 
and 20.9(b) of this chapter), each applicant submitting a long-form 
application for a license(s) for frequency block C or F shall in an 
exhibit to its long-form application:
    (i) Disclose separately and in the aggregate the gross revenues and 
total assets, computed in accordance with paragraphs (a) and (b) of this 
section, for each of the following: The applicant; the applicant's 
affiliates, the applicant's control group members; the applicant's 
attributable investors; and affiliates of its attributable investors;
    (ii) List and summarize all agreements or other instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility for 
a license(s) for frequency block C or frequency block F and its 
eligibility under Secs. 24.711, 24.712, 24.714 and 24.720, 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, partnership agreements, 
management agreements, joint marketing agreements, franchise agreements, 
and any other relevant agreements (including letters of intent), oral or 
written; and
    (iii) List and summarize any investor protection agreements and 
identify specifically any such provisions in those agreements identified 
pursuant to paragraph (c)(2)(ii) of this section, 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.
    (3) Records maintenance. All applicants, including those that are 
winning bidders, shall maintain at their principal place of business an 
updated file of ownership, revenue and asset information, including 
those documents referenced in paragraphs (c)(2)(ii) and (c)(2)(iii) of 
this section and any other documents necessary to establish eligibility 
under this section and any other documents necessary to establish 
eligibility under this section or under the definition of small 
business. Licensees (and their successors in interest) shall maintain 
such files for the term of the license. Applicants that do not obtain 
the license(s) for which they applied shall maintain such files until 
the grant of such license(s) is final, or one year from the date of the 
filing of their short-form application (Form 175), whichever is earlier.
    (d) Definitions. The terms control group, existing investor, 
institutional investor, nonattributable equity, preexisting entity, 
publicly traded corporation with widely dispersed voting power, 
qualifying investor, and small business used in this section are defined 
in Sec. 24.720.

[67 FR 45368, July 9, 2002, as amended at 68 FR 42998, July 21, 2003]