[Code of Federal Regulations]

[Title 47, Volume 2]

[Revised as of October 1, 2004]

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., Sec. Sec. 

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 Sec. Sec. 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]