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MACNormalTV6 ,d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddndddddddCourier New (TT)CG Times (W1)Times New Roman (TT)Times New Roman (Bold) (TT)"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCddddddd<d<CCoodCCddCoCddzzzzzzzzzzCCCCozdddddddYYYYY8888dddddddndddddYdCourier New (TT)CG Times (W1)Times New Roman (TT)Times New Roman (Bold) (TT)Times New Roman (Italic) (TT)Courier New (Italic) (TT)WP MultinationalA Roman (TT)Courier New (TT)CG Times (W1)Times New Roman (TT)Times New Roman (Bold) (TT)Times New Roman (Italic) (TT)Courier New (Italic) (TT)WP MultinationalA Roman (TT)Clarendon Cd (W1) (Bold)Times New Roman (Bold Italic) (TT)dW!0(X _h0\  P6QhPR&HHHXhH6X@DQh@"5@^(1<$Xk ?7ԍGiles Comments at 25.> BET also proposes alternative rule changes that it contends will satisfy the Congressional goals outlined in the Budget Act, flow  X,from the Commission's record, and comport with the standards pronounced in Adarand.A%k ?& 7ԍBET Comments at 3, 1217.A  Xa, 11. Upon careful review we remain concerned that our present record would not adequately support the race and genderbased provisions in our C block competitive bidding rules under a strict scrutiny standard of review. Significantly, the D.C. Circuit previously stayed the C block auction in response to a constitutional equal protection challenge against these provisions when a less strict standard of review was applicable. As a result, we strongly believe that there is a substantial likelihood of further legal challenge to the C block  X ,auction in the wake of Adarand if such provisions remain unchanged. None of the  X ,commenters have challenged this belief. Furthermore, as we indicated in the Further Notice, we would need additional evidence to sufficiently develop our record to support these race  X,and genderbased provisions consistent with the dictates of Adarand. Any efforts to obtain this additional evidence would require additional time and, therefore, further delay the commencement of the C block auction. The legal uncertainty associated with the race and genderbased provisions, combined with the views of potential C block bidders that the auction not be subject to any further delay, prompt us to modify our rules in a fashion which would be minimally disruptive to as many of the interested parties, potential bidders as well as members of the financial and investment communities as possible. We also disagree with the assertion by BET and Giles that today's rule changes are inconsistent with the Budget Act.  X,As we concluded in the Further Notice, today's rule changes would allow small businesses to benefit from the most favorable bidding credits and installment payment plans contained in our rules. As a result, because we have evidence which supports a conclusion that many designated entities, including minority and womenowned businesses, would qualify as small businesses and, thus, benefit from such provisions, we believe that our action is fully consistent with the Budget Act. We further conclude that the proposals we adopt today are necessary under the circumstances and indeed will best serve the public interest.  X*, 12. With respect to alternative rule change proposals presented by the commenters, we conclude, as discussed more fully below, that because they draw distinctions based upon race, most of these proposals would engender the same danger of constitutional infirmity and would result in the same legal uncertainties that we seek to mitigate by these decisions. To the extent that the commenters have presented race and genderneutral rule changes, we  X!,conclude, as discussed herein, that the proposals set forth in the Further Notice, which are broadly supported by numerous commenters, constitute the more prudent and expedient course  X#,of action for proceeding with the auctioning of the C block licenses postAdarand. "#x%0*0*0*!"Ԍ X,ԙ B.Control Group Equity Structures  X,  13. Background. Our current rules permit broadband PCS applicants for licenses in  X,the C block to utilize one of two equity "control group" structures,&|k ?47ЍUnder the two control group options, the gross revenues and total assets of certain investors are not attributed to the applicant provided the applicant has a control group consisting  ?7of one or more individuals or entities that have de jure and de  ?7facto control of the applicant. The gross revenues and total assets of each member of the control group (with the exception of certain control group investors) aggregated and counted toward the financial caps applicable to the entrepreneurs' block  ? 7licenses including the small business size standard. See 47 CFR  24.709(a)(2), (b)(3), (b)(4). Other options are available to small business consortia and certain publiclytraded  ? 7corporations. Id. at 24.709(b)(1), (b)(3). so that the gross revenues and total assets of persons or entities holding interests in such applicants will not be  X,considered. These two equity structures are the Control Group Minimum 25 Percent Equity  Xx,Optionr'x k ?57Ѝ47 CFR  24.709(b)(3), (b)(5). r (which is available to all applicants) and the Control Group Minimum 50.1 Percent  Xc,Equity Optionl(c t1 ?7Ѝ47 CFR  24.709(b)(3), (b)(5). l (which is currently available only to minority or women applicants).r)c, k ?@7ЍSee 47 CFR  24.709(b)(5) and (b)(6).r In the  XN,Further Notice, we proposed to modify our rules to permit all C block applicants, including  X9,small businessesj*89 k ?7ЍUnder our rules, a "small business" is defined as an entity that, together with its affiliates and persons or entities that hold interest in such entity and their affiliates, has average gross revenues that are not more than $40 million for the preceding three years. 47 CFR  24.720(b)(1).j and entrepreneurs,i+89k ?7ЍThe term "entrepreneurs" as used herein, refers to applicants in the C block that have gross revenues of less than $125 million in each of the last two years and total assets of less than $500 million at the time the FCC Form 175 is filed.  ?7See 47 CFR  24.709(a).i to avail themselves of the Control Group Minimum  X$ ,50.1 Percent Equity Option.H,$ k ? 7ԍFurther Notice at  15.H When we adopted the Control Group Minimum 50.1 Percent  X ,Equity Option in the Fifth R&O, we determined that making such a mechanism available to minority or womenowned businesses would better enable them to attract adequate financing. We have previously noted that the primary impediment to participation by businesses owned  X ,by women and minorities in broadband PCS is a lack of access to capital.g- Lk ?%7ЍFifth R&O, 9 FCC Rcd at 5537.g We tentatively concluded that such a rule change would cause the least disruption and open up additional  X,financing options for other applicants in the C block auction.1.k ?+)7ԍId.1 The Further Notice sought" l.0*0*0*" comment on this proposed rule change and tentative conclusion.  X, 14. Comments. Most commenters agree that the Control Group Minimum 50.1  X,Percent Equity Option should be made available to all C block applicants.O/k ?67ԍSpectrum Resources Comments at 2; Minority Media et al. Comments at 1; GO Communications Comments at 23; CIRI Comments at 24; Oneida Tribe Comments at 16; Central Alabama & Mobile TriStates Comments at 4; DCR Communications Comments at 56, 8; Airlink Comments at 35; General Wireless Comments at 45; Small Business PCS Comments at 12; Infocore Comments at 2, 3; Century Comments at 1; Chase Telecommunications Comments at 1; Prairie Island Comments at 1; U.S. Airwaves Comments at 12; National Telecomm Comments at 1; CSI Comments at 12.O Several commenters express concerns about further delay of the auctioning and licensing of the C block and agree that this minimal rule change would not unduly disrupt existing business  Xz,relationships.0Xzk ?7ԍSpectrum Resources Comments at 34; GO Communications Comments at 3; CIRI Comments 2324; Airlink Comments 45; Infocore Comments at 3; CSI Comments at 12. Other commenters support the proposed rule change on the basis that it would substantially reduce, if not eliminate, the possibility of legal challenges to the C block auction  XL,based on the Adarand decision.1XL k ?7ԍCentral Alabama & Mobile TriStates Comments at 4; Airlink Comments at 45; General Wireless Comments at 45; Small Business PCS Comments at 12; CSI Comments at 12. DCR Communications and Small Business PCS argue that elimination of minority and genderbased provisions would provide meaningful opportunity for small businesses, as well as minority and womenowned businesses, to participate in the  X ,C block auction.m2 k ?7ԍDCR Communications Comments at 56; Small Business PCS Comments at 2.m  X ,15. Other commenters, however, oppose extending availability of the Control Group  X ,Minimum 50.1 Percent Equity Option to all entrepreneurs.Y3 0k ?7ԍO.N.E. Comments at 1; Omnipoint Comments at 910.Y K&M proposes that this equity structure only be available to "very small businesses," defined as businesses with revenues up  X,to $20 million.:4k ? #7ԍK&M Comments at 5.: Omnipoint argues that because the Control Group Minimum 50.1 Percent  X,Equity Option was created to address the problems experienced by women and minorityowned companies in accessing capital, the Commission should either justify the measure  XY,under the strict scrutiny standard of review or eliminate it completely.C5YPk ?Z'7ԍOmnipoint Comments at 910.C Omnipoint expresses  XB,concern that extension of the Control Group Minimum 50.1 Percent Equity Option equity structure to all C block applicants would increase the number of "shams" financed by big"- 50*0*0*"  X,companies.I6k ?y7ԍOmnipoint Ex Parte Comments at 1.I Similarly, Silverman and Century oppose allowing large companies, whether minority or womenowned, as a general matter, to own more than 25 percent of a C block  X,applicant's equity.W7Xk ?7ԍSilverman Comments at 1; Century Comments at 1.W   X,16. Decision. We have decided to amend our rules to permit all C block applicants  X,to avail themselves of the Control Group Minimum 50.1 Percent Equity Option. This amendment enables minority or womenowned applicants structured under our prior rule to  Xa,retain the Control Group Minimum 50.1 Percent Equity Option, while extending this option to other applicants in the entrepreneurs' block as well. We recognize that we originally  X5,established the Control Group Minimum 50.1 Percent Equity Option as a race and genderbased measure aimed at addressing the unique financing problems experienced by women and minorityowned businesses. All C block applicants, as well as the public, will be better served if we proceed expeditiously in a manner which both reduces the likelihood of legal challenges and enhances the opportunities for a wide variety of applicants, including  X ,designated entities, to obtain licenses and rapidly deploy broadband PCS service.Q8 k ?]7ԍSee 47 U.S.C. 309(j)(3)(A) and (B).Q Thus, we conclude that use of this equity structure should now be dependent upon economic size, a  X,factor not implicated by the Courts decision in Adarand. Moreover, retaining the Control  X,Group Minimum 50.1 Percent Equity Option should help to preserve existing business relationships formed in reliance on our prior rules and encourage participation in the C block auction.  X',17. We disagree with Omnipoint's position on the Control Group Minimum 50.1  X,Percent Equity Option rule change. In the Fifth R&O and the Fifth MO&O, we indicated that the equity structure options provided under our rules are designed to provide qualified bidders with a reasonable amount of flexibility in attracting needed financing from other entities,  X,while ensuring that such entities do not acquire controlling interests in the qualified bidders.v9xk ?7ԍFifth R&O, 9 FCC Rcd at 5602, 5603; Fifth MO&O, 10 FCC Rcd at 453.v  X,With respect to the Control Group Minimum 50.1 Percent Equity Option, we previously explained that in order to guard against abuses, the control group of applicants choosing this option must own at least 50.1 percent of the applicant's equity, as well as retain control and  Xu,hold at least 50.1 perent of the voting stock.K:uk ?#7ԍFifth R&O, 9 FCC Rcd at 5602.K We have previously concluded that this requirement reduces substantially the danger that a wellcapitalized investor with substantial  XG,ownership stake will be able to assume de facto control of the applicant.:;G` k ?X'7ԍId. at 5603.: In addition, we previously clarified our rules so that persons or entities that are affiliates of one another, or that have an "identity of interests," as well as their other investors pursuant to Sections" ;0*0*0*"" 24.709(c) and 24.813 will be treated as though they are one person or entity and their ownership interests aggregated for purposes of determining compliance with our  X,nonattributable equity limits.P<k ?K7ԍFifth MO&O, 10 FCC Rcd at 453454.P This clarification was aimed at discouraging large investors  X,from circumventing our equity limitations for nonattributable investors.9=Xk ?7ԍId. at 453.9 We believe that these measures will be effective in deterring the type of "sham" deals described by Omnipoint. Moreover, we will have the opportunity to review these structures through the application process when bidders who elect to utilize such equity structures are required to identify the members of their control groups. Consequently, we believe that our rules adequately protect against "sham" deals.  X ,18. Accordingly, under Section 24.709 of the rules, all applicants in the C block auction selecting a "control group" structure in order to exclude the total assets and gross revenues of certain investors will have two options for raising capital through the distribution  X ,of equity among "qualifying investors," other eligible investors in the control group (e.g., management and institutional investors) and other nonattributable "strategic" investors. In light of the fact that we have eliminated the eligibility dichotomy in the two control group equity options, we specify and clarify here how both options apply to C block applicants.  Xb,19. First, we note that under both options the following control and voting requirements continue to apply: (1) the control group must own at least 50.1 percent of the applicant's voting stock, if a corporation, or all of the applicant's general partnership interests,  X,if a partnership;S>k ?7ԍ47 CFR  24.709(b)(3)(iii) and (4)(iii).S (2) qualifying investors, as defined in the rules, must hold at least 50.1 percent of the voting stock and all general partnership interests within the control group, and  X,must have de facto control of the control group and the applicant;X?xk ?7ԍId.  24.709(b)(5)(i)(B) and (6)(i)(B).X and (3) the investor(s) holding "nonattributable equity" (up to 25 percent or 49.9 percent) are limited to 25 percent of a corporate applicant's voting equity (including the right to vote such interests through a voting trust or other arrangement) and may hold only limited partnership interests, if the  X,applicant is a partnership.@k ?L!7ԍId.  24.709(b)(3)(i) and (4)(i), 24.720(j) (definition of "nonattributable equity").  Xe,20. Control Group Minimum 25 Percent Equity Option. This equity structure option  XP,requires the control group to hold at least 25 percent of the applicants total equity.GAP` k ?a&7ԍId.  24.709(b)(5)(i).G Of this  X9,25 percent equity, at least 15 percent must be held by "qualifying investors."JB9 k ?(7ԍId.  24.709(b)(5)(i)(A).J A "qualifying"9 B0*0*0*j" investor" is generally defined as a member of, or a holder of an interest in a member of, the applicant's or licensee's control group whose gross revenues and total assets, when aggregated with those of all other attributable investors and affiliates, do not exceed the gross revenues and total assets restrictions specified in our rules with regard to eligibility for entrepreneurs'  X,block licenses or status as a small business.CXk ?7ԍ47 CFR  24.720(n)(1). Below, we clarify the definition of "qualifying investor" with respect to holders of the remaining control group equity. With regard to the remaining 10 percent of the control group's equity, this may be held by four types of noncontrolling investors without these investors' assets and revenues being attributed to the applicant, as is the case with other  X_,control group members.VD_k ? 7ԍId.  24.709(b)(5)(i)(C) and (3)(ii).V These are (1) qualifying investors (small businesses or entrepreneurs); (2) individuals who are members of the applicant's management team; (3) existing investors in a preexisting entity that is a member of the control group; and (4)  X ,institutional investors.E xk ?C7ԍId.  24.709(b)(5)(i)(C); See Fifth MO&O, 10 FCC Rcd at  ? 7438444, erratum at  25. The minimum equity amounts within the control group vary slightly three years after the license is received and for applicants whose sole control group member  X ,is a preexisting entity.SF k ?m7ԍ47 CFR  24.709(b)(5)(i)(D) and (5)(ii).S As for the remaining 75 percent of the applicants equity (assuming the control group holds no more than the minimum 25 percent), the gross revenues and total assets (and other affiliations) of an investor holding a portion of this remaining equity are not considered so long as such investor (together with its affiliates) holds no more than 25  X,percent of the applicant's total equity.GG` k ?7ԍId.  24.709(b)(3). G  Xb,21. Control Group Minimum 50.1 Percent Equity Option. This equity structure  XM,option requires the control group to hold at least 50.1 percent of the applicants total equity.GHM k ?7ԍId.  24.709(b)(6)(i).G  X6,Of this 50.1 percent equity, at least 30 percent must be held by "qualifying investors."^I6 k ?g 7ԍId.  24.709(b)(5)(i)(A) (as revised herein).^ The remaining 20.1 percent of the control group's equity may be held by the same four types of  X,investors specified above.VJk ?#7ԍId.  24.709(b)(6)(i)(C) and (4)(ii).V As with the Control Group Minimum 25 Percent Equity Option, the minimum equity amounts within the control group vary slightly three years after the license is received and for applicants whose sole control group member is a preexisting  X,entity.kKk ?(7ԍId.  24.709(b)(6)(i)(D) and (6)(ii) (as modified herein).k As for the remaining noncontrol group equity, the gross revenues and total assets (and affiliates) of the investor(s) holding this remaining equity is not considered so long as" 0K0*0*0*" such investor(s) (together with its affiliates) holds no more than 49.9 percent of the applicant's  X,total equity.GLk ?b7ԍId.  24.709(b)(4). G The reasoning behind these two options and their advantages to applicants for  X,purposes of raising capital are set forth in our Fifth R&O and Fifth MO&O.}MXk ?7ԍSee Fifth R&O, 9 FCC Rcd at 55845585; Fifth MO&O, 10 FCC Rcd at 438443.} We affirm here that this reasoning and the advantages for maintaining both options remain applicable. We note that, under our prior rules, businesses owned by minorities and women had the option to use either equity structure. It is our understanding that such businesses, depending on their particular circumstances, were forming applicants based on the option that best met their needs for outside investment and what the capital markets were seeking from them in the form of equity interests. We now provide both options to all C block applicants and we anticipate that each applicant will pursue (or switch to) the option that best suits its particular capital needs and equity ownership situation.  X ,22. Qualifying Investors. The modification in the Fifth MO&O and here of the control group minimum equity requirements to allow certain other investors to own "control  X ,group equity" and not have their assets and revenues attributed to the applicantMN k ?#7ԍSee  1621 supra.M may not be clear in light of the definition of "qualifying investor" in section 24.720(n) of the  X,Commission's rules.O @k ?7ԍThe term "qualifying minority and/or women investor" in section 24.720(n)(2), and anywhere it is used, will be deleted from the C block auction rules in accordance with the changes made herein. Specifically, in the Fifth MO&O, we modified the rules to allow certain noncontrolling investors who do not qualify for the entrepreneurs' block or as a small business to be investors in an applicant's control group. In making these limited changes to the control group equity requirements, we said that this added, but limited, flexibility will (1) promote investment in designated entities generally; (2) attract and promote skilled management for applicants; and (3) encourage involvement by existing firms that have  X ,valuable management skills and resources to contribute to the success of applicants.VP ( k ?7ԍSee Fifth MO&O, 10 FCC Rcd at 438, 441. V  X,23. We stated that the first category for inclusion in this 10 percent or 20.1 percent portion of the control group is "investors in the control group that are women, minorities,  X,small businesses or entrepreneurs."[Q k ?%7ЍFifth MO&O, 10 FCC Rcd at 406, 440.[ The text of the rules adopted in the Fifth MO&O and  X,the erratum to the Fifth MO&O capsulized this category as "qualifying investors,"GRH k ?'7ԍErratum at  5, 7.G but the definition of "qualifying investors" in the rules failed to reflect the broader nature and purpose for allowing "women, minorities, small businesses or entrepreneurs" hold shares or options in"oR0*0*0*" the 10 percent or 20.1 percent portion of the control group even though they like the other categories "if attributed, would cause the applicant to exceed the small business or  X,entrepreneurs' block financial caps . . .." Consistent with our intent in the Fifth MO&O, we clarify that, so long as the minimum equity requirements for "qualifying investors" (15 percent or 30 percent) under our new rules are met, the remaining control group equity (10 percent or 20.1 percent) may be held by investors that meet either the small business or entrepreneur eligibility requirements. We continue to believe that such entities, if they wish to provide financial support to C block applicants, should not be precluded from doing so because their financial status would, if considered with other control group members, make the applicant ineligible for the C block or small business status. Accordingly, we clarify our definition of "qualifying investor" for purposes of Section 24.709(b)(5)(i)(C) and (6)(i)(C).   X , C.Affiliation Rules  X ,24. Background. We adopted affiliation rules for purposes of identifying all individuals and entities whose gross revenues and assets must be aggregated with those of the applicant in determining whether the applicant exceeds the financial caps for the  X{,entrepreneurs blocks or for small business size status.mS{k ?7ЍFifth R&O, 9 FCC Rcd at 5620, 5625.m There are two exceptions to our broadband PCS affiliation rules. Under one exception, applicants affiliated with Indian tribes and Alaska Regional or Village Corporations organized pursuant to the Alaska Native Claims  X6,Settlement Act, 43 U.S.C.  1601 et seq., are generally exempt from the affiliation rules for purposes of determining eligibility to participate in bidding on C block licenses. These applicants additionally qualify as a small business with a rebuttable presumption that revenues  X,derived from gaming, pursuant to the Indian Gaming Regulatory Act, 25 U.S.C.  2701 et  X,seq. will be included in the applicant's eligibility determination.aTXk ?7Ѝ47 CFR  24.720(l)(11)(i).a Under the second exception, the gross revenues and assets of affiliates controlled by minority investors who are members of the applicants control group are not attributed to the applicant for purposes of  X,determining compliance with the eligibility standards for entry into the entrepreneurs' block.bUk ?47Ѝ47 CFR  24.720(l)(11)(ii).b   Xm,25. In the Further Notice, we proposed to eliminate the exception pertaining to  XX,minority investors.HVXxk ?"7ԍFurther Notice at  19.H In crafting this exception, we anticipated that it would permit minority investors that control other business entities to be members of an applicants control group and to bring their management skills and financial resources to bear in its operation without the assets and revenues of those other concerns being counted as part of the applicants total  X,assets and revenues.lWk ?'7ЍFifth MO&O, 10 FCC Rcd at 425426.l We further anticipated that such an exception would permit minority applicants to pool their resources with other minorityowned businesses and draw on the"W0*0*0*"  X,expertise of those who have faced similar barriers to raising capital in the past.MXk ?y7ЍId.M In the  X,Further Notice, we tentatively concluded that it would be imprudent to respond to Adarand by extending this exception to all entrepreneurs because to do so would frustrate the Commission's goals in establishing the entrepreneurs' block namely, to ensure that broadband PCS will be disseminated among a wide variety of applicants including small  X,businesses and rural telephone companies.YdXk ?7ЍFurther Notice at  19. See also Fifth R&O, 9 FCC Rcd at 5538.  Xa,26. The Further Notice proposed to retain the affiliation exception for Indian tribes  XL,and Alaska Regional or Village Corporations.HZLk ? 7ԍFurther Notice at  20.H We tentatively concluded that the "Indian Commerce Clause" of the United States Constitution provides an independent basis for this  X ,exception that is not implicated by the Adarand decision.[d k ?7ЍId.; Order on Reconsideration, FCC 94217 (released Aug.  ?715, 1994); Fifth MO&O, 10 FCC Rcd at 427428.  X ,27. Comments. The commenters overwhelmingly support elimination of the exception to our affiliation rules that excludes the gross revenues and total assets of affiliates  X ,controlled by minority investors who are members of an applicant's control group.\@ @k ?7ԍCSI Comments at 12; National Telecomm Comments at 1; U.S. Airwaves Comments at 12; Chase Telecommunications Comments at 1; Prairie Island Comments at 1; Infocore Comments at 2,3; Small Business PCS Comments at 12; General Wireless Comments at 45; Airlink Comments at 35; DCR Communications Comments at 56, 89; Central Alabama & Mobile TriStates Comments at 4; GO  ?e7Communications Comments at 23; Minority Media et al. Comments at 1; Oneida Tribe Comments at 16. Some commenters agree that this rule change would reduce the likelihood of a further delay to the  X,C block auction resulting from legal challenges premised on the Adarand decision.]XHk ?7ԍGeneral Wireless Comments at 45; CSI Comments at 12; Airlink Comments at 45; Central Alabama & Mobile TriStates Comments at 4. Other  X,commenters argue that the Court's ruling in Adarand requires elimination of the affiliation  Xl,rule exception applicable solely to investors who are members of minority groups.^Xlhk ?$7ԍU.S. Airwaves Comments at 12; Infocore Comments at 2,3; Small Business PCS Comments at 12; GO Communications Comments at 3. With respect to the effect of such rule change, Central Alabama & Mobile TriStates argue that by virtue of the current rule, wellfinanced entities who might otherwise not qualify as an entrepreneur or as small businesses are allowed to participate in the C block which is"'^0*0*0*" ultimately to the detriment of those C block applicants who actually experience difficulties in  X,accessing capital.Z_k ?b7ԍCentral Alabama & Mobile TriStates Comments at 4.Z DCR Communications contends that the proposed rule change would not deprive women and minorityowned businesses of investment from other minorities whose affiliates would exceed the financial size limitations imposed under our rules; rather, it would  X,limit such investment to 25 percent before it becomes attributable.K`Xk ?7ԍDCR Communications Comments at 89.K  Xv,28. BET, NABOB, and O.N.E. oppose elimination of the affiliation rule exception pertaining to investors who are members of minority groups. NABOB argues that such elimination will prevent many bidders from including experienced, successful minority entrepreneurs in their control groups, which, in turn, may cause them to lose financing dependent upon such alliances, and, thus, prevent them from participating in the C block  X ,auctions.>a k ?7ԍNABOB Comments at 26.> Similarly, BET argues that this rule change would not only exclude several minority entrepreneurs, but, because the A and B blocks already have been licensed, such  X ,minorities would be precluded from any meaningful participation in broadband PCS.:b xk ?7ԍBET Comments at 7.: BET further argues that elimination of the affiliation rule exception would be inconsistent with the congressional mandate given in the Budget Act and the record established by the Commission regarding those problems experienced by minorityowned businesses that the exception was  Xy,specifically designed to address.>cyk ?27ԍBET Comments at 1012.> Also, BET contends that Adarand does not require such a  Xd,rule change.;ddk ?7ԍBET Comments 2437.;  X6,29. Some commenters generally propose alternative modifications to the affiliation rule exception for minority investors. NABOB proposes that the exception be modified so that an entity controlled by a member of the control group of a small business applicant or licensee would not be considered an affiliate of the applicant if the entity would qualify as an  X,entrepreneur.<e( k ?!7ԍNABOB Comments at 5.< Spectrum Resources proposes that investors who have affiliates with gross revenues and total assets sufficiently large to disqualify a small business applicant would still be allowed to invest in the application if their investment was capped at a relatively low level, such as $100,000. Spectrum Resources argues that this modification would increase the pool of investors for small businesses while ensuring that the applicant remains a small  Xg,business.Kfg k ?'7ԍSpectrum Resources Comments at 23.K "PH f0*0*0*"Ԍ X,30. BET suggests four alternative affiliation rule exceptions. Under BET's first alternative exception, it proposes that the exception be made available only when the revenues and assets of each of the affiliates of minorities in a control group separately qualify as entrepreneurs under our rules. If, however, any of the affiliates exceeded the financial limitations for the C block, then the minorityowned applicant would not be allowed to  X,participate in the C block auction.>gk ?7ԍBET Comments at 1314.> BET argues that this proposal is analogous to the  Xv,Commission's treatment of small business consortia in the C Block.;hvXk ? 7ԍBET Comments at 14.; Under BET's second proposal, the revenues and assets of affiliates of minority members of an applicant's control group would be excluded if the average revenues of the affiliates over the past two years are less than the C block financial limits. BET argues that without such modification, Native Americans are being singled out for special treatment in violation of the Equal Protection  X ,Clause.Ai k ?7ԍBET Comments at 16, n.25.A Under these proposals, BET suggests that aggregation of the gross revenues and total assets of these affiliates would not be required in determining whether the applicant qualifies as an entrepreneur or a small business. BET's other affiliation rule exception proposals consist of making the first two proposals described above applicable to all members of a control group regardless of race. BET argues that these proposals would exclude large telecommunications companies, allow otherwise excluded minority applicants to participate in  Xy,the C block auction, and provide for the limited growth of small companies.>jyxk ?7ԍBET Comments at 1819.>  XK,31. With regard to the affiliation rule exception pertaining to Native Americans, CIRI,  X4,the Oneida Tribe, and Prairie Island agree that such exception should be retained.{k4k ?7ԍCIRI Comments at 423; Oneida Tribe Comments at 6; Prairie Island Comments at 25. { These commenters also agree that this exception is authorized by the Indian Commerce Clause of  X,the Constitution.wl` k ?7ԍCIRI Comments at 56; Oneida Tribe Comments at 6; Prairie Island Comments at 4.w Furthermore, CIRI and Prairie Island contend that the affiliation rule  X,exception is not a racebased measure implicated by Adarand.\m k ?X"7ԍCIRI Comments at 410; Prairie Island Comments at 2.\ Prairie Island argues that the exception is an outgrowth of an accommodation by the federal government of several Indian  X,tribes as sovereign political entities in a trust relationship with the United States.EnH k ?%7ԍPrairie Island Comments at 2.E CIRI and  X,Prairie Island also argue that this exception is part of federal Indian law and policy._ok ?5(7ԍCIRI Comments at 1115; Prairie Island Comments at 45._ CIRI also argues that elimination of the affiliation rule exception pertaining to Indian tribes would"ho0*0*0*]" be: (1) inconsistent with the Small Business Administration's treatment of tribal entities; and (2) without record support since the record supports the exception's underlying purpose and  X,the essential circumstances justifying such exception have not changed.Fpk ?K7ԍCIRI Comments at 1314, 1523.F  X,32. Decision. Although we proposed to eliminate the exception to our affiliation rules pertaining to minoritycontrolled affiliates, we now decide to modify it in a manner  Xv,similar to BET's proposal.dqvXk ? 7ԍSee also Comtech Ex Parte Letter, filed July 14, 1995.d When we originally crafted this exception for minorityowned applicants, we anticipated that it would permit minority investors who control other concerns to be members of a minorityowned applicants control group and to bring their management skills and financial resources to bear in its operation without the assets and revenues of those  X ,other concerns being counted as part of the applicants total assets and revenues.Yr k ?7ԍFifth MO&O, 10 FCC Rcd at 425426,  41.Y We further anticipated that such an exception would permit minorityowned applicants to pool their resources with other minorityowned businesses and draw on the expertise of those who  X ,have faced similar barriers to raising capital in the past.1s xk ?7ԍId.1 However, as we recognized in allowing small business consortia to apply in the C block and in granting small businesses special measures, all small businesses, including those owned by minorities and women, should not be precluded from pooling their resources in this capital intensive service. We believe that to some extent, these firms face barriers to raising capital not faced by the larger firms. In addition, small businesses experienced in managing smaller businesses should not be penalized because they own or are otherwise affiliated with other businesses whose assets and revenues must be considered on a cumulative basis and aggregated for purposes of  X,qualifying for the C block auction.Ktk ?7ԍSee 47 CFR  24.709(a)(2).K  X, 33. Our modification will benefit small business applicants only where the financial position of their affiliates or their qualifying control group member's affiliates, when considered individually and on a cumulative basis, would not present an unfair competitive advantage in the auction. Thus, to achieve the objectives outlined above including minimizing the adverse impact on existing business relationships, mitigating the risk of legal challenges, and ensuring that the auctions are fair and do not present any bidder with an unfair competitive advantage we modify this exclusion from affiliation coverage as follows: Xo For purposes of the affiliation rules, a small business applicant can exclude from coverage of the affiliation rules any affiliate of the small business applicant if the following conditions are met:(# XX` ` (1) the affiliate would otherwise qualify as an entrepreneur pursuant to section"t0*0*0*" 24.709(a)(1) ($125 million in gross revenues and $500 million in total assets); and(#` XX` ` (2) the total assets and gross revenues of all such affiliates, when considered on a cumulative basis and aggregated with each other, do not exceed these amounts.(#` This exemption will apply for purposes of qualifying for both the C block auction and small business status.  X ,!34. We will also retain the affiliation exception for Indian tribes and Alaska Regional  X ,or Village Corporations. In the Fifth MO&O, we stated that our decision to exempt Indian tribes generally from our affiliation rules was premised on the fact that Congress has imposed  X ,unique legal constraints on the way they can utilize their revenues and assets.Lu k ?P7ԍFifth MO&O, 10 FCC Rcd at 427.L We recognized that as a result of such constraints imposed by the Alaska Native Claims  X ,Settlement Act, 43 U.S.C.  1601 et seq., Native American corporations are precluded from utilizing two important means of raising capital: (1) the ability to pledge the stock of the company against ordinary borrowings, and (2) the ability to issue new stock or debt  Xf,securities.1vfXk ?o7ԍId.1 We further recognized that Congress has mandated that the Small Business Administration determine the size of a business concern owned by a tribe without regard to the concern's affiliation with the Indian tribe and determined that the affiliation exception  X!,contained in our C block affiliation rules mirrored this congressional mandate.1w!k ?7ԍId.1 Although Indian tribes are minorities under our C block auction rules, we conclude that their affiliation rule exception is different from the exception applicable only to minority investors in that it is premised on their unique legal status as recognized in the "Indian Commerce Clause" of the  X,United States Constitution.Jxxk ?7ԍU.S. Const. art. I,  8, cl. 3.J  X, D.Installment Payments  XR,"35. Background. Five different installment payment plans are available to C block  X;,applicants under Section 24.711 of the Commission's Rules.y;k P$7ԍ#Xw PE37 dXP## c PE37 KP#47 CFR  24.711. In the Further Notice, we sought comment on our proposal to allow all small businesses, regardless of racial or gender classification, the opportunity to use the most favorable installment payment plan to pay for their licenses. This proposal provides for interestonly payments for six years and payments of principal and interest amortized over the remaining four years of the license term. We"y0*0*0*" indicated that this approach would allow many prospective bidders to maintain their pre X,Adarand business arrangements.   X,#36. Comments. A majority of the comments support the elimination of installment payment plans that are tied to an applicant's status as a minority or womenowned business, and to provide for three installment payment plans that are based solely on financial size. Several commenters note that our proposal will result in the least amount of delay to the  Xa,auction and grant of C block licenses.zak P7ԍ#c PE37 KP#GO Communications Comments at 3; General Wireless Comments at 45; CSI Comments at 12; Small Business PCS Comments at 12; Airlink Comments at 35. GO Communications asserts that delays and threats  XJ,of delay to the C block auction will irrevocably damage all entrepreneurs.o{J1k P, 7ԍ#c PE37 KP#GO Communications Comments at 3.o Airlink expresses a similar opinion when it notes that there is a direct link between auction delays,  X ,market competitiveness and investor confidence.g| k P7ԍ#c PE37 KP#Airlink Comments at 35.g Airlink further maintains that auction  X ,delays inhibit the ability of applicants to keep and find sources of investment.m} sk P)7ԍ#c PE37 KP#Airlink Comments at 35.m Small Business PCS was even more adamant that any other alternative would result in further delay  X ,and no viable licenses for any small businesses.p~ k P7ԍ#c PE37 KP#Small Business PCS Comments at 2.p Although the majority of commenters  X ,favor our proposal, Minority Media et al. also suggests allowing any applicant who can  X ,demonstrate "good cause" to request a waiver under Sections 1.3 and 24.819(a) of our rulesq k P7ԍ#c PE37 KP#47 CFR  1.3 and 24.819(a).q  X,to be eligible for small business preferences and the bidding credit under our proposed rule.{V k P7ԍ#c PE37 KP#Minority Media et al. Comments at 78.{  X},Under Minority Media et al.'s proposed alternative, any waiver requests by women and minorities would receive a "plus" factor since there is record evidence in this proceeding and in congressional legislation that establishes compelling governmental interests in diversity of  X:,ownership.{: k P 7ԍ#c PE37 KP#Minority Media et al. Comments at 89.{  X ,$37. Several commenters oppose our proposal to modify our installment payment plan. InTouch asserts that we are raising barriers to accessing capital by minorityowned  X,businesses.ek P'&7ԍ#c PE37 KP#InTouch Comments at 3.e By eliminating the race and gender preference, BET argues that we are not assisting minorityowned small businesses in overcoming obstacles to entry into the PCS"90*0*0*"  X,marketplace.bk Py7ԍ#c PE37 KP#BET Comments at 33.b BET further maintains that the Further Notice must still satisfy Congress' directive to disseminate licenses among a wide variety of applicants and to ensure that  X,minorities are not excluded from the auction process.hik ?7ԍBET Comments at 33.#c PE37 KP#h O.N.E. charges that we are wrong to eliminate all race and genderbased preferences without proposing a race and genderneutral  X,solution.dk PP 7ԍ#c PE37 KP#O.N.E. Comments at 1.d Specifically, O.N.E. argues that our proposals do not create a size standard that is race and gender neutral yet small enough to ensure that businesses owned by members of minority groups and women are given the opportunity to participate in the provision of  Xa,PCS.=ak ? 7ԍO.N.E. Comments at 1.= As a result, they assert that our proposals have the effect of restricting opportunities  XJ,to only an elite handful of minorities and women.=J*k ?%7ԍO.N.E. Comments at 1.=  X ,%38. RTC disagrees with our installment plans as set forth in the Further Notice and suggests two proposals of its own. First, RTC would make the same installment payment terms available to all small businesses that qualify to participate in the C block auction. Alternatively, RTC would maintain the existing differentials available to small businesses that meet the $40 million gross revenues test visavis other small businesses that qualify as  X ,"entrepreneurs."a k P7ԍ#c PE37 KP#RTC Comments at 2.a RTC asserts that the effect of the proposals creates a massive gulf between small businesses whose control groups can meet the $40 million gross revenues test versus those whose control group cannot meet that test.   XO,&39. Decision. We will amend our rules concerning installment payments as set forth  X8,in the Further Notice. We have concluded that revision of our installment payment program  X#,in this manner, is minimally disruptive to the established business arrangements of the  X ,applicants. [ k ? 7ԍSee e.g., Letter from Tara Kalagher Guinta representing  ? 7TTW Communications Inc. to Regina M. Keeney, Chief, Wireless  ?!7Telecommunications Bureau, FCC and Kathleen O. Ham, Chief, Auctions Division (June 25, 1995); Letter from Steven Y. Barnes,  ?8#7President, PCS Consultants, Inc. to Reed Hundt, Chairman, FCC (June 16, 1995). All small businesses, including minority or womenowned small businesses, will continue to be eligible for the most favorable installment plan.   X,'40. We further conclude that our installment payment plan designed solely for small businesses will give designated entities an opportunity to participate in the provision of spectrumbased services. By allowing all small businesses to pay for their licenses in this"0*0*0*"  X,manner (i.e., using installments, at a rate equal to tenyear U.S. Treasury obligations applicable on the date the license is granted and requiring that payments include interest only for the first six years with payments of principal and interest amortized over the remaining four years of the license term), we will provide the most favorable plan to the smallest companies. We are not, as O.N.E. suggests, restricting opportunities to a handful of minorities and women. We are complying with our statutory obligations in a manner that we believe is necessary under the circumstances. We reject RTC's alternatives to make the same installment plan available to all applicants. Our record shows that smaller companies need more assistance accessing capital for broadband licenses and, therefore, the Commission decided these businesses should receive more favorable treatment than the medium to large companies participating in the C block auction.   X ,(41. Based on our experience, we conclude that Minority Media et al.'s waiver proposal as described in its comments is administratively burdensome, and potentially has its own legal risks since it is based in part on an applicant's status as a woman or minority. A major purpose of our proposals is to avert further delays in the auction and grant of C block licenses. The waivers would give losing applicants a builtin reason to challenge the auction results with petitions to deny if a winning applicant utilized the bidding credit solely as a result of a waiver for "good cause." Therefore, for purposes of the C block auction, we will not adopt such a waiver proposal.  X!,)42. Although the revised rules do not specifically target minorities and women, we realize that because a large number of minority or womenowned businesses are small businesses, our new rules will nonetheless, afford designated entities opportunities to participate in the C block auction. We recognize that this amendment to the installment payment plan will not allow some minority and womenowned businesses to elect the most favorable installment payment plan because these businesses exceed our small business threshold. We further recognize that these businesses may have to restructure agreements to obtain additional capital to participate in the C block auction.  XR,*43. We weighed the risks of litigation to the Commission and to winning bidders, the need to preserve competition, and our commitment to providing service to the public as expeditiously as possible against the additional financial burden this rule change will have on minority and womenowned businesses that do not qualify as small businesses under our rules. After carefully considering these issues, we determined that the need to mitigate litigation risks, enhance market competition, and encourage prompt service to the public far outweigh the additional financial burden this rule change would create for potential bidders.  X#, E.Bidding Credits  XU%,+44. Background. Our current rules provide three tiers of bidding credits ranging  X>&,between 10 percent and 25 percent.b>&k P(7ԍ#c PE37 KP#47 CFR  24.712.b Small businesses are eligible for a 10 percent bidding">&i0*0*0*$" credit. Businesses owned by women or minorities are eligible for a 15 percent bidding credit and small businesses owned by women or minorities are eligible for a 25 percent total bidding credit. The bidding credit acts as a discount on the winning bid amount that a  X,licensee actually pays for the license. In the Further Notice, we proposed increasing the bidding credit for small businesses from 10 percent to 25 percent and eliminating the remaining bidding credits. We recognized that this proposal would enhance the competitiveness of all small businesses which will receive a 15 percent increase in their bidding credits. The positions of minority or womenowned small businesses will remain the same because they are already eligible for a 25 percent bidding credit.  X ,,45. Comments. Commenters generally advocate increasing the small business bidding credit to 25 percent and the elimination of bidding credits based upon an applicant's race or  X ,gender.T k Pg 7ԍ#c PE37 KP#Infocore Comments at 23; Small Business PCS Comments at 12; Airlink Comments at 35; CSI Comments at 12; General Wireless Comments at 45; GO Communications Comments at 23; Spectrum Resources Comments at 3; Central Alabama & Mobile TriStates Comments at 5; Prairie Island Comments at 1; Chase Telecommunications Comments at 1; U.S. Airwaves Comments at 12; National  xP`,Telecomm Comments at 1; Minority Media et al. Comments at 1. See eg. Letter from  xP(,Tara Kalagher Guinta representing TTW Communications, Inc. to Regina M. Keeney, Chief, Wireless Telecommunications Bureau, FCC and Kathleen O. Ham, Chief,  xP,Auctions Division (June 15, 1995); Letter from Gloria Borland, Gloria Borland Hawaii,  xP,PCS to William F. Caton, Acting Secretary, FCC (June 19, 1995); Letter from Steven Y.  xPH,Barnes, President, PCS Consultants, Inc. to Reed Hundt, Chairman, FCC (June 16, 1995).T Some commenters supported our proposal to differentiate between applicants on  X ,the basis of size in order to avert any Adarand or TEC legal challenges to our rules.i 9 k P7ԍ#c PE37 KP#General Wireless Comments at 45; Small Business PCS Comments at 12;  xP,Airlink Comments at 35; Infocore Comments at 23; Central Alabama & Mobile TriStates Comments at 5.  X ,Minority Media et al. repeated its "good cause" waiver argument under Sections 1.3 and  X ,24.819(a)q j k P7ԍ#c PE37 KP#47 CFR  1.3 and 24.819(a).q of our rules.u k Pi7ԍ#c PE37 KP#See infra  36, 41.u  X,-46. Two commenters oppose the proposed bidding credit modification.yk P!7ԍ#c PE37 KP#BET Comments at 34; InTouch Comments at 3.y Both BET and InTouch argue that race neutral alternatives serve only to reinforce the barriers to capital  XQ,that many minorityowned businesses face.yQMk PO%7ԍ#c PE37 KP#BET Comments at 34; InTouch Comments at 3.y BET specifically states that the bidding credit  X:,is meant to "address directly the financing obstacles encountered by minorities.":k P'7ԍ#c PE37 KP#BET Comments at 34 (citing Fifth R&O, 9 FCC Rcd at 55895590). Two":0*0*0*"  X,commenters presented alternative proposals for consideration.wk Py7ԍ#c PE37 KP#RTC Comments at 2; O.N.E. Comments at 2.w RTC wants to either (1) make the same bid credits available to all small businesses that qualify to participate in the C block auction or (2) maintain the existing differentials available to small businesses that meet the $40 million gross revenues test visavis other small businesses that  X,qualify as "entrepreneurs."aik P7ԍ#c PE37 KP#RTC Comments at 2.a O.N.E. proposes increasing the bidding credit for small  X,businesses to 40 percent. k PH 7ԍ#c PE37 KP# O.N.E. Comments at 2. O.N.E. also proposes a size standard of $5 million for small businesses from the present $40 million.  X_,.47. Decision. We amend our rules to provide for a 25 percent small business bidding credit only. Restructuring our bidding credits in this manner is consistent with our post X1,Adarand concerns about the C block auction. While small businesses, in general, will benefit  X ,with a higher credit (i.e., from 10 to 25 percent), this rule change will allow the Commission and prospective bidders to avoid litigation, allow the auction to proceed as close to its original schedule as possible and permit prospective bidders to maintain previously negotiated business arrangements and financial agreements.  X ,/48. We understand BET's and InTouch's concerns, but believe our proposals do not contradict our statutory obligations. Many commenters have noted that the elimination of minority and genderbased preferences is necessary in light of recent court challenges to racebased statutes if the C block auction is to proceed without significant delay. Specifically, GO Communications comments that our bidding credit proposal strikes an appropriate balance by leveling benefits upward in a manner that mitigates potential harm to  X!,all affected parties.o!sk PE7ԍ#c PE37 KP#GO Communications Comments at 3.o Spectrum Resources contends that the proposal is reasonable and viable although a slight negative effect will result because of the additional competition into the  X,bidding process and a diminishing number of successful minority and women bidders.rk P7ԍ#c PE37 KP#Spectrum Resources Comments at 34.r DCR Communications argues that the proposal is the most sensible and is necessary to ensure  X,participation by designated entities in the auction for, and offering of, PCS.r k P+"7ԍ#c PE37 KP#DCR Communications Comments at 56.r We agree that we are striking an appropriate balance between varied interests to retain our statutory mandate to provide opportunities for designated entities.  XR, F. Cellular PCS CrossOwnership and CMRS Spectrum Aggregation Limit  X;,  X$,049. Background. Our cellularPCS crossownership rule prohibits entities with"$V 0*0*0*F" attributable interests in cellular licenses from holding more than 10 MHz of PCS spectrum in  X,an overlapping PCS service area.>k ?b7ԍ47 CFR  24.204(a).> For purposes of this rule, a 20 percent or greater interest in a cellular license is considered to be attributable, except in the case of cellular interests  X,held by designated entities. In the latter case, we permit small businesses, rural telephone companies, and businesses owned by minorities or women to hold up to a 40 percent noncontrolling interest in a cellular licensee without being subject to the cellularPCS cross Xv,ownership restriction.XvXk ? 7ԍId.,  24.204(d)(2)(ii). See Memorandum Opinion & Order,  ?G 7GEN Docket No. 90314, 9 FCC Rcd 4957, 5007 (Broadband PCS  ? 7Reconsideration Order). We also apply a 40 percent cellular attribution threshold to any  X_,entity with a noncontrolling interest in a PCS license controlled by minorities or women.t_xk ? 7ԍId. See Broadband PCS Reconsideration Order, 9 FCC Rcd at 5008.t The same attribution rules apply to our 45 MHz spectrum cap, which restricts any entity from  X1,holding interests in more than 45 MHz of broadband PCS, cellular, and SMR spectrum in the  X ,same geographic area.X k ?7ԍ47 CFR  20.6. See Third Report and Order, GN Docket No. 93252, PR Docket No. 93144, PR Docket No. 89553, 9 FCC Rcd  ?+77988, ( 263) (1994) (CMRS Third Report and Order). Thus, while interests of 20 percent or more in a broadband PCS, cellular, or SMR license are generally attributable for purposes of the spectrum cap, small businesses, rural telephone companies, and businesses owned by minorities or women are  X ,subject to a 40 percent attribution threshold.C k ?v7ԍId.,  20.6(d)(2).C  X ,150. In the Further Notice, we proposed to modify both the cellularPCS crossownership and the PCS/cellular/SMR spectrum cap rule with respect to the C block by  X{,eliminating the use of the 40 percent attribution threshold on the basis of race or gender.H{ k ?7ԍFurther Notice at  30.H Thus, in the cellularPCS context, we proposed to apply the 40 percent attribution threshold only to cellular interests held by small businesses and rural telephone companies, but to apply the 20 percent threshold to all other cellular interests, including those held by minority and womencontrolled entities that are not small business or rural telephone companies. We further proposed to eliminate the rule allowing 40 percent cellular attribution for noncontrolling investors in minority or womencontrolled PCS applicants or licensees and instead proposed to apply the 40 percent threshold to noncontrolling investors in PCS applicants or licensees controlled by small businesses. In this regard, we noted that the extension of the 40 percent threshold to noncontrolling investors in small businesses might result in additional investment in small business PCS applicants. Similarly, with respect to the PCS/cellular/SMR spectrum cap, we proposed to use the 40 percent attribution threshold where PCS/cellular/SMR interests are held by small businesses and rural telephone"g0*0*0*"  X,companies, but to use the 20 percent threshold in all other cases.} k ?y7ԍIn the Further Notice, we inadvertently referenced Section  ?A720.6(d)(2) as adopted in the CMRS Third Report and Order rather  ? 7than Section 20.6(d)(2) as corrected by the Erratum of theCMRS  ?7Third Report and Order , which was released on November 30, 1994.} Although we noted that the cellularPCS and spectrum cap rules applied to more than just the C block, we proposed to change the rules with respect to the C block only.  X,251. Comments. The comments generally support our proposals for modifying the cellularPCS crossownership and CMRS spectrum aggregation limit rules. Most of the  Xv,comments mirror earlier comments concerning the commenters' desire to avoid delay;Hvk ? 7ԍGO Communications Comments at 3.H to  X_,avoid Adarand and TEC type legal challenges;X_@k ?P7ԍSpectrum Resources Comments at 3; Central Alabama & Mobile TriStates Comments at 5; Small Business PCS Comments at 12; Infocore Comments at 23. and to minimize disruption.X_` k ?p7ԍGO Communications Comments at 3; Spectrum Resources Comments at 3; DCR Communications Comments at 1011; Airlink Comments at 45. DCR  XJ,Communications notes that our proposal will promote investment.MJ k ?{7ԍDCR Communications Comments at 1011.M Only two commenters object to our proposal. O.N.E. reasserts its argument that we should not eliminate all race  X ,and genderbased preferences without proposing a race and genderneutral solution. K k ?7ԍSee infra at  37, 40.K Radiofone challenges both the 40 percent cellularPCS crossownership rule and our proposed  X ,amendment as unlawful and discriminatory.@ k ??7ԍRadiofone Comments at 3.@  X ,352. Decision. We will amend our cellular PCS crossownership and PCS/cellular/SMR spectrum aggregation limit rules with respect to C block as proposed in the  X,Further Notice. These changes will help to avoid further delay or legal challenges to the C block auction and are strongly supported by the comments. We reject Radiofone's argument that the cellularPCS crossownership rule should be eliminated. This argument has been  XO,fully addressed previously in the PCS docket and is not an issue raised in this proceeding.O0k ?0$7ԍSee Second Report and Order, GEN 90314, 8 FCC Rcd 7700,  ?$77745; Broadband PCS Reconsideration Order, 9 FCC Rcd at 4998. Specifically, we modify Section 24.204(d)(2)(ii) with respect to the C block to eliminate the provision in the cellularPCS crossownership rule that increases the attribution threshold to 40 percent on the basis of the race or gender of the holder of the ownership interest, but we will continue to apply the 40 percent threshold to cellular interests held by small businesses"0*0*0*" and rural telephone companies. We also modify Section 24.204(d)(2)(ii) to provide that noncontrolling investors in C block PCS applicants or licensees controlled by small businesses may hold up to a 40 percent interest in a cellular licensee without being subject to the cellularPCS crossownership restrictions. Finally, we make the same modification to the attribution provisions in our spectrum cap rule in Section 20.6(d)(2) that we have made to our cellularPCS rule. Thus, small businesses or rural telephone companies may hold up to a 40 percent interest in broadband PCS, cellular, or SMR licenses without such interests being attributable under the 45 MHz spectrum cap, but minority and womencontrolled interest holders who are not small businesses or rural telephone companies will be subject to the 20 percent attribution rule for purposes of determining C block eligibility under the spectrum cap. To avoid any apparent inconsistency, Section 20.6(d)(2) will also reflect the modification with respect to noncontrolling investors in C block PCS applicants and licensees that are small businesses.  X , G.Miscellaneous Issues  X ,  X,453. Information Collection. With respect to our proposal to continue requesting information on the shortform applications (FCC Form 175) regarding minority or women Xd,owned status,Hdk ?7ԍFurther Notice at  17.H both Spectrum Resources and Central Alabama & Mobile TriStates agree that we should continue to collect such information. Central Alabama & Mobile TriStates believe that collection of the status data will enable the Commission to analyze the applicant pool and auction results to determine if small business provisions alone were sufficient to achieve the participation of all designated entities, including businesses owned by minorities  X,or women.ZXk ?7ԍCentral Alabama & Mobile TriStates Comments at 7.Z Central Alabama & Mobile TriStates further state that in the event that such participation is not obtained, then the collected information would be helpful in establishing a  X,record supporting race and genderbased preferences for future auctions.Zk ?\7ԍCentral Alabama & Mobile TriStates Comments at 7.Z Similarly, Spectrum Resources believes that such information could prove valuable in supporting the  X,Commission's actions in any ensuing litigation.Ixk ?7ԍSpectrum Resources Comments at 2.I  Xg,554. We agree that continuing to request information on the shortform applications (FCC Form 175) concerning the minority or womenowned status of applicants will assist us in analyzing the applicant pool and the auction results to determine whether we have accomplished substantial participation by minorities and women through provisions available to small businesses as required by the Budget Act. We conclude that such information will be helpful and probative in two respects: (1) our preparation of a report to Congress on the participation of designated entities in the auctions and in the provision of spectrumbased"0*0*0*"  X,services;kk ?y7ЍSee 47 U.S.C.  309(j)(12)(D).k and, (2) our development of a supplemental record should we find that special provisions for small businesses in the C block PCS auctions prove unsuccessful in ensuring participation by businesses owned by members of minority groups and women in broadband PCS. In this connection, we emphasize that those applicants who indicate that they are minority or womenowned must meet the applicable definitions as set forth in Section  X,24.720(c) of our rules.  X_,655. Other. Several commenters addressed issues regarding the auctioning and  XJ,licensing of the C block other than the specific rule changes proposed in the Further Notice.  X5,These issues included the following: (a) scheduled commencement of the C block auction;r5Xk ?> 7ԍNational Telecomm Comments 13 (seeking further delay of C block auction).r (b) proposals of special provisions for entrepreneurs with gross revenues between $40 and  X ,$75 million; k ?h7ԍComtech Comments at 28 (proposes adoption of bidding credits and installment payment plans for these entrepreneurs). (c) proposals of circumstances under which upfront payments and down  X ,payments can earn interest and be withdrawn;X k ?7ԍMichigan Telecommunications Comments at 24 (proposes establishment of interest bearing accounts for deposit of upfront payments and down payments). (d) definition of small businesses;X ( k ?7ԍO.N.E. Comments at 2 (proposes size standard of $5 million); RTC Comments at 210 (argues that small business definition is not properly targeted). (e)  X ,criteria for determining C block eligibility;w H k ?7ԍAllied Comments at 23 (urges reinstatement of personal net worth limitations).w (f) the rebuttable presumption concerning Indian  X ,gaming revenues; k ?7ԍOneida Tribe Comments at 615 (challenges propriety of rebuttable presumption applicable to Indian gaming revenues). and (g) effect of business growth and development on C block small  X ,business status.X k ?T!7ԍMasTec Comments at 23 (seeks continued C block eligibility for small preexisting companies that have experienced growth since January, 1994). We have adequately considered these issues previously and we find no basis to revisit them here in this narrowlyfocused rule making. Therefore, we will not make  X},the rule changes proposed by commenters pertaining to such issues.  XO, 756. On our own motion, however, we clarify the measurement of gross revenues. Section 24.720 (f) specifies that gross revenues shall be measured "for the relevant number of calendar years preceding January 1, 1994, or if audited financial statements were not prepared on a calendaryear basis, for the most recently completed fiscal years preceding the filing of" 0*0*0*"  X,the applicant's shortform application (Form 175)."Dk ?y7ԍ47 CFR  24.720(f).D For purposes of qualifying for the C block, an entity, together with its affiliates and persons or entities that hold an attributable interest in such entity and their affiliates, must have gross revenues of less than $125 million  X,in each of the last two years.DXk ?7ԍId.  24.709(a)(1).D Therefore, such an entity would measure its annual gross revenues for the calendar years 1992 and 1993, or for its two most recently completed fiscal years. For purposes of qualifying as a small business, an entity, together with its affiliates and persons or entities that hold an attributable interest in such entity and their affiliates, must have average annual gross revenues of not more than $40 million for the preceding three  XH,years.DHk ? 7ԍId.  24.720(b)(1).D Therefore, such an entity would calculate its average annual gross revenues for the years 1991, 1992, and 1993, or for its three most recently completed fiscal years.  X ,  X ,857. We note that this definition of gross revenues was adopted when the C block applications were to be filed in early 1995, when audited calendar year 1994 financial statements for most firms were not yet available and when it was unlikely that there would be a substantial difference between calendar and fiscal years for accounting purposes. If our rule's distinction between calendar years and fiscal years results in undue hardship due to a  X,company's particular accounting practices, we will entertain waiver requests to use either a calendaryear or a fiscalyear measurement of gross revenues to determine compliance with  Xd,the financial caps. dxk ?7ԍAudited financial statements are required of all applicants except for "startup" companies where unaudited financials are permitted provided they are certified to be  ?7correct by an officer of the applicant. See 47 CFR  24.720(f) and (g). The Wireless Telecommunications Bureau has previously indicated that the Commission will consider requests for waivers of this requirement in cases where applicants can show for good cause that they do not have audited financial statements prepared. In such cases, certified financial statements may be accepted if accompanied by an affidavit from a senior corporate officer certifying the accuracy of the  ?% 7information provided. See Public Notice, "Wireless Telecommunications Bureau Staff Responds to Questions About the Broadband PCS C Block Auction," June 8, 1995.  We did not intend to discriminate based upon a company's particular accounting practices. We delegate authority to the Wireless Telecommunications Bureau to decide such waivers on a casebycase basis and to grant such upon an affirmative showing pursuant to Section 24.419 of the Commission's rules.   X,$  IV. PROCEDURAL MATTERS AND ORDERING CLAUSES Đm  X,958. The Final Regulatory Flexibility Analysis, as required by Section 604 of the"00*0*0*"  X,Regulatory Flexibility Act,Vk ?y7Ѝ5 U.S.C.  604.V is set forth in Appendix B.   X,:59. IT IS ORDERED that the rule changes specified in Appendix A ARE ADOPTED.  X,;60. IT IS FURTHER ORDERED that the rule changes set forth in Appendix A WILL  X,BECOME EFFECTIVE upon publication in the Federal Register. Pursuant to 5 U.S.C.  553(d)(3) we find "good cause" exists to have the rule amendments set forth herein take  X_,effect immediately upon publication in the Federal Register. The C block auction for broadband PCS is scheduled to commence on August 29, 1995, and initial shortform applications are due July 28, 1995. Our revised rules need to be effective prior to receipt of the shortform applications in order to avoid the delays and litigation risks associated with prior rules.  X ,<61. IT IS FURTHER ORDERED that the Wireless Telecommunications Bureau has delegated authority to decide waiver requests pertaining to our C block competitive bidding  X ,rules as specified in paragraph 57 of this Sixth Report and Order.   X{,=62. This action is taken pursuant to Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r) and 309(j). ` `  Ghh~FEDERAL COMMUNICATIONS COMMISSION ` `  Ghh~William F. Caton  X,` `  Ghh~Acting Secretary#Xx{2 PQ dXP# "X0*0*0*U"  ^, APPENDIX A ă  ^,  ^,FINAL RULES ă  X,# XP\  P6QXP# Parts 20 and 24 of Chapter I of Title 47 of the Code of Federal Regulations are amended as follows:  XH, PART 20 COMMERCIAL MOBILE RADIO SERVICES 1. The authority citation for Part 20 continues to read as follows: AUTHORITY: Secs. 4, 303, and 332, 48 Stat. 1066, 1082, as amended; 47 U.S.C.  154, 303, and 332, unless otherwise noted.  X , 2. Section 20.6 is amended by revising paragraph (d)(2) to read as follows:  Xy,  20.6 CMRS spectrum aggregation limit. * * * * * (d)* * * (2) Partnership and other ownership interests and any stock interest amounting to 20 percent or more of the equity, or outstanding stock, or outstanding voting stock of a broadband PCS, cellular or SMR licensee shall be attributed, except that ownership will not be attributed unless the partnership and other ownership interests and any stock interest amount to at least 40 percent of the equity, or outstanding stock, or outstanding voting stock of a broadband PCS, cellular or SMR licensee if the ownership interest is held by a small business, a rural telephone company or a business owned by minorities and/or women, as these terms are defined in Sec. 1.2110 of this chapter or other related provisions of the Commission's rules, or if the ownership interest is held by an entity with a noncontrolling equity interest in a broadband PCS licensee or applicant that is a business owned by minorities and/or women. For purposes of broadband PCS licenses for frequency block C, the 40 percent attribution levels shall only apply to interests held by a small business or a rural telephone company and interests held by an entity with a noncontrolling equity interest in a licensee or applicant that is a small business. * * * * *  X", PART 24 PERSONAL COMMUNICATIONS SERVICES 1. The authority citation for Part 24 continues to read as follows: AUTHORITY: Secs. 4, 301, 302, 303, 309 and 332, 48 Stat. 1066, 1082, as amended; 47 U.S.C.  154, 301, 302, 303, 309 and 332, unless otherwise noted. 2. Section 24.204 is amended by revising paragraph (d)(2)(ii) to read as follows:"( 0*0*0*&"Ԍ X,ԙ  24.204 Cellular eligibility. l* * * * * (d)* * * (2)* * * (ii) Partnership and other ownership interests and any stock interest amounting to 20 percent or more of the equity, or outstanding stock, or outstanding voting stock of a cellular licensee will be attributable, except that ownership will not be attributed unless the partnership and other ownership interests and any stock interest amount to 40 percent or more of the equity, or outstanding stock, or outstanding voting stock of a cellular licensee if the ownership interest is held by a small business, a rural telephone company, or a business owned by minorities and/or women, as these terms are defined in Sec. 24.720, or if the ownership interest is held by an entity with a noncontrolling equity interest in a broadband PCS licensee or applicant that is a business owned by minorities and/or women. For purposes of broadband PCS licenses for frequency block C, the 40 percent attribution levels shall only apply to interests held by a small business or rural telephone company and interests held by an entity with a noncontrolling equity interest in a licensee or applicant that is a small business. ***** m 3. Section 24.709 is amended by revising the heading and paragraphs (a), (b)(6), (c)(1), (c)(2), (c)(2)(ii) and (e) to read as follows:  X,  24.709 Eligibility for licenses for frequency Block C.  X|,(a) General Rule. (1) No application is acceptable for filing and no license shall be granted for frequency  XP,block C, unless the applicant, together with its affiliates and persons or entities that hold  X;,interests in the applicant and their affiliates, have gross revenues of less than $125 million in  X&,each of the last two years and total assets of less than $500 million at the time the applicants shortform application (Form 175) is filed.  X, (2) The gross revenues and total assets of the applicant (or licensee), and its affiliates, and (except as provided in paragraph (b) of this section) of persons or entities that hold interests  X ,in the applicant (or licensee), and their affiliates, shall be attributed to the applicant and considered on a cumulative basis and aggregated for purposes of determining whether the applicant (or licensee) is eligible for a license for frequency block C under this section. (3) Any licensee awarded a license pursuant to this section (or pursuant to  24.839(d)(2)) shall maintain its eligibility until at least five years from the date of initial license grant,  X]%,except that a licensees (or other attributable entitys) increased gross revenues or increased  XH&,total assets due to nonattributable equity investments (i.e., from sources whose gross  X3',revenues, and total assets are not considered under paragraph (b) of this section), debt financing, revenue from operations or other investments, business development or expanded service shall not be considered.")!0*0*0*&"Ԍ X, (b)* * * (5)* * * (C) The remaining 10 percent of the applicant's (or licensee's) total equity may be owned, either unconditionally or in the form of stock options, by any of the following entities, which may not comply with  24.720(n)(1):  X,(1) Institutional investors;  Xz,(2) Noncontrolling existing investors in any preexisting entity that is a member of the  Xe,control group; (3) Individuals that are members of the applicant's (or licensee's) management; or  X9,(4) Qualifying investors, as specified in  24.720(n)(4).  X$ , (6) Control Group Minimum 50.1 Percent Equity Requirement. In order to be eligible to  X ,exclude gross revenues and total assets of persons or entities identified in paragraph (b)(4) of this section, an applicant (or licensee) must comply with the following requirements:  X , (i) Except for an applicant (or licensee) whose sole control group member is a preexisting  X ,entity, as provided in paragraph (b)(6)(ii) of this section, at the time the applicants shortform application (Form 175) is filed and until at least three years following the date of initial  X,license grant, the applicants (or licensees) control group must own at least 50.1 percent of the applicants (or licensees) total equity as follows: (A) at least 30 percent of the applicants (or licensees) total equity must be held by  X_,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 shortform application (Form 175);  X, (B) Such qualifying investors must hold 50.1 percent of the voting stock and all general  X,partnership interests within the control group and must have de facto control of the control group and of the applicant; (C) The remaining 20.1 percent of the applicants (or licensees) total equity may be owned  X,by qualifying investors, either unconditionally or in the form of stock options not subject to the restrictions of paragraph (b)(6)(i)(A) of this section, or by any of the following entities which may not comply with  24.720(n)(1):  X, (1)  Institutional investors, either unconditionally or in the form of stock options;  Xl,  (2) Noncontrolling existing investors in any preexisting entity that is a member of the control  XW,group, either unconditionally or in the form of stock options;  XB,  (3) Individuals that are members of the applicants (or licensees) management, either unconditionally or in the form of stock options; or  X, (4) Qualifying investors, as specified in  24.720(n)(4).pp! (D) Following termination of the threeyear period specified in paragraph (b)(6)(i) of this  X ,section, qualifying investors must continue to own at least 20 percent of the applicants (or licensees) total equity, either unconditionally or in the form of stock options subject to the restrictions in paragraph (b)(6)(i)(A) of this section. The restrictions specified in paragraph  X#,(b)(6)(i)(C)(1) through (4) of this section no longer apply to the remaining equity after termination of such threeyear period.  Xw%, (ii) At the election of an applicant (or licensee) whose control groups sole member is a  Xb&,preexisting entity, the 50.1 percent minimum equity requirements set forth in paragraph (b)(6)(i) of this section shall apply, except that only 20 percent of the applicants (or  X6(,licensees) total equity must be held by qualifying investors, and that the remaining 30.1  X!),percent of the applicants (or licensees) total equity may be held by qualifying investors, or"!)"0*0*0*&"  X,noncontrolling existing investors in such control group member or individuals that are members of the applicants (or licensees) management. These restrictions on the identity of the holder(s) of the remaining 30.1 percent of the licensees total equity no longer apply after  X,termination of the threeyear period specified in paragraph (b)(6)(i) of this section.  X,l* * * * * (c)* * *  XJ, (1) Shortform Application. In addition to certifications and disclosures required by Part 1,  X5,subpart Q of this Chapter and  24.813, each applicant for a license for frequency Block C shall certify on its shortform 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  24.720, and shall append the following information as an exhibit to its Form 175: l* * * * *  Xh, (2) Longform Application. In addition to the requirements in subpart I of this part and other applicable rules (e.g.,  24.204(f), 20.6(e) and 20.9(b) of this chapter), each applicant submitting a longform application for a license(s) for frequency block C shall, in an exhibit to its longform application: l* * * * * (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 applicants eligibility for a license(s) for frequency Block C and its eligibility under  24.711, 24.712,  X,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 l* * * * *  X ,(e) Definitions. The terms affiliate, business owned by members of minority groups and women, consortium of small businesses, control group, existing investor, gross revenues, institutional investor, members of minority groups, nonattributable equity, preexisting entity, publicly traded corporation with widely dispersed voting power, qualifying investor, small  Xt$,business and total assets used in this section are defined in  24.720.  XH&,4. Section 24.711 is amended by revising the heading and paragraphs (a) introductory text, (a)(1), (b) introductory text and (b)(3), and removing paragraphs (b)(4) and (5) to read as follows: ")#0*0*0*&"Ԍ X,  24.711 Upfront payments, down payments and installment payments for licenses for  X,frequency Block C.  X, (a) Upfront Payments and Down Payments. (1) Each eligible bidder for licenses on frequency Block C subject to auction shall pay an upfront payment of $0.015 per MHz per pop for the maximum number of licenses (in terms of MHzpops) on which it intends to bid pursuant to  1.2106 of this Chapter and procedures specified by Public Notice. l* * * * *  X3, (b) Installment Payments. Each eligible licensee of frequency Block C may pay the remaining 90 percent of the net auction price for the license in installment payments pursuant to  1.2110(e) of this Chapter and under the following terms: l* * * * * (3) For an eligible licensee that qualifies as a small business or as a consortium of small businesses, interest shall be imposed based on the rate for tenyear U.S. Treasury obligations applicable on the date the license is granted; payments shall include interest only for the first six years and payments of interest and principal amortized over the remaining four years of the license term. l* * * * * 5. Section 24.712 is amended by revising the heading and paragraph (a), removing paragraphs (b) and (c), and redesignating paragraph (d) as paragraph (b) to read as follows:  X,  24.712 Bidding credits for licenses for frequency Block C. (a) A wining bidder that qualifies as a small business or a consortium of small businesses may use a bidding credit of twentyfive percent to lower the cost of its winning bid. l* * * * * m 6. Section 24.713 is removed and reserved. 7. A new Section 24.715 is added to Subpart H to read as follows:  X ,  24.715 Eligibility for licenses for frequency Block F.  X", (a) General Rule. (1) No application is acceptable for filing and no license shall be granted for frequency  Xn$,block F, unless the applicant, together with its affiliates and persons or entities that hold  XY%,interests in the applicant and their affiliates, have gross revenues of less than $125 million in  XD&,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.  X(, (2) The gross revenues and total assets of the applicant (or licensee), and its affiliates, and (except as provided in paragraph (b) of this section) of persons or entities that hold interests")$0*0*0*&"  X,in the applicant (or licensee), and their affiliates, shall be attributed to the applicant and considered on a cumulative basis and aggregated for purposes of determining whether the applicant (or licensee) is eligible for a license for frequency block F under this section. (3) Any licensee awarded a license pursuant to this section (or pursuant to  24.839(d)(2)) shall maintain its eligibility until at least five years from the date of initial license grant,  X,except that a licensee's (or other attributable entity's) increased gross revenues or increased  Xz,total assets due to nonattributable equity investments (i.e., from sources whose gross  Xe,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.  X" , (b) Exceptions to General Rule.  X , (1) Small Business Consortia. Where an applicant (or licensee) is a consortium of small  X ,businesses, the gross revenues and total assets of each small business shall not be aggregated.  X , (2) Publicly-Traded Corporations. Where an applicant (or licensee) is a publicly traded  X ,corporation with widely dispersed voting power, the gross revenues and total assets of a  X ,person or entity that holds an interest in the applicant (or licensee), and its affiliates, shall not be considered.  X, (3) 25 Percent Equity Exception. The gross revenues and total assets of a person or entity  Xx,that holds an interest in the applicant (or licensee), and its affiliates, shall not be considered so long as:  XL, (i) 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; (ii) Except as provided in paragraph (b)(5) of this section, such person or entity is not a  X ,member of the applicant's (or licensee's) control group; and  X, (iii) The applicant (or licensee) has a control group that complies with the minimum equity requirements of paragraph (b)(5) 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.  X, (4) 49.9 Percent Equity Exception. The gross revenues and total assets of a person or entity  X,that holds an interest in the applicant (or licensee), and its affiliates, shall not be considered so long as:  XY, (i) 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; (ii) Except as provided in paragraph (b)(6) of this section, such person or entity is not a  X,member of the applicant's (or licensee's) control group; and  X , (iii) The applicant (or licensee) has a control group that complies with the minimum equity requirements of paragraph (b)(6) 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.  X#, (5) Control Group Minimum 25 Percent Equity Requirement. In order to be eligible to  X$,exclude gross revenues and total assets of persons or entities identified in paragraph (b)(3) of this section, an applicant (or licensee) must comply with the following requirements:  Xf&, (i) Except for an applicant (or licensee) whose sole control group member is a preexisting  XQ',entity, as provided in paragraph (b)(5)(ii) 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  X%),license grant, the applicant's (or licensee's) control group must own at least 25 percent of the"%)%0*0*0*&" applicant's (or licensee's) total equity as follows: (A) 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);  X, (B) Such qualifying investors must hold 50.1 percent of the voting stock and all general  Xx,partnership interests within the control group, and must have de facto control of the control group and of the applicant; (C) The remaining 10 percent of the applicant's (or licensee's) total equity may be owned by  X5,qualifying investors, either unconditionally or in the form of stock options not subject to the restrictions of paragraph (b)(5)(i)(A) of this section, or by any of the following entities, which may not comply with section 24.720(n)(1):  X ,  (1) Institutional investors, either unconditionally or in the form of stock options;  X , (2) Noncontrolling existing investors in any preexisting entity that is a member of the  X ,control group, either unconditionally or in the form of stock options;  X ,  (3) Individuals that are members of the applicant's (or licensee's) management, either unconditionally or in the form of stock options; or  X, (4) Qualifying investors, as specified in  24.720(n)(4). (D) Following termination of the three-year period specified in paragraph (b)(5)(i) of this  XY,section, qualifying investors must continue to own at least 10 percent of the applicant's (or licensee's) total equity, either unconditionally or in the form of stock options subject to the restrictions in paragraph (b)(5)(i)(A) of this section. The restrictions specified in paragraph  X,(b)(5)(i)(C)(1) through (4) of this section no longer apply to the remaining equity after termination of such three-year period.  X, (ii) At the election of an applicant (or licensee) whose control group's sole member is a  X,preexisting entity, the 25 percent minimum equity requirements set forth in paragraph (b)(5)(i) of this section shall apply, except that only 10 percent of the applicant's (or licensee's) total  X,equity must be held by qualifying investors and that the remaining 15 percent of the  X,applicant's (or licensee's) total equity may be held by qualifying investors or noncontrolling  X},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)(5)(i) of this section.  X#, (6) Control Group Minimum 50.1 Percent Equity Requirement. In order to be eligible to  X,exclude gross revenues and total assets of persons or entities identified in paragraph (b)(4) of this section, an applicant (or licensee) must comply with the following requirements:  X , (i) Except for an applicant (or licensee) whose sole control group member is a preexisting  X!,entity, as provided in paragraph (b)(6)(ii) 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  X#,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: (A) at least 30 percent of the applicant's (or licensee's) total equity must be held by  X^&,qualifying minority and/or women 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);  X), (B) Such qualifying minority and/or women investors must hold 50.1 percent of the voting")&0*0*0*&"  X,stock and all general partnership interests within the control group and must have de facto control of the control group and of the applicant; (C) The remaining 20.1 percent of the applicant's (or licensee's) total equity may be owned  X,by qualifying investors, either unconditionally or in the form of stock options not subject to the restrictions of paragraph (b)(5)(i)(A) of this section, or by any of the following entities, which may not comply with section 24.720(n)(1):  Xz, (1) Institutional investors, either unconditionally or in the form of stock options;  Xe, (2) Noncontrolling existing investors in any preexisting entity that is a member of the  XP,control group, either unconditionally or in the form of stock options; (3) Individuals that are members of the applicant's (or licensee's) management, either unconditionally or in the form of stock options; or  X , (4) Qualifying investors, as specified in  24.720(n)(4). (D) Following termination of the three-year period specified in paragraph (b)(6)(i) of this  X ,section, qualifying minority and/or women investors must continue to own at least 20 percent of the applicant's (or licensee's) total equity, either unconditionally or in the form of stock options subject to the restrictions in paragraph (b)(6)(i)(A) of this section. The restrictions specified in paragraph (b)(6)(i)(C)(1) through (4) of this section no longer apply to the remaining equity after termination of such three-year period.  Xp, (ii) At the election of an applicant (or licensee) whose control group's sole member is a  X[,preexisting entity, the 50.1 percent minimum equity requirements set forth in paragraph (b)(6)(i) of this section shall apply, except that only 20 percent of the applicant's (or  X/,licensee's) total equity must be held by qualifying minority and/or women investors, and that the remaining 30.1 percent of the applicant's (or licensee's) total equity may be held by  X,qualifying minority and/or women investors, or noncontrolling existing investors in such  X,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)(6)(i) of this section.  X, (7) Calculation of Certain Interests. Except as provided in paragraphs (b)(5) and (b)(6) 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  X#,to comply with the nonattributable equity requirements in paragraphs (b)(3)(i) and (b)(4)(i) of this section.  X, (8) Aggregation of Affiliate Interests. Persons or entities that hold interest in an applicant (or  X ,licensee) that are affiliates of each other or have an identity of interests identified in  24.720(1)(3) 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  X#,the nonattributable equity requirements in paragraphs (b)(3)(i) and (b)(4)(i) of this section.  X$, Example 1 for paragraph (b)(8). 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.  X), Example 2 for paragraph (b)(8). ABC Corp. has subsidiary BC Corp., of which it holds a")'0*0*0*&" 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.  X, (c) Short-Form and Long-Form Applications: Certifications and Disclosure.  X, (1) Short-form Application. In addition to certifications and disclosures required by Part 1,  X,subpart Q of this Chapter and  24.813, each applicant for a license for 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  24.720, and shall append the following information as an exhibit to its Form 175:  X , (i) For an applicant that is a publicly traded corporation with widely disbursed voting  X ,power: (A) A certified statement that such applicant complies with the requirements of the  X ,definition of publicly traded corporation with widely disbursed voting power set forth in  24.720(m);  X , (B) The identify of each affiliate of the applicant if not disclosed pursuant to  24.813; and  X, (C) The applicant's gross revenues and total assets, computed in accordance with paragraphs (a) and (b) of this section. (ii) For all other applicants:  X[, (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 citizenship and the gender or minority group classification for each member of the  X,applicant's control group if the applicant is claiming status as a business owned by members  X,of minority groups and/or women;  X, (C) The status of each control group member that is an institutional investor, an existing  X,investor, and/or a member of the applicant's management;  X, (D) 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)(C) of this section if not disclosed pursuant to  24.813;  X, (E) A certification that the applicant's sole control group member is a preexisting entity, if the applicant makes the election in either paragraph (b)(5)(ii) or (b)(6)(ii) of this section; and  XU, (F) The applicant's gross revenues and total assets, computed in accordance with paragraphs (a) and (b) of this section.  X), (iii) for each applicant claiming status as a small business consortium, the information specified in paragraph (c)(1)(ii) of this section, for each member of such consortium.  X, (2) Long-form Application. In addition to the requirements in subpart I of this part and other applicable rules (e.g.,  24.204(f), 20.6(e) and 20.9(b) of this chapter), each applicant submitting a long-form application for license(s) for frequency Block F shall, in an exhibit to its long-form application:  X#, (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  Xw%,applicant; the applicant's affiliates, the applicant's control group members; the applicant's  Xb&,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 F and its eligibility under  24.711 through")(0*0*0*&"  X,24.270, 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.  X , (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 or  X ,under the definitions of small business and/or business owned by members of minority groups  X ,and/or women. 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.  XS, (d) Audits. (1) Applicants and licensees claiming eligibility under this section or  24.711 through 24.720 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 (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 licensed broadband PCS service and shall also include consent to the interview of principals, employees, customers and suppliers of the applicant or licensee.  X*, (e) Definitions. The terms affiliate, business owned by members of minority groups and  X,women, consortium of small businesses, control group, existing investor, gross revenues,  X,institutional investor, members of minority groups, nonattributable equity, preexisting entity,  V,publicly traded corporation with widely dispersed voting power, qualifying investor,  X ,qualifying minority and/or woman investor, small business and total assets used in this section are defined in  24.720.  X", 8. A new section 24.716 is added to Subpart H to read as follows:   Xc%,  24.716 Upfront payments, down payments, and installment payments for licenses for  XL&,frequency Block F.  X(, (a) Upfront Payments and Down Payments. (1) Each eligible bidder for licenses on frequency Block F subject to auction shall pay an" ))0*0*0*&" upfront payment of $0.015 per MHz per pop for the maximum number of licenses (in terms of MHz-pops) on which it intends to bid pursuant to  1.2106 of this Chapter and procedures specified by Public Notice. (2) Each winning bidder shall make a down payment equal to ten percent of its winning bid (less applicable bidding credits); a winning bidder shall bring its total amount on deposit with the Commission (including upfront payment) to five percent of its net winning bid within five business days after the auction closes, and the remainder of the down payment (five percent) shall be paid within five business days after the application required by  24.809(b) is granted.  X1, (b) Installment Payments. Each eligible licensee of frequency Block F may pay the remaining 90 percent of the net auction price for the license in installment payments pursuant to  1.2110(e) of this Chapter and under the following terms:  X , (1) For an eligible licensee with gross revenues exceeding $75 million (calculated in accordance with  24.715(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.  X}, (2) For an eligible licensee with gross revenues not exceeding $75 million (calculated in accordance with  24.715(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 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.  X#, (c) Unjust Enrichment. (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"(*0*0*0*&" installment payments, the licensee shall first seek Commission approval and must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of such change as a condition of approval. A licensee's (or other attributable entity's) increased gross revenues or increased total assets due to nonattributable equity investments (i.e., from sources whose gross revenues and total assets are not considered under  24.715(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. (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.  X , 9. A new Section 24.717 is added to Subpart H to read as follows:  X ,  24.717 Bidding credits for licenses for frequency Block F.  X,  Xy, (a) A winning bidder that qualifies as a small business or a consortium of small businesses may use a bidding credit of ten percent to lower the cost of its winning bid. (b) A winning bidder that qualifies as a business owned by members of minority groups and/or women may use a bidding credit of fifteen percent to lower the cost of its winning bid. (c) A winning bidder that qualifies as a small business owned by members of minority groups and/or women or a consortium of small business owned by members of minority groups and/or women may use a bidding credit of twentyfive percent to lower the cost of its winning bid.  X, (d) Unjust Enrichment.  X, (1) If during the term of the initial license grant (see  24.15), a licensee that utilizes a bidding credit under this section 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 bidding credits under this section, the licensee must seek Commission approval and reimburse the government for the amount of the bidding credit as a condition of the approval of such assignment, transfer or other ownership change.  X , (2) If during the term of the initial license grant (see  24.15), a licensee that utilizes a bidding credit under this section 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 reimburse the government for 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 under this section as a condition of the approval of such assignment, transfer or other ownership change. 10. Section 24.720 is amended by revising paragraphs (a), (b)(2), (c)(2), (j)(2), (1)(11)(i), (l)(11)(ii), (n)(1), (n)X01Í ÍX0Í Í(3) and adding paragraph (n)(4) to read as follows:  X(,  24.720 Definitions. "(+0*0*0*&"Ԍ(a) Scope. The definitions in this section apply to  24.709 through 24.717, unless otherwise specified in those sections. (b)* * * (2) For purposes of determining whether an entity meets the $40 million average annual gross revenues size standard set forth in paragraph (b)(1) of this section, the gross revenues of the entity, its affiliates, persons or entities holding interests in the entity and their affiliates shall be considered on a cumulative basis and aggregated, subject to the exceptions set forth  24.709(b) or 24.715(b). l* * * * * (c)* * * (2) That complies with the requirements of  24.715(b)(3) and (b)(5) or  24.715(b)(4) and (b)(6). l* * * * * (j)* * * (2) For purposes of assessing compliance with the equity limits in  24.709(b)(3)(i) and (b)(4)(i) or  24.715(b)(3)(i) and (b)(4)(i), where such interests are not held directly in the applicant, the total equity held by a person or entity shall be determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain. (l)* * * (11) * * * (i) For purposes of  24.709(a)(2), 24.715(a)(2) and paragraphs (b)(2) and (d) of this section, Indian tribes or Alaska Regional or Village Corporations organized pursuant to the Alaska Native Claims 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  24.709 (b)(3) and (b)(5) or  24.709 (b)(4) and (b)(6) or  24.715 (b)(3) and (b)(5) or  24.715 (b)(4) and (b)(6), except that gross revenues derived from gaming activities conducted by affiliated entities pursuant to the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.) will be counted in determining such applicant's (or licensee's) compliance with the financial requirements of  24.709(a) or  24.715(a) and paragraphs (b) and (d) 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. (ii) For the C block, for purposes of  24.709(a)(2) and paragraph (b)(2) of this section, an affiliate with 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 shortform application (Form 175) is filed will not be considered an affiliate of an applicant (or licensee) that qualifies as a small business under section 24.720(b)(2) (small business definition) provided the gross revenues and total assets of all such affiliates, when considered on a cumulative basis and aggregated with each other do not exceed the amounts specified in section 24.709(a)(1) (entrepreneurs' block caps). K* * * * * "(,0*0*0*&"Ԍ(n) * * * (1) A qualifying investor is a person who is (or holds an interest in) a member of the applicant's (or licensee's) control group and whose gross revenues and total assets, when aggregated with those of all other attributable investors and affiliates, do not exceed the gross revenues and total assets limits specified in  24.709(a) or  24.715(a) , or, in the case of an applicant (or licensee) that is a small business, do not exceed the gross revenues limit specified in paragraph (b) of this section. l* * * * * m(3) For purposes of assessing compliance with the minimum equity requirements of  24.709(b)(5) and (6) or  24.715(b)(5) and (6), where such equity interests are not held directly in the applicant, interests held by qualifying investors or qualifying minority and/or woman investors shall be determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain. (4) For purposes of  24.709(b)(5)(C) and (b)(6)(C) or  24.715(b)(5)(C) and (b)(6)(C), a qualifying investor is a person who is (or holds an interest in) a member of the applicant's (or licensee's) control group and whose gross revenues and total assets do not exceed the gross revenues and total assets limits specified in  24.709(a) or  24.715(a). l* * * * *   Y4, #Xx{2 PQ dXP#