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A. 1. a.(1)(a) i) a)#)a [ PcQ)P# ## b, oT9 !#)^ `> XidQ)X#Advanced Legal WordPerfect Learning Guide   u I. A. 1. a.(1)(a) i) a)#)a [ PeQ)P# ## b, oT9 !#)^ `> XifQ)X#   Copyright  Portola Systems, Inc. 1987, 1988`e%APage   I. A. 1. a.(1)(a) i) a)#)a [ PgQ)P# ## b, oT9 !#)^ `> XihQ)X#   Page ``e%)Copyright  Portola Systems, Inc. 1987, 1988 2" Y   p!Style 87=@6FInitial Codes for BeginningF*'Ç.7=.EV IJ#)a [ PiQ)P# dn  ## b, oT9  [  I. A. 1. a.(1)(a) i) a)#)a [ PjQ)P# ## b, oT9 #)^ `> XikQ)X#`^e%)Beginning Legal WordPerfect Learning Guide   v I. A. 1. a.(1)(a) i) a)#)a [ PlQ)P# ## b, oT9 #)^ `> XimQ)X#Beginning Legal WordPerfect Learning Guide   v I. A. 1. a.(1)(a) i) a)#)a [ PnQ)P# ## b, oT9 #)^ `> XioQ)X#   Copyright  Portola Systems, Inc. 1987, 1988`e%APage   I. A. 1. a.(1)(a) i) a)#)a [ PpQ)P# ## b, oT9 #)^ `> XiqQ)X#   Page ``e%)Copyright  Portola Systems, Inc. 1987, 1988 Style 97=@6FInitial Codes for Intermediate*'Ç.7=.ET KL#)a [ PrQ)P# dn  ## b, oT9 Њ [  I. A. 1. a.(1)(a) i) a)#)a [ PsQ)P# ## b, oT9 #)^ `> XitQ)X#`e%'Intermediate Legal WordPerfect Learning Guide   z I. A. 1. a.(1)(a) i) a)#)a [ PuQ)P# ## b, oT9 #)^ `> XivQ)X#Intermediate Legal WordPerfect Learning Guide   z I. A. 1. a.(1)(a) i) a)#)a [ PwQ)P# ## b, oT9 #)^ `> XixQ)X#   Copyright  Portola Systems, Inc.`e%APage   I. A. 1. a.(1)(a) i) a)#)a [ PyQ)P# ## b, oT9 #)^ `> XizQ)X#   Page ``e%)Copyright  Portola Systems, Inc. 1987, 1988 Update7=@6FInitial Codes for Update Module*'Ç.7=.Ee MN#)a [ P{Q)P# dn  ##  [ b, oT9 ! I. A. 1. a.(1)(a) i) a)#)a [ P|Q)P# ## b, oT9 !#)^ `> Xi}Q)X#`Ye%%Legal WordPerfect 5.0 Update Class Learning Guide   } I. 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Reg.  {O^-  49103 (September 18, 1996). In response to this Further Notice, 4 comments and 1 reply comment were filed. A list of commenters is attached as Appendix C.& we were prompted to reexamine our race and  Xl-  ygenderbased IVDS auction rules by the Supreme Court's decisions in Adarand and VMI.l R {O-#X\  P6G;IP#эFurther Notice at  5360. We  XW-  initially adopted these race and genderbased rules in the Fourth Report and Order in this docket   in order to fulfill our mandate under Section 309(j) of the Communications Act of 1934, as   amended ("Communications Act"), to provide opportunities for businesses owned by members  X-  of minority groups and women to participate in the provision of spectrumbased services.WR {O#- #X\  P6G;IP#эImplementation of Section 309(j) of the Communications Act Competitive Bidding, Fourth Report and  {O$-Order, PP Docket No. 93253, 9 FCC Rcd 2330, 233640  3454 (1994) (Fourth Report and Order).W After  X-  ywe adopted these rules, however, the Supreme Court held in Adarand that any federal program   Lthat makes distinctions on the basis of race must satisfy the strict scrutiny standard of judicial"t,-(-(ZZ"  X-  !review.S(R {Oy-  #X\  P6G;IP#эAdarand, 115 S. Ct. at 2113. Adarand explicitly overruled the intermediate scrutiny standard for racial  {OC-  classifications set by the Supreme Court in Metro Broadcasting, Inc. v. FCC, 497 U.S. 547, 56465 (1990), which  {O -  was the standard of review at the time our IVDS rules were adopted. See Further Notice at  54; Fourth Report and  {O-Order, 9 FCC Rcd at 2338 n.73.S More recently, the Supreme Court held in VMI that a state program that makes   distinctions on the basis of gender must be supported by an "exceedingly persuasive justification"  X-  in order to withstand constitutional scrutiny.y R {O=-#X\  P6G;IP#эVMI, 116 S. Ct. at 227476.y Based on our analysis of VMI in conjunction with  X-  LAdarand, we conclude that any genderbased preference maintained in the IVDS auction rules  X-must meet the VMI intermediate scrutiny standard of judicial review.  X~-  3.Based upon our review of the comments submitted in response to the Further Notice,  Xi-  we also conclude that the present record is insufficient to support either our racebased IVDS   <auction rules under the strict scrutiny standard or our genderbased rules under the "exceedingly   persuasive justification" standard of intermediate scrutiny. We have considered the need to award   the remaining IVDS licenses expeditiously and to promote the rapid deployment of new services  X -  <to the public without judicial delays,t JR yO-#X\  P6G;IP#э47 U.S.C.  309(j)(3)(A).t as well as the statutory objective of disseminating licenses  X -  Zamong a wide variety of applicants, including designated entities.t R {O-#X\  P6G;IP#эId.  309(j)(3)(B).t Bearing these factors in mind,   we conclude that in order to avoid uncertainty and delay that would likely result from legal   jchallenges to the special provisions for minority and womenowned businesses in our current  X -  IVDS rules, it is appropriate to make our IVDS rules race and genderneutral.  l R {O- #X\  P6G;IP#эSee Amendment of Parts 20 and 24 of the Commission's Rules, Report and Order, WT Docket No. 9659,  {O-  11 FCC Rcd 7824 (1996) (DEF Report and Order), which modified the designated entity provisions of the broadband   Personal Communications Services (PCS) F block rules to make them race and genderneutral; Implementation of  {O*-  JSection 309(j) of the Communications Act Competitive Bidding, Sixth Report and Order, PP Docket No. 93253,  {O-  K11 FCC Rcd 136 (1995), aff'd sub nom. Omnipoint Corp. v. FCC, 78 F.3d 620 (D.C. Cir. 1996), which modified  {O-the designated entity provisions of the broadband PCS C block rules to make them race and genderneutral. ğ We believe that  X-our action here is consistent with our obligations under Section 309(j)(3).q R yO9-#X\  P6G;IP#э47 U.S.C.  309(j)(3).q  Xl- #x4.As explained in the Further Notice, our experience in conducting the initial IVDS  xauction also led us to examine other aspects of our rules and we have determined that we should  X@- xtake certain steps to minimize the possibility of insincere bidding and bidder default.@~R {Oo$-#X\  P6G;IP#эFurther Notice at  7677. To  xachieve these goals, we amend Section 95.816(c)(3) of the Commission's Rules to raise the initial  xupfront payment for participation in the IVDS auction to $9,000 per Metropolitan Statisticalv!"Mervice Area",-(-(ZZ("  x(MSA) license and $2,500 per license for Rural Service Area (RSA) markets, for the maximum number of licenses on which the applicant wishes to bid.  X- x5.Finally, a number of the comments addressed other issues which are not within the  xiscope of this proceeding. We defer decisions on those matters until they can be addressed in the appropriate context.  XH-#  II. Rules Affecting Designated Entities T TPA. Meeting the Constitutional Standards  X -  X - |x6.Background. In the Further Notice, we explained the history of our raceand gender xbased IVDS rules, the statutory objectives they were designed to promote, and the impact of the  X - xxSupreme Court's decisions in Adarand and VMI. As discussed, an intermediate scrutiny standard  xof review was applied to federal race and genderbased programs at the time our IVDS rules were adopted.  Xf- x7.In Adarand, the Supreme Court held that all racial classifications, whether imposed  xat the federal, state or local government level, must be analyzed by a reviewing court under a  xstrict scrutiny standard of review. This standard requires such classifications to be narrowly  X#- xtailored to further a compelling governmental interest.z#R {O-#X\  P6G;IP#эxAdarand, 115 S. Ct. at 2113.z In VMI, the Supreme Court reviewed  xa state program containing gender classification and held it was unconstitutional under an  xintermediate scrutiny standard of review. This standard requires that "[p]arties who seek to  xdefend genderbased government action must demonstrate an exceedingly persuasive justification  X- xfor that action.";ZR {O-  #X\  P6G;IP#эxVMI, 116 S. Ct. at 2274 (citing J.E.B. v. Alabama ex rel. T. B., 511 U.S. 127, 13637 & n.6 (1994) and  {O-Mississippi Univ. for Women v. Hogan, 458 U.S. 718, 724 (1982)).; Under this test, the government must show "at least that the [challenged]  xMclassification serves important governmental objectives and that the discriminatory means  X- xemployed are substantially related to the achievement of those objectives." R {O-   #X\  P6G;IP#эxId. at 2275 (quoting Mississippi Univ. for Women, 458 U.S. at 724 (quoting Wengler v. Druggists Mutual  {O-Ins. Co., 446 U.S. 142, 150 (1980))).  While the  xSupreme Court has not directly addressed constitutional challenges to federal genderbased  Xm- xprograms since Adarand and VMI,FmR {O0#-  >#X\  P6G;IP#эxBut see Lamprecht v. FCC, 958 F.2d 382, 391, 393 n.3 (D.C. Cir. 1992), a preAdarand/VMI decision in  x which Justice Thomas (a member of the D.C. Circuit panel to which the case was presented) invokes the  x"exceedingly persuasive justification" standard in striking down a federal genderpreference policy. As the dissent  {O%- xin Lamprecht confirmed, Justice Thomas applied "the more exacting scrutiny of Justice O'Connor's dissent [in Metro,  {OT&- xK497 U.S. at 60231]," id. at 404 (Mikva, C.J., dissenting), which formed the core of Justice O'Connor's majority  {O'-opinion in Adarand.F our review of the relevant broad language in VMI indicates"m ,-(-(ZZ"  xthat the Court does not differentiate between federal and state official actions in its equal  X- xprotection analysis._R {Ob-  j#X\  P6G;IP#эx"Since [Reed v. Reed, 404 U.S. 71 (1971)], the Court has repeatedly recognized that neither federal nor state  {O,- xygovernment acts compatibly with the equal protection principle when a law or official policy denies . . . equal  {O- xopportunity . . . ." VMI, 116 S. Ct. at 2275 (emphasis added); "To summarize the Court's current directions for cases  {O- x,of official classification based on gender: . . . the reviewing court must determine whether the proffered justification  {O- xis exceedingly persuasive." Id. (emphasis added). See also Heckler v. Mathews, 465 U.S. 728, 74445 (1984)  xZ(reviewing a federal statute containing gender classification under the same standard the Court used to review the  {O-state statute in Mississippi Univ. for Women); Califano v. Westcott, 443 U.S. 76, 85 (1979) (same)._ Similarly, the Adarand decision definitively eliminated any distinction  x[between federal and state racebased programs in setting its strict scrutiny standard of judicial  X- xzreview.zR {O -#X\  P6G;IP#эxAdarand, 115 S. Ct. at 2113.z Therefore, we conclude that any genderbased preference maintained in the IVDS  X-auction rules would need to meet the VMI intermediate scrutiny standard of review.  Xz- x8.In the Further Notice, we noted that judicial precedent indicates that only a record  xof discrimination against a particular racial group would support remedial measures designed to  XN- xbenefit that group and that generalized assertions of discriminations are inadequate.0NR {O-  #X\  P6G;IP#эxFurther Notice at  57 (citing Richmond v. J.A. Croson Co., 488 U.S. 469, 498 (1989) (quoting Wygant v.  {Oo-Jackson Bd. of Educ., 476 U.S. 267, 275 (1986))).0 We  x=tentatively concluded that, although we have some general evidence of discrimination against  xcertain racial groups, the evidence in the record to date does not appear adequate to satisfy the  x<strict scrutiny standard of review. We requested comment on this tentative conclusion. We also  xlrequested comment on a number of questions related to this analysis, including whether  xcompensating for discrimination in lending practices in the communications industry constitutes  xa compelling government interest. We also asked interested parties to comment on other  xobjectives that could be furthered by our minoritybased provisions and whether they could be  xconsidered compelling governmental interests, such as increased diversity in ownership and  x employment in the communications industry or increased industry competition. We asked  xcommenters to submit statistical data, personal accounts, studies, or any other data relevant to the  xentry of specific racial groups into the field of telecommunications, and whether our racebased  x[provisions are narrowly tailored to serve the interests that commenters assert to be compelling  X#- xgovernmental interests.t# R {O-#X\  P6G;IP#эxId. at  6163.t In the Further Notice, we also tentatively concluded that the present  xrecord in support of our genderbased IVDS rules may be insufficient to satisfy the intermediate  xscrutiny standard and asked commenters to submit evidence relating to the entry of women into  xLthe field of telecommunications. We asked interested parties to comment on whether there are  xany other goals that would satisfy the "important government objective" requirement of the  x=intermediate scrutiny standard, such as increased participation of women in the FCClicensing" ,-(-(ZZR"  xprocess for auction spectrum, and whether our genderbased IVDS rules are "substantially related"  X-to the achievement of such objectives.mR {Ob-#X\  P6G;IP#эxId. at  64.m  X- }x9.In the Further Notice, we also tentatively concluded that we should not delay the  xjIVDS auction for the amount of time it would take to adduce sufficient evidence to support our  xrace and genderbased IVDS provisions. We also concluded that proceeding with the IVDS  x\auction with these rules intact would not serve the public interest because it might result in  xlitigation that ultimately would further delay the award of the IVDS licenses and postpone the  XJ- xintroduction of new competition to the marketplace.\JZR {OU -  #X\  P6G;IP#эxId. at  6667. We observe that the D.C. Circuit Court of Appeals stayed the C block auction under an  xwintermediate scrutiny standard on the basis of race and genderbased provisions similar to those adopted in the IVDS  {O -rules. Telephone Electronics Corp. v. FCC, No. 951015 (D.C. Cir. Mar. 15, 1995) (order granting stay). We tentatively concluded that in order to  x meet our Congressional mandate and expeditiously proceed to auction the remaining IVDS  xlicenses, we should adopt race and genderneutral IVDS auction provisions, but continue to  xmaintain the provisions for small businesses which we believe adequately benefit most of the  X -businesses owned by minorities and/or women.x ~R {O-#X\  P6G;IP#эxFurther Notice at  67.x  X - x 10.Discussion. Upon review of the record before us, we revise our IVDS rules to make  X - xythem race and genderneutral, particularly since most of the commenters support this action. R {Oj-#X\  P6G;IP#эxSee, e.g., Progressive Communications, Inc. (Progressive) Comments at 1; ITV, Inc. and IVDS Affiliates, LLC (ITV/IALC) Comments at 4.  x0The other commenters failed to provide any specific anecdotal or statistical evidence to  xZsupplement our record supporting racebased or genderbased IVDS auction rules. IAC takes the  xposition that, because there is a lack of available equipment for constructing IVDS systems, the  XM- xCommission is moving too quickly in eliminating minority and genderbased preferences.Mj R yOh-#X\  P6G;IP#эxInteractive America Corporation, Inc. (IAC) Comments at 57. IAC  xproposes that the Commission allow parties additional time to establish a full record upon which  X- x<to decide whether the race and genderbased preferences should be eliminated.} R {O-#X\  P6G;IP#эxId.; IAC Reply Comments at 12.} However, IAC  xdoes not present any support for the proposition that a record could be developed in this  X- xproceeding if more time was available, nor do any of the other commenters. Accordingly, we  x conclude that making our IVDS auction rules race and genderneutral will serve the public  xinterest by enabling us to expeditiously auction the remaining IVDS licenses. Other commenters  xalso requested that the Commission delay the IVDS auction, but not for the purpose of  xestablishing a record to support race and genderbased rules. Specifically, IVDS Licensees  xmrequest that the Commission delay the auction until certain technical, regulatory, and"~ ,-(-(ZZP"  X- xadministrative issues are resolved. R yOy-  #X\  P6G;IP#эxLoli, Inc., Trans Pacific Interactive, Wireless Interactive Return Path, L.L.C., and IVDS OnLine Partnership (collectively, "IVDS Licensees") Comments at 46.  ITV/IALC request that the auction not be held until  x^resolution of all auction default issues and action has been taken on the petitions for  X- xreconsideration of the Commission's IVDS mobility rulemaking. $ R yO-  #X\  P6G;IP#эxITV/IALC Comments at 79 (citing Amendment of Part 95 of the Commission's Rules to Allow Interactive  {Ok- xVideo and Data Service Licensees to Provide Mobile Service to Subscribers, Report and Order, WT Docket No. 95 {O5- x47, 11 FCC Rcd 6610 (1996), recon. pending). See also IAC Reply Comments at 45 (agreeing with IVDS Licensees and ITV/IALC on these points).  We deny these requests to  x;delay the auction, and note that applicants should factor the obligations and uncertainties attendant  X-to the auction process into their decision to participate and the amount to bid.5 R {Oa -  N#X\  P6G;IP#эxSee Requests for Waivers in the First Auction of Interactive Video and Data Service (IVDS) Licenses,  {O+ -Memorandum Opinion and Order, 11 FCC Rcd 8211, 8213  5 (1996).5  Xv- @x 11.While we eliminate the race and genderbased provisions of the IVDS auction rules,  X_- xLwe will retain provisions for small businesses, as agreed to by all commenters. _h R yOx-  #X\  P6G;IP#эxIVDS Licensees Comments at 2 (in light of the elimination of race and genderbased provisions, the small  xJbusiness preferences provide "one of the few avenues remaining for minority and womenowned businesses to enter  xxthe communications industry"); IAC Comments at 8 (preferences for small businesses should be retained to fulfill  xthe Commission's statutory obligations under Section 309(j)); ITV/IALC Comments at 4 (preferences should be based  xwon a party's lack of economic strength); Progressive Comments at 1 (small business provisions will give "equal status to all small business enterprises"). We conclude  XH- xthat nothing in the Adarand or VMI decisions calls our small business provisions into question.  xkMoreover, by retaining small business preferences, we believe we will continue to fulfill our  xmandate under Section 309(j) to provide increased opportunities for minority and womenowned  X - xbusinesses,q! R yO-#X\  P6G;IP#эx47 U.S.C.  309(j)(3).q because many minority and womenowned entities are small businesses who  xtherefore will qualify for the same special provisions that would have applied to them under the  X -previous rules. "& pR {O-  #X\  P6G;IP#эxSee generally 1992 Survey of MinorityOwned Business Enterprises, Agriculture and Financial Statistics  {O- xDivision, Bureau of the Census, U.S. Department of Commerce (December 11, 1995); 1992 Survey of WomenOwned  {O- xBusinesses, Agriculture and Financial Statistics Division, Bureau of the Census, U.S. Department of Commerce (January 29, 1996).   X - x 12.We also have initiated a comprehensive rule making proceeding to gather evidence  xregarding market barriers to entry faced by minority and womenowned firms as well as small  X{- xbusinesses.=#{^R {O%-#X\  P6G;IP#эxSee Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses,  {OT&-Notice of Inquiry, GN Docket No. 96113, 11 FCC Rcd 6280 (1996). See also 47 U.S.C.  257.= If a sufficient record is adduced that will support race and genderbased provisions  x[that will satisfy judicial scrutiny, we will consider race and genderbased provisions for future"d#,-(-(ZZ"  xauctions. Toward this end, we will continue to request bidder information on the IVDS short x-form filings as to minority and/or womenowned status. In our analysis of the applicant pool and  xythe auction results, we will monitor whether we have accomplished substantial participation by  xminorities and women through the broad provisions available to small businesses. This will also  X-assist us in preparing our report to Congress on the success of designated entities in auctions.$R {O-#X\  P6G;IP#эxSee 47 U.S.C.  309(j)(12)(D).  X_- B. Special Provisions for Designated Entities  X1- x1. Small Business Definition  X - mx 13.Background. In our current IVDS rules, we adopted a definition of "small business,"  xLthat requires an entity to demonstrate that, together with its affiliates, its net worth is not more  X - xLthan $6 million, and its annual profits are not more than $2 million for the previous two years.x% ZR {O-#X\  P6G;IP#эxFurther Notice at  68.x  X - xIn the Further Notice, we stated our belief that the gross revenues of the applicant and its  xaffiliates is a more accurate indicator of its size than is its net worth or annual profits, and we  xproposed to revise the IVDS definition of small business to match the threeyear gross revenues  X{- x[test that we have used to define "small business" for other auctions._&({R {O-  #X\  P6G;IP#эxId. at  69 (citing 47 C.F.R.  24.320, 24.720, 90.912(b), 90.814(b)(1)). See also Implementation of  {O- xSection 309(j) of the Communications Act Competitive Bidding, Second Order on Reconsideration and Seventh  {O- x Report and Order, PR Docket No. 89553, PP Docket No. 93253, GN Docket No. 93252, 11 FCC Rcd 2639, 2700 {Ov-01  154 & n.320 (1995) (900 SMR Auction Report and Order)._ We further stated that,  xbecause we expect that the capital requirements for IVDS will be relatively low (as compared to,  xfor example, broadband PCS), IVDS may attract greater participation by smaller businesses who  xlack access to capital. The potential in IVDS for greater participation by smaller businesses also  x>justifies special provisions based on the size of the bidding entity, such as a tiered bidding  X- xcredits.x'R {O-#X\  P6G;IP#эxFurther Notice at  73.x Therefore, we proposed to redefine a "small business" as an entity with average gross  x[revenues not to exceed $15 million for each of the preceding three years. We also proposed to  xadd a second tier of small businesses, referred to as "very small businesses," and defined as  xentities with average gross revenues of not more than $3 million for each of the preceding three  X- xjyears. We requested comment on these revised definitions.m(n R {O"-#X\  P6G;IP#эxId. at  69.m We also requested comment on  xwhether to implement a five percent attribution threshold for purposes of determining an entity's  X~- xjeligibility as a small business.m)~ R {O/&-#X\  P6G;IP#эxId. at  70.m Alternatively, we sought comment on whether we should only  xcount the gross revenues of the controlling principals in the applicant and its affiliates for"g ),-(-(ZZ1"  X- xypurposes of determining small business status.a*R {Oy-#X\  P6G;IP#эxId.a Finally, we sought comment on our tentative  X- xLconclusion to use a multiplier similar to the one adopted in the CMRS Third Report and Order  xKfor the spectrum aggregation cap to determine attribution when IVDS licensees are held indirectly  X-through intervening corporate entities.+^ZR {O-  #X\  P6G;IP#эxId. (citing Implementation of Sections 3(n) and 332 of the Communications Act Regulatory Treatment  {O- xof Mobile Services, Third Report and Order, GN Docket No. 93252, PR Docket No. 93144, PR Docket No. 89 {O\-553, 9 FCC Rcd 7988, 811415  277 (1994) (CMRS Third Report and Order)).  X- x 14.Discussion. Based upon our experience with spectrum auctions, we believe that gross  xrevenuesbased definitions are a more accurate indicator of an entity's size than the net  x=worth/annual profit definition which was previously used. Therefore, we will redefine a "small  xbusiness" as an entity with average gross revenues not exceeding $15 million for each of the  xpreceding three years, and a "very small business" as an entity with average gross revenues not  xexceeding $3 million for each of the preceding three years. IVDS Licensees and ITV/IALC  X - xsupport small business definitions based upon gross revenues,, R {O6-#X\  P6G;IP#эxSee, e.g., IVDS Licensees Comments at 12; ITV/IALC Comments at 45. and only Progressive takes the  X - xposition that we should retain our previous small business definition.- R yO-  /#X\  P6G;IP#эxProgressive Comments at 1 (contending that differing categories of small businesses will create problems for the Commission in the future). We further note that the  xKcreation of a subcategory of very small businesses enables us to tailor our benefits to better meet  xthe needs of the smaller business entities likely to participate in the IVDS auction. As discussed  xybelow, we find that our goals can best be served by offering varying bidding credits tailored to  xthe applicant's size. We also believe that the $15 million/$3 million gross revenue financial  xZthresholds are appropriate and are consistent with the carefullyanalyzed approach we took in the  Xd- x\auction of 900 MHz Specialized Mobile Radio (SMR) licenses..dj R {O-#X\  P6G;IP#эx900 SMR Auction Report and Order, 11 FCC Rcd at 2700  153. Indeed, in this auction, we  xiexpect participation by a comparable group of smaller businesses that participated in the 900 MHz  xSMR auction. Because we believe these are appropriate thresholds, we decline to adopt the  X-higher thresholds proposed by ITV/IALC./X R yO-  \#X\  P6G;IP#эxITV/IALC Comments at 45 (proposing small business average gross revenues eligibility threshold of $18  xmillion and very small business average gross revenues eligibility threshold of $5 million because IVDS licensees will more likely be financing their systems from equity sources rather than debt).  X- 1x15.In determining whether an entity qualifies as a small business at either threshold, we  xwill consider the gross revenues of the small business applicant, its affiliates, and certain investors  xin the applicant. Specifically, we will attribute the gross revenues of all controlling principals" /,-(-(ZZ"  X- xyin the small business applicant as well as the gross revenues of affiliates of the applicant.W0R yOy-  z#X\  P6G;IP#эxBoth commenters addressing this issue supported the use of gross revenues of controlling principals as the  {OA-determinant of small business status. See IVDS Licensees Comments at 2; ITV/IALC Comments at 5 n.5.W At  X- xyITV/IALC's request,}1"R yO-#X\  P6G;IP#эxITV/IALC Comments at 5 n.5.} we clarify that personal net worth is not included in the determination of  X- xeligibility for bidding as a small business.2^R {O5-  #X\  P6G;IP#эxSee, e.g., Implementation of Section 309(j) of the Communications Act Competitive Bidding, Fifth  {O- xMemorandum Opinion and Order, PP Docket No. 93253, 10 FCC Rcd 403, 421  30 (1994) (Competitive Bidding  {O -Fifth Memorandum Opinion and Order).  In addition, we will use the multiplier adopted in  X- x.the CMRS Third Report and Order for the spectrum aggregation cap to determine when IVDS  X- xlicensees are indirectly held through intervening corporate entities.3R {O/ -#X\  P6G;IP#эxCMRS Third Report and Order, 9 FCC Rcd at 811415  277. IVDS Licensees supports  X- xythis proposal.u4j R yO-#X\  P6G;IP#эxIVDS Licensees Comments at 2.u We thus choose not to impose specific equity requirements on the controlling  Xx- x[principals that meet our small business definition.+5x R yO#-  .#X\  P6G;IP#эxIVDS Licensees alternatively proposes a twentyfive percent equity exception similar to that adopted in our broadband PCS rules. 47 C.F.R.  24.709(b)(3). IVDS Licensees Comments at 2.+ However, we will still require that, in order  x-for an applicant to qualify as a small business, qualifying small business principals must maintain  XJ- x["control" of the applicant. The term "control" would include both de jure and de facto control  X5- xof the applicant.6~5R R {O8-  #X\  P6G;IP#эxTypically, de jure control is evidenced by ownership of 50.1 percent of an entity's voting stock. De facto  xcontrol is determined on a casebycase basis. An entity must demonstrate at least the following indicia of control  {O- xv to establish that it retains de facto control of the applicant: (1) the entity constitutes or appoints more than 50 percent  xof the board of directors or partnership management committee; (2) the entity has authority to appoint, promote,  x,demote and fire senior executives that control the daytoday activities of the licensees; and (3) the entity plays an  {O$- xintegral role in all major management decisions. See Competitive Bidding Fifth Memorandum Opinion and Order, 10 FCC Rcd at 447  80. While we are not imposing specific equity requirements on the small business  x[principals, the absence of significant equity could raise questions about whether the applicant  X -qualifies as a bona fide small business.  X - "x16.On a related matter, ITV/IALC seeks clarification in its comments that once an entity  xqualifies as a small business, it would not lose its status through financial growth in subsequent  X - x.years,s7 R yO"-#X\  P6G;IP#эxITV/IALC Comments at 5 n.4.s and thereby lose its ability to make installment payments as a small business under 47  x{C.F.R.  95.816(d)(2). We addressed this concern in our broadband PCS rules. There we  xemphasized our strong interest in seeing small businesses grow and succeed in the wireless  xjmarketplace and stated that growth of the licensee's gross revenues and assets, or growth as a  x result of a licensee acquiring additional licenses, generally would not jeopardize continued"Q (7,-(-(ZZ"  X- xeligibility for designated entity preferences.8R {Oy-  #X\  P6G;IP#эxCompetitive Bidding Fifth Memorandum Opinion and Order, 10 FCC Rcd at 420  27. See also 47 C.F.R.  {OC- x 24.711(c)(2) ("A licensee (or other attributable entity's) increased gross revenues or increased total assets due to  {O - x<nonattributable equity investments . . . , debt financing, revenue from operations or other investments, business  xidevelopment or expanded service shall not be considered to result in the licensee losing eligibility for installment payments."). We believe this policy equally should apply to  X-IVDS licensees and, therefore, incorporate this concept into our IVDS rules.9~R yO-#X\  P6G;IP#эx47 C.F.R.  95.816(e)(2) (as revised in Appendix A).  X- x2. Bidding Credits  Xv- Qx17.Background. Under our current IVDS rules, businesses owned by members of  X_- xminority groups or women are granted a 25 percent bidding credit. In the Further Notice, we  x\proposed to eliminate race and genderbased bidding credits in our IVDS rules and sought  xcomment on whether we should extend a single bidding credit to all small businesses and, if so,  X - xthe magnitude of that credit.: R {O-#X\  P6G;IP#эxFurther Notice at  72. We asked whether we should offer tiered bidding credits for small  X - xbusinesses of different sizes, e.g., a 15 percent bidding credit for very small businesses and a 10  xpercent bidding credit for small businesses. We tentatively concluded that given the relatively  xlow bids that IVDS garnered in the July 1994 auction, IVDS may attract smaller businesses, thus justifying tiered bidding credits.  X- x18.Discussion. We will maintain bidding credits for small businesses and will adopt a  X}- xtiered bidding credit approach, as supported by several commenters.;}R {O-#X\  P6G;IP#эxSee IVDS Licensees Comments at 23; ITV/IALC Comments at 6. We agree with IVDS  x<Licensees that preservation of the bidding credit is consistent with our obligations under Section  x309(j) to "promote economic opportunity for a wide variety of applicants, including small  X8- xbusinesses and businesses owned by minorities and women."<82 R {O-#X\  P6G;IP#эxSee IVDS Licensees Comments at 3 (quoting 47 U.S.C.  309(j)(4)(C)(ii)). Furthermore, we believe that a  xKtiered approach, which enhances the discounting effect of bidding credits because not all entities  xreceive the same benefit, will encourage smaller businesses to participate in the provision of  X- xIVDS services.= R {Oh"-#X\  P6G;IP#эxSee id. (quoting DEF Report and Order, 11 FCC Rcd at 7849  53). We also believe that the 15 percent bidding credit for very small businesses  xzand a 10 percent bidding credit for small businesses are appropriate and consistent with the  X- xthresholds used in the 900 MHz SMR auctions.>V R {O%-#X\  P6G;IP#эx900 SMR Auction Report and Order, 11 FCC Rcd at 2700  153. As noted above, we expect auction participation  xby a group of smaller businesses comparable to those that participated in the 900 MHz SMR" >,-(-(ZZ"  xauction. Moreover, we do not believe a greater bidding credit is justified here as it was for  xcertain highly capital intensive services, like broadband PCS. Therefore, we decline to adopt the  X- xyhigher bidding credits proposed by IVDS Licensees and ITV/IALC.?R yOK-  #X\  P6G;IP#эxIVDS Licensees Comments at 3; ITV/IALC Comments at 6 (suggesting a 25 percent bidding credit for very small businesses and a 15 percent credit for small businesses). The two tiered approach  xLand the magnitude of the bidding credits we adopt here are reasonable and equitable and meet  x=the concerns of the commenters. These credits are narrowly tailored to the varying abilities of  xxbusinesses to access capital and also take into account that different small businesses will pursue different strategies.  X1-  III. Upfront Payments TP  X - x19.Background. We recognized in the Further Notice that in order to deter insincere,  xspeculative bidding and guard against the substantial number of defaults that occurred after the  xJuly 1994 auction, we need to obtain a higher upfront payment from IVDS bidders than the  X - x>upfront payment currently required by our rules (i.e., $2,500 for every five licenses a bidder  X - x-desires to win).@ R {O|-#X\  P6G;IP#эxFurther Notice at  7677. In response to several ex parte filings from IVDS bidders supporting increased  xKupfront payments, we proposed to increase the initial upfront payment to $9,000 per MSA license  xyand $2,500 per RSA license, for the maximum number of licenses on which the applicant wishes  Xh-to bid.wAhR {O-#X\  P6G;IP#эxId. at  77.w  X:- 1x20.Discussion. Based upon the record regarding IVDS upfront payment amounts,2B:DR {O/-  #X\  P6G;IP#эxIVDS Licensees Comments at 3; IAC Comments at 9; ITV/IALC Comments at 67; Further Notice at n.140  {O-(list of ex parte filings supporting increased upfront payments).2 we  x{adopt the proposed upfront payment amounts and will amend Section 95.816(c)(3) of the  xCommission's Rules. Specifically, we raise the initial upfront payments for participation in the  xIVDS auction to $9,000 per MSA license and $2,500 per RSA license, for the maximum number  xjof licenses on which an entity wishes to bid. We believe that this action is consistent with the  xunderlying purpose for upfront payments to deter insincere and speculative bidding and to  X- xensure that bidders have the financial capability to build out their systems.CR {O"-#X\  P6G;IP#эxSee, e.g., DEF Report and Order, 11 FCC Rcd at 7860  78. We also believe that  xthe revised upfront payments will continue to attract as many qualified bidders, while providing" 2 C,-(-(ZZQ"  xan adequate deterrent against frivolous bidding. Thus, we decline to adjust the upfront payment  X-amounts as proposed by ITV/IALC.D"R yOb-  #X\  P6G;IP#эxITV/IALC Comments at 67 (proposing that the MSA payment be an even multiple of the RSA payment,  {O*- xe.g., permarket payments of $7,500.00 for MSA's and $2,500.00 for RSA's, to reduce computational complexity  xYin figuring bidding eligibility as the auction proceeds and to avoid "stranding" MSA upfront payments with no ability to apply the entire amount to an RSA license).  X- IV. Other Issues TP  Xv- Qx21.Several commenters raise issues beyond the scope of the Further Notice. For  xLexample, Progressive and IAC request that we revise the length of the IVDS license terms from  XJ- xy5 to 10 years.EJR yO -#X\  P6G;IP#эxProgressive Comments at 1; IAC Reply Comments at 4. This proposal requires formal rule making procedures and is beyond the scope  X3- x/of this proceeding.F3BR yO&-  #X\  P6G;IP#эxOn September 4, 1996, Euphemia Banas, Trans Pacific Interactive, Inc., Wireless Interactive Return Path,  xL.L.C., New Wave Communications, L.L.C., Loli, Inc., Multimedia Computer Communication, Inc., Southeast  xLEquities, Inc., Robert H. Steele, MAR Partnership, IVDS OnLine Partnership, A.B.R. Communications Inc.,  xIVIDCO, L.L.C., Vision TV, Dunbar TV Corp., and Legacy TV, Inc. collectively filed a formal Petition for  xRulemaking requesting that the Commission amend its rules to extend license terms for IVDS providers from five to ten years. Similarly, ITV/IALC seeks an exception to the crossownership rule.{G3 R yO-#X\  P6G;IP#эxITV/IALC Comments at 35.{  xjAgain, this type of relief falls outside the scope of this proceeding. Finally, a number of policy  X - xquestions were raised in the comments regarding default issues.H J R yO-  y#X\  P6G;IP#эxIAC Comments at 78 (request not to reauction defaulted licenses before the defaulting party's administrative  {O- xZand judicial remedies are exhausted); id. at 9 (request the Commission clarify how it evaluates requests for waiver  xof payment deadlines and other IVDS auctionrelated rules); ITV/IALC Comments at 2 (request that defaulting  x-parties should not be eligible for future IVDS auctions); IAC Reply Comments at 24 (opposition to ITV/IALC's request). We note that the Commission  xZwill be addressing default issues in a future proceeding regarding the general competitive bidding rules.  X-  V. Procedural Matters and Ordering Clauses ă  Xd- x22.As required by the Regulatory Flexibility Act of 1980, Pub. L. No. 96354, 94 Stat.  x1164, as amended by the Contract with America Advancement Act of 1996, Pub. L. No. 104121,  X6- x=110 Stat. 847, 5 U.S.C.  601 et seq., the Commission has prepared a Final Regulatory Flexibility  x-Analysis of the expected impact of the rule changes in this document on small entities. The Final Regulatory Flexibility Analysis is set forth in Appendix B. " H,-(-(ZZ"Ԍ X-  ?x23. Authority for issuance of this Tenth Report and Order is contained in Sections 4(i),  xz303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r) and 309(j).  X-  Nx24. Accordingly, IT IS ORDERED that, pursuant to the authority of Sections 4(i), 303(r),  xand 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r), and  Xx- x{309(j), this Tenth Report and Order is adopted, and Part 95 of the Commission's Rules IS AMENDED as set forth below.  X5-  x25. IT IS FURTHER ORDERED that the rule changes made herein WILL BECOME EFFECTIVE 30 days after their publication in the Federal Register. x  X - Qx26.For further information concerning this proceeding, contact Howard Griboff or  x.Christina Eads Clearwater at (202) 4180660 (Auctions Division, Wireless Telecommunications Bureau). x x hhFEDERAL COMMUNICATIONS COMMISSION x hhWilliam F. Caton x hhActing Secretary"H,-(-(ZZ7"  X-) APPENDIX A TP xPart 95 of Chapter I of Title 47 of the Code of Federal Regulations is amended as follows:  X- Part 95 ! Personal Radio Services  xSection 95.816 is amended by revising paragraphs (c)(3) and (d)(1), adding new paragraph (d)(4),  xredesignating paragraph (e) as paragraph (e)(1), and revising it, and adding new paragraph (e)(2) to read as follows:  X -  95.816Competitive bidding proceedings.  X - l<* * * * *  X -(c)x* * *  Xy- x (3) Upfront payments. Each eligible bidder in the IVDS auction will be required to submit  xMan upfront payment of $9,000 per MSA license and $2,500 per RSA license for the maximum  x<number of licenses on which it intends to bid pursuant to  1.2106 of this chapter and procedures specified by Public Notice. l<* * * * *  X-(d)x* * *  X- (1) Bidding credits.   |x(i) A winning bidder that qualifies as a small business (as defined in 95.816(d)(4)(i) of this section) may use a bidding credit of 10 percent to lower the cost of its winning bid.   x(ii) A winning bidder that qualifies as a very small business (as defined in  xz95.816(d)(4)(ii) of this section) may use a bidding credit of 15 percent to lower the cost of its winning bid. l<* * * * * (4) Definitions.  X"-  1x(i) Small business. A small business is an entity that, together with its affiliates and  x-persons or entities that hold interests in such entity and their affiliates, has average annual gross revenues that are not more than $15 million for the preceding three years. "W%H,-(-(ZZ $"Ԍ X-  Px(ii) Very small business. A very small business is an entity that, together with its  xaffiliates and persons or entities that hold interests in such entity and their affiliates, has average annual gross revenues that are not more than $3 million for the preceding three years.  X-  2x(iii) Gross revenues. Gross revenues shall mean all income received by an entity,  X- xxwhether earned or passive, before any deductions are made for costs of doing business (e.g., cost  xof goods sold), as evidenced by audited financial statements for the relevant number of most  xrecently completed calendar years, or, if audited financial statements were not prepared on a  x calendaryear basis, for the most recently completed fiscal years preceding the filing of the  xkapplicant's shortform application (Form 175). If an entity was not in existence for all or part  xof the relevant period, gross revenues shall be evidenced by the audited financial statements of  xithe entity's predecessorininterest or, if there is no identifiable predecessorininterest, unaudited  xifinancial statements certified by the applicant as accurate. When an applicant does not otherwise  xuse audited financial statements, its gross revenues may be certified by its chief financial officer or its equivalent.  X-  /x(iv) Controlling interest shall be attributable. Controlling interest means majority voting  x/equity ownership, any general partnership interest, or any means of actual working control (including negative control) over the operation of the licensee, in whatever manner exercised.  X<-  {x(v) Multiplier. Ownership interests that are held indirectly by any party through one or  xmore intervening corporations will be determined by successive multiplication of the ownership  x0percentages for each link in the vertical ownership chain and application of the relevant  xattribution benchmark to the resulting product, except that if the ownership percentage for an  xinterest in any link in the chain exceeds 50 percent or represents actual control, it shall be treated as if it were a 100 percent interest.  X-(e) Unjust enrichment.  x (1) Any business owned by minorities and/or women that has obtained a IVDS license in the  xIVDS auction held in July 1994 through the benefit of tax certificates shall not assign or transfer  x.control of its license within one year of its license grant date. If the assignee or transferee is a  xbusiness owned by minorities and/or women, this paragraph shall not apply; provided, however,  xthat the assignee or transferee shall not assign or transfer control of the license within one year of the grant date of the assignment or transfer.  x< (2) A licensee's (or other attributable entity's) increased gross revenues due to nonattributable  X"- xequity investments (i.e., from sources whose gross revenues are not considered under  x.95.816(d)(4)(iv) of this section), debt financing, revenue from operations or other investments,  xZbusiness development or expanded service shall not be considered to result in the licensee losing eligibility for preferences as a small business or very small business under this section."_%H,-(-(ZZ $"  X-H'c APPENDIX B: T  a< #|\  P6G;iP#Final Regulatory Flexibility Analysis#Xj\  P6G;+XP# T  X-TP Tenth Report and Order   1xAs required by the Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C.  603, an Initial  X- xRegulatory Flexibility Analysis (IRFA) was incorporated in the Sixth Memorandum Opinion and  Xk- xyOrder and Further Notice of Proposed Rule Making in the FCC's Competitive Bidding docket,  XV- x_PP Docket No. 93253, FCC 96330 (rel. September 10, 1996) (Further Notice). The  xCommission sought written public comments on the expected impact of the rule changes proposed  X* - x!in the Further Notice on small entities, including on the IRFA. The Commission's Final  X - xRegulatory Flexibility Analysis (FRFA) in this Tenth Report and Order conforms to the RFA,  x5 U.S.C.  604, as amended by the Contract with America Advancement Act of 1996 (CWAAA),  X -Pub. L. No. 104121, 110 Stat. 847 (1996).   yOb-  O#X\  P6G;IP#эxSubtitle II of the CWAAA is "The Small Business Regulatory Enforcement Fairness Act of 1996"  {O*-(SBREFA), codified at 5 U.S.C.  601, et seq.  X-A.x Need for and Objective of the Rules  X-  xThis Tenth Report and Order adopts rule changes regarding the Commission's auction of  xLInteractive Video and Data Service (IVDS) licenses. The rule changes are appropriate because  xlaws have changed since the rules were originally adopted. The Supreme Court's decisions in  XJ- xAdarand Constructors, Inc. v. Pe9a, 115 S. Ct. 2097 (1995) and United States v. Virginia, 116  xS. Ct. 2264 (1996) raised questions about the level of legal scrutiny that must be met by some  x.of the designated entity provisions in our rules which take race and gender into account. The  X- xobjective of the rule changes in the Tenth Report and Order primarily is to ensure that the  xycompetitive bidding rules comply with the appropriate legal standards by making the rules race  xand genderneutral, while at the same time instituting further rule changes that continue to  xpromote participation of small businesses in auctions for licenses to provide spectrum services.  xKFurther, a secondary objective of some of the rule changes, such as the small business definition,  xavailability of bidding credits, and increased upfront payments, is to apply the benefit of our  xlexperience from the first IVDS auction to subsequent IVDS auctions, and to increase the  xflexibility and opportunities available to small businesses to participate in the provision of the services. x  X#- B.xSummary of Issues Raised by Public Comment on the  X -xInitial Regulatory Flexibility Analysis   OxThere were no petitions or comments which solely discussed or addressed the Initial  xRegulatory Flexibility Analysis. However, a number of commenters raised and discussed issues""",-(-(ZZ!"  X- xeffecting small businesses in their comments on the Tenth Report and Order. Those comments are addressed and discussed, where applicable, in the detailed sections below.  X- C.xProjected Reporting, Recordkeeping and Other  X-xCompliance Requirements of the Rules  Xx-  xThe small businesses which choose to participate in these services will be required to  xdemonstrate that they meet the criteria set forth to qualify as small businesses (or very small  xbusinesses), just as was required by the prior rules. The changed rules will include more  x businesses in the category of small businesses, which will be eligible for designated entity  xZpreferences such as bidding credits. Any small business applicant wishing to avail itself of those  x=provisions will need to make the general financial disclosures, as well as applicant and affiliate  x.disclosures, necessary to establish that the small business is in fact small (or very small). The  x/changed rules have eliminated the requirements that small businesses owned by women or  x0minorities demonstrate that their owners are women or minorities. However, we request  xvoluntary reporting of minority and women ownership to comply with our mandate to report our  xefforts to Congress. Accordingly, there are no additional reporting or recordkeeping requirements being imposed by these rules.  XM- D. xDescription and Estimate of Small Entities Subject to the Rules   x The Commission is directed by the Communications Act of 1934, 47 U.S.C.  309(j),  xto make provisions to ensure that smaller businesses, and other designated entities, have an  xLopportunity to participate in the auction process. To fulfill this statutory mandate and comply  xwith the current legal standards, these rule changes are designed to ensure compliance with the  xnew legal standards while promoting participation by small entities, including minorities, women,  xand rural telephone companies. The small businesses who will be subject to the rules would be  xthose which choose to operate IVDS, a class of wireless communications services with a wide  x.variety of uses. The services will generally be offered to consumers who wish to subscribe to those services.   xIVDS is a communicationsbased service subject to regulation as a wireless provider of  xpay television services under Standard Industrial Classification 4841 (SIC 4841), which covers  X - xysubscription television services. R yO -  #X\  P6G;IP#эxGenerally, IVDS services will be subscriberbased services providing video communications which could be described as a form of subscription television service. The U.S. Small Business Administration (SBA) defines small  x>businesses in SIC 4841 as businesses with annual gross revenues of $11 million or less. 13  X- x!C.F.R.  121.201. In this Tenth Report and Order, we extend special provisions to small  xKbusinesses with annual gross revenues of $15 million or less and additional benefits to very small  x[businesses with annual gross revenues of $3 million or less. We observe that this rule change  X"- x\is consistent with our approach in other wireless services, see e.g., the 900 MHz specialized"" ,-(-(ZZ!"  xmobile radio service, and is narrowly tailored to address the lower capital requirements for IVDS. SBA approval for the small business definitions is pending for this and other auctionable services.   !xThe Commission's estimate of the number of small business entities subject to the rules  xMbegins with the Bureau of Census report on businesses listed under SIC 4841, subscription  X- x.television services. The total number of entities under this category is 1,788.\XR yO-  #X\  P6G;IP#эxU.S. Small Business Administration 1992 Economic Census Industry and Enterprise Report, Table 2D, SIC  xCode 4841 (Bureau of the Census data adapted by the Office of Advocacy of the U.S. Small Business Administration). \ There are 1,463  xKcompanies in the 1992 Census Bureau report which are categorized as small businesses providing  X_- x.cable and pay TV services._R yO -  /#X\  P6G;IP#эxThe Census table divides those companies by the amount of annual receipts. There is a dividing point at  xcompanies with annual receipts of $10 million. The next increment is annual receipts of $17 million, a category that  x,greatly exceeds the SBA definition of small businesses that provide subscription television services. However, there  xare 17 firms in this category, with revenues between $10$17 million. Approximately 1,480 SIC 4841 category firms have annual gross receipts of $15 million or less. Only a small fraction of those 1,480 firms provide IVDS. We know that many of these businesses are cable and television  xservice businesses, rather than IVDS licensees. Therefore, the number of small entities currently in this business which will be subject to the rules will be less than 1,463.   xThe first IVDS auction resulted in 170 entities winning licenses for 594 Metropolitan  xStatistical v!"M   v!"M Area (MSA) licenses. Of the 594 licenses, 557 were won by entities qualifying as a  x\small business. For that auction, we defined a small business as an entity, together with its  xaffiliates, that has no more than a $6 million net worth and, after federal income taxes (excluding  x[any carry over losses), has no more than $2 million in annual profits each year for the previous  X- xtwo years.-R {O-  >#X\  P6G;IP#эxImplementation of Section 309(j) of the Communications Act Competitive Bidding, Fourth Report and  {O-Order, PP Docket No. 93253, 9 FCC Rcd 2330, 2336  36 (1994).- In the upcoming IVDS reauction of approximately 100 licenses in MSA markets  xand auction of 856 licenses in Rural Service A v!"Ma rea (RSA) markets (two licenses in each of 428  x/markets), while we make our rules race and genderneutral, we also modify our definition of  xZsmall business to include a second tier of very small businesses, adopt tiered bidding credits, and  xycontinue to include provisions for installment payments in our rules to encourage participation  xby small and very small businesses. We cannot estimate, however, the number of licenses that  x=will be won by entities qualifying as small or very small businesses under our rules. Given the  X- xsuccess of small businesses in past IVDS auctions, and that small businesses comprise over 80  xpercent of firms in the subscription television services industry, we assume for purposes of this  xLFRFA that all of the licenses may be awarded to small businesses, which would be affected by  xthe rule changes we have made. Some companies may win more than one license, as was the situation in the earlier IVDS auction.   xApplicants seeking to participate in the auction also will be subject to these rule changes.  xyIt is impossible to accurately predict how many small businesses will apply to participate in the  xauction. In the last IVDS auction, there were 289 qualified applicants. We do not anticipate that"7 ,-(-(ZZ"  xthere will be significantly more participants in the subsequent IVDS auction. However, because  x\of the lower capital requirements for IVDS in general, there may be a greater number of very small businesses participating.  X- E.xSteps Taken to Minimize the Burdens on Small Entities  Xv-  xThe changes made in the Tenth Report and Order are designed to ensure compliance with  x=the current legal standards applicable to federal programs implemented to benefit minority and  xwomenowned businesses, while minimizing burdens on small businesses and promoting  xparticipation of small businesses in spectrum auctions. The extension of a twotiered definition  xfor small businesses, as well as the provision for tiered bidding credits will assist businesses  xowned by women and minorities. Based upon experience to date, most of the businesses owned  xby women and minorities which have participated in the Commission's auctions are small  xbusinesses or very small businesses which, in the end, will benefit from these rule changes. As  x<discussed below, the Commission considered and rejected alternatives, such as providing parties  xadditional time to supplement the record or to afford the industry more time to develop  xtechnology and equipment, because there is no evidence that, given additional time, the record  xwill be sufficiently supplemented or the industry will develop the technology any faster. While  xsome may argue that the increase in upfront payments may raise some entry barriers, such  xconcerns are outweighed by the need to maintain the integrity of the auction process to ensure  xsincere bidders and, thus, create increased opportunities for sincere small business bidders.  xFurthermore, the rule change increasing the upfront payment amounts will ultimately benefit the  x=entities participating in the IVDS auctions, by ensuring that the participants have the financial ability to pay for the licenses for which they bid.  X- F.xSignificant Alternatives Considered and Rejected  V-xEliminating the Race and GenderBased Provisions  Xg-  0x In the Tenth Report and Order, the Commission concludes that the possibility of legal  xchallenges to the rules due to the race and genderbased provisions could cause lengthy delays  xMin issuing licenses in this service and, therefore, revises those provisions in its competitive  xbidding rules to make them race and genderneutral. The Commission has not been able to  xconsider other alternatives to the rule changes given that no alternatives were proposed by any  xof the commenters, and the record was not supplemented during this proceeding with any  x-additional evidence of market entry barriers, anecdotal or statistical evidence or any other factors  xwhich directly adversely effect small businesses owned by minorities and/or women. Although  xZone commenter requested that the Commission provide parties with additional time to supplement  xthe record, and another requested that the Commission delay any rule making determinations to  xafford the industry additional time to develop equipment and technology for implementing IVDS,  x?the Commission rejected these requests, because there is no evidence the record will be  xsufficiently supplemented or the industry will develop the technology any faster. We note that  X>&- xxthe Commission is currently gathering evidence, through a Notice of Inquiry proceeding pursuant  xlto the Telecommunications Act of 1996, on barriers to market entry for small businesses,")',-(-(ZZ%"  X- xincluding those owned by women and minorities.SR {Oy-  #X\  P6G;IP#эxSection 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Notice of  {OC-Inquiry, GN Docket No. 96113, 11 FCC Rcd 6280 (1996); Pub. L. No. 104104, 110 Stat. 56, 77 (1996).S The Commission believes that the rule  xchanges discussed below (for example, offering bidding credits based upon an entity's size) will more than adequately benefit small businesses that are owned by minorities or women.  V-xAdoption of TwoTiered Definition for Small Businesses  Xv-  xThe Tenth Report and Order adopts a twotiered definition to define small businesses: (1)  xa small business is a business with average gross revenues for each of the preceding three years  xthat do not exceed $15 million, and (2) a very small business is one which has less than an  X3- x average of $3 million in gross revenues in each of the last three years. See supra  14. We  xadopt this twotiered definition because our ongoing experience with spectrum auctions has  xxaffirmed our belief that gross revenuesbased definitions are a more accurate indicator of size than  xZa net worth/annual profit definition. Also, this definition is consistent with the carefullyanalyzed  xapproach used in other auctionable mobile radio services such as 900 MHz specialized mobile  X - xradio services.\ $R {O-  #X\  P6G;IP#эxSee Implementation of Section 309(j) of the Communications Act Competitive Bidding, Second Order  {Oa- xon Reconsideration and Seventh Report and Order, PR Docket No. 89553, PP Docket No. 93253, GN Docket No. 93252, 11 FCC Rcd 2639, 2700  153 (1995). Although one commenter suggested altering the financial thresholds for  x-determining whether an entity is a "small business" or "very small business" under the proposed  xdefinition, we believe that the adopted twotiered definition is appropriate given the likely  xparticipants in this auction and the Commission's desire to maintain consistency between auctions.  xyIn determining whether an entity qualifies as a small business under either tier, we will attribute  xthe gross revenues of all controlling principals, as well as the gross revenues of affiliates of the  X8- xapplicant. Also, we will use the multiplier adopted in the CMRS Third Report and Order for the  xxspectrum aggregation cap to determine when IVDS licensees are indirectly held through corporate  x-entities. While we chose not to impose specific equity requirements on the controlling principals  xyof qualifying small businesses, we will still require that qualifying small businesses are actually  X-"controlled" by their principals. See supra  15.  V-xAdoption of Tiered Bidding Credits    "xWe adopted tiered small business bidding credits for the upcoming IVDS auction as  x\follows: (1) 10 percent bidding credits for small businesses and (2) 15 percent for very small  XV- x<businesses. See supra  18. Although a few commenters proposed higher percentages for each  xtier of bidding credits offered (for example, 15 percent for small businesses and 25 percent for  xvery small businesses), we decline to adopt their proposals because we do not believe a greater  xbidding credit is justified here as it was for certain highly capital intensive services, like  xKbroadband PCS. We believe the extent, magnitude and range of the bidding credits adopted meet the varying needs of small and very small businesses who will participate in the IVDS auctions. " H,-(-(ZZ"Ԍ V-xIncrease in Upfront Payment Amounts x  X-  xThe Tenth Report and Order adopts increased upfront payment amounts of $9,000 per  X- xMSA license and $2,500 per RSA license for businesses participating in IVDS auctions. See  X- xsupra  20. These increased amounts are designed to maintain the integrity of the auction by  xminimizing the adverse impact of participation by speculators and other frivolous bidders in the  xIVDS auction. Commenters agree that the previous upfront payment was too low, and no other  Xe- xalternatives were suggested to 0}R X- 0deter speculative or frivolous bidders who do not meet the  xcommitments they make in bidding in IVDS auctions. Based upon the record regarding IVDS  xxupfront payment values, we believe that the revised upfront payment values are set at appropriate  xlevels and provide an adequate deterrent against frivolous bidding, and therefore, we declined to  xadopt the approach of one commenter who suggested we modify the multiplier for the MSA  xpayment to an even multiplier of the RSA payment. Moreover, the impact that increased upfront  xZpayments may have on designated entities will be offset by the fact that eligible entities may elect  xto make payments for their licenses via installment payments, which eligibility shall not be  X -jeopardized due to normal projected growth of gross revenues and assets. See supra  16.  X- G.xCommission's Outreach Efforts to Learn of and Respond to  Xj-xthe Views of Small Entities Pursuant to 5 U.S.C.  609   mxThe Commission sought specific comments regarding the views of small entities with  xrespect to the changes being made through solicitation of comments and reply comments to its  X- xFurther Notice, and the IRFA that was contained therein. Although there were no comments on  X- xjthe IRFA, there were a number of comments received in connection with the Further Notice as  xnoted herein. Further, the Commission's Office of Communications and Business Opportunities  xhas undertaken additional outreach efforts through newsletters and other mailings to learn of the views of, and respond to, small entities.  X- H.xReport to Congress   xThe Commission shall send a copy of this Final Regulatory Flexibility Analysis, along  XC- xLwith this Tenth Report and Order, in a report to Congress pursuant to the SBREFA, 5 U.S.C.   x801(a)(1)(A). A copy of this Final Regulatory Flexibility Analysis will also be published in the Federal Register.",-(-(ZZ"  X-) APPENDIX C TP  X-Comments  Xv-1.xITV, Inc. and IVDS Affiliates, LLC (ITV/IALC)  X_-2.xInteractive America Corporation, Inc. (IAC)  XH-3.xxLoli, Inc., Trans Pacific Interactive, Wireless Interactive Return Path, L.L.C., and IVDS OnLine Partnership (collectively, "IVDS Licensees")(#  X -4.xProgressive Communications, Inc. (Progressive)  X - Reply Comments  X -1.xIAC