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A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8::?~;@i<A^=reference>;#FxX  Pg9CXP#itemizeX1?&V 8F ` hp xr#FxX  Pg9CXP#header2@I ` hp x`    #FxX  Pg9CXP# heading 3AF` hp x #FxX  Pg9CXP# 2EBO?@X'CXCfooter!B!!#d\  PCP#Times RomanTimes Roman Bold^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxdTimes New RomanTimes New Roman BoldTimes New Roman ItalicTimes New Roman Bold ItalicS7oC2o\  PCXP7tC2 t4  p(ACXIXzAxpCXAnCllllpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDddddddd<d<$YYdCCddooCYB Xy-ԍ Id.,  68, 70, 7285.R Our rules, however, did not permit rural telephone companies to obtain bidding credits or installment payments unless they also qualified as small businesses  X-or businesses owned by minorities and/or women.,? yB X-ԍ  As discussed further infra, these rules were based on the rationale that rural telephone companies do not face special barriers to entry into this service, nor are special  X-accommodations necessary to ensure service in rural areas. See Third Report and Order,   X-71, 76. We concluded in the Third Report and Order that, given the relatively modest construction costs for narrowband PCS, even new entrants may choose to provide service to rural areas, and special provisions are not necessary to ensure that rural telephone companies  Xr -will have the opportunity to participate in provision of service to rural areas. Id.,  71. We noted that women, minorities, and small businesses, in contrast, may face particular financing obstacles that require additional provisions to ensure that they have an opportunity to  X--participate in providing narrowband PCS. Id.,  72, 76.,  X-x` ` x!34. Petitions. Three petitioners assert that provisions made available for various designated entities, such as bidding credits, installment payments and tax certificates, should also be made available to all designated entity groups, and for all narrowband PCS licenses. The Association of Independent Designated Entities (AIDE) suggests that bidding credits, currently available for all businesses owned by minorities and/or women, should be granted to  X1-all small businesses and rural telephone companies, for all narrowband PCS licenses.h@1[ B X=-#o\  PC XP#э AIDE Petition at 1418.h AIDE reasons that even if bidding credits are not appropriate for small businesses applying for nationwide licenses (because small businesses can not afford to construct nationwide narrowband PCS systems), the Commission should nevertheless permit small businesses to  X -obtain bidding credits for the smaller, geographically limited narrowband licenses.AA B X-ԍ AIDE Petition at 1617.A AIDE also states that the decision to limit installment payments to certain licenses was  X -impermissibly based on maximizing auction revenues.CB B X-ԍ Id. at 1819.C  Xy-X` hp x (#%'0*,.8135@8:63. In addition, we are adopting for narrowband PCS the requirement that all entities claiming a designated entity benefit must substantiate their eligibility for such benefits. In a  X4-related action reconsidering the Second Report and Order in this proceeding, we are requiring  X-applicants that seek designated entity benefits to document their eligibility for such benefits.fK X-ԍ See Second Memorandum Opinion and Order at  134; Cook Inlet Petition for  X-reconsideration of Second Report and Order at 16. For narrowband PCS we therefore require designated entity applicants to describe on their longform applications how they meet the eligibility criteria for designated entity benefits. Applicants must list and summarize on their longform application all agreements that affect designated entity status, such as all partnership agreements, shareholder agreements, management agreements and other agreements, including oral agreements, which establish that  X-the designated entity will have both de facto and de jure control of the entity. In addition, we will require that such information be maintained at the licensee's facilities, or by its designated agent, for the term of the license, and that the information be made available to Commission staff upon request. We believe that this provision will prove useful when the Commission conducts its random audits of designated entities providing narrowband PCS to ensure their continuing designated entity status. "f0*(("Ԍ X- VI. PROPOSED DESIGNATED ENTITY PROVISIONS FOR MTA AND BTA  X-AUCTIONS  X- dA.xIntroduction  X-dx?64. In the Budget Act, Congress recognized the novelty of auctions as a licensing method and encouraged us to experiment with a variety of techniques to ensure that small businesses and those owned by women and minorities have an opportunity to participate in spectrumbased services. While we believe that measures taken with respect to the regional narrowband PCS auctions will provide substantial opportunities for designated entities to participate in narrowband PCS, we seek comment on whether it may be necessary to adopt alternative provisions such as entrepreneurs'  blocks or higher bidding credits to encourage investment in minority and womenowned businesses in future auctions. As we have learned, narrowband PCS licenses may be auctioned for large sums of money in the competitive bidding process. It therefore may be necessary to do more to ensure that designated entities have the opportunity to participate in narrowband PCS than may be necessary in other, less costly spectrumbased services. In our view, we must consider whether these steps and any others we may adopt are required to fulfill Congress's mandate that designated entities have the opportunity to participate in the provision of PCS. We believe that the measures we propose today would increase the likelihood that designated entities will win licenses in the  X4-auctions and become strong competitors in the provision of narrowband PCS service. We also will review the results of the regional auction in making our decision on the rules proposed in this Further Notice.  X- dx@65. As we noted in the Fifth Report and Order, by instructing the Commission to ensure the opportunity for designated entities to participate in auctions and spectrumbased services, Congress was well aware of the difficulties these groups encounter in accessing  X-capital.g X -ԍ Fifth Report and Order in PP Docket No. 93253, FCC 94178, adopted June 29,  X-1994, released July 15, 1994 (Fifth Report and Order) at  97. Indeed, less than two years ago, Congress made specific findings in the Small Business Credit and Business Opportunity Enhancement Act of 1992, that "small business concerns, which represent higher degrees of risk in financial markets than do large businesses,  XN-are experiencing increased difficulties in obtaining credit."hNb Xa -ԍ Small Business Credit and Business Opportunity Enhancement Act of 1992, Section 331(a) (3), Pub. Law 102366, Sept. 4, 1992. Because of these problems, Congress resolved to consider carefully legislation and regulations "to ensure that small business concerns are not negatively impacted" and to give priority to passage of "legislation  X -and regulations that enhance the viability of small business concerns."Ki  X%-ԍ Id., Section 331(b)(2),(3).K "i0*((<"Ԍ X-dxA66. Congress also recognized that these funding problems are even more severe for minority and womenowned businesses, who face discrimination in the private lending market. For example, Congress explicitly found that businesses owned by minorities and women have particular difficulties in obtaining capital and that problems encountered by minorities in this  X-regard are "extraordinary."Oj X-ԍ Id., Section 112(4); 331(a)(4).O A number of studies also amply support the existence of  X-widespread discrimination against minorities in lending practices. As we noted in the Fifth  Xv-Report and Order, in October, 1992, the year prior to passage of the auction law, the Federal Reserve Bank of Boston released an important and highlypublicized study demonstrating that a black or Hispanic applicant in the Boston area is roughly 60 percent more likely to be  X1-denied a mortgage loan than a similarly situated white applicant.k1y X[ -ԍ Mortgage Lending in Boston: Interpreting HMDA Data, Federal Reserve Bank of Boston, Working Paper 927 (October 1992). The researchers measured every variable mentioned as important in numerous conversations with lenders, underwriters, and examiners and found that minority applicants are more likely to be denied mortgages even where they have the same obligation ratios, credit history, loan to value and property characteristics as white applicants. The lending discrimination that occurs, the study found, does not involve the application of specific rules, but instead occurs where discretionary decisions are made. Based on the Boston study, we found that it is reasonable to expect that race will affect business loans that are based on more subjective criteria to an even greater extent than the mortgage loan process, which uses more standard rules. d  XK-dxB67. Similarly, evidence presented in testimony before the House Minority Enterprise Subcommittee on May 20, 1994 indicates that African American business borrowers have difficulty raising capital mainly because they have less equity to invest, they receive fewer loan dollars per dollar of equity investment, and they are less likely to have alternate loan sources, such as affluent family or friends. Assuming two hypothetical collegeeducated, similarly situated male entrepreneurs, one black, one white, the testimony indicated that the white candidate would have access to $1.85 in bank loans for each dollar of owner equity invested, while the black candidate would have access to only $1.16. According to the testimony, the problems associated with lower incomes and intergenerational wealth, as well as the discriminatory treatment minorities receive from financial institutions, make it much more likely that minorities will be shut out of capital intensive industries, such as telecommunications. This testimony also noted that African American representation in communications is so low that it was not possible to generate meaningful summary statistics  X -on underrepresentation.jl  X#-ԍ Testimony of Dr. Timothy Bates, Visiting Fellow, The Woodrow Wilson Center, before the U.S. House of Representatives Committee on Small Business, Subcommittee on Minority Enterprise, Finance, and Urban Development (House Minority Enterprise  X&-Subcommittee), May 20, 1994. j "  l0*((["Ԍ X-dxC68. We also stated in the Fifth Report and Order that inability to access capital is also a major impediment to the successful participation of women in PCS auctions. In enacting the Women's Business Ownership Act in 1988, Congress made findings that women, as a group, are subject to discrimination that adversely affects their ability to raise or secure  X-capital.m X-ԍ Pub. L. 100533 (1988). In 1991, Congress enacted the Women's Business Development Act of 1991 to further assist the development of small businesses owned by  X-women. See Pub. L. 102191 (1991).  AWRT documents that these discriminatory barriers still exist today. Indeed, AWRT reports that while venture capital is an important source of funding for telecommunications companies, womenowned companies received only approximately one percent of the $3 billion invested by institutional venture capitalists in 1993. Citing a 1992 National Women's Business Council report, AWRT further argues that even successful womenowned companies did not overcome these financing obstacles after they had reached a  X -level of funding and profitability adequate for most other businesses.n K X-ԍ See Letter of AWRT to the Honorable Kweisi Mfume, Chairman, House Minority Enterprise Subcommittee, June 1, 1994.  X -dxD69. A study prepared in 1993 by the National Foundation for Women Business Owners (NFWBO) further illustrates the barriers faced by womenowned businesses. For example, it finds that womenowned firms are 22 percent more likely to report problems dealing with their banks than are businesses at large. In addition, the NFWBO study finds that the largest single type of shortterm financing used by women business owners is credit cards and that over half of womenowned firms use credit cards for such purposes, as compared to 18 percent of all small to mediumsized businesses, which generally use bank loans and vendor credit for shortterm credit needs. With regard to longterm financing, the study states that a greater proportion of womenowned firms are turning, or are forced to turn, to private sources, and to a wider variety of sources, to fulfill their needs. Based on these findings, the NFWBO study concludes that removal of financial barriers would encourage stronger growth among womenowned businesses, resulting in much greater growth  X-throughout the economy.o Xn-ԍ See The National Foundation for Women Business Owners, Financing the Business, A Report on Financial Issues from the 1992 Biennial Membership Survey of Women Business Owners, October 1993.  X-dxE70. If we are to meet the congressional goals of promoting economic opportunity and competition by disseminating licenses among a wide variety of providers, we must find ways  X|-to counteract effectively these barriers to entry. As chronicled in the Fifth Report and Order, both Congress and the Commission have tried various methods to enhance access to the  XN-broadcast and cable industries by minorities and women.epNh  Xg'-ԍ See Fifth Report and Order at  103106.e These efforts however, have met"N  p0*((" with limited success. The record shows that women and minorities have not gained substantial ownership representation in either the broadcast or nonbroadcast telecommunications industries. For example, a 1993 report conducted by the National Telecommunications and Information Administration's (NTIA) Minority Telecommunications Development Program shows that, as of August 1993, only 2.7 percent of commercial broadcast stations were owned by minorities. Another study commissioned by the Commerce Department's Minority Business Development Agency in 1991 found that only one half of one percent of the telecommunications firms in the country were minority owned. The study  XH-also identified only 15 minority cable operators and 11 minority firms engaged in the delivery of cellular, specialized mobile radio, radio paging or messaging services in the United  X -States.qH  X -ԍ See Testimony of Larry Irving, Assistant Secretary for Communications and Information, U.S. Department of Commerce, before the House Minority Enterprise Subcommittee, May 20, 1994. In his testimony at this same hearing, FCC Chairman Reed Hundt cited some of these statistics and noted that in light of this serious underrepresentation, there remains "a fundamental obligation for both Congress and the FCC to examine new and creative ways to ensure minority opportunity." Testimony of Reed E. Hundt, Chairman, Federal Communications Commission, before the House Minority Enterprise Subcommittee, May 20, 1994. And, according to the last available U.S. Census, only 24 percent of the communications firms in the country were owned by women, and these womenowned firms generated only approximately 8.7 percent of the revenues earned by communications  X -companies.cr  X^-ԍ See WomenOwned Businesses, 1987 Economic Censuses, U.S. Department of Commerce, issued August 1990, at 7, 147. The census data includes sole proprietorships, partnerships, and subchapter S corporations. We have no statistics regarding women representation among owners of larger communications companies.c When companies without paid employees are removed from the equation, firms with women owners represent only 14.5 percent of the communications companies in the  X -country.3s D  X-ԍ Id.3 One result of these low numbers is that there are very few minority or womenowned businesses that bring experience or infrastructure to narrowband PCS. They thus face an additional barrier relative to many existing service providers.  XK-dxF71. Small businesses also have not become major participants in the telecommunications industry. For instance, one commenter asserts that ten large companies six Regional Bell Operating Companies (RBOCs), AirTouch (formerly owned by Pacific Telesis), McCaw, GTE and Sprint control nearly 86 percent of the cellular industry. This commenter further contends that nine of these ten companies control 95 percent of the cellular  X-licenses and population in the 50 BTAs that have one million or more people.jt X~&-ԍ Ex parte filing of DCR Communications, May 31, 1994.j "!t0*((q"Ԍ X-dxG72. In the new auction law, Congress directed the Commission to remedy this serious imbalance in the participation by certain groups, especially minorities and women. The auction law itself contemplates that requiring payment for initial licenses through competitive bidding, unlike existing licensing methods such as comparative hearings or lotteries, may inhibit participation by those with limited access to capital and could further diminish opportunities for designated entities. The first nationwide auction demonstrated that a 25 percent bidding credit may not be sufficient to ensure that designated entities have the opportunity to participate where narrowband PCS values are high. The regional auctions will  XH-demonstrate whether a 40 percent bidding credit for women and minorityowned firms combined with installment payments for eligible small businesses is sufficient to provide meaningful opportunities for designated entities at the regional level. We further propose to  X -examine the use of measures we specified in the Fifth Report and Order to carry out Congress's directive to provide meaningful opportunities for small entities and businesses owned by women and minorities to provide PCS services. If, based on the results of the regional auction, we conclude that the 40 percent bidding credit is insufficient, we may decide that these measures, which are expressly designed to address the funding problems faced by these groups, may be necessary to achieve Congress's goals with respect to narrowband PCS.  XK- B. Summary of Special Provisions for Designated Entities  X-dxH73. While there was significant designated entity participation in the nationwide narrowband PCS auction, we are concerned that the high license values in that auction and the substantial involvement by large, incumbent firms with significant financial resources suggests that designated entities may have difficulties in competing in future narrowband PCS auctions. We recognize that larger incumbent firms are able to pay much higher license prices than smaller firms because of the significant infrastructure and cost of capital advantages these firms enjoy. Because of these factors, we believe that additional measures may be necessary to achieve Congress's mandate that we ensure the opportunity for designated entities to participate in the competitive bidding process and in the provision of spectrumbased services. In this regard, we propose additional provisions for businesses owned by woman and/or minorities and small businesses similar to those employed in the auction rules for broadband PCS.  X-dxI74. To fulfill Congress's mandate that we ensure that designated entities have the opportunity to participate in providing narrowband PCS, we propose to reserve up to four MTA frequency blocks 19, 21, 22 and 24 , and both BTA frequency blocks 25 and 26 for bidding exclusively by entities with annual gross revenues of less than $125 million and total assets of less than $500 million ("entrepreneurs' blocks"). We believe that excluding large companies from bidding in the proposed entrepreneurs' blocks, and limiting the total number of licenses that one entity can obtain in these blocks, would significantly enhance opportunities for smaller entities to become PCS providers and thereby ensure that narrowband PCS licenses will be disseminated "among a wide variety of applicants," as required by Section 309(j)(3)(B). "#'"t0*((%"Ԍ X-ԙdxJ75. We recognize, however, that reserving blocks for bidding only by relatively small companies may not, by itself, be sufficient to ensure that small businesses and businesses owned by members of minority groups and women have the opportunity to obtain narrowband PCS licenses. Businesses owned by members of minority groups and women face discrimination that poses additional obstacles for these firms. Accordingly, we propose a number of related steps to assist small businesses and businesses owned by woman and/or minorities in attracting the capital necessary to obtain a narrowband PCS license.  XH-dxK76. First, to encourage large companies to invest in designated entities and to assist designated entities without large investors to overcome the additional hurdle presented by auctions, we propose to make bidding credits available to designated entities within the entrepreneurs' blocks. More specifically, we propose to provide small businesses with a 10 percent bidding credit. Businesses owned by minorities and women would receive a 15 percent bidding credit to compensate for the substantial problems they face in attracting  X -capital.^u  X7-ԍ Although this bidding credit would be less than the bidding credit available for selected nationwide and regional licenses (25 percent and 40 percent respectively), the 15 percent bidding credit would be available within the entrepreneurs' blocks rather than in a block where all companies could participate.^ The credits would be cumulative, so that a business owned by minorities or women that also qualified as a small business would receive a 25 percent bidding credit. Second, we propose to allow most successful bidders within the entrepreneurs' blocks to pay for their licenses in installments and to "enhance" those installment payments for small businesses and businesses owned by minorities and women by varying the moratorium on principal and the interest rate. Third, we propose to continue to extend our tax certificate policies to promote participation by minorities and women in the provision of narrowband PCS. Fourth, we propose to reduce the upfront payment for all eligible bidders in the entrepreneurs' blocks from $0.02 per MHz per pop to $0.015 per MHz per pop.  X-  X-dxL77. Finally, we propose to redesignate the two BTA licenses as regional licenses organized in the same configuration set forth in Section 24.102 of the rules. We also seek comment on other means to achieve larger geographic license sizes such as designating these BTA licenses as nationwide licenses or by maintaining the BTA designation, but allowing combinatorial bidding for the designated regions. We also seek comment on whether some of the MTA and BTA response channels should be redesignated as larger license areas with bidding limited only to those entities eligible to bid for entrepreneurs' block licenses.  X -dxM78. The following chart highlights the major provisions proposed for businesses  X -bidding in the proposed entrepreneurs' blocks.v 4 X$-ԍ This table is not comprehensive and therefore it does not present all the provisions established for designated entities, especially those available outside the entrepreneurs' blocks. " #v0*(("Ԍ]ř Y ddx !ddx$   Y  L  )  " X- XBidding zCredits  Xc-L)  X-   Xz-_Installment PaymentsL)" X-Tax Certificates for  Xz- InvestorsL   )  Entrepreneurial Businesses (in excess of $40 MM and less than or equal to $125 MM in revenue and less than $500 MM in total assets)J "h0J  Interest only for 1 year; rate equal to 10year Treasury note plus 2.5%; (for businesses with revenues greater than $75 MM, available only in regional and MTA markets)J "No  L   Small Businesses (not in excess of $40 MM in revenues and less than $500 MM in total assets, see  45)_"10%_ Interest only for 2 years; rate equal to 10year Treasury note plus 2.5%;_"No  J    Businesses Owned by Minorities and/or Women (in excess of $40 MM and less than or equal to $125 MM in revenues and less than $500 MM in total assets)F"15%F Interest only for 3 years; rate equal to 10year Treasury note;F"Yes .  _   Small Businesses Owned by Minorities and/or Women (not in excess of $40 MM in revenues and less than $500 MM in total assets)t"25%t Interest only for 5 years; rate equal to 10year treasury note;t"Yes %, .  F]  X!-,d C.xSummary of Eligibility Requirements and Definitions (#  X"- dx1.44Entrepreneurs' Blocks and Small Business Eligibility  X$-dxN79. The following points summarize the principal rules we propose regarding eligibility to bid in the entrepreneurs' blocks and have adopted above to qualify as a small business. In addition, they summarize the attribution rules we will propose to use to assess"w&$v0*((5%" whether an applicant satisfies the various financial thresholds. More precise details are discussed in the subsections that follow.  X-Proposed Financial Caps:  Xv-,dEntrepreneurs' Blocks: To bid in the entrepreneurs' blocks, the applicant, including attributable investors and affiliates, must cumulatively have less than $125 million in gross revenues and less than $500 million in total assets. No individual attributable investor or affiliate may have $100 million or more in personal net worth.(#  X -,dSmall Business: To qualify for special measures accorded a small business, the applicant, including attributable investors and affiliates, must cumulatively have not in excess of $40 million in gross revenues. No individual attributable investor or affiliate may have in excess of $40 million in personal net worth. ( Note: this is the small business definition we have adopted above). We seek comments on whether in an entrepreneur's block we should define small businesses differently.(#  Xb-Proposed Attribution Rules:  X4-,dControl Group. The gross revenues, total assets and personal net worth of certain investors are not considered so long as the applicant has a "control group" consisting of one or more individuals or entities that control the applicant, hold at least 25percent of the equity and, for corporations, at least 50.1 percent of the voting stock.(#  X-,dThe gross revenues, total assets and personal net worth of each member of the control group are counted toward the financial caps.(#  X|-,dOther Investors. Where the applicant has a control group, the gross revenues, total assets and personal net worth of any other investor are not considered unless the investor holds 25 percent or more of the applicant's passive equity (which, for corporations, will include as much as 15 percent of the voting stock).(#  X -,dPassive Equity. Passive equity is limited partnership or nonvoting stock interests or voting stock interests of 15 percent or less of the issued and outstanding voting stock.(#  X -,dProposed Option for Minority or WomanOwned Applicants. If the control group (consisting entirely of women and/or minorities) owns at least 50.1 percent of the equity and, for corporations, at least 50.1 percent of the voting stock, then the gross revenues, total assets and personal net worth of any other investor are not considered unless the investor holds more than 49.9 percent of the applicant's passive equity (which, for corporations, includes no more than as 15 percent of the voting stock).(# ":&%v0*(($"Ԍ X-,dAffiliates. The gross revenues, assets and personal net worth of outside interests held by the applicant (and the attributable investors in the applicant) are counted toward the financial caps if the applicant (or the attributable investors in the applicant) control or have power to control the outside interests or if the applicant (or the attributable investors in the applicant) is under the control of the outside interests. The financial interests of spouses are also attributed to each other.(#  X_- dx2.44Definition of Women and/or MinorityOwned Business  X1-dxO80. The points below summarize the two structural options proposed to be available to firms that wish to qualify for the special provisions adopted for businesses owned by minorities and women. These options will be discussed in more detail in the text that follows.  X -50.1 Percent Equity Option:  X -,dIf women and/or minority principals control the applicant and own at least:(#  Xy-d/x50.1 percent of the equity, and  Xb-d/x50.1 percent of the voting stock, in the case of corporations  X4-,d Then any other investor may hold:(#  X-d/Xxnot more than 49.9 percent of the passive equity (which, for corporations, includes as much as 15 percent of the voting stock).(#  X-25 Percent Equity Option:  X-,dIf women and/or minority principals control the applicant and own at least:(#  Xe-d/x25 percent of the equity, and  XN-d/x50.1 percent of the voting stock, in the case of corporations  X -,d Then any other investor may hold:(#  X-d/Xx25 percent or less of the passive equity (which, for corporations,includes as much as 15 percent of the voting stock).(# d  X!-dxP81. We also request comment on alternatives intended to deter shams and fronts and to prevent abuse of the incentives for designated entities. The Commission would enforce vigorously any requirements adopted. These proposals include a holding and limited transfer period for licensees in the entrepreneurs' blocks and repayment provisions associated with bidding credits and installment payments. These steps and our eligibility and affiliation rules are intended to ensure that the benefits of any measures we take flow to the entities Congress intended. Ultimately, we believe that we will best fulfill our statutory mandate by creating"#'&v0*((%"  X-powerful incentives for bona fide designated entities to attract the capital necessary to compete both in auctions for narrowband PCS and in the provision of service. We therefore specifically request that commenters address in detail the impact any of these alternatives would likely produce on the opportunity for designated entities to acquire narrowband PCS licenses.  Xv-_d D.xThe Entrepreneurs' Blocks  XH-dxQ82. As discussed above, because the auction process itself requires additional expenditures of capital to acquire licenses, this new licensing procedure in many respects holds the potential to erect an additional barrier to entry that had not existed even under the Act's previous licensing methods, comparative hearings and lotteries. As reflected in the Hou_se Committee Report, Congress was well aware of that possibility and wanted to ensure  X -that competitive bidding should not exclude smaller entities from obtaining licenses.Qw w XN-ԍ See H.R. Rep. No. 103111 at 255.Q The inability of small businesses and businesses owned by women and minorities to obtain adequate private financing creates a serious imbalance between these companies and large businesses in their prospects for competing successfully in narrowband PCS auctions.  Xb-dxR83. We anticipate that the results of the narrowband regional auctions as well as the comments we seek in this Notice will be relevant to our final conclusion of whether an entrepreneurs' block is appropriate in narrowband PCS. We seek comments on what results in the regional auction would or would not justify the use of an entrepreneurs' block in subsequent narrowband auctions. The $125 million gross revenue/$500 million asset caps have the effect of excluding the large companies that would easily be able to outbid designated entities and frustrate Congress's goal of disseminating licenses among a diversity of licensees. At the same time, this restriction does not exclude many firms that, while not large in comparison with other telecommunications companies, nevertheless are likely to have the financial ability to provide sustained competition for the PCS licensees. For example, the $125 million gross revenue figure corresponds roughly to the Commission's definition of a  Xe-Tier 2, or mediumsized, local exchange carrier,x _eyw X-ԍ Local exchange carriers are categorized as Tier 1 and Tier 2 companies by applying the criterion that Sections 32.11(a) and 32.11(e) of the Commission's Rules use to distinguish Class A and Class B companies, respectively. Class A companies are those companies having annual revenues from regulated telecommunications operations of $100 million or more; Class B companies are those companies having annual revenues from regulated telecommunications operations of less than $100 million. The initial classification of a company is determined by its lowest annual operating revenues for the five immediately preceding years. A company's classification is changed when its annual operating revenue exceeds or is under the $100 million mark in each of five consecutive years. The Commission imposes more relaxed regulatory requirements on Tier 2 LECs than on Tier 1"&w0*((&"  X-LECs. See Automated Reporting Requirements for Certain Class A and Tier 1 Telephone Companies, 2 FCC Rcd 5770, 5772 (1987), Commission Requirements for Cost Support Material to be Filed with 1994 Annual Access Tariffs and for Other Cost Support Material, 9 FCC Rcd 1060 n. 3 (Comm. Carr. Bur. 1994); Commission Requirements for Cost Support Material to be Filed with Access Tariffs on March 1, 1985, Public Notice, Mimeo No. 2133 (Comm. Carr. Bur. released Jan. 25, 1985).  and would include virtually all of the"e'x0*((" independently owned rural telephone companies, while excluding the largest incumbent paging  X-licensees. Limiting the personal net worth of any individual investor or affiliate of the applicant to $100 million would prevent a very wealthy individual from leveraging his or her personal assets to allow the applicant to circumvent the size limitations of the entrepreneurs' blocks.  Xv-dxS84. In determining which of the blocks in each market should constitute the entrepreneurs' blocks, we seek to make sufficient opportunity available to businesses that would qualify for the entrepreneurs' blocks and to those that would not. We seek comment on whether it would be appropriate to include all of those remaining blocks designated for bidding credits and to add one additional MTA block and one additional BTA block if we decide to adopt the proposal. We seek comment on the choice of blocks and the number of blocks that should be included in the entrepreneurs' blocks. We want to choose blocks to provide adequate amounts of spectrum and geographic territory necessary to ensure that the  X -eligible bidders will be able to compete effectively. We believe that designating a variety of frequency blocks as entrepreneurs' blocks would satisfy the needs of those parties who believe they must have larger amounts of spectrum to compete effectively as well as the needs of other designated entities who require smaller blocks. Finally, it would not foreclose  Xb-opportunities for other parties.ybw X-ԍ In addition, incumbent paging licensees would have the opportunity to bid on 2,176 MTA and BTA response channel licenses reserved for existing paging licensees.  X4-dxT85. Holding and Limited Transfer Period. Because we interpret the congressional goal of giving designated entities the opportunity to provide spectrumbased services to extend beyond merely obtaining a license, we seek comment on whether we should prohibit licensees in the entrepreneurs' blocks from voluntarily assigning or transferring control of their licenses  X-for a period of three years from the date of the license grant.z_ w X"-ԍ We propose considering exceptions to this threeyear holding period rule on a casebycase basis in the event of a judicial order decreeing bankruptcy or a judicial foreclosure if the licensee proposes to assign or transfer its authorization to an entity that meets the financial thresholds for bidding in the entrepreneurs' blocks. In addition, we note that a transfer is considered "involuntary" if it is made pursuant to a court decree requiring the sale or transfer  X&-of the licensee's stock or assets. Paramount Pictures, Inc., 43 FCC 453 (1949); Cf. William  X'-Penn Broadcasting, 16 FCC 2d 1050 (1969). We further ask commenters"(z0*((6" to address whether, for the next two to seven years of the license term, we should permit the licensee to assign or transfer control of its authorization only to an entity that satisfies the  X-entrepreneurs' blocks entry criteria.){w XK-ԍ We note that a licensee assigning its authorization pursuant to this limited transfer period might be subject to the repayment provisions associated with installment payments and  X-bidding credits. See infra  91, 98.) Comments should address whether any restrictions of this type would accurately balance the goal of promoting access to capital by designated entities with the need to assure the integrity of our process. During this limited transfer period, licensees would continue to be bound by the financial eligibility requirements, as set  Xv-forth below.*|vKw Xr -ԍ See infra  101106. In addition, for purposes of the installment payment and bidding credit provisions set forth below, licensees will continue to be bound by the financial eligibility requirements throughout the term of the license. * In addition, a transferee or assignee who receives an entrepreneurs' block license during this period would remain subject to the transfer restrictions for the balance of  XH-the holding period.@}Hw X-ԍ For example, if an entrepreneurs' block authorization is assigned to an eligible business in year four of the license term, it would be required to hold that license until the original holding period expires, subject to the same exceptions that applied to the original licensee.@ Should any of these proposals be adopted, the Commission would conduct random pre and postauction audits to ensure that applicants receiving preferences are in compliance with the FCC's rules.  X -dxU86. Our goals are to create significant opportunities for entrepreneurs, small businesses, and businesses owned by minorities and women to compete in auctions for licenses and attract sufficient capital to buildout those licenses and provide service. We recognize the critical need to attract capital, which requires flexibility. We are very concerned, however, that such flexibility not undermine our more fundamental objective,  Xy-which is to ensure that designated entities retain de facto and de jure control of their companies. The holding and limited transfer period upon which we seek comment, may help promote this objective. We seek comment on the effect that any rules of this sort are likely to have on the achievement of our goals of meaningful longterm participation by designated entities and how such a rule would impact the ability to raise capital.  X-d E.xBidding Credits  X-dxV87. In the Third Report and Order we adopted a 25 percent bidding credit for businesses owned by minorities and women. We concluded that the use of bidding credits would be an effective tool to ensure that women and minorityowned businesses have  X|-opportunities to participate in the provision of narrowband services.\~|: w Xg'-ԍ See Third Report and Order at  72.\ And, in this Order, we"|) ~0*((" raised this bidding credit to 40 percent for the regional narrowband auctions. While we do not think that a bidding credit of this magnitude is required when used in conjunction with an insulated entrepreneurs' block, we continue to believe that a bidding credit is necessary to ensure that women and minorityowned businesses have the opportunity to participate in narrowband PCS. In addition, we believe that a small bidding credit is warranted to help small businesses overcome financing obstacles. Accordingly, we propose to continue to provide a bidding credits in the proposed entrepreneurs' blocks that would give small businesses a 10 percent credit, women and minorityowned businesses a 15 percent credit, and small businesses owned by women and minorities an aggregate credit of 25 percent.  X -dxW88. In ex parte presentations to the Commission, many commenters have indicated that, without spectrum setasides for narrowband PCS, bidding credits would not be sufficient to assist designated entities in outbidding very large entities who are likely to bid for licenses in this service. PCSD states, for example, that all of the existing large paging companies can justify much larger payments for licenses than could an individual entrepreneur, regardless of a bidder's credit. Therefore, it believes no entrepreneur will win a bid for any PCS market  X-that is desirable to any of the large companies.~w X -ԍ Ex parte filing of PCSD Development Corporation (PCSD), August 9, l994. ~ As described above, in order to afford designated entities a realistic opportunity to obtain licenses in the narrowband PCS service, we propose to exclude very large businesses from bidding for licenses in the entrepreneurs' blocks. These measures would enhance the value of the bidding credits for small businesses and businesses owned by minorities and women. In this context, we believe that bidding credits can have a significant effect on the ability of small businesses and businesses owned by women and minorities to participate successfully in auctions for licenses in entrepreneurs' blocks.  X-dxX89. As explained above, the capital access problems faced by small firms and women and minorityowned firms make special provisions like bidding credits appropriate for these  X-designated entities in narrowband PCS.yw X-ԍ Although we did not previously grant bidding credits to small businesses in the Third  X-Report and Order, we now believe that, given the exponentially greater expense likely to be incurred in acquiring broadband PCS licenses, bidding credits might be a proper means to ensure that these firms have the opportunity to participate in this service. In effect, the bidding credit would function as a discount on the bid price a firm would actually have to pay to obtain a license and, thus, will address directly the financing obstacles encountered by these entities. Moreover, as noted previously, women and minorities face discrimination in lending and other barriers to entry not encountered by other firms, including other designated entities. Therefore, as one of the measures designed to counter these increased capital formation difficulties, we propose to provide them with a slightly higher bidding credit than small businesses. Thus, women and minorities would receive a 15 percent payment discount that is applied against the amounts they bid on licenses. Absent such measures targeted specifically to women and minorities, it"*0*((" might be impossible to assure that these groups achieve any meaningful measure of opportunity for actual participation in the provision of narrowband PCS. Similarly, it is reasonable to assume that small firms owned by women and minorities suffer the problems endemic to both groups. Therefore, we propose a cumulative bidding credit of 25 percent for these groups. We believe that these measures will help women and minorities to attract the capital necessary for obtaining a license and constructing and operating a narrowband PCS system, consistent with the intent of Congress. We seek comments on these proposals.  XH-dxY90. As discussed below, we have also proposed to modify the definition of a minority  X1-and womenowned firm.Q1w X -ԍ See infra  107117.Q To receive a 10 percent bidding credit, we propose that a small business must satisfy the same gross revenue test adopted for installment payments. As explained more fully in the small business definition section, we propose that a consortium consisting entirely of small businesses also be eligible for a 10 percent bidding credit even if the combined gross revenues of the consortium exceed the small business gross revenues threshold. In addition, we propose that a small business that is owned by women and minorities must satisfy the definition of a business owned by minorities and women as well as the small business definition to receive a 25 percent bidding credit. Finally, we propose that a consortium of small firms owned by women and/or minorities is eligible for a 25 percent bidding credit, provided that each member of the consortium meets the definition of a small business and a minority and/or womenowned firm.  X-dxZ91. Repayment Policies Applicable to Bidding Credits To ensure that bidding credits benefit the parties to whom they are directed, we inquire whether we should adopt strict repayment policies: if, within the original 10year term, a licensee applies to assign or transfer control of a license to for example, an entity that is not eligible for as a high a level of bidding credit, then the difference between the bidding credit obtained by the assigning party and the bidding credit for which the acquiring party would qualify would have to be paid to the U.S. Treasury as a condition of approval of the transfer. Thus, an assignment of a license from a small minorityowned firm to a womenowned firm with revenues greater than $40 million would require repayment of 10 percent of the original bid price (25 percent less 15 percent) to the Treasury. A sale to an entity that would not qualify for bidding credits would entail full repayment of the original bidding credit as a condition of transfer. Small businesses also would be bound by the financial eligibility rules during the entire license term as set forth below. Thus, if after licensing an investor purchases an "attributable" interest in the business and, as a result, the gross revenues of the firm exceed the $40 million small  X-business cap, this repayment provision would apply.yw X$-ԍ See infra  102106, for a discussion of which investor interests would be "attributable" for purposes of calculating the gross revenues caps. If such a proposal were to be adopted, we would envision that these repayment provisions apply throughout the original term of the license to help promote the longterm holding of licenses by those parties receiving bidding"!+0*(( " credits. Nevertheless, as in the case of the holding period and transfer restrictions discussed at 8889 above we seek comment on any effects such rules may have on the ability of designated entities to attract capital. We therefore ask commenters to address in detail whether this type of restriction would further the goal of increasing the number of designated entities participating in the provision of narrowband PCS services.  Xv- dF.xInstallment Payments  XH-dx[92. A significant barrier for most businesses small enough to qualify to bid in the proposed entrepreneurs' blocks would be access to adequate private financing to ensure their  X -ability to compete against larger firms in the PCS marketplace. w X -ԍ See e.g., comments of SBA Chief Counsel of Advocacy at 6, 2021, NTIA at 27; SBAC Report at 2 (September 15, 1993). In the Third  Report and  X -Order, we concluded that installment payments are an effective means to address the inability of small businesses to obtain financing and will enable these entities to compete more effectively for the auctioned spectrum. We also determined that small businesses eligible for installment payments would only be required to pay half of the down payment (10 percent of the winning bid, as opposed to 20 percent) five days after the auction closes, with the remaining 10 percent payment deferred until five days after grant of the license. Finally, we indicated that installment payments should be made available to small businesses at an interest  Xb-rate equal to the rate for U.S. Treasury obligations.cbbw Xu-ԍ See Third Report and Order at  8690.c   X4-dx\93. In light of the expected substantial capital required to acquire narrowband PCS licenses, we propose that installment payments be available to most businesses that obtain narrowband PCS licenses in the proposed entrepreneurs' blocks. By allowing payment in installments, the government would in effect be extending credit to licensees, thus reducing the amount of private financing needed prior to and after the auction. Such low cost government financing would promote longterm participation by these businesses, which, because of their smaller size, lack access to sufficient capital to compete effectively with larger PCS licensees. Under the rules we propose today, installment payments would be available to smaller entities that do not technically qualify as small businesses for purposes of other measures we have proposed, such as bidding credits. We believe, however, that, given the significant costs of narrowband PCS licenses and the likelihood of very large participants in the other blocks, this option would be fully consistent with the congressional intent in enacting Section 309(j)(4)(A) to avoid a competitive bidding program that has the effect of favoring incumbent providers of other communications services, with established revenue  X-streams, over smaller entities.w X%-ԍ See H.R. Rep. No. 103111 at 255 (Commission has the authority to design alternative payment schedules in order that the auction process does not inadvertently favor only those with "deep pockets" over new or small companies).",0*(("Ԍ  X-dx]94. Under the plan we propose here, all licensees that satisfy the gross revenues, total assets and personal net worth criteria to bid in the entrepreneurs' blocks would be allowed to pay in installments for regional and MTA licenses granted in those blocks. With respect to the BTA licenses in those blocks, however, only businesses owned by women and minorities and those licensees with less than $75 million in gross revenues would be able to use  Xv-installment payments.ivw X-ԍ We will apply the same $500 million total assets and $100 million personal net worth standards for purposes of determining eligibility for installment payments in the BTA entrepreneurs' blocks. The attribution rules set forth with regard to eligibility to bid will also apply in all of the BTA entrepreneurs' blocks. i This distinction is based on the expected lower costs to acquire licenses and construct systems in the BTAs. However, if we adopt our proposal to redesignate BTA licenses as nationwide or regional licenses, we propose extending installment payments on those blocks to all parties eligible for the entrepreneurs' blocks. Thus, with the exception of companies owned by women or minorities, which face additional problems accessing capital, we do not think that a firm with gross revenues exceeding $75 million  X -would require government financing to be competitive for the BTA licenses.( 4w X-ԍ We note that a consortium of small businesses would be eligible for installment payments in any market so long as each member of the consortium satisfies the definition of a  X-small business, as set forth in Section V.A., infra. (  X -dx^95. The installment payment option would enable qualified businesses to pay their winning bid over time. These businesses would still make the applicable upfront payment in full before the auction, but would be required to make a postauction down payment equaling only ten percent of their winning bids, half of which will be due five business days after the auction closes. Payment of the other half of the down payment would be deferred until five business days after the license is granted. In general, the remaining 90 percent of the auction price would be paid in installments with interest charges to be fixed at the time of licensing at a rate equal to the rate for tenyear U.S. Treasury obligations plus 2.5 percent. Under this general rule, only payments of interest would be due for the first year with principal and  X-interest payments amortized over the remaining nine years of the license. Timely payment of all installments would be a condition of the license grant and failure to make such timely  X-payment would be grounds for revocation of the license.w X)!-ԍ As described in the Second Report and Order, the Commission may, on a casebycase basis, permit a three to six month grace period within which a licensee may seek a restructuring of the payment plan. We seek comment on this installment payment proposal.  X|-dx_96. Enhanced Installment Payments As explained previously, small businesses and businesses owned by minorities and women face capital access difficulties not encountered by other firms and, thus, require special measures to ensure their opportunity to participate in"N-: 0*((" narrowband PCS. Accordingly, we propose an "enhanced" installment payment plan for these entities. Pursuant to this enhanced installment payment plan, small businesses who win licenses in the proposed entrepreneurs' blocks would be required to pay interest only for the first two years of the license term at the same interest rate as set forth in the general rule. Businesses owned by women and/or minorities would be able to make interestonly payments for three years. Interest would accrue at the Treasury note rate without the additional 2.5  Xv-percent.=vw X-ԍ To be eligible for these "enhanced" installment payments, a firm would have to satisfy either of the two alternative definitions of a woman or minorityowned business, as set forth  X -in 107-117, infra, as well as the applicable financial caps.= And, finally, businesses that are both small and owned by women and/or minorities would be required to pay only interest for five years. Interest would accrue at the Treasury note rate.  X -dx`97. These proposed enhanced installment payments are narrowly tailored to the needs of the various designated entities, as reflected in the record in this proceeding. We believe that varying the moratorium on principal in the early years of the loan and varying the interest rate based on these needs would allow small businesses and companies owned by women and/or minorities to bid higher in auctions, thereby increasing their chances for obtaining licenses. In addition, it would allow them to concentrate their resources on infrastructure buildout and, therefore, it would increase the likelihood that they become viable narrowband PCS competitors. We request comment on these proposed enhancements to the installment payment plan.  X4-dxa98. Unjust Enrichment Applicable to Installment Payments To ensure that large businesses do not become the unintended beneficiaries of measures meant for smaller firms,  X-we propose to retain the unjust enrichment provisions adopted in the Third Report and Order applicable to installment payments. Specifically, if a licensee that was awarded installment payments seeks to assign or transfer control of its license to an entity not meeting the applicable eligibility standards set out above during the term of the license, we would require payment of the remaining principal and any interest accrued through the date of assignment as  X-a condition of the license assignment or transfer.]Kw X-ԍ See Third Report and Order at  89.]  Moreover, if an entity seeks to assign or transfer control of a license to an entity that does not qualify for as favorable an installment payment plan, the installment payment plan, if any, for which the acquiring entity qualifies would become effective immediately upon transfer. Thus, a higher interest rate and earlier payment of principal may begin to be applied. For example, a transfer of a license in the fourth year after license grant from a small minorityowned firm to a small nonminority owned firm would require that the firm begin principal payments and the balance would begin accruing interest at a rate 2.5 percent above the rate that had been in effect. Finally, if an investor subsequently purchases an "attributable" interest in the businesses and, as a result, the".0*((" gross revenues or total assets of the business exceed the applicable financial caps, this unjust  X-enrichment provision would also apply.w Xb-ԍ See infra  102106, for a discussion of which investor interests would be "attributable" for purposes of calculating the gross revenues and total assets thresholds. We seek comment on these proposals.  X- dG.xUpfront Payments  X-dxb99. As previously indicated in the Third Report and Order, the upfront payment requirement was designed to ensure that bidders are qualified and serious and to provide the Commission with a source of funds in the event that it becomes necessary to assess default or  XH-bid withdrawal penalties.Hbw X[ -ԍx#Xj\  P6G; XP#Third Report and Order, #Xj\  P6G; XP# 4145. The upfront payment ensures that bids during the course of the  X1-auction are bona fide and convey information about the value of the underlying licenses. Our standard upfront payment for narrowband PCS is $0.02 per MHz per pop. As an additional means of enhancing the opportunity of designated entities to participate in competitive bidding we propose to reduce the required upfront payment for those applicants. As we concluded in  X -the Fifth Report and Order, we are concerned that the $0.02 per MHz per pop upfront payment requirement might impose a barrier for smaller entities wishing to participate in the auctions. Moreover, we note that most bidders in the proposed entrepreneurs' blocks would be entitled to pay for their licenses in installments, which would require a down payment of only five percent of the winning bid. We are concerned that requiring an upfront payment that may be larger than the down payment that the winning bidder is required to tender could discourage auction participation.  X-dxc100. For these reasons, we propose to reduce the upfront payment requirement to $0.015 per MHz per pop for bidders in the entrepreneurs' blocks. This 25 percent discount should facilitate auction participation by capitalconstrained companies and would permit them to conserve resources for infrastructure development after winning a license. Moreover, since the upfront payment is still substantial, we believe that insincere bidding would be discouraged and the Commission would have access to funds if it must collect default or bid withdrawal penalty payments.  Xe-_d H.xDefinitions and Eligibility  X7-dx 1.44Eligibility to Bid in the Proposed Entrepreneurs' Blocks  X -dxd101. As noted previously, eligibility to bid in the proposed entrepreneurs' blocks would be limited to companies that, together with their affiliates and investors, had gross revenues of less than $125 million in each of the last two years and have total _assets of less than $500 million at the time their short form applications are filed. In addition, we propose to prohibit an applicant from bidding in these blocks if any one attributable individual"!/0*(( " investor or principal in the applicant has $100 million or greater in personal net worth at the short form application filing date.  X- dx2. Attribution Rules for the Proposed Entrepreneurs' Blocks  X-dxe102. For purposes of determining whether an entity qualifies to bid in the entrepreneurs' blocks, we propose to follow the control group and attribution rules set forth  X_-with regard to eligibility to bid as a small business.V_w X-ԍ See supra  4147. V In particular, winning bidders would be required to identify on their longform applications a control group that controls the applicant, owns at least 25 percent of the equity, and in the case of a corporation, holds at least 50.1 percent of the voting stock. For partnership applicants, we propose that every general partner be considered part of the group. The gross revenues and total assets of each member of the control group and each member's affiliates would be counted toward the $125 million/$500 million thresholds, regardless of the size of the member's total interest in the applicant. The $100 million personal net worth limitation would also apply to each member of the control group. We would not consider the gross revenues or personal net worth of any other investor unless the investor holds 25 percent or more of the outstanding passive equity in the applicant, which, as defined above, includes as much as fifteen percent of the voting stock in a corporate applicant.  X4-dxf103. We also propose the more relaxed attribution standard set forth in  4951 with regard to investors in small businesses owned by minorities and women. Specifically, we would not consider the gross revenues or personal net worth of a single passive investor in a minority or femaleowned small business unless the investor holds in excess of a 49.9 percent passive interest (which includes as much as fifteen percent of a corporate applicant's voting stock), provided the women or minority control group maintains at least 50.1 percent of the equity and, in the case of a corporate applicant, at least 50.1 percent of the voting stock. We  X-believe that such revenue attribution would ensure that only bona fide small businesses are able to take advantage of the special provisions we have proposed, but would allow those businesses to attract sufficient equity capital to be truly viable contenders in the PCS industry.  X7-dxg104. In addition, we propose to allow a consortium of small businesses to qualify for any of the measures adopted in this order applicable to individual small businesses including the ability to bid in the entrepreneurs' block. As used here, the term "consortium" means a conglomerate organization formed as a joint venture among mutuallyindependent business firms, each of which individually satisfies the definition of a small business.  X!-dxh105. We explain how these attribution rules would apply with regard to any holding and limited transfer period for entrepreneurs' block licensees should such rules ultimately be adopted. During this holding period, an entrepreneurs' block licensee could not sell more than 25 percent of its passive equity to a single investor if the resulting attribution of that"h$0y0*((F#" investor's gross revenues or total assets would bring the company over the $125 million gross revenues/$500 million total assets thresholds, or if that investor's personal net worth exceeds the $100 million personal net worth cap. Similarly, while individual members of the control group could change (if it would not result in a transfer of control of the company), the control group would have to maintain control and at least 25 percent of the equity and 50.1 percent of  X-the voting stock.w X-ԍ A minority or womanowned company would have to continue to adhere to the attribution rules applicable to it, set out above. A company would be permitted to grow beyond these gross revenues/total assets caps, however, through equity investment by nonattributable (i.e. passive) investors,  X_-debt financing, revenue from operations, business development or expanded service._bw Xr -ԍ These rules would continue to apply in this manner throughout the license term with regard to a firm's continuing eligibility for installment payments, "enhanced" installment payments and bidding credits.  X1-dxi106. We seek comment on these proposed eligibility requirements for the entrepreneurs' blocks. In particular, parties should discuss the equity and control requirements for the control group and investors in both the corporate and partnership context. In addition, commenters should discuss the alternative option for women and minorityowned companies and the ability of small businesses to form consortia. With regard to all of these issues, parties are asked to comment on the proposals' impact on the ability of entities to obtain financing as well as on the Commission's goals of deterring shams and fronts.  Xy-d x3.44Definition of Women and MinorityOwned Business  XK-dxj107. As discussed above, we have proposed steps in this order to address the special funding problems faced by minority and womenowned firms and thereby to ensure that these groups have the opportunity to participate and become strong competitors in the narrowband  X-PCS service.Hw X-ԍ We propose to use the same criteria set forth in the Second Report and Order, and consider the members of the following groups "minorities" for purposes of our rules: "[T]hose of Black, Hispanic Surnamed, American Eskimo, Aleut, American Indian and Asiatic  XW-American extraction." See Statement of Policy on Minority Ownership of Broadcasting Facilities, 68 FCC 2d 979, 980 n.8 (1978); Commission Policy Regarding the Advancement of Minority Ownership in Broadcasting, 92 FCC 2d 849, 489 n.1 (1982). Moreover, as adopted in the Second Report and Order, minority and womenowned businesses would be eligible for  X"-special measures only if the minority and women principals are also United States citizens.  We previously adopted a tax certificate program for women and minorities to allow more sources of potential funding, and in this Order have relaxed the attribution standard used to determine eligibility as a qualified small business.  X-dxk108. For purposes of implementing these steps, we propose to depart from the  X-definition of a minority and womanowned firm that was adopted in the Third Report and"10*(("  X-Order. We have adopted relaxed attribution standards for businesses owned by women and minorities for purposes of qualifying for small business provisions ( 46). We are proposing relaxed standards for businesses owned by women and minorities to qualify for the  X-entrepreneurs' blocks. In the Third Report and Order, we found generally that to establish ownership by minorities and women, a strict eligibility standard should be adopted that required minorities or women to have at least a 50.1 percent equity stake and a 50.1 percent  Xv-controlling interest in the designated entity. Third Report and Order at 68; 47 C.F.R.  1.2110(b)(2). For future narrowband PCS auctions, we propose to retain the requirement that minorities and/or women control the applicant and hold at least 50.1 percent of a corporate applicant's voting stock. However, to establish their eligibility for certain benefits, summarized below, we propose an additional requirement that, even where minorities and women hold at least 50.1 percent of the applicant's equity, other investors in the applicant may own only passive interests, which, for corporate applicants, is defined to include as much as fifteen percent of the voting stock. In addition, provided that certain restrictions are met, we propose to allow women and minorityowned firms the option to reduce to 25 percent the 50.1 percent minimum equity amount that must be held.  Xy-dxl109. We emphasized in the Third Report and Order that we did not intend to restrict the use of various equity financing mechanisms and incentives to attract financing, provided that the minority and women principals continued to own 50.1 percent of the equity, calculated on a fullydiluted basis, and that their equity interest entitled them to a substantial stake in the profits and liquidation value of the venture relative to the noncontrolling  X-principals. We noted, however, in the Second Report and Order that different standards that  X-meet the same objectives may be appropriate in other contexts. Second Report and Order at  278. In view of the evidence of discriminatory lending experiences faced by minority and women entrepreneurs and the exceptionally great financial resources believed to be required by narrowband PCS applicants, we conclude that it may be appropriate to allow more flexibility with regard to the 50.1 percent equity requirements for this service in order to open doors to more sources of equity financing for women and minorityowned firms.  XN-dxm110. We propose therefore to allow women and minorityowned firms the following  X7-options. First, they may satisfy the general definition set forth in the Second Report and  X -Order, which requires the minority and/or female principals to control the applicant, own at  X -least 50.1 percent of its equity and, in the case of corporate applicants, hold at least 50.1 percent of the voting stock. Under this option, other investors may own as much as a 49.9 percent passive equity interest. As noted above regarding eligibility to bid in the entrepreneurs' blocks, passive equity in the corporate context means only nonvoting stock  X!-may be held, or stock that includes no more than fifteen percent of the voting interests.!w X&$-ԍ For example, under this option, a corporate applicant with two classes of issued and outstanding stock, 100 shares of voting stock and 100 shares of nonvoting stock, could sell to a single noneligible entity 49.9 percent of the applicant's equity, consisting of 5 shares of the corporation's voting stock and 94 shares of its nonvoting stock. Under this scenario,"&0*((&" eligible minorities or women, in order to retain at least 50.1 percent of the value of all outstanding shares of the corporation's stock, must own all of the corporation's remaining shares of stock; that is, 95 shares of voting stock and six shares of nonvoting stock. For"!2K0*(( " partnerships, the term means limited partnership interests that do not have the power to exercise control of the entity. We ask commenters specifically to address whether the proposed fifteen percent voting interest limitation strikes the correct balance, or whether a higher percentage would facilitate capital formation without unduly contributing to a  X-proliferation of shams. In addition, the Second Report and Order, all investor interests would be calculated on a fullydiluted basis, meaning that agreements such as stock options, warrants and convertible debentures generally would be considered to have a present effect and would  X_-be treated as if the rights thereunder already have been fully exercised.Tv_Kw X[ -ԍ As also noted in the Second Report and Order, we will consider departing from the requirement that the equity of investors in minority and womenowned businesses must be calculated on a fully-diluted basis only upon a demonstration, in individual cases, that options or conversion rights held by non-controlling principals will not deprive the minority and women principals of a substantial financial stake in the venture or impair their rights to  X-control the designated entity. See Second Report and Order at  277. T We recognize that the requirement that other investors own only passive interests would be a departure from the  X1-definition of a minority or womenowned business adopted in the Second Report and Order, but because of the very significant financial contribution that may be made by such other investors in designated entities, we believe that the passive equity requirement may be appropriate as an additional safeguard. In addition, we seek comments on whether these rules as currently framed may affect the ability of legitimate designated entities to obtain the capital needed to participate in the auction.  X-dxn111. As a second proposed option, women and minorityowned firms would be able to sell up to 75 percent of the company's equity, provided that no single investor may hold 25 percent or more of the firm's passive equity, which is defined in the same manner as above. For example, a corporation with 100 shares of voting stock and 100 shares of nonvoting stock, with the 200 shares representing the total outstanding shares of the company, could qualify as a minority or womenowned business under the following circumstances. The minority or women principals would have to own at least 51 shares of voting stock, which satisfies the requirement that they have voting control and, in this case, also meets the requirement that they hold at least 25 percent of the equity. Two other investors could each own 34 shares of nonvoting stock and fifteen shares of voting stock, which represents 24.5 percent of the company's equity for each of the shareholders. A third investor could own the remaining 32 shares of nonvoting stock and fifteen shares of the voting stock, or 23.5 percent of the equity. The remaining 4 shares of voting stock may be sold to other investors.  XN-dxo112. Whichever option is chosen, we would require establishment of a "control group" for women and minorityowned firms in much the same way we did for purposes of eligibility"73 0*((]" to bid in the entrepreneurs' blocks. Specifically, winning bidders, transferees or assignees would have to identify on their longform applications a control group (consisting entirely of minorities and/or women or entities 100 percent owned and controlled by minorities and  X-women) that has de jure and de facto control of the applicant and holds either at least 50.1 or 25 percent of the applicant's equity, depending upon which option is elected.  Xv-dxp113. We believe that a modification of our 50.1 percent equity requirement would best achieve the Congressional objective of providing effective and longterm economic opportunities for women and minorityowned firms in narrowband PCS. At the same time, we propose to maintain strict enforcement of the requirement that actual control reside with the qualified designated entities. Thus, to establish their eligibility for tax certificates, enhanced installment payments, bidding credits and relaxed cellular attribution rules, women and minorityowned applicants electing to use the 25 percent equity option could not in any instance allow an individual investor who is not in the control group to own more than a 25 percent passive equity interest. This restriction would apply even in circumstances in which allowing an investor to exceed these limitations would not result in the applicant's exceeding the gross revenues and other financial standards that apply to other bidders in the entrepreneurs' blocks and other situations involving financial caps. These structural safeguards, as well as the general requirement that other investors hold only passive interests in women and minorityowned applicants, would help to ensure that control truly remains with the women and minority designated entities.  X-dxq114. For example, a women or minorityowned firm electing to use the 25 percent option may have a noneligible investor with more than a 25 percent passive stake and still qualify to bid in the entrepreneurs' blocks or for benefits that apply to small businesses, as long as the attributable revenues of the investor do not cause the applicant to exceed the gross revenues/total assets caps. In these contexts, no additional restrictions would be necessary, because women and minorityowned applicants, like other applicants, would be eligible to bid in these blocks and to qualify as small businesses so long as they comply with the same restrictions on financial eligibility that apply to other applicants. Since the attribution rule itself operates to ensure compliance with size limitations, it would not be necessary to impose additional restrictions on the size of interests held by investors with attributable interests. This firm would not qualify, however, for special measures applicable only to women and minorityowned businesses, such as "enhanced" installment payments or the 15 or 25 percent bidding credits, because it has a single noneligible investor with more than a 25 percent passive interest. In circumstances in which women and minorities are required to retain only 25 percent of the firm's equity, this additional structural restriction would be appropriate because the objective in this context is to ensure not merely financial eligibility, but that women and minorities retain control of the license.  Xh$-dxr115. We set forth previously rules defining more explicitly the term "control" for  XQ%-purposes of determining whether a "control group" maintains de facto as well as de jure"Q%40*(( $"  X-control of an applicant.Iw Xy-ԍ See supra  112.I We propose to apply those rules equally to the minority and women principals of minority and womenowned applicants. Consistent with our general policies with regard to womenowned applicants for purposes of our multiple ownership and crossownership rules in this broadcast context, we do not propose to adopt, at this time, any special rules or presumptions to determine whether womenowned applicants exercise  X-independent control of their firms. See In the Matter of Clarification of Commission Policies Regarding Spousal Attribution, 7 FCC Rcd. 1920 (1992)  XH-dxs116. We also note here that we are proposing to depart from the provision in the  X1-Third Report and Order that bars publicly traded companies from qualifying as minority and womanowned businesses for purposes of participating in auctions. Most of the steps  X -proposed to assist these designated entities in this Further Notice (e.g., bidding credits and installment payments) are confined to winning bidders in the entrepreneurs' blocks, where there would be a financial limit on the size of participants. Because of the large capital entry costs of narrowband PCS, we now believe that even publicly traded companies owned by women and minorities that qualify to bid in entrepreneurs' blocks require additional measures, such as bidding credits and installment payments, to be able to participate successfully.  Xb-dxt117. As noted above, we propose that applicants owned by women and minorities must meet the limitations on gross revenues, total assets and personal net worth to qualify for entry into the entrepreneurs' blocks. The size limitations would not apply, however, to all measures designed to assist applicants owned by minorities and or women. The tax certificate policy applies to all narrowband PCS licenses and would not be limited to licenses in the entrepreneurs' blocks. Therefore, businesses owned by minorities and women need not meet the gross revenue and other financial restrictions to qualify for tax certificates. But minority and womenowned firms would have to satisfy the Commission's structural ownership requirements to receive the benefits of tax certificates; that is, they would be subject to the limitation that interests held by investors who are not women and minorities must be passive.  Xe- _dx4.44Definition of an Affiliate  X7-dxu118. In the Second Report and Order, we referenced the SBA's affiliation rules for purposes of defining generally whether an entity qualifies as a small business and gave  X -examples of how the affiliation rules would be applied. In the Fifth Report and Order, we expanded on the SBA's affiliation rules in establishing detailed affiliation standards for _narrowband PCS to be used when designated entities must include "affiliates" to determine  X -their eligibility for special designated entity provisions. In the Second Memorandum Opinion  X!-and Order that we adopted in this docket, we incorporate into our generic auction rules the  X"-affiliation standards that we established for narrowband PCS in the Fifth Report and Order. We propose to apply these affiliation standards would also apply to narrowband PCS for purposes of determining any of the above described, sizedbased eligibility criteria for"h$5y0*((F#" designated entities seeking special treatment under the provisions adopted herein. These standards would give applicants clear guidance regarding the relationships that we will attribute for purposes of applying any of our sizedbased eligibility criteria. d  X- d I. Limit on Licenses Awarded in Entrepreneurs' Blocks  X-  Xv-dxv119. The special provisions which we propose for designated entities are based, in part, on our mandate to fulfill the congressional goal that we disseminate licenses among a wide variety of applicants. 47 U.S.C.  309(j)(3)(B). Therefore, in proposing the financial assistance measures set forth in this Further Notice, we are concerned about the possibility, even if remote, that a few bidders will win a very large number of the licenses in the entrepreneurs' blocks. As a consequence, the benefits that Congress intended for designated entities would be enjoyed, in disproportionate measure, by only a few individuals or entities. Congress, in our view, did not intend that result. We therefore propose steps to ensure that the financial assistance provided through our rules is dispersed to a reasonable number of applicants who win licenses in these blocks.  Xy-dxw120. To achieve a fair distribution of the benefits intended by Congress, we propose a limit on the total number of licenses within the entrepreneurs' blocks that a single entity could win at auction. In setting this limit, we would avoid imposing a restriction that would prevent applicants from obtaining a sufficient number of licenses to create large and efficient nationwide or regional services. Specifically, we propose a limitation that no single entity may win more than 10 percent of the licenses available in the entrepreneurs' blocks. These licenses could be in any combination of frequency blocks. Such a limit would ensure that at least 10 winning bidders enjoy the benefits of the entrepreneurs' blocks. At the same time, it would allow bidders to effectuate aggregation strategies that include large numbers of licenses and extensive geographic coverage.  X|-dxx121. Further, this limitation would apply only to the total number of licenses that may be won at auctions in these proposed entrepreneurs' blocks; it would not be an ownership cap that applies to licenses that might be obtained after the auctions. For purposes of implementing this restriction, we would consider licenses to be won by the same entity if an applicant (or other entity) that controls, or has the power to control licenses won at the auction, controls or has the power to control another license won at the auction.  X - dJ. xRedesignation of Certain Narrowband PCS Spectrum Blocks  X"-dxy122. Finally, we are concerned that there are companies that would be eligible for an entrepreneurs' block license that may desire larger license areas than MTAs and BTAs. It appears that over half of the bidders in the nationwide auction would have qualified for an entrepreneurs' block license. As a result, we propose to redesignate the two BTA licenses as regional licenses organized in the same configuration set forth in Section 24.102 of the rules. Doing so would give designated entities an opportunity to bid on a larger and more valuable"#'60*((%" license under the rules for entrepreneurs' blocks. We also seek comment on other means to achieve larger geographic license sizes such as designating these BTA licenses as nationwide licenses or by maintaining the BTA designation, but allowing combinatorial bidding for the designated regions. Commenters should also address the appropriate premium we should adopt for comparison of combinatorial and BTA license bids if we allow combinatorial bidding. We also seek comment on whether some of the MTA and BTA response channels should be redesignated as larger license areas with bidding limited only to those entities eligible to bid for entrepreneurs' block licenses.  XH- 1  X1-VII. PROCEDURAL MATTERS AND ORDERING CLAUSE  X - dA. Regulatory Flexib ility Analysis Đ  X -dxz123. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.  604, the  X -Commission's final analysis for the Memorandum Opinion and Order  and the Commission's  X -initial regulatory flexibility analysis for the Further Notice is as follows:  X-1  Xy-d Memorandum Opinion and Order Final Analysis  Xb-  XK-dx{124. Need for, and Purpose of, this Action. As a result of new statutory authority, the Commission may utilize competitive bidding mechanisms in the granting of certain initial  X-licenses. The Commission published an Initial Regulatory Flexibility Analysis, see generally  X-5 U.S.C.  603, within the Notice of Proposed Rule Making in this proceeding, and published  X-Final Regulatory Flexibility Analyses within the Second Report and Order (at  299302) and  X-the Third Report and Order (at  9194). As noted in these previous final analyses, this proceeding will establish a system of competitive bidding for choosing among certain  X-applications for initial licenses, and will carry out statutory mandates that certain designated entities, including small entities, be afforded an opportunity to participate in the competitive bidding process and in the provision of spectrumbased services.  XN- d x|125. Summary of the Issues Raised by the Public Comments. In regard to the  X7-specific narrowband PCS issues addressed by this Third Memorandum Opinion and Order, no comments were submitted in response to our Initial Regulatory Flexibility Analysis.  X-dx}126.  ` ` 44 Significant Alternatives Considered. Although, as described in (B) above, no  X-comments were received pertaining to narrowband PCS, the Second Report and Order and  X -Third Report and Order addressed at length the general policy considerations raised as a result of the Commission's new auction authority.  X#- Further Notice Initial Analysis  XQ%- dx~127. Reason for the Action. The purpose of the Further Notice is to implement competitive bidding rules and regulations rules consistent with the Commission's competitive  X#'-bidding authority that will carry out the statutory mandates that certain designated entities,"#'70*((%" including small entities, are afforded an opportunity to participate in the competitive bidding process and in the provision of spectrumbased services.  X- d x128. Objectives of this Action.  The Omnibus Budget Reconciliation Act of 1993 and  X-the subsequent Commission actions to implement it are intended to establish a system of  X-competitive bidding for choosing among certain applications for initial licenses, and will carry out statutory mandates that certain designated entities, including small entities, are afforded an opportunity to participate in the competitive bidding process and in the provision of narrowband PCS services.  X -dx129. Legal Basis. Authority for the for the Further Notice can be found in the Omnibus Budget Reconciliation Act of 1993 and in Sections 2(a), 4(i) 303(r), 309(i) and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  152 (a), 154 (i), 303(r), 309(i) and 309(j).  X-d130. Reporting, Recordkeeping and Other Compliance Requirements.  The proposals  Xy-under consideration in this Further Notice include the possibility of new reporting and recordkeeping requirements for a number of small business entities.  X4-d131.  Federal Rules Which Overlap, Duplicate or Conflict With These Rules. None.  X-d132.  Description, Potential Impact, and Number of Small Entities Involved . The rule  X-changes proposed in this Further Notice could effect smaller entities if they have mutually exclusive applications for initial licenses or permits for narrowband PCS licenses.  X-The Further Notice proposes to establish certain narrowband PCS spectrum blocks for bidding exclusively by smaller entities and to provide installment payments and bidding credits to certain eligible entities bidding within those blocks.  Xe-d133.  Any Significant Alternatives Minimizing the Impact on Small Entities Consistent  XN-with the Stated Objectives. The Further Notice  proposes certain provisions for smaller entities designed to ensure that such entities have the opportunity to participate in the competitive bidding process and in the provision of narrowband PCS services.  X- dB. Ex Parte Rules  X -d x134. This is a nonrestricted notice and comment rule making proceeding. Ex Parte presentations are permitted, except during the Sunshine Agenda period, provided they are  X"-disclosed as provided in Commission rules. See generally 47 C.F.R.  1.1202, 1.1203, and 1.1206(a).  XQ%-d C. Comment Dates  X:&- ":&80*(($"Ԍ X-dx135. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R.  1.415 and 1.419, interested parties may file comments on or before September 16, 1994 and reply comments on or before October 3, 1994. To file formally in this proceeding, you must file an original and four copies of all comments, reply comments, and supporting comments. If you want each Commissioner to receive a personal copy of your comments, you must file an original plus nine copies. You should send comments and reply comments to Office of the Secretary, Federal Communications Commission, Washington, DC 20554. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center of the Federal Communications Commission, Room 239, 1919 M Street, N.W., Washington, DC 20554. The complete text of this document may be purchased from the Commission's copy contractor, International Transcription Service, 1919 M Street, Room 236, Washington, DC 20554, telephone (202) 8573800.  X - dD. Ordering Clause  X-dx136. Accordingly, IT IS ORDERED, That the petitions for reconsideration ARE GRANTED to the extent described above and DENIED in all other respects.  XK-dx137. IT IS FURTHER ORDERED, that Part 24 of the Commission's Rules IS AMENDED as set forth in the attached Appendix. IT IS ORDERED, that the rule changes made herein WILL BECOME EFFECTIVE 30 days after their publication in the Federal Register. 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). dP,d,x,44,` ` , , FEDERAL COMMUNICATIONS COMMISSION(# ,d,x,44,` ` , , William F. Caton(# ,d,x,44,` ` , , Acting Secretary(# "#'90*((%"Ԍ  X- .APPENDIX ă  Xv-  V = V RULES ă  :   X1- Part 24 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: 1. The authority citation for Part 24 continues to read as follows:  X - 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.  X- 2. Section 24.129 is revised to read as follows:  Xb- Section. 24.129 Frequencies. dThe following frequencies are available for narrowband PCS. All licenses on channels indicated with an (* ) will be eligible for bidding credits of 25 percent, and all licenses indicated with an (**) will be eligible for bidding credits of 40 percent, as set forth in Section 24.309(b) of this Part if competitive bidding is used to award such licenses. d(a) Eleven frequencies are available for assignment on a nationwide basis as follows: d(1) Five 50 kHz channels paired with 50 kHz channels:  X|-X4` hp x (#%'0*,.8135@8:0*((%"Ԍ(f) Unjust Enrichment. Designated entities using installment payments, bidding credits or tax certificates to obtain a narrowband PCS license will be subject to the following unjust enrichment provisions: x(1) If a small business paying for a narrowband PCS license in installment payments seeks to transfer a license to a nonsmall business entity during the term of the license, the remaining principal balance must be repaid as a condition of the license transfer. x (2) If a licensee that utilizes installment financing under this section seeks to make any change in ownership structure that would result in the licensee losing eligibility for installment payments, the licensee shall first seek Commission approval and must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of the change as a condition of approval. Increases in gross revenues that result from equity investments that are not attributable to the licensee under  24.320(b)(2)(iv), revenues from operations, business development or expanded service shall not be considered changes in ownership structure under this paragraph. 7. Section 24.320 is added to read as follows:  XK-  24.320 Definitions.   X-(a) Scope. The definitions in this section apply to  24.30924.315 of this subpart, unless otherwise specified in those sections.  X-(b) Small Business; Consortium of Small Businesses.  X-x(1) A small business is an entity that (i) together with its affiliates has average annual gross revenues that are not more than $40 million for the preceding three calendar years; (ii) has no attributable investor or affiliate that has a personal net worth of $40 million or more; (iii) has a control group all of whose members and affiliates are considered in determining whether the entity meets the $40 million annual gross revenues and personal net worth standards; and (iv) such control group holds 50.1 percent of the entity's voting interest, if a corporation, and at least 25 percent of the entity's equity on a fully diluted basis, except that a business owned by members of minority groups and/or women (as defined in subsection (c)) may also qualify as a small business if a control group that is 100 percent composed of members of minority groups and/or women holds 50.1 percent of the entity's voting interests, if a corporation, and 50.1 percent of the entity's total equity on a fully diluted basis and no single other investor holds more than 49.9 percent of passive equity in the entity.  X#-x(2) Attribution and Aggregation of Gross Revenues and Personal Net Worth. Xx(i) Except as specified in paragraphs (iii) and (iv), the gross revenues of the applicant (or licensee) and its affiliates, and other persons that hold interests in the applicant (or"<&?0*(($" licensee) and their affiliates shall be considered on a cumulative basis and aggregated for purposes of determining whether the applicant (or licensee) is a small business.(# Xx(ii) The personal net worth of individual applicants (or licensees) and other persons that hold interests in the applicant (or licensee), and their affiliates, if less than $40 million, shall not be considered for purposes of determining whether the applicant (or licensee) is eligible to bid as a small business. (# Xx(iii) Where an applicant (or licensee) is a consortium of small businesses, the gross revenues of each small business shall not be aggregated.(# Xx(iv)(a) The gross revenues and personal net worth of a person that holds an interest in the applicant (or licensee) shall not be considered so long as (1) such person holds no more than 25 percent of the applicant's (or licensee's) passive equity and is not a member of the applicant's or control group; and (2) the applicant has a control group that owns at least 25 percent of the applicant's total equity and, if a corporation, holds at least 50.1 percent of the applicant's voting interests.(# Xx (b) The gross revenues, total assets and personal net worth of a person that holds an interest in the applicant shall not be considered so long as (1) such person holds no more than 49.9 percent of the applicant's (or licensee's) passive equity and is not a member of the applicant's control group; and (2) the applicant has a control group that consists entirely of members of minority groups and/or women and that owns at least 50.1 percent of the applicant's total equity and, if a corporation, at least 50.1 percent of the applicant's voting interests.(# Xx(# XxNote: 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 the such agreements may not be used to appear to terminate or divest ownership interests before they actually do so.(#  X -x(3) A small business consortium is a conglomerate organization formed as a joint venture between mutuallyindependent business firms, each of which individually satisfies the definition of a small business.  X -(c) Business Owned by Members of Minority Groups and/or Women. A business owned by  X!-members of minority groups and/or women is an entity (i) that has a control group composed 100 percent of members of minority groups and/or women who are United States Citizens, and (ii) such control group owns and holds 50.1 percent of the voting interests, if a corporation, and (A) owns and holds 50.1 percent of the total equity in the entity, provided that all other investors hold passive interests; or (B) holds 25 percent of the total equity in the entity, provided that no single other investor holds more than 25 percent passive equity interests in the entity. In a partnership, all general partners must be members of minority")'@0*((%" groups and/or women. 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 the such agreements may not be used to appear to terminate or divest ownership interests before they actually do so.  Xv-(d) Gross Revenues. Gross revenues shall mean all income received by an entity, whether  Xa-earned or passive, before any deductions are made for costs of doing business (e.g., cost of goods sold), as evidenced by audited quarterly financial statements for the relevant period.  X -(e) Personal Net Worth. Personal net worth shall mean the market value of all assets (real and personal, tangible and intangible) owned by an individual, less all liabilities (including personal guarantees) owed by the individual in his individual capacity or as a joint obligor.  X -(f) Members of Minority Groups. Members of minority groups includes individuals of African American, Hispanicsurnamed, American Eskimo, Aleut, American Indian and Asian American extraction.  Xh-(g) Passive Equity. Passive equity shall mean (i) for corporations, nonvoting stock or stock that includes no more than fifteen percent of the voting equity; (ii) for partnerships, joint ventures and other noncorporate entities, limited partnership interests and similar interests that do not afford the power to exercise control of the entity.  X-(h) Control Group. A control group is an entity, or a group of individuals or entities, that  X-possesses de jure control and de facto control of an applicant or licensee, and as to which the applicant's or licensee's charters, articles of incorporation, bylaws, agreements and any other relevant documents (and amendments thereto) provide (i) that the entity and/or its members own unconditionally at least 50.1 percent of the total voting interests of a corporation; (ii) that the entity and/or its members receive at least 50.l percent of the annual distribution of any dividends paid on the voting stock of a corporation; (iii) that, in the event of dissolution or liquidation of a corporation, the entity and/or its members are entitled to receive 100 percent of the value of each share of stock in its possession and a percentage of the retained earnings of the concern that is equivalent to the amount of equity held in the corporation; and (iv) that the entity and/or its members have the right to receive dividends, profits and regular and liquidating distributions from the business in proportion to its interest in the total equity of the applicant or licensee.  X!-XxNote: Voting control does not always assure de facto control, such as, for example,  X"-when the voting stock of the control group is widely dispersed (see, e.g.,  24.720 (e) (2) (iii)).(#  Xr$-  X[%-(i) Affiliate. (1) Determinations regarding whether an individual or entity will be considered  XD&-an affiliate of (a) an applicant or (b) a person holding an attributable interest in an applicant"D&A0*(($" under paragraph (b) (2) will be made pursuant to the general affiliation rules set forth in section 24.720 (l) of this part. 8. Section 24.406 is revised to read as follows:  X- Sec. 24.406 Filing of Narrowband PCS applications, fees, and numbers of copies.  Xv- (a) As prescribed by Sections 24.305, 24.307, and 24.409 of this part, standard formal application forms applicable to the narrowband PCS may be obtained from either: (1) Federal Communications Commission, Washington, DC 20554; or (2) by calling the Commission's Forms Distribution Center, (202) 4183676. (b) Applications for the initial provision of narrowband PCS service must be filed on FCC Form 175 in accordance with the rules in Section 24.305 and Part 1, Subpart Q. In the event of mutual exclusivity between applicants filing FCC Form 175, only auction winners will be eligible to file subsequent long form applications on FCC Form 401 for initial narrowband PCS licenses. Mutually exclusive applications filed on Form 175 are subject to competitive bidding under those rules. Narrowband PCS applicants filing Form 401 need not complete Schedule B. (c) All applications for Narrowband PCS radio station authorizations (other than applications for initial provision of narrowband PCS service filed on FCC Form 175) shall be submitted for filing to: Federal Communications Commission, Washington, DC 20554, Attention: Narrowband PCS Processing Section. Applications requiring fees as set forth at Part 1, Subpart G of this chapter must be filed in accordance with Sec. 0.401(b). (d) All correspondence or amendments concerning a submitted application shall clearly identify the name of the applicant, applicant identification number or Commission file number (if known) or station call sign of the application involved, and may be sent directly to the Common Carrier Bureau, Narrowband PCS Processing Section. (e) Except as otherwise specified, all applications, amendments, correspondence, pleadings and forms (including FCC Form 175) shall be submitted on one original paper copy and with three microfiche copies, including exhibits and attachments thereto, and shall be signed as prescribed by Sec. 1.743. Unless otherwise provided by the FCC, filings of five pages or less are exempt from the requirement to submit on microfiche, as well as emergency filings like letters requesting special temporary authority. Those filing any amendments, correspondence, pleadings, and forms must simultaneously submit the original hard copy which must be stamped "original". In addition to the original hard copy, those filing pleadings, including pleadings under Section 1.2108 of the rules shall also submit 2 paper copies as provided in Sec. 1.51 of the rules. "#'B0*((%"Ԍ (1) Microfiche copies. Each microfiche copy must be a copy of the signed original. Each microfiche copy shall be a 148mm X 105mm negative (clear transparent characters appearing on an opaque background) at 24X to 27X reduction for microfiche or microfiche jackets. One of the microfiche sets must be a silver halide camera master or a copy made on silver halide film such as Kodak Direct Duplicatory Film. The microfiche must be placed in paper microfiche envelopes and submitted in a B6 (125 mm x 176 mm) or 5 x 7.5 inch envelope. All applicants must leave Row "A" (the first row for page images)of the first fiche blank for in-house identification purposes. (2) All applications and all amendments must have the following information printed on the mailing envelope, the microfiche envelope, and on the title area at the top of the microfiche: (i) The name of the applicant; (ii) The type of application (e.g. nationwide, regional, MTA, BTA, response channel); (iii) The month and year of the document; (iv) Name of the document; (v) File number, applicant identification number, and call sign, if assigned; and (vi) The identification number and date of the Public Notice announcing the auction in response to which the application was filed (if applicable). Each microfiche copy of pleadings shall include: (A) The month and year of the document; (B) Name of the document; (C) Name of the filing party; (D) File number, applicant identification number, and call sign, if assigned; (E) The identification number and date of the Public Notice announcing the auction in response to which the application was filed (if applicable). Abbreviations may be used if they are easily understood. 9. Section 24.422 is revised to read as follows:  X:&- Sec. 24.422 Amendment of application for Narrowband Personal Communications  X#'-Service filed on FCC Form 175. "#'C0*((%"Ԍx(a) The Commission will provide bidders a limited opportunity to cure defects in FCC Form 175 specified herein except for failure to sign the application and to make certifications. These are defects which may not be cured. See also Section 1.2105. x(b) In the Narrowband PCS, applicants will be permitted to amend their Form 175 applications to make minor amendments to correct minor errors or defects such as typographical errors. Applicants will also be permitted to amend FCC Form 175, to make ownership changes or changes in the identification of parties to bidding consortia, provided such changes do not result in a change in control of the applicant and do not involve another applicant (or parties in interest to an applicant) who has applied for any of the same licenses as the applicant. Amendments which change control of the applicant will be considered major amendments. An FCC Form 175 which is amended by a major amendment will be considered to be newly filed and cannot be resubmitted after applicable filing deadlines. See also Section 1.2105. 10. Section 24.429 is amended by deleting paragraph (b) and redesignating paragraphs (c) and (d) as (b) and (c), respectively, to read as follows:  Xb- Sec. 24.429 Ownership changes and agreements to amend or to dismiss applications or  XK-pleadings. (a) Applicability. Subject to the provisions of Sec. 1.2105 (Bidding Application and Certification Procedures; Prohibition of Collusion), this section applies to applicants and all other parties interested in pending applications who wish to resolve contested matters among themselves with a formal or an informal agreement or understanding. This section applies  X-only when the agreement or understanding will result in: (1) A major change in the ownership of an applicant to which Sec. 24.423 (c) and 24.423 (g) would apply or which would cause the applicant to lose its status as a designated entity under Section 24.309, or (2) The individual or mutual withdrawal, amendment or dismissal of any pending application, amendment, petitioner or other pleading. (b) If the amendment would cause the applicant to lose its status as a designated entity under Section 24.309, the applicant must notify the Commission of this change in status and must comply with the obligations imposed by Sections 24.308, including increasing its down payment to the level required as a nondesignated entity. (c) The provisions of Section 22.927 will apply in the event of the individual or mutual withdrawal, amendment or dismissal of any pending application, amendment, petitioner or other pleading. 11. Section 24.430 is revised to read as follows:"#'D0*((%"Ԍ X-ԙ Sec. 24.430 Opposition to applications. (a) Petitions to deny (including petitions for other forms of relief) and responsive pleadings for Commission consideration must comply with Section 1.2108 and must: (1) Identify the application or applications (including applicant's name, station location, Commission file numbers and radio service involved) with which it is concerned; (2) Be filed in accordance with the pleading limitations, filing periods, and other applicable provisions of Secs. 1.41 through 1.52 except where otherwise provided in Section 1.2108; (3) Contain specific allegations of fact which, except for facts of which official notice may be taken, shall be supported by affidavit of a person or persons with personal knowledge thereof, and which shall be sufficient to demonstrate that the petitioner (or respondent) is a party in interest and that a grant of, or other Commission action regarding, the application would be prima facie inconsistent with the public interest; (4) Be filed within thirty (30) days after the date of public notice announcing the acceptance for filing of any such application or major amendment thereto (unless the Commission otherwise extends the filing deadline); and (5) Contain a certificate of service showing that it has been mailed to the applicant no later than the date of filing thereof with the Commission. (b) A petition to deny a major amendment to a previously filed application may only raise matters directly related to the amendment which could not have been raised in connection with the underlying, previously filed application. This does not apply to petitioners who gain standing because of the major amendment. (c) parties who file frivolous petitions to deny may be subject to sanctions including monetary forfeitures, license revocation, if they are FCC licensees, and may be prohibited from participating in future auctions.