FCC 94-219
Before the 
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Implementation of Section 309(j) 
of the Communications Act - 
Competitive Bidding 
Narrowband PCS
and
PP Docket No. 93-253
Amendment of the Commission's 
Rules to Establish New Narrowband 
Personal Communication Services
GEN Docket No. 90-314 
ET Docket No. 92-100
THIRD MEMORANDUM OPINION AND ORDER 
AND FURTHER NOTICE OF PROPOSED RULEMAKING
Adopted: August 16, 1994
Comment Date: September 16, 1994 
Reply Comment Date: October 3, 1994
By the Commission:
Released: August 17, 1994
TABLE OF CONTENTS
I. INTRODUCTION
Paragraph 
1
II. AUCTION DESIGN 
A. Bidding Procedures 
B. Minimum Opening Bid 
C. Activity and Stopping Rules 
D. Release of Bidder Information
5
5
10
12
16
175
E. Filing Procedures 17
F. Application-Processing Rules 21
III. RULES PROHIBITING SETTLEMENTS AND COLLUSION 25
IV. PAGING RESPONSE CHANNEL ELIGIBILITY 32
V. DESIGNATED ENTITY PROVISIONS 33
A. Definition of Small Business 42
B. Bidding Credits in Regional Narrowband Auctions 58
C. Rural Telephone Companies 59
D. Other Designated Entity Decisions 62
VI. PROPOSED DESIGNATED ENTITY PROVISIONS FOR MTA AND BTA
AUCTIONS 64
A. Introduction 64
B. Summary of Special Provisions for Designated Entities 73
C. Summary of Eligibility Requirements and Definitions 79
1. Entrepreneurs' Blocks and Small Business Eligibility 79
2. Definition of Women and/or Minority-Owned Business 80
D. The Entrepreneurs' Blocks 82
E. Bidding Credits 87
F. Installment Payments 92
G. Upfront Payments 99
H. Definitions and Eligibility 101
1. Eligibility to Bid in the Entrepreneurs' Blocks 101
2. Attribution Rules for the Entrepreneurs' Blocks 102
3. Definition of Women and Minority-Owned Business 107
4. Definition of an Affiliate 118
I. Limit on Licenses Awarded in Entrepreneurs' Blocks 119
J. Redesignaton of Certain Narrowband PCS Spectrum Blocks 122
VII. PROCEDURAL MATTERS AND ORDERING CLAUSE 122
A. Final Regulatory Flexibility Analysis 122
B. Ex Parte Rules 126
C. Comment Dates 127
D. Ordering Clause 128
176
I. INTRODUCTION
1. By this action, we respond to petitions for reconsideration of the Third Report and 
Order in this proceeding. 1 The Third Report and Order established service-specific rules for 
competitive bidding for the award of licenses for Personal Communications Services hi the 
900 MHz band (narrowband PCS). Seven such petitions were received, as well as three 
oppositions and comments and one reply.2
2. On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (the Budget 
Act) added a new section 309(j) to the Communications Act of 1934, as amended, 47 U.S.C. 
§§ 151-173 (the Communications Act). This amendment to the Communications Act gave the 
Commission express authority to employ competitive bidding procedures to choose from 
among mutually exclusive applications for initial licenses. The Commission's Second Report 
and Order established general rules and procedures and a broad menu of competitive bidding 
methods to be used for all auctionable services.3
3. The Third Report and Order established competitive bidding rules for narrowband 
PCS. The Commission decided that because of the interdependence within certain classes of 
narrowband PCS licenses and the relatively high expected value of such licenses, where the 
agency received mutually exclusive applications most narrowband PCS licenses would be 
awarded through a sequence of simultaneous multiple round auctions. However, we stated 
that we might alternatively use oral sequential or single round sealed bidding to award certain 
narrowband PCS licenses if the operational complexity or administrative costs associated with 
simultaneous auctions proved excessive relative to the expected value of the licenses to be 
awarded. We stated that in conducting narrowband PCS auctions we would generally follow 
the payment and procedural rules adopted hi the Second Report and Order, and we adopted 
general procedural and processing rules for the narrowband PCS service based on Parts 22 
and 90 of the Commission's rules. We also structured our rules to provide opportunities for
1 See Third Report and Order in PP Docket No. 93-253, 9 FCC Red 2941 (1994) (Third 
Report and Order).
2 Petitions for reconsideration were received from the Association of Independent 
Designated Entities (AIDE), Mercury Communications, Inc. (Mercury), Paging Network, Inc. 
(PageNet), Phase One Communications, Inc. (Phase One), the Rural Cellular Association 
(RCA), Tri-State Radio Co. (Tri-State), and U.S. Intelco Networks, Inc. (USIN). Oppositions 
or comments were received from United States Telephone Association (USTA), AirTouch 
Paging (AirTouch), and Paging Network, Inc. (PageNet); a reply was received from American 
Paging, Inc. (API).
3 Second Report and Order in PP Docket No. 93-253, 9 FCC Red 2348 (1994) (Second 
Report and Order).
177
small businesses and businesses owned by women and minorities to participate in the auction 
and in the provision of spectrum based services.
4. On July 29, 1994 we completed the first spectrum auction for the ten available 
nationwide narrowband PCS licenses. This auction was the first test of the simultaneous 
multiple round auction design and of our provisions for designated entities. This auction was 
enormously successful. One indication of the efficiency of the simultaneous multiple round 
bidding process is the fact that the winning bids were either identical or virtually identical for 
virtually identical licenses. As we expected, this auction also attracted broad participation by 
designated entities. Of the 29 registered bidders 9, or 30 percent, indicated status as either 
minority or woman-owned firms. The strong bidding competition among relatively large 
firms and incumbent paging companies, however, may have been a factor in the lack of 
designated entities among the winning bidders. These results have caused us to reexamine 
some of the auction rules and designated entity provisions previously adopted in the Third 
Report and Order. In addition, we request comment on a number of possible further changes 
in the designated entity provisions that might apply to the upcoming MTA and BTA auctions.
H. AUCTION DESIGN 
A. Bidding Procedures
5. In the Third Report and Order, the Commission noted its earlier findings 1) that 
licenses with strong value interdependencies should be auctioned simultaneously, 2) that 
multiple round auctions will generally yield more efficient allocations of licenses and higher 
revenues than other auction methodologies because they provide bidders with information 
regarding other bidders' valuations of licenses, and 3) that simultaneous multiple round 
auctions become less cost effective as the value of licenses decreases, because they are 
relatively time-consuming and expensive to implement.4 The Commission stated that where 
the licenses to be auctioned are interdependent and their value is expected to be high, 
simultaneous multiple round auctions would best achieve the Commission's goals.5 We 
stated, however, that we might use methods other than simultaneous multiple round bidding in 
cases where license values are expected to be relatively low, where bidder participation is 
expected to be limited, or where the interdependence of licenses is less significant.6 We 
stated that in selecting the auction method for each narrowband PCS auction, we would
4 Third Report and Order at ^| 12.
5 Id. at 1 13.
6 Id., at f 20.
178
balance the advantages of more sophisticated auction methods, such as simultaneous multiple 
round bidding, with the greater complexity and cost they might entail.7
6. In the Third Report and Order the Commission decided to auction the 12.5 kHz 
unpaired MTA and BTA response channel licenses in a single round sealed bid auction 
because the value of those licenses is low relative to the cost of conducting more complex 
auctions. We also stated that because only incumbent paging licensees already serving the 
license area are eligible to bid on these licenses, sealed bid auctions might help to reduce the 
likelihood of collusion. We further stated that information about license values from earlier 
narrowband auctions would also be available to assist bidders in valuing these licenses. 
Moreover, because under the sealed bid approach bidders cannot be certain that they will be 
the high bidder on the licenses they seek to obtain, we allowed bidders to bid without risking 
a default penalty on more than the two licenses in each service area, provided they specify in 
advance the order in which they wish to be awarded such licenses if they are the high bidder 
on more than they are permitted to hold.8
7. Petitions. Paging Network, Inc. (PageNet) and Tri-State Radio Co. (Tri-State) seek 
reconsideration of the decision to use single round sealed bid auction procedures for 
assignment of the 12.5 kHz unpaired licenses.9 PageNet and Tri-State assert that the 
Commission has underestimated the likely value of the response channel licenses. 10 PageNet 
and Tri-State also assert that great value interdependence exists among the response channel 
licenses." They state that there are likely to be numerous bidders for most licenses.12 In this 
regard, PageNet claims that collusive behavior is no more likely for these licenses than for 
other narrowband PCS licenses. PageNet and Tri-State question whether bidders for response 
channel licenses will obtain useful information about license values from previous narrowband 
PCS auctions. PageNet asserts that license values will vary from one provider and area to 
another, and that bidders may have no realistic idea as to the value of the licenses.13 
PageNet claims that the single sealed bid mechanism will require exorbitantly expensive
7 Id.
8 Id. at f 29.
9 PageNet Petition at 2; Tri-State Petition at 3.
10 PageNet Petition at 2; Tri-State Petition at 7.
11 PageNet Petition at 5; Tri-State Petition at 3.
12 PageNet Petition at 10; Tri-State Petition at 8.
13 PageNet Petition at 5.
179
market research on the part of bidders, and the result will still depend on chance.14 Further, 
PageNet states that it is important to choose an auction method which provides useful 
information on license values to bidders during the auction. Therefore, PageNet supports 
adopting an alternative auction method that is streamlined to niinimize cost and complexity, 
and recommends an ascending bid multiple round methodology. 15
8. Tri-State claims that the rules mandating single round sealed bidding are deficient 
from an auction design perspective. Tri-State asserts that these rules are poorly structured to 
allow bidders to obtain a common frequency across regions, and that under the rules bidders 
cannot know how to prioritize their bids. Tri-State further claims that the sealed bidding 
procedures require exceedingly complicated bidding strategies, which necessitate the adoption 
of a clear reallocation mechanism for defaulted licenses. Alternatively, Tri-State recommends 
a procedure in which bidders submit sealed bids for a given MTA or BTA without specifying 
which of the available frequencies the bidder is bidding on. Under Tri-State's recommended 
approach, winning bidders would be ranked for purposes of frequency selection according to 
the total amount they bid for all the channels on which they hold winning bids. Tri-State 
claims that this procedure maximizes the number of multiple MTA/BTA bidders who can 
obtain a common paging response channel in all markets in which they bid.16 Tri-State argues 
that its proposed auction procedures will level the playing field between bidders for paging 
response channels and those for regional and nationwide narrowband PCS authorizations, who 
do not need to aggregate a common frequency across geographic areas.17 Tri-State includes a 
25 percent bidding credit for minority- and female-owned businesses and small businesses, 
and states that its plan could be refined by providing that winning bidders pay the highest 
losing bid for a license.18 Tri-State asserts that its proposed auction procedures will ensure 
that the Commission maximizes revenues from paging response license auctions and allow 
bidders to set priorities more accurately and to adopt relatively simple bidding strategies.19 
AirTouch recommends multiple round simultaneous auctions, and suggests that bids for the 
response channels be in pool form, such that the highest four bidders would receive a license
14 Opposition of PageNet at 3.
15 PageNet reserves comment on more specific procedures pending conclusion of the 
nationwide narrowband PCS and Interactive Video and Data Service (IVDS) auctions. Id. at 
6.
16 Tri-State Petition at 12-16
17 Id. at 17.
18 Id. at 18-20.
19 Id. at 21.
180
and could agree among themselves as to the licenses to be held by each.20 American Paging, 
Inc. (API) supports multiple-round ascending simultaneous bidding methodologies, at least for 
the MTA response channel licensing.21
9. Discussion. Petitioners have convinced us that paging response channel licenses 
may have more value interdependency, and higher value, man was apparent at the time of the 
Third Report and Order. We also recognize that alternative auction methodologies proposed 
by petitioners may offer a low-cost auction method with desirable characteristics for 
auctioning interdependent licenses, and thus may prove superior to the sealed bid approach 
set forth in the Third Report and Order. In addition, the recent nationwide narrowband 
auction demonstrated that simultaneous multiple round auctions are easier and less expensive 
to implement than we earlier anticipated, and thus they may prove to be an appropriate 
procedure for auctioning the response channel licenses. However, we will defer our decision 
regarding the auction design for the 12.5 kHz MTA and BTA paging response channels until 
we have gained further experience with simultaneous multiple round auctions. We will 
announce our final choice of auction design and procedures for the response channels by 
Public Notice prior to the auction.
B. Minimum Opening Bid
10. In the Third Report and Order, we stated that we believe it is necessary to impose 
a minimum bid increment to ensure that the auctions conclude within a reasonable period of 
time in narrowband PCS auctions where simultaneous multiple round bidding is used. The 
bid increment is the amount or percentage by which the bid must be raised above the previous 
round's high bid in order to be accepted as a valid bid in the current round. We stated that 
we might impose a minimum bid increment of 5 percent or $0.01 per MHz per pop, 
whichever is greater, in narrowband PCS auctions where multiple round bidding is used. We 
also retained the discretion to vary the minimum bid increments for individual licenses or 
groups of licenses over the course of an auction.22
11. In order to expedite the auction process further, we also reserve the discretion to 
establish a suggested opening bid or a minimum opening bid on each license in addition to 
the minimum bid increment23 If we were to adopt minimum opening bids, we anticipate that 
we would seek expedited comments on any figures proposed. Once a minimum bid is 
established for a license, initial bids will have to be above that level to be considered valid.
20 Opposition of AirTouch at 7-8.
21 Reply of API at 2.
22 Third Report and Order at ffl 30-32.
23 See ex parte submission of Paul Milgrom, May 19, 1994 and Fifth Report and Order
145.
181
The amount of the suggested opening bid or the minimum opening bid, if one is used, will be 
set forth in the Public Notice announcing the auction. Generally, we will establish suggested 
opening bids or minimum opening bids in the range of $.03 - $.20 per MHz-pop for each 
license.24 A suggested opening bid or minimum opening bid will provide bidders with an 
incentive to start bidding at a substantial portion of the license value, thus ensuring a rapid 
conclusion to the auction.
C. Activity and Stopping Rules
12. In the Third Report and Order, we stated that when we use the three-stage 
Milgrom-Wilson activity rule, the auction will move from stage I to stage II when, after three 
rounds of bidding, the high bid has changed on 5 percent or fewer of the licenses (measured 
in MHz-pops) being auctioned. Stage III will begin when the high bid has changed on 2 
percent or fewer licenses over three rounds.25 We conclude after our experience in conducting 
the nationwide narrowband auction that we may find it important to move the auctions from 
one stage to the next at a different pace than would occur under this rule. Accordingly, we 
retain the discretion to determine and announce during the course of an auction when, and if, 
to move from one auction stage to the next, based on a variety of measures of bidder activity, 
(e.g.. the percentage of licenses on which there are new bids, the number of new bids, and the 
percentage increase in revenue). Bidders will be notified at least one round prior to the 
commencement of the next stage of an auction.
13. We also stated that in stage III, a bidder would have to be active on 100 percent 
of the MHz-pops for which it wishes to retain eligibility.26 In order to allow bidders greater 
flexibility, we think that it may be beneficial in some auctions to reduce this figure slightly, 
but in no case below 90 percent. We will announce the required activity levels for stage III 
in a Public Notice in advance of each auction.
14. In the Third Report and Order, we stated that where we use the Milgrom-Wilson 
activity rule we intend to use a simplified waiver procedure whereby bidders will be permitted
24 The number of "MHz-pops" is calculated by multiplying the population of the license 
service area by the amount of spectrum authorized by the license. In its September 1993 
Mid-Session Review of the 1994 Budget, the Office of Management and Budget estimated 
that spectrum auctions would generate $12.6 billion from 1994 through 1998. A 1992 report 
by the Congressional Budget Office assumed that $2 billion would be raised from competitive 
bidding in services other than PCS. Thus, the approximate value of 120 MHz of PCS 
spectrum is placed at $10.6 billion according to these estimates, or 35 cents per pop per MHz.
25 Third Report and Order at n. 16.
26 See Third Reort and Order
182
five automatic waivers from the activity rule during the course of an auction.27 A waiver 
permits a bidder to maintain its eligibility at the same level as in the round for which the 
waiver is submitted, regardless of the bidder's level of bidding activity in that round. 
Subsequently, we have concluded based on our experience in conducting the nationwide 
narrowband auction that fewer waivers may be necessary to maintain the pace of the auction 
and prevent strategic use of waivers. Consequently, we will allow one automatic waiver from 
the activity rule during each stage of an auction, or one automatic waiver during a number of 
bidding rounds specified in a Public Notice. We retain the flexibility, however, to change by 
Public Notice the number of waivers that will be permitted and the frequency with which they 
may be exercised by public notice prior to a specific narrowband auction. While we may 
allow bidders to request proactive waivers that will keep the bidding open, under no 
circumstances will an automatic waiver prevent an auction from closing.
15. In the Second Report and Order, we retained the discretion to declare by 
announcement at any point during a multiple round auction that the auction will end after a 
specified number of additional rounds.28 We want to clarify however, that if this procedure 
is used, we will accept bids in the final rounds only for licenses on which the highest bid 
increased in at least one of the preceding three rounds. No new bids will be accepted for 
other licenses.29 There are two reasons not to take bids on licenses on which there has been 
no recent bidding. First, the fact that bidding on an individual license may close will provide 
an additional incentive to bid actively and thus speed the conclusion of the auction. If bids 
are accepted on all licenses in the final rounds there is less cost to a bidder in holding back. 
Second, closing bidding on licenses for which activity has ceased ensures high bidders for 
those licenses that they will not lose a license without having an opportunity to make a 
counter-offer.30 This reduces the uncertainty associated with aggregating licenses that are 
worth more to a particular bidder as a package than individually. If final bids are accepted on 
all licenses, a high bidder on an aggregation of licenses may unexpectedly lose a critical part 
of the aggregation and have no chance to regain it except in the post-auction market, where 
bargaining or other transaction costs may be high.
27 Third Report and Order at f 40.
28 Second Report and Order at f 132.
29 See reply comments of PacBell, appendix to attachment by Milgrom and Wilson at 5. 
See also Second Report and Order at t 130, n.106.
30 Either the auction will close only when bidding ceases on all licenses, so the high 
bidder will have an opportunity to respond to any new bids, or the Commission will call for 
final bids but not accept new bids on licenses on which there have been no new bids in the 
previous three rounds, so no other bidder will have the opportunity to outbid the high bidder 
in a final round.
183
D. Release of Bidder Information
16. We note that in the reconsideration of the Second Report and Order we reserved 
additional flexibility with respect to the requirement to release information concerning the 
identity of bidders, which may affect auctions for narrowband PCS licenses. In the Second 
Memorandum Opinion and Order we reserved the option to release bidder identities on an 
auction-by-auction basis, and stated that we would announce by Order and Public Notice prior 
to each auction whether the identities of bidders would be made public in that auction.31 In 
this regard, we retain the flexibility in the context of narrowband PCS auctions to determine 
on an auction-by-auction basis whether or not to release bidder identities during the course of 
the auction.
E. Filing Procedures
17. Petition. Phase One asserts that the Communications Act permits the FCC to 
employ competitive bidding procedures only where mutual exclusivity exists, and that 
consequently the FCC is prohibited from establishing specific auction dates until it has 
determined that a particular application is mutually exclusive with another.32 Phase One 
states that the FCC must first notify each qualified applicant of its application processing 
status in advance of scheduling auctions to allow applicants sufficient time to analyze auction 
strategies and evaluate the competition.33 Phase One also states that the FCC is obligated to 
suspend its auctions until each petition in PP Docket No. 93-253 has been addressed.34 Phase 
One states that our contractor, Tradewinds International, Inc. (Tradewinds) must be prevented 
from promoting FCC auctions. Because there can be no auctions without mutual exclusivity, 
according to Phase One the advertising by Tradewinds amounts to false and misleading 
advertising and raises conflict of interest questions because Tradewinds may benefit if 
auctions are actually held.35
18. AirTouch Paging (AirTouch) asserts in opposition that the Communications Act 
only prohibits auctioning of a license for which no mutually exclusive applications have been 
accepted for filing, and not the establishment of auction dates. In fact, AirTouch notes that 
mutually exclusive applications were received for each of the nationwide narrowband PCS
31 Second Memorandum Opinion and Order at f 46.
32 Phase One Petition at 2.
33 Id. at 3.
34 Id. at 5.
35 Id. at 5-6.
184
licenses.36 PacBell states that there is no legal basis for Phase One's argument that the 
Commission must delay announcing auction dates until mutual exclusivity has been 
established.37
19. Discussion. The Budget Act provides that if applications are not mutually 
exclusive no auction will be held.38 We have found, however, that it is important to begin 
planning for auctions as early as possible to assure that they will run smoothly. To maintain 
an expeditious auctioning and licensing schedule it is necessary, for instance, to reserve sites 
for auctions before all applications have been received. Further, we believe that it is 
important that we schedule auctions far enough in advance to provide applicants with ample 
time to attract financing and plan then- bidding strategies. In any event, we have previously 
indicated that we will cancel a scheduled auction if we do not receive mutually exclusive 
applications.39 Consequently we believe that our auction schedule and procedures are fully 
consistent with the provisions of the Budget Act.
20. We find advertising of auctions desirable and in the public interest, even if, 
because of lack of mutual exclusivity, no auction takes place for some licenses. Among its 
other beneficial effects, advertising of auctions may be essential for making potential 
licensees, and in particular designated entities, aware of the opportunities available to them. 
In order to make service available as rapidly and efficiently as possible, we must ensure that 
those who value the license most highly, and will offer the services most valued by the 
public, have an opportunity to bid on them. Mutual exclusivity cannot be established until 
applications have been received, and at that point advertising will no longer be useful because 
the purpose of advertising is to inform potential licensees of the opportunity to file 
applications. Consequently, we retain our existing filing procedures and continue to permit 
our contractor to advertise auctions even before mutual exclusivity has been established.40
36 Opposition of Airtouch at 4.
37 Opposition of PacBell at 8.
38 47 U.S.C. § 309G)(1).
39 See Second Report and Order at f 165. In fact, 29 applicants are eligible to bid for 
nationwide narrowband PCS licenses; at least 24 applicants are eligible to bid on each of the 
ten licenses. Thus, mutual exclusivity exists for all nationwide narrowband licenses, and 
Phase One's petition is moot on this point.
40 In this regard we also note that since we find that advertising auctions is in the public 
interest, no conflict of interest exists between Tradewinds' interests and the Commission's.
185
F. Application-Processing Rules
21. In the NPRM in this proceeding, the Commission stated:
In order to avoid needless duplication, we propose that the following general 
filing and processing rules apply to all PCS: Sections 22.3-22.45 and 22.917(f), 
and 22.918-22.945, 47 C.F.R §§ 22.3-22.45, 22.917(f), and 22.918-22.945. For 
those PCS applicants who file on Form 574, we believe that Sections 90.113- 
90.159 of our rules, 47 C.F.R. §§ 90.113-90.159, could be used to process 
those applications with appropriate modifications.41
22. Petition. AIDE asserts in its petition for reconsideration of the Second Report and 
Order that the Commission acted improperly in proposing substantive PCS application- 
processing rules hi the NPRM because, it argues, such rules are outside the scope of this 
rulemaking, which is limited to implementation of the competitive bidding requirements of 
§309(j) of the Communications Act.42 AIDE argues that the Commission's proposal of 
application-processing rules is legally insufficient to constitute a valid notice of proposed 
rules, and that some of the rules cited have no immediate applicability to PCS service. AIDE 
asserts that hi the Second Report and Order the Commission failed to respond to the merits of 
the arguments concerning filing and processing rules hi AIDE'S comments on the NPRM. 
AIDE concludes that the Commission needs to issue a supplemental Notice of Proposed 
Rulemaking to adopt license-processing rules for PCS. PacBell states, however, that the 
Administrative Procedure Act does not prohibit the Commission from issuing more than one 
order based on a notice and comment period.43 PacBell also states that there is an exception 
to the Administrative Procedure Act's notice and comment requirements "when the agency for 
good cause finds (and incorporates the finding. . .hi the rules issued) that notice and public 
procedure thereon are impracticable, unnecessary, or contrary to the public interest."44
23. Discussion. The Commission adopted few filing or processing rules in the Second 
Report and Order. Those rules that the Commission did adopt pertaining to the filing and 
processing of applications and certifications were clearly proposed hi the NPRM.45 In the 
Second Memorandum Opinion and Order we stated that we would address AIDE'S concerns 
hi the reconsiderations of the service-specific Orders hi which the application processing rules 
were adopted. In the Third Report and Order, we adopted the service-specific narrowband
41 NPRM at 1(128.
42 AIDE Petition at 20-21.
43 PacBell Opposition at 10.
44 Id. at 11, citing 5 U.S.C. § 553(c).
45 See Second Report and Order at ffi{ 164-168, NPRM at ffl 96-101.
186
PCS application processing rules to which AIDE'S petition refers and thus, we address the 
substance of AIDE'S arguments below.
24. The competitive bidding process is a means of assigning licenses, and rules and 
procedures for processing of license applications are an integral and necessary part of that 
process. By citing in the NPRM the specific Part 22 and Part 90 application processing rules 
that we would use as the basis for adopting PCS rules, we provided commenters with 
exceptionally clear notice and an opportunity to comment on the rules we contemplated 
adopting for narrowband PCS. The few changes that we made from the proposed rules were 
necessary to adapt them to auctioning narrowband PCS licenses. For example, we adopted 
certain technical requirements such as restrictions on station antenna structures.46 We also 
deleted any procedures that were related to grants by random selection.47 The resulting rules 
are clearly a logical outgrowth of the rules proposed in the NPRM, applied in the context of 
the use of competitive bidding to assign narrowband PCS licenses. Rules adopted as a logical 
outgrowth comply with all Administrative Procedure Act requirements.48
HI. RULES PROHIBITING SETTLEMENTS AND COLLUSION
25. Petitions and Oppositions. The collusion rules adopted hi the Third Report and 
Order prevent bidders for narrowband PCS licenses from entering into settlement agreements 
after applications are filed. AIDE asserts that narrowband bidders should be allowed to enter 
into settlement agreements, as encouraged by Section 24.429(b), and asserts that the 
Commission's decision to avoid post-filing settlements was impermissibly based on 
consideration of potential revenues. Quentin L. Breen (Breen) urges us to act on AIDE'S 
petition to liberalize treatment of full market settlements. Breen states that the Budget Act 
does not relieve the Commission of its obligation hi the public interest to continue to use 
means such as negotiation to avoid mutual exclusivity, nor does the Act oblige us to adopt 
inti-collusion regulations. Instead of permitting applicants to avoid the uncertainties and 
inefficiencies of the auction process, Breen states that the rules effectively mandate that 
parties will go to end of auction without being able to consider settlement.49 PageNet, 
conversely, urges the Commission to prohibit any settlement negotiations during the 
competitive bidding process.50 According to PageNet, there is no way for mutually exclusive
46 47 C.F.R, § 24.416.
47 47 C.F.R- § 22.33.
48 Public Service Commission of the District of Columbia v. FCC. 906 F.2nd 713, 717 
(D.C. Cir. 1990).
49 Breen Opposition at 1-4.
50 PageNet Opposition at 20-26.
187
applicants to come to an agreement on settlement without exchanging the same kinds of 
information that would be exchanged for the formation of collusive strategies in auction 
bidding. Accordingly, PageNet asserts that settlement discussions should be prohibited prior 
to selection of a winner from among the Form 175 applicants51 Furthermore, PageNet 
contends, that there is little likelihood of an all-market settlement in any given market, 
because if any one applicant declines to settle, the settlement is defeated.52
26. Discussion. As stated in our reconsideration of the Second Report and Order, we 
have decided to retain the existing collusion rules, to the extent that they prevent settlements 
after applications are filed.53 These rules were designed to avoid formation of 
anticompetitive agreements among bidders, although we intend to continue reliance on the 
antitrust laws as our primary method of avoiding bidder collusion.54 As we indicated in the 
Second Report and Order, we believe that our rules prohibiting collusion will serve the 
objectives of the Budget Act by preventing applicants, especially the largest companies, from 
entering into agreements to use bidding strategies that divide the market to the disadvantage 
of other bidders.55 We also seek to ensure that entities will not file applications solely for the 
purpose of demanding payment from other bidders in exchange for settlement or withdrawal 
of their applications.
27. Accordingly, to ensure that the bidding process is competitive and to encourage 
formation of a competitive post-auction market structure, we are retaining the collusion rules 
in the narrowband PCS context.56 Furthermore, to make clear that we recognize that these 
rules effectively prohibit post-filing settlements, we are amending our rules to eliminate 
Section 24.429(b). We believe that this is the most straightforward approach, given our 
strong concerns that collusion could have an extremely harmful impact upon competition.
28. However, in order to provide bidders sufficient time and greater flexibility to 
attract capital, we make several modifications to our collusion rules adopted in the Third 
Report and Order. First, in the Second Memorandum Opinion and Order, we clarified the 
applicability of the collusion rules to cases where an applicant has a common ownership
51 Idi at22&n.ll.
52 Id at 24.
53 See Second Memorandum Opinion and Order at f 54.
54 See Second Report and Order, ff 221-224.
55 14
56 See id. f 223.
188
interest with another applicant.57 In that item we stated that, unless the second applicant is 
expressly identified as an entity with whom the first applicant has an agreement concerning 
bidding, we will prohibit these parties from communicating concerning their bidding 
strategies. This prohibition will hold even if the other bidder is identified on the applicant's 
short-form application as having a common ownership interest with the applicant.
29. Furthermore, where common non-controlling ownership exists between two or 
more bidders, those bidders may win more licenses cumulatively than a single entity is 
entitled to hold. In such cases we will permit divestiture of non-controlling interests to bring 
the entities into compliance with the license aggregation limits provided such divestiture is 
completed within 90 days of grant of the license. Such post-auction divestiture will enable 
investors to finance more than one bidder without risking default penalties if both bidders win 
licenses which in combination exceed our aggregation limits.
30. In addition, we wish to modify our rules regarding amendments to short-form 
applications. Section 24.413 of the Commission's rules requires all applicants to list certain 
ownership information including all partners, subsidiaries, affiliates and all persons holding 
five percent or more of the stock, warrants, options or debt securities of the applicant. 
Section 24.422 (b) currently prohibits amendments to the short-form application to make 
ownership changes or changes in the parties to bidding consortia after the application filing 
deadline has passed. As a result of our experience in the nationwide narrowband PCS auction 
we believe that it is necessary to allow applicants to amend their FCC Form 175 applications 
to make ownership changes after the filing deadline has passed, provided such changes do not 
result in a change in control of the applicant and provided that discussions leading up to such 
changes do not violate our anti-collusion rules. Such amendments must be made within two 
business days of any such change. Permitting such amendments will provide bidders with 
flexibility to seek additional capital after applications have been filed, while ensuring that the 
real party in interest does not change. Accordingly, we will modify rule 24.422 (b) to permit 
applicants to amend their FCC Form 175 applications to reflect ownership changes that do not 
result in a change in control of the applicant. Such changes shall not be regarded as major 
amendments to an application, provided they do not result in a transfer of control of the 
applicant.
31. In addition, we are modifying our collusion rules, which currently prohibit bidders 
from communicating with one another after short form applications have been filed regarding 
the substance of their bids or bidding strategies and which also prohibit bidders from entering 
into consortia arrangements or joint bidding agreements of any kind after the deadline for 
short form applications has passed. In order to permit bidders to respond to higher than 
expected license prices by combining their resources during an auction, we will now permit 
bidders who have not filed Form 175 applications for any of the same licenses to engage in 
discussions and enter into bidding consortia or joint bidding arrangements during the course of
57 Second Memorandum Opinion and Order at f 55.
189
an auction. We conclude that where bidders have not applied for any of the same licenses 
there is little risk of anticompetitive conduct with respect to a single license and therefore we 
believe that it is appropriate to relax our collusion rules to permit bidders in this context to 
have greater flexibility to increase their competitiveness in the auction by combining their 
resources, provided that no change of control of any applicant takes place.
IV. PAGING RESPONSE CHANNEL ELIGIBILITY
32. Mercury submitted a request for clarification that non-incumbent paging licensees 
will be permitted to apply for only those narrowband paging response channel licenses that 
remain available after the initial response channel auctions. Eligibility requirements for these 
channels were adopted in GEN Docket No. 90-314, and therefore we will address this issue as 
part of the further reconsideration of the narrowband PCS service rules in that docket and in 
ET Docket No. 92-100.
V. DESIGNATED ENTITY PROVISIONS
33. Background. In the 1993 Omnibus Budget Reconciliation Act, Congress amended 
the Communications Act to require the Commission to ensure that small businesses, rural 
telephone companies, and businesses owned by women and minority group members 
(designated entities) would have an opportunity to obtain licenses and participate in offering 
spectrum-based services.58 We considered numerous alternatives that might ensure 
opportunities for these designated entities, including installment payment plans, bidding 
credits, spectrum set-asides, tax certificates, royalty payments, innovator's preferences, and 
distress sales to designated entities.59 After considering the characteristics of the narrowband 
PCS service, we ultimately adopted installment payments for small businesses acquiring 
certain regional, MTA or BTA licenses.60 We also provided that a 25 percent bidding credit 
would be available to businesses owned by minorities and/or women on certain nationwide, 
regional, MTA and BTA licenses.61 Both installment payments and bidding credits were 
made available to small businesses owned by minorities and/or women. In addition, we 
provided that tax certificates would be made available to encourage investment in women- and
58 See Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, Title VI, § 
6002(a), 107 Stat. 312, 387-389 (1993) (Budget Act) (adopting 47 U.S.C. §§ 309(j)(3)(B), 
309(j)(4)(D)).
59 See Second Report and Order, H 231-257, See Infra 1164-68 for discussion on why 
provisions are necessary.
60 See Third Report and Order. H 68, 86-89.
61 14,172.
190
minority-owned businesses.62 Our rules, however, did not permit rural telephone companies to 
obtain bidding credits or installment payments unless they also qualified as small businesses 
or businesses owned by minorities and/or women.63
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 
all small businesses and rural telephone companies, for all narrowband PCS licenses.64 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 
obtain bidding credits for the smaller, geographically limited narrowband licenses.65 AIDE 
also states that the decision to limit installment payments to certain licenses was 
impermissibly based on maximizing auction revenues.66
35. U.S. Intelco Networks, Inc. (USIN) and the Rural Cellular Association (RCA) 
assert that the failure to provide any narrowband provisions for rural telephone companies 
violates the Budget Act67 and ensures that narrowband PCS will be unavailable in rural
62 Id, ff 68, 70, 72-85.
63 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 
accommodations necessary to ensure service in rural areas. See Third Report and Order, tt 
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 
will have the opportunity to participate hi provision of service to rural areas. Id, f 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 
participate hi providing narrowband PCS. Id., ff 72, 76.
64 AIDE Petition at 14-18.
65 AIDE Petition at 16-17.
66 Id at 18-19.
67 The Budget Act names rural telephone companies as one of the groups whose 
opportunity to participate in auctioned services must be ensured by our auction procedures. 
See Budget Act, § 6002, 107 Stat 388 (adopting 47 U.S.C. § 309(j)(3)(B) and 309(j)(4)(D)).
191
areas.68 RCA states that rural telephone companies should receive bidding 
credits and tax certificates.69 RCA bases this assertion on the rationale that providing special 
bidding provisions for rural telephone companies would increase the likelihood that 
narrowband PCS licenses will be awarded to entities that will provide service to rural areas.70 
RCA also notes that the Budget Act directs that the auction procedures must ensure that 
licenses for new technologies are awarded in a manner that promotes their rapid deployment 
"for the benefit of the public, including those residing in rural areas."71
36. Oppositions. PageNet states that no additional measures should be taken with 
respect to participation of rural telephone companies or small businesses in narrowband PCS 
auctions.72 As to the availability of provisions for women and minority-owned businesses for 
only one license per channel grouping, PageNet notes that licenses with bidding credits 
comprise 37 percent of regional licenses and almost 45 percent of the available narrowband 
spectrum, thus earmarking a good deal of spectrum for designated entities.73 PageNet states 
that small businesses have always had ample opportunities in paging, and thus there is no 
reason to grant them special consideration.74 We also request comment on a proposal to 
redesignate the BTA licenses as regional licenses.
37. Decision. We have decided, hi response to petitions and to our experience with 
the nationwide narrowband auction, to expand the provisions for designated entities in future 
narrowband auctions. First, we will modify the definition of small business to expand 
eligibility. Second, for the upcoming regional narrowband auctions we will increase the 
bidding credit for women- and minority-owned businesses. Finally, as described in Section 
VI below, we propose, and request comment on, additional designated entity provisions for 
the MTA and BTA auctions.75
38. Congress mandated that the Commission "ensure that small businesses, rural 
telephone companies, and businesses owned by members of minority groups and women are
68 See USIN Petition at 1-8, RCA Petition at 2-9.
69 RCA Petition at 9.
70 RCA Petition at 2
71 Id (quoting 47 U.S.C. § 309(j)(3)(A)).
72 PageNet Opposition at 12-15.
73 Id at 14.
74 Id at 14-15.
75 See t%4 infra.
192
given the opportunity to participate in the provision of spectrum-based services."76 To 
achieve this goal, the statute requires the Commission to "consider the use of tax certificates, 
bidding preferences, and other procedures." Thus, while providing that we may charge for 
licenses, Congress has ordered that the Commission design its auction procedures to ensure 
that designated entities have opportunities to obtain licenses and provide service. For that 
purpose, the law does not mandate the use of any particular procedure, but it specifically 
approves the use of "tax certificates, bidding preferences, and other procedures." The use of 
any such procedure is, in our view, mandated where necessary to achieve Congress's objective 
of ensuring that designated entities have the opportunity to participate in narrowband PCS.
39. In addition to this mandate, the statute sets forth various congressional objectives. 
For example, it provides that in establishing eligibility criteria and bidding methodologies the 
Commission shall "promotje] economic opportunity and competition and ensur[e] that new 
and innovative technologies are readily accessible to the American people by avoiding 
excessive concentration of licenses and by disseminating licenses among a wide variety of 
applicants, including small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women."77 Further, Section 309(j)(4)(A) provides that to 
promote the statute's objectives the Commission shall "consider alternative payment schedules 
and methods of calculation, including lump sums or guaranteed installment payments, with or 
without royalty payments, or other schedules or methods . . . and combinations of such 
schedules and methods."
40. To satisfy these statutory mandates and objectives, we established in the Second 
Report and Order eligibility criteria and general rules to govern the special measures for small 
businesses, and businesses owned by members of minority groups and women. In the Third 
Report and Order, we employed several measures, including installment payments, bidding 
credits and tax certificates, to enhance opportunities for designated entities bidding on certain 
narrowband PCS licenses. We stated that we believed that narrowband PCS would provide 
significant opportunities for all designated entities to provide a wide variety of new services 
including advanced paging and messaging services. In adopting the particular measures for 
designated entities, however, we assumed that narrowband PCS would involve relatively low
76 47 U.S.C. § 309(j)(4)(D).
77 47 U.S.C. § 309(j)(3)(B); see also id.. § 309(j)(4)(C) (requiring the Commission when 
prescribing area designations and bandwidth assignments, to promote "economic opportunity 
for a wide variety of applicants, including small businesses, rural telephone companies, and 
businesses owned by members of minority groups and women). As noted in the Second 
Report and Order, the statute also requires the Commission to promote the purposes specified 
hi Section 1 of the Communications Act, which include, among other things, "to make 
available, so far as possible, to all the people of the United States a rapid, efficient, Nation 
wide, and world-wide wire and radio communication service with adequate facilities at 
reasonable charges." 47 U.S.C. § 151; Second Report and Order at n.3.
193
capital entry requirements, and would therefore be well-suited to small entities, which lack 
access to large amounts of capital.78 Accordingly, we found that the measures we selected for 
narrowband PCS auctions were appropriately tailored to the unique characteristics of 
narrowband PCS and would therefore "create meaningful incentives for small businesses and 
businesses owned by minorities and/or women to both bid successfully for available licenses 
and provide innovative and expeditious service to the public."79 In this regard we indicated 
that installment payments would provide a significant means for small businesses to overcome 
their main barrier to entry: lack of access to financing. And, a 25 percent bidding credit for 
minority and women-owned businesses together with a tax certificate program would address 
the additional obstacles faced by those designated entities. We noted, however, that we would 
continue to assess the effectiveness of the measures adopted for narrowband PCS, and would 
apply any knowledge gained to subsequent auctions.
41. Our goal in the narrowband personal communications service is to meet fully the 
statutory mandate of Section 309(j)(4)(D), as well as the objectives of promoting economic 
opportunity and competition, of avoiding excessive concentration of licenses, and of ensuring 
access to new and innovative technologies by disseminating licenses among a wide variety of 
applicants, including small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women. As explained more fully below, we believe that it 
is necessary in some respects to do more to ensure that small businesses and businesses owned 
by members of minority groups and women have a meaningful opportunity to participate in 
the provision of narrowband PCS. As a result of our experience in the nationwide 
narrowband PCS auction, we are concerned that a 25 percent bidding credit and installment 
payments may not be sufficient to ensure the opportunity of these businesses to compete 
against the larger, deep pocketed incumbent firms. Therefore, we have decided to expand the 
provisions for designated entities as described below.
A. Definition of Small Business
42. In the Third Report and Order we adopted a definition for small businesses based 
on the standard definition used by the Small Business Administration (SBA). This definition 
permits an applicant to qualify for installment payments based on a net worth not in excess of 
$6 million with average net income after Federal income taxes for the two preceding years 
not in excess of $2 million. 13 C.F.R. § 121.802(a)(2).80 In the Second Memorandum
78 Third Report and Order at ^ 69.
79 Id. atH70.
80 The SBA has recently changed its net worth/net income standard as it applies to its 
Small Business Investment Company (SBIC) Program. See 59 Fed. Reg. 16953, 16956 (April 
8, 1994). The new standard for determining eligibility for small business concerns applying 
for financial and/or management assistance under the SBIC program was increased to $18 
million net worth and $6 million after-tax net income. 13 C.F.R. § 121.802(a)(3)(i). The
194
Opinion and Order, we removed our generic "small business" definition, which was based on 
the original SBA size standard and indicated that we would establish a definition for "small 
businesses" on a service-specific basis.
43. Many commenters, including the Chief Counsel for Advocacy of the SBA, argue 
that the SBA net worth/net revenue definition is too restrictive and will exclude businesses of 
sufficient size to survive, much less succeed, in the competitive PCS marketplace. The SBA's 
Chief Counsel for Advocacy and the Suite 12 Group advocate adoption of a gross revenue 
test, arguing that a net worth test could be misleading as some very large companies have low 
net worth. The SBA's Chief Counsel for Advocacy recommends that the revenue standard be 
raised to include firms that (together with affiliates) have less than $40 million in gross 
revenues. Similarly, Suite 12 suggests a $75 million in annual sales threshold. As another 
option, the SBA's Chief Counsel for Advocacy suggests that the Commission consider a 
higher revenue ceiling or adopt different size standards for different telecommunications 
markets.81
44. We now realize that the cost of acquiring a narrowband PCS license will be 
significant and bidders may be required to expend millions of dollars to acquire a license and 
construct a system in PCS markets. Thus, we believe that our current narrowband PCS small 
business definition is overly restrictive because it would exclude most businesses possessing 
the financial resources to compete successfully in the provision of narrowband PCS services. 
Accordingly, we modify our small business definition for narrowband PCS auctions to ensure 
the participation of small businesses with the financial resources to compete effectively hi an 
auction and in the provision of narrowband PCS services.
45. There is substantial support hi the record for a $40 million gross revenue 
standard. For example, the SBA recommends that for PCS, a small business be defined as
change in this size standard was attributable to an adjustment for inflation and changes in the 
SBIC program "designed to strengthen and expand the capabilities of SBICs to finance small 
businesses so that they can increase their contribution to economic growth and job creation." 
59 Fed. Reg. at 16955.
81 Some parties recommend using the SBA's alternative 1500 employee standard. See, 
e.g.. comments of SBA Associate Administrator for Procurement Assistance at 2, CFW 
Communications at 2, and Iowa Network at 17. A number of other commenters, including 
the SBA's Chief Counsel for Advocacy, argue, however, that adoption of this alternative SBA 
definition would open up a huge loophole hi the designated entity eligibility criteria. 
Specifically, they contend that telecommunications is a capital, rather than labor, intensive 
industry, and that an entity with 1,500 employees is likely to be extremely well capitalized 
and have no need for the special treatment mandated by Congress in the Budget Act. See, 
e.g., comments of SBA Chief Counsel for Advocacy at 8, LuxCel Group, Inc. at 4, Suite 12 
Group at 10-11.
195
one whose average annual gross revenues for its past three years do not exceed $40 million.82 
It states that this definition isolates those companies that have significantly greater difficulty 
in obtaining capital than larger enterprises. At the same time, the SBA contends that a 
company with $40 million in revenue is sufficiently large that it could survive in a 
competitive wireless communications market.83 Similarly, the SBA Chief Counsel for 
Advocacy asserts that a $40 million threshold will allow participation by firms "of sufficient 
size to meet demands in almost all small markets and some medium-size markets without 
significant outside financial assistance."84
46. For purposes of narrowband PCS, we shall therefore define a small business as 
any firm, together with affiliates and certain large investors, with average gross revenues for 
the three preceding years of less than $40 million.85 In addition, an applicant will not qualify 
as a small business if any one attributable investor in, or affiliate of, the entity has $40 
million or more in personal net worth.86 To ensure that only bona fide small businesses in 
need of government financing are eligible, we will consider the gross revenues of the 
applicant, its affiliates, as well as those of "attributable" investors on a cumulative basis. The 
text that follows discusses what interests are attributable for these purposes. In addition, it 
sets forth exceptions to these attribution rules for minority and women-owned applicants.
47. Qualified "Small Businesses". As a general rule, the gross revenues of all 
investors in, and affiliates of, an applicant are counted on a cumulative, fully-diluted basis for
82 Ex parte filing of U.S. Small Business Administration, June 24, 1994.
83 Id.
84 Comments of SBA Office of Advocacy at 10. Cf. comments of Iowa Network and 
Telephone Electronics Corporation (advocating a $40 million annual revenue criterion for 
telephone companies) and reply comments of North American Interactive Partners and 
Kingwood Associates (advocating $40 million gross-revenue criterion for applicants for the 
fifty most-populous BTAs, based on estimated average build-out cost).
85 The establishment of small business size standards is generally governed by Section 3 
of the Small Business Act of 1953, as amended, 15 U.S.C. § 642 (a). Recent amendments to 
that statute provide that small business size standards developed by Federal agencies must be 
based on the average annual gross revenues of such business over a period of not less than 
three years. See Pub. L. No. 102-366, Title II, § 222 (a), 106 Stat 999 (1992); 15 U.S.C. § 
632 (a) (2) (B) (ii).
86 Unlike our proposed eligibility criteria to bid in the entrepreneurs' blocks, described 
below, the small business definition does not include a total assets standard. We believe that 
the $40 million gross revenue cap for small businesses should be sufficient to ensure that only 
bona fide small businesses are able to take advantage of the measures intended for them.
196
purposes of determining whether the $40 million gross revenue threshold has been exceeded, 
and on an individual basis regarding the $40 million personal net worth standard.87 There are 
two exceptions to this rule, however. First, applicants that meet the definition of a small 
business may, as discussed below, form consortia of small businesses that, on a aggregate 
basis, exceed the gross revenue cap. Second, the gross revenues, personal net worth, and 
affiliations of any investor in the applicant are not considered so long as the investor holds 25 
percent or less of the applicant's passive equity. For corporations, we shall use the term 
passive equity investors to mean investors who hold only non-voting stock or voting stock 
that includes no more than 15 percent of the voting interests. Where different classes of stock 
are held, however, the total amount of equity must still be no more than 25 percent to meet 
this requirement. For partnerships, the term means limited partnership interests that do not 
have the power to exercise control of the entity.88 The passive investor exception will be 
available, however, only so long as the applicant remains under the control of one or more 
entities or individuals (defined as the "control group") and the control group holds at least 25 
percent of the applicant's equity and, in the case of corporate applicants, at least 50.1 percent 
of the voting stock.89 In the case of partnership applicants, the control group must hold all 
the general partnership interests. Whining bidders are required to identify on their long-form 
applications the identity of the members of this control group and the means of ensuring 
control (such as a voting trust agreement). The gross revenues of each member of the control 
group and each member's affiliates will be counted toward the $40 million gross revenues 
threshold and applicants shall certify that each control group member meets the individual $40 
million personal net worth standard, regardless of the size of the member's total interest in the 
applicant.
48. The attribution levels we have selected here are intended to balance the competing 
considerations that apply hi this particular context and may differ from those we have used hi 
other circumstances. As a general matter, the 25 percent limitation on equity investment 
interests will serve as a safeguard that the very large entities who are excluded from bidding 
in these blocks do not, through then- investments hi qualified firms, circumvent the gross 
revenue cap. At the same time, it will afford qualified bidders a reasonable measure of
87 By "fully-diluted," we mean that agreements such as stock options, warrants and 
convertible debentures will generally be considered to have a present effect and will be treated 
as if the rights thereunder already have been fully exercised.
88 Applicants must be prepared to demonstrate that the limited partners do not have 
influence over the affairs of the applicant that is inconsistent with their roles as passive 
investors. For purposes of our rules, we presume that any general partner has the power to 
control a partnership. Therefore, each general partner hi a partnership will be considered part 
of the partnership's control group.
89 So long as the applicant remains under the de jure and de facto control of the control 
group, we shall not bar passive investors from entering into management agreements with 
applicants.
197
flexibility in obtaining needed financing from other entities, while ensuring that such entities 
do not acquire controlling interests in the eligible bidders. Similarly, the 15 percent threshold 
for attributing revenues of investors with voting stock in corporate applicants is designed to 
keep ineligible parties from exerting undue influence over eligible firms. For all of these 
reasons, we also will attribute the gross revenues of entities, or the personal net worth of 
individuals, that otherwise constitute "affiliates" of the applicant.90
49. Qualified Woman and Minority-Owned Small Businesses. The record 
demonstrates that women and minorities have especially acute problems in obtaining 
financing, due in part to discriminatory lending practices by private financial institutions. To 
address these special problems and to afford women and minority-owned small businesses 
more flexibility in attracting financing, it is necessary to provide these entities with an 
alternative, somewhat more relaxed option regarding the attribution of revenues of passive 
investors. Under this alternative standard, we will not attribute to the applicant the gross 
revenues or net worth of any single investor in a minority or woman-owned small business 
applicant unless it holds more than 49.9 percent of the passive equity (which is defined to 
include as much as 15 percent of a corporation's voting stock). To guard against abuses, 
however, the control group of applicants choosing this option would have to own at least 50.1 
percent of the applicant's equity, as well as retain control and hold at least 50.1 percent of the 
voting stock.91 Winning bidders must identify on their long-form applications a control group 
(this time consisting entirely of minorities and/or women or entities 100 percent owned and 
controlled by minorities and/or women) and the gross revenues and net worth of each member 
of the control group and each member's affiliates will be counted toward the $40 million 
gross revenue threshold or the individual $40 million personal net worth limitation, regardless 
of the size of the member's total interest in the applicant.
50. Relaxing the attribution standard somewhat in determining the eligibility of 
women and minority-owned companies to bid as small businesses directly addresses what 
most commenters have stated to be the biggest obstacle to entry for these designated entities: 
obtaining adequate financing. By this measure, women and minorities who are eligible to bid 
as small businesses (i.e.. who otherwise meet the $40 million gross revenue standard) will be 
required to maintain control of their companies and, at the same time, will have flexibility to 
attract significant infusions of capital from a single investor. The requirement that the 
minority and women principals hold 50.1 percent of the company's equity mitigates 
substantially the danger that a well-capitalized investor with a substantial ownership stake will 
be able to assume de facto control of the applicant.
90 The definition of an "affiliate" is set forth in subsection 118, infra.
91 As noted previously, the control group of a partnership applicant must hold all of the 
general partnership interests.
198
51. Of course, women and minority-owned firms, like any other small business 
applicant, may sell a larger portion of their companies' equity, provided that they also abide 
by the general eligibility requirements for small businesses. Specifically, the gross revenues 
and net worth of all investors holding more than 25 percent of the company's passive equity 
(as defined to include 15 percent or more of the voting stock) will be attributed toward the 
$40 million cap and the $40 million personal net worth standard. In this event, the control 
group will be required to hold at least 25 percent of the company's equity and 50.1 percent of 
its voting stock.
52. De Facto Control Issues. We shall codify in our rules a provision explaining 
more explicitly the term "control," so that applicants will have clear guidance concerning the 
requirement that a control group maintains de facto as well as de jure control of the firms that 
are eligible for special treatment under the rules for narrowband PCS. For this purpose, we 
shall borrow from certain SBA rules that are used to determine when a firm should be 
deemed an affiliate of a small business. These SBA rules, which are codified hi 13 C.F.R. § 
121.401, provide several specific examples of instances in which an entity might have control 
of a firm even though the entity has less than 50 percent of the voting stock of a concern, and 
thus provide a useful model for our rules. Through reference to circumstances such as those 
described hi the SBA rules, our rules will expressly alert designated entities that control of the 
applicant through ownership of 50.1 percent of the firm's voting interests may be insufficient 
to ensure de facto control of the applicant if, for example, the voting stock of the eligible 
control group is widely dispersed. In those and other circumstances, ownership of 50.1 
percent of the voting stock may be insufficient to assure control of the applicant. Of course, 
apart from these structural issues relative to control, eligible entities must not, during the 
license term, abandon control of their licenses through any other mechanism. As we stated in 
the Second Report and Order, designated entities must be prepared to demonstrate that they 
are in control of the enterprise.92
53. In the Second Memorandum Opinion and Order, we concluded that designated 
entities might be permitted to receive benefits based on their participation in consortium on a 
service specific basis, but believed generally that such a consortium should not be entitled to 
qualify for measures designed specifically for designated entities. As a general matter, we 
shall continue to adhere to that principle. We think, however, that in the narrowband PCS 
service, allowing small businesses to pool their resources hi this manner is necessary to help 
them overcome capital formation problems and thereby ensure then* opportunity to participate 
in auctions and to become strong narrowband PCS competitors. Because of the exceptionally 
large capital requirements associated with acquiring a license hi this service, we agree with 
the SBA Chief Counsel for Advocacy that, so long as individual members of the consortium 
satisfy the definition of a small business, the congressional objective of ensuring opportunities 
for small businesses will be fully met. Individual small entities that join to form consortia, as
92 Second Report and Order at f 278, citing Intermountain Microwave. 24 Rad. Reg. 983, 
984 (1963).
199
distinguished from a single entity with gross revenues in excess of $40 million, still are likely 
to encounter capital access problems and, thus, should qualify for measures aimed at small 
businesses. We do not believe however, that this congressional goal will be satisfied if 
special measures are allowed for consortia that are "predominantly" or "significantly" owned 
and/or controlled by small businesses. This would have the effect of eviscerating our small 
business definition criteria and would not further the ability of bona fide small businesses to 
participate in PCS services.
54. Financial Benefits. To ensure that the control group has a substantial financial 
stake in the venture, we shall adopt certain additional requirements. As noted previously, we 
shall require that at least 50.1 percent of the voting stock and at least 25 percent (or 50.1 
percent for the alternative option for minority and women-owned businesses) of the aggregate 
of all outstanding shares of stock to be unconditionally owned by the control group members. 
In addition, 50.1 percent of the annual distribution of dividends paid on the voting stock of a 
corporate applicant concern must be paid to these members. Also, in the event stock is sold, 
the control group members must be entitled to receive 100 percent of the value of each share 
of stock in his or her possession. Similarly, in the event of dissolution or liquidation of the 
corporation, the control group members must be entitled to receive at least 25 percent (or 50.1 
percent, as the case may be) of the retained earnings of the concern and 100 percent of the 
value of each share of the stock in his or her possession, subject, of course, to any applicable 
laws requiring that debt be paid before distribution of equity.
55. Partnerships and other non-corporate entities will be subject to similar 
requirements. Indicia of ownership that we will consider in non-corporate cases include (but 
are not limited to) (a) the right to share in the profits and losses, and receive assets or 
liabilities upon liquidation, of the enterprise pro rata in relationship to the designated entity's 
ownership percentage and (b) the absence of opportunities to dilute the interest of the 
designated entity (through capital calls or otherwise) in the venture. As with corporations, our 
concern is ensuring that the economic opportunities and benefits provided through these rules 
flow to designated entities, as Congress directed.
56. Abuses. As stated above, we intend by these attribution rules to ensure that 
bidders and recipients of these licenses are bona fide in their eligibility, and we intend to 
conduct random audits both before the auctions and during the 10-year initial license period to 
ensure that our rules are complied with in letter and spirit. If we find that large firms or 
individuals exceeding our personal net worth caps are able to assume control of licensees that 
have received small business provisions or otherwise circumvent our rules, we will not 
hesitate to force divestiture of such improper interests or, in appropriate cases, issue 
forfeitures or revoke licenses. In this regard, we reiterate that it is our intent, and the intent 
of Congress, that women, minorities and small businesses be given an opportunity to 
participate in narrowband PCS services, not merely as fronts for other entities, but as active 
entrepreneurs.
200
57. In addition, in view of our new small business definition and the associated 
maximum investor limits, we are modifying our unjust enrichment rules to prevent any post- 
auction circumvention of our financial threshold, and to ensure that the ultimate licensees are 
bona fide designated entities. Accordingly, firms that received installment payments based on 
their small business status will be subject to repayment if, for example, another entity 
subsequently purchases an "attributable" interest or becomes a member of th& control group 
and, as a result, the gross revenues of the firm would exceed the $40 million gross revenues 
cap, or the personal net worth of an individual investor exceeds the $40 million personal net 
worth threshold.
B. Bidding Credits in Regional Narrowband Auctions
58. In the Third Report and Order we established bidding credits of 25 percent for 
women-and minority-owned businesses on two of the six regional narrowband licenses.93 In 
order to increase the opportunities for women and minorities to participate in the provision of 
narrowband service, we have decided to increase the bidding credit on the same two licenses 
for women-and minority-owned businesses in the upcoming regional narrowband auction from 
25 percent to 40 percent. Our experience with the nationwide narrowband PCS auctions, 
where very high license values coupled with only a 25 percent bidding credit may have 
contributed to the failure of women-and minority-owned businesses to win licenses, suggests 
that a credit of this magnitude may be necessary to overcome the disadvantages of these 
groups in bidding for licenses representing large populations and large geographic areas.94 In 
an ex parte filing, Essence Television Productions, Inc. one of the initial participants in the 
nationwide narrowband PCS auction, argues that designated entities should receive bidding 
credits of up to 40 percent when competing in auctions against non-designated entities.95 The 
increased bidding credit combined with installment payments for firms that meet our revised 
small business definition should enable minority-and women-owned businesses to attract the 
capital necessary to compete. In addition, we seek comment on whether additional measures 
such as an entrepreneurs' block should be employed in future auctions (see infra.).
C. Rural Telephone Companies
59. In this docket, we established general rules and identified several measures, 
including installment payments, spectrum set-asides, bidding credits and tax certificates, that 
we would choose among in establishing rules for auctionable spectrum-based services, on a 
service-specific basis. In adopting service-specific rules, we have carefully selected provisions 
to meet the particular needs of each designated entity group, so as to "ensure," pursuant to the
93 Third Report and Order at ^ 68.
94 We have already adopted installment payments for small businesses on regional, MTA 
and BTA licenses. See Section 24.309 (A).
95 Ex parte filing of Essence Television Productions, Inc., August 2, 1994.
201
statute, that each group has the opportunity to participate in providing spectrum-based 
services.
60. As we indicated above, it is occasionally necessary to do more to ensure that 
businesses owned by members of minority groups and women have a meaningful opportunity 
to participate hi provision of personal communications services than is necessary to ensure 
that other designated entity groups have similar opportunities.96 The major problem facing 
minorities and women who seek to offer PCS is lack of access to capital.97 Small businesses 
also encounter serious funding problems.98 In contrast rural telephone companies that are not 
small businesses (and are not owned by minorities or women) do not face the same 
difficulties hi obtaining capital. Accordingly, we do not believe that any additional provisions 
for rural telephone companies are necessary or appropriate hi the context of narrowband PCS. 
Moreover, as we stated hi the Second Report and Order, limiting installment payments to 
smaller businesses, including those owned by minorities and women, best comports with the 
intent of Congress by avoiding auction procedures that tend to favor incumbents with 
established revenue streams over new companies and entrepreneurs.99 Therefore, rural 
telephone companies that are not eligible as small businesses will not receive installment 
payment assistance.
61. Finally, we believe that special provisions for rural telephone companies that are 
not smaller entities are not necessary hi this context to encourage service to rural areas.100 
Especially in regions where the lack of wireline service makes wireless alternatives desk-able, 
paging service is provided to rural areas by paging companies as well as telephone companies. 
We therefore believe that many telecommunications companies, and not only rural telephone
96 Fifth Report and Order hi PP Docket No. 93-253, FCC 94-178, adopted June 29, 1994, 
released July 15, 1994 fFifth Report and Order) at f 96.
97 Id-; see also, e.g.. Report of the FCC Small Business Advisory Committee to the FCC 
Regarding Gen. Docket No. -90-314 (Sept. 15, 1993), reprinted at 8 FCC Red 7820, 8727 
(1993) (SBAC Report); Small Business Credit and Business Opportunity Enhancement Act of 
1992, Sections 112(4), 331(a)(4), Pub. Law 102-366, Sept. 4, 1992 (Small Business Credit 
Act) (finding that minority- and woman-owned businesses encounter particular problems hi 
obtaining capital, and minorities face "extraordinary" obstacles in this regard);
98See Fifth Report and Order tH 93-108.
99 See Second Report and Order, ffij 234 & n.179 (citing H.R. Rep. No. 103-111 at 255), 
237. We note, however, that many more rural telephone companies are considered small 
businesses under our revised small business definition than was the case previously.
100 Congress did not instruct us to provide for every designated entity group hi every 
service, and we believe that provisions for this particular group are not necessary for 
narrowband PCS.
202
companies, will pursue ordinary profit incentives to provide narrowband PCS service to 
outlying areas. Accordingly, we believe that installment payment plans are not necessary to 
encourage larger rural telephone companies to provide this relatively low-cost service in rural 
areas.
D. Other Designated Entity Decisions
62. We make two additional decisions concerning designated entities on our own 
motion. First, we clarify that, for a partnership to qualify for designated entity status, all 
general partners in the applicant and its "control group" must be eligible entities, consistent 
with our revised generic eligibility criteria in the Second Memorandum Opinion and Order in 
this proceeding. For the purposes of our rules, we presume that all general partners hi a 
partnership have the power to bind the partnership, and therefore have de facto control. 101 
Therefore, to ensure that designated entity provisions are made available only to legitimate 
eligible entities if the partnership is to receive designated entity benefits, all general partners 
will be required to be designated entities if the partnership is to obtain designated entity 
status.
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 
related action reconsidering the Second Report and Order in this proceeding, we are requiring 
applicants that seek designated entity benefits to document then- eligibility for such benefits.102 
For narrowband PCS we therefore require designated entity applicants to describe on their 
long-form applications how they meet the eligibility criteria for designated entity benefits. 
Applicants must list and summarize on then- long-form 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 
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.
101 See, e.g.. Fifth Report and Order, f 158 & n. 134 (making such a presumption and 
therefore treating each general partner in a partnership applying for broadband PCS licenses as 
part of the partnership's control group).
102 See Second Memorandum Opinion and Order at f 134; Cook Inlet Petition for 
reconsideration of Second Report and Order at 16.
203
VL PROPOSED DESIGNATED ENTITY PROVISIONS FOR MTA AND BTA 
AUCTIONS
A. Introduction
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 
spectrum-based 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 women-owned 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 hi narrowband PCS than may be necessary in other, less 
costly spectrum-based 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 
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.
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 spectrum-based 
services, Congress was well aware of the difficulties these groups encounter in accessing 
capital.103 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 hi financial markets than do large businesses, 
are experiencing increased difficulties in obtaining credit."104 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 
and regulations that enhance the viability of small business concerns."105
103 Fifth Report and Order in PP Docket No. 93-253, FCC 94-178, adopted June 29, 
1994, released July 15, 1994 (Fifth Report and Order') at ^ 97.
104 Small Business Credit and Business Opportunity Enhancement Act of 1992, Section 
331(a) (3), Pub. Law 102-366, Sept. 4, 1992.
105 Id., Section 331(b)(2),(3).
204
66. Congress also recognized that these funding problems are even more severe for 
minority and women-owned 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 
regard are "extraordinary." 106 A number of studies also amply support the existence of 
widespread discrimination against minorities in lending practices. As we noted in the Fifth 
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 highly-publicized study demonstrating that 
a black or Hispanic applicant in the Boston area is roughly 60 percent more likely to be 
denied a mortgage loan than a similarly situated white applicant.107 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.
67. 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 college-educated, 
similarly situated male entrepreneurs, one black, one white, the testimony indicated that the 
white candidate would have access to $1.85 hi 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 hi 
communications is so low that it was not possible to generate meaningful summary statistics 
on underrepresentation. 108
106 Id., Section 112(4); 331(a)(4).
107 Mortgage Lending hi Boston: Interpreting HMDA Data, Federal Reserve Bank of 
Boston, Working Paper 92-7 (October 1992).
108 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 
Subcommittee), May 20, 1994.
205
68. 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 
capital. 109 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, women-owned 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 
women-owned companies did not overcome these financing obstacles after they had reached a 
level of funding and profitability adequate for most other businesses.110
69. A study prepared in 1993 by the National Foundation for Women Business 
Owners (NFWBO) further illustrates the barriers faced by women-owned businesses. For 
example, it finds that women-owned 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 short-term financing used by women business owners is credit 
cards and that over half of women-owned firms use credit cards for such purposes, as 
compared to 18 percent of all small to medium-sized businesses, which generally use bank 
loans and vendor credit for short-term credit needs. With regard to long-term financing, the 
study states that a greater proportion of women-owned 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 women-owned businesses, resulting in much greater growth 
throughout the economy.111
70. 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 
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 
broadcast and cable industries by minorities and women.112 These efforts however, have met
109 Pub. L. 100-533 (1988). In 1991, Congress enacted the Women's Business 
Development Act of 1991 to further assist the development of small businesses owned by 
women. See Pub. L. 102-191 (1991).
110 See Letter of AWRT to the Honorable Kweisi Mfume, Chairman, House Minority 
Enterprise Subcommittee, June 1, 1994.
111 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.
112 See Fifth Report and Order at ft 103-106.
206
with limited success. The record shows that women and minorities have not gained 
substantial ownership representation in either the broadcast or non-broadcast 
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 hi 1991 found that only one half of 
one percent of the telecommunications firms in the country were minority owned. The study 
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 
States. 113 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 women-owned firms 
generated only approximately 8.7 percent of the revenues earned by communications 
companies.114 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 
country. 115 One result of these low numbers is that there are very few minority or women- 
owned businesses that bring experience or infrastructure to narrowband PCS. They thus face 
an additional barrier relative to many existing service providers.
71. Small businesses also have not become major participants hi 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 
licenses and population hi the 50 BTAs that have one million or more people. 116
113 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 hi 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.
114 See Women-Owned 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.
115 Id.
116 Ex parte filing of OCR Communications, May 31, 1994.
207
72. 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 
demonstrate whether a 40 percent bidding credit for women- and minority-owned 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 
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.
B. Summary of Special Provisions for Designated Entities
73. 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 spectrum-based 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.
74. 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).
208
75. 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.
76. 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 
capital. 117 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 then- 
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 hi the entrepreneurs' blocks 
from $0.02 per MHz per pop to $0.015 per MHz per pop.
77. 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.
78. The following chart highlights the major provisions proposed for businesses 
bidding hi the proposed entrepreneurs' blocks.118
117 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.
118 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.
209
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)
Small Businesses 
(not in excess of $40 MM 
in revenues and less than 
$500 MM in total assets, 
see f 45)
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)
Small Businesses Owned 
by Minorities and/or 
Women 
(not in excess of $40 MM 
in revenues and less than 
$500 MM in total assets)
Bidding 
Credits
0
10%
15%
25%
Installment Payments
Interest only for 1 year; rate 
equal to 10-year Treasury note 
plus 2.5%; (for businesses 
with revenues greater than $75 
MM, available only in 
regional and MTA markets)
Interest only for 2 years; rate 
equal to 10-year Treasury note 
plus 2.5%;
Interest only for 3 years; rate 
equal to 10-year Treasury 
note;
Interest only for 5 years; rate 
equal to 10-year treasury note;
Tax 
Certificates for
Investors
No
No
Yes
Yes
C. Summary of Eligibility Requirements and Definitions 
1. Entrepreneurs' Blocks and Small Business Eligibility
79. 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
210
whether an applicant satisfies the various financial thresholds. More precise details are 
discussed in the subsections that follow.
Proposed Financial Caps:
  Entrepreneurs' Blocks: To bid in the entrepreneurs' blocks, the applicant, including
attributable investors and affiliates, must cumulatively have less than $12§ 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.
  Small 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.
Proposed Attribution Rules:
  Control 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 25 percent of 
the equity and, for corporations, at least 50.1 percent of the voting stock.
  The gross revenues, total assets and personal net worth of each member of the control 
group are counted toward the financial caps.
  Other 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).
  Passive Equity. Passive equity is limited partnership or non-voting stock interests or 
voting stock interests of 15 percent or less of the issued and outstanding voting stock.
  Proposed Option for Minority or Woman-Owned 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).
211
  Affiliates. 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 
hi the applicant) is under the control of the outside interests. The financial interests of 
spouses are also attributed to each other.
2. Definition of Women and/or Minority-Owned Business
80. The pouits 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 hi more detail in the text that follows.
50.1 Percent Equity Option:
  If women and/or minority principals control the applicant and own at least:
  50.1 percent of the equity, and
  50.1 percent of the voting stock, hi the case of corporations
  Then any other investor may hold:
  not more than 49.9 percent of the passive equity (which, for corporations, includes as 
much as 15 percent of the voting stock).
25 Percent Equity Option:
  If women and/or minority principals control the applicant and own at least:
  25 percent of the equity, and
  50.1 percent of the voting stock, hi the case of corporations
  Then any other investor may hold:
  25 percent or less of the passive equity (which, for corporations,includes as much as 
15 percent of the voting stock).
81. 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
212
powerful incentives for bona fide designated entities to attract the capital necessary to 
compete both hi 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.
D. The Entrepreneurs' Blocks
82. As discussed above, because the auction process itself requires additional 
expenditures of capital to acquire licenses, this new licensing procedure hi 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 hi the 
House Committee Report, Congress was well aware of that possibility and wanted to ensure 
that competitive bidding should not exclude smaller entities from obtaining licenses. 119 The 
inability of small businesses and businesses owned by women and minorities to obtain 
adequate private financing creates a serious unbalance between these companies and large 
businesses in their prospects for competing successfully hi narrowband PCS auctions.
83. 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 hi narrowband PCS. We seek comments on what results 
in the regional auction would or would not justify the use of an entrepreneurs' block hi 
subsequent narrowband auctions. The $125 million gross revenue/5500 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 hi 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 
Tier 2, or medium-sized, local exchange carrier,120 and would include virtually all of the
119 See H.R. Rep. No. 103-111 at 255.
120 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 hi each of five consecutive years. The 
Commission imposes more relaxed regulatory requirements on Tier 2 LECs than on Tier 1
213
independently owned rural telephone companies, while excluding the largest incumbent paging 
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.
84. In determining which of the blocks hi 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 hi the entrepreneurs' blocks. We want to choose blocks to 
provide adequate amounts of spectrum and geographic territory necessary to ensure that the 
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 
opportunities for other parties.121
85. Holding and Limited Transfer Period. Because we interpret the congressional 
goal of giving designated entities the opportunity to provide spectrum-based services to extend 
beyond merely obtaining a license, we seek comment on whether we should prohibit licensees 
hi the entrepreneurs' blocks from voluntarily assigning or transferring control of their licenses 
for a period of three years from the date of the license grant122 We further ask commenters
LECs. See Automated Reporting Requirements for Certain Class A arid Tier 1 Telephone 
Companies, 2 FCC Red 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 Red 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).
121 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.
122 We propose considering exceptions to this three-year holding period rule on a case- 
by-case basis hi 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 hi 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 
of the licensee's stock or assets. Paramount Pictures. Inc.. 43 FCC 453 (1949); Cf. William 
Penn Broadcasting. 16 FCC 2d 1050 (1969).
214
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 
entrepreneurs' blocks entry criteria. 123 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 
forth below. 124 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 
the holding period. 125 Should any of these proposals be adopted, the Commission would 
conduct random pre- and post-auction audits to ensure that applicants receiving preferences 
are in compliance with the FCC's rules.
86. 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 build-out 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, 
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 long-term participation by designated 
entities and how such a rule would impact the ability to raise capital.
E. Bidding Credits
87. 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 minority-owned businesses have 
opportunities to participate in the provision of narrowband services.126 And, in this Order, we
123 We note that a licensee assigning its authorization pursuant to mis limited transfer 
period might be subject to the repayment provisions associated with installment payments and 
bidding credits. See infra ffl[ 91, 98.
124 See infra ffll 101-106. 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.
125 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.
126 See Third Report and Order at f 72.
215
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 minority-owned 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 minority-owned businesses a 15 percent credit, and 
small businesses owned by women and minorities an aggregate credit of 25 percent.
88. In ex parte presentations to the Commission, many commenters have indicated 
that, without spectrum set-asides 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 
that is desirable to any of the large companies.127 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.
89. As explained above, the capital access problems faced by small firms and women 
and minority-owned firms make special provisions like bidding credits appropriate for these 
designated entities in narrowband PCS.128 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
127 Ex parte filing of PCSD Development Corporation (PCSD), August 9,1994.
128 Although we did not previously grant bidding credits to small businesses in the Third 
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.
216
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.
90. As discussed below, we have also proposed to modify the definition of a minority 
and women-owned firm. 129 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 women-owned firm.
91. 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 10-year 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 minority-owned firm to a women-owned 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 hi 
the business and, as a result, the gross revenues of the firm exceed the $40 million small 
business cap, this repayment provision would apply.130 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 long-term holding of licenses by those parties receiving bidding
129 See infra 1f1f 107-117.
130 See infra f^[ 102-106, for a discussion of which investor interests would be 
"attributable" for purposes of calculating the gross revenues caps.
217
credits. Nevertheless, as in the case of the holding period and transfer restrictions discussed 
at tf88-89 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.
F. Installment Payments
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 then- 
ability to compete against larger firms in the PCS marketplace. 131 In the Third Report and 
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 
rate equal to the rate for U.S. Treasury obligations.132
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 hi 
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 long-term 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 
streams, over smaller entities.133
131 See e.g.. comments of SBA Chief Counsel of Advocacy at 6, 20-21, NTIA at 27; 
SBAC Report at 2 (September 15, 1993).
132 See Third Report and Order at fflf 86-90.
133 See H.R. Rep. No. 103-111 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).
218
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 hi gross revenues would be able to use 
installment payments. 134 This distinction is based on the expected lower costs to acquire 
licenses and construct systems hi 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 
would require government financing to be competitive for the BTA licenses. 135
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 post-auction 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 ten-year 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 
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 
payment would be grounds for revocation of the license. 136 We seek comment on this 
installment payment proposal.
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
134 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.
135 We note that a consortium of small businesses would be eligible for installment 
payments hi any market so long as each member of the consortium satisfies the definition of a 
small business, as set forth hi Section V.A., infra.
136 As described in the Second Report and Order, the Commission may, on a case-by-case 
basis, permit a three to six month grace period within which a licensee may seek a 
restructuring of the payment plan.
219
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 interest-only payments 
for three years. Interest would accrue at the Treasury note rate without the additional 2.5 
percent.137 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.
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 
build-out 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.
98. Unjust Enrichment Applicable to Installment Payments To ensure that large 
businesses do not become the unintended beneficiaries of measures meant for smaller firms, 
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 
a condition of the license assignment or transfer.138 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 hi the 
fourth year after license grant from a small minority-owned firm to a small non-minority 
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
137 To be eligible for these "enhanced" installment payments, a firm would have to satisfy 
either of the two alternative definitions of a woman or minority-owned business, as set forth 
in ff 107-117, infra, as well as the applicable financial caps.
138 See Third Report and Order at f 89.
220
gross revenues or total assets of the business exceed the applicable financial caps, this unjust 
enrichment provision would also apply.139 We seek comment on these proposals.
G. Upfront Payments
99. 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 
bid withdrawal penalties.140 The upfront payment ensures that bids during the course of the 
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 
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.
100. For these reasons, we propose to reduce the upfront payment requirement to 
$0.015 per MHz per pop for bidders hi the entrepreneurs' blocks. This 25 percent discount 
should facilitate auction participation by capital-constrained 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.
H. Definitions and Eligibility
1. Eligibility to Bid in the Proposed Entrepreneurs' Blocks
101. As noted previously, eligibility to bid hi the proposed entrepreneurs' blocks 
would be limited to companies that, together with then* 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
139 See infra ff 102-106, for a discussion of which investor interests would be 
"attributable" for purposes of calculating the gross revenues and total assets thresholds.
140 Third Report and Order, fflf 41-45.
221
investor or principal in the applicant has $100 million or greater hi personal net worth at the 
short form application filing date.
2. Attribution Rules for the Proposed Entrepreneurs' Blocks
102. 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 
with regard to eligibility to bid as a small business. 141 In particular, winning bidders would be 
required to identify on their long-form 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.
103. We also propose the more relaxed attribution standard set forth hi fflj 49-51 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 female-owned small business unless the investor holds hi 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, hi the case of a corporate applicant, at least 50.1 percent of the voting stock. We 
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 hi the PCS industry.
104. 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 mutually-independent business 
firms, each of which individually satisfies the definition of a small business.
105. 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
141 See supra ffl 41-47.
222
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 
the voting stock. 142 A company would be permitted to grow beyond these gross revenues/total 
assets caps, however, through equity investment by non-attributable (i.e. passive) investors, 
debt financing, revenue from operations, business development or expanded service.143
106. 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 minority-owned 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.
3. Definition of Women and Minority-Owned Business
107. As discussed above, we have proposed steps in this order to address the special 
funding problems faced by minority and women-owned firms and thereby to ensure that these 
groups have the opportunity to participate and become strong competitors in the narrowband 
PCS service. I44 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.
108. For purposes of implementing these steps, we propose to depart from the 
definition of a minority and woman-owned firm that was adopted in the Third Report and
142 A minority or woman-owned company would have to continue to adhere to the 
attribution rules applicable to it, set out above.
143 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.
144 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 
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.l (1982). Moreover, as adopted 
in the Second Report and Order, minority and women-owned businesses would be eligible for 
special measures only if the minority and women principals are also United States citizens.
223
Order. We have adopted relaxed attribution standards for businesses owned by women and 
minorities for purposes of qualifying for small business provisions (f 46). We are proposing 
relaxed standards for businesses owned by women and minorities to qualify for the 
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 
controlling interest in the designated entity. Third Report and Order at f 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 minority-owned firms the option to reduce to 25 percent the 
50.1 percent minimum equity amount that must be held.
109. 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 fully-diluted basis, and that their equity interest entitled them to a substantial 
stake in the profits and liquidation value of the venture relative to the non-controlling 
principals. We noted, however, in the Second Report and Order that different standards that 
meet the same objectives may be appropriate in other contexts. Second Report and Order at f 
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 minority-owned firms.
110. We propose therefore to allow women and minority-owned firms the following 
options. First, they may satisfy the general definition set forth in the Second Report and 
Order, which requires the minority and/or female principals to control the applicant, own at 
least 50.1 percent of its equity and, hi 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 hi the 
entrepreneurs' blocks, passive equity hi the corporate context means only non-voting stock 
may be held, or stock that includes no more than fifteen percent of the voting interests.145 For
145 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 non-voting stock, could sell 
to a single non-eligible entity 49.9 percent of the applicant's equity, consisting of 5 shares of 
the corporation's voting stock and 94 shares of its non-voting stock. Under this scenario,
224
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 
proliferation of shams. In addition, the Second Report and Order, all investor interests would 
be calculated on a fully-diluted basis, meaning that agreements such as stock options, warrants 
and convertible debentures generally would be considered to have a present effect and would 
be treated as if the rights thereunder already have been fully exercised.146 We recognize that 
the requirement that other investors own only passive interests would be a departure from the 
definition of a minority or women-owned business adopted in the Second Report and Order, 
but because of the very significant financial contribution that may be made by such other 
investors hi 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.
111. As a second proposed option, women and minority-owned 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 hi the same manner as above. 
For example, a corporation with 100 shares of voting stock and 100 shares of non-voting 
stock, with the 200 shares representing the total outstanding shares of the company, could 
qualify as a minority or women-owned 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 non-voting 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 
regaining 32 shares of non-voting 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.
112. Whichever option is chosen, we would require establishment of a "control group" 
for women and minority-owned firms hi much the same way we did for purposes of eligibility
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 non-voting stock.
146 As also noted hi the Second Report and Order, we will consider departing from the 
requirement that the equity of investors hi minority and women-owned 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 then- rights to 
control the designated entity. See Second Report and Order at If 277.
225
to bid in the entrepreneurs' blocks. Specifically, winning bidders, transferees or assignees 
would have to identify on their long-form applications a control group (consisting entirely of 
minorities and/or women or entities 100 percent owned and controlled by minorities and 
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.
113. We believe that a modification of our 50.1 percent equity requirement would 
best achieve the Congressional objective of providing effective and long-term economic 
opportunities for women and minority-owned 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 minority-owned 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 hi which 
allowing an investor to exceed these limitations would not result hi 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 minority-owned applicants, would help to ensure that control truly remains 
with the women and minority designated entities.
114. For example, a women or minority-owned firm electing to use the 25 percent 
option may have a non-eligible 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 minority-owned 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 
minority-owned businesses, such as "enhanced" installment payments or the 15 or 25 percent 
bidding credits, because it has a single non-eligible 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.
115. We set forth previously rules defining more explicitly the term "control" for 
purposes of determining whether a "control group" maintains de facto as well as de jure
226
control of an applicant.147 We propose to apply those rules equally to the minority and 
women principals of minority and women-owned applicants. Consistent with our general 
policies with regard to women-owned applicants for purposes of our multiple ownership and 
cross-ownership rules in this broadcast context, we do not propose to adopt, at this time, any 
special rules or presumptions to determine whether women-owned applicants exercise 
independent control of their firms. See In the Matter of Clarification of Commission Policies 
Regarding Spousal Attribution, 7 FCC Red. 1920 (1992)
116. We also note here that we are proposing to depart from the provision in the 
Third Report and Order that bars publicly traded companies from qualifying as minority and 
woman-owned businesses for purposes of participating in auctions. Most of the steps 
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.
117. 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 women-owned 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.
4. Definition of an Affiliate
118. 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 
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 
their eligibility for special designated entity provisions. In the Second Memorandum Opinion 
and Order that we adopted in this docket, we incorporate into our generic auction rules the 
affiliation standards that we established for narrowband PCS hi 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, sized-based eligibility criteria for
147 ee supra f 112.
227
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 sized-based eligibility criteria.
I. Limit on Licenses Awarded in Entrepreneurs' Blocks
119. 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 hi 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 hi these blocks.
120. 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 hi 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.
121. Further, this limitation would apply only to the total number of licenses that may 
be won at auctions hi 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.
J. Redesignation of Certain Narrowband PCS Spectrum Blocks
122. 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 hi 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 hi the same configuration set forth hi Section 24.102 of the rules. 
Doing so would give designated entities an opportunity to bid on a larger and more valuable
228
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.
VH. PROCEDURAL MATTERS AND ORDERING CLAUSE 
A. Regulatory Flexibility Analysis
123. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. § 604, the 
Commission's final analysis for the Memorandum Opinion and Order and the Commission's 
initial regulatory flexibility analysis for the Further Notice is as follows:
Memorandum Opinion and Order — Final Analysis
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 
licenses. The Commission published an Initial Regulatory Flexibility Analysis, see generally 
5 U.S.C. § 603, within the Notice of Proposed Rule Making in this proceeding, and published 
Final Regulatory Flexibility Analyses within the Second Report and Order (at flf 299-302) and 
the Third Report and Order (at ff 91-94). As noted in these previous final analyses, this 
proceeding will establish a system of competitive bidding for choosing among certain 
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 hi the provision of spectrum-based services.
125. Summary of the Issues Raised bv the Public Comments. In regard to the 
specific narrowband PCS issues addressed by this Third Memorandum Opinion and Order, no 
comments were submitted hi response to our Initial Regulatory Flexibility Analysis.
126. Significant Alternatives Considered. Although, as described hi (B) above, no 
comments were received pertaining to narrowband PCS, the Second Report and Order and 
Third Report and Order addressed at length the general policy considerations raised as a result 
of the Commission's new auction authority.
Further Notice — Initial Analysis
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 
bidding authority that will carry out the statutory mandates that certain designated entities,
229
including small entities, are afforded an opportunity to participate in the competitive bidding 
process and in the provision of spectrum-based services.
128. Objectives of this Action. The Omnibus Budget Reconciliation Act of 1993 and 
the subsequent Commission actions to implement it are intended to establish a system of 
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 hi the provision of 
narrowband PCS services.
129. Legal Basis. Authority for the for the Further Notice can be found in the 
Omnibus Budget Reconciliation Act of 1993 and hi Sections 2(a), 4(i) 303(r), 309(i) and 
3090) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 152 (a), 154 (i), 
303(r), 309(i) and 309(j).
130. Reporting. Recordkeeping and Other Compliance Requirements. The proposals 
under consideration in this Further Notice include the possibility of new reporting and 
recordkeeping requirements for a number of small business entities.
131. Federal Rules Which Overlap. Duplicate or Conflict With These Rules. None.
132. Description. Potential Impact and Number of Small Entities Involved. The rule 
changes proposed hi this Further Notice could effect smaller entities if they have mutually 
exclusive applications for initial licenses or permits for narrowband PCS licenses. 
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.
133. Any Significant Alternatives MinimiTing the Impact on Small Entities Consistent 
with the Stated Objectives. The Further Notice proposes certain provisions for smaller 
entities designed to ensure that such entities have the opportunity to participate hi the 
competitive bidding process and hi the provision of narrowband PCS services.
6. Ex Parte Roles
134. This is a non-restricted notice and comment rule making proceeding. Ex Parte 
presentations are permitted, except during the Sunshine Agenda period, provided they are 
disclosed as provided hi Commission rules. See generally 47 C.F.R. §§ 1.1202, 1.1203, and 
1.1206(a).
C. Comment Dates
230
135. Pursuant to applicable procedures set forth in Sections 1.41.5 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) 857-3800.
D. Ordering Clause
136. Accordingly, IT IS ORDERED, That the petitions for reconsideration ARE 
GRANTED to the extent described above and DENIED in all other respects.
137. 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).
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton 
Acting Secretary
231
APPENDIX 
RULES
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:
AUTHORITY: Sees. 4, 301, 302, 303, 309 and 332, 48 Stat. 1066, 10S2, as amended; 47 
U.S.C. §§ 154, 301, 302, 303, 309 and 332, unless otherwise noted.
2. Section 24.129 is revised to read as follows: 
Section. 24.129 Frequencies.
The 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.
(a) Eleven frequencies are available for assignment on a nationwide basis as follows: 
(1) Five 50 kHz channels paired with 50 kHz channels:
Channel 1: 940.00-940.05 and 901.00-901.05 MHz;
Channel 2: 940.05-940.10 and 901.05-901.10 MHz;
Channel 3: 940.10-940.15 and 901.10-901.15 MHz;
Channel 4: 940.15-940.20 and 901.15-901.20 MHz; and,
Channel 5: 940.20-940.25 and 901.20-901.25 MHz.*
(2) Three 50 kHz channels paired with 12.5 kHz channels:
Channel 6: 930.40-930.45 and 901.7500-901.7625 MHz;
Channel 7: 930.45-930.50 and 901.7625-901.7750 MHz; and,
Channel 8: 930.50-930.55 and 901.7750-901.7875 MHz;*
(3) Three 50 kHz unpaired channels:
Channel 9: 940.75-940.80 MHz; 
Channel 10: 940.80-940.85 MHz; and,
232
Channel 11: 940.85-940.90 MHz.*
(b) Six frequencies are available for assignment on a regional basis as follows:
(1) Two 50 kHz channels paired with 50 kHz channels:
Channel 12: 940.25-940.30 and 901.25-901.30 MHz; and, 
Channel 13: 940.30-940.35 and 901.30-901.35 MHz.**
(2) Four 50 kHz channels paired with 12.5 kHz channels:
Channel 14: 930.55-930.60 and 901.7875-901.8000 MHz;
Channel 15: 930.60-930.65 and 901.8000-901.8125 MHz;
Channel 16: 930.65-930.70 and 901.8125-901.8250 MHz; and,
Channel 17: 930.70-930.75 and 901.8250-901.8375 MHz.**
(c) Seven frequencies are available for assignment on a MTA basis as follows: 
(1) Two 50 kHz channels paired with 50 kHz channels:
Channel 18: 940.35-940.40 and 901.35-901.40 MHz; and, 
Channel 19: 940.40-940.45 and 901.40 -901.45 MHz.*
(2) Three 50 kHz channels paired with 12.5 kHz channels:
Channel 20: 930.75-930.80 and 901.8375-901.8500 MHz;
Channel 21: 930.80-930.85 and 901.8500-901.8625 MHz; and,
Channel 22: 930.85-930.90 and 901.8625-901.8750 MHz.*
(3) Two 50 kHz unpaired channels:
Channel 23: 940.90-940.95 MHz; and, 
Channel 24: 940.95-941.00 MHz.*
(d) Two 50 kHz channels paired with 12.5 kHz channels are available for assignment 
on a BTA basis:
Channel 25: 930.90-930.95 and 901.8750-901.8875 MHz; and, 
Channel 26: 930.95-931.00 and 901.8875-901.9000 MHz.*
Note 1: Operations in markets or portions of markets which border other countries, such as 
Canada and Mexico, will be subject to on-going coordination arrangements with neighboring 
countries.
3. Section 24.130 is amended by revising paragraphs (b) and (c) to read as follows:
233
(b) The following four 12.5 kHz unpaired channels are available for assignment on a 
MTA basis:
A: 901.9000-901.9125 MHz;
B: 901.9125-901.9250 MHz;
C: 901.9250-901.9375 MHz; and
D: 901.9375-901.9500 MHz.
(c) The following four 12.5 kHz unpaired channels are available for assignment on a 
BTA basis:
E: 901.9500-901.9625 MHz;
F: 901.9625-901.9750 MHz;
G: 901.9750-901.9875 MHz; and
H: 901.9875-902.0000 MHz.
4. Section 24.303 is revised to read as follows: 
Sec. 24303 Competitive Bidding Mechanisms.
(a) Sequencing. The Commission will establish and may vary the sequence in which 
narrowband PCS licenses will be auctioned.
(b) Grouping. In the event the Commission uses either a simultaneous multiple round 
competitive bidding design or combinatorial bidding, the Commission will determine which 
licenses will be auctioned simultaneously or in combination.
(c) Reservation Price. The Commission may establish a reservation price, either disclosed or 
undisclosed, below which a license subject to auction will not be awarded.
(d) Minimum Bid Increments. The Commission may, by announcement before or during an 
auction, require minimum bid increments in dollar or percentage terms. The Commission 
may also establish by Public Notice a suggested opening bid or a minimum opening bid on 
each license.
(e) Stopping Rules. The Commission may establish stopping rules before or during multiple 
round auctions hi order to terminate an auction within a reasonable time.
(f) Activity Rules. The Commission may establish activity rules which require a minimum 
amount of bidding activity. In the event that the Commission establishes an activity rule hi
234
connection with a simultaneous multiple round auction, each bidder will be entitled to request 
and will be automatically granted one activity rule waiver during each stage of an auction, or 
one automatic waiver during a specified number of bidding rounds. The Commission may 
change by Public Notice the number and frequency of such automatic activity rule waivers for 
a specific auction.
(g) Bidder Identification During Auctions. The Commission may choose, on an auction-by- 
auction basis, to release the identity of the bidders associated with bidder identification 
numbers. The Commission will announce by Public Notice before each auction whether 
bidder identities will be revealed.
5. Section 24.308 is revised to read as follows:
Sec. 24.308 License Grant, Denial, Default, and Disqualification.
(a) Unless eligible for installment payments and/or a bidding credit, each winning bidder is 
required to pay the balance of its winning bid in a lump sum payment within five (5) business 
days following the award of the license. Grant of the license will be conditioned upon full and 
timely payment of the winning bid amount.
(b) A bidder who withdraws its bid, defaults on a payment or is disqualified will be subject 
to the penalties specified in Section 1.2109 of this Chapter.
6. Section 24.309 is revised to read as follows: 
Sec. 24.309 Designated Entities.
(a) Designated entities entitled to preferences in the narrowband PCS service are small 
businesses and businesses owned by members of minority groups and/or women as defined in 
§§ 24.320(b) and 24.320(c) of this Subpart.
/
(b) Designated entities will be eligible for certain special narrowband PCS provisions as 
follows:
(1) Installment payments. Small businesses, including small businesses owned by members 
of minority groups and women, will be eligible to pay the full amount of their winning bid on 
any regional, MTA or BTA license in installments over the term of the license pursuant to the 
terms set forth in Section 1.2110(d) of this Chapter.
(2) Bidding Credits. Businesses owned by members of minority groups and women, including 
small businesses owned by members of minority groups and women, will be eligible for a 
twenty-five (25) percent bidding credit when bidding on the following licenses: (1) the 
nationwide licenses on Channel 5, Channel 8 and Channel 11; (2) all MTA licenses on 
Channel 19, Channel 22, Channel 24; and (3) all BTA licenses on Channel 26. This bidding
235
credit will reduce by 25 percent the bid price that businesses owned by members of minority 
groups and women will be required to pay to obtain a license. Businesses owned by women 
and/or minorities, including small businesses owned by women and/or minorities will be 
eligible for a forty (40) percent bidding credit when bidding on all regional licenses on 
Channel 13 and Channel 17. In section 24.129 above, the licenses that will be eligible for 25 
percent bidding credits are indicated by an (*); the licenses that will be eligible for 40 percent 
bidding credits are indicated by an (**).
(3) Tax Certificates. Any non-controlling initial investor in a business owned by members of 
minority groups and/or women and who provides "start-up" financing, which allows such 
business to acquire a narrowband PCS license(s), and any non-controlling investor who 
purchases an interest in a narrowband PCS license held by a business owned by members of 
minority groups and/or women within the first year after license issuance, may, upon the sale 
of such investment or interest, request from the Commission a tax certificate. Any narrowband 
PCS licensee who assigns or transfers control of its license to a business owned by members 
of minority groups and/or women may request that the Commission issue the licensee a tax 
certificate.
(c) Short-Form Application Certification: Long-Form Application Disclosure.
(1) All applicants for licenses under the designated entity provisions set forth in this 
section shall certify on their short-form applications (Form 175) that they are eligible for 
those preferences pursuant to this section.
(2) In addition to the requirements in subpart I, all designated entity applicants that are 
winning bidders shall, in an exhibit to their long-form applications  
(i) identify each member of the applicant's control group, regardless of the size of 
the member's total interest in the applicant, and each member's minority group or 
gender classification, if applicable;
(ii) disclose the gross revenues of the applicant and its affiliates, and other persons 
that hold interests in the applicant and their affiliates (including all members of the 
applicant's control group); and
(iii) certify that the personal net worth of the applicant (if an individual), each 
affiliate and each person that hold an interest in the applicant is less than $40 million.
(d) Audits. Applicants and licensees claiming eligibility under this section shall be subject to 
random audits by the Commission.
(e) Definitions. The terms affiliate, business owned by members of minority groups and 
 women, consortium of small businesses, control group, gross revenues, members of minority 
groups, passive equity, personal net worth, and small business used in this section are defined 
in § 24.320.
236
(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:
(1) If a small business paying for a narrowband PCS license in installment payments 
seeks to transfer a license to a non-small business entity during the term of the license, the 
remaining principal balance must be repaid as a condition of the license transfer.
(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 hi 
ownership structure under this paragraph.
7. Section 24.320 is added to read as follows: 
§24.320 Definitions.
(a) Scope. The definitions in this section apply to §§ 24.309-24.315 of this subpart, unless 
otherwise specified in those sections.
Business: Consortium of Small
(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 worm of $40 million or more; 
(iii) has a control group all of whose members and affiliates are considered hi 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.
(2) Attribution and Aggregation of Gross Revenues and Personal Net Worth.
(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
237
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.
(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.
(iii) Where an applicant (or licensee) is a consortium of small businesses, the gross 
revenues of each small business shall not be aggregated.
(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.
(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.
Note: 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.
(3) A small business consortium is a conglomerate organization formed as a joint 
venture between mutually-independent business firms, each of which individually satisfies the 
definition of a small business.
(c) Business Owned bv Members of Minority Groups and/or Women. A business owned by 
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
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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.
(d) Gross Revenues. Gross revenues shall mean all income received by an entity, whether 
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.
(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.
(f) Members of Minority Groups. Members of minority groups includes individuals of 
African American, Hispanic-surnamed, American Eskimo, Aleut, American Indian and Asian 
American extraction.
(g) Passive Equity. Passive equity shall mean (i) for corporations, non-voting stock or stock 
that includes no more than fifteen percent of the voting equity; (ii) for partnerships, joint 
ventures and other non-corporate entities, limited partnership interests and similar interests 
that do not afford the power to exercise control of the entity.
(h) Control Group. A control group is an entity, or a group of individuals or entities, that 
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 50.1 percent of the annual distribution of any 
dividends paid on the voting stock of a corporation; (in) 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.
Note: Voting control does not always assure de facto control, such as, for example, 
when the voting stock of the control group is widely dispersed (see, e.g., § 24.720 (e) 
(2) (Hi)).
(i) Affiliate. (1) Determinations regarding whether an individual or entity will be considered 
an affiliate of (a) an applicant or (b) a person holding an attributable interest in an applicant
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under paragraph (b) (2) will be made pursuant to the general affiliation rules set forth in 
section 24.720 (1) of this part.
8. Section 24.406 is revised to read as follows:
Sec. 24.406 Filing of Narrowband PCS applications, fees, and numbers of copies.
(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) 418-3676.
(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.
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(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 hi 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:
Sec. 24.422 Amendment of application for Narrowband Personal Communications 
Service filed on FCC Form 175.
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(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.
(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:
Sec. 24.429 Ownership changes and agreements to amend or to dismiss applications or 
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 
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 non-designated 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:
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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 Sees. 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.
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