Sec. 24.709  Eligibility for licenses for frequency Blocks C and F.

    (a) General Rule. (1) No application is acceptable for filing and no 
license shall be granted for frequency block C or frequency block F, 
unless the applicant, together with its affiliates and persons or 
entities that hold interests in the applicant and their affiliates, have 
gross revenues of less than $125 million in each of the last two years 
and total assets of less than $500 million at the time the applicant's 
short-form application (Form 175) is filed.
    (2) The gross revenues and total assets of the applicant (or 
licensee), and its affiliates, and (except as provided in paragraph (b) 
of this section) of persons or entities that hold interests in the 
applicant (or licensee), and their affiliates, shall be attributed to 
the applicant and considered on a cumulative basis and aggregated for 
purposes of determining whether the applicant (or licensee) is eligible 
for a license for frequency block C or frequency block F under this 
section.
    (3) Any licensee awarded a license pursuant to this section (or 
pursuant to Sec. 24.839(d)(2)) shall maintain its eligibility until at 
least five years from the date of initial license grant, except that a 
licensee's (or other attributable entity's) increased gross revenues or 
increased total assets due to nonattributable equity investments (i.e., 
from sources whose gross revenues and total assets are not considered 
under paragraph (b) of this section), debt financing, revenue from 
operations or other investments, business development or expanded 
service shall not be considered.
    (b) Exceptions to General Rule. (1) Small Business Consortia. Where 
an applicant (or licensee) is a consortium of small businesses, the 
gross revenues and total assets of each small business shall not be 
aggregated.
    (2) Publicly-Traded Corporations. Where an applicant (or licensee) 
is a publicly traded corporation with widely dispersed voting power, the 
gross revenues and total assets of a person or entity that holds an 
interest in the applicant (or licensee), and its affiliates, shall not 
be considered.
    (3) 25 Percent Equity Exception. The gross revenues and total assets 
of a person or entity that holds an interest in the applicant (or 
licensee), and its affiliates, shall not be considered so long as:
    (i) Such person or entity, together with its affiliates, holds only 
nonattributable equity equaling no more than 25 percent of the 
applicant's (or licensee's) total equity;
    (ii) Except as provided in paragraph (b)(5) of this section, such 
person or entity is not a member of the applicant's (or licensee's) 
control group; and
    (iii) The applicant (or licensee) has a control group that complies 
with the minimum equity requirements of paragraph (b)(5) of this 
section, and, if the applicant (or licensee) is a corporation, owns at 
least 50.1 percent of the applicant's (or licensee's) voting interests, 
and, if the applicant (or licensee) is a partnership, holds all of its 
general partnership interests.
    (4) 49.9 Percent Equity Exception. The gross revenues and total 
assets of a person or entity that holds an interest in the applicant (or 
licensee), and its affiliates, shall not be considered so long as:
    (i) Such person or entity, together with its affiliates, holds only 
nonattributable equity equaling no more than 49.9 percent of the 
applicant's (or licensee's) total equity;
    (ii) Except as provided in paragraph (b)(6) of this section, such 
person or entity is not a member of the applicant's (or licensee's) 
control group; and
    (iii) The applicant (or licensee) has a control group that complies 
with the minimum equity requirements of paragraph (b)(6) of this section 
and, if the applicant (or licensee) is a corporation, owns at least 50.1 
percent of the applicant's (or licensee's) voting interests, and, if the 
applicant (or licensee) is a partnership, holds all of its general 
partnership interests.
    (5) Control Group Minimum 25 Percent Equity Requirement. In order to 
be eligible to exclude gross revenues and total assets of persons or 
entities identified in paragraph (b)(3) of this section, and

[[Page 276]]

applicant (or licensee) must comply with the following requirements:
    (i) Except for an applicant (or licensee) whose sole control group 
member is a preexisting entity, as provided in paragraph (b)(5)(ii) of 
this section, at the time the applicant's short-form application (Form 
175) is filed and until at least three years following the date of 
initial license grant, the applicant's (or licensee's) control group 
must own at least 25 percent of the applicant's (or licensee's) total 
equity as follows:
    (A) At least 15 percent of the applicant's (or licensee's) total 
equity must be held by qualifying investors, either unconditionally or 
in the form of options exercisable, at the option of the holder, at any 
time and at any exercise price equal to or less than the market value at 
the time the applicant files its short-form application (Form 175);
    (B) Such qualifying investors must hold 50.1 percent of the voting 
stock and all general partnership interests within the control group, 
and must have de facto control of the control group and of the 
applicant;
    (C) The remaining 10 percent of the applicant's (or licensee's) 
total equity may be owned, either unconditionally or in the form of 
stock options, by any of the following entities, which may not comply 
with Sec. 24.720(n)(1):
    (1) Institutional Investors;
    (2) Noncontrolling existing investors in any preexisting entity that 
is a member of the control group;
    (3) Individuals that are members of the applicant's (or licensee's) 
management; or
    (4) Qualifying investors, as specified in Sec. 24.720(n)(4).
    (D) Following termination of the three-year period specified in 
paragraph (b)(5)(i) of this section, qualifying investors must continue 
to own at least 10 percent of the applicant's (or licensee's) total 
equity, either unconditionally or in the form of stock options subject 
to the restrictions in paragraph (b)(5)(i)(A) of this section. The 
restrictions specified in paragraph (b)(5)(i)(C)(1) through (4) of this 
section no longer apply to the remaining equity after termination of 
such three-year period.
    (ii) At the election of an applicant (or licensee) whose control 
group's sole member is a preexisting entity, the 25 percent minimum 
equity requirements set forth in paragraph (b)(5)(i) of this section 
shall apply, except that only 10 percent of the applicant's (or 
licensee's) total equity must be held by qualifying investors and that 
the remaining 15 percent of the applicant's (or licensee's) total equity 
may be held by qualifying investors or noncontrolling existing investors 
in such control group member or individuals that are members of the 
applicant's (or licensee's) management. These restrictions on the 
identity of the holder(s) of the remaining 15 percent of the licensee's 
total equity no longer apply after termination of the three-year period 
specified in paragraph (b)(5)(i) of this section.
    (6) Control Group Minimum 50.1 Percent Equity Requirement. In order 
to be eligible to exclude gross revenues and total assets of persons or 
entities identified in paragraph (b)(4) of this section, an applicant 
(or licensee) must comply with the following requirements:
    (i) Except for an applicant (or licensee) whose sole control group 
member is a preexisting entity, as provided in paragraph (b)(6)(ii) of 
this section, at the time the applicant's short-form application (Form 
175) is filed and until at least three years following the date of 
initial license grant, the applicant's (or licensee's) control group 
must own at least 50.1 percent of the applicant's (or licensee's) total 
equity as follows:
    (A) At least 30 percent of the applicant's (or licensee's)total 
equity must be held by qualifying investors, either unconditionally or 
in the form of options, exercisable at the option of the holder, at any 
time and at any exercise price equal to or less than the market value at 
the time the applicant files its short-form application (Form 175);
    (B) Such qualifying investors must hold 50.1 percent of the voting 
stock and all general partnership interests within the control group and 
must have de facto control of the control group and of the applicant;
    (C) The remaining 20.1 percent of the applicant's (or licensee's) 
total equity may be owned by qualifying investors, either 
unconditionally or in the form of stock options not subject to the 
restrictions of paragraph (b)(6)(i)(A) of this section, or by any of the 
following

[[Page 277]]

entities which may not comply with Sec. 24.720(n)(1):
    (1) Institutional investors, either unconditionally or in the form 
of stock options;
    (2) Noncontrolling existing investors in any preexisting entity that 
is a member of the control group, either unconditionally or in the form 
of stock options;
    (3) Individuals that are members of the applicant's (or licensee's) 
management, either unconditionally or in the form of stock options; or
    (4) Qualifying investors, as specified in 24.720(n)(4).
    (D) Following termination of the three-year period specified in 
paragraph (b)(6)(i) of this section, qualifying investors must continue 
to own at least 20 percent of the applicant's (or licensee's) total 
equity unconditionally or in the form of stock options subject to the 
restrictions in paragraph (b)(6)(i)(A) of this section. The restrictions 
specified in paragraph (b)(6)(i)(C)(1) through (4) of this section no 
longer apply to the remaining equity after termination of such three-
year period.
    (ii) At the election of an applicant (or licensee) whose control 
group's sole member is a preexisting entity, the 50.1 percent minimum 
equity requirements set forth in paragraph (b)(6)(i) of this section 
shall apply, except that only 20 percent of the applicant's (or 
licensee's) total equity must be held by qualifying investors, and that 
the remaining 30.1 percent of the applicant's (or licensee's) total 
equity may be held by qualifying investors, or noncontrolling existing 
investors in such control group member or individuals that are members 
of the applicant's (or licensee's) management. These restrictions on the 
identity of the holder(s) of the remaining 30.1 percent of the 
licensee's total equity no longer apply after termination of the three-
year period specified in paragraph (b)(6)(i) of this section.
    (7) Calculation of Certain Interests. Except as provided in 
paragraphs (b)(5) and (b)(6) of this section, ownership interests shall 
be calculated on a fully diluted basis; all agreements such as warrants, 
stock options and convertible debentures will generally be treated as if 
the rights thereunder already have been fully exercised, except that 
such agreements may not be used to appear to terminate or divest 
ownership interests before they actually do so, in order to comply with 
the nonattributable equity requirements in paragraphs (b)(3)(i) and 
(b)(4)(i) of this section.
    (8) Aggregation of Affiliate Interests. Persons or entities that 
hold interest in an applicant (or licensee) that are affiliates of each 
other or have an identify of interests identified in Sec. 24.720(1)(3) 
will be treated as though they were one person or entity and their 
ownership interests aggregated for purposes of determining an 
applicant's (or licensee's) compliance with the nonattributable equity 
requirements in paragraphs (b)(3)(i) and (b)(4)(i) of this section.

    Example 1 for paragraph (b)(8). ABC Corp. is owned by individuals, 
A, B, and C, each having an equal one-third voting interest in ABC Corp. 
A and B together, with two-thirds of the stock have the power to control 
ABC Corp. and have an identity of interest. If A & B invest in DE Corp., 
a broadband PCS applicant for block C, A and B's separate interests in 
DE Corp. must be aggregated because A and B are to be treated as one 
person.
    Example 2 for paragraph (b)(8). ABC Corp. has subsidiary BC Corp., 
of which it holds a controlling 51 percent of the stock. If ABC Corp. 
and BC Corp., both invest in DE Corp., their separate interests in DE 
Corp. must be aggregated because ABC Corp. and BC Corp. are affiliates 
of each other.

    (c) Short-Form and Long-Form Applications: Certifications and 
Disclosure. (1) Short-form Application. In addition to certifications 
and disclosures required by Part 1, subpart Q of this chapter and 
Sec. 24.813, each applicant for a license for frequency block C or 
frequency block F shall certify on its short-form application (Form 175) 
that it is eligible to bid on and obtain such license(s), and (if 
applicable) that it is eligible for designated entity status pursuant to 
this section and Sec. 24.720, and shall append the following information 
as an exhibit to its Form 175:
    (i) For an applicant that is a publicly traded corporation with 
widely disbursed voting power:

[[Page 278]]

    (A) A certified statement that such applicant complies with the 
requirements of the definition of publicly traded corporation with 
widely disbursed voting power set forth in Sec. 24.720(m);
    (B) The identify of each affiliate of the applicant if not disclosed 
pursuant to Sec. 24.813; and
    (C) The applicant's gross revenues and total assets, computed in 
accordance with paragraphs (a) and (b) of this section.
    (ii) For all other applicants:
    (A) The identity of each member of the applicant's control group, 
regardless of the size of each member's total interest in the applicant, 
and the percentage and type of interest held;
    (B) The citizenship and the gender or minority group classification 
for each member of the applicant's control group if the applicant is 
claiming status as a business owned by members of minority groups and/or 
women;
    (C) The status of each control group member that is an institutional 
investor, an existing investor, and/or a member of the applicant's 
management;
    (D) The identify of each affiliate of the applicant and each 
affiliate of individuals or entities identified pursuant to paragraphs 
(c)(1)(ii)(A) and (c)(1)(ii)(C) of this section if not disclosed 
pursuant to Sec. 24.813;
    (E) A certification that the applicant's sole control group member 
is a preexisting entity, if the applicant makes the election in either 
paragraph (b)(5)(ii) or (b)(6)(ii) of this section; and
    (F) The applicant's gross revenues and total assets, computed in 
accordance with paragraphs (a) and (b) of this section.
    (iii) For each applicant claiming status as a small business 
consortium, the information specified in paragraph (c)(1)(ii) of this 
section, for each member of such consortium.
    (2) Long-form Application. In addition to the requirements in 
subpart I of this part and other applicable rules (e.g., Secs. 20.6(e) 
and 20.9(b) of this chapter), each applicant submitting a long-form 
application for a license(s) for frequency block C or frequency block F 
shall, in an exhibit to its long-form application:
    (i) Disclose separately and in the aggregate the gross revenues and 
total assets, computed in accordance with paragraphs (a) and (b) of this 
section, for each of the following: the applicant; the applicant's 
affiliates, the applicant's control group members; the applicant's 
attributable investors; and affiliates of its attributable investors;
    (ii) List and summarize all agreements or other instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility for 
a license(s) for frequency block C or frequency block F and its 
eligibility under Secs. 24.711, 24.712, 24.714 and 24.720, including the 
establishment of de facto and de jure control; such agreements and 
instruments include articles of incorporation and bylaws, shareholder 
agreements, voting or other trust agreements, partnership agreements, 
management agreements, joint marketing agreements, franchise agreements, 
and any other relevant agreements (including letters of intent), oral or 
written; and
    (iii) List and summarize any investor protection agreements and 
identify specifically any such provisions in those agreements identified 
pursuant to paragraph (c)(2)(ii) of this section, including rights of 
first refusal, supermajority clauses, options, veto rights, and rights 
to hire and fire employees and to appoint members to boards of directors 
or management committees.
    (3) Records Maintenance. All applicants, including those that are 
winning bidders, shall maintain at their principal place of business an 
updated file of ownership, revenue and asset information, including 
those documents referenced in paragraphs (c)(2)(ii) and (c)(2)(iii) of 
this section and any other documents necessary to establish eligibility 
under this section or under the definitions of small business and/or 
business owned by members of minority groups and/or women. Licensees 
(and their successors in interest) shall maintain such files for the 
term of the license. Applicants that do not obtain the license(s) for 
which they applied shall maintain such files until the grant of such 
license(s) is final, or one year from the date of the filing of their 
short-form application (Form 175), whichever is earlier.

[[Page 279]]

    (d) Audits. (1) Applicants and licensees claiming eligibility under 
this section or Secs. 24.711 through 24.720 shall be subject to audits 
by the Commission, using in-house and contract resources. Selection for 
audit may be random, on information, or on the basis of other factors.
    (2) Consent to such audits is part of the certification included in 
the short-form application (Form 175). Such consent shall include 
consent to the audit of the applicant's or licensee's books, documents 
and other material (including accounting procedures and practices) 
regardless of form or type, sufficient to confirm that such applicant's 
or licensee's representations are, and remain, accurate. Such consent 
shall include inspection at all reasonable times of the facilities, or 
parts thereof, engaged in providing and transacting business, or keeping 
records regarding licensed broadband PCS service and shall also include 
consent to the interview of principals, employees, customers and 
suppliers of the applicant or licensee.
    (e) Definitions. The terms affiliate, business owned by members of 
minority groups and women, consortium of small businesses, control 
group, existing investor, gross revenues, institutional investor, 
members of minority groups, nonattributable equity, preexisting entity, 
publicly traded corporation with widely dispersed voting power, 
qualifying investor, small business and total assets used in this 
section are defined in Sec. 24.720.
[59 1997 FR 63232 , Dec. 7, 1994;  60 FR 5335 , Jan. 27, 1995, as amended at  60 FR 37795 , July 21, 1995;  61 FR 33868 , July 1, 1996]