§  24.709   Eligibility for licenses for frequency Blocks C or F.

   (a) General rule for licenses offered for closed bidding. (1) No
   application is acceptable for filing and no license shall be granted to
   a winning bidder in closed bidding 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 had 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) Any licensee awarded a license won in closed bidding pursuant to
   the eligibility requirements of this section (or pursuant to
   §  24.839(a)(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.

   (3) Tiers. (i) For purposes of determining spectrum to which the
   eligibility requirements of this section are applicable, the BTA
   service areas (see §  24.202(b)) are divided into two tiers according to
   their population as follows:

   (A) Tier 1: BTA service areas with population equal to or greater than
   2.5 million;

   (B) Tier 2: BTA service areas with population less than 2.5 million.

   (ii) For Auction No. 35, the population of individual BTA service areas
   will be based on the 1990 census. For auctions beginning after the
   start of Auction No. 35, the population of individual BTA service areas
   will be based on the most recent available decennial census.

   (4) Application of eligibility requirements. (i) The following
   categories of licenses will be subject to closed bidding pursuant to
   the eligibility requirements of this section in auctions that begin
   after the effective date of this paragraph.

   (A) For Tier 1 BTAs, one of the 10 MHz C block licenses (1895-1900 MHz
   paired with 1975-1980 MHz);

   (B) For Tier 2 BTAs, two of the 10 MHz C block licenses (1895-1900 MHz
   paired with 1975-1980 MHz; 1900-1905 MHz paired with 1980-1985 MHz) and
   all 15 MHz C block licenses.

   (ii) Notwithstanding the provisions of paragraph (a)(4)(i) of this
   section, any C block license for operation on spectrum that has been
   offered, but not won by a bidder, in closed bidding in any auction
   beginning on or after March 23, 1999, will not be subject in a
   subsequent auction to closed bidding pursuant to the eligibility
   requirements of this section.

   (5) Special rule for licensees disaggregating or returning certain
   spectrum in frequency block C.

   (i) In addition to entities qualifying for closed bidding under
   paragraph (a)(1) of this section, any entity that was eligible for and
   participated in the auction for frequency block C, which began on
   December 18, 1995, or the reauction for frequency block C, which began
   on July 3, 1996, will be eligible to bid for C block licenses offered
   in closed bidding in any reauction of frequency block C spectrum that
   begins within two years of March 23, 1999.

   (ii) In cases of merger, acquisition, or other business combination of
   entities, where each of the entities is eligible to bid for C block
   licenses offered in closed bidding in any reauction of C block spectrum
   on the basis of the eligibility exception set forth in paragraph
   (a)(5)(i) of this section, the resulting entity will also be eligible
   for the exception specified in paragraph (a)(5)(i) of this section.

   (iii) In cases of merger, acquisition, or other business combination of
   entities, where one or more of the entities are ineligible for the
   exception set forth in paragraph (a)(5)(i) of this section, the
   resulting entity will not be eligible pursuant to paragraph (a)(5)(i)
   of this section unless an eligible entity possesses de jure and de
   facto control over the resulting entity.

   (iv) The following restrictions will apply for any reauction of
   frequency block C spectrum conducted after March 24, 1998:

   (A) Applicants that elected to disaggregate and surrender to the
   Commission 15 MHz of spectrum from any or all of their frequency block
   C licenses, as provided in Amendment of the Commission's Rules
   Regarding Installment Payment Financing for Personal Communications
   Services (PCS) Licensees, Second Report and Order and Further Notice of
   Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd 16,436 (1997), as
   modified by the Order on Reconsideration of the Second Report and
   Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 1998), will not be
   eligible to apply for such disaggregated spectrum until 2 years from
   the start of the reauction of that spectrum.

   (B) Applicants that surrendered to the Commission any of their
   frequency block C licenses, as provided in Amendment of the
   Commission's Rules Regarding Installment Payment Financing for Personal
   Communications Services (PCS) Licensees, Second Report and Order and
   Further Notice of Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd
   16,436 (1997), as modified by the Order on Reconsideration of the
   Second Report and Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24,
   1998), will not be eligible to apply for the licenses that they
   surrendered to the Commission until 2 years from the start of the
   reauction of those licenses if they elected to apply a credit of 70% of
   the down payment they made on those licenses toward the prepayment of
   licenses they did not surrender.

   (b) Exceptions to general rule —(1) Scope. The following provisions
   apply to licenses acquired in Auctions No. 5, 10, 11 or 22, or pursuant
   to §  24.839(a)(2) or (a)(3) prior to October 30, 2000.

   (i) 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.

   (ii) 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.

   (iii) 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:

   (A) 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;

   (B) Except as provided in paragraph (b)(1)(v) of this section, such
   person or entity is not a member of the applicant's (or licensee's)
   control group; and

   (C) The applicant (or licensee) has a control group that complies with
   the minimum equity requirements of paragraph (b)(1)(v) 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.

   (iv) 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:

   (A) 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;

   (B) Except as provided in paragraph (b)(1)(vi) of this section, such
   person or entity is not a member of the applicant's (or licensee's)
   control group; and

   (C) The applicant (or licensee) has a control group that complies with
   the minimum equity requirements of paragraph (b)(1)(vi) 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.

   (v) 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)(1)(iii) of this section, and
   applicant (or licensee) must comply with the following requirements:

   (A) Except for an applicant (or licensee) whose sole control group
   member is a preexisting entity, as provided in paragraph (b)(1)(v)(B)
   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:

   ( 1 ) 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);

   ( 2 ) 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;

   ( 3 ) The remaining 10 percent of the applicant's (or licensee's) total
   equity may be owned, either unconditionally or in the form of stock
   options, by any of the following entities, which may not comply with
   §  24.720(g)(1):

   ( i ) Institutional Investors;

   ( ii ) Noncontrolling existing investors in any preexisting entity that
   is a member of the control group;

   ( iii ) Individuals that are members of the applicant's (or licensee's)
   management; or

   ( iv ) Qualifying investors, as specified in §  24.720(g)(3).

   ( 4 ) Following termination of the three-year period specified in
   paragraph (b)(1)(v)(A) of this section, qualifying investors must
   continue to own at least 10 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)(1)(v)(A)( 1 ) of this section. The
   restrictions specified in paragraphs (b)(1)(v)(A)( 3 )( i ) through
   (b)(1)(v)(A)( 3 )( iv ) of this section no longer apply to the
   remaining equity after termination of such three-year period.

   (B) 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)(1)(v)(A) of this section shall
   apply, except that only 10 percent of the applicant's (or licensee's)
   total equity must be held in 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)(1)(v)(A) of this section.

   (vi) 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)(1)(iv) of this section, an
   applicant (or licensee) must comply with the following requirements:

   (A) Except for an applicant (or licenses) whose sole control group
   member is a preexisting entity, as provided in paragraph (b)(1)(vi)(B)
   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:

   ( 1 ) 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);

   ( 2 ) 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;

   ( 3 ) 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)(1)(vi)(A)( 1 ) of this section, or by any
   of the following entities which may not comply with §  24.720(g)(1):

   ( i ) Institutional investors, either unconditionally or in the form of
   stock options;

   ( ii ) Noncontrolling existing investors in any preexisting entity that
   is a member of the control group, either unconditionally or in the form
   of stock options;

   ( iii ) Individuals that are members of the applicant's (or licensee's)
   management, either unconditionally or in the form of stock options; or

   ( iv ) Qualifying investors, as specified in §  24.720(g)(3).

   ( 4 ) Following termination of the three-year period specified in
   paragraph (b)(1)(vi)(A) 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)(1)(vi)(A)( 1 ) of this section. The
   restrictions specified in paragraph (b)(1)(vi)(A)( 3 )( i ) through
   (b)(1)(vi)(A)( 3 )( iv ) of this section no longer apply to the
   remaining equity after termination of such three-year period.

   (B) 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)(1)(vi)(A) 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)(1)(vi)(A) of this section.

   (vii) Calculation of certain interests. Except as provided in
   paragraphs (b)(1)(v) and (b)(1)(vi) 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)(1)(iii)(A) and (b)(1)(iv)(A) of this section.

   (viii) 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
   §  1.2110(c)(5)(iii) 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)(1)(iii)(A) and
   (b)(1)(iv)(A) of this section.

   Example 1 for paragraph (b)(1)(viii). 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)(1)(viii). 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.

   (2) The following provisions apply to licenses acquired pursuant to
   §  24.839(a)(2) or (a)(3) on or after October 30, 2000. In addition to
   the eligibility requirements set forth at 24.709(a) and (b), applicants
   and/or licensees seeking to acquire C and/or F block licenses pursuant
   to 24.839(a)(2) or (a)(3) will be subject to the controlling interest
   standard in 1.2110(c)(2) of this chapter for purposes of determining
   unjust enrichment payment obligations. See §  1.2111 of this chapter.

   (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, each
   applicant to participate in closed bidding 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 §  24.720, and shall append the following
   information as an exhibit to its Form 175:

   (i) For all applicants: The applicant's gross revenues and total
   assets, computed in accordance with paragraphs (a) of this section and
   §  1.2110(b)(1) through (b)(2) of this chapter.

   (ii) For all applicants that participated in Auction Nos. 5, 10, 11,
   and/or 22:

   (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 status of each control group member that is an institutional
   investor, an existing investor, and/or a member of the applicant's
   management;

   (C) The identity of each affiliate of the applicant and each affiliate
   of individuals or entities identified pursuant to paragraphs
   (C)(1)(ii)(A) and (c)(1)(ii)(B) of this section;

   (D) A certification that the applicant's sole control group member is a
   preexisting entity, if the applicant makes the election in either
   paragraph (b)(1)(v)(B) or (b)(1)(vi)(B)of this section; and

   (E) For an applicant that is a publicly traded corporation with widely
   disbursed voting power:

   ( 1 ) 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 §  24.720(f);

   ( 2 ) The identity of each affiliate of the applicant.

   (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., § §  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 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 § §  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 and any other documents necessary to establish
   eligibility under this section or under the definition of small
   business. 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.

   (d) Definitions . The terms control group, existing investor,
   institutional investor, nonattributable equity, preexisting entity,
   publicly traded corporation with widely dispersed voting power,
   qualifying investor, and small business used in this section are
   defined in §  24.720.

   [ 67 FR 45368 , July 9, 2002, as amended at  68 FR 42998 , July 21, 2003]

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