Sec.  1.2110   Designated entities.

   (a) Designated entities are small businesses, businesses owned by members of
   minority groups and/or women, and rural telephone companies.

   (b) Eligibility for small business and entrepreneur provisions —(1) Size
   attribution. (i) The gross revenues of the applicant (or licensee), its
   affiliates, its controlling interests, the affiliates of its controlling
   interests, and the entities with which it has an attributable material
   relationship  shall  be  attributed to the applicant (or licensee) and
   considered on a cumulative basis and aggregated for purposes of determining
   whether  the applicant (or licensee) is eligible for status as a small
   business, very small business, or entrepreneur, as those terms are defined
   in  the service-specific rules. An applicant seeking status as a small
   business, very small business, or entrepreneur, as those terms are defined
   in the service-specific rules, must disclose on its short- and long-form
   applications, separately and in the aggregate, the gross revenues for each
   of the previous three years of the applicant (or licensee), its affiliates,
   its controlling interests, the affiliates of its controlling interests, and
   the entities with which it has an attributable material relationship.

   (ii) If applicable, pursuant to  Sec. 24.709 of this chapter, the total assets of
   the applicant (or licensee), its affiliates, its controlling interests, the
   affiliates of its controlling interests, and the entities with which it has
   an attributable material relationship shall be attributed to the applicant
   (or  licensee) and considered on a cumulative basis and aggregated for
   purposes of determining whether the applicant (or licensee) is eligible for
   status as an entrepreneur. An applicant seeking status as an entrepreneur
   must disclose on its short- and long-form applications, separately and in
   the aggregate, the gross revenues for each of the previous two years of the
   applicant (or licensee), its affiliates, its controlling interests, the
   affiliates of its controlling interests, and the entities with which it has
   an attributable material relationship.

   (2)  Aggregation of affiliate interests. Persons or entities that hold
   interests in an applicant (or licensee) that are affiliates of each other or
   have an identity of interests identified in  Sec. 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 requirements of this section.

   Example 1 to paragraph (b)(2):   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 or entity.

   Example 2 to paragraph (b)(2):   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.

   (3)  Exceptions. (i) Consortium . Where an applicant to participate in
   bidding  for  Commission licenses or permits is a consortium either of
   entities eligible for size-based bidding credits an/or for closed bidding
   based on gross revenues and/or total assets, the gross revenues and/or total
   assets of each consortium member shall not be aggregated. Each consortium
   member must constitute a separate and distinct legal entity to qualify for
   this exception. Consortia that are winning bidders using this exception must
   comply with the requirements of  Sec. 1.2107(g) of this chapter as a condition of
   license grant.

   (ii)  Applicants  without identifiable controlling interests. Where an
   applicant (or licensee) cannot identify controlling interests under the
   standards set forth in this section, the gross revenues of all interest
   holders in the applicant, and their affiliates, will be attributable.

   (iii) Rural telephone cooperatives. (A)( 1 ) An applicant will be exempt
   from  Sec. 1.2110(c)(2)(ii)(F) for the purpose of attribution in  Sec. 1.2110(b)(1),
   if the applicant or a controlling interest in the applicant, as the case may
   be, meets all of the following conditions:

   (  i  )  The applicant (or the controlling interest) is organized as a
   cooperative pursuant to state law;

   ( ii ) The applicant (or the controlling interest) is a “rural telephone
   company” as defined by the Communications Act; and

   ( iii ) The applicant (or the controlling interest) demonstrates either that
   it is eligible for tax-exempt status under the Internal Revenue Code or that
   it adheres to the cooperative principles articulated in Puget Sound Plywood,
   Inc. v. Commissioner of Internal Revenue, 44 T.C. 305 (1965).

   ( 2 ) If the condition in paragraph (b)(3)(iii)(A)( 1 )( i ) above cannot be
   met because the relevant jurisdiction has not enacted an organic statute
   that specifies requirements for organization as a cooperative, the applicant
   must show that it is validly organized and its articles of incorporation,
   by-laws, and/or other relevant organic documents provide that it operates
   pursuant to cooperative principles.

   (B) However, if the applicant is not an eligible rural telephone cooperative
   under paragraph (a) of this section, and the applicant has a controlling
   interest other than the applicant's officers and directors or an eligible
   rural telephone cooperative's officers and directors, paragraph (a) of this
   section applies with respect to the applicant's officers and directors and
   such  controlling  interest's  officers  and  directors only when such
   controlling interest is either:

   ( 1 ) An eligible rural telephone cooperative under paragraph (a) of this
   section or

   ( 2 ) controlled by an eligible rural telephone cooperative under paragraph
   (a) of this section.

   (iv) Applicants or licensees with material relationships —(A) Impermissible
   material relationships. An applicant or licensee that would otherwise be
   eligible for designated entity benefits under this section and applicable
   service-specific  rules  shall  be ineligible for such benefits if the
   applicant  or  licensee has an impermissible material relationship. An
   applicant or licensee has an impermissible material relationship when it has
   arrangements with one or more entities for the lease or resale (including
   under a wholesale agreement) of, on a cumulative basis, more than 50 percent
   of  the  spectrum capacity of any one of the applicant's or licensee's
   licenses.

   (B) Attributable material relationships. An applicant or licensee must
   attribute the gross revenues (and, if applicable, the total assets) of any
   entity, (including the controlling interests, affiliates, and affiliates of
   the  controlling interests of that entity) with which the applicant or
   licensee has an attributable material relationship. An applicant or licensee
   has  an  attributable  material  relationship  when it has one or more
   arrangements with any individual entity for the lease or resale (including
   under a wholesale agreement) of, on a cumulative basis, more than 25 percent
   of  the  spectrum capacity of any one of the applicant's or licensee's
   licenses.

   (C)  Grandfathering —( 1 ) Licensees. An impermissible or attributable
   material relationship shall not disqualify a licensee for previously awarded
   benefits with respect to a license awarded before April 25, 2006, based on
   spectrum lease or resale (including wholesale) arrangements entered into
   before April 25, 2006.

   ( 2 ) Applicants. An impermissible or attributable material relationship
   shall not disqualify an applicant seeking eligibility in an application for
   a  license,  authorization,  assignment, or transfer of control or for
   partitioning  or  disaggregation filed before April 25, 2006, based on
   spectrum lease or resale (including wholesale) arrangements entered into
   before April 25, 2006. Any applicant seeking eligibility in an application
   for a license, authorization, assignment, or transfer of control or for
   partitioning  or  disaggregation  filed after April 25, 2006, or in an
   application to participate in an auction in which bidding begins on or after
   June 5, 2006, need not attribute the material relationship(s) of those
   entities that are its affiliates based solely on  Sec. 1.2110(c)(5)(i)(C) if
   those affiliates entered into such material relationship(s) before April 25,
   2006, and are subject to a contractual prohibition preventing them from
   contributing to the applicant's total financing.

   Example to paragraph (b)(3)(iv)(C)(2):   Newco is an applicant seeking
   designated entity status in an auction in which bidding begins after the
   effective date of the rules. Investor is a controlling interest of Newco.
   Investor  also  is  a controlling interest of Existing DE. Existing DE
   previously was awarded designated entity benefits and has impermissible
   material relationships based on leasing agreements entered into before April
   25, 2006, with a third party, Lessee, that were in compliance with the
   Commission's designated eligibility standards prior to April 25, 2006. In
   this example, Newco would not be prohibited from acquiring designated entity
   benefits solely because of the existing impermissible material relationships
   of its affiliate, Existing DE. Newco, Investor, and Existing DE, however,
   would need to enter into a contractual prohibition that prevents Existing DE
   from contributing to the total financing of Newco.

   (c) Definitions —(1) Small businesses. The Commission will establish the
   definition of a small business on a service-specific basis, taking into
   consideration the characteristics and capital requirements of the particular
   service.

   (2) Controlling interests. (i) For purposes of this section, controlling
   interest includes individuals or entities with either de jure or de facto
   control  of the applicant. De jure control is evidenced by holdings of
   greater than 50 percent of the voting stock of a corporation, or in the case
   of  a  partnership, general partnership interests. De facto control is
   determined on a case-by-case basis. An entity must disclose its equity
   interest  and demonstrate at least the following indicia of control to
   establish that it retains de facto control of the applicant:

   (A) The entity constitutes or appoints more than 50 percent of the board of
   directors or management committee;

   (B) The entity has authority to appoint, promote, demote, and fire senior
   executives that control the day-to-day activities of the licensee; and

   (C) The entity plays an integral role in management decisions.

   (ii) Calculation of certain interests. (A) Fully diluted requirement. ( 1 )
   Except  as  set forth in paragraph (c)(2)(ii)(A)( 2 ) 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.

   ( 2 ) Rights of first refusal and put options shall not be calculated on a
   fully diluted basis for purposes of determining de jure control; however,
   rights of first refusal and put options shall be calculated on a fully
   diluted basis if such ownership interests, in combination with other terms
   to an agreement, deprive an otherwise qualified applicant or licensee of de
   facto control.

   Note to paragraph(c)(2)(ii)(A): Mutually exclusive contingent ownership
   interests, i.e., one or more ownership interests that, by their terms, are
   mutually  exclusive of one or more other ownership interests, shall be
   calculated as having been fully exercised only in the possible combinations
   in which they can be exercised by their holder(s). A contingent ownership
   interest is mutually exclusive of another only if contractual language
   specifies that both interests cannot be held simultaneously as present
   ownership interests.

   (B) Partnership and other ownership interests and any stock interest equity,
   or outstanding stock, or outstanding voting stock shall be attributed as
   specified.

   (C) Stock interests held in trust shall be attributed to any person who
   holds or shares the power to vote such stock, to any person who has the sole
   power to sell such stock, and to any person who has the right to revoke the
   trust  at will or to replace the trustee at will. If the trustee has a
   familial, personal, or extra-trust business relationship to the grantor or
   the  beneficiary,  the grantor or beneficiary, as appropriate, will be
   attributed with the stock interests held in trust.

   (D) Non-voting stock shall be attributed as an interest in the issuing
   entity.

   (E) Limited partnership interests shall be attributed to limited partners
   and shall be calculated according to both the percentage of equity paid in
   and the percentage of distribution of profits and losses.

   (F) Officers and directors of the applicant shall be considered to have a
   controlling interest in the applicant. The officers and directors of an
   entity that controls a licensee or applicant shall be considered to have a
   controlling interest in the licensee or applicant. The personal net worth,
   including personal income of the officers and directors of an applicant, is
   not  attributed  to the applicant. To the extent that the officers and
   directors  of an applicant are affiliates of other entities, the gross
   revenues of the other entities are attributed to the applicant.

   (G) Ownership interests that are held indirectly by any party through one or
   more   intervening  corporations  will  be  determined  by  successive
   multiplication of the ownership percentages for each link in the vertical
   ownership chain and application of the relevant attribution benchmark to the
   resulting product, except that if the ownership percentage for an interest
   in any link in the chain exceeds 50 percent or represents actual control, it
   shall be treated as if it were a 100 percent interest.

   (H)  Any person who manages the operations of an applicant or licensee
   pursuant to a management agreement shall be considered to have a controlling
   interest in such applicant or licensee if such person, or its affiliate, has
   authority to make decisions or otherwise engage in practices or activities
   that determine, or significantly influence:

   (  1 ) The nature or types of services offered by such an applicant or
   licensee;

   ( 2 ) The terms upon which such services are offered; or

   ( 3 ) The prices charged for such services.

   (I)  Any  licensee  or its affiliate who enters into a joint marketing
   arrangement  with an applicant or licensee, or its affiliate, shall be
   considered to have a controlling interest, if such applicant or licensee, or
   its  affiliate, has authority to make decisions or otherwise engage in
   practices or activities that determine, or significantly influence:

   (  1 ) The nature or types of services offered by such an applicant or
   licensee;

   ( 2 ) The terms upon which such services are offered; or

   ( 3 ) The prices charged for such services.

   (3) Businesses owned by members of minority groups and/or women. Unless
   otherwise provided in rules governing specific services, a business owned by
   members of minority groups and/or women is one in which minorities and/or
   women who are U.S. citizens control the applicant, have at least greater
   than 50 percent equity ownership and, in the case of a corporate applicant,
   have a greater than 50 percent voting interest. For applicants that are
   partnerships, every general partner must be either a minority and/or woman
   (or minorities and/or women) who are U.S. citizens and who individually or
   together own at least 50 percent of the partnership equity, or an entity
   that is 100 percent owned and controlled by minorities and/or women who are
   U.S. citizens. The interests of minorities and women are to be calculated on
   a fully diluted basis; agreements such as stock options and convertible
   debentures shall be considered to have a present effect on the power to
   control an entity and shall be treated as if the rights thereunder already
   have been fully exercised. However, upon a demonstration that options or
   conversion rights held by non-controlling principals will not deprive the
   minority and female principals of a substantial financial stake in the
   venture  or  impair  their  rights to control the designated entity, a
   designated entity may seek a waiver of the requirement that the equity of
   the minority and female principals must be calculated on a fully-diluted
   basis. The term minority includes individuals of Black or African American,
   Hispanic or Latino, American Indian or Alaskan Native, Asian, and Native
   Hawaiian or Pacific Islander extraction.

   (4)  Rural telephone companies. A rural telephone company is any local
   exchange carrier operating entity to the extent that such entity—

   (i) Provides common carrier service to any local exchange carrier study area
   that does not include either:

   (A)  Any incorporated place of 10,000 inhabitants or more, or any part
   thereof, based on the most recently available population statistics of the
   Bureau of the Census, or

   (B) Any territory, incorporated or unincorporated, included in an urbanized
   area, as defined by the Bureau of the Census as of August 10, 1993;

   (ii) Provides telephone exchange service, including exchange access, to
   fewer than 50,000 access lines;

   (iii) Provides telephone exchange service to any local exchange carrier
   study area with fewer than 100,000 access lines; or

   (iv) Has less than 15 percent of its access lines in communities of more
   than 50,000 on the date of enactment of the Telecommunications Act of 1996.

   (5) Affiliate. (i) An individual or entity is an affiliate of an applicant
   or of a person holding an attributable interest in an applicant if such
   individual or entity—

   (A)  Directly  or  indirectly controls or has the power to control the
   applicant, or

   (B) Is directly or indirectly controlled by the applicant, or

   (C) Is directly or indirectly controlled by a third party or parties that
   also controls or has the power to control the applicant, or

   (D) Has an “identity of interest” with the applicant.

   (ii) Nature of control in determining affiliation.

   (A) Every business concern is considered to have one or more parties who
   directly or indirectly control or have the power to control it. Control may
   be affirmative or negative and it is immaterial whether it is exercised so
   long as the power to control exists.

   Example.   An applicant owning 50 percent of the voting stock of another
   concern would have negative power to control such concern since such party
   can  block any action of the other stockholders. Also, the bylaws of a
   corporation may permit a stockholder with less than 50 percent of the voting
   stock to block any actions taken by the other stockholders in the other
   entity. Affiliation exists when the applicant has the power to control a
   concern while at the same time another person, or persons, are in control of
   the concern at the will of the party or parties with the power to control.

   (B)  Control can arise through stock ownership; occupancy of director,
   officer or key employee positions; contractual or other business relations;
   or combinations of these and other factors. A key employee is an employee
   who, because of his/her position in the concern, has a critical influence in
   or substantive control over the operations or management of the concern.

   (C) Control can arise through management positions where a concern's voting
   stock is so widely distributed that no effective control can be established.

   Example.   In a corporation where the officers and directors own various
   size blocks of stock totaling 40 percent of the corporation's voting stock,
   but no officer or director has a block sufficient to give him or her control
   or the power to control and the remaining 60 percent is widely distributed
   with no individual stockholder having a stock interest greater than 10
   percent,  management  has  the  power to control. If persons with such
   management  control  of the other entity are persons with attributable
   interests in the applicant, the other entity will be deemed an affiliate of
   the applicant.

   (iii) Identity of interest between and among persons. Affiliation can arise
   between or among two or more persons with an identity of interest, such as
   members  of  the  same  family  or persons with common investments. In
   determining if the applicant controls or has the power to control a concern,
   persons with an identity of interest will be treated as though they were one
   person.

   Example.    Two  shareholders  in Corporation Y each have attributable
   interests in the same PCS application. While neither shareholder has enough
   shares to individually control Corporation Y, together they have the power
   to control Corporation Y. The two shareholders with these common investments
   (or identity in interest) are treated as though they are one person and
   Corporation Y would be deemed an affiliate of the applicant.

   (A) Spousal affiliation. Both spouses are deemed to own or control or have
   the power to control interests owned or controlled by either of them, unless
   they are subject to a legal separation recognized by a court of competent
   jurisdiction in the United States. In calculating their net worth, investors
   who are legally separated must include their share of interests in property
   held jointly with a spouse.

   (B) Kinship affiliation. Immediate family members will be presumed to own or
   control or have the power to control interests owned or controlled by other
   immediate family members. In this context “immediate family member” means
   father, mother, husband, wife, son, daughter, brother, sister, father- or
   mother-in-law,  son-  or  daughter-in-law,  brother- or sister-in-law,
   step-father or -mother, step-brother or -sister, step-son or -daughter, half
   brother or sister. This presumption may be rebutted by showing that the
   family members are estranged, the family ties are remote, or the family
   members are not closely involved with each other in business matters.

   Example.    A  owns  a  controlling  interest  in  Corporation  X. A's
   sister-in-law, B, has an attributable interest in a PCS application. Because
   A and B have a presumptive kinship affiliation, A's interest in Corporation
   Y is attributable to B, and thus to the applicant, unless B rebuts the
   presumption with the necessary showing.

   (iv) Affiliation through stock ownership. (A) An applicant is presumed to
   control or have the power to control a concern if he or she owns or controls
   or has the power to control 50 percent or more of its voting stock.

   (B) An applicant is presumed to control or have the power to control a
   concern even though he or she owns, controls or has the power to control
   less than 50 percent of the concern's voting stock, if the block of stock he
   or she owns, controls or has the power to control is large as compared with
   any other outstanding block of stock.

   (C) If two or more persons each owns, controls or has the power to control
   less  than  50 percent of the voting stock of a concern, such minority
   holdings are equal or approximately equal in size, and the aggregate of
   these minority holdings is large as compared with any other stock holding,
   the presumption arises that each one of these persons individually controls
   or has the power to control the concern; however, such presumption may be
   rebutted by a showing that such control or power to control, in fact, does
   not exist.

   (v) Affiliation arising under stock options, convertible debentures, and
   agreements to merge. Except as set forth in paragraph (c)(2)(ii)(A)( 2 ) of
   this section, stock options, convertible debentures, and agreements to merge
   (including agreements in principle) are generally considered to have a
   present effect on the power to control the concern. Therefore, in making a
   size determination, such options, debentures, and agreements are generally
   treated as though the rights held thereunder had been exercised. However, an
   affiliate cannot use such options and debentures to appear to terminate its
   control over another concern before it actually does so.

   Example 1 to paragraph (c)(5)(v).   If company B holds an option to purchase
   a controlling interest in company A, who holds an attributable interest in a
   PCS application, the situation is treated as though company B had exercised
   its rights and had become owner of a controlling interest in company A. The
   gross revenues of company B must be taken into account in determining the
   size of the applicant.

   Example 2.   If a large company, BigCo, holds 70% (70 of 100 outstanding
   shares) of the voting stock of company A, who holds an attributable interest
   in  a  PCS application, and gives a third party, SmallCo, an option to
   purchase 50 of the 70 shares owned by BigCo, BigCo will be deemed to be an
   affiliate of company A, and thus the applicant, until SmallCo actually
   exercises its option to purchase such shares. In order to prevent BigCo from
   circumventing the intent of the rule which requires such options to be
   considered on a fully diluted basis, the option is not considered to have
   present effect in this case.

   Example  3.   If company A has entered into an agreement to merge with
   company B in the future, the situation is treated as though the merger has
   taken place.

   Note  to  paragraph(c)(5)(v):  Mutually exclusive contingent ownership
   interests, i.e., one or more ownership interests that, by their terms, are
   mutually  exclusive of one or more other ownership interests, shall be
   calculated as having been fully exercised only in the possible combinations
   in which they can be exercised by their holder(s). A contingent ownership
   interest is mutually exclusive of another only if contractual language
   specifies that both interests cannot be held simultaneously as present
   ownership interests.

   (vi) Affiliation under voting trusts. (A) Stock interests held in trust
   shall be deemed controlled by any person who holds or shares the power to
   vote such stock, to any person who has the sole power to sell such stock,
   and  to any person who has the right to revoke the trust at will or to
   replace the trustee at will.

   (B)  If  a  trustee  has  a familial, personal or extra-trust business
   relationship to the grantor or the beneficiary, the stock interests held in
   trust  will  be  deemed  controlled  by the grantor or beneficiary, as
   appropriate.

   (C) If the primary purpose of a voting trust, or similar agreement, is to
   separate voting power from beneficial ownership of voting stock for the
   purpose of shifting control of or the power to control a concern in order
   that  such  concern  or another concern may meet the Commission's size
   standards, such voting trust shall not be considered valid for this purpose
   regardless of whether it is or is not recognized within the appropriate
   jurisdiction.

   (vii) Affiliation through common management. Affiliation generally arises
   where  officers,  directors, or key employees serve as the majority or
   otherwise as the controlling element of the board of directors and/or the
   management of another entity.

   (viii) Affiliation through common facilities. Affiliation generally arises
   where  one  concern  shares office space and/or employees and/or other
   facilities with another concern, particularly where such concerns are in the
   same or related industry or field of operations, or where such concerns were
   formerly affiliated, and through these sharing arrangements one concern has
   control, or potential control, of the other concern.

   (ix) Affiliation through contractual relationships. Affiliation generally
   arises where one concern is dependent upon another concern for contracts and
   business  to  such a degree that one concern has control, or potential
   control, of the other concern.

   (x) Affiliation under joint venture arrangements. (A) A joint venture for
   size  determination  purposes  is  an  association  of concerns and/or
   individuals, with interests in any degree or proportion, formed by contract,
   express or implied, to engage in and carry out a single, specific business
   venture for joint profit for which purpose they combine their efforts,
   property, money, skill and knowledge, but not on a continuing or permanent
   basis for conducting business generally. The determination whether an entity
   is  a joint venture is based upon the facts of the business operation,
   regardless of how the business operation may be designated by the parties
   involved. An agreement to share profits/losses proportionate to each party's
   contribution  to  the  business  operation  is a significant factor in
   determining whether the business operation is a joint venture.

   (B) The parties to a joint venture are considered to be affiliated with each
   other. Nothing in this subsection shall be construed to define a small
   business consortium, for purposes of determining status as a designated
   entity, as a joint venture under attribution standards provided in this
   section.

   (xi) Exclusion from affiliation coverage. For purposes of this section,
   Indian tribes or Alaska Regional or Village Corporations organized pursuant
   to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq. ), or
   entities  owned and controlled by such tribes or corporations, are not
   considered  affiliates of an applicant (or licensee) that is owned and
   controlled by such tribes, corporations or entities, and that otherwise
   complies with the requirements of this section, except that gross revenues
   derived from gaming activities conducted by affiliate entities pursuant to
   the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq. ) will be counted
   in  determining  such  applicant's (or licensee's) compliance with the
   financial requirements of this section, unless such applicant establishes
   that it will not receive a substantial unfair competitive advantage because
   significant legal constraints restrict the applicant's ability to access
   such gross revenues.

   (6) Consortium. A consortium of small businesses, very small businesses, or
   entrepreneurs  is  a conglomerate organization composed of two or more
   entities, each of which individually satisfies the definition of a small
   business, very small business, or entrepreneur, as those terms are defined
   in the service-specific rules. Each individual member must constitute a
   separate and distinct legal entity to qualify.

   (d) The Commission may set aside specific licenses for which only eligible
   designated entities, as specified by the Commission, may bid.

   (e) The Commission may permit partitioning of service areas in particular
   services for eligible designated entities.

   (f) Bidding credits. (1) The Commission may award bidding credits ( i.e.,
   payment discounts) to eligible designated entities. Competitive bidding
   rules applicable to individual services will specify the designated entities
   eligible for bidding credits, the licenses for which bidding credits are
   available, the amounts of bidding credits and other procedures.

   (2) Size of bidding credits . A winning bidder that qualifies as a small
   business  may  use  the following bidding credits corresponding to its
   respective average gross revenues for the preceding 3 years:

   (i) Businesses with average gross revenues for the preceding years, 3 years
   not exceeding $3 million are eligible for bidding credits of 35 percent;

   (ii) Businesses with average gross revenues for the preceding years, 3 years
   not exceeding $15 million are eligible for bidding credits of 25 percent;
   and

   (iii) Businesses with average gross revenues for the preceding years, 3
   years not exceeding $40 million are eligible for bidding credits of 15
   percent.

   (3) Bidding credit for serving qualifying tribal land. A winning bidder for
   a  market  will  be eligible to receive a bidding credit for serving a
   qualifying tribal land within that market, provided that it complies with
    Sec. 1.2107(e). The following definition, terms, and conditions shall apply for
   the purposes of this section and  Sec. 1.2107(e):

   (i) Qualifying tribal land means any federally recognized Indian tribe's
   reservation, Pueblo, or Colony, including former reservations in Oklahoma,
   Alaska Native regions established pursuant to the Alaska Native Claims
   Settlement Act (85 Stat. 688), and Indian allotments, that has a wireline
   telephone subscription rate equal to or less than eighty-five (85) percent
   based on the most recently available U.S. Census Data.

   (ii)  Certification. (A) Within 180 days after the filing deadline for
   long-form  applications,  the  winning bidder must amend its long-form
   application and attach a certification from the tribal government stating
   the following:

   ( 1 ) The tribal government authorizes the winning bidder to site facilities
   and provide service on its tribal land;

   (  2  ) The tribal area to be served by the winning bidder constitutes
   qualifying tribal land; and

   ( 3 ) The tribal government has not and will not enter into an exclusive
   contract with the applicant precluding entry by other carriers, and will not
   unreasonably discriminate among wireless carriers seeking to provide service
   on the qualifying tribal land.

   (B) In addition, within 180 days after the filing deadline for long-form
   applications, the winning bidder must amend its long-form application and
   file a certification that it will comply with the construction requirements
   set forth in paragraph (f)(3)(vii) of this section and consult with the
   tribal government regarding the siting of facilities and deployment of
   service on the tribal land.

   (C) If the winning bidder fails to submit the required certifications within
   the 180-day period, the bidding credit will not be awarded, and the winning
   bidder must pay any outstanding balance on its winning bid amount.

   (iii) Bidding credit formula. Subject to the applicable bidding credit limit
   set forth in  Sec. 1.2110(f)(3)(iv), the bidding credit shall equal five hundred
   thousand (500,000) dollars for the first two hundred (200) square miles (518
   square kilometers) of qualifying tribal land, and twenty-five hundred (2500)
   dollars  for  each additional square mile (2.590 square kilometers) of
   qualifying tribal land above two hundred (200) square miles (518 square
   kilometers).

   (iv) Bidding credit limit. If the high bid is equal to or less than one
   million (1,000,000) dollars, the maximum bidding credit calculated pursuant
   to  Sec. 1.2110(f)(3)(iii) shall not exceed fifty (50) percent of the high bid.
   If the high bid is greater than one million (1,000,000) dollars, but equal
   to or less than two million (2,000,000) dollars, the maximum bidding credit
   calculated pursuant to  Sec. 1.2110(f)(3)(iii) shall not exceed five hundred
   thousand (500,000) dollars. If the high bid is greater than two million
   (2,000,000) dollars, the maximum bidding credit calculated pursuant to
    Sec. 1.2110(f)(3)(iii) shall not exceed thirty-five (35) percent of the high
   bid.

   (v) Bidding credit limit in auctions subject to specified reserve price(s) .
   In any auction of eligible frequencies described in section 113(g)(2) of the
   National Telecommunications and Information Administration Organization Act
   (47 U.S.C. 923(g)(2) with reserve price(s) and in any auction with reserve
   price(s) in which the Commission specifies that this provision shall apply,
   the aggregate amount available to be awarded as bidding credits for serving
   qualifying tribal land with respect to all licenses subject to a reserve
   price shall not exceed the amount by which winning bids for those licenses
   net of discounts the Commission takes into account when reporting net bids
   in the Public Notice closing the auction exceed the applicable reserve
   price. If the total amount that might be awarded as tribal land bidding
   credits based on applications for all licenses subject to the reserve price
   exceeds the aggregate amount available to be awarded, the Commission will
   award  eligible  applicants a pro rata tribal land bidding credit. The
   Commission may determine at any time that the total amount that might be
   awarded as tribal land bidding credits is less than the aggregate amount
   available  to be awarded and grant full tribal land bidding credits to
   relevant applicants, including any that previously received pro rata tribal
   land bidding credits. To determine the amount of an applicant's pro rata
   tribal land bidding credit, the Commission will multiply the full amount of
   the tribal land bidding credit for which the applicant would be eligible
   excepting  this  limitation ((f)(3)(v)) of this section by a fraction,
   consisting of a numerator in the amount by which winning bids for licenses
   subject to the reserve price net of discounts the Commission takes into
   account when reporting net bids in the Public Notice closing the auction
   exceed the reserve price and a denominator in the amount of the aggregate
   maximum tribal land bidding credits for which applicants for such licenses
   might have qualified excepting this limitation ((f)(3)(v)) of this section.
   When determining the aggregate maximum tribal land bidding credits for which
   applicants for such licenses might have qualified, the Commission shall
   assume  that any applicant seeking a tribal land bidding credit on its
   long-form application will be eligible for the largest tribal land bidding
   credit  possible for its bid for its license excepting this limitation
   ((f)(3)(v)) of this section. After all applications seeking a tribal land
   bidding credit with respect to licenses covered by a reserve price have been
   finally resolved, the Commission will recalculate the pro rata credit. For
   these purposes, final determination of a credit occurs only after any review
   or reconsideration of the award of such credit has been concluded and no
   opportunity remains for further review or reconsideration. To recalculate an
   applicant's  pro  rata tribal land bidding credit, the Commission will
   multiply the full amount of the tribal land bidding credit for which the
   applicant would be eligible excepting this limitation ((f)(3)(v)) of this
   section by a fraction, consisting of a numerator in the amount by which
   winning bids for licenses subject to the reserve price net of discounts the
   Commission takes into account when reporting net bids in the Public Notice
   closing the auction exceed the reserve price and a denominator in the amount
   of  the  aggregate amount of tribal land bidding credits for which all
   applicants for such licenses would have qualified excepting this limitation
   ((f)(3)(v)) of this section.

   (vi) Application of credit . A pending request for a bidding credit for
   serving qualifying tribal land has no effect on a bidder's obligations to
   make any auction payments, including down and final payments on winning
   bids, prior to award of the bidding credit by the Commission. Tribal land
   bidding credits will be calculated and awarded prior to license grant. If
   the Commission grants an applicant a pro rata tribal land bidding credit
   prior to license grant, as provided by paragraph (f)(3)(v) of this section,
   the  Commission shall recalculate the applicant's pro rata tribal land
   bidding credit after all applications seeking tribal land biddings for
   licenses subject to the same reserve price have been finally resolved. If a
   recalculated  tribal land bidding credit is larger than the previously
   awarded pro rata tribal land bidding credit, the Commission will award the
   difference.

   (vii) Post-construction certification. Within fifteen (15) days of the third
   anniversary of the initial grant of its license, a recipient of a bidding
   credit under this section shall file a certification that the recipient has
   constructed and is operating a system capable of serving seventy-five (75)
   percent of the population of the qualifying tribal land for which the credit
   was awarded. The recipient must provide the total population of the tribal
   area covered by its license as well as the number of persons that it is
   serving in the tribal area.

   (viii) Performance penalties . If a recipient of a bidding credit under this
   section fails to provide the post-construction certification required by
   paragraph (f)(3)(vii) of this section, then it shall repay the bidding
   credit amount in its entirety, plus interest. The interest will be based on
   the rate for ten-year U.S. Treasury obligations applicable on the date the
   license is granted. Such payment shall be made within thirty (30) days of
   the third anniversary of the initial grant of its license. Failure to repay
   the bidding credit amount and interest within the required time period will
   result in automatic termination of the license without specific Commission
   action. Repayment of bidding credit amounts pursuant to this provision shall
   not affect the calculation of amounts available to be awarded as tribal land
   bidding credits pursuant to (f)(3)(v) of this section.

   (g)  Installment  payments. The Commission may permit small businesses
   (including small businesses owned by women, minorities, or rural telephone
   companies that qualify as small businesses) and other entities determined to
   be eligible on a service-specific basis, which are high bidders for licenses
   specified by the Commission, to pay the full amount of their high bids in
   installments over the term of their licenses pursuant to the following:

   (1) Unless otherwise specified by public notice, each eligible applicant
   paying for its license(s) on an installment basis must deposit by wire
   transfer in the manner specified in  Sec. 1.2107(b) sufficient additional funds
   as are necessary to bring its total deposits to ten (10) percent of its
   winning bid(s) within ten (10) days after the Commission has declared it the
   winning bidder and closed the bidding. Failure to remit the required payment
   will  make  the  bidder  liable  to  pay a default payment pursuant to
    Sec. 1.2104(g)(2).

   (2) Within ten (10) days of the conditional grant of the license application
   of a winning bidder eligible for installment payments, the licensee shall
   pay  another  ten (10) percent of the high bid, thereby commencing the
   eligible licensee's installment payment plan. If a winning bidder eligible
   for installment payments fails to submit this additional ten (10) percent of
   its high bid by the applicable deadline as specified by the Commission, it
   will be allowed to make payment within ten (10) business days after the
   payment  deadline, provided that it also pays a late fee equal to five
   percent of the amount due. When a winning bidder eligible for installment
   payments fails to submit this additional ten (10) percent of its winning
   bid, plus the late fee, by the late payment deadline, it is considered to be
   in default on its license(s) and subject to the applicable default payments.
   Licenses will be awarded upon the full and timely payment of second down
   payments and any applicable late fees.

   (3) Upon grant of the license, the Commission will notify each eligible
   licensee of the terms of its installment payment plan and that it must
   execute a promissory note and security agreement as a condition of the
   installment payment plan. Unless other terms are specified in the rules of
   particular services, such plans will:

   (i) Impose interest based on the rate of U.S. Treasury obligations (with
   maturities closest to the duration of the license term) at the time of
   licensing;

   (ii) Allow installment payments for the full license term;

   (iii) Begin with interest-only payments for the first two years; and

   (iv) Amortize principal and interest over the remaining term of the license.

   (4) A license granted to an eligible entity that elects installment payments
   shall be conditioned upon the full and timely performance of the licensee's
   payment obligations under the installment plan.

   (i)  Any  licensee  that  fails  to submit its quarterly payment on an
   installment payment obligation (the “Required Installment Payment”) may
   submit such payment on or before the last day of the next quarter (the
   “first  additional  quarter”) without being considered delinquent. Any
   licensee making its Required Installment Payment during this period (the
   “first additional quarter grace period”) will be assessed a late payment fee
   equal  to  five  percent  (5%)  of the amount of the past due Required
   Installment Payment. The late payment fee applies to the total Required
   Installment Payment regardless of whether the licensee submitted a portion
   of its Required Installment Payment in a timely manner.

   (ii) If any licensee fails to make the Required Installment Payment on or
   before the last day of the first additional quarter set forth in paragraph
   (g)(4)(i) of this section, the licensee may submit its Required Installment
   Payment  on  or  before  the last day of the next quarter (the “second
   additional quarter”), except that no such additional time will be provided
   for the July 31, 1998 suspension interest and installment payments from C or
   F block licensees that are not made within 90 days of the payment resumption
   date for those licensees, as explained in Amendment of the Commission's
   Rules Regarding Installment Payment Financing for Personal Communications
   Services (PCS) Licensees, Order on Reconsideration of the Second Report and
   Order, WT Docket No. 97–82, 13 FCC Rcd 8345 (1998). Any licensee making the
   Required Installment Payment during the second additional quarter (the
   “second additional quarter grace period”) will be assessed a late payment
   fee  equal to ten percent (10%) of the amount of the past due Required
   Installment Payment. Licensees shall not be required to submit any form of
   request  in order to take advantage of the first and second additional
   quarter grace periods.

   (iii) All licensees that avail themselves of these grace periods must pay
   the associated late payment fee(s) and the Required Installment Payment
   prior  to  the  conclusion  of the applicable additional quarter grace
   period(s). Payments made at the close of any grace period(s) will first be
   applied to satisfy any lender advances as required under each licensee's
   “Note and Security Agreement,” with the remainder of such payments applied
   in the following order: late payment fees, interest charges, installment
   payments for the most back-due quarterly installment payment.

   (iv) If an eligible entity obligated to make installment payments fails to
   pay the total Required Installment Payment, interest and any late payment
   fees associated with the Required Installment Payment within two quarters (6
   months)  of  the Required Installment Payment due date, it shall be in
   default, its license shall automatically cancel, and it will be subject to
   debt collection procedures. A licensee in the PCS C or F blocks shall be in
   default, its license shall automatically cancel, and it will be subject to
   debt collection procedures, if the payment due on the payment resumption
   date, referenced in paragraph (g)(4)(ii) of this section, is more than
   ninety (90) days delinquent.

   (h) The Commission may establish different upfront payment requirements for
   categories of designated entities in competitive bidding rules of particular
   auctionable services.

   (i)  The Commission may offer designated entities a combination of the
   available preferences or additional preferences.

   (j) Designated entities must describe on their long-form applications how
   they satisfy the requirements for eligibility for designated entity status,
   and must list and summarize on their long-form applications all agreements
   that  affect  designated entity status such as partnership agreements,
   shareholder   agreements,   management  agreements,  spectrum  leasing
   arrangements, spectrum resale (including wholesale) arrangements, and all
   other agreements, including oral agreements, establishing, as applicable, de
   facto  or  de jure control of the entity or the presence or absence of
   impermissible and attributable material relationships. Designated entities
   also  must  provide the date(s) on which they entered into each of the
   agreements listed. In addition, designated entities must file with their
   long-form applications a copy of each such agreement. In order to enable the
   Commission to audit designated entity eligibility on an ongoing basis,
   designated entities that are awarded eligibility must, for the term of the
   license, maintain at their facilities or with their designated agents the
   lists, summaries, dates, and copies of agreements required to be identified
   and provided to the Commission pursuant to this paragraph and to  Sec. 1.2114.

   (k) The Commission may, on a service-specific basis, permit consortia, each
   member of which individually meets the eligibility requirements, to qualify
   for any designated entity provisions.

   (l) The Commission may, on a service-specific basis, permit publicly-traded
   companies that are owned by members of minority groups or women to qualify
   for any designated entity provisions.

   (m) Audits. (1) Applicants and licensees claiming eligibility 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 (FCC 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
   FCC-licensed service and shall also include consent to the interview of
   principals, employees, customers and suppliers of the applicant or licensee.

   (n) Annual reports . Each designated entity licensee must file with the
   Commission an annual report within five business days before the anniversary
   date of the designated entity's license grant. The annual report shall
   include,  at  a  minimum,  a  list and summaries of all agreements and
   arrangements (including proposed agreements and arrangements) that relate to
   eligibility for designated entity benefits. In addition to a summary of each
   agreement or arrangement, this list must include the parties (including
   affiliates, controlling interests, and affiliates of controlling interests)
   to each agreement or arrangement, as well as the dates on which the parties
   entered into each agreement or arrangement. Annual reports will be filed no
   later than, and up to five business days before, the anniversary of the
   designated entity's license grant.

   (o) 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
   financial statements for the relevant number of most recently completed
   calendar years or, if audited financial statements were not prepared on a
   calendar-year basis, for the most recently completed fiscal years preceding
   the filing of the applicant's short-form (FCC Form 175). If an entity was
   not in existence for all or part of the relevant period, gross revenues
   shall be evidenced by the audited financial statements of the entity's
   predecessor-in-interest    or,    if    there   is   no   identifiable
   predecessor-in-interest, unaudited financial statements certified by the
   applicant as accurate. When an applicant does not otherwise use audited
   financial statements, its gross revenues may be certified by its chief
   financial officer or its equivalent and must be prepared in accordance with
   Generally Accepted Accounting Principles.

   (p) Total assets. Total assets shall mean the book value (except where
   generally accepted accounting principles (GAAP) require market valuation) of
   all property owned by an entity, whether real or personal, tangible or
   intangible, as evidenced by the most recently audited financial statements
   or certified by the applicant's chief financial offer or its equivalent if
   the applicant does not otherwise use audited financial statements.

   [ 63 FR 2343 , Jan. 15, 1998;  63 FR 12659 , Mar. 16, 1998, as amended at  63 FR 17122 , Apr. 8, 1998;  65 FR 47355 , Aug. 2, 2000;  65 FR 52345 , Aug. 29, 2000;
    65 FR 68924 , Nov. 15, 2000;  67 FR 16650 , Apr. 8, 2002;  67 FR 45365 , July 9,
   2002;  68 FR 23422 , May 2, 2003;  68 FR 42996 , July 21, 2003;  69 FR 61321 ,
   Oct. 18, 2004;  70 FR 57187 , Sept. 30, 2005;  71 FR 6227 , Feb. 7, 2006;  71 FR 26251 , May 4, 2006]