§  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 § 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
   § 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
   § 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 § 1.2110(c)(2)(ii)(F) for the purpose of attribution in
   § 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 § 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 § 1.2107(e). The following definition, terms, and conditions shall
   apply for the purposes of this section and § 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 § 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 § 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 § 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 § 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 § 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 § 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
   § 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]