Sec. 21.960  Designated entity provisions for MDS.

    (a) Designated entities. As specified in this section, designated 
entities that are winning bidders for BTA service areas are eligible for 
special incentives in the auction process. See 47 CFR 1.2110.
    (b) Installment payments. Small businesses and small business 
consortia may elect to pay the full amount of their winning bids for BTA 
service areas in installments over a ten (10) year period running from 
the date that their BTA authorizations are issued.
    (1) Each eligible winning bidder paying for its BTA authorization(s) 
on an installment basis must deposit by wire transfer or cashier's check 
in the manner specified in Sec. 21.955 sufficient additional funds as 
are necessary to bring its total deposits to ten (10) percent of its 
winning bid(s) within five (5) business 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 for the payments set 
forth in Sec. 21.959(a)(2).
    (2) Within five (5) business days following release of the public 
notice stating that the BTA authorization of a winning bidder eligible 
for installment payments is ready to be issued, the winning bidder shall 
pay another ten (10) percent of its winning bid, thereby commencing the 
eligible bidder's installment payment plan. The Commission will issue 
the BTA authorization to the eligible winning bidder within ten (10) 
business days following notification of receipt of this additional ten 
(10) percent payment. Failure to remit the required payment will make 
the bidder liable for the payments set forth in Sec. 21.959(a)(2).
    (3) Upon issuance of a BTA authorization to a winning bidder 
eligible for installment payments, the Commission will notify such 
eligible BTA authorization holder of the terms of its installment 
payment plan. For MDS, such installment payment plans will:
    (i) Impose interest based on the rate of ten (10) year U.S. Treasury 
obligations at the time of issuance of the BTA authorization, plus two 
and one half (2.5) percent;
    (ii) Allow installment payments for a ten (10) year period running 
from the date that the BTA authorization is issued;
    (iii) Begin with interest-only payments for the first two (2) years; 
and
    (iv) Amortize principal and interest over the remaining years of the 
ten (10) year period running from the date that the BTA authorization is 
issued.
    (4) A BTA authorization issued to an eligible winning bidder that 
elects installment payments shall be conditioned upon the full and 
timely performance of the BTA authorization holder's payment obligations 
under the installment plan.
    (i) If an eligible holder making installment payments is more than 
ninety (90) days delinquent in any payment, it shall be in default.
    (ii) Upon default or in anticipation of default of one or more 
installment payments, a holder may request that the Commission permit a 
three (3) to six (6) month grace period, during which no installment 
payments need be made. In considering whether to grant a request for a 
grace period, the Commission may consider, among other things, the 
holder's payment history, including whether the holder has defaulted 
before, how far into the payment period the default occurs, the reasons 
for default, whether the holder has met construction build-out 
requirements within its BTA service area, the holder's financial 
condition, and whether the holder is seeking an eligible buyer. If the 
Commission grants a request for a grace period, or otherwise approves a 
restructured payment schedule, interest will continue to accrue and will 
be amortized over the remaining years of the ten (10) year payment 
period.
    (iii) Following expiration of any grace period without successful 
resumption of payment or upon denial of a grace period request, or upon 
default with no such request submitted, the BTA authorization will 
automatically cancel and the Commission will initiate debt collection 
procedures pursuant to part 1, subpart O of the Commission's rules.

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    (5) Unjust enrichment. (i) If an eligible BTA authorization holder 
that utilizes installment financing under this paragraph seeks to assign 
or transfer control of its BTA authorization to an entity not meeting 
the eligibility standards for installment payments, the holder must make 
full payment of the remaining unpaid principal and any unpaid interest 
accrued through the date of assignment or transfer as a condition of 
approval. If an eligible BTA authorization holder that utilizes 
installment financing under this subsection seeks to partition, pursuant 
to Sec. 21.931, a portion of its BTA containing one-third or more of the 
population of the area within its control in the licensed BTA to an 
entity not meeting the eligibility standards for installment payments, 
the holder must make full payment of the remaining unpaid principal and 
any unpaid interest accrued through the date of partition as a condition 
of approval.
    (ii) If a BTA authorization holder that utilizes installment 
financing under this subsection seeks to make any change in ownership 
structure that would result in the holder losing eligibility for 
installment payments, the holder shall first seek Commission approval 
and must make full payment of the remaining unpaid principal and any 
unpaid interest accrued through the date of the change in ownership 
structure as a condition of approval. Increases in gross revenues that 
result from revenues from operations, business development or expanded 
service shall not be considered changes in ownership structure under 
this paragraph.
    (c) Reduced upfront payments. A prospective bidder that qualifies as 
a small business, or as a small business consortia, is eligible for a 
twenty-five (25) percent reduction in the amount of the upfront payment 
required by Sec. 21.954. To be eligible to bid on a particular BTA, a 
small business will be required to submit an upfront payment equal to 
seventy-five (75) percent of the upfront payment amount specified for 
that BTA in the public notice listing the upfront payment amounts 
corresponding to each BTA service area being auctioned.
    (d) Bidding credits. A winning bidder that qualifies as a small 
business, or as a small business consortia, may use a bidding credit of 
fifteen (15) percent to lower the cost of its winning bid on any of the 
BTA authorizations awarded in the MDS auction.
    (1) Unjust enrichment. (i) If a BTA authorization holder that 
utilizes a bidding credit under this paragraph seeks to assign or 
transfer control of its BTA authorization to an entity not meeting the 
eligibility standards for bidding credits, the authorization holder must 
reimburse the government for the amount of the bidding credit, plus 
interest at the rate imposed for installment financing at the time the 
authorization was awarded, before assignment or transfer will be 
permitted. If an eligible BTA authorization holder that utilizes a 
bidding credit under this paragraph seeks to partition, pursuant to 
Sec. 21.931, a portion of its BTA containing one-third or more of the 
population of the area within its control in the licensed BTA to an 
entity not meeting the eligibility standards for bidding credits, the 
authorization holder must reimburse the government for the amount of the 
bidding credit, plus interest at the rate imposed for installment 
financing at the time the authorization was awarded, before the 
partitioning will be permitted. The amount of the required reimbursement 
will be reduced over time. An assignment, transfer or partition in the 
first two years after issuance of the BTA authorization will result in a 
reimbursement of one hundred (100) percent of the value of the bidding 
credit; during year three, of seventy-five (75) percent of the bidding 
credit; in year four, of fifty (50) percent; in year five, twenty-five 
(25) percent; and thereafter, no reimbursement.
    (ii) If a BTA authorization holder that utilizes a bidding credit 
under this subsection seeks to make any change in ownership structure 
that would result in the holder losing eligibility for bidding credits, 
the holder shall first seek Commission approval and must reimburse the 
government for the amount of the bidding credit, plus interest at the 
rate imposed for installment financing at the time the authorization was 
awarded, as a condition of approval. The amount of the required 
reimbursement will be reduced over

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time. Such a change in ownership structure in the first two years after 
issuance of the BTA authorization will result in the reimbursement of 
one hundred (100) percent of the value of the bidding credit; during 
year three, of seventy-five (75) percent of the bidding credit; in year 
four, of fifty (50) percent; in year five, twenty-five (25) percent; and 
thereafter, no reimbursement. Increases in gross revenues that result 
from revenues from operations, business development or expanded service 
shall not be considered changes in ownership structure under this 
paragraph.
    (e) Short-form application certification; Long-form application or 
statement of intention disclosure. An MDS applicant claiming designated 
entity status shall certify on its short-form application that it is 
eligible for the incentives claimed. A designated entity that is a 
winning bidder for a BTA service area(s) shall, in addition to 
information required by Sec. 21.956(b), file an exhibit to either its 
initial long-form application for an MDS station license, or to its 
statement of intention with regard to the BTA, which discloses the gross 
revenues for each of the past three years of the winning bidder and its 
affiliates. This exhibit shall describe how the winning bidder claiming 
status as a designated entity satisfies the designated entity 
eligibility requirements, and must list and summarize all agreements 
that affect designated entity status, such as partnership agreements, 
shareholder agreements, management agreements and other agreements, 
including oral agreements, which establish that the designated entity 
will have both de facto and de jure control of the entity. See 47 CFR 
1.2110(i).
    (f) Records maintenance. All holders of BTA authorizations acquired 
by auction that claim designated entity status shall maintain, at their 
principal place of business or with their designated agent, an updated 
documentary file of ownership and revenue information necessary to 
establish their status. Holders of BTA authorizations or their 
successors in interest shall maintain such files for a ten (10) year 
period running from the date that their BTA authorizations are issued. 
The files must be made available to the Commission upon request.
    (g) Audits. BTA authorization holders claiming eligibility under 
designated entity provisions shall be subject to audits by the 
Commission, using in-house or contract resources. Selection for an audit 
may be random, on information, or on the basis of other factors. Consent 
to such audits is part of the certification included in the short-form 
application. Such consent shall include consent to the audit of the 
holders' books, documents and other material (including accounting 
procedures and practices), regardless of form or type, sufficient to 
confirm that such holders' representations are, and remain, accurate. 
Such consent shall also include inspection at all reasonable times of 
the facilities, or parts thereof, engaged in providing and transacting 
business or keeping records regarding licensed MDS offerings, and shall 
also include consent to the interviewing of principals, employees, 
customers, and suppliers of the BTA authorization holders.
[ 60 FR 36560 , July 17, 1995, as amended at  60 FR 57367 , Nov. 15, 1995]