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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations
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interests, has fewer than 250,000
combined wireless, wireline, broadband, and cable subscribers; and 2 serve predominantly rural areas.
Rural areas are defined as counties with a population density of 100 or fewer persons per square mile. An applicant seeking a rural service provider bidding credit must provide the number of subscribers served as of the short-form application deadline. An applicant may count any subscriber as a single subscriber even if that subscriber receives more than one service.
76. Each applicant seeking a rural service provider bidding credit must disclose the number of its subscribers, along with the number of subscribers of its affiliates, controlling interests, and the affiliates of its controlling interests.
The applicant must also submit an attachment that lists all parties with which the applicant has entered into any spectrum use agreements or arrangements for any licenses that may be won by the applicant in Auction 110.
In addition, to the extent that an applicant has an agreement with any disclosable interest holder for the use of more than 25% of the spectrum capacity of any license that may be won in Auction 110, the identity and the attributable subscribers of any such disclosable interest holder must be disclosed. Like applicants seeking eligibility for small business bidding credits, eligible rural service providers may also form a consortium. If an applicant is applying as a consortium of rural service providers, then the disclosures described in this paragraph, including the certification, must be provided for each consortium member.
3. Caps on Bidding Credits 77. Eligible applicants claiming either a small business or rural service provider bidding credit will be subject to specified caps on the total amount of bidding credit discounts that they may receive. OEA and WTB adopt the bidding credit caps for Auction 110 at the amounts proposed by the Commission in the Auction 110
Comment Public Notice. Specifically, OEA and WTB adopt a $25 million cap on the total amount of bidding credit discounts that may be awarded to an eligible small business, and a $10
million cap on the total amount of bidding credit discounts that may be awarded to an eligible rural service provider. Additionally, to create parity among eligible small businesses and rural service providers competing against each other in smaller markets, no winning designated entity bidder may receive more than $10 million in bidding credit discounts in total for
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licenses won in PEAs with populations of 500,000 or less.
4. Attributable Interests a. Controlling Interests and Affiliates 78. Pursuant to section 1.2110 of the Commissions rules, an applicants eligibility for designated entity benefits is determined by attributing the gross revenues for those seeking small business benefits or subscribers for those seeking rural service provider benefits of the applicant, its affiliates, its controlling interests, and the affiliates of its controlling interests.
Controlling interests of an applicant include individuals and entities with either de facto or de jure control of the applicant. Typically, ownership of greater than 50% of an entitys voting stock evidences de jure control. De facto control is determined on a case-by-case basis based on the totality of the circumstances. The following are some common indicia of de facto control:
The entity constitutes or appoints more than 50% of the board of directors or management committee;
the entity has authority to appoint, promote, demote, and fire senior executives that control the day-to-day activities of the licensee; and the entity plays an integral role in management decisions.
79. Additionally, for attribution purposes, officers and directors of an applicant seeking a bidding credit are considered to have a controlling interest in the applicant. Applicants should refer to section 1.2110c2 of the Commissions rules and the FCC Form 175 Instructions to understand how certain interests are calculated in determining control for purposes of attributing gross revenues.
80. Affiliates of an applicant or controlling interest include an individual or entity that: 1 Directly or indirectly controls or has the power to control the applicant, 2 is directly or indirectly controlled by the applicant, 3 is directly or indirectly controlled by a third party that also controls or has the power to control the applicant, or 4
has an identity of interest with the applicant. The Commissions definition of an affiliate of the applicant encompasses both controlling interests of the applicant and affiliates of controlling interests of the applicant.
For more information on the application requirements regarding controlling interests and affiliates, applicants should refer to sections 1.2110c2 and c5 respectively, as well as the FCC
Form 175 Instructions.
81. An applicant seeking a small business bidding credit must
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demonstrate its eligibility for the bidding credit by: 1 Meeting the applicable small business size standard, based on the controlling interest and affiliation rules discussed in the Auction 110 Procedures Public Notice;
and 2 retaining control, on a licenseby-license basis, over the spectrum associated with the licenses for which it seeks small business benefits. For purposes of the first prong of the standard, applicants should note that control and affiliation may arise through, among other things, ownership interests, voting interests, management and other operating agreements, or the terms of any other types of agreements including spectrum lease agreements that independently or together create a controlling, or potentially controlling, interest in the applicants or licensees business as a whole. In addition, once an applicant demonstrates eligibility as a small business under the first prong, it must also be eligible for benefits on a license-by-license basis under the second prong. As part of making the FCC Form 175 certification that it is qualified as a designated entity under section 1.2110, an applicant is certifying that it does not have any spectrum use or other agreements that would confer either de jure or de facto control of any license it seeks to acquire with bidding credits.
82. Applicants should note that, under this standard for evaluating eligibility for small business bidding credits, if an applicant executes a spectrum use agreement that does not comply with the Commissions relevant standard of de facto control, then it will be subject to unjust enrichment obligations for the benefits associated with that particular license, as well as the penalties associated with any violation of section 310d of the Communications Act and related regulations, which require Commission approval of transfers of control. If that spectrum use agreement either alone or in combination with the designated entity controlling interest and attribution rules described above goes so far as to confer control of the applicants overall business, then the gross revenues of the additional interest holders will be attributed to the applicant, which could render the applicant ineligible for all current and future small business benefits on all licenses.
b. Limitation on Spectrum Use 83. Under section 1.2110c2iiJ of the Commissions rules, the gross revenues or the subscribers, in the case of a rural service provider of an applicants disclosable interest holder
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