[Federal Register: February 8, 2006 (Volume 71, Number 26)]
[Notices]
[Page 6486-6495]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe06-98]
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FEDERAL COMMUNICATIONS COMMISSION
[AU Docket No. 06-30; Report No. AUC-06-66-A (Auction No. 66); DA 06-
238]
Auction of Advanced Wireless Services Licenses Scheduled for June
29, 2006 Comment Sought on Reserve Prices or Minimum Opening Bids and
Other Procedures
AGENCY: Federal Communications Commission.
ACTION: Notice.
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SUMMARY: This document announces the auction of Advance Wireless
Services licenses in the 1710-1755 MHz and 2110-2155 MHz (AWS-1) bands.
The auction is scheduled to commence on June 29, 2006. This document
also seeks comments on reserve prices or minimum opening bids and other
procedures for Auction No. 66.
DATES: Comments are due on or before February 14, 2006 and reply
comments are due on or before February 28, 2006.
ADDRESSES: Comments and reply comments may be submitted using the
Commission's electronic comment filing system (ECFS) at http://www.fcc.gov/cgb/ecfs/.
The Wireless Telecommunications Bureau (Bureau)
also requested that a copy of all comments and reply comments be
submitted by electronic mail to the following address:
auctions66@fcc.gov.
FOR FURTHER INFORMATION CONTACT: For legal questions: Scott Mackoul at
(202) 418-0660. For general auction questions: Lisa Stover at (717)
338-2888.
For service rules questions: Peter Corea at (202) 418-2487.
SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 66
Comment Public Notice released on January 31, 2006. The complete text
of the Auction No. 66 Comment Public Notice, including attachments and
related Commission documents is available for public inspection and
copying from 8 a.m. to 4:30 p.m. Monday through Thursday or from 8 a.m.
to 11:30 a.m. on Friday at the FCC Reference Information Center,
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554.
The Auction No. 66 Comment Public Notice and related Commission
documents may also be purchased from the Commission's duplicating
contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th
Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-488-
5300, facsimile 202-488-5563, or you may contact BCPI at its Web site:
http://www.BCPIWEB.com. When ordering documents from BCPI please
provide the appropriate FCC document number for example, DA 06-238. The
Auction No. 66 Comment Public Notice and related documents are also
available on the Internet at the Commission's Web site: http://wireless.fcc.gov/auctions/66/
.
I. Licenses To Be Offered at Auction
1. The 90 megahertz of spectrum in the AWS-1 bands consists of
1,122 licenses: 36 Regional Economic Area Grouping (REAG) licenses, 352
Economic Area (EA) licenses, and 734 Cellular Market Area (CMA)
licenses.
2. License Descriptions. The following table describes the AWS-1
licenses:
----------------------------------------------------------------------------------------------------------------
Total
Block Frequency bands (MHz) bandwidth Geographic area type Number of
(MHz) licenses
----------------------------------------------------------------------------------------------------------------
A.................................... 1710-1720/2110-2120 20 CMA................... 734
B.................................... 1720-1730/2120-2130 20 EA.................... 176
C.................................... 1730-1735/2130-2135 10 EA.................... 176
D.................................... 1735-1740/2135-2140 10 REAG.................. 12
E.................................... 1740-1745/2140-2145 10 REAG.................. 12
F.................................... 1745-1755/2145-2155 20 REAG.................. 12
----------------------------------------------------------------------------------------------------------------
[[Page 6487]]
The AWS-1 licenses available at auction are also listed in
Attachment A of the Auction No. 66 Comment Public Notice.
3. Incumbency Issues/Spectrum Relocation Fund. The lower half of
paired frequencies for AWS-1 licenses, i.e., 1710-1755 MHz, is spectrum
covered by a Congressional mandate that requires that auction proceeds
fund the estimated relocation costs of incumbent federal entities.
Specifically, the Commercial Spectrum Enhancement Act (CSEA)
established a Spectrum Relocation Fund (SRF), to which the cash
proceeds attributable to eligible frequencies in an auction of licenses
involving such frequencies would be deposited.
4. In addition to requiring that specified auction proceeds be
deposited in the SRF, CSEA prohibits the Commission from concluding any
auction of eligible frequencies if the total cash proceeds attributable
to such spectrum are less than 110 percent of the estimated relocation
costs provided to the Commission by the National Telecommunications and
Information Administration (NTIA). NTIA has collected estimates of the
relocation costs for the eligible frequencies in the AWS-1 bands.
5. In 2005, the Commission opened a proceeding to address CSEA
implementation. In the CSEA/Part 1 Declaratory Ruling, 70 FR 43372
(July 27, 2005), the Commission determined, among other things, that
total cash proceeds for purposes of meeting CSEA's revenue requirement
means winning bids net of any applicable bidding credit discounts at
the end of bidding. Thus, to determine whether CSEA's revenue
requirements regarding eligible frequencies have been met at the end of
a CSEA auction, the Commission will have to determine whether winning
bids net of any applicable bidding credit discounts at the end of
bidding that are attributable to such spectrum equal at least 110
percent of estimated relocation costs. On January 24, 2006, the
Commission released the CSEA/Part 1 Report and Order, FCC 06-4 (rel.
January 24, 2006), addressing CSEA implementation. Among other
provisions, the CSEA/Part 1 Report and Order modified the Commission's
reserve price rules pursuant to CSEA to ensure that CSEA's revenue
requirement will be met.
II. Seeking Comment on Auction Procedures
6. Section 309(j)(3) of the Communications Act of 1934, as amended,
requires the Commission to ``ensure that, in the scheduling of any
competitive bidding under this subsection, an adequate period is
allowed * * * before issuance of bidding rules, to permit notice and
comment on proposed auction procedures * * * .'' Consistent with the
provisions of section 309(j)(3) and to ensure that potential bidders
have adequate time to familiarize themselves with the specific rules
that will govern the day-to-day conduct of an auction, the Commission
directed the Bureau, under its existing delegated authority, to seek
comment on a variety of auction-specific procedures prior to the start
of each auction. The Bureau therefore seeks comment on the following
issues relating to the auction of AWS-1 licenses.
A. Proposals for Auction Design
i. Simultaneous Multiple Round Auction(s)--With or Without Package
Bidding
7. The Bureau proposes to auction all of the AWS-1 licenses in a
single auction using the Commission's standard simultaneous multiple-
round (SMR) auction format. This type of auction offers every license
for bid at the same time and consists of successive bidding rounds in
which eligible bidders may place bids on individual licenses. A bidder
may bid on, and potentially win, any number of licenses. Typically,
bidding remains open on all licenses until bidding stops on every
license, unless a modified stopping rule is invoked.
8. Although the Bureau proposes to offer all of the AWS-1 licenses
in a single auction using its standard SMR format, in the alternative,
the Bureau seeks comment on the feasibility and desirability of
allocating the AWS-1 licenses among two auctions, run concurrently,
with one of the auctions using the standard SMR format and the other
using the FCC's package bidding format (SMR-PB). The Bureau recommends
that the two auctions be run concurrently, rather than sequentially, in
order to permit bidders interested in winning licenses in both auctions
to coordinate their bidding across auctions, and in order to facilitate
the application of the aggregate reserve price.
9. Under the SMR-PB format, bidders can place bids on groups of
licenses they wish to win in combination, with the result that they win
either all of the licenses in a group or none of them, in contrast to
the license-by-license bidding in the FCC's SMR format. In the SMR-PB
auction format, each bidder can have at most a single winning bid, so
that in order to win any particular license combination, the bidder
must have placed a package bid on that license or specific group of
licenses.
10. This option could allow bidders to better express the value of
any synergies (i.e., benefits from combining complementary items) that
may exist among licenses, and to avoid the risk of winning only part of
a desired aggregation.
11. At the same time the Bureau notes that package bidding under
the SMR-PB format may be more complex for bidders if they wish to
aggregate any or all of a number of licenses because they cannot win a
group of licenses unless they have explicitly placed a bid on that
exact combination. In an SMR-PB auction, bidders may need to place a
large number of bids in order to completely express their interests. If
they do not place the bids, the system may not be able to find a
consistent set of smaller bids that collectively exceeds the amount of
a large package bid, thereby potentially making it more difficult for
bidders interested in small groups or single licenses to compete
against bidders interested in large aggregations.
12. The Bureau believes that offering all licenses in a single
standard SMR auction will provide bidders with the simplest and most
flexible means of obtaining single AWS-1 licenses or aggregations of
AWS-1 licenses. A single auction will apply a single set of familiar
rules to all bidders, bids and licenses. Bidders interested in licenses
in several blocks will not have to try to manage their bidding activity
and eligibility across two auctions, as they might if the different
blocks were offered in two different auctions.
13. Furthermore, the Bureau believes that an SMR auction format,
together with a bandplan which offers bidders the option to bid on
several blocks of large regional licenses, will provide bidders with
the opportunity to create efficient aggregations of licenses without
creating the difficulties that a package bidding format may introduce
for bidders trying to win single licenses or smaller groups of
licenses. The Bureau, therefore, proposes to offer the 1,122 AWS-1
licenses in one SMR auction without package bidding.
14. If commenters feel that it would be feasible and desirable to
offer some of the licenses in the AWS-1 inventory in a concurrent but
separate auction using the SMR-PB format, the Bureau seeks comment on
which blocks of licenses should be included in the package bidding
auction.
[[Page 6488]]
ii. Information Available to Bidders Before and During an Auction
15. Economic theory and recent analysis suggest that the
competitiveness and economic efficiency of an SMR auction may in some
circumstances be enhanced if certain information about bids and bidder
identities is not revealed publicly prior to and during the auction.
Recognizing that there are benefits as well as potential harms from
publicly revealing all information during the auction process, the
Commission, in the past, reserved the option to limit the availability
of information on an auction-by-auction basis, and retained discretion
in the Bureau, under its existing delegated authority, to limit the
information disclosed to bidders. With certain exceptions, the Bureau
has generally opted to make bidders' license selections public at the
conclusion of the application process, as well as to release the
identities of all bidders and their bid amounts at the conclusion of
each round during the auction.
16. The particular circumstances of the AWS-1 auction, however,
suggest that the Commission's statutory mandates under section
309(j)(3) of the Communications Act would better be served by
withholding, until after the auction closes, the public release of (1)
information on bidder interests, normally made available prior to the
start of the auction, and (2) the identities of bidders placing bids
and the amounts of non-winning bids, normally released after each
bidding round. In the years since the Commission's SMR auction design
was first developed, economists have observed, as a potential drawback
to disclosing information, that bidders could use the information
revealed over the multiple rounds to signal each other and implement a
division of the licenses at lower than market prices, and in some
cases, to retaliate against competing bidders. In particular, the
potential for such anti-competitive bidding behavior is greater when an
auction offers multiple, substitutable blocks of licenses for sale and
when the number of bidders is expected to be relatively low compared to
the number of licenses offered. Given that the AWS-1 auction is likely
to meet these criteria--i.e., there are multiple spectrum blocks
offered with over 1100 licenses and perceived license values may limit
the number of potential bidders--the Bureau believes that the potential
harm from coordinated behavior that is facilitated by full information
on bidders' interests and bidding behavior is likely to outweigh the
benefits.
17. Moreover, the Bureau also believes that the potential benefits
from fully revealing bid and bidder information are less likely to be
important in the AWS-1 auction than they have been in other FCC
auctions, particularly in early auctions. The Commission previously
identified certain benefits to disclosing bidder identities and other
information during an auction, including: Bidders may bid more
confidently if they know the bids of their potential competitors;
information on the identities of likely other licensees may provide
useful technical information, such as the degree of possible signal
interference or the potential for negotiating roaming agreements; and
full transparency during an auction promotes confidence in the
Commission's auction process.
18. The Bureau believes these benefits may be less significant in
an auction of AWS-1 licenses. With respect to the argument that bidders
will have more confidence in their bids if they know against whom they
are bidding, the Bureau notes that the evolving market for wireless
services and a record of spectrum license sales gives bidders far more
information about how they should value spectrum licenses than bidders
in early spectrum auctions had. Furthermore, the Bureau notes that even
under the proposal to limit bid information, the number of bids placed
on a license in a round will continue to be publicly available as well
as the amount of the provisionally winning bid. With respect to the
benefit of knowing bidders' identities to account for technical
information, the Bureau expects that the flexible and sophisticated
technologies employed by successful bidders for the AWS-1 spectrum
licenses will make any technical information conveyed through bidder
identities of limited value relative to its value in certain other
services or at an earlier stage in the development of the wireless
industry. Finally, confidence in the Commission's auctions has been
established over the course of many auctions, and is likely to be
enhanced further by a procedure that reduces the potential for anti-
competitive bidding behavior.
19. Based on the increased likelihood that fully revealing bid and
bidder information may lead to anti-competitive bidding behavior under
the particular circumstances of the AWS-1 auction and the belief that
any potential benefits to the auction process from fully revealing such
information are unlikely to be significant, the Bureau believes that
the competitive bidding for AWS-1 licenses would be enhanced by not
releasing certain information about bids and bidders until after
bidding in the auction closes. In particular, in contrast to its
general practice, the Bureau proposed not to reveal until the close of
the auction: (1) Bidders' license selections on their short form
applications and the amount of their upfront payments; (2) the amounts
of non-provisionally winning bids and the identities of bidders placing
those bids; and (3) the identities of bidders making provisionally
winning bids. Thus, during the auction, the only information about bids
that the Bureau proposes to reveal to the public is the gross, not the
net, amount of any provisionally winning bids. However, as in past
auctions, after each round each bidder individually may access reports
regarding whether their own bids are provisionally winning bids. This
proposed approach will strike a balance between withholding information
that is likely to foster anticompetitive behavior, and making essential
information available to bidders so that the multiple round structure
of the auction enables efficient outcomes to emerge.
20. In the event that the Bureau decides to allocate the AWS-1
licenses between two auctions, one with package bidding, the Bureau
proposes to limit information only in the SMR auction without package
bidding. The Bureau proposes to disclose full information about bids
and bidders in an SMR-PB auction because, among other things, the
Bureau have not yet analyzed the role of revealing information in an
SMR-PB auction and both the Commission and bidders have only limited
experience with this type of auction. The Bureau seeks comment on this
approach.
B. Auction Structure
i. Round Structure
21. The Commission will conduct the AWS-1 auction(s) over the
Internet. Alternatively, telephonic bidding will also be available via
the Auction Bidder Line. The toll-free telephone number for telephonic
bidding will be provided to qualified bidders.
22. The auction(s) will consist of sequential bidding rounds. The
initial bidding schedule(s) will be announced in a public notice to be
released at least one week before the start of the auction.
23. The Bureau retains the discretion to change the bidding
schedule(s) in order to foster an auction pace that reasonably balances
speed with the bidders' need to study round results and adjust their
bidding strategies. The Bureau may increase or decrease the
[[Page 6489]]
amount of time for the bidding rounds and review periods, or the number
of rounds per day, depending upon bidding activity levels and other
factors.
24. In the event that two auctions are run concurrently, the Bureau
will make an effort to structure the timing of the rounds so as to
facilitate the participation of bidders potentially interested in
winning licenses in both auctions. The Bureau seeks comment on this
approach.
ii. Stopping Rule
25. The Bureau has discretion to establish stopping rules before or
during multiple round auctions in order to terminate the auction within
a reasonable time. The Bureau proposes two different stopping rules for
the auction of AWS-1 licenses, the first in the event there is a single
auction of AWS-1 licenses, and the second in the event there are two
concurrent auctions of AWS-1 licenses.
26. Single Auction--For a single auction of AWS-1 licenses, the
Bureau proposes to employ a simultaneous stopping rule approach. A
simultaneous stopping rule means that all licenses remain available for
bidding until bidding closes simultaneously on all licenses. More
specifically, bidding will close simultaneously on all licenses after
the first round in which no bidder submits any new bids, applies a
proactive waiver, or submits a withdrawal. Thus, unless circumstances
dictate otherwise, bidding will remain open on all licenses until
bidding stops on every license.
27. Further, the Bureau proposes to retain the discretion to
exercise any of the following options during a single AWS-1 auction:
(a) Use a modified version of the simultaneous stopping rule. The
modified stopping rule would close the auction for all licenses after
the first round in which no bidder applies a waiver, places a
withdrawal, or submits any new bids on any license for which it is not
the provisionally winning bidder. Thus, absent any other bidding
activity, a bidder placing a new bid on a license for which it is the
provisionally winning bidder would not keep the auction open under this
modified stopping rule; (b) keep the auction open even if no bidder
submits any new bids, applies a waiver, or submits a withdrawal. In
this event, the effect will be the same as if a bidder had applied a
waiver. The activity rule, therefore, will apply as usual and a bidder
with insufficient activity will either lose bidding eligibility or use
a remaining activity rule waiver; (c) declare that the auction will end
after a specified number of additional rounds (special stopping rule).
If the Bureau invokes this special stopping rule, it will accept bids
in the specified final round(s) after which the auction will close.
28. The Bureau proposes to exercise these options only in certain
circumstances, for example, where the auction is proceeding very
slowly, there is minimal overall bidding activity, or it appears likely
that the auction will not close within a reasonable period of time.
Before exercising these options, the Bureau is likely to attempt to
increase the pace of the auction by, for example, increasing the number
of bidding rounds per day and/or changing the minimum acceptable bid
percentage. The Bureau seeks comment on these proposals.
29. Two Auctions--In the event that the Commission holds two
concurrent auctions of AWS-1 licenses, the Bureau proposes that all
licenses in both auctions will remain available for bidding until
bidding closes simultaneously on all licenses in both auctions.
Accordingly, even though there may be a round in one auction in which
no bidder submits any new bids, applies a proactive waiver or submits a
withdrawal, that auction will remain open so long as there are new
bids, proactive waivers applied, or withdrawals submitted in the other
concurrent AWS-1 auction.
30. This proposal reflects two connections between two concurrent
AWS-1 auctions. First, concurrent auctions offering AWS-1 licenses will
be offering licenses that may be used together. Individual applicants
may seek combinations of licenses offered in separate concurrent
auctions. If one auction of AWS-1 licenses stops while another
continues, bids in the first will become final before bids in the
second. In contrast, if the bidding remains open in both auctions,
bidders may better be able to achieve their desired aggregations, which
may facilitate the assignment of licenses to the parties that value
them most highly.
31. Second, two auctions offering AWS-1 licenses will be subject to
an aggregate reserve price, as fully described below. Congress provided
in CSEA that an auction for licenses authorizing use of eligible
frequencies, which includes frequencies from 1710-1755 MHz, may
conclude only if the total cash proceeds attributable to such spectrum
are at least 110 percent of the total estimated relocation costs of
federal entities previously assigned to the spectrum. The Commission
has determined that total cash proceeds in an auction for purposes of
the CSEA shall be measured by the winning bids net of applicable
discounts at the end of bidding. If an aggregate reserve price applies
to both auctions and one auction stops first, applicants in the first
auction would be unable to raise their bids to meet the reserve price
in the event that bidding in the second auction did not satisfy the
reserve price. Of course, if the reserve price is satisfied by the
first auction in which bidding stops, it will not be necessary to hold
that auction open to assure that the reserve price is met.
32. The Bureau seeks comment on its proposal. Comments regarding
the appropriate stopping rule for two concurrent auctions should
specify whether the comments apply regardless of how AWS-1 licenses are
divided between the auctions.
33. The Bureau also seeks comment on an alternative stopping rule
for two concurrent auctions. In this alternative, if the first auction
to have a round with no new bids, proactive waivers or withdrawals
satisfies the reserve price by itself, bidding will close
simultaneously on all licenses in that auction, even though bidding
will continue in the second auction.
34. Finally, the Bureau proposes to retain the discretion to
exercise any of the following options during two concurrent AWS-1
auctions: (a) Use a modified version of the simultaneous stopping rule.
The modified stopping rule would close the auctions for all licenses
after the first round in which no bidder applies a waiver, places a
withdrawal, or submits any new bids on any license or package of
licenses for which it is not the provisionally winning bidder. Thus,
absent any other bidding activity, a bidder placing a new bid on a
license for which it is the provisionally winning bidder would not keep
the auctions open under this modified stopping rule; (b) keep the
auctions open even if no bidder submits any new bids, applies a waiver,
or makes a withdrawal. In this event, the effect will be the same as if
a bidder had applied a waiver. The activity rule, therefore, will apply
as usual and a bidder with insufficient activity will either lose
bidding eligibility or use a remaining activity rule waiver; (c)
declare that the auctions will end after a specified number of
additional rounds (special stopping rule). If the Bureau invokes this
special stopping rule, it will accept bids in the specified final
round(s) after which the auctions will close.
35. The Bureau proposes to exercise these options only in certain
circumstances, for example, where the auctions are proceeding very
slowly, there is minimal overall bidding
[[Page 6490]]
activity, or it appears likely that the auctions will not close within
a reasonable period of time. Before exercising these options, the
Bureau is likely to attempt to increase the pace of the auction by, for
example, increasing the number of bidding rounds per day and/or
changing the minimum acceptable bid percentage. The Bureau seeks
comment on these proposals.
iii. Information Relating to Auction Delay, Suspension, or Cancellation
36. For the AWS-1 auction(s), the Bureau proposes that, by public
notice or by announcement during the auction, the Bureau may delay,
suspend, or cancel the auction(s) in the event of natural disaster,
technical obstacle, evidence of an auction security breach, unlawful
bidding activity, administrative or weather necessity, or for any other
reason that affects the fair and efficient conduct of competitive
bidding. In such cases, the Bureau, in its sole discretion, may elect
to resume the auction(s) starting from the beginning of the current
round(s), resume the auction(s) starting from some previous round(s),
or cancel the auction(s) in their entirety. Network interruption may
cause the Bureau to delay or suspend the auction(s). The Bureau
emphasizes that exercise of this authority is solely within the
discretion of the Bureau, and its use is not intended to be a
substitute for situations in which bidders may wish to apply their
activity rule waivers. The Bureau seeks comment on this proposal.
C. Bidding Procedure Considerations
37. In the sections that follow, there are considerations that
apply regardless of auction format and others that are specific to
either the SMR or the SMR-PB format. Similarly, there are
considerations that differ based on whether a single auction of all the
AWS-1 licenses is held, or whether the Bureau conduct two concurrent
auctions. In each section, the Bureau first discusses the procedures
that apply generally and then the Bureau discusses format-specific (SMR
or SMR-PB), or auction number-specific, procedures separately. The
Bureau seeks comment on the options set forth below.
i. Upfront Payments and Bidding Eligibility
38. The Bureau has delegated authority and discretion to determine
an appropriate upfront payment for each license being auctioned, taking
into account such factors as the population in each geographic license
area and the value of similar spectrum. A bidder's upfront payment is a
refundable deposit to establish eligibility to bid on licenses. Upfront
payments related to licenses for the specific spectrum subject to
auction protect against frivolous or insincere bidding and provide the
Commission with a source of funds from which to collect payments owed
at the close of the auction. With these guidelines in mind for AWS-1
auction(s), the Bureau proposes to calculate upfront payments on a
license-by-license basis using the following formula: $0.05 * MHz *
License Area Population.
39. Consistent with the Bureau's usual practice, the Bureau further
proposes that the amount of the upfront payment submitted by a bidder
will determine the bidder's initial bidding eligibility in bidding
units. Eligibility cannot be increased during the auction; it can only
remain the same or decrease. Each license is assigned a specific number
of bidding units equal to the upfront payment listed in Attachment A of
the Auction No. 66 Comment Public Notice, on a bidding unit per dollar
basis. The number of bidding units for a given license is fixed and
does not change during the auction as prices change. A bidder's upfront
payment is not attributed to specific licenses. If there are two
concurrent auctions and bidders wish to participate in both, they must
submit separate upfront payments.
40. The proposed upfront payment and number of bidding units for
each AWS-1 license are set forth in Attachment A of the Auction No. 66
Comment Public Notice.
41. SMR--A bidder may place bids on any combination of licenses as
long as the total number of bidding units associated with those
licenses does not exceed its current eligibility. Thus, in calculating
its upfront payment amount and hence its initial bidding eligibility,
an applicant must determine the maximum number of bidding units it may
wish to bid on (or hold provisionally winning bids on) in any single
round, and submit an upfront payment amount covering that total number
of bidding units. Provisionally winning bids are bids that would become
final winning bids if the auction were to close in that given round.
42. SMR-PB--With package bidding, bidders can submit bids on groups
of one or more licenses, but each bidder can have at most one
provisionally winning bid. The number of bidding units associated with
each bid in an SMR-PB auction is the sum of the bidding units assigned
to the individual licenses comprising the package. As in an SMR
auction, a bidder's eligibility limits the total number of bidding
units that a bidder can win. However, because any licenses that a
bidder wins in a package bidding auction must be packaged together in a
single bid, the bidder's eligibility limits the total number of bidding
units that can be included in the bidder's largest (in terms of bidding
units) single bid. Therefore, to calculate its upfront payment amount
and initial bidding eligibility, an applicant must determine the
largest number of bidding units associated with licenses it may wish to
include in a single package bid, and submit an upfront payment amount
covering that total number of bidding units. Bidders should note that
the eligibility rules will permit them to place multiple package bids,
as long as the number of bidding units associated with any one bid does
not exceed their current eligibility.
ii. Activity Rule
43. In order to ensure that an auction closes within a reasonable
period of time, an activity rule requires bidders to bid actively
throughout the auction, rather than wait until late in the auction
before participating.
44. Bidders are required to be active on a specific percentage of
their current bidding eligibility during each round of the auction.
Failure to maintain the required activity level will result in the use
of an activity rule waiver, if any remain, or a reduction in the
bidder's eligibility, possibly curtailing or eliminating the bidder's
ability to place bids in the auction.
45. The Bureau proposes to divide the auction into two stages, each
characterized by a different activity requirement. The auction will
start in Stage One. The Bureau proposes that the auction generally will
advance from Stage One to Stage Two when the auction activity level, as
measured by the percentage of bidding units receiving new provisionally
winning bids, is approximately twenty percent or below for three
consecutive rounds of bidding. However, the Bureau further proposes
that it retains the discretion to change stages unilaterally by
announcement during the auction. In exercising this discretion, the
Bureau will consider a variety of measures of bidder activity,
including, but not limited to, the auction activity level, the
percentage of licenses (as measured in bidding units) on which there
are new bids, the number of new bids, and the percentage of increase in
revenue.
46. In the event there are two concurrent auctions for the AWS-1
licenses, bidders will be required to manage their eligibility and
activity separately for each auction.
47. Commenters that believe these activity rules should be modified
should
[[Page 6491]]
explain their reasoning and comment on the desirability of an
alternative approach. Commenters are advised to support their claims
with analyses and suggested alternative activity rules.
48. SMR--A bidder's activity in a round will be the sum of the
bidding units associated with any licenses upon which it places bids
during the current round and the bidding units associated with any
licenses for which it holds provisionally winning bids.
49. For an SMR auction for AWS-1 licenses, the Bureau proposes the
following activity requirements:
Stage One: In each round of the first stage of the auction, a
bidder desiring to maintain its current bidding eligibility is required
to be active on licenses representing at least 80 percent of its
current bidding eligibility. Failure to maintain the required activity
level will result in a reduction in the bidder's bidding eligibility in
the next round of bidding (unless an activity rule waiver is used).
During Stage One, a bidder's reduced eligibility for the next round
will be calculated by multiplying the bidder's current round activity
by five-fourths (\5/4\).
Stage Two: In each round of the second stage, a bidder desiring to
maintain its current bidding eligibility is required to be active on 95
percent of its current bidding eligibility. Failure to maintain the
required activity level will result in a reduction in the bidder's
bidding eligibility in the next round of bidding (unless an activity
rule waiver is used). During Stage Two, a bidder's reduced eligibility
for the next round will be calculated by multiplying the bidder's
current round activity by twenty-nineteenths (\20/19\).
50. SMR-PB--A bidder's activity in a round will be the number of
bidding units associated with the bidder's largest (in terms of bidding
units) active bid. Active bids include current provisionally winning
bids, new bids and any bids from previous rounds which are at or above
the current minimum acceptable bid.
51. For an SMR-PB auction, the Bureau proposes the following
activity requirements, while noting again that it retains the
discretion to change stages unilaterally by announcement during the
auction:
Stage One: In each round of the first stage of the auction, a
bidder desiring to maintain its current bidding eligibility is required
to be active on licenses representing at least 60 percent (three-
fifths) of its current bidding eligibility. Failure to maintain the
required activity level will result in a reduction in the bidder's
bidding eligibility in the next round of bidding (unless an activity
rule waiver is used). During Stage One, a bidder's reduced eligibility
for the next round will be calculated by multiplying the bidder's
current round activity by five-thirds (\5/3\).
Stage Two: In each round of the second stage, a bidder desiring to
maintain its current bidding eligibility is required to be active on 90
percent of its current bidding eligibility. Failure to maintain the
required activity level will result in a reduction in the bidder's
bidding eligibility in the next round of bidding (unless an activity
rule waiver is used). During Stage Two, a bidder's reduced eligibility
for the next round will be calculated by multiplying the bidder's
current round activity by ten-ninths (\10/9\). The Bureau maintains the
discretion not to transition to Stage Two if the Bureau believes the
auction is progressing satisfactorily under the Stage One activity
requirement, and in the alternative, to transition to Stage Two with an
activity requirement that is lower than the 90 percent proposed herein,
by announcement during the auction.
iii. Activity Rule Waivers
53. Use of an activity rule waiver preserves the bidder's
eligibility despite the bidder's activity in the current round being
below the required minimum level. An activity rule waiver applies to an
entire round of bidding. Activity rule waivers can be either proactive
or automatic and are principally a mechanism for auction participants
to avoid the loss of bidding eligibility in the event that exigent
circumstances prevent them from placing a bid in a particular round.
54. The FCC Auction System assumes that a bidder that does not meet
the activity requirement would prefer to apply an activity rule waiver
(if available) rather than lose bidding eligibility. Therefore, the
system will automatically apply a waiver at the end of any bidding
round where a bidder's activity level is below the minimum required
unless: (1) The bidder has no activity rule waivers available; or (2)
the bidder overrides the automatic application of a waiver by reducing
eligibility, thereby meeting the minimum requirement. If a bidder has
no waivers remaining and does not satisfy the required activity level,
its eligibility will be permanently reduced, possibly curtailing or
eliminating the bidder's ability to place additional bids in the
auction.
55. A bidder with insufficient activity may wish to reduce its
bidding eligibility rather than use an activity rule waiver. If so, the
bidder must affirmatively override the automatic waiver mechanism
during the bidding round by using the reduce eligibility function in
the FCC Auction System. In this case, the bidder's eligibility is
permanently reduced to bring the bidder into compliance with the
activity rules as described above. Reducing eligibility is an
irreversible action. Once eligibility has been reduced, a bidder will
not be permitted to regain its lost bidding eligibility, even if the
round has not yet closed.
56. A bidder may apply an activity rule waiver proactively as a
means to keep the auction open without placing a bid. If a bidder
proactively applies an activity rule waiver (using the apply waiver
function in the FCC Auction System) during a bidding round in which no
bids or withdrawals are submitted, the auction will remain open and the
bidder's eligibility will be preserved. An automatic waiver applied by
the FCC Auction System in a round in which there are no new bids or
withdrawals will not keep the auction open. A bidder cannot submit a
proactive waiver after submitting a bid in a round, and submitting a
proactive waiver will preclude a bidder from placing any bids in that
round. Applying a waiver is irreversible; once a proactive waiver is
submitted, that waiver cannot be unsubmitted, even if the round has not
yet closed.
57. The Bureau proposes that each bidder in the AWS-1 auction(s) be
provided with three activity rule waivers that may be used at the
bidder's discretion during the course of the auction as set forth
above. Waivers apply to a specific auction.
iv. Reserve Price or Minimum Opening Bid
58. Section 309(j) calls upon the Commission to prescribe methods
for establishing a reasonable reserve price or a minimum opening bid
amount when FCC licenses are subject to auction, unless the Commission
determines that a reserve price or minimum opening bid amount is not in
the public interest. Consistent with this mandate, the Commission has
directed the Bureau to seek comment on the use of a minimum opening bid
amount and/or reserve price prior to the start of each auction.
a. Reserve Price
59. In CSEA, Congress requires the Commission to prescribe methods
by which the total cash proceeds from any auction of licenses
authorizing use of eligible frequencies, such as 1710-1755 MHz, shall
equal at least 110 percent of the total estimated relocation costs
provided to the Commission pursuant to
[[Page 6492]]
CSEA. For purposes of determining whether a CSEA revenue requirement
has been met, the Commission has determined that total cash proceeds
means winning bids net of any applicable bidding credit discounts at
the end of bidding.
60. CSEA also requires that the total cash proceeds attributable to
eligible spectrum must be at least 110 percent of the total estimated
relocation costs before the Commission may conclude the auction. If
this condition is not met, CSEA requires that the Commission shall
cancel the auction. One-half of the frequencies covered by the AWS-1
licenses authorize use of CSEA eligible spectrum. Accordingly, the
Bureau proposes that one-half of each winning bid net of any applicable
bidding credit discounts at the end of bidding will be counted toward
meeting the reserve price. In light of the proposed procedures on
information available to bidders, the Bureau also seeks comment on
whether the Commission should announce before the close of bidding
whether the reserve price has been met.
61. On December 27, 2005, pursuant to CSEA, NTIA notified the
Commission of the estimated relocation costs and timelines for
relocation of eligible Federal entities assigned to frequencies from
1710 to 1755 MHz. NTIA reported that the total estimated relocation
costs equal $935,940,312. This information can be found at http://www.ntia.doc.gov/osmhome/reports/specrelo/index.htm
.
62. Single Auction--The Bureau proposes to establish an aggregate
reserve price of $1,029,534,343.20 for all AWS-1 licenses. This
aggregate reserve price, $1,029,534,343.20, is 110 percent of total
estimated relocation costs of $935,940,312 and therefore the minimum
reserve price required by CSEA. This reserve price will be met if half
of the total winning bids for AWS-1 licenses net of any applicable
bidding credit discounts at the end of bidding equals
$1,029,534,343.20.
63. Two Auctions--In the event that the Commission conducts two
auctions of AWS-1 licenses, the aggregate reserve price will apply
jointly to both auctions. In other words, half of the total winning
bids for all AWS-1 licenses net of any applicable bidding credit
discounts at the end of bidding must equal at least $1,029,534,343.20
to meet the reserve price. If the reserve price is not met, the
Commission will cancel both auctions pursuant to CSEA.
b. Minimum Opening Bid
64. In contrast to a reserve price, a minimum opening bid amount is
the minimum bid price set at the beginning of the auction below which
no bids are accepted. It is generally used to accelerate the
competitive bidding process. The auctioneer, however, often has the
discretion to lower the minimum opening bid amount during the course of
the auction. It is also possible for the minimum opening bid amount and
the reserve price to be the same amount.
65. In light of section 309(j)'s requirements, the Bureau proposes
to establish minimum opening bid amounts for the AWS-1 auction(s). The
Bureau believes a minimum opening bid amount, which has been used in
other auctions, is an effective bidding tool for accelerating the
competitive bidding process.
66. Specifically, for the AWS-1 auction(s), the Commission proposes
the following license-by-license formula for calculating minimum
opening bids: $0.05 * MHz * License Area Population.
67. The specific proposed minimum opening bid for each AWS-1
license available at auction is set forth in Attachment A of the
Auction No. 66 Comment Public Notice.
68. If commenters believe that these minimum opening bid amounts
will result in unsold licenses, or are not reasonable amounts, they
should explain why this is so, and comment on the desirability of an
alternative approach. Commenters are advised to support their claims
with valuation analyses and suggested minimum opening bid amount levels
or formulas. In establishing the minimum opening bid amounts, the
Bureau particularly seeks comment on such factors as the amount of
spectrum being auctioned, levels of incumbency, the availability of
technology to provide service, issues of interference with other
spectrum bands and any other relevant factors that could reasonably
have an impact on valuation of the AWS-1 licenses. The Bureau also
seeks comment on whether, consistent with section 309(j), the public
interest would be served by having no minimum opening bid amounts.
v. Bid Amounts
69. The Bureau proposes that, in each round, eligible bidders be
able to place bids in any of nine different amounts. Under this
proposal, the FCC Auction System interface will list the nine
acceptable bid amounts for each license (or package). The first of the
nine acceptable bid amounts, called the minimum acceptable bid amount,
is calculated using a formula that takes into account the amount of
bidding activity on the license (or package). The eight additional bid
amounts are determined by adding successively higher multiples of a
fixed bid increment amount to the minimum acceptable bid.
70. The Bureau retains the discretion to change the minimum
acceptable bid amounts, the parameters of the formula to determine the
percentage increment, and the bid increment percentage if it determines
that circumstances so dictate. If it does make any of these changes,
the Bureau will do so by announcement in the FCC Auction System during
the auction.
71. SMR--The minimum acceptable bid amount for a license will be
equal to its minimum opening bid amount until there is a provisionally
winning bid for the license. After there is a provisionally winning bid
for a license, the minimum acceptable bid amount for that license will
be equal to the amount of the provisionally winning bid plus an
additional amount calculated using the formula described below. The
Bureau will round the result using its standard rounding procedures.
72. The Bureau proposes to calculate minimum acceptable bid amounts
by using an activity-based formula, as it has done in several other
auctions. The formula calculates minimum acceptable bid amounts by
first calculating a percentage increment. The percentage increment for
each license is a function of bidding activity on that license in prior
rounds; therefore, a license that has received many bids will have a
higher percentage increment than a license that has received few bids.
73. The calculation of the percentage increment used to determine
the minimum acceptable bid amounts for each license for the next round
is made at the end of each round. The computation is based on an
activity index, which is a weighted average of the number of bids in
that round and the activity index from the prior round. The current
activity index is equal to a weighting factor times the number of
bidders that submit bids on the license in the most recent bidding
round plus one minus the weighting factor times the activity index from
the prior round. The activity index is then used to calculate a
percentage increment by multiplying a minimum percentage increment by
one plus the activity index with that result being subject to a maximum
percentage increment. The Commission will initially set the weighting
factor at 0.5, the minimum percentage increment at 0.1 (10%), and the
maximum percentage increment at 0.2 (20%). Hence, at these initial
settings, the percentage increment will fluctuate between 10% and 20%
depending upon the number of bids for the license. Equations and
examples are
[[Page 6493]]
shown in Attachment C of the Auction No. 66 Comment Public Notice.
74. In the case of a license for which the provisionally winning
bid has been withdrawn, the minimum acceptable bid amount will equal
the second highest bid received for the license.
75. The acceptable bid amounts in addition to the minimum
acceptable bid amount for each license are calculated using a bid
increment percentage. The first additional acceptable bid amount equals
the minimum acceptable bid amount times one plus the bid increment
percentage, rounded--e.g., if the increment percentage is 10 percent,
the calculation is (minimum acceptable bid amount) * (1 + 0.10),
rounded, or (minimum acceptable bid amount) * 1.10, rounded; the second
additional acceptable bid amount equals the minimum acceptable bid
amount times one plus two times the bid increment percentage, rounded,
or (minimum acceptable bid amount) * 1.20, rounded; the third
additional acceptable bid amount equals the minimum acceptable bid
amount times one plus three times the bid increment percentage,
rounded, or (minimum acceptable bid amount) * 1.30, rounded; etc.
76. SMR-PB--Because bids are submitted on groups of licenses in
SMR-PB, there generally are not provisionally winning bid amounts
associated with individual licenses, as there are in an SMR auction
where bids are submitted on a license-by-license basis. Consequently,
in order to determine license-specific acceptable bid amounts for the
next round, after each round the auction system will assign a price to
each license using an algorithm that takes into account the bids placed
so far in the auction that include that license. These prices, or
current price estimates (CPEs), form the basis for calculating minimum
acceptable bids and the additional increment bid amounts, much as the
per-license provisionally winning bids do in the SMR format. The
algorithm for computing CPEs is described in detail in Attachment B of
the Auction No. 66 Comment Public Notice.
77. Once CPEs are determined following a round, the minimum
acceptable bids for each license will be calculated as the CPE plus a
percentage of the CPE. This percentage (known as the percentage
increment) is determined according to a formula based on the number of
bids placed that included a given license. The percentage increment
will be higher for licenses that have been included in many bids than
for licenses receiving little bidding activity.
78. As in an SMR auction, the computation of the percentage
increment for each license is based on an activity index, which is a
weighted average of the number of bids in that round and the activity
index from the prior round. The current activity index is equal to a
weighting factor times the number of bidders that submit bids on
packages that include the license in the most recent bidding round plus
one minus the weighting factor times the activity index from the prior
round. The activity index is then used to calculate a percentage
increment by multiplying a minimum percentage increment by one plus the
activity index with that result being subject to a maximum percentage
increment. The Commission will initially set the weighting factor at
0.5, the minimum percentage increment at 0.1 (10%), and the maximum
percentage increment at 0.2 (20%). Hence, at these initial settings,
the percentage increment will fluctuate between 10% and 20% depending
upon the number of bids for the license. Equations and examples are
shown in Attachment C of the Auction No. 66 Comment Public Notice.
79. The percentage increment is added to the CPE in order to
determine minimum acceptable bids for each license. The minimum
acceptable bid amount for a package will be the sum of the minimum
acceptable bid amounts for the license(s) comprising the package. Once
the minimum acceptable bids have been calculated for a package, the
additional eight bid amounts will be calculated by adding successively
higher multiples of a fixed bid increment amount to the minimum
acceptable bid.
vi. Provisionally Winning Bids
80. SMR--At the end of a bidding round, a provisionally winning bid
amount for each license will be determined based on the highest bid
amount received for the license. In the event of identical high bid
amounts being submitted on a license in a given round (i.e., tied
bids), the Bureau will use a random number generator to select a single
provisionally winning bid from among the tied bids. (Each bid is
assigned a random number, and the tied bid with the highest random
number wins the tiebreaker.) The remaining bidders, as well as the
provisionally winning bidder, can submit higher bids in subsequent
rounds. However, if the auction were to end with no other bids being
placed, the winning bidder would be the one that placed the selected
provisionally winning bid. If any bids are received on the license in a
subsequent round, the provisionally winning bid again will be
determined by the highest bid amount received for the license.
81. A provisionally winning bid will remain the provisionally
winning bid until there is a higher bid on the same license at the
close of a subsequent round, unless the provisionally winning bid is
withdrawn. Bidders are reminded that provisionally winning bids count
toward activity for purposes of the activity rule.
82. SMR-PB--At the end of each bidding round in an SMR-PB auction,
the FCC Auction System will determine the set of provisionally winning
bids by considering all of the bids that have been placed in the
auction and determining which combination of non-overlapping bids
yields the highest aggregate gross bid amount while not allowing a
bidder to have more than one provisionally winning bid.
83. If more than one set of bids generates the same highest
aggregate gross bid amount (i.e., the sets of bids are tied), the
Bureau will randomly select a provisionally winning set of bids from
among the tied sets. Specifically, each license in each bid will be
assigned a random number. The sum of random numbers for the licenses
comprising the bid will determine a selection number for each bid. The
provisionally winning set of bids will be that set of bids that
generates the highest aggregate gross bid amount and that maximizes the
sum of selection numbers for the bids in the set. Bidders, regardless
of whether they hold a provisionally winning bid, can submit higher
bids in subsequent rounds. However, if the auction were to end, the
winning bidders would be those that placed the provisionally winning
bids.
84. In the SMR-PB format, all bids placed in the auction will be
considered when determining the provisionally winning set of bids. This
contrasts with the SMR format in which only provisionally winning bids
from the previous round and bids placed during the current round are
considered when determining new provisionally winning bids. As a
consequence, in SMR-PB a bid that does not become a provisionally
winning bid at the conclusion of the round in which it was placed may
become a provisionally winning bid at the conclusion of a subsequent
round. This may occur even if the bidder no longer has the bidding
eligibility to cover the newly-provisionally winning bid. Bids cannot
be withdrawn in an SMR-PB auction.
85. The rule that a bidder can hold only one of the bids in the
provisionally winning set of bids may increase the likelihood that bids
placed in previous rounds may appear in the provisionally
[[Page 6494]]
winning set for the first time many rounds later. Bids at very
competitive prices may have been excluded from the provisionally
winning set because the bidder placed another bid which, in combination
with the bids of others, yielded a higher aggregate gross bid amount.
However, if a bid placed by another bidder displaces the bidder's
provisionally winning bid from the set of provisionally winning bids,
an old bid by that bidder may fit better into the new set of winning
bids.
86. The set of provisionally winning bids is determined after every
round in which new bids are submitted.
vii. Bid Removal and Bid Withdrawal
87. SMR--Before the close of a bidding round, a bidder has the
option of removing any bid placed in that round. By removing selected
bids in the FCC Auction System, a bidder may effectively unsubmit any
bid placed within that round. In contrast to the bid withdrawal
provisions described below, a bidder removing a bid placed in the same
round is not subject to a withdrawal payment. Once a round closes, a
bidder may no longer remove a bid.
88. A bidder may withdraw its provisionally winning bids using the
withdraw bids function in the FCC Auction System. A bidder that
withdraws its provisionally winning bid(s) is subject to the bid
withdrawal payment provisions of the Commission rules. The Bureau seeks
comment on these bid removal and bid withdrawal procedures.
89. In the Part 1 Third Report and Order, 65 FR 13540 (May 21,
1997), the Commission explained that allowing bid withdrawals
facilitates efficient aggregation of licenses and the pursuit of backup
strategies as information becomes available during the course of an
auction. The Commission noted, however, that in some instances bidders
may seek to withdraw bids for improper reasons. The Bureau, therefore,
has discretion in managing the auction to limit the number of
withdrawals to prevent any bidding abuses. The Commission stated that
the Bureau should assertively exercise its discretion, consider
limiting the number of rounds in which bidders may withdraw bids, and
prevent bidders from bidding on a particular market if the Bureau finds
that a bidder is abusing the Commission's bid withdrawal procedures.
90. Applying this reasoning, the Bureau proposes to limit each
bidder in an auction using the SMR format to withdrawing provisionally
winning bids in no more than two rounds during the course of the
auction. To permit a bidder to withdraw bids in more than two rounds
may encourage insincere bidding or the use of withdrawals for anti-
competitive purposes. The two rounds in which withdrawals may be used
will be at the bidder's discretion; withdrawals otherwise must be in
accordance with the Commission's rules. There is no limit on the number
of provisionally winning bids that may be withdrawn in either of the
rounds in which withdrawals are used. Withdrawals will remain subject
to the bid withdrawal payment provisions specified in the Commission's
rules.
91. SMR-PB--As in the SMR format, before the close of a round a
bidder has the option of removing any bid placed in that round,
effectively unsubmitting any bid placed in the round. Once a round
closes, a bidder may no longer remove a bid. However, in contrast to
SMR, bidders will not be permitted to withdraw any bids after a round
has closed.
92. As discussed above, the Part 1 Third Report and Order permits
withdrawals in the SMR format in part to allow bidders to avoid being
the winning bidder on some, but not all, of a desired set of licenses.
In contrast to the license-by-license bidding of SMR, the SMR-PB format
does not expose bidders to the risk of winning incomplete aggregations.
In SMR-PB, bidders can only win licenses that were submitted as part of
a single package bid and therefore, withdrawals are not needed to avoid
winning an incomplete set of licenses.
93. Bids in an SMR-PB auction are much more interdependent than in
an SMR auction. In an SMR auction, whether a bid on a license becomes
provisionally winning depends only upon whether it is the highest bid
submitted for the license and, in the case of ties, on its random
number assignment. In contrast, in the SMR-PB format, whether a bid
becomes part of the provisionally winning set depends in part upon the
particular configuration of package bids submitted by other bidders and
upon the identities of the bidders submitting them, because a given
bidder can only have one bid in the provisionally winning set.
Consequently, a withdrawn bid in an SMR-PB auction may significantly
change the current set of provisionally winning bids and seriously
disrupt the bidding strategies of other bidders.
94. Hence, because the potential benefits to bidders from being
able to withdraw bids are much lower in an SMR-PB auction than in an
SMR auction and because the potential harms to other bidders from
withdrawn bids are potentially much greater, no withdrawals will be
permitted in an auction using the SMR-PB format.
D. Considerations Relating to Certain Post-Auction Payment Rules
i. Apportioning Package Bids
95. In the event that it offers AWS-1 licenses in an auction using
SMR-PB, the Bureau seeks comment on the appropriate mechanism for
apportioning package bids among the individual licenses comprising the
package. In package bidding, when bidders place winning all-or-nothing
bids on groups of licenses, there will be no identifiable bid amounts
on the individual licenses that comprise packages of more than one
license. However, the Commission's competitive bidding rules and
procedures assume that the amount of each bid on an individual license
always is known.
96. In the event that it offers AWS-1 licenses in an auction using
SMR-PB, the Bureau proposes to use final current price estimates as a
mechanism for apportioning package bids among the individual licenses
comprising the package when regulatory calculations require a bid
amount on an individual license. As summarized below and described in
detail in Attachment B of the Auction No. 66 Comment Public Notice,
current price estimates (CPEs) for each license in an SMR-PB auction
reflect the demand expressed by bids in the auction that include the
license. CPEs are calculated in each round of the auction using an
algorithm that takes into account all the bids placed in the auction
that include that license, whether the bids are for the individual
license or include the license in a package with other licenses. The
algorithm assures that the sum of CPEs for individual licenses in a
package that is part of the provisionally winning set equals the
provisionally winning bid amount for the package. Thus, CPEs in effect
apportion the provisionally winning bid amount for a package in the
provisionally winning set among the individual licenses in the package
based on the relative demand for each license as expressed by bids in
the auction. Final CPEs, or final price estimates (FPEs), are the CPEs
from the final round of the auction. Accordingly, FPEs reflect all bids
made in the auction and can be used to apportion a winning bid on a
package. The Bureau seeks comment on this proposal.
ii. Establishing the Interim Withdrawal Payment Percentage
97. The Bureau seeks comment on the appropriate percentage of a
withdrawn
[[Page 6495]]
bid that should be assessed as an interim withdrawal payment, in the
event that a final withdrawal payment cannot be determined at the close
of the auction. In general, the Commission's rules provide that a
bidder that withdraws a bid during an auction is subject to a
withdrawal payment equal to the difference between the amount of the
withdrawn bid and the amount of the winning bid in the same or
subsequent auction(s). However, if a license for which there has been a
withdrawn bid is neither subject to a subsequent higher bid nor won in
the same auction, the final withdrawal payment cannot be calculated
until a corresponding license is subject to a higher bid or won in a
subsequent auction. When that final payment cannot yet be calculated,
the bidder responsible for the withdrawn bid is assessed an interim bid
withdrawal payment, which will be applied toward any final bid
withdrawal payment that is ultimately assessed. The Commission recently
amended its rules to provide that in advance of the auction, the
Commission shall establish the percentage of the withdrawn bid to be
assessed as an interim bid withdrawal payment between three percent
(3%) and twenty percent (20%).
98. When it adopted the new rule, the Commission indicated that the
level of the interim withdrawal payment in a particular auction will be
based on the nature of the service and the inventory of the licenses
being offered. The Commission noted that it may impose a higher interim
withdrawal payment percentage to deter the anti-competitive use of
withdrawals when, for example, bidders likely will not need to
aggregate licenses offered, such as when few licenses are offered that
are not on adjacent frequencies or in adjacent areas, or there are few
synergies to be captured by combining licenses.
99. With respect to an auction of AWS-1 licenses, the service rules
permit a wide range of advanced services, some of which may best be
offered by combining licenses on adjacent frequencies or in adjacent
areas. In addition, an auction of AWS-1 licenses will make available
multiple licenses on adjacent frequencies in geographic areas of
varying sizes. Given the availability of so many different licenses and
the Bureau's interest in deterring strategic withdrawals, the Bureau
proposes a percentage above the 3 percent (3%) previously provided by
the Commission's rules. Specifically, taking into account the factors
discussed above, the Bureau proposes to establish the percentage of the
withdrawn bid to be assessed as an interim bid withdrawal payment at
ten percent (10%) for the AWS-1 auction. The Bureau seeks comment on
this proposal.
iii. Establishing the Additional Default Payment Percentage
100. The Bureau seeks comment on the appropriate percentage of an
applicable bid that should be assessed as an additional default payment
in an auction under the SMR format. If, after the close of an auction,
a winning bidder defaults on a down payment or final payment obligation
or is disqualified, the bidder is liable for a default payment. This
payment consists of a deficiency portion, equal to the difference
between the amount of the bidder's bid and the amount of the winning
bid the next time a license covering the same spectrum is won in an
auction, plus an additional payment equal to a percentage of the
defaulter's bid or of the subsequent winning bid, whichever is less.
Under both prior and recently adopted Commission rules, in an auction
under the SMR-PB format, the additional default payment will be twenty-
five percent (25%) of the defaulted bid. However, the Commission's
recently adopted new rule provides that in auctions under the SMR
format, the Commission shall establish in the advance of the auction
the percentage of the applicable bid to be assessed as an additional
payment between three percent (3%) and twenty percent (20%).
101. When it adopted the new rule, the Commission indicated that
the level of the additional default payment in a particular SMR auction
will be based on the nature of the service and the inventory of the
licenses being offered. In this regard, the Bureau believes that it is
significant that the auction of AWS-1 licenses will be the first
opportunity for bidders to obtain licenses to provide advanced wireless
services. This context heightens the public interest in avoiding any
delay in providing access to the spectrum that might result from
defaults on winning bids. Furthermore, the public interest in rapid
deployment of new advanced wireless services might be adversely
affected by defaults.
102. Given its interest in deterring defaults, the Bureau proposes
a percentage above the 3 percent (3%) minimum previously provided by
the Commission's rules. The Bureau proposes to set the additional
default payment for the auction of AWS-1 licenses at ten percent (10%)
of the applicable bid. The Bureau seeks comment on this proposal.
III. Conclusion
103. Comments are due on or before February 14, 2006, and reply
comments are due on or before February 28, 2006. All filings related to
the auction(s) of AWS-1 licenses should refer to AU Docket No. 06-30.
Comments may be submitted using the Commission's Electronic Comment
Filing System (ECFS) or by filing paper copies. The Bureau encourages
interested parties to file electronically.
104. Electronic Filers: Parties who choose to file electronically
through ECFS need submit only one copy. Comments may be filed
electronically using the Internet by accessing the ECFS at http://www.fcc.gov/cgb/ecfs/.
Filers should follow the instructions provided
on the website for submitting comments. In completing the transmittal
screen, filers should include their full name, U.S. Postal Service
mailing address, and the applicable docket or rulemaking number.
Parties may also submit an electronic comment by Internet e-mail. To
get filing instructions, filers should send an e-mail to ecfs@fcc.gov,
and include the following words in the body of the message, ``get
form.'' A sample form and directions will be sent in response.
105. Paper Filers: Parties who choose to file by paper must file an
original and four copies of each filing. Filings can be sent by hand or
messenger delivery, by commercial overnight courier, or by first-class
or overnight U.S. Postal Service mail. All filings must be addressed to
the Commission's Secretary Attn: WTB/ASAD, Office of the Secretary,
Federal Communications Commission.
106. This proceeding has been designated as a ``permit-but-
disclose'' proceeding in accordance with the Commission's ex parte
rules. Persons making oral ex parte presentations are reminded that
memoranda summarizing the presentations must contain summaries of the
substance of the presentations and not merely a listing of the subjects
discussed. More than a one or two sentence description of the views and
arguments presented is generally required. Other rules pertaining to
oral and written ex parte presentations in permit-but-disclose
proceedings are set forth in Sec. 1.1206(b) of the Commission's rules.
Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions Spectrum and Access Division.
[FR Doc. 06-1196 Filed 2-7-06; 8:45 am]
BILLING CODE 6712-01-P