[Federal Register Volume 63, Number 230 (Tuesday, December 1, 1998)]
[Notices]
[Pages 66172-66176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32015]


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FEDERAL COMMUNICATIONS COMMISSION

[DA 98-2318; Report No. AUC-98-23-A (Auction No. 22)]


C Block PCS Spectrum Auction Scheduled for March 23, 1999 Comment 
Sought on Auction Procedural Issues

AGENCY: Federal Communications Commission.

ACTION: Notice; seeking comment.

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SUMMARY: This Public Notice announces the auction of C block broadband 
personal communications services (``PCS'') licenses set to begin on 
March 23, 1999, and seeks comment on procedural issues relating to the 
C block broadband PCS auction.

DATES: Comments are due on or before November 30, 1998. Reply comments 
are due on or before December 7, 1998.

ADDRESSES: To file formally, parties must submit an original and four 
copies to the Office of the Secretary, Federal Communications 
Commission, 445 Twelfth Street, S.W., TW-A325, Washington, D.C. 20554. 
In addition, parties must submit one copy to Amy Zoslov, Chief, 
Auctions and Industry Analysis Division, Wireless Telecommunications 
Bureau, Federal Communications Commission, Room 5202, 2025 M Street, 
N.W., Washington, D.C. 20554. Comments and reply comments will be 
available for public inspection during regular business hours in the 
Wireless Telecommunications Bureau Reference Center, Room 5608, 2025 M 
Street, N.W., Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Audrey Bashkin, Bob Reagle, or Jeff 
Garretson, Auctions and Industry Analysis Division, Wireless 
Telecommunications Bureau, at (202) 418-0660.


[[Page 66173]]


SUPPLEMENTARY INFORMATION: This Public Notice was released on November 
12, 1998, and is available in its entirety, including the Attachment, 
for inspection and copying during normal business hours in the Wireless 
Telecommunications Bureau Reference Center, Room 5608, 2025 M Street 
N.W., Washington, D.C., and also may be purchased from the Commission's 
copy contractor, International Transcription Services, (202) 857-3800, 
fax (202) 857-3805, 1231 20th Street, N.W., Washington, D.C. 20036. It 
is also available on the Commission's website at http://www.fcc.gov.

Synopsis of the Public Notice

    1. By this Public Notice, the Wireless Telecommunications Bureau 
(``Bureau'') announces an auction of C block broadband personal 
communications services (``PCS'') licenses set to begin on March 23, 
1999 (Auction No. 22). Auction No. 22 will cover licenses for operation 
on frequencies that were previously licensed under now-cancelled 
licenses, licenses for operation on 30 MHz and 15 MHz spectrum blocks 
that were returned to the Commission pursuant to elections, and 
licenses for operation on frequencies that had not been previously 
licensed. A list of licenses is included at Appendix A. In addition, 
future public notices could include information about other Commission 
licenses in conjunction with Auction No. 22. Future public notices will 
include further details regarding application filing and payment 
deadlines, a seminar for potential bidders, and other pertinent 
information. In this Public Notice, the Bureau seeks comment on 
procedural issues relating to Auction No. 22.

I. Reserve Price or Minimum Opening Bid

    2. The Balanced Budget Act of 1997 (``Budget Act'') calls upon the 
Commission to prescribe methods by which a reasonable reserve price 
will be required or a minimum opening bid established when FCC licenses 
are subject to auction (i.e., because the Commission has accepted 
mutually exclusive applications for those licenses), unless the 
Commission determines that a reserve price or minimum bid is not in the 
public interest.
    3. Normally, a reserve price is an absolute minimum price below 
which an item will not be sold in a given auction. Reserve prices can 
be either published or unpublished. A minimum opening bid, on the other 
hand, 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. Also, in a minimum opening bid 
scenario, the auctioneer generally has the discretion to lower the 
amount later in the auction.
    4. The Commission in the Second Report and Order and Further Notice 
of Proposed Rule Making (``C Block Further Notice''), 62 FR 55375 
(October 24, 1997), sought comment on the use of a minimum opening bid 
and/or reserve price for the upcoming C block PCS auction. The 
Commission stated that, for the upcoming C block auction, employing a 
minimum opening bid, more than a reserve price, would help make certain 
that the public is fairly compensated, the auction is expedited, and 
the Commission is able to make adjustments based on the competitiveness 
of the auction. Accordingly, the Commission proposed to use a minimum 
opening bid, rather than a reserve price, for the upcoming C block 
auction and requested comment on this proposal, as well as on which 
methodology to employ and factors to consider in establishing minimum 
opening bids. The Commission proposed minimum opening bids for each 
market equal to ten percent of the corresponding net high bid for the 
market in the original C block auction. The Commission asked commenters 
to explain whether this proposal would be reasonable or would result in 
a substantial number of unsold licenses. The Commission asked further 
whether the amount of the minimum opening bid should be capped and 
whether the Commission should establish a different amount.
    5. In the Fourth Report and Order (``C Block Fourth Report and 
Order''), 63 FR 50791 (September 23, 1998), which resolved issues 
raised in the C Block Further Notice, the Commission decided that it 
would be appropriate to establish minimum opening bids for each market 
in the upcoming C block auction equal to ten percent of the 
corresponding net high bid for the market in the original C block 
auction. The Commission stated, however, that the Bureau may exercise 
its discretion to set forth minimum opening bids smaller than ten 
percent if, based upon further evaluation, the Bureau believes that a 
smaller amount is warranted. In considering a reduction of the minimum 
opening bid, the Bureau would consider such factors as the amount of 
spectrum being auctioned, levels of incumbency, the availability of 
technology to provide service, the size of the geographic service 
areas, issues of interference with other spectrum bands, and any other 
relevant factors that could reasonably affect valuation of the spectrum 
being auctioned.
    6. The Commission made no adjustment to the minimum opening bid for 
those licenses which, in Auction No. 22, will be 15 MHz rather than 30 
MHz. The Bureau, however, believes that such an adjustment is 
appropriate and, accordingly, proposes to establish as the minimum 
opening bid for each 15 MHz license available in Auction No. 22 an 
amount equal to five percent of the most recent net high bid for the 
corresponding 30 MHz license, but in no event lower than the upfront 
payment amount for that license in Auction No. 22 (see discussion of 
upfront payments immediately below). For 15 MHz licenses with minimum 
opening bids that would otherwise be lower than upfront payment 
amounts, the Bureau proposes to establish minimum opening bids that 
equal the upfront payment amounts. For each 30 MHz license available in 
Auction No. 22, the Bureau plans to establish a minimum opening bid 
equal to ten percent of the most recent corresponding net high bid for 
the license, but in no event lower than the upfront payment amount for 
that license in Auction No. 22. For 30 MHz licenses with minimum 
opening bids that would otherwise be lower than upfront payment 
amounts, the Bureau plans to establish minimum opening bids that equal 
the upfront payment amounts. Minimum opening bid amounts are provided 
in Attachment A.

II. Upfront Payments and Initial Maximum Eligibility for Each 
Bidder

    7. In the C Block Further Notice, the Commission explained that, in 
the Second Report and Order, 59 FR 22980 (May 4, 1994), (``Competitive 
Bidding Second Report and Order''), it had indicated that the upfront 
payment should be set using a formula based upon the amount of spectrum 
and population (``pops'') covered by the license(s) for which the 
parties intend to bid and that the amount of the upfront payment should 
be determined on an auction-by-auction basis. The Commission proposed 
in the C Block Further Notice to set an upfront payment for the 
upcoming C block auction at $0.06 per MHz per pop. The Commission 
determined that this amount was appropriate to further its goal of 
allowing only serious, qualified applicants to participate in the 
auction. The Commission noted that it had adopted the same upfront 
payment for its most recent broadband PCS auction, the D, E, and F 
block auction.

[[Page 66174]]

    8. In the C Block Fourth Report and Order, the Commission noted 
that there was support among commenters for setting the upfront payment 
amount at the proposed $0.06 per MHz per pop and expressed its belief 
that in the upcoming C block auction the upfront payment should be no 
higher than this amount. Accordingly, the Bureau plans to set the 
upfront payment amount for each license in Auction No. 22 at $0.06 * 
MHz * Pops (rounded up to the next dollar). The Bureau notes, however, 
that in the C Block Fourth Report and Order the Commission stated that 
the Bureau may establish a lower upfront payment if it deems a lower 
amount to be reasonable.
    9. As required by the C Block Fourth Report and Order, the upfront 
payment amount for ``former defaulters,'' i.e., applicants that have 
ever been in default on any Commission licenses or have ever been 
delinquent on any non-tax debt owed to any Federal agency, will be 
fifty percent more than the normal amount required to be paid.
    10. For Auction No. 22, the Commission proposes that the amount of 
the upfront payment submitted by a bidder will determine the initial 
maximum eligibility (as measured in bidding units) for each bidder. 
Upfront payments will not be attributed to specific licenses, but 
instead will be translated into bidding units to define a bidder's 
initial maximum eligibility, which cannot be increased during the 
auction. Thus, in calculating the upfront payment amount, an applicant 
must determine the maximum number of bidding units it may wish to bid 
on (or hold high bids on) in any single round, and submit an upfront 
payment covering that number of bidding units. The Commission seeks 
comment on this proposal.

III. Attribution Rules

    11. The attribution rules set forth in Section 24.709 of the 
Commission's rules will apply to Auction No. 22.

IV. Other Auction Procedural Issues

    12. The Budget Act 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 the Budget Act and to ensure that 
potential bidders have adequate time to familiarize themselves with the 
specific provisions 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 
issues prior to the start of each auction. The Bureau therefore seeks 
comment on the following issues.

a. Auction Sequence and License Groupings

    13. In the C Block Further Notice, the Commission proposed a 
simultaneous multiple-round design for the upcoming C block auction, 
and it received no comments opposing this proposal. Accordingly, in the 
C Block Fourth Report and Order, the Commission stated that the 
simultaneous multiple-round design would be appropriate for the 
upcoming C block auction. The Commission noted, however, that it 
remains within the Bureau's authority to seek comment on, and to 
modify, the competitive bidding design of the upcoming C block auction, 
if the Bureau determines that another design might be warranted. In 
light of this history, and because a simultaneous multiple-round design 
allows bidders to take advantage of any synergies that exist among 
licenses, the Bureau proposes to award all C block PCS licenses 
currently available for auction in a single, simultaneous multiple-
round auction. The Bureau seeks comment on this proposal.

b. Structure of Bidding Rounds, Activity Requirements, and Criteria for 
Determining Reductions in Eligibility

    14. In the C Block Further Notice, the Commission tentatively 
concluded that a C block auction should be conducted in three stages. 
The Commission proposed to use high activity requirements, with bidders 
required to be more active in each subsequent stage than they had been 
in the last. The Commission also proposed requiring the Bureau to use 
its delegated authority to schedule bidding rounds aggressively, to 
move quickly into the next stage of the auction when bidding activity 
falls, and to use higher minimum bid increments for very active 
licenses. In the Third Report and Order and Second Further Notice of 
Proposed Rule Making, 63 FR 2315 (January 15, 1998), (``Part 1 Third 
Report and Order''), the Commission directed the Bureau to seek comment 
prior to the start of each auction on activity requirements for each 
stage of the auction and activity rule waivers.
    15. No party opposed the Commission's tentative conclusion to 
conduct a C block auction in three stages. Accordingly, in the C Block 
Fourth Report and Order, the Commission expressed its continued belief 
that this structure would be reasonable for the upcoming C block 
auction. The Commission noted, however, that the Bureau normally 
determines the structure of the auction and stated that it remains 
within the Bureau's discretion to deviate from the proposed three-stage 
structure if, after appropriate notice and comment, the Bureau 
determines that a different structure would better serve the public 
interest.
    16. Accordingly, the Bureau proposes to divide the auction into 
three stages: Stage One, Stage Two and Stage Three. The auction will 
start in Stage One. The Bureau proposes that the auction will generally 
advance to the next stage (i.e., from Stage One to Stage Two, and from 
Stage Two to Stage Three) when the auction activity level, as measured 
by the percentage of bidding units receiving new high bids, is below 
ten percent for three consecutive rounds of bidding in each Stage. 
However, the Bureau further proposes that the Bureau retain 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 percentages of licenses (as measured in 
bidding units) on which there are new bids, the number of new bids, and 
the percentage increase in revenue. The Bureau seeks comment on these 
proposals.
    17. In order to ensure that auctions close within a reasonable 
period of time, the Commission imposes an activity rule that requires 
bidders to bid actively on a percentage of their maximum bidding 
eligibility during each round of an auction rather than waiting until 
the end to participate. A bidder that does not satisfy the activity 
rule will either lose bidding eligibility in the next round or use an 
activity rule waiver.
    18. For Auction No. 22, the Bureau proposes that, in each round of 
Stage One of the auction, a bidder desiring to maintain its current 
eligibility must remain active on licenses encompassing at least 80 
percent of its current bidding eligibility. Failure to maintain the 
requisite 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, reduced eligibility for the 
next round will be calculated by multiplying the current round activity 
by five-fourths (\5/4\). In each round of the second stage of the 
auction, a bidder desiring to maintain its current eligibility is 
required to be active on at least 90 percent of its current bidding 
eligibility. During Stage Two, reduced eligibility for the next round 
will be

[[Page 66175]]

calculated by multiplying the current round activity by ten-ninths 
(\10/9\). In each round of Stage Three, a bidder desiring to maintain 
its current eligibility is required to be active on 98 percent of its 
current bidding eligibility. In this final stage, reduced eligibility 
for the next round will be calculated by multiplying the current round 
activity by fifty forty-ninths (\50/49\). The Bureau seeks comment on 
these proposals.

c. Minimum Accepted Bids

    19. Once there is a standing high bid on a license, a bid increment 
will be applied to that license to establish a minimum acceptable bid 
for the following round. For Auction No. 22, the Bureau proposes to use 
a smoothing methodology to calculate bid increments. This methodology 
will be designed to vary the increment for a given license between a 
maximum and minimum value based on the bidding activity on that 
license. A similar methodology was used in previous auctions, including 
the original LMDS auction and the 220 MHz auction. The Bureau proposes 
initial values for the maximum of 0.2 or 20% of the license value, and 
a minimum of 0.1 or 10% of the license value. The Bureau seeks comment 
on this proposal.
    20. The Bureau retains the discretion to change these values if 
circumstances so dictate, such as raising the minimum increment toward 
the end of the auction to enable bids to reach their final values more 
quickly. The Bureau will do so by announcement in the Automated Auction 
System. Under its discretion, the Bureau may also implement an absolute 
dollar floor for the bid increment to further facilitate a timely close 
of the auction. The Bureau further seeks comment on the advantages and 
disadvantages of using the discretion to adjust the minimum bid 
increment without prior notice. The Bureau additionally seeks comment 
on the advantages and disadvantages of, as an alternative approach, 
adjusting the minimum bid increment gradually over a number of rounds 
as opposed to single large changes in the minimum bid increment. The 
Bureau also retains the discretion to use alternate methodologies for 
Auction No. 22 if circumstances warrant. The Bureau seeks comment on 
these proposals.

d. Activity Rule Waivers and Reducing Eligibility

    21. Use of an activity rule waiver preserves the bidder's current 
bidding 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 and not to a particular license. Activity 
waivers are principally a mechanism for auction participants to avoid 
the loss of auction eligibility in the event that exigent circumstances 
prevent them from placing a bid in a particular round.
    22. The FCC auction system assumes that bidders with insufficient 
activity would prefer to use an activity rule waiver (if available) 
rather than lose bidding eligibility. Therefore, the system will 
automatically apply a waiver (known as an ``automatic waiver'') at the 
end of any bidding period where a bidder's activity level is below the 
minimum required unless: (1) There are no activity rule waivers 
available; or (2) the bidder overrides the automatic application of a 
waiver by reducing eligibility thereby meeting the minimum 
requirements.
    23. A bidder with insufficient activity that wants to reduce its 
bidding eligibility rather than use an activity rule waiver must 
affirmatively override the automatic waiver mechanism during the 
bidding period by using the reduce eligibility function in the 
software. In this case, the bidder's eligibility is permanently reduced 
to bring the bidder into compliance with the activity rules as 
described above. Once eligibility has been reduced, a bidder will not 
be permitted to regain its lost bidding eligibility.
    24. A bidder may proactively use an activity rule waiver as a means 
to keep the auction open without placing a bid. If a bidder submits a 
proactive waiver (using the proactive waiver function in the bidding 
software) during a bidding period in which no bids are submitted, the 
auction will remain open and the bidder's eligibility will be 
preserved. An automatic waiver invoked in a round in which there are no 
new valid bids will not keep the auction open.
    25. The Bureau proposes that each bidder in Auction No. 22 be 
provided with five activity rule waivers that may be used in any round 
during the course of the auction as set forth above. The Bureau seeks 
comment on this proposal.

e. Information Regarding Bid Withdrawal and Bid Removal

    26. In the C Block Fourth Report and Order, the Commission directed 
the Bureau, in conducting the upcoming C block auction, to follow the 
Part 1 rule on bid withdrawal, Section 1.2104(g), to the extent 
applicable. Accordingly, for Auction No. 22, the Bureau proposes the 
following bid removal and bid withdrawal procedures. Before the close 
of a bidding period, a bidder has the option of removing any bids 
placed in that round. By using the remove bid function in the software, 
a bidder may effectively ``unsubmit'' any bid placed within that round. 
A bidder removing a bid placed in the same round is not subject to 
withdrawal payments.
    27. Once a round closes, a bidder may no longer remove a bid. 
However, in the next round, a bidder may withdraw standing high bids 
from previous rounds using the withdraw bid function. A high bidder 
that withdraws its standing high bid from a previous round is subject 
to the bid withdrawal payment provisions. The Bureau seeks comment on 
these bid removal and bid withdrawal procedures.
    28. In the Part 1 Third Report and Order, the Commission recently 
explained that allowing bid withdrawals facilitates efficient 
aggregation of licenses and the pursuit of efficient 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, including to delay the close of the 
auction for strategic purposes. The Bureau, therefore, has discretion, 
in managing the auction, to limit the number of withdrawals to prevent 
strategic delay of the close of the auction or other 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.
    29. Applying this reasoning, the Bureau proposes to limit each 
bidder in Auction No. 22 to withdrawals in no more than two rounds 
during the course of the auction. To permit a bidder to withdraw bids 
in more than two rounds would likely encourage insincere bidding or the 
use of withdrawals for anti-competitive strategic purposes. The two 
rounds in which withdrawals are utilized 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 standing high 
bids that may be withdrawn in either of the rounds in which withdrawals 
are utilized. Withdrawals will remain subject to the bid withdrawal 
payment provisions specified in the Commission's rules. The Bureau 
seeks comment on this proposal.

f. Stopping Rule

    30. For Auction No. 22, the Bureau proposes to employ a 
simultaneous stopping approach. The Bureau has

[[Page 66176]]

discretion ``to establish stopping rules before or during multiple 
round auctions in order to terminate the auction within a reasonable 
time.'' See, Section 1.2104 of the Commission's Rules, 47 CFR 
1.2104(c). A simultaneous stopping rule means that all licenses remain 
open until the first round in which no new acceptable bids, proactive 
waivers, or withdrawals are received. After the first such round, 
bidding closes simultaneously on all licenses. Thus, unless 
circumstances dictate otherwise, bidding would remain open on all 
licenses until bidding stops on every license.
    31. The Bureau seeks comment on 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 
submits a proactive waiver, a withdrawal, or a new bid on any license 
on which it is not the standing high bidder. Thus, absent any other 
bidding activity, a bidder placing a new bid on a license for which it 
is the standing high bidder would not keep the auction open under this 
modified stopping rule. The Bureau further seeks comment on whether 
this modified stopping rule should be used unilaterally or only in 
stage three of the auction.
    32. The Commission proposes that the Bureau retain the discretion 
to keep an auction open even if no new acceptable bids or proactive 
waivers are submitted and no previous high bids are withdrawn. In this 
event, the effect will be the same as if a bidder had submitted a 
proactive 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.
    33. Finally, the Commission proposes that the Bureau reserve the 
right to 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 final round(s) 
only for licenses on which the high bid increased in at least one of 
the preceding specified number of rounds. The Bureau proposes to 
exercise this option only in certain circumstances, such as, 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 this 
option, the Bureau is likely to attempt to increase the pace of the 
auction by, for example, moving the auction into the next stage (where 
bidders would be required to maintain a higher level of bidding 
activity), increasing the number of bidding rounds per day, and/or 
increasing the amount of the minimum bid increments for the limited 
number of licenses where there is still a high level of bidding 
activity. The Bureau seeks comment on these proposals.

g. Information Relating to Auction Delay, Suspension or Cancellation

    34. For Auction No. 22, the Commission proposes that, by public 
notice or by announcement during the auction, the Bureau may delay, 
suspend or cancel the auction 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 competitive conduct of competitive 
bidding. In such cases, the Bureau, in its sole discretion, may elect 
to: resume the auction starting from the beginning of the current 
round; resume the auction starting from some previous round; or cancel 
the auction in its entirety. Network interruption may cause the Bureau 
to delay or suspend the auction. The Commission emphasizes that 
exercise of this authority is solely within its discretion, 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.

Federal Communications Commission.

Daniel B. Phythyon,
Chief, Wireless Telecommunications Bureau.
[FR Doc. 98-32015 Filed 11-27-98; 11:51 am]
BILLING CODE 6712-01-P