[Federal Register Volume 63, Number 235 (Tuesday, December 8, 1998)]
[Notices]
[Pages 67685-67688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32641]
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FEDERAL COMMUNICATIONS COMMISSION
[DA 98-2386; Report No. AUC-99-24-A (Auction No. 24)]
Phase II 220 MHz Service Spectrum Auction Scheduled for June 8,
1999; Application Filing Deadline Set for May 10, 1999; Comment Sought
on Reserve Prices or Minimum Opening Bids and Other Auction Procedures
AGENCY: Federal Communications Commission.
ACTION: Notice; seeking comment.
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SUMMARY: This Public Notice announces an auction of 225 Phase II 220
MHz Service licenses set to begin on June 8, 1999 and seeks comment on
procedural issues relating to this auction.
DATES: Comments are due on or before December 16, 1998, and reply
comments are due on or before December 23, 1998.
ADDRESSES: To file formally, parties must submit an original and four
copies to the Office of the Secretary, Federal Communications
Commission, 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 FCC Public Reference Room, Room 239, 1919 M
Street N.W., Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT: Christina Clearwater, Ruby Hough, or
Bob Reagle, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, at (202) 418-0660.
SUPPLEMENTARY INFORMATION: This Public Notice was released on November
24, 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, 20205 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
1. By this Public Notice, the Wireless Telecommunications Bureau
(``Bureau'') announces an auction of 225 Phase II 220 MHz Service
licenses set to begin on June 8, 1999 (Auction No. 24). A list of
licenses is included as an Attachment. In addition, future public
notices could include additional information about available spectrum
in conjunction with Auction No. 24. 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 Commission seeks comment on procedural issues
relating to Auction No. 24.
Key Dates
Short Form Application (FCC Form 175), May 10, 1999; 5:30
p.m. ET.
Upfront Payments (via wire transfer), May 24, 1999; 6:00
p.m. ET.
Auction Start, June 8, 1999.
[[Page 67686]]
I. Reserve Price or Minimum Opening Bid
2. The Balanced Budget Act of 1997 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 opening bid 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 and/or reserve price
prior to the start of each auction. The Bureau was directed to seek
comment on the methodology to be employed in establishing each of these
mechanisms. Among other factors the Bureau should consider are 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 reasonably could have an
impact on valuation of the spectrum being auctioned. The Commission
concluded that the Bureau should have the discretion to employ either
or both of these mechanisms for future auctions.
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. It is also possible for the minimum
opening bid and the reserve price to be the same amount.
4. In anticipation of this auction and in light of the Balanced
Budget Act, the Bureau proposes to establish minimum opening bids for
the Phase II 220 MHz Service auction, and retain discretion to lower
the minimum opening bids. The Bureau believes a minimum opening bid,
which has been utilized in other auctions, is an effective bidding
tool. A minimum opening bid, rather than a reserve price, will help to
regulate the pace of the auction and provides flexibility.
5. Specifically, for Auction No. 24, the Commission proposes the
following for minimum opening bids:
1. EAG Licenses, $0.0125 * 0.15 MHz * License Population
(rounded up to the nearest dollar.)
2. EA Licenses, $500 per license.
Comment is sought on this proposal. If commenters believe that the
formula proposed above for minimum opening bids will result in
substantial numbers of unsold licenses, or is not a reasonable amount,
or should instead operate as a reserve price, 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 reserve prices or minimum opening bid levels or formulas.
In establishing the formula for minimum opening bids, the Commission
particularly seeks comment on such factors as, among other things, 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 have an
impact on valuation of the Phase II 220 MHz Service spectrum.
Alternatively, comment is sought on whether, consistent with the
Balanced Budget Act, the public interest would be served by having no
minimum opening bid or reserve price.
II. Other Auction Procedures
6. The Balanced Budget Act of 1997 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 Balanced 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 procedures prior to the start of each
auction. The Bureau therefore seeks comment on the following issues.
a. Auction Sequence and License Groupings
7. Because it is most administratively appropriate, and allows
bidders to take advantage of any synergies that exist among licenses,
the Commission proposes to award these 225 Phase II 220 MHz Service
licenses in a single, simultaneous multiple-round auction. The Bureau
seeks comment on this proposal.
b. Upfront Payments and Initial Maximum Eligibility for Each Bidder
8. 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. With these guidelines in mind,
the Bureau proposes for the Phase II 220 MHz Service auction the
following upfront payments:
1. EAG Licenses, $0.01 * 0.15 MHz * License Population (rounded
up to the nearest dollar.)
2. EA Licenses, $500 per license.
The Bureau seeks comment on this proposal. For the Phase II 220 MHz
Service auction, the Bureau further 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.
c. Structure of Bidding Rounds, Activity Requirements, and Criteria for
Determining Reductions in Eligibility
9. The Commission proposes to divide the auction into three stages:
Stage One, Stage Two and Stage Three. The auction will start in Stage
One. The Commission 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 Commission 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 on which there are new
bids, the number of new bids, and the percentage increase in revenue.
The Commission seeks comment on these proposals.
[[Page 67687]]
10. In order to ensure that the auction closes within a reasonable
period of time, an activity rule requires bidders to bid actively on a
percentage of their maximum bidding eligibility during each round of
the 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.
11. For the Phase II 220 MHz Service auction, the Commission
proposes that, in each round of Stage One of the auction, a bidder
desiring to maintain its current eligibility is required to be 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 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 Commission seeks comment on these proposals.
d. Minimum Accepted Bids
12. 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 the Phase II 220 MHz Service auction, the
Commission 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 Phase II 220 MHz Service
auction and LMDS 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.
13. 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. As an alternative approach, the Bureau
seeks comment on the advantages and disadvantages of 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 the Phase II
220 MHz Service auction if circumstances warrant. The Commission seeks
comment on these proposals.
e. Activity Rule Waivers and Reducing Eligibility
14. 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.
15. 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.
16. 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.
17. 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.
18. The Bureau proposes that each bidder in the Phase II 220 MHz
Service auction 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 Commission seeks comment on this proposal.
f. Information Regarding Bid Withdrawal and Bid Removal
19. For the Phase II 220 MHz Service auction, 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.
20. 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 Commission seeks comment
on these bid removal and bid withdrawal procedures.
21. 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 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
[[Page 67688]]
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.
22. Applying this reasoning, the Bureau proposes to limit each
bidder in the Phase II 220 MHz Service auction 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 Commission seeks comment on this proposal.
g. Stopping Rule
23. For the Phase II 220 MHz Service auction, the Bureau proposes
to employ a simultaneous stopping approach. The Bureau has discretion
``to establish stopping rules before or during multiple round auctions
in order to terminate the auction within a reasonable time.'' 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.
24. 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.
25. 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.
26. 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 Commission seeks comment on these proposals.
h. Information Relating to Auction Delay, Suspension or Cancellation
27. For the Phase II 220 MHz Service auction, 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
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 Commission seeks comment on this proposal.
Federal Communications Commission.
Daniel B. Phythyon,
Chief, Wireless Telecommunications Bureau.
[FR Doc. 98-32641 Filed 12-7-98; 8:45 am]
BILLING CODE 6712-01-P