[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