[Federal Register Volume 64, Number 242 (Friday, December 17, 1999)]
[Notices]
[Pages 70708-70711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32826]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-99-30-A (Auction No. 30); DA 99-2624]


Auction of Licenses For Fixed Point-to-Point Microwave Services 
in the 38.6 to 40.0 GHz (39 GHz) Band Scheduled for April 11, 2000

AGENCY: Federal Communications Commission.

ACTION: Notice; seeking comment.

-----------------------------------------------------------------------

SUMMARY: This Public Notice announces the auction of licenses for fixed 
point-to-point microwave services in the 38.6 to 40.0 GHz band (``39 
GHz Auction''), scheduled to commence on April 11, 2000. As discussed 
in greater detail herein, the Bureau proposes that the 39 GHz Auction 
be composed of 2,450 licenses in the 38.6-40.0 GHz bands (``39 GHz 
band''). Fourteen 100 megahertz licenses (paired 50 megahertz channel 
blocks) will be offered in each of 172 Economic Areas (EAs) and 3 EA-
like areas, covering the United States, the Northern Mariana Islands, 
Guam, American Samoa, the United States Virgin Islands and Puerto Rico.

DATES: Comments are due on or before December 8, 1999 and reply 
comments are due on or before December 20, 1999.\1\

    \1\ Editorial note: This document was received by the Office of 
the Federal Register on December 14, 1999.

ADDRESSES: To file formally, parties must submit an original and four 
copies to the Office of the Secretary, Federal Communications 
Commission, 445 Twelfth Street, SW, 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, 445 Twelfth Street, SW, Room No. 4-
---------------------------------------------------------------------------
A760, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Kenneth Burnley, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, at (202) 418-
0664.

SUPPLEMENTARY INFORMATION: This is a summary of a Public Notice 
released November 23, 1999. The complete text, including all 
attachments, of the public notice is available for inspection and 
copying during normal business hours in the FCC Reference Center (Room 
CY-A257), 445 12th Street, SW, Washington, DC. It may also be purchased 
from the Commission's copy contractor, International Transcription 
Services, Inc., (ITS, Inc.) 1231 20th Street, NW, Washington, DC 20035, 
(202) 857-3800. It is also available on the Commission's website at 
http://www.fcc.gov/wtb/auctions.

I. Upfront Payments and Initial Maximum Eligibility for Each Bidder

    1. The Wireless telecommunications Bureau (``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 following 
upfront payments are proposed for the 39 GHz Auction:

For licenses with populations of 1,000,000 or greater:
    License population * $0.04 (the result rounded to the nearest 
thousand).

For licenses with populations of less than 1,000,000:
    License population * $0.02 (the result rounded to the nearest 
hundred for levels below $10,000 and to the nearest thousand for levels 
above $10,000) with a minimum of no less than $2,500 per license. 
Comment is sought on this proposal. It is further proposed 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

[[Page 70709]]

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. 
Comment is sought on this proposal.

II. 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 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. More specifically, 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 Budget Act, 
the Bureau proposes to establish minimum opening bids for the 39 GHz 
Auction.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. 30, the Commission proposes the 
following license-by-license formulas for calculating minimum opening 
bids, based on the population (``pops'') of the EA:

For licenses with populations of 1,000,000 or greater:
    License population * $0.08 (the result rounded to the nearest 
thousand).

For licenses with populations of less than 1,000,000:
    License population * $0.04 (the result rounded to the nearest 
hundred for results less than $10,000 and to the nearest thousand for 
results greater than $10,000) with a minimum of no less than $2,500 per 
license.
    Comment is sought on this proposal. If commenters believe 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, comment is sought 
on 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 
have an impact on valuation of the 39 GHz band. Alternatively, comment 
is sought on whether, consistent with the Budget Act, the public 
interest would be served by having no minimum opening bid or reserve 
price.

III. Other Auction Procedural Issues

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

    6. The Bureau proposes that the auction be divided 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 approximately 
ten percent or below for three consecutive rounds of bidding in Stages 
One and Two. However, the Bureau further proposes that it 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. Comment is sought on these 
proposals.
    7. 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 must use an activity rule waiver (if 
any remain).
    8. For the 39 GHz Auction, we propose the following activity 
requirements:
    Stage One: In each round of the first stage of the auction, a 
bidder desiring to maintain its current eligibility is required to be 
active on licenses representing 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).
    Stage Two: In each round of the second stage, a bidder desiring to 
maintain its current eligibility is required to be active on 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).
    Stage Three: In each round of the third stage, 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-fortyninths (50/49). Comment is sought 
on these proposals.

b. Minimum Accepted Bids

    9. 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 39 GHz Auction, the Bureau proposes to 
use a smoothing methodology to calculate bid

[[Page 70710]]

increments, as we have done in several other auctions. The Bureau 
retains the discretion to change the minimum bid increment if it 
determines that circumstances so dictate. The Bureau will do so by 
announcement in the Automated Auction System. Comment is sought on 
these proposals.
    10. The exponential smoothing formula calculates the bid increment 
for each license based on a weighted average of the activity received 
on each license in all previous rounds. This methodology will tailor 
the bid increment for each license based on activity, rather than 
setting a global increment for all licenses. For every license that 
receives a bid, the bid increment for the next round for that license 
will be established using the exponential smoothing formula.
    11. The calculation of the percentage bid increment for each 
license in a given round is made at the end of the previous round. The 
computation is based on an activity index, which is calculated as the 
weighted average of the activity in that round and the activity index 
from the prior round. The activity index at the start of the auction 
(round 0) will be set at 0. The current activity index is equal to a 
weighting factor times the number of new bids received 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, and the maximum percentage increment at 0.2.
Equations
Ai = (C * Bi) + ((1-C) * Ai-1)
Ii+1 = smaller of ((1 + Ai) * N) and M
where,
Ai = activity index for the current round (round i)
C = activity weight factor
Bi = number of bids in the current round (round i)
Ai-1 = activity index from previous round (round i-1), A0 is 
0
Ii+1 = percentage bid increment for the next round (round i+1)
N = minimum percentage increment or bid increment floor
M = maximum percentage increment or bid increment ceiling
    Under the exponential smoothing methodology, once a bid has been 
received on a license, the minimum acceptable bid for that license in 
the following round will be the new high bid plus the dollar amount 
associated with the percentage increment (variable Ii+1 from 
above times the high bid). This result will be rounded to the nearest 
thousand if it is over ten thousand or to the nearest hundred if it is 
under ten thousand.
Examples
License 1
C=0.5, N = 0.1, M = 0.2
Round 1 (2 new bids, high bid = $1,000,000)
a. Calculation of percentage increment for round 2 using exponential 
smoothing:
    A1 = (0.5 * 2) + (0.5 * 0) = 1
    The smaller of I2 = (1 + 1) * 0.1 = 0.2 or 0.2 (the 
maximum percentage increment)
b. Minimum bid increment for round 2 using the percentage increment 
(I2 from above)
    0.2 * $1,000,000 = $200,000
c. Minimum acceptable bid for round 2 = 1,200,000
Round 2 (3 new bids, high bid = 2,000,000)
a. Calculation of percentage increment for round 3 using exponential 
smoothing:
    A2 = (0.5 * 3) + (0.5 * 1) = 2
    The smaller of I3 = (1 + 2) * 0.1 = 0.3 or 0.2 (the 
maximum percentage increment)
b. Minimum bid increment for round 3 using the percentage increment 
(I3 from above)
    0.2 * $2,000,000 = $400,000
c. Minimum acceptable bid for round 3 = 2,400,000
Round 3 (1 new bid, high bid = 2,400,000)
a. Calculation of percentage increment for round 4 using exponential 
smoothing:
    A3 = (0.5 * 1) + (0.5 * 2) = 1.5
    The smaller of I4 = (1 + 1.5) * 0.1 = 0.25 or 0.2 (the 
maximum percentage increment)
b. Minimum bid increment for round 4 using the percentage increment 
(I4 from above)
    0.2 * $2,400,000 = $480,000
c. Minimum acceptable bid for round 4 = 2,880,000

c. Activity Rule Waivers and Reducing Eligibility

    12. 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.
    13. The 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.
    14. 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.
    15. A bidder may proactively apply 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. Note: an automatic waiver invoked in a round in 
which there are no new valid bids will not keep the auction open.
    The Bureau proposes that each bidder in the 39 GHz Auction be 
provided with five activity rule waivers that may be used in up to five 
separate rounds at the bidder's discretion during the course of the 
auction as set forth above. Comment is sought on this proposal.

d. Information Regarding Bid Withdrawal and Bid Removal

    16. For the 39 GHz 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, but will affect a bidder's activity for the round in which it 
is removed.
    17. 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.

[[Page 70711]]

A high bidder that withdraws its standing high bid from a previous 
round is subject to the bid withdrawal payment provisions. Comment is 
sought on these bid removal and bid withdrawal procedures.
    18. In the Part 1 Third Report and Order, 63 FR 2315 (January 15, 
1998), the Commission 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. 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.
    19. Applying this reasoning, the Bureau proposes to limit each 
bidder in the 39 GHz 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 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. Comment is sought on 
this proposal.

e. Stopping Rule

    20. For the 39 GHz Auction, the Bureau proposes to employ a 
simultaneous stopping rule 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.
    21. 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.
    22. The Bureau proposes that it 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.
    23. Finally, the Bureau proposes that it 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. Comment is sought on these proposals.

f. Information Relating to Auction Delay, Suspension or Cancellation

    24. For the 39 GHz Auction, the Bureau 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, administra- tive 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 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. Comment 
is sought on this proposal.

Federal Communications Commission.
Louis Sigalos,
Deputy Chief, Auctions & Industry Analysis Division.
[FR Doc. 99-32826 Filed 12-16-99; 8:45 am]
BILLING CODE 6712-01-U