[Federal Register Volume 65, Number 135 (Thursday, July 13, 2000)]
[Notices]
[Pages 43361-43372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17673]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-00-31-H (Auction No. 31); DA 00-1486]


Auction of Licenses in the 747-762 AND 777-792 MHz Bands 
Scheduled for September 6, 2000; Procedures Implementing Package 
Bidding for Auction No. 31

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces revised procedures to allow for 
package bidding for the upcoming auction of licenses for services in 
the 747-762 and 777-792 MHz bands (``Auction No. 31''). These 
procedures are designed to be efficient, and to avoid both the risk of 
bidders winning licenses they do not desire (exposure problems) and the 
difficulty that multiple bidders desiring the single licenses (or 
smaller packages) that constitute a larger package may have in 
outbidding a single bidder bidding for the larger package (threshold 
problems). The procedures are also designed to allow the auction to 
proceed at an appropriate pace; to encourage straightforward bidding 
and deter gaming; and to be simple for straightforward bidders, while 
permitting bidders to employ flexible backup strategies.

DATES: Auction No. 31 is scheduled for September 6, 2000.

FOR FURTHER INFORMATION CONTACT: Howard Davenport, Attorney, Auctions 
Legal Branch; Joel Rabinovitz, Attorney, Auctions Legal Branch, or 
Craig Bomberger, Analyst, Auctions Operations Branch, at (202) 418-
0660. Media Contact: Meribeth McCarrick at (202) 418-0654.

SUPPLEMENTARY INFORMATION: This is a summary of a public notice 
released July 3, 2000 (``Auction No. 31 Public Notice''). The complete 
text of the Auction No. 31 Public Notice, including all attachments, 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 20036, (202) 857-3800. It is also 
available on the Commission's website at http://www.fcc.gov/wtb/auctions.
    List of Attachments available at the FCC:

Appendix A--List of Commenters
Attachment A--Licenses to be Auctioned
Attachment B--FCC Auction Seminar Registration Form
Attachment C--Electronic Filing and Review of the FCC Form 175
Attachment D--Guideline for Completion of FCC Form 175 and Exhibits
Attachment E--Accessing the FCC Network to Submit FCC Form 175 
Applications

I. Introduction and General Information

A. Introduction

    1. The public notice announces revised procedures to allow for 
package bidding for the upcoming auction of licenses for services in 
the 747-762 and 777-792 MHz bands (``Auction No. 31''). See Service 
Rules for the 746-764 and 776-794 MHz Bands, and Revisions to Part 27 
of the Commission's Rules, First Report and Order, 65 FR 3139 (January 
20, 2000). On February 18, 2000, the Wireless Telecommunications Bureau 
(``Bureau'') announced the procedures and minimum opening bids for 
Auction No. 31. See Auction of Licenses in the 747-762 and 777-792

[[Page 43362]]

MHz Bands, Auction No. 31 Procedures Public Notice, 65 FR 12251 (March 
8, 2000) and Postponement PN, 65 FR 30598 (May 12, 2000). On May 18, 
2000, the Bureau released a public notice seeking comment on modifying 
those procedures to allow combinatorial (or ``package'') bidding for 
Auction No. 31. See Auction of Licenses in the 747-762 and 777-792 MHz 
Bands Scheduled for September 6, 2000; Comment Sought on Modifying the 
Simultaneous Multiple Round Auction Design to Allow Combinatorial 
(Package) Bidding, Auction No. 31 Package Bidding Comment Public 
Notice, 65 FR 35636 (June 5, 2000). On June 22, 2000, the Commission 
adopted the 700 MHz Memorandum Opinion and Order and Further Notice of 
Proposed Rulemaking in which it stated that the Bureau may implement a 
combinatorial auction design for Auction No. 31 pursuant to its 
existing delegated authority if, after review of the comments, the 
Bureau finds combinatorial bidding to be appropriate and feasible.
    2. In general, package bidding should be an improvement over our 
usual auction design when (a) there are strong complementarities among 
licenses for some bidders, and (b) the pattern of those 
complementarities varies for different bidders. Under these 
circumstances, package bidding should yield the more efficient outcome, 
with licenses being sold to those bidders who value them the most. The 
comments we previously received in this docket have suggested these 
conditions are true for Auction No. 31. For example, some potential 
bidders have expressed the importance of acquiring a nationwide 
footprint, and others the importance of acquiring all 30 MHz in a 
region. The comments we received in response to the Auction No. 31 
Package Bidding Comment Public Notice largely concur that package 
bidding is appropriate for the types of licenses being sold in Auction 
No. 31.
    3. Under the procedures we establish here, bidders may place bids 
on individual licenses, as under our usual auction procedures, and may 
also place all-or-nothing bids on up to twelve packages of licenses of 
their own design at any point during the auction. This approach allows 
bidders to better express the value of any synergies (benefits from 
combining complementary items) that may exist among licenses. The 
winning bids are the set of ``consistent'' bids on individual licenses 
and packages that maximize total revenue when the auction closes. 
Consistent bids are bids that (i) do not overlap and (ii) are made or 
renewed by an individual bidder in the same round (bids made by an 
individual bidder in different rounds are treated as mutually exclusive 
under the procedures we are establishing for this auction).
    4. The specific procedures we establish are designed to meet a 
number of objectives. They are designed to be efficient, and to avoid 
both exposure problems--the risk of bidders winning licenses they do 
not desire--and threshold problems--the difficulty that multiple 
bidders desiring the single licenses (or smaller packages) that 
constitute a larger package may have in outbidding a single bidder 
bidding for the larger package. The procedures are also designed to 
allow the auction to proceed at an appropriate pace; to encourage 
straightforward bidding and deter gaming; and to be simple for 
straightforward bidders while permitting bidders to employ flexible 
backup strategies.
    5. As a general matter, bidders in our simultaneous multiple round 
auction that wish to acquire a certain combination of licenses, and 
only that combination, may face an exposure problem. Although they 
desire either all of the licenses or none, by bidding on the licenses 
individually they risk winning only some of the licenses. They 
therefore risk either acquiring licenses they do not desire or paying 
more for each license than they would have paid if they knew that the 
license was not going to be part of the combination they desired. With 
the package bidding procedures we establish today, however, this risk 
can be avoided. For example, a bidder desiring an aggregation of all 
six 20 MHz licenses in order to implement a nationwide service could 
bid on the six licenses as a package and thereby avoid the risk of 
winning only some of the desired licenses or of paying more for those 
licenses than it wishes.
    6. Allowing package bidding, however, introduces a threshold 
problem--the difficulty that multiple bidders for the single licenses 
(or smaller packages) that constitute a larger package may have in 
outbidding a single bidder on the larger package, even though the 
multiple bidders may value the sum of the parts more than the single 
bidder values the whole. This may occur because bidders for parts of a 
larger package each have an incentive to hold back in the hope that a 
bidder for another part will increase its bid sufficiently for the bids 
on the pieces collectively to beat the bid on the larger package. The 
package bidding procedures that we establish are designed to facilitate 
the emergence of bids that will overcome this problem.
    7. The changes we adopt from our initial package bidding proposal 
respond to three design weaknesses that were identified by commenters. 
First, the proposal to allow only nine specific packages was too 
restrictive. Second, in some circumstances the rules could have 
resulted in bidders being caught with retained but non-winning bids 
that they no longer wished to hold. This possibility could have chilled 
bidding and made bidders unable to switch to backup strategies. Third, 
the pace of the auction could be too slow because there were inadequate 
incentives for bidders to make bids that would be or could become 
provisional winning bids, as opposed to bids that merely preserved 
bidders' eligibility but were unlikely to become winning. In addition, 
implementation of package bidding procedures for Auction No. 31 makes 
unnecessary the nationwide bid withdrawal procedure we established in 
the Auction No. 31 Procedures Public Notice.

B. Auction Specifics

i. Auction Procedures and New Dates and Deadlines
    8. The auction procedures announced in the February 18, 2000, 
Auction No. 31 Procedures Public Notice remain in effect except as 
modified by (a) the dates announced in the May 2, 2000, Postponement 
Public Notice, and (b) the package bidding and other auction procedures 
established here. The new schedule is as follows:

Filing Window Opens for FCC Form 175--July 17, 2000
Bidder Seminar--July 24, 2000
Filing Deadline for FCC Form 175--August 1, 2000, 6:00 p.m. EDT
Upfront Payment Deadline--August 18, 2000, 6:00 p.m. EDT
Mock Auction--August 31, 2000
Auction Start Date--September 6, 2000
ii. Licenses and Packages To Be Auctioned
    9. The licenses available in this auction consist of one 20 
megahertz license (consisting of paired 10 megahertz blocks) and one 10 
megahertz license (consisting of paired 5 megahertz blocks) in each of 
six regions to be known as the 700 MHz Band Economic Area Groupings 
(``700 MHz Band EAGs''). These licenses are listed in this public 
notice in Attachment A and are shown in the following table.

[[Page 43363]]



                                                                    700 MHz Band EAGs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Northeast         Mid-Atlantic          Southeast          Great Lakes      Central/Mountain         Pacific
--------------------------------------------------------------------------------------------------------------------------------------------------------
10 MHz..........................  WXEAG701-C........  WXEAG702-C........  WXEAG703-C........  WXEAG704-C........  WXEAG705-C........  WXEAG706-C.
20 MHz..........................  WXEAG701-D........  WXEAG702-D........  WXEAG703-D........  WXEAG704-D........  WXEAG705-D........  WXEAG706-D
--------------------------------------------------------------------------------------------------------------------------------------------------------

    10. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed to permit bidders to submit all-or-nothing bids on nine 
packages of licenses: A global package of all of the licenses; a 
nationwide package of either 10 MHz or 20 MHz consisting of the six 10 
MHz or the six 20 MHz licenses, respectively; or six regional 30 MHz 
packages consisting of the 10 MHz license and the 20 MHz license for a 
particular 700 MHz Band EAG. We also sought comment on whether the 
Commission should allow all possible packages composed of the twelve 
individual licenses, or only certain additional packages.
    11. We agree with some of the commenters that limiting packages to 
those identified by the Commission is overly restrictive and may lead 
to inefficient results. On the other hand, we are also concerned that 
allowing an unlimited number of packages would be needlessly complex 
and could facilitate strategic bidding. It is highly unlikely that any 
serious bidder actually needs to bid on all 4,095 combinations of 
licenses that are possible in this auction. Moreover, allowing bidders 
to bid upon an unlimited number of packages would introduce the risk of 
bidders ``parking'' bids, which could lead to an unacceptable pace for 
the auction. ``Parking'' is the placing of a bid that a bidder does not 
expect to become a winning bid for the purpose of maintaining 
eligibility and/or keeping the auction open. Finally, from a purely 
practical view, allowing 4,095 possible packages may lead to 
computational difficulties.
    12. Bidders will be permitted to create and bid on up to twelve 
different packages of their own choosing during the course of the 
auction. Each variation of a package is considered a separate package. 
This is a somewhat larger number than the nine packages originally 
proposed, and does not wed bidders to the Commission's choice of 
packages (although bidders may very well choose to bid on some of the 
packages already identified.) We believe that this provides bidders 
with sufficient flexibility to achieve any reasonable business plan, 
while maintaining simplicity for bidders and the Commission, as well as 
limiting the opportunity for ``parking'' on an unlimited number of 
packages. Bidders will not be required to identify or create their 
packages before start of the auction, but may create their packages as 
the auction progresses. Bidders may modify or delete a package after 
they create the package but before they bid on it. Once a bidder bids 
on a package, however, the package may not be modified or deleted and 
counts as one of the bidder's twelve allowable packages. Bidders are 
limited to bidding on, and hence creating packages from, those licenses 
which they selected on their FCC Form 175 and for which they have 
eligibility. Bidders may therefore wish to save one or more of their 
opportunities to create packages for use near the end of the auction.
iii. Bidding Methodology
    13. The bidding methodology for Auction No. 31 will be simultaneous 
multiple round combinatorial (package) bidding. Bidding will be 
permitted only from remote locations, either electronically (by 
computer) or telephonically.
iv. Requirements for Participation
    14. Those wishing to participate in the auction must:
     Submit a short form application (FCC Form 175) 
electronically by 6:00 p.m. EDT, August 1, 2000.
     Submit a sufficient upfront payment and a FCC Remittance 
Advice Form (FCC Form 159) by 6:00 p.m. EDT, August 18, 2000.
     Comply with all provisions outlined in this public notice 
and the February 18, 2000, Auction No. 31 Procedures Public Notice.
     Comply with all rules set forth in the Commission's orders 
in WT Docket No. 99-168, Service Rules for the 746-764 and 776-794 MHz 
Bands, and Revisions to Part 27 of the Commission's Rules.
v. Auction Registration and Remote Electronic Bidding Software
    15. Procedures for replacement of lost security identification and 
access to remote electronic bidding software will be announced in a 
future Public Notice.

II. Auction Event

    16. The first round of bidding for Auction No. 31 will begin on 
September 6, 2000. The initial bidding schedule will be announced in 
the public notice listing the qualified bidders, which is released 
approximately 10 days before the start of the auction.

A. Auction Structure

i. Simultaneous Multiple Round With Package Bidding
    17. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed to award 12 licenses in the 700 MHz bands in a single, 
simultaneous multiple round auction with package bidding. When we refer 
to ``simultaneous multiple round'' we mean without package bidding; 
when we refer to ``package bidding'' we mean simultaneous multiple 
round with package bidding. We conclude that it is appropriate and 
operationally feasible to implement the package bidding design 
described for Auction No. 31. We believe that package bidding provides 
many advantages over our current simultaneous multiple round auction 
design. For the reasons we stated in the introduction, we believe that 
package bidding will allow bidders in this auction to take advantage of 
any synergies that exist among licenses and will lead to the most 
efficient outcome consistent with our objectives under section 309(j) 
of the Communications Act of 1934.
    18. While commenters stated that we (and they) have not had 
sufficient time to consider package bidding and that more study is 
needed, in fact the Commission has been considering the possibility of 
implementing combinatorial bidding since 1994. Congress has also 
instructed us to experiment with this form of bidding. In 1997, the 
Commission awarded research and development contracts to consultants to 
provide and test combinatorial bidding approaches. Experiments and 
tests were completed this spring demonstrating that combinatorial 
bidding is feasible and generally leads to more efficient auction 
results. The material presented at the Combinatorial Bidding Conference 
that occurred this spring also supported the view that it was feasible 
to implement combinatorial bidding for this auction. We have made these 
studies and papers presented at the Conference available on the 
Commission's web site. In addition, the delay of the auction date 
provided more time to implement this auction

[[Page 43364]]

design. We conclude that there has been sufficient time to implement a 
proper package bidding auction design for this auction. We also have 
carefully considered the comments submitted in response to the Auction 
No. 31 Package Bidding Comment Public Notice which were very helpful in 
our process of determining the procedures for implementing package 
bidding. We are confident that the procedures we establish today 
adequately address the concerns raised in the comments.
    19. Finally, we note that the auction will not occur for another 
two months. We believe that this time is sufficient for bidders to 
understand the package bidding procedures and to develop appropriate 
auction strategies. Moreover, we have endeavored, to the extent 
possible, to make the package bidding procedures similar to the 
simultaneous multiple round auction procedures with which bidders are 
familiar. We therefore believe that bidders will be able to grasp the 
new procedures quickly. We also plan on extensive bidder education 
efforts and will be available both before and during the auction to 
answer any questions bidders might have.
ii. Maximum Eligibility
    20. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed no change in upfront payments established for individual 
licenses. We proposed to calculate bidding units and associated upfront 
payment for a package by adding together the bidding units and 
associated upfront payments of the individual licenses that make up the 
package. We conclude that the bidding units for a package will be 
calculated by adding together the bidding units of the individual 
licenses that make up the package.
    21. We also proposed no change in our procedure for determining 
initial maximum eligibility, which calculates initial maximum 
eligibility based on the bidding units represented by a bidder's 
upfront payment. We noted, however, that, under some circumstances, 
bidders might wish to purchase more eligibility than the total bidding 
units associated with all licenses. We conclude that we will not change 
our procedure for determining initial maximum eligibility.
iii. Activity Rules
    22. In order to ensure that the auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively 
throughout the auction, rather than wait until the end before 
participating. Bidders are required to be active on a specific 
percentage of their maximum eligibility during each round of the 
auction if they wish to maintain their current eligibility.
    23. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed that in each round of the auction a bidder desiring to 
maintain its current eligibility would be required to be active on 
licenses encompassing at least 50 percent of its current eligibility. 
For a bidder that failed to meet the activity requirement in a given 
round, we would reduce the bidder's eligibility for the next round to 
two times its activity in the current round. Thus, a bidder's 
eligibility in the current round would be the lesser of: (i) Its 
eligibility in the previous round, or (ii) twice its activity in the 
previous round.
    24. We adopt the 50 percent activity requirement. We reserve the 
right, however, to increase to two-thirds the proportion of bidding 
units on which bidders must be active to retain their current 
eligibility. The two-thirds limit will ensure that bidders retain the 
flexibility to switch from bidding on a 20 MHz package to a 30 MHz 
package with the equivalent population. Any such change will be 
announced to bidders prior to the beginning of the round in which the 
change takes effect.
    25. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed that a bid would be considered ``active'' if it was either a 
``retained'' bid from the previous round or an accepted bid in the 
current round. A ``retained'' bid was defined as a provisionally 
winning bid or a bid that has the potential to become a provisionally 
winning bid because of changes in other bids in subsequent rounds. The 
bidding units associated with licenses on which a bidder was active, 
including retained bids, would count towards the bidder's activity. To 
account for the possibility of overlapping bids, which by definition 
can not simultaneously be part of the winning set, we proposed to 
measure a bidder's activity in a round as the maximum number of bidding 
units associated with the bidder's active bids that could 
simultaneously be in a provisional winning set.
    26. Several of the commenters criticize the proposal to use 
retained bids. Also, under the procedures we establish today, we have 
not implemented the concept of ``retained'' bids as the term was used 
in the Auction No. 31 Package Bidding Comment Public Notice. We 
therefore cannot establish the activity rule originally proposed in the 
Auction No. 31 Package Bidding Comment Public Notice.
    27. To determine activity in the current round, we will count 
accepted new bids made in the current round and provisionally winning 
bids that are ``renewed'' in the current round. Bids placed in a prior 
round no longer count towards a bidder's activity, except for bids that 
are provisionally winning bids at the end of the previous round. 
Therefore, a bidder is active on a license or package in the current 
round if (i) it has a bid on the license or package that is part of the 
provisionally winning set at the end of the previous round, or (ii) it 
submits a new accepted bid or renews a provisionally winning bid for 
the license or package in the current round.
    28. A bidder's activity level in a round is the maximum number of 
bidding units that the bidder can win considering only the licenses and 
packages on which the bidder is active--i.e., counting the set of bids 
with the most bidding units in the case of mutually exclusive bids. For 
example, suppose license A has 10 bidding units associated with it; 
license B, 20; and license C, 20. If the only bids made by a bidder 
were on packages AB and BC its activity would be 40 since AB and BC are 
mutually exclusive (i.e., license B is included in both packages, but 
can only be awarded as part of one package) and the package BC has more 
bidding units. Counting activity as the maximum number of bidding units 
a bidder could win makes activity a measure of (i) a bidder's potential 
contribution to moving the auction along and (ii) the maximum amount of 
bidding units associated with active licenses for which the bidder 
could be financially responsible and for which it therefore must have 
eligibility (as determined by the bidder's upfront payment).
iv. Activity Rule Waivers and Reducing Eligibility
    29. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed that each bidder in the auction would be provided five 
activity rule waivers that may be used in any round during the course 
of the auction. 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.
    30. Based upon our experience in previous auctions, we adopt our 
proposal that each bidder be provided five activity rule waivers that 
may be used in any round during the course of the auction. We are 
satisfied that our practice of providing five waivers over the course 
of the auction provides a sufficient number of waivers and

[[Page 43365]]

maximum flexibility to the bidders, while safeguarding the integrity of 
the auction.
    31. We also proposed that bidders would not have the ability to 
apply waivers proactively, as they can under our current simultaneous 
multiple round auction format. We received no comment on this issue. We 
adopt our proposal.
    32. We proposed, with the exception of the proactive waiver rule 
described, no other changes to activity rule waivers and reducing 
eligibility. Thus, automatic waivers and reducing eligibility will 
continue to function as described.
    33. The FCC automated 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 at the end of any round where a 
bidder's activity level is below the minimum required unless: (i) There 
are no activity rule waivers available; or (ii) the bidder overrides 
the automatic application of a waiver by reducing eligibility, thereby 
meeting the minimum requirements.
    34. 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 round 
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 in the previous 
section. Once eligibility has been reduced, a bidder will not be 
permitted to regain its lost bidding eligibility.
v. Auction Stages and Stage Transitions
    35. As stated in section II.B.iii. Activity Rules, in the Auction 
No. 31 Package Bidding Comment Public Notice, we proposed that in each 
round of the auction a bidder desiring to maintain its current 
eligibility would be required to be active on licenses encompassing at 
least 50 percent of its current eligibility. We sought comment on 
whether we should instead adopt multiple stages with increasing 
activity requirements.
    36. We adopt our proposal for a 50 percent activity requirement, 
but we retain the discretion during the auction to increase to two-
thirds the proportion of bidding units on which bidders must be active 
to retain their current eligibility. The two-thirds limit will ensure 
that bidders retain the flexibility to switch from bidding on a 20 MHz 
package to a 30 MHz package with the equivalent population. Any such 
change will be announced to bidders prior to the beginning of the round 
in which the change takes effect.
vi. Auction Stopping Rules
    37. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed to employ a two-round simultaneous stopping rule approach. A 
two-round simultaneous stopping rule means that all licenses remain 
open until two consecutive rounds have occurred in which no new bids 
are accepted. After the second consecutive 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.
    38. The Bureau also sought comment on a modified version of the 
two-round simultaneous stopping rule that would close the auction for 
all licenses after the second consecutive round in which no bidder 
submits a new accepted bid on any license on which it is not the 
provisional winning bidder. Thus, absent any other bidding activity, a 
bidder placing a new bid on a license for which it is the provisional 
winning bidder would not keep the auction open under this modified 
rule.
    39. Based on our experience in past auctions with a simultaneous 
stopping rule that closed the auction after one round of no new bids 
(or withdrawals or proactive waivers), we believe that the two-round 
stopping rule we proposed allows adequate time for bidders. We 
therefore adopt the two-round simultaneous stopping rule we proposed, 
with one clarification. Renewed bids are not considered new bids for 
purposes of the stopping rule; in other words, a round in which the 
only bids that are placed are renewed bids is considered a round with 
no new bids for purposes of the stopping rule.
    40. As in previous auctions, the Bureau proposed to retain the 
discretion to keep an auction open even if no new accepted bids are 
submitted. The activity rule would apply as usual, and a bidder with 
insufficient activity will either lose bidding eligibility or use a 
remaining activity rule waiver. We also proposed that the Bureau 
reserve the right to declare that the auction will end after a 
specified number of additional rounds (``special stopping rule''). The 
Bureau would 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, for example, by increasing the number of bidding rounds 
per day, and/or by increasing the amount of the minimum bid increments 
for the limited number of licenses where there is still a high level of 
bidding activity. We received no comments on these proposals, and we 
retain the discretion to keep an auction open or to implement a 
``special stopping rule.'' Any such change will be announced to bidders 
before it takes effect.
vii. Auction Delay, Suspension, or Cancellation
    41. We proposed no change to the procedures regarding auction 
delay, suspension, or cancellation. 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. We 
emphasize 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

B. Bidding Procedures

i. Round Structure
    42. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed no changes in the round structure from those we have already 
adopted for Auction No. 31. We, adopt our proposal to use the round 
structure previously announced. Thus, the Commission will use an 
automated auction system to conduct the package bidding auction format. 
The initial bidding schedule will be announced in a public notice to be 
released at least one week before the start of the auction, and will be 
included in the registration mailings. The package bidding format will 
consist of sequential bidding rounds, each followed by the release of 
round results. Multiple bidding rounds may be conducted in a single 
day. Details regarding the location and format of round results will be 
included in the same public notice.

[[Page 43366]]

    43. The Bureau has discretion to change the bidding schedule in 
order to foster an auction pace that reasonably balances speed with the 
bidders' need to study round results and adjust their bidding 
strategies. The Bureau may increase or decrease the amount of time for 
the bidding rounds and review periods, or the number of rounds per day, 
depending upon the bidding activity level and other factors. Any 
changes will be announced to bidders before they take effect.
ii. Reserve Price or Minimum Opening Bid
    44. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed no change in the minimum opening bids from those we previously 
adopted for the individual licenses. For a package, we proposed to 
calculate the minimum, opening bid by adding together the minimum 
opening bids of the individual licenses that make up the package. We 
adopt our proposal for the minimum opening bids for individual 
licenses. For a package, we adopt our proposal that the minimum opening 
bid is the sum of the minimum opening bids of the individual licenses 
that make up the package. We retain the discretion to lower the minimum 
opening bids during the auction.
iii. Minimum Accepted Bids and Bid Increments
    45. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed that for a bid to be accepted in any round it must be x% 
greater than the minimum amount to have become a retained bid in the 
previous round, where the Bureau will specify the value of x. This was 
analogous to the minimum accepted bid rule in a simultaneous multiple 
round auction. We also sought comment on other methods for calculating 
the minimum accepted bid. We noted that one possibility was to 
determine the bid increment as the maximum of (i) the increment as 
calculated and (ii) an increment based on the total revenue (the 
provisionally winning bids) in the previous round. Another possibility 
was to determine the minimum accepted bid by allocating the total 
amount needed to beat the provisional winners (``the shortfall 
approach''). We also proposed to set the minimum increment for a 
license or package initially at five percent and retain the discretion 
to vary the minimum bid increments in each round of the auction by 
announcement prior to each round.
    46. We conclude that our original proposal for basing minimum 
accepted bids on retained bids did not comport well with other elements 
of our proposed package bidding procedures (e.g., the use of contingent 
``or'' bids or allowing cancellation of retained but non-provisionally 
winning bids) nor with other elements of the package bidding procedures 
we establish today (e.g., allowing bidders to place mutually exclusive 
bids across rounds). With any of those procedures, the determination of 
retained bids as potentially winning bids is complicated. Accordingly, 
it is necessary to modify our proposal.
    47. The major purpose of a minimum accepted bid rule is to ensure 
the proper pacing for the auction even if bidders act strategically. In 
the case of package bidding, a properly designed minimum accepted bid 
rule also can facilitate bids that overcome the threshold problem (the 
potential difficulty of combining small packages to beat larger ones). 
We believe that simplicity, while obviously desirable, ranks as a 
lesser factor. In this regard we note that bidders will not be required 
to calculate minimum accepted bids themselves, but will have the 
minimum accepted bids provided to them by the bidding software.
    48. We adopt a variation of our first proposed alternative method 
for calculating minimum accepted bids. The minimum accepted bid for any 
license or package will be the greater of: (i) the minimum opening bid; 
(ii) the bidder's own previous high bid on that package plus x%, where 
the Bureau will specify the value of x in each round; and (iii) the 
number of bidding units for the license or package multiplied by the 
lowest $/bidding unit on any provisionally winning package in the last 
5 rounds. We retain the discretion to change the minimum accepted bid, 
and to do so on a license-by-license and package-by-package basis, if 
circumstances so dictate. We will notify bidders of any such change 
before it takes effect.\1\
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    \1\ As described further in section II.B.iv, Last and Best Bids, 
and section II.B.v, Renewed Bids, there are two exceptions to the 
minimum accepted bid requirement. First, bidders who choose to place 
no further bids in the auction may place one last set of bids at any 
amount between their previous high bid and the minimum accepted bid. 
Second, at any time bidders may ``renew'' their highest previous bid 
on a license or package without increasing the bid; however, a 
bidder is not conferred activity credit for renewing a non-
provisionally winning bid. Because bids in each round are considered 
mutually exclusive, renewing a provsionally winning bid does not 
double count that bid towards a bidder's total activity credit.
---------------------------------------------------------------------------

    49. Part (i) of the formula simply ensures consistency with the 
minimum opening bids we have adopted. With regard to part (ii) of the 
formula, by using a bidder's own prior bid as a base we ensure that the 
price each bidder faces is rising, generally in small steps above the 
amount it has indicated it is willing to pay. Moreover, we find that 
when we allow for mutually exclusive bids across rounds \2\ and package 
bidding, there are disadvantages to requiring a bidder to beat a high 
bid on a package or license. One effect of allowing mutually exclusive 
bids is that a bid does not necessarily have to be the highest bid on a 
particular package or license in order for it to be a provisional 
winner. An example will illustrate this point.

    \2\ As discussed in more detail in section II.B.vi.b, Winning 
and Provisionally Winning Bids, bids that are made by the same 
bidder in different rounds are treated as being mutually exclusive, 
or as contingent ``or'' ``bids''. The bidder may win with the bids 
in one round, or the other, but not both.

    Bidder 1 places a bid of 50 on Package A, and Bidder 2 places a 
bid of 50 on Package B. In the next round, Bidder 1 places a bid of 
100 on Package B, which is mutually exclusive with its bid of 50 on 
Package A from the previous round. If Bidder 3 is allowed to bid 40 
on Package A, even though it is not higher than Bidder 1's bid of 
50, Bidder 3 will become a provisional winner (assuming that these 
are the only bids). Bidder 3's bid of 40 on Package A plus Bidder 
1's bid of 100 on Package B totals 140, and this total is higher 
than Bidder 1's bid of 50 on Package A plus Bidder 2's bid of 50 on 
Package B which totals only 100. We wish to encourage such bids. 
Moreover, Bidder 3 may not have bid if it were required to beat 
Bidder 1's bid of 50 on Package A, which is not the efficient 
---------------------------------------------------------------------------
outcome.

    Under part (iii) of the formula, we calculate the least expensive 
provisionally winning ``unit price'' (the provisionally winning bid for 
a license or package divided by the number of bidding units associated 
with the bid) for the five prior rounds. To perform this calculation, 
we examine all of the provisionally winning bids for the five prior 
rounds. We then divide each of those provisionally winning bids by the 
number of bidding units associated with it, to yield a ``unit price'' 
for each provisionally winning bid. Finally, we determine the lowest 
unit price of all of the provisionally winning bids (in other words, 
the lowest unit price that any bidder has bid for any provisionally 
license or package in the prior five rounds). To apply part (iii) of 
the formula to a new bid, we multiply that lowest unit price by the 
bidding units associated with the license or package for which the 
bidder is bidding. It is possible, and indeed likely, that the lowest 
unit rate will come from a different license or package than the one on 
which the bidder is bidding.
    50. Part (iii) of the formula essentially requires that bids on any 
license or package be not too far from the provisionally winning bids; 
unless we

[[Page 43367]]

include such a provision, bids might not become competitive without 
many rounds of bidding. Part (iii) thereby facilitates bids that will 
overcome the threshold problem. By using the least expensive 
provisionally winning rate for any license or package over the previous 
five rounds, we believe that we have ensured that minimum accepted bids 
will not be too high. Although we recognize that part (iii) may not 
meet some commenters' concerns about simplicity, omitting part (iii) 
would adversely and unacceptably affect the pace of the auction. We 
also believe that the rule as a whole will discourage ``parking'' 
because any minimum accepted bid has a reasonable chance of becoming a 
provisional winner. ``Parking'' is the placing of a bid that a bidder 
does not expect to become a winning bid for the purpose of maintaining 
eligibility and/or keeping the auction open.
    51. We retain the discretion to limit minimum accepted bids when 
circumstances warrant, and to do so on a round-by-round, package-by-
package and license-by-license basis. We believe that this discretion, 
along with our discretion to increase the time for the bidding rounds 
and review periods and the number of rounds per day, which we will 
exercise with sensitivity to the needs of bidders to study round 
results and adjust their bidding strategies, is sufficient to meet 
commenters' concerns of having adequate time in which to make decisions 
involving potentially hundreds of millions of dollars.
    52. We note that part (ii) of the minimum accepted bid rule is 
specific to each bidder. It may therefore be the case that different 
bidders will have different minimum accepted bids on the same license 
or package. We do not believe that this will yield an inefficient 
result because when part (ii) applies the bidder's new bid is based on 
an amount that it has already bid and therefore indicated it is willing 
to pay. Moreover, any inefficiency or inequity caused by part (ii) of 
this rule is mitigated by the ability of bidders to renew bids without 
increasing them and by the last and best bid procedure, described in 
the next section, which allows a bidder to make a final set of bids 
without regard to the minimum accepted bid rule.
    53. As has become standard in our auctions, we also proposed that 
we would use ``click box'' bidding. Specifically, we proposed to allow 
package bids to increase by one increment in each round, while bids on 
individual licenses could increase by one to nine increments.
    54. Under our previously adopted procedures, a bid increment was 
defined as x% of the standing high bid, where x was specified by the 
Bureau, and the minimum accepted bid was the standing high bid plus x%. 
Thus, if x was equal to 10, bidders were permitted to made bids of the 
standing high bid plus 10%, plus 20%, etc., with the maximum bid being 
equal to the standing high bid plus 90%. Under the procedures we 
establish today, however, there are no standing high bids and minimum 
accepted bids are not based on standing high bids. We believe, however, 
that the prior definition of a bid increment is one that is easy for 
bidders to understand. Accordingly, we believe our new definition of a 
bid increment should be analogous to the old definition. Accordingly, 
for this auction, we are defining a bid increment as x% of the minimum 
accepted bid, where the minimum accepted bid is determined as 
discussed. As under our previously established procedures, the Bureau 
will specify the value of x in each round. The Bureau also retains the 
discretion to change the bid increment, and to do so on a license-by-
license and package-by-package basis, if circumstances so dictate. Any 
such change will be announced to bidders prior to the beginning of the 
round in which the change takes effect.
    55. Several commenters disagreed with our proposal to restrict 
bidders from raising a bid on a package by more than one increment. 
Because we believe that the minimum bid rule we are adopting helps 
overcome the threshold problem, we no longer find it necessary to adopt 
that restriction. We note that we currently use click box bidding in 
our simultaneous multiple round auctions. Click box bidding eliminates 
the use of trailing digits for bid signaling. It also helps prevent 
bidders from making mistakes when placing their bids. The nine-
increment limit constrains jump bidding to some degree while generally 
not preventing a bidder from making up in a single bid the entire 
shortfall necessary to become a provisional winner. We therefore adopt 
our proposal to use click box bidding and to allow bids on either 
individual licenses or packages to increase by one to nine increments. 
We reserve the right to change the number of possible increments. Any 
such change will be announced to bidders prior to the beginning of the 
round in which the change takes effect.
iv. Last and Best Bids
    56. Bidders that wish to drop out of the auction or that believe 
they are about to lose their bidding eligibility will have the 
opportunity before they drop out to make a ``last and best'' bid on any 
packages for which they remain eligible. Such bids may be of any amount 
(in thousand dollar increments) between their previous high bid and the 
minimum accepted bid. This is a limited exception to the minimum 
accepted bid rule and to click box bidding. If a bidder chooses this 
option, it will not be permitted to make any further bids during the 
auction.
    57. We adopt this procedure primarily as a method of ensuring that 
there are no tie bids at the end of the auction. Several commenters had 
expressed their concern that, especially with click box bidding, 
bidders could submit tie bids. We believe that this procedure provides 
a fair and efficient way to break ties should they occur, although it 
is not limited to those situations where there is a tie. An example of 
how this procedure would break a tie is provided at the beginning of 
section II.B.vi, Winning and Provisionally Winning Bids. The procedure 
also allows bidders to bid the maximum amount they are willing to pay 
for a package regardless of how the Commission sets the minimum 
accepted bid, and thus mitigates the possible inefficiency that would 
result from setting minimum accepted bids too high.
v. Renewed Bids
    58. Without regard to the minimum accepted bid requirement, a 
bidder may ``renew'' in the current round the highest previous bid it 
made on any license or package; that is, it may resubmit the bid 
without increasing the amount bid. No activity credit will be conferred 
for renewing a non-provisionally winning bid (provisionally winning 
bids, however, receive activity credit whether or not they are 
renewed). Renewed bids will be treated as being made in the current 
round.
    59. Allowing bidders to renew bids provides several benefits. For 
example, because bids made in different rounds are treated as mutually 
exclusive, if a bidder wishes to win both a license for which it is the 
provisional winner and another license, it must bid on both licenses in 
a single round. Therefore, unless we provide bidders an opportunity to 
renew their provisionally winning bids without increasing them, 
provisionally winning bidders that desired additional licenses would be 
forced to raise their bids on the licenses for which they were already 
provisional winners. Allowing bidders to renew bids also mitigates the 
potential concern that we are not retaining all potentially winning 
bids and a bidder may not be able to submit a new bid on a license

[[Page 43368]]

or package on which it previously bid because the bid increment is too 
high.
vi. Winning and Provisionally Winning Bids
    60. The first part of this section describes how we will determine 
the winning and provisionally winning bids from among the bids we 
examine. The second part describes the universe of bids we will examine 
and includes a discussion of retained bids, contingent ``or'' bids, and 
bid cancellation.

Section A

    61. In the Auction No. 31 Package Bidding Comment Public Notice, we 
defined winning bids as the set of gross bids on individual licenses 
and packages that maximizes gross revenue when the auction closes, 
assigning each license to only one party (a bidder or, in the case of 
unsold licenses, the Commission).\3\ We defined provisionally winning 
bids as the set of bids that maximize revenue in a particular round 
(i.e., they would win if the auction were to close in that round), 
assigning each license to only one party (a bidder or the Commission).
---------------------------------------------------------------------------

    \3\ If the action closes with any license(s) unsold, those 
license(s) remain held by the FCC. As stated, in determining the set 
of bids that maximizes gross revenue, FCC held licenses will be 
treated as having a bid at the minimum opening bid.
---------------------------------------------------------------------------

    62. No commenter disagrees with how we proposed to determine the 
winning bids. Accordingly, we adopt our proposal with a clarification 
to take into account the fact that, we will treat the bids it makes in 
different rounds as mutually exclusive (as explained in section b). The 
winning bids are the set of ``consistent'' bids (bids that (i) do not 
overlap and (ii) are made or renewed by an individual bidder in the 
same round) that maximize total revenue when the auction closes. The 
provisionally winning bids are the consistent bids that maximize total 
revenue in a particular round. The Bureau is developing computer 
software to perform these tasks.\4\
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    \4\ For example, we are using the ILOG CPLEX, version 6.5 
software for our solving algorithm. Prior to the auction date, the 
Bureau will release further information describing the computer 
software in detail. Further, we will make available a bidder aid for 
bidders to be able to determine for themselves what bid amount would 
have been necessary to beat the other bids and become a provisional 
winner in the prior round.
---------------------------------------------------------------------------

    63. We note that, in the case of a tie among bids, the algorithm we 
are using to calculate the winning and provisionally winning bids 
selects the winning bid randomly.\5\ The procedure we are adopting for 
last and best bids, described in section II.B.iv, should help ensure 
that the winning bid is not the result of a tie. In the case of a tie, 
the bidder(s) whose bid is not chosen has the opportunity in the next 
round to make another bid. If the bidder believes that the minimum bid 
increment is too high and so would ordinarily cease bidding on that 
license or package, it still has the opportunity, using the last and 
best bid procedure, to make one final bid on the license or package 
(which may be as little as $1,000 more).\6\ The bidder whose bid was 
chosen randomly then has the opportunity in the next round to beat the 
new bid.\7\
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    \5\ To ensure randomness, we will use a National Institute of 
Standards and Technology (``NIST'') tested pseudorandom generator, 
which will permute the order of the set of all bids prior to 
consideration by the solving algorithm.
    \6\ The bidder would ordinarily choose the best and final bid 
option only when it has decided to stop bidding and drop out of the 
auction altogether.
    \7\ If, however, the bidder whose bid is not chosen chooses not 
to bid and no other bidder makes a higher bid (and the provisionally 
winning bidder does not make a mutually exclusive bid on a different 
license or package), then the provisional winner will become the 
winner at the end of the auction.

    Bidder 1 and Bidder 2 both bid $100 million on License A in 
Round 20. The algorithm randomly selects Bidder 1 as the provisional 
winner. In round 21, Bidder 2 may make the minimum accepted bid on 
License A, for example, $105 million, in which case bidding on the 
license would simply continue. If, however, Bidder 2 does not value 
License A at $105 million, and if it wishes to cease bidding on all 
other licenses and packages, it may use the last and best bid option 
to place any bid it wishes on License A between $100,001,000 and 
$104,999,000 (in thousand dollar increments). (If Bidder 2 wishes to 
continue to bid on other licenses or packages, it may use the last 
and best bid option at a later point in the auction.) Bidder 2 
therefore bids $103.5 million on License A, the maximum amount it is 
willing to bid. Bidder 2 is not permitted to place any new bids in 
the auction. In Round 22, Bidder 1 has the opportunity to place the 
minimum accepted bid on License A, for example, $108.67 million, 
thereby beating Bidder 2. But if Bidder 1 believes that the minimum 
bid is too high, Bidder 1 also has the opportunity to choose the 
last and best bid option to place any bid it wishes on License A 
between $103,501,000 and $108,670,100. He therefore bids $104 
million, and is not permitted to place any new bids in the auction. 
If no other bidders bid on License A, Bidder 1 would be awarded the 
---------------------------------------------------------------------------
license at a price of $104 million.

    We therefore believe that by adopting the last and best bid 
procedure, we have mitigated any adverse effects the algorithm may have 
on winning bids. We acknowledge, however, a bidder that submits a tie 
bid and whose bid is not selected as part of the provisionally winning 
set will have a higher minimum accepted bid in the next round than the 
bidder whose bid was selected and who need not raise its bid in order 
to be considered active on that license or package.
    64. We also proposed that licenses on which no bids have been 
submitted would be treated as if the minimum opening bid had been 
submitted. SBC/BellSouth state that licenses for which no bids have 
been made should be treated as having a bid of $0. Prof. Paul Milgrom 
(``Milgrom'') disagrees.
    65. In determining provisionally winning bids, individual licenses 
on which no bids are available to be considered when solving for the 
provisionally winning set will be treated as having a bid at the 
minimum opening bid. We believe that at the end of the auction there 
will not be any licenses on which bids no bids have been made (either 
directly or as part of a package), and if it appears that this will 
occur, the Commission retains the discretion during the auction to 
lower the minimum opening bid and the minimum accepted bid. Thus, the 
question of how to treat licenses for which no bids are currently 
available is one that mostly affects the pace of the auction and the 
computational simplicity in the early rounds. We believe that treating 
the licenses as having bids at the opening minimum bid is the better 
course.

Section B

    66. Mutually Exclusive Bids. In order to determine the 
provisionally winning bids at the end of each round, we proposed to 
consider both the bids made in the current round and ``retained'' bids. 
We defined ``retained'' bids as the provisionally winning bids plus 
bids that have the potential to become provisionally winning bids 
because of changes in other bids in subsequent rounds. Somewhat 
simplified, retained bids were the standing high bids for any package 
or license (except that a bid on a package that was not greater than 
the sum of the bids on its best components would not be retained).
    67. Commenters have various views of our proposed use of retained 
bids in calculating provisionally winning bids. Some commenters suggest 
that we retain all bids. If some or all bids are retained, commenters 
variously suggest that we permit non-provisionally winning bids to be 
cancelled, or that we permit contingent ``or'' bids. Contingent ``or'' 
bids would allow bidders to specify that they wish to win one bid or 
the other, but not both. We had proposed both of these alternatives in 
the Auction No. 31 Package Bidding Public Notice. We agree with those 
commenters that state

[[Page 43369]]

that without one of these procedures (cancellation or contingent ``or'' 
bids) bidders face the risk that they will have retained but non-
provisionally winning bids that they do not desire, which both consumes 
some of their eligibility and leads to the possibility that they 
ultimately may win more licenses than they wish. This risk could make 
bidders unable to switch to backup strategies and could generally chill 
bidding.
    68. In the Auction No. 31 Package Bidding Public Notice, we noted 
that contingent ``or'' bids could provide a bidder greater flexibility 
to aggressively bid on licenses that it considers substitutes by 
overcoming the exposure problem. For computational simplicity and 
transparency, we proposed a number of restrictions on the use of 'or'' 
bids. We also noted that we would need to modify our method for 
determining retained bids. With regard to bid cancellation, we noted 
that it could avoid the possible complexity of ``or'' bids while 
overcoming exposure problems and thereby allow bidders to explore bids 
that would overcome the threshold problem. On the other hand, by 
allowing potential partnering bids to be cancelled, bid cancellation 
could also make it more difficult to overcome the threshold problem. It 
also could facilitate adverse strategic bidding, and adversely affect 
the pace of the auction. Finally, we noted that if we permitted bid 
cancellation, we would probably retain all bids and modify the activity 
rules and the procedures for calculating minimum accepted bids.
    69. We conclude that calculating provisionally winning bids using 
the definition of retained bids as set forth in the Auction No. 31 
Package Bidding Comment Public Notice does not necessarily ``retain'' 
all potentially winning bids when bidders are permitted to submit bids 
that are mutually exclusive across rounds (``or'' bids). As illustrated 
in section II.B.iii., Minimum Accepted Bids and Bid Increments, a bid 
does not have to be the highest bid on a particular package in order 
for it to be a provisional winner. The definition of retained bids, 
however, would not retain a bid unless it was the highest bid on a 
particular package.
    70. We also conclude that it is not computationally feasible at 
this time to calculate provisionally winning bids using all of the bids 
that are made throughout the auction (i.e., to retain all bids) when 
``or'' bids are permitted. Similarly, we conclude that permitting 
unrestricted ``or'' bids is computationally too complicated to 
implement for this auction. Finally, we do not favor allowing bidders 
to freely cancel bids because, as stated, bid cancellation could be 
used strategically and because other bidders on a smaller package 
attempting to beat a larger package need some certainty about what bids 
are available in order to overcome the threshold problem.
    71. We conclude that the nature of package bidding requires that we 
devise some system for retaining non-provisionally winning bids so that 
more than just the bids made in the current round are considered in 
determining the new provisionally winning bids. Otherwise, it would be 
very difficult to overcome the threshold problem. Bidders on individual 
licenses or smaller packages need to know what other bids are available 
that, when considered along with their bids, could beat a larger 
package.
    72. We believe that the following procedure meets our objectives 
and responds to the design weaknesses discussed. First, we will treat 
the bids a bidder makes in the current round as mutually exclusive with 
the bids that same bidder made in prior rounds. If a bidder does not 
want a bid from the previous round (including a provisionally winning 
bid) to be considered mutually exclusive with bids made in the current 
round, it can resubmit the bid in the current round. A bidder may 
either ``renew'' a bid without increasing the amount bid or increase 
the bid.\8\
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    \8\ As stated, ``renewing'' a non-provisionally winning bid 
confers no activity credit, while making a minimum accepted bid 
does. On the other hand, a bidder receives activity for a bid that 
is a provisionally winning bid at the end of the last round, whether 
or not it renews the bid.
---------------------------------------------------------------------------

    73. Second, to determine the provisionally winning bids, we will 
consider (i) the bids made by each bidder in the most recent two rounds 
in which that bidder placed new or renewed bids and (ii) all 
provisionally winning bids from the prior round. This approach ensures 
that bidders in the current round will have bids by other bidders 
available for them to ``partner'' with so they can make a bid that 
would have made them a provisional winner in the last round.\9\ It 
thereby assists bidders in overcoming the threshold problem. This 
approach also helps ensure that bidding is sincere since bidders are 
held to their bids even after they stop bidding. Bidders should be 
willing to pay the amount they previously bid even if they are not 
willing to raise their bids.
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    \9\ The use of the term ``partner'' does not imply collusion 
among bidders and collusion is strictly prohibited by the 
Commission's Rules. See 47 CFR 1.2105(c). It simply refers to the 
fact that in order to beat a larger package, a bidder on an 
individual license or smaller package needs others to bid on the 
other licenses or packages that make up the larger package.
---------------------------------------------------------------------------

    74. The auction design we establish today therefore takes elements 
from both, contingent ``or'' bids and bid cancellation. By making a 
bidder's own bids mutually exclusive across rounds, we have implicitly 
provided for a limited number of ``or'' bids without the imposition of 
excessive computational burdens. Moreover, by considering only a 
bidder's two most recent rounds in which it made a bid (either an 
accepted new bid or a renewed bid), plus any provisionally winning 
bids, we have essentially cancelled all of the bidder's other bids.
    75. More importantly, treating each participant's bids across 
rounds as mutually exclusive meets the objectives that both of these 
methods were attempting to accomplish without either the complications 
or the risks. As with ``or'' bids and bid cancellation, bidders may 
pursue back-up strategies without exposing themselves to the risk that 
they will win both sets of licenses. Also, bidders may achieve all of 
the flexibility of using ``or'' bids within a round by bidding 
straightforwardly across rounds. And by considering a bidder's two most 
recent rounds of bids in which accepted new bids or renewed bids were 
made (plus its provisionally winning bids), we allow bidders to explore 
ways to partner with other bids in order to beat bids on larger 
packages. Yet the bidding method we are adopting, by automatically 
canceling bids instead of leaving it to the bidder's discretion, 
lessens the risk of strategic bidding. We believe that this bidding 
method meets both the commenters' concerns and their desires.
vii. Bidding
    76. During a bidding round, a bidder may submit individual bids for 
as many licenses as it wishes, subject to its eligibility; may submit 
bids on any packages it has designed, subject to its eligibility and a 
limit of bidding on twelve different packages throughout the auction; 
may renew bids it has previously made; may remove bids placed in that 
round before the round closes; may use an activity rule waiver, and may 
permanently reduce eligibility. Bidders may make certain mutually 
exclusive bids (i.e., overlapping bids) in a bidding round. For 
example, a bidder may place a bid on License A and a bid on a package 
consisting of Licenses A and B. The bids are mutually exclusive because 
it is not possible that both bids can become provisionally winning 
bids. Bidders have the option of making multiple submissions and 
removals in each bidding round.

[[Page 43370]]

    77. Bidders should note that all bidding will take place remotely 
either through the automated bidding software or by telephonic bidding. 
(Telephonic bid assistants are required to use a script when entering 
bids placed by telephone. Telephonic bidders are therefore reminded to 
allow sufficient time to bid by placing their calls well in advance of 
the close of a round, especially since this is the first combinatorial 
auction conducted by the Commission. For the simultaneous multiple 
round auctions, normally, four to five minutes were necessary to 
complete a bid submission. Bid submissions may take longer for 
combinatorial auctions.) There will be no on-site bidding during 
Auction No. 31.
    78. A bidder's ability to bid on specific licenses and packages in 
the first round of the auction is determined by two factors: (i) The 
licenses applied for on FCC Form 175; and (ii) the upfront payment 
amount deposited. The bid submission screens will be tailored for each 
bidder to include only those licenses for which the bidder applied on 
its FCC Form 175. Bidders must create packages on the package creation 
screen before they are permitted to bid on the packages. Bidders are 
reminded that they will be able to create only those packages (i) that 
contain only the licenses for which they applied on FCC Form 175, and 
(ii) for which they have eligibility based on their upfront payments.
    79. The bidding software requires each bidder to log in to the FCC 
auction system during the bidding round using its FCC-supplied security 
identification. Procedures for obtaining security information and 
accessing the FCC auction system will be announced in a future Public 
Notice. Bidders are strongly encouraged to download and print bid 
confirmations after they submit their bids.
    80. The bid entry screen of the automated auction system software 
for Auction No. 31 allows bidders to place multiple increment bids. In 
addition to placing the minimum accepted bid, bidders may increase the 
minimum accepted bid by from one to nine bid increments. The bidding 
software will display allowable bids for each license and package 
created by the bidder.
    81. To place a new bid on a license or package, the bidder must 
place a minimum accepted bid, and may place a bid up to nine times the 
bid increment. A bidder may also place a renewed bid on a license or 
package. Both actions are done by clicking the desired bid amount in 
the Amount Bid box displayed on the bidding screen and then clicking 
the submit button.
viii. Bid Removal and Bid Withdrawal
    82. Bid ``removal'' is the voiding of a bid made in the current 
round. Bid ``withdrawal'' is the voiding of a provisionally winning 
bid. Bid ``cancellation'' is the voiding of a non-provisionally winning 
bid. We discuss bid cancellation in section II.B.vi.b, Winning and 
Provisionally Winning Bids. For the reasons set forth and in section 
II.B.vi.b, we permit only the removal of bids placed in the current 
round. The withdrawal or cancellation of bids made in previous rounds 
is prohibited.
    83. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed to retain the bid removal procedures that we previously 
established. Spectrum Exchange endorses the proposal and no commenter 
objects. Accordingly, we retain the bid removal procedures previously 
announced. At any time before the close of a bidding round, 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. This is not the same as 
withdrawing a bid, which, in our simultaneous multiple round auction 
system, can occur in rounds subsequent to the round in which the high 
bid was placed. A bidder removing a bid placed in the same round is not 
subject to withdrawal payments. See 47 CFR 1.2104(g). Once a round 
closes, a bidder may no longer remove a bid.
    84. We also proposed not to allow bidders to withdraw provisionally 
winning bids from previous rounds. If a bid is declared the winner and 
the bidder does not pay the amount due, it is liable for a default 
payment as set forth in the Commission's Rules.
    85. We believe that by making bids placed in different rounds 
mutually exclusive, we have eliminated a bidder's exposure risk when 
changing strategies. Bidders will win at most one set of bids, not 
both. Moreover, the bid withdrawal procedure was designed to allow 
bidders to back out of failed aggregations--to avoid winning some 
licenses that are worth less to them than the amount bid without the 
other licenses they need to implement their business plan. Therefore, 
since bidders may make package bids on all combinations of licenses 
with significant complementarities, the use of withdrawals to mitigate 
such risk is no longer necessary. Moreover, while there is no 
offsetting benefit from allowing bid withdrawals, there would still be 
potential harm. Withdrawals may be used strategically to provide 
incorrect price signals during the auction and lead other bidders to 
place inefficient bids. Also, when withdrawals are permitted, one 
cannot ensure that the auction will proceed at an acceptable pace. 
Moreover, the harm associated with withdrawals is likely to be more 
severe in auctions with package bidding since a single withdrawal of a 
bid (on either an individual license or a package) can affect the 
entire provisionally winning set. Accordingly, we will not permit 
bidders to withdraw their provisionally winning bids.
    86. Finally, we proposed that the previously announced special 30 
MHz nationwide bid withdrawal procedure would no longer apply. No 
commenter objects. We believe that such a special procedure is 
unnecessary once package bidding is generally permitted. Accordingly, 
upon approval by the Commission, we will not apply the previously 
announced special 30 MHz nationwide bid withdrawal procedure.\10\
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    \10\ In the 700 MHz First Report and Order, the Commission 
directed the Bureau to adopt a special 30 MHz nationwide withdrawal 
rule if it was operationally feasible to do so. Accordingly, the 
Bureau established such a rule in the Auction No. 31 Procedures 
Public Notice. As discussed in section II.B.x, Default, the 
Commission has stated that prior to the due date for the filing of 
short form applications for Auction No. 31, it will adopt any rule 
changes necessary to implement package bidding.
---------------------------------------------------------------------------

ix. Bid Composition Restriction
    87. We sought comment on bid composition restrictions to deter 
bidders without complementarities from strategically bidding on large 
packages in order to create a threshold problem for competitors that 
want only parts of the larger package. For example, the Milgrom-McAfee 
bid composition restriction would not allow a bidder that is active in 
a round on a package, but not on a subset of that package, to bid 
subsequently for the subset. No commenter believes that such a bid 
composition restriction is necessary for this auction. We agree. 
Therefore, we are not adopting any restrictions on bid composition 
(other than limiting bidders to creating and bidding on at most twelve 
packages).
x. Default
    88. In the Auction No. 31 Package Bidding Comment Public Notice, we 
proposed to modify the default procedures and rules to take into 
account package bidding. In the 700 MHz Memorandum Opinion and Order 
and Further Notice of Proposed Rulemaking, the Commission stated that 
after the Bureau has reviewed the record in this proceeding and 
determined

[[Page 43371]]

whether or not to implement package bidding, which we do today, it will 
adopt any necessary rule changes, such as changes to the general 
competitive bidding default payment rule, in a further reconsideration 
order to be adopted prior to the due date for the filing of short forms 
for Auction No. 31. Accordingly, we leave for the Commission the 
discussion of the proposed modifications to the default rule and the 
comments received to that proposal.
xi. Round Results
    89. Although we did not propose any changes to the round results 
that would be provided, the modified procedures we establish today 
change some of the results that will be reported. As we stated in the 
Auction No. 31 Procedures Public Notice, bids placed during a round 
will not be published until the conclusion of that bidding period. 
After a round closes, the Commission will compile reports of all bids 
placed, provisionally winning bids, whether or not there were ties for 
the provisionally winning bids, and bidder eligibility status (bidding 
eligibility and activity rule waivers), and post the reports for public 
access. Reports reflecting bidders' identities and bidder 
identification numbers for Auction No. 31 will be available before and 
during the auction. Thus, bidders will know in advance of this auction 
the identities of the bidders against which they are bidding.
xii. Auction Announcements
    90. The Commission will use auction announcements to announce items 
such as schedule changes. All Commission auction announcements will be 
available on the FCC Extranet and on the Internet.
xiii. Maintaining the Accuracy of FCC Form 175 Information
    91. As we stated in the Auction No. 31 Procedures Public Notice, 
after the short-form filing deadline, applicants may make only minor 
changes to their FCC Form 175 applications. For example, permissible 
minor changes include deletion and addition of authorized bidders (to a 
maximum of three) and certain revisions to exhibits. Impermissible 
changes include changes to the selection of licenses on which the 
applicant wishes to bid. Filers must make these changes on-line, and 
submit a letter to: Amy Zoslov, Chief, Auctions and Industry Analysis 
Division, Wireless Telecommunications Bureau, Federal Communications 
Commission, 445 12th Street, SW, Washington, DC 20554. A separate copy 
of the letter should be mailed to Howard Davenport, Auctions and 
Industry Analysis Division), briefly summarizing the changes. Questions 
about other changes should be directed to Howard Davenport, Auctions 
and Industry Analysis Division at (202) 418-0660.

C. Post-Auction Procedures: Refund of Remaining Upfront Payment Balance

    92. The package bidding procedures we adopt here necessitate a 
slight change in the post-auction procedures regarding the refund of a 
bidder's remaining upfront payment balance. Because a bidder with no 
provisionally winning bids during the auction may still be a winning 
bidder at the end of the last round of the auction, bidders may not 
drop out of the auction completely. Accordingly, bidders are no longer 
eligible for a refund of their upfront payments before the close of the 
auction. The refund procedures are therefore as follows:
    93. All applicants that submitted upfront payments but were not 
winning bidders for a 700 MHz license may be entitled to a refund of 
their remaining upfront payment balance after the conclusion of the 
auction. At the end of the auction, those bidders who are eligible for 
a refund must submit a written refund request which includes wire 
transfer instructions, a Taxpayer Identification Number (``TIN''), and 
a copy of their bidding eligibility screen print, to: Federal 
Communications Commission, Financial Operations Center, Auctions 
Accounting Group, Shirley Hanberry, 445 12th Street, SW, Room 1-A824, 
Washington, DC 20554.
    94. Bidders are encouraged to file their refund information 
electronically using the Refund Information portion of the FCC Form 
175, but bidders can also fax their request to the Auctions Accounting 
Group at (202) 418-2843. Once the request has been approved, a refund 
will be sent to the party identified in the refund information. Refund 
processing generally takes up to two weeks to complete. Bidders with 
questions about refunds should contact Michelle Bennett or Gail Glasser 
at (202) 418-1995.

Federal Communications Commission.
Margaret Wiener,
Deputy Chief, Auctions and Industry Analysis Division Wireless 
Telecommunications Bureau.

                                                  Attachment--Auction No. 31; Licenses to be Auctioned
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                                                        License
   Economic area grouping         License numbers      bandwidth        Description         Population    Bidding  units      Upfront         Minimum
                                                         (MHz)                                (1990)                          payment       opening bid
--------------------------------------------------------------------------------------------------------------------------------------------------------
EAG701......................  WXEAG701-C............          10  Northeast.............      41,567,654      14,000,000     $14,000,000     $40,000,000
EAG702......................  WXEAG702-C............          10  Mid-Atlantic..........      42,547,218      14,000,000      14,000,000      40,000,000
EAG703......................  WXEAG703-C............          10  Southeast.............      44,516,919      14,000,000      14,000,000      40,000,000
EAG704......................  WXEAG704-C............          10  Great Lakes...........      41,560,906      14,000,000      14,000,000      40,000,000
EAG705......................  WXEAG705-C............          10  Central/Mountain......      40,926,284      14,000,000      14,000,000      40,000,000
EAG706......................  WXEAG706-C............          10  Pacific...............      41,427,686      14,000,000      14,000,000      40,000,000
    Subtotal................  ......................  ..........  ......................  ..............      84,000,000      84,000,000     240,000,000
EAG701......................  WXEAG701-D............          20  Northeast.............      41,567,654      28,000,000      28,000,000      80,000,000
EAG702......................  WXEAG702-D............          20  Mid-Atlantic..........      42,547,218      28,000,000      28,000,000      80,000,000
EAG703......................  WXEAG703-D............          20  Southeast.............      44,516,919      28,000,000      28,000,000      80,000,000
EAG704......................  WXEAG704-D............          20  Great Lakes...........      41,560,906      28,000,000      28,000,000      80,000,000
EAG705......................  WXEAG705-D............          20  Central/Mountain......      40,926,284      28,000,000      28,000,000      80,000,000
EAG706......................  WXEAG706-D............          20  Pacific...............      41,427,686      28,000,000      28,000,000      80,000,000
    Subtotal................  ......................  ..........  ......................  ..............     168,000,000     168,000,000     480,000,000
    Total...................  ......................  ..........  ......................  ..............     252,000,000     252,000,000     720,000,000
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[[Page 43372]]

[FR Doc. 00-17673 Filed 7-12-00; 8:45 am]
BILLING CODE 6712-01-P