[Federal Register Volume 65, Number 178 (Wednesday, September 13, 2000)]
[Notices]
[Pages 55243-55250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23502]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-00-35-C (Auction No. 35); DA 00-2038]


C and F Block Broadband PCS Spectrum Auction Scheduled for 
November 29, 2000, Rescheduled for December 12, 2000, Comment Sought on 
Reserve Prices or Minimum Opening Bids and Other Procedural Issues

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document reschedules the next auction (Auction No. 35) of 
C and F block broadband Personal Communications Service (``PCS'') 
licenses for December 12, 2000 and seeks comment on upfront payments, 
reserve prices or minimum opening bids, and other auction procedural 
issues for this auction.

DATES: Comments are due on or before September 18, 2000, and reply 
comments are due on or before September 25, 2000.

ADDRESSES: An original and four copies of all pleadings must be filed 
with the Commission's Secretary, Magalie Roman Salas, Office of the 
Secretary, Federal Communications Commission, 445 Twelfth Street, SW, 
TW-A325, Washington, DC 20054, in accordance with Sec. 1.51(c) of the 
Commission's rules. See 47 CFR 1.51(c). In addition, one copy of each 
pleading must be delivered to each of the following locations: (i) The 
Commission's duplicating contractor, International Transcription 
Service, Inc. (ITS), 1231 20th Street, NW., Washington, DC 20036; (ii) 
Office of Media Relations, Public Reference Center, 445 Twelfth Street, 
SW., Suite

[[Page 55244]]

CY-A257, Washington, DC 20554; (iii) Rana Shuler, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, 445 Twelfth 
Street, SW., Suite 4-A628, Washington, DC 20554. Comments and reply 
comments will be available for public inspection during regular 
business hours in the FCC Public Reference Room, Room CY-A257, 445 12th 
Street, SW., Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Auctions and Industry Analysis 
Division, Wireless Telecommunications Bureau, Craig Bomberger, Auctions 
Analyst, or Audrey Bashkin, Attorney, at (202) 418-0660; or Lisa 
Stover, Project Manager, at (717) 338-2888.

SUPPLEMENTARY INFORMATION: This is a summary of a Public Notice 
released September 6, 2000. The complete text of the Public Notice, 
including Attachment A the revised list of licenses available, is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room CY-A257), 445 12th Street, SW., 
Washington, DC 20554. 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 web site at http://www.fcc.gov.

I. General Information

A. Introduction

    1. By the Public Notice, the Wireless Telecommunications Bureau 
(``Bureau'') reschedules the next auction (Auction No. 35) of C and F 
block broadband Personal Communications Service (``PCS'') licenses for 
December 12, 2000, provides a revised list of licenses available in 
Auction No. 35, and seeks comment on upfront payments, reserve prices 
or minimum opening bids, and other auction procedural issues for 
Auction No. 35.
    2. The Communications Act of 1934 as amended by the Balanced Budget 
Act of 1997, Public Law 105-33, requires the Commission to ``ensure 
that, in the scheduling of any competitive bidding under this 
subsection, an adequate period is allowed * * * before issuance of 
bidding rules, to permit notice and comment on proposed auction 
procedures * * *.'' Consistent with the provisions of the Balanced 
Budget Act, and to ensure that potential bidders have adequate time to 
familiarize themselves with the specific rules that will govern the 
day-to-day conduct of an auction, the Commission directed the Bureau, 
under its existing delegated authority, to seek comment on a variety of 
auction-specific procedures prior to the start of each auction.

B. Background of Proceeding

    3. In January 2000, the Bureau announced that the next C and F 
block auction was scheduled to begin on July 26, 2000, and provided a 
preliminary list of licenses for auction, including 30 MHz and 15 MHz C 
block licenses, as well as F block licenses (all 10 MHz each), for 
operation on frequencies for which previous licenses had automatically 
cancelled or had been returned to the Commission. On March 3, 2000, the 
Bureau released Auction No. 35 Public Notice, 15 FCC Rcd. 4702, seeking 
comment on reserve prices, minimum opening bids and other auction 
procedural issues for the next C and F block auction, Auction No. 35.
    4. After release of the C and F Block Broadband PCS Spectrum 
Auction Scheduled for July 26, 2000, Public Notice, (January 2000 PN), 
65 FR 8363 (February 18, 2000) a number of parties filed petitions 
asking that the Commission waive, modify, or eliminate the eligibility 
requirements for participation in the auction and make other changes to 
the C and F block rules. In past auctions, the Commission's rules 
limited eligibility for all C and F block licenses to 
``entrepreneurs.'' The Commission sought comment on the issues raised 
by these petitions in a Further Notice of Proposed Rulemaking 
(``Further Notice''), 65 FR 37092 (June 13, 2000). Also on June 7, 
2000, the Bureau announced that Auction No. 35 would begin on November 
29, 2000, in order to allow resolution of the issues in the Further 
Notice and implementation of any rule changes prior to the auction.
    5. On August 14, 2000, the Commission released the Part 1 Fifth 
Report and Order, 65 FR 52401 (August 29, 2000) in which the 
Commission, inter alia, adopted a ``controlling interest'' standard for 
attributing to auction applicants the total assets and/or gross 
revenues of their investors and affiliates in determining entrepreneur 
and small business eligibility for future C and F block auctions. The 
Commission also observed that the rule modifications adopted in the 
various part 1 orders would result in discrepancies and/or redundancies 
between certain of the new part 1 rules and existing service-specific 
rules, and the Commission delegated to the Bureau the authority to make 
conforming edits to the Code of Federal Regulations consistent with the 
rules adopted in the part 1 proceeding. The part 1 rules that 
superseded inconsistent service-specific rules will control in Auction 
No. 35. Accordingly, the ``controlling interest'' standard will be in 
effect for Auction No. 35, even if conforming edits are not made prior 
to the auction.
    6. On August 29, 2000, the Commission released the C/F Block Sixth 
Report and Order, 65 FR 53624 (September 5, 2000) in which it resolved 
the issues raised in the Further Notice. The Commission decided that it 
would reconfigure each 30 MHz C block license available in Auction No. 
35 and other future broadband PCS auctions into three 10 MHz C block 
licenses. The Commission also divided Basic Trading Areas (``BTAs'') 
into two tiers according to the population size, with Tier 1 comprising 
markets with population at or above 2.5 million, based on 1990 census 
figures, and Tier 2 comprising the remaining markets. The Commission 
decided that some licenses would be open to all bidders in ``open'' 
bidding, while other licenses would be available only to entrepreneurs 
in ``closed'' bidding. The Commission established open bidding for the 
following licenses: two of the three reconfigured 10 MHz C block 
licenses in Tier 1; one of the three reconfigured 10 MHz C block 
licenses in Tier 2; all 15 MHz C block licenses in Tier 1; all F block 
licenses; and all C and F block licenses available but unsold in 
Auction No. 22 or any subsequent auction. The Commission established 
small and very small business bidding credits of 15 percent and 25 
percent, respectively, for licenses won in open bidding and eliminated 
bidding credits for licenses won in closed bidding. Additionally, the 
Commission removed from its rules the Sec. 24.710 license cap, which 
had prohibited an applicant from winning more than 98 of the licenses 
available in the C and F blocks. Finally, the Commission decided that 
the Commercial Mobile Radio Services spectrum cap would continue to 
apply to C and F block licenses, including those won in Auction No. 35.
    7. The following table contains the Block/Eligibility Status/
Frequency Cross Reference List for Auction No. 35:

[[Page 55245]]



                                            C and F Block Allocations
----------------------------------------------------------------------------------------------------------------
                                       Eligibility status
         Channel block        ----------------------------------   Bankwidth              Frequencies
                                    Tier 1           Tier 2         (MHz)
----------------------------------------------------------------------------------------------------------------
 C1..........................  [Open].........  Closed.........           15  1902.5-1910, 1982.5-1990
 C2..........................  [Open].........  Closed*........           15  1985-1902.5, 1975-1982.5
 C3..........................  Closed*........  Closed*........           10  1895-1900, 1975-1980
 C4..........................  Open...........  Closed*........           10  1900-1905, 1980-1985
 C5..........................  Open...........  Open...........           10  1905-1910, 1985-1990
 F...........................  Open...........  Open...........           10  1890-1895, 1970-1975
----------------------------------------------------------------------------------------------------------------
 Notes: Brackets indicate no available licenses of the particular tier/channel block combination in Auction No.
  35.
 * The entrepreneur eligibility restriction does not apply to licenses that were available but unsold in Auction
  No. 22. Tier 2 C2 licenses are classified as closed, but all of the C2 licenses available in Auction No. 35
  were available but unsold in Auction No. 22 and are therefore open to all bidders. Certain C3, C4, and C5
  licenses were also available but unsold in Auction No. 22 (as 30 MHz licenses) and are therefore open to all
  bidders.

    8. In addition to the license reconfiguration, the revised license 
inventory reflects additional licenses, not included in the Auction No. 
35 Public Notice, for operation on frequencies as to which previous 
licenses have cancelled or otherwise have been returned to the 
Commission, as well as licenses for operation on frequencies that had 
not previously been licensed.

C. Change of Auction Date

    9. In order to provide additional time between the effective date 
of the new rules and the auction application deadline, Auction No. 35 
has been rescheduled for December 12, 2000. Because the C/F Block Sixth 
Report and Order reconfigured the licenses available for auction and 
changed the eligibility rules for applicants, we seek comment on 
minimum opening bids, reserve prices, and other procedural issues for 
Auction No. 35.
    The critical dates and deadlines for Auction No. 35 are as follows:

 Seminar Date........................  October 20, 2000.
 Short-Form Application (FCC Form      November 6, 2000.
 175) Filing Deadline.
 Upfront Payments Deadline...........  November 27, 2000.
 Mock Auction........................  December 8, 2000.
 Auction Start Date..................  December 12, 2000.
 

D. Due Diligence Information

    10. Bidder Alerts: The FCC makes no representations or warranties 
about the use of this spectrum for particular services. Applicants 
should be aware that an FCC auction represents an opportunity to become 
an FCC licensee in this service, subject to certain conditions and 
regulations. An FCC auction does not constitute an endorsement by the 
FCC of any particular services, technologies or products, nor does an 
FCC license constitute a guarantee of business success. Applicants and 
interested parties should perform their own due diligence before 
proceeding, as they would with any new business venture.
    11. As is the case with many business investment opportunities, 
some unscrupulous entrepreneurs may attempt to use Auction No. 35 to 
deceive and defraud unsuspecting investors. Common warning signals of 
fraud include the following:
     The first contact is a ``cold call'' from a telemarketer, 
or is made in response to an inquiry prompted by a radio or television 
infomercial.
     The offering materials used to invest in the venture 
appear to be targeted at IRA funds, for example, by including all 
documents and papers needed for the transfer of funds maintained in IRA 
accounts.
     The amount of investment is less than $25,000.
     The sales representative makes verbal representations 
that: (a) the Internal Revenue Service (``IRS''), Federal Trade 
Commission (``FTC''), Securities and Exchange Commission (``SEC''), 
FCC, or other government agency has approved the investment; (b) the 
investment is not subject to state or federal securities laws; or (c) 
the investment will yield unrealistically high short-term profits. In 
addition, the offering materials often include copies of actual FCC 
releases, or quotes from FCC personnel, giving the appearance of FCC 
knowledge or approval of the solicitation.
    12. Information about deceptive telemarketing investment schemes is 
available from the FTC at (202) 326-2222 and from the SEC at (202) 942-
7040. Complaints about specific deceptive telemarketing investment 
schemes should be directed to the FTC, the SEC, or the National Fraud 
Information Center at (800) 876-7060. Consumers who have concerns about 
specific proposals regarding Auction No. 35 may also call the FCC 
National Call Center at (888) CALL-FCC or (888) 225-5322.
    13. Bidder Responsibility for Due Diligence: Potential bidders are 
reminded that private and common carrier fixed microwave services 
(``FMS'') operating in the 1850-1990 MHz band (and other bands) are 
being relocated to available frequencies in higher bands or to other 
media. Bidders should become familiar with the status of FMS operation 
and relocation, and applicable Commission rules and orders, in order to 
make reasoned, appropriate decisions about their participation in 
Auction No. 35 and their bidding strategy.
    14. Potential bidders and interested parties should be aware that 
various proceedings that may relate to the licenses available in 
Auction No. 35 may be pending or subject to further administrative 
review before the Commission, including, for example, waiver requests, 
petitions for reconsideration, and applications for review. In 
addition, certain judicial proceedings that may relate to the licenses 
available in Auction No. 35 are pending or may be subject to further 
review. Resolution of these matters could have an effect on the 
availability of spectrum included in Auction No. 35 and the auction is 
subject to such matters. Some of these matters (whether before the 
Commission or the courts) may not be resolved by the time of the

[[Page 55246]]

auction. The Commission will continue to act on matters before it, but 
it makes no representations as to the resolution of judicial 
proceedings. Potential bidders are solely responsible for identifying 
associated risks, and investigating and evaluating the degree to which 
such matters may affect their ability to bid on or otherwise acquire 
licenses in Auction No. 35.
    15. Additionally, potential bidders may obtain some information 
about licenses available in Auction No. 35 through the Bureau's 
licensing databases on the World Wide Web at http://www.fcc.gov/wtb/uls>. Potential bidders should direct questions regarding the search 
capabilities to the FCC Technical Support hotline at (202) 414-1250 
(voice) or (202) 414-1255 (TTY), or via e-mail at [email protected]. The 
hotline is available to assist potential bidders with questions Monday 
through Friday, from 8 AM to 6 PM Eastern Time. In order to provide 
better service to the public, all calls to the hotline are recorded. 
The Commission makes no representations or guarantees regarding the 
accuracy or completeness of information in its databases, nor any third 
party databases, including, for example, court docketing systems.
    16. Further, potential bidders are strongly encouraged to 
physically inspect any sites located in, or near, the geographic area 
for which they plan to bid.
    17. Finally, potential bidders are strongly encouraged to make 
periodic, and continuing, inquiries to the Office of the Secretary and 
other available sources regarding any proceedings that are, or may be, 
pending with respect to the licenses available in Auction No. 35.

E. Clarification of Payment Issue Relating to Licenses Subject to 
Pending Proceedings

    18. As noted, potential bidders should be aware that certain of the 
licenses included in Auction No. 35 are or may become the subject of 
Commission or judicial proceedings initiated by parties claiming to 
have continuing interests in the licenses, despite their failure to 
meet payment obligations. The Public Notice clarifies that the 
Commission will return the payments made by winning bidders of licenses 
in Auction No. 35 in the event that such bidders are subsequently 
required to surrender licenses won to prior applicants or license 
holders as a result of final determinations reached in pending 
proceedings. The Commission, however, will not pay interest on the 
returned payments as it lacks legal authority to do so.
    19. Including contested licenses in the auction helps to fulfill 
the Commission's statutory mandate to hasten the development and 
deployment of new technologies and services and to promote competition 
for the benefit of the public. Returning payments to winning bidders if 
licenses won are later determined to be unavailable due to subsequent 
resolution of other proceedings furthers these vital public interest 
goals by reducing uncertainty in the licensing process and encouraging 
auction participants to bid on licenses regardless of whether they are 
subject to pending proceedings. Retaining payments under the 
circumstances could have a chilling effect on participation in Auction 
No. 35 and would therefore undermine our efforts to encourage more 
efficient use of the spectrum. We note that winning bidders of licenses 
subject to pending proceedings are still required to meet the normal 
payment and construction schedules established by the Commission.

II. Auction Structure

A. Simultaneous Multiple Round Auction Design

    20. The Commission proposes to conduct the competitive bidding for 
these licenses by using a single, simultaneous multiple-round auction. 
As described further, this methodology offers every license for bid at 
the same time, with successive bidding rounds in which bidders may 
place bids. We seek comment on this proposal.

B. Upfront Payments and Initial Maximum Eligibility

    21. The Bureau has delegated authority and discretion to determine 
an appropriate upfront payment for each license being auctioned, taking 
into account such factors as the population in each geographic license 
area, and the value of similar spectrum. As described further, the 
upfront payment is a refundable deposit made by each bidder to 
establish eligibility to bid on licenses. The proposed upfront payment 
formulae take into account information gained from previous auctions of 
broadband PCS C and F block licenses. Also, as required by the Part 1 
Fifth Report and Order, the upfront payment amount for ``former 
defaulters,'' i.e., applicants that have ever been in default on any 
Commission licenses or have ever been delinquent on any non-tax debt 
owed to any Federal agency, will be fifty percent more than the normal 
amount required to be paid.
    22. We proposed and sought comment on upfront payments in the 
Auction No. 35 Public Notice. In light of the comments we received in 
response and the rules adopted in the C/F Block Sixth Report and Order, 
we now propose the following formulae for upfront payments:

Tier 1
    (i) 15 MHz licenses--2.5% of most recent net high bid for C block 
licenses in same BTA
    (ii) 10 MHz licenses--1.6% of most recent net high bid for C block 
licenses in same BTA
Tier 2
    (i) 15 MHz licenses--1.25% of most recent net high bid for C block 
licenses in same BTA
    (ii) 10 MHz licenses--1.0% of most recent net high bid for C block 
licenses in same BTA

A complete list of all licenses, including the related population and 
upfront payments, is included as Attachment A of the complete Public 
Notice. We seek comment on this proposal.
    23. For Auction No. 35, we further propose that the amount of the 
upfront payment submitted by a bidder will determine the initial 
maximum eligibility (as measured in bidding units) for each bidder. 
Upfront payments will not be attributed to specific licenses, but 
instead will be translated into bidding units to define a bidder's 
initial maximum eligibility, which cannot be increased during the 
auction. Thus, in calculating the upfront payment amount, an applicant 
must determine the maximum number of bidding units it may wish to bid 
on (or hold high bids on) in any single round, and submit an upfront 
payment covering that number of bidding units. We seek comment on this 
proposal.

C. Activity Rules

    24. In order to ensure that the auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively on a 
percentage of their maximum bidding eligibility during each round of 
the auction rather than waiting until the end to participate. A bidder 
that does not satisfy the activity rule will either lose bidding 
eligibility in the next round or use an activity rule waiver, if any 
remain.
    25. We propose to divide the auction into three stages: Stage One, 
Stage Two, and Stage Three--each characterized by an increased activity 
requirement. The auction will start in Stage One. We propose 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

[[Page 55247]]

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 each stage. However, we further 
propose that the Bureau retain the discretion to change stages 
unilaterally by announcement during the auction. In exercising this 
discretion, the Bureau will consider a variety of measures of bidder 
activity, including, but not limited to, the auction activity level, 
the percentage of licenses (as measured in bidding units) on which 
there are new bids, the number of new bids, and the percentage increase 
in revenue. We seek comment on these proposals.
    26. For Auction No. 35, we propose the following activity 
requirements:
    Stage One: In each round of Stage One, a bidder desiring to 
maintain its current eligibility is required to be active on licenses 
encompassing at least 80 percent of its current bidding eligibility. 
Failure to maintain the requisite activity level will result in a 
reduction in the bidder's bidding eligibility in the next round of 
bidding (unless an activity rule waiver is used). During Stage One, 
reduced eligibility for the next round will be calculated by 
multiplying the current round activity by five-fourths (5/4).
    Stage Two: In each round of the second stage of the auction, a 
bidder desiring to maintain its current eligibility is required to be 
active on at least 90 percent of its current bidding eligibility. 
During Stage Two, reduced eligibility for the next round will be 
calculated by multiplying the current round activity by ten-ninths (10/
9).
    Stage Three: In each round of Stage Three, a bidder desiring to 
maintain its current eligibility is required to be active on 98 percent 
of its current bidding eligibility. In this final stage, reduced 
eligibility for the next round will be calculated by multiplying the 
current round activity by fifty-fortyninths (50/49).
    We seek comment on these proposals. If commenters believe that 
these activity rules should be changed, they should explain their 
reasoning and comment on the desirability of an alternative approach. 
Commenters are advised to support their claims with analyses and 
suggested alternative activity rules.

D. Activity Rule Waivers and Reducing Eligibility

    27. 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 
rule waivers are principally a mechanism for auction participants to 
avoid the loss of auction eligibility in the event that exigent 
circumstances prevent them from placing a bid in a particular round.
    28. The FCC auction system assumes that bidders with insufficient 
activity would prefer to use an activity rule waiver (if available) 
rather than lose bidding eligibility. Therefore, the system will 
automatically apply a waiver (known as an ``automatic waiver'') at the 
end of any bidding period where a bidder's activity level is below the 
minimum required unless: (1) There are no activity rule waivers 
available; or (2) the bidder overrides the automatic application of a 
waiver by reducing eligibility, thereby meeting the minimum 
requirements.
    29. A bidder with insufficient activity may wish to reduce its 
bidding eligibility rather than use an activity rule waiver. If so, the 
bidder 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. 
Once eligibility has been reduced, a bidder will not be permitted to 
regain its lost bidding eligibility.
    30. A bidder may proactively use an activity rule waiver as a means 
to keep the auction open without placing a bid. If a bidder submits a 
proactive waiver (using the proactive waiver function in the bidding 
software) during a bidding period in which no bids or withdrawals are 
submitted, the auction will remain open and the bidder's eligibility 
will be preserved. An automatic waiver invoked in a round in which 
there are no new valid bids or withdrawals will not keep the auction 
open.
    31. We propose that each bidder in Auction No. 35 be provided with 
five activity rule waivers that may be used at the bidder's discretion 
during the course of the auction. We seek comment on this proposal.

E. Information Relating to Auction Delay, Suspension or Cancellation

    32. For Auction No. 35, we propose that, by public notice or by 
announcement during the auction, the Bureau may delay, suspend or 
cancel the auction in the event of natural disaster, technical 
obstacle, evidence of an auction security breach, unlawful bidding 
activity, administrative or weather necessity, or for any other reason 
that affects the fair and competitive conduct of competitive bidding. 
In such cases, the Bureau, in its sole discretion, may elect to resume 
the auction starting from the beginning of the current round, resume 
the auction starting from some previous round, or cancel the auction in 
its entirety. Network interruption may cause the Bureau to delay or 
suspend the auction. 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. We seek comment on this proposal.

III. Bidding Procedures

A. Round Structure

    33. The Commission will use its Automated Auction System to conduct 
the electronic simultaneous multiple round auction format for Auction 
No. 35. 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 auction 
format will consist of sequential bidding rounds, each followed by the 
release of round results. Details regarding the location and format of 
round results will be included in the same public notice.
    34. 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. We seek 
comment on this proposal.

B. Reserve Price or Minimum Opening Bid

    35. The Balanced Budget Act calls upon the Commission to prescribe 
methods by which a reasonable reserve price will be required or a 
minimum opening bid established when FCC licenses are subject to 
auction (i.e., because the Commission has accepted mutually exclusive 
applications for those licenses), unless the Commission determines that 
a reserve price or minimum bid is not in the public interest. 
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.
    36. 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

[[Page 55248]]

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.
    37. In light of the Balanced Budget Act, the Bureau proposes to 
establish minimum opening bids for Auction No. 35. 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.
    38. Because both the C and F spectrum blocks are being auctioned at 
the same time, under the same general conditions, the Commission 
believes that it is appropriate to use a common baseline to establish 
the minimum opening bid formulae for all of the licenses in the 
auction. The net high bids from prior C block auctions provide the most 
comprehensive broadband PCS baseline. We, therefore, propose to base 
the minimum opening bids for each license available in Auction No. 35, 
including F block licenses, on the most recent net high bid for the C 
block license in the same BTA.
    39. We proposed and sought comment on minimum opening bids in the 
Auction No. 35 Public Notice. In light of the comments received in 
response and the rules adopted in the C/F Block Sixth Report and Order, 
we now propose the following formulae for minimum opening bids:

Tier 1
    (i) 15 MHz licenses--5% of most recent net high bid for C block 
licenses in same BTA
    (ii) 10 MHz licenses--3.2% of most recent net high bid for C block 
licenses in same BTA

Tier 2
    (i) 15 MHz licenses--2.5% of most recent net high bid for C block 
licenses in same BTA
    (ii) 10 MHz licenses--1.6% of most recent net high bid for C block 
licenses in same BTA

    40. The specific minimum opening bid for each license available in 
Auction No. 35 is set forth in Attachment A of the complete Public 
Notice. We believe these minimum opening bids best meet the objectives 
of our auction authority in establishing reasonable minimum opening 
bids. The Commission believes these minimum opening bids will speed the 
course of the auction and ensure that valuable assets are not sold for 
nominal prices without unduly interfering with the efficient assignment 
of licenses. Minimum opening bids are reducible at the discretion of 
the Bureau. This discretion will allow the Bureau flexibility to adjust 
the minimum opening bids if circumstances warrant. We emphasize, 
however, that such discretion will be exercised, if at all, sparingly 
and early in the auction, i.e., before bidders lose all waivers and 
begin to lose substantial eligibility. During the course of the 
auction, the Bureau will not entertain any bidder requests to reduce 
the minimum opening bid on specific licenses. We seek comment on these 
proposals.
    41. If commenters believe that these 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 minimum opening bids, we 
particularly seek comment on such factors as, among other things, the 
amount of spectrum being auctioned, levels of incumbency, the 
availability of technology to provide service, the size of the 
geographic service areas, issues of interference with other spectrum 
bands and any other relevant factors that could reasonably have an 
impact on valuation of C and F block licenses. Alternatively, comment 
is sought on whether, consistent with the Balanced Budget Act, the 
public interest would be served by having no minimum opening bid or 
reserve price.

C. Minimum Accepted Bids and Bid Increments

    42. Once there is a standing high bid on a license, a bid increment 
will be applied to that license to establish a minimum acceptable bid 
for the following round. For Auction No. 35, we propose to use a 
smoothing methodology to calculate bid 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. 
We seek comment on these proposals.
    43. 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.
    44. 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 (10%), and the maximum percentage increment at 0.2 
(20%).

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. Multiple increment bids are not rounded according 
to the previously stated rounding rule; they are received,

[[Page 55249]]

displayed, and stored by the Automated Auction System as non-rounded 
dollar amounts resulting from the following formula:

Amount Bid = High Bid + (Bid Multiplier * Bid Increment).

Examples

License 1
C = 0.5, N = 0.1, M = 0.2
    Round 1 (2 new bids, high bid = $1,000,000)--
    i. Calculation of percentage increment for round 2 using 
exponential smoothing:

A1 = (0.5 * 2)  + (0.5 * 0) = 1
I2 = The smaller of ((1  + 1) * 0.1) = 0.2 or 0.2 
(the maximum percentage increment)

    ii. Minimum bid increment for round 2 using the percentage 
increment (I2 from above)

0.2 * $1,000,000 = $200,000

    iii. Minimum acceptable bid for round 2 = $1,200,000
    Round 2 (3 new bids, high bid = $2,000,000)--
    i. Calculation of percentage increment for round 3 using 
exponential smoothing:

A2 = (0.5 * 3) + (0.5 * 1) = 2
I3 = The smaller of ((1  + 2) * 0.1) = 0.3 or 0.2 
(the maximum percentage increment)

    ii. Minimum bid increment for round 3 using the percentage 
increment (I3 from above)

0.2 * $2,000,000 = $400,000

    iii. Minimum acceptable bid for round 3 = $2,400,000
    Round 3 (1 new bid, high bid = $2,400,000)--
    i. Calculation of percentage increment for round 4 using 
exponential smoothing:

A3 = (0.5 * 1) + (0.5 * 2) = 1.5

I4 = The smaller of ((1  + 1.5) * 0.1) = 0.25 or 
0.2 (the maximum percentage increment)

    ii. Minimum bid increment for round 4 using the percentage 
increment (I4 from above)

0.2 * $2,400,000 = $480,000

    iii. Minimum acceptable bid for round 4 = $2,880,000

D. Information Regarding Bid Withdrawal and Bid Removal

    45. For Auction No. 35, we propose 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.
    46. Once a round closes, a bidder may no longer remove a bid. 
However, in the next round, a bidder may withdraw standing high bids 
from previous rounds using the withdraw bid function. A high bidder 
that withdraws its standing high bid from a previous round is subject 
to the bid withdrawal payment provisions. We seek comment on these bid 
removal and bid withdrawal procedures.
    47. In the Part 1 Third Report and Order, 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.
    48. Applying this reasoning, we propose to limit each bidder in 
Auction No. 35 to withdraw standing high bids in no more than two 
rounds during the course of the auction. To permit a bidder to withdraw 
bids in more than two rounds would likely encourage insincere bidding 
or the use of withdrawals for anti-competitive strategic purposes. The 
two rounds in which withdrawals are utilized will be at the bidder's 
discretion; withdrawals otherwise must be in accordance with the 
Commission's rules. There is no limit on the number of standing high 
bids that may be withdrawn in either of the rounds in which withdrawals 
are utilized. Withdrawals will remain subject to the bid withdrawal 
payment provisions specified in the Commission's rules. We seek comment 
on this proposal.

E. Stopping Rule

    49. For Auction No. 35, 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.
    50. 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.
    51. The Bureau proposes to 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.
    52. Finally, we propose that the Bureau reserve the right to 
declare that the auction will end after a specified number of 
additional rounds (``special stopping rule''). If the Bureau invokes 
this special stopping rule, it will accept bids in the final round(s) 
only for licenses on which the high bid increased in at least one of 
the preceding specified number of rounds. The Bureau proposes to 
exercise this option only in certain circumstances, such as, for 
example, where the auction is proceeding very slowly, there is minimal 
overall bidding activity, or it appears likely that the auction will 
not close within a reasonable period of time. Before exercising this 
option, the Bureau is likely to attempt to increase the pace of the 
auction by, for example, moving the auction into the next stage (where 
bidders would be required to maintain a higher level of bidding 
activity), increasing the number of bidding rounds per day, and/or 
increasing the amount of the minimum bid increments for the limited 
number of licenses where there is still a high level of bidding 
activity. We seek comment on these proposals.


[[Page 55250]]


Federal Communications Commission.
Margaret Wiener,
Deputy Chief, Auctions and Industry Analysis Division, Wireless 
Telecommunications Bureau.
[FR Doc. 00-23502 Filed 9-12-00; 8:45 am]
BILLING CODE 6712-01-P