[Federal Register Volume 67, Number 31 (Thursday, February 14, 2002)]
[Notices]
[Pages 6925-6928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3624]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-02-31-A (Auction No. 31); DA 02-260]


Auction of Licenses in the 747-762 And 777-792 MHz Bands 
Scheduled for June 19, 2002 Comment Sought on Adding to Auction 
Inventory and Further Modifying Package Bidding Procedures

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document seeks comment on the potential inclusion of 24 
additional licenses in Auction No. 31 and potential modifications of 
previously-announced procedures for Auction No. 31.

DATES: Comments are due on or before February 19, 2002 and reply 
comments are due on or before February 26, 2002.

ADDRESSES: Comments and reply comments must be sent by electronic mail 
to the following address: [email protected]. The electronic mail 
containing the comments or reply comments must include a subject or 
caption referring to Auction No. 31 Comments. The Bureau requests that 
parties format any attachments to electronic mail as Adobe 
Acrobat (pdf) or Microsoft Word documents. Copies 
of comments and reply comments will be available for public inspection 
during regular business hours in the FCC Public Reference

[[Page 6926]]

Room, Room CY-A257, 445 12th Street, SW., Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Contact the following employees of 
Auctions and Industry Analysis Division, Wireless Telecommunications 
Bureau, at (202) 418-0660: for legal questions: Howard Davenport; for 
general auction questions: Craig Bomberger or Martha Stancill; for 
software questions: Karen Wrege.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 31 
Comment Public Notice released February 4, 2002. The complete text of 
the Auction No. 31 Comment Public Notice, including Attachment A 
``Using the Smoothed Anchoring Method to Obtain Current Price 
Estimates,'' is available for public inspection and copying during 
regular business hours at the FCC Reference Information Center, Portals 
II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The 
Auction No. 31 Comment Public Notice may also be purchased from the 
Commission's duplicating contractor, Qualex International, Portals II, 
445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 
202-863-2893, facimile 202-863-2898, or via e-mail [email protected].
    1. By the Auction No. 31 Comment Public Notice, the Wireless 
Telecommunications Bureau (``Bureau'') seeks comment on the potential 
inclusion of 24 additional licenses in Auction No. 31 and potential 
modifications of previously-announced procedures for Auction No. 31. In 
the Auction No. 31 Procedures Public Notice, 65 FR 12251 (March 8, 
2000), the Bureau established procedures for the auction of the twelve 
licenses in the 747-762 and 777-792 MHz bands (the ``Upper 700 MHz'' 
bands). The Bureau later revised its procedures to include package 
bidding in Auction No. 31 Package Bidding Procedures Public Notice, 65 
FR 43361 (July 13, 2000), and subsequently modified those procedures in 
the Auction No. 31 Package Bidding Procedures Modification Public 
Notice, 66 FR 7907 (January 26, 2001). In light of subsequent 
developments and further analysis, the Bureau has determined that it 
may be appropriate to make further refinements. Accordingly, the 
Auction No. 31 Comment Public Notice seeks comment on whether to:
    i. Include 24 licenses from the 698-746 MHz band (the ``Lower 700 
MHz'' band) in Auction No. 31;
    ii. Increase the number of bidder-defined packages if the Lower 700 
MHz band licenses are included in Auction No. 31;
    iii. Change part (iii) of the minimum acceptable bid calculation by 
either substituting a new method of calculating minimum acceptable bids 
(Option 1) or modifying the existing formula for calculating minimum 
acceptable bids for new packages (Option 2) and, if Option 1 is 
adopted, consider all bids submitted when determining provisionally 
winning bid sets; and
    iv. Establish an aggregate reserve price or increase the 
previously-established minimum opening bids.

I. Whether To Include 24 Licenses From the Lower 700 MHz Band in 
Auction No. 31

    2. The Bureau seeks comment on whether to include 24 licenses from 
the Lower 700 MHz band in Auction No. 31. These 24 licenses consist of 
licenses for four blocks of spectrum in each of the six regions known 
as the 700 MHz band economic area groupings (``700 MHz band EAGs''). In 
each 700 MHz band EAG, four Lower 700 MHz band licenses are for the use 
of two 12 megahertz blocks (each block consists of paired 6 megahertz 
segments) and two 6 megahertz blocks that are unpaired and contiguous.
    3. Including these 24 Lower 700 MHz band licenses in Auction No. 31 
would enable bidders to create and bid on packages containing 700 MHz 
band EAG licenses from both the Upper and Lower 700 MHz bands. 
Commenters should address any potential advantages or disadvantages of 
permitting package bidding on such combinations and facilitating the 
substitution of spectrum in the Upper and Lower 700 MHz bands. 
Interested parties are advised that the Bureau also seeks comment 
regarding this issue in a separate Public Notice addressing procedures 
for the auction of licenses in the Lower 700 MHz bands (Auction No. 
44).
    4. If these 24 additional licenses are included in Auction No. 31, 
operational considerations would require the Bureau also to adopt the 
more comprehensive revision to the minimum acceptable bid calculation 
described as Option 1 in Section III(B).

II. Whether to Increase the Number of Bidder-Defined Packages

    5. The Bureau seeks comment on whether to increase the number of 
bidder-defined packages if the Bureau includes 24 licenses from the 
Lower 700 MHz band in Auction No. 31. Taking into account various 
factors, including the available licenses, the Bureau previously 
announced that Auction No. 31 bidders would be permitted to create and 
bid on up to twelve different packages of their own choosing during 
Auction No. 31. Commenters are asked to address whether the inclusion 
of additional licenses in Auction No. 31 would create any need to 
increase the number of bidder-defined packages, considering that 
bidder-defined packages may contain any number of licenses, up to all 
the licenses available in the auction.

III. Whether to Change the Minimum Acceptable Bid Calculation

A. Summary of Existing Procedures

    6. The Bureau established the current three-part formula for 
calculating minimum acceptable bids in the Auction No. 31 Package 
Bidding Procedures Modification Public Notice. Pursuant to the existing 
procedure, the minimum acceptable bid for any particular license or 
package would be the greatest of: (i) The applicable minimum opening 
bid; (ii) the bidder's previous high bid on that license/package plus 
x%, where the Bureau would specify the value of x in each round; and 
(iii) the bidder's previous high bid on that particular license/package 
plus an amount based on the increase in the bidder's previous high bid 
needed to create a tie with the provisional winners. If the bidder has 
not bid on a license or an already constructed package, the bidder's 
previous high bid for purposes of calculating part (iii) would be the 
applicable minimum opening bid.
    7. With respect to part (iii), the Bureau established that it would 
determine the amount to add to a given previous high bid in three 
steps. First, the Bureau would calculate a shortfall for the given bid, 
with the shortfall being the difference between the revenue of the 
provisionally winning bid set and the maximum total revenue associated 
with a set of bids that includes the given bid and satisfies all other 
constraints for determining a provisionally winning set. Second, the 
Bureau would determine a deficit for the given bid, or its share of the 
shortfall produced by the set, in two stages. Initially, the Bureau 
would determine the ratio of bidding units in the given bid's 
particular license/package to bidding units for all the non-
provisionally winning bids in the set of bids that produced the 
shortfall. (If more than one set of bids yields the same shortfall for 
a given bid, the Bureau would use the set that includes the most 
provisionally winning bidding units.) The Bureau then would multiply 
the given bid's shortfall by this ratio to arrive at the deficit for 
the given bid. Third, and finally, the Bureau would

[[Page 6927]]

determine the amount to be added to the given previous high bid by 
multiplying the given bid's deficit by y%. At the beginning of the 
auction, the Bureau would set y at 100 but would retain the discretion 
to adjust the amount during the course of the auction.
    8. However, part (iii) cannot be used to calculate the minimum 
acceptable bid for a package in the same round that the particular 
package is created because no shortfall or deficit was calculated with 
respect to that particular package at the end of the prior round. For 
such a new package, the Bureau established the following procedures. 
Generally, the third part of the initial minimum acceptable bid formula 
would be calculated for new packages by multiplying the number of 
bidding units in the package by the lowest $/bidding unit of any 
provisionally winning bid in the last five rounds. However, in the 
event the new package is the global package of all licenses available 
in the auction, the minimum acceptable bid would be the revenue 
generated by the provisionally winning bid set in the previous round 
plus w%. This assures that no bid for the global package would be 
accepted that does not exceed the maximum revenue in the preceding 
round.
    9. Pursuant to current Auction No. 31 procedures, provisionally 
winning bids would be determined by considering: (i) For each bidder, 
bids from the most recent two rounds in which the bidder submitted bids 
or renewed bids; (ii) all provisionally winning bids from the prior 
round; and (iii) a set of FCC bids on each license at some small amount 
less than the applicable minimum opening bid. Furthermore, a bidder's 
bids submitted in a given round would be treated as mutually exclusive 
of the bidder's bids submitted in other rounds.

B. Proposed Procedures--Option 1

    10. Option 1 involves two significant changes to current 
procedures, the first being a comprehensive revision in calculating 
part (iii) of the minimum acceptable bid formula and the second 
regarding the bids considered when determining provisionally winning 
bids. These changes would be made jointly or not at all. Adopting the 
first proposed change would enable the Bureau to include additional 
licenses in Auction No. 31, as discussed in Section I; could improve 
the pace of the auction; and would make it feasible to consider all 
bids submitted during the auction when determining provisionally 
winning bids. Considering all bids submitted during the auction when 
determining provisionally winning bids would make bidders responsible 
for all bids throughout the auction and may discourage strategic 
bidding. On the other hand, considering all bids submitted might make 
it more complex for participants and other observers to track the 
auction. The Bureau seeks comment on both aspects of the proposal.
i. Minimum Acceptable Bids
    11. As the first part of Option 1, the Bureau proposes to replace 
part (iii) of the minimum acceptable bid formula with a current price 
estimate of the license or package plus z%. A current price estimate 
for each license would be calculated at the close of each round using 
the Smoothed Anchoring Method (see Attachment A of the Auction No. 31 
Comment Public Notice). The current price estimate for a package would 
be the sum of the current price estimates of the licenses that comprise 
the package. Pursuant to this proposal, the Bureau would set z to be 
zero at the beginning of the auction but would retain the discretion to 
adjust the amount, including setting it at less than zero, during the 
course of the auction in order to provide control over the pace of the 
auction.
    12. Implementing current price estimates for licenses and packages 
would preclude the need for a special version of part (iii) of the 
minimum acceptable bid formula for newly-created packages. However, the 
Bureau would retain the exception for calculating the minimum 
acceptable bid for a newly-created global package. After the first 
round of the auction, the minimum acceptable bid for the global package 
would always be the revenue generated by the provisionally winning bid 
set in the previous round plus w%. The Bureau would make this 
distinction in order to retain the ability to ensure that bids for the 
global package would continue to increase even if it were to employ a 
percentage z that would not guarantee that outcome. That is, the Bureau 
might want to set w higher than z.
ii. Bids Considered
    13. As the second part of Option 1, the Bureau would consider all 
bids submitted during the auction when determining the provisionally 
winning set of bids. It is impractical to consider every bid submitted 
during the auction when calculating shortfalls and deficits in each 
round pursuant to the existing minimum acceptable bid formula. In the 
event that the Bureau calculates minimum acceptable bids using current 
price estimates, it would become feasible to consider every bid 
submitted when calculating minimum acceptable bids. As in the 
previously-established procedures, bids placed and/or renewed in 
different rounds would be considered as mutually exclusive--a bidder 
could be a provisional winner only on bids placed in the same round.

C. Proposed Procedures--Option 2

    14. Option 2 involves a more modest change to current procedures, 
limited to revising the third part of the minimum acceptable bid 
formula applicable to newly-created packages. Pursuant to this 
alternative proposal, for newly-created packages, the third part of the 
minimum acceptable bid formula would be calculated by multiplying the 
number of bidding units in the package by the average dollar per 
bidding unit of all provisionally winning bids in the past five rounds. 
The average dollar per bidding unit would be calculated by dividing the 
sum of gross revenues from the provisionally winning bid sets over the 
last five rounds by five times the sum of all of bidding units in the 
auction. This exception would not apply to bids for the global package, 
however, for which the minimum acceptable bid would be the maximum 
revenue from the previous round plus w%.
    15. This alternative proposed revision to the calculation of 
minimum acceptable bids could improve the pace of the auction. The 
Bureau seeks comment on this proposal.

IV. Whether to Establish an Aggregate Reserve Price or Increase 
Previously-Established Minimum Opening Bids

    16. The Communications Act, see 47 U.S.C. 309(j)(4)(F), calls upon 
the Commission to prescribe methods by which a reasonable reserve price 
will be required, or a minimum opening bid will be established, when 
the Commission auctions licenses, unless the Commission determines that 
a reserve price or a minimum opening bid is not in the public interest. 
Consistent with this mandate, the Commission has directed the Bureau to 
seek comment on the use of a minimum opening bid and/or reserve price 
and on the methodology to be employed in establishing each of these 
mechanisms prior to the start of each auction. After seeking comment on 
relevant issues, the Bureau established minimum opening bids for 
Auction No. 31 in the Auction No. 31 Package Bidding Procedures Public 
Notice. The Bureau further established that the minimum opening bids 
for packages would be the sum of the minimum opening bids for the 
licenses comprising the package.
    17. For Auction No. 31, to supplement the established minimum 
opening bids,

[[Page 6928]]

the Bureau seeks comment on establishing an aggregate reserve price 
that exceeds the sum of the minimum opening bids. A reserve price is an 
absolute minimum price below which specified goods will not be sold. 
Bidders, however, may place bids below reserve prices. Furthermore, 
reserve prices can be either public or undisclosed. The spectrum in 
Auction No. 31 is subject to a unique statutory clearance process, 
which the Commission has created incentives to accelerate. In light of 
these complexities, using an aggregate reserve price in addition to 
minimum opening bids may be appropriate to ensure ``a recovery for the 
public of a portion of the value of the public spectrum resource,'' 47 
U.S.C. 309(j)(3)(C) commensurate with Congressional expectations.
    18. With respect to the appropriate level of an aggregate reserve 
price, Congress has estimated that the Upper 700 MHz band licenses 
available for auction will generate $2.6 billion in revenue. The 
Commission's previous 700 MHz guard bands auctions raised nearly $541 
million. Therefore, the Bureau seeks comment on the possibility of an 
aggregate reserve in Auction No. 31 equal to $2.6 billion in gross 
bids. This gross bid figure should result in net revenues approximating 
the Congressional revenue estimate minus net revenues from the 700 MHz 
guard bands auctions. Under this approach, the Commission only would 
accept the provisionally winning set of bids at the close of Auction 
No. 31 if the gross amount of the provisionally winning set of bids 
equals or exceeds the $2.6 billion aggregate reserve price.
    19. Commenters are asked to address how the public interest would 
or would not be served by adopting an aggregate reserve price. In 
particular, given all the circumstances of this auction, the Bureau 
seeks comment on whether the public interest would be served by 
establishing an aggregate reserve price to ensure that the Commission 
recovers for the public a portion of the value of the public spectrum 
resource commensurate with Congressional expectations. Additionally, 
the Bureau seeks comment on whether an aggregate reserve price would 
introduce an added threshold problem with which bidders would have to 
contend. The threshold problem is defined and discussed in the Auction 
No. 31 Package Bidding Procedures Public Notice.
    20. Commenters also should address whether any aggregate reserve 
price should be made public or remain undisclosed. Commenters 
supporting disclosure should address when and how any aggregate reserve 
price would be made public. For example, should it be disclosed when 
the Bureau announces the qualified bidders for the auction? Or when the 
auction begins? In addition, commenters should address whether the 
Bureau should make periodic announcements during the auction regarding 
whether bids meet the aggregate reserve price or postpone any 
announcements until after the auction closes. Commenters supporting an 
undisclosed aggregate reserve price should comment on whether the 
Bureau should announce whether bids meet any aggregate reserve at any 
time before the auction closes. For example, should the Bureau announce 
whether bids meet any aggregate reserve price if the Bureau keeps the 
auction open by exercising its discretion under the stopping rule?
    21. Commenters addressing the level of the proposed aggregate 
reserve price should support their claims with valuation analyses and 
suggested reserve prices or formulas. In addressing these issues, 
commenters may also wish to address the possibility that 24 lower 700 
MHz bands licenses may be added to the inventory of Auction No. 31. Any 
commenters suggesting license-by-license reserve prices, in place of 
the proposed aggregate reserve price, should explain with specificity 
how reserve prices for individual licenses would be established. The 
Bureau particularly seeks comment on such factors as, among other 
things, the amount of spectrum being auctioned, levels and 
circumstances of incumbency, the availability of technology to provide 
service, the size of the geographic service areas, issues of 
interference with other spectrum bands and any other relevant factors 
that reasonably could have an impact on valuation of the 747-762 and 
777-792 MHz bands.
    22. As an alternative, the Bureau also seeks comment on increasing 
the previously-established minimum opening bids in Auction No. 31. The 
previously-established minimum opening bids total $720 million. If 
commenters believe that the public interest would be served by 
increasing the current minimum opening bids, they should support their 
claims with valuation analyses and suggested minimum opening bid levels 
or formulas. With respect to the amounts of the minimum opening bids, 
the Bureau particularly seeks comment on such factors as, among other 
things, the amount of spectrum being auctioned, levels of incumbency, 
the availability of technology to provide service, the size of the 
geographic service areas, issues of interference with other spectrum 
bands and any other relevant factors that reasonably could have an 
impact on valuation of the 747-762 and 777-792 MHz bands.

V. Conclusion

    23. Comments are due on or before February 19, 2002, and reply 
comments are due on or before February 26, 2002. Because of the 
disruption of regular mail and other deliveries in Washington, DC, the 
Bureau requires that all comments and reply comment be filed 
electronically. Comments and reply comments must be sent by electronic 
mail to the following address: [email protected]. The electronic mail 
containing the comments or reply comments must include a subject or 
caption referring to Auction No. 31 Comments. The Bureau requests that 
parties format any attachments to electronic mail as Adobe 
Acrobat (pdf) or Microsoft Word documents. Copies 
of 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.
    24. In addition, the Bureau requests that commenters fax a courtesy 
copy of their comments and reply comments to the attention of Kathryn 
Garland at (717) 338-2850.
    25. This proceeding has been designated as a ``permit-but-
disclose'' proceeding in accordance with the Commission's ex parte 
rules. Persons making oral ex parte presentations are reminded that 
memoranda summarizing the presentations must contain summaries of the 
substance of the presentations and not merely a listing of the subjects 
discussed. More than a one-or two-sentence description of the views and 
arguments presented is generally required. Other rules pertaining to 
oral and written ex parte presentations in permit-but-disclose 
proceedings are set forth in Sec. 1.1206(b) of the Commission's rules.

Federal Communications Commission.
Margaret Wiener,
Chief, Auctions and Industry Analysis Division, WTB.
[FR Doc. 02-3624 Filed 2-13-02; 8:45 am]
BILLING CODE 6712-01-P