[Federal Register Volume 68, Number 25 (Thursday, February 6, 2003)]
[Notices]
[Pages 6167-6173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3039]


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

FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-03-53-A (Auction No. 53); DA 03-286]


Auction of Multichannel Video Distribution and Data Service 
Licenses Rescheduled for June 25, 2003; Comment Sought on Reserve 
Prices or Minimum Opening Bids and Other Auction Procedures

AGENCY: Federal Communications Commission.

ACTION: Notice.

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

SUMMARY: This document announces that the auction of licenses in the 
Multichannel Video Distribution and Data Service (``MVDDS'') is 
rescheduled for June 25, 2003 and seeks comment on specific terms and 
conditions of this auction.

DATES: Comments are due on or before February 13, 2003, and reply 
comments are due on or before February 20, 2003.

ADDRESSES: Comments and reply comments must be sent by electronic mail 
to the following address: [email protected]. See SUPPLEMENTARY 
INFORMATION for filing instructions.

FOR FURTHER INFORMATION CONTACT: For legal questions: Brian Carter 
(202) 418-0660. For general auction questions: Roy Knowles (717) 338-
2888 or Barbara Sibert (717) 338-2888. For service rule questions: 
Jennifer Burton (legal), Michael Pollak (technical) at (202) 418-0680.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 49 
Comment Public Notice released on January 30, 2003. The complete text 
of the Auction No. 49 Comment Public Notice 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. 49 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, facsimile 202-863-2898, 
or via e-mail [email protected].
    1. By the Auction No. 49 Comment Public Notice, the Wireless 
Telecommunications Bureau (``Bureau'') announces that the auction of 
licenses in the MVDDS previously scheduled to commence on August 6, 
2003 (``Auction No. 53'') has been rescheduled for June 25, 2003. The 
Auction No. 49 Comment Public Notice seeks comment on specific terms 
and conditions of this auction. The key dates are listed:

[[Page 6168]]

    Auction Seminar: May 1, 2003.
    Short Form Deadline: May 12, 2003.

(FCC Form 175 Application)

    Upfront Payment Deadline: May 30, 2003.
    Mock Auction: June 20, 2003.
    Auction Begins: June 25, 2003.
    2. Auction No. 53 will offer one block of unpaired spectrum in the 
12.2-12.7 GHz band. MVDDS licensees may use this spectrum for any 
digital fixed one-way non-broadcast service including direct-to-home/
office wireless service.\1\ Mobile and aeronautical services are not 
authorized. Two-way services may be provided by using other spectrum or 
media for the return or upstream path.\2\
---------------------------------------------------------------------------

    \1\ 47 CFR 101.1407. Broadcast services are intended for 
reception of the general public and not on a subscribership basis.
    \2\ The following eligibility restriction applies to MVDDS 
licenses: no cable operator, nor any entity owning an attributable 
interest in a cable operator, may hold an attributable interest in 
an MVDDS license if such cable operator's service area significantly 
overlaps the MVDDS license area. See 47 CFR 101.1412.
---------------------------------------------------------------------------

I. Background

    3. In the MVDDS Second Report and Order, 67 FR 43031 (June 26, 
2002), the Commission adopted Component Economic Areas (``CEAs'') as 
the geographic licensing areas for this service. CEAs are based on 
Economic Areas delineated by the United States Department of Commerce. 
There are a total of 354 CEAs and FCC-defined CEA-like service areas 
that encompass the United States, American Samoa, Guam, the Northern 
Mariana Islands, San Juan (Puerto Rico), Mayaguez/Aguadilla-Ponce 
(Puerto Rico), and the United States Virgin Islands. The 354 CEA 
service areas are based on the 348 Component Economic Areas delineated 
by the Regional Economic Analysis Division, Bureau of Economic 
Analysis, U.S. Department of Commerce, February 1995, with the 
following six FCC-defined service area additions: American Samoa, Guam, 
the Northern Mariana Islands, San Juan (Puerto Rico), Mayaguez/
Aguadilla-Ponce (Puerto Rico), and the United States Virgin Islands. 
County definitions for the 348 U.S. Department of Commerce Component 
Economic Areas can be obtained from a file posted on the internet at 
http://www.fcc.gov/oet/info/maps/areas/ via the link labeled ``CEA 
DATA.'' (This link is to a compressed file (ceadata.zip) that includes 
the text file Eacodes.fin. The Eacodes.fin file includes county, metro 
area, Component Economic Area, and Economic Area codes for each county, 
and alphabetic names for all counties, Component Economic Areas, and 
Economic Areas.)
    4. The Commission has before it petitions for reconsideration of 
the MVDDS Second Report and Order, and a pleading filed in response to 
these petitions that urges the Commission, inter alia, to reconsider 
its decision to use CEAs and instead use Designated Market Areas 
(``DMAs'') as the geographic licensing areas. DMAs have been developed 
by Nielsen Media Research (``Nielsen'') utilizing audience survey 
information from cable and non-cable households to determine the 
assignment of counties to local television markets.\3\ There are a 
total of 214 DMAs and FCC-defined DMA-like service areas that encompass 
the United States, Guam and the Northern Mariana Islands, Puerto Rico 
and the United States Virgin Islands, and American Samoa.
---------------------------------------------------------------------------

    \3\ See http://www.nielsenmedia.com/DMAs.html. Nielsen 
determines what constitutes a separate market by applying a complex 
statistical formula based upon viewership and other factors. Nielsen 
owns the copyright to the DMA listing.
---------------------------------------------------------------------------

    5. The 214 service areas are based on the 210 DMAs delineated by 
Nielsen in its publication entitled ``U.S. Television Household 
Estimates'' dated September 2002 plus the following four FCC-defined 
service area additions: Alaska--Balance of State (all geographic areas 
of Alaska not included in Nielsen's three DMAs for the state: 
Anchorage, Fairbanks, and Juneau), Guam and the Northern Mariana 
Islands, Puerto Rico and the United States Virgin Islands, and American 
Samoa. While most DMAs consist of one contiguous geographic area, a few 
are composed of multiple noncontiguous areas.
    6. To minimize any delay in the auction process that might result 
from a decision by the Commission to change the MVDDS geographic 
license areas, the Bureau seeks comment on reserve prices, minimum 
opening bids, and other auction procedures as they would apply to an 
auction of either CEA licenses or DMA licenses. With respect to 
licenses for the 210 DMAs developed by Nielsen, the Bureau seeks 
comment on reserve prices, minimum opening bids, and other auction 
procedures as they would apply to DMAs as defined in Nielsen's 
publication entitled ``U.S. Television Household Estimates'' dated 
September 2002.\4\
---------------------------------------------------------------------------

    \4\ This publication lists estimates of television households 
``as of January 2003'' and can be found at Nielsen's Web site. See 
http://www.nielsenmedia.com. Interested parties are advised to 
consult this website and contact Nielsen directly for relevant 
market data.
---------------------------------------------------------------------------

    7. As discussed, the Bureau proposes to use the same auction rules 
and procedures for an auction of MVDDS licenses whether the licenses 
are based on CEAs or DMAs, but it proposes different upfront payments 
and minimum opening bids for each of these geographic licensing areas.
    8. A complete list of the CEA licenses that are available for 
Auction No. 53 is included in Attachment A of the Auction No. 49 
Comment Public Notice. Attachment B of the Auction No. 49 Comment 
Public Notice provides a complete list of the licenses that would be 
available in Auction No. 53 if licenses were based on DMAs.
    9. The following table describes the licenses that will be 
auctioned, depending on whether the Bureau uses a CEA or DMA geographic 
license area:

----------------------------------------------------------------------------------------------------------------
                Frequencies                     Bandwidth       Geographic area type         No. of licenses
----------------------------------------------------------------------------------------------------------------
12.2-12.7 GHz..............................         500 MHz                          CEA                    354
12.2-12.7 GHz..............................         500 MHz                       DMA                       214
----------------------------------------------------------------------------------------------------------------

    10. The Balanced Budget Act of 1997 requires the Commission to 
``ensure that, in the scheduling of any competitive bidding under this 
subsection, an adequate period is allowed * * * before issuance of 
bidding rules, to permit notice and comment on proposed auction 
procedures * * *.'' Consistent with the provisions of the Balanced 
Budget Act and to ensure that potential bidders have adequate time to 
familiarize themselves with the specific 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. The 
Bureau therefore seeks comment on the issues set forth relating to 
Auction No. 53. Parties submitting comments in response to the Auction 
No. 49 Comment Public Notice should file an additional copy of such 
comments in ET Docket No. 98-206. Instructions for filing comments are 
provided.

[[Page 6169]]

II. Auction Structure

A. Simultaneous Multiple Round (SMR) Auction Design

    11. The Bureau proposes to award all licenses included in Auction 
No. 53 in a 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. The Bureau 
seeks comment on this proposal.

B. Upfront Payments and Initial Maximum Eligibility

    12. The Bureau has been 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. Upfront 
payments related to the specific spectrum subject to auction protect 
against frivolous or insincere bidding and provide the Commission with 
a source of funds from which to collect payments owed at the close of 
the auction. With these guidelines in mind for Auction No. 53, the 
Bureau proposes to calculate upfront payments on a license-by-license 
basis.
    13. The Bureau proposes to calculate upfront payments on a license-
by-license basis for CEAs using the following formula: $0.025 * License 
Area Population with a minimum of $1,000 per license.
    14. Accordingly, the Bureau lists all CEA licenses, including the 
related license area population and proposed upfront payment for each 
license, in Attachment A of the Auction No. 49 Comment Public Notice. 
The Bureau seeks comment on this proposal.
    15. The Bureau proposes to calculate upfront payments on a license-
by-license basis for DMAs as follows: From the total upfront payment 
amount for all CEA licenses ($7,139,300), subtract the upfront payments 
for CEA349-CEA354 ($104,700), for a remainder of $7,034,600. For each 
DMA (DMA001-DMA210), the upfront payment is calculated by multiplying 
$7,034,600 by a percentage that is the ratio of television households 
in that DMA to the total television households in DMA001-DMA210, with a 
minimum of $1,000 per license. The upfront payment for DMA211 is set at 
the minimum upfront payment amount of $1,000. Upfront payments for 
DMA212-DMA214 are calculated as the sum of the upfront payments for the 
corresponding CEA licenses.\5\ Accordingly, the Bureau lists all DMA 
licenses, including the related percentage of total television 
households and proposed upfront payment for each license, in Attachment 
B of the Auction No. 49 Comment Public Notice. The Bureau seeks comment 
on this proposal.
---------------------------------------------------------------------------

    \5\ That is, the upfront payment for DMA212 equals the sum of 
the upfront payments for CEA352-CEA354; for DMA213, the sum of the 
upfront payments for CEA350 and CEA351; and for DMA214, the upfront 
payment for CEA349.
---------------------------------------------------------------------------

    16. The Bureau further proposes that the amount of the upfront 
payment submitted by a bidder will determine the number of bidding 
units on which a bidder may place bids. This limit is a bidder's 
``maximum initial eligibility.'' Each license is assigned a specific 
number of bidding units equal to the upfront payment listed in 
Attachment A of the Auction No. 49 Comment Public Notice (CEAs) or 
Attachment B of the Auction No. 49 Comment Public Notice (DMAs), on a 
bidding unit per dollar basis. This number does not change as prices 
rise during the auction. A bidder's upfront payment is not attributed 
to specific licenses. Rather, a bidder may place bids on any 
combination of licenses as long as the total number of bidding units 
associated with those licenses does not exceed the bidder's 
eligibility. Eligibility cannot be increased during the auction. Thus, 
in calculating its upfront payment amount, an applicant should 
determine the maximum number of bidding units it may wish to bid on (or 
hold high bids on) in any single round and submit an upfront payment 
covering that number of bidding units. The Bureau seeks comment on this 
proposal.

C. Activity Rules

    17. 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 current 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 use an activity 
rule waiver (if any remain) or lose bidding eligibility for the next 
round.
    18. The Bureau proposes to divide the auction into three stages, 
each characterized by an increased activity requirement. The auction 
will start in Stage One. The Bureau proposes that the auction generally 
will advance to the next stage (i.e., from Stage One to Stage Two, and 
from Stage Two to Stage Three) when the auction activity level, as 
measured by the percentage of bidding units receiving new high bids, is 
approximately twenty percent or below for three consecutive rounds of 
bidding. However, the Bureau further proposes that it retain the 
discretion to change stages unilaterally by announcement during the 
auction. In exercising this discretion, the Bureau will consider a 
variety of measures of bidder activity, including, but not limited to, 
the auction activity level, the 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. The Bureau seeks comment on these 
proposals.
    19. For Auction No. 53, the Bureau proposes the following activity 
requirements:
    Stage One: In each round of the first stage of the auction, a 
bidder desiring to maintain its current eligibility is required to be 
active on licenses representing at least 80 percent of its current 
bidding eligibility. Failure to maintain the requisite activity level 
will result in a reduction in the bidder's bidding eligibility in the 
next round of bidding (unless an activity rule waiver is used). During 
Stage One, reduced eligibility for the next round will be calculated by 
multiplying the current round activity by five-fourths (\5/4\).
    Stage Two: In each round of the second stage, a bidder desiring to 
maintain its current eligibility is required to be active on 90 percent 
of its current bidding eligibility. During Stage Two, reduced 
eligibility for the next round will be calculated by multiplying the 
current round activity by ten-ninths (\10/9\).
    Stage Three: In each round of the third stage, a bidder desiring to 
maintain its current eligibility is required to be active on 98 percent 
of its current bidding eligibility. In this final stage, reduced 
eligibility for the next round will be calculated by multiplying the 
current round activity by fifty/forty-ninths (\50/49\).
    20. The Bureau seeks comment on these proposals. Commenters that 
believe these activity rules should be modified 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

    21. 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

[[Page 6170]]

of bidding and not to a particular license. Activity rule waivers can 
be either proactive or automatic and 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.

    Note: Once a proactive waiver is submitted during a round, that 
waiver cannot be unsubmitted.

    22. 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 (known as an ``automatic waiver'') at 
the end of any bidding round in which a bidder's activity level is 
below the minimum required unless: (i) the bidder has no activity rule 
waivers remaining; or (ii) the bidder overrides the automatic 
application of a waiver by reducing eligibility, thereby meeting the 
minimum requirements.

    Note: If a bidder has no waivers remaining and does not satisfy 
the required activity level, its current eligibility will be 
permanently reduced, possibly eliminating the bidder from the 
auction.

    23. 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 bidding system. In this case, the bidder's eligibility is 
permanently reduced to bring the bidder into compliance with the 
activity rules as described. Once eligibility has been reduced, a 
bidder will not be permitted to regain its lost bidding eligibility.
    24. 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 system) 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.
    25. The Bureau proposes that each bidder in Auction No. 53 be 
provided with five activity rule waivers that may be used at the 
bidder's discretion during the course of the auction as set forth. The 
Bureau seeks comment on this proposal.

E. Information Relating to Auction Delay, Suspension, or Cancellation

    26. For Auction No. 53, the Bureau proposes that, by public notice 
or by announcement during the auction, it 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 efficient conduct of competitive bidding. In such 
cases, the Bureau, in its sole discretion, may elect to resume the 
auction starting from the beginning of the current round, resume the 
auction starting from some previous round, or cancel the auction in its 
entirety. Network interruption may cause the Bureau to delay or suspend 
the auction. The Bureau emphasizes that exercise of this authority is 
solely within its discretion, and its use is not intended to be a 
substitute for situations in which bidders may wish to apply their 
activity rule waivers. The Bureau seeks comment on this proposal.

III. Bidding Procedures

A. Round Structure

    27. The Commission will conduct Auction No. 53 over the Internet. 
Telephonic Bidding will also be available. As a contingency, the FCC 
Wide Area Network will be available as well. The telephone number 
through which the backup FCC Wide Area Network may be accessed will be 
announced in a later public notice. Full information regarding how to 
establish such a connection, and related charges, will be provided in 
the public notice announcing details of auction procedures.
    28. 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 
simultaneous multiple round 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.
    29. 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. The Bureau 
seeks comment on this proposal.

B. Reserve Price or Minimum Opening Bid

    30. The Balanced Budget Act calls upon the Commission to prescribe 
methods for establishing a reasonable reserve price or a minimum 
opening bid when FCC licenses are subject to auction, unless the 
Commission determines that a reserve price or minimum opening bid is 
not in the public interest. Consistent with this mandate, the 
Commission has directed the Bureau to seek comment on the use of a 
minimum opening bid and/or reserve price prior to the start of each 
auction.
    31. Normally, a reserve price is an absolute minimum price below 
which an item will not be sold in a given auction. Reserve prices can 
be either published or unpublished. A minimum opening bid, on the other 
hand, is the minimum bid price set at the beginning of the auction 
below which no bids are accepted. It is generally used to accelerate 
the competitive bidding process. Also, the auctioneer often has the 
discretion to lower the minimum opening bid amount later in the 
auction. It is also possible for the minimum opening bid and the 
reserve price to be the same amount.
    32. In light of the Balanced Budget Act's requirements, the Bureau 
proposes to establish minimum opening bids for Auction No. 53. The 
Bureau believes a minimum opening bid, which has been utilized in other 
auctions, is an effective bidding tool.
    33. For Auction No. 53, the Bureau proposes the following license-
by-license formula for calculating minimum opening bids for CEAs: $0.05 
* License Area Population with a minimum of $1,000 per license.
    34. The specific minimum opening bid for each CEA license available 
in Auction No. 53 is set forth in Attachment A of the Auction No. 49 
Comment Public Notice. Comment is sought on this proposal.
    35. The Bureau proposes to calculate minimum opening bids on a 
license-by-license basis for DMAs as follows: From the total minimum 
opening bid amount for all CEA licenses ($14,283,500), subtract the 
minimum opening bids for CEA349-CEA354 ($210,500), for a remainder of 
$14,073,000. For each DMA (DMA001-DMA210), the minimum opening bid is 
calculated by multiplying $14,073,000 by a percentage that is the ratio 
of television households in that DMA to the total television households 
in DMA001-DMA210, with a minimum of $1,000 per license. The minimum 
opening bid for DMA211 is set at the minimum amount of $1,000.

[[Page 6171]]

Minimum opening bids for DMA212-DMA214 are calculated as the sum of the 
minimum opening bids for the corresponding CEA licenses.\6\ 
Accordingly, the Bureau lists all DMA licenses, including the related 
percentage of total television households and proposed minimum opening 
bid for each license, in Attachment B of the Auction No. 49 Comment 
Public Notice. The Bureau seeks comment on this proposal.
---------------------------------------------------------------------------

    \6\ That is, the minimum opening bid for DMA212 equals the sum 
of the minimum opening bids for CEA352-CEA354; for DMA213, the sum 
of the minimum opening bids for CEA350 and CEA351; and for DMA214, 
the minimum opening bid for CEA349.
---------------------------------------------------------------------------

    36. If commenters believe that these minimum opening bids will 
result in substantial numbers of unsold licenses, or are not reasonable 
amounts, or should instead operate as reserve prices, 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, the 
Bureau particularly seeks comment on such factors as the amount of 
spectrum being auctioned, levels of incumbency, the availability of 
technology to provide service, the size of the geographic service 
areas, issues of interference with other spectrum bands and any other 
relevant factors that could reasonably have an impact on valuation of 
the MVDDS spectrum. Alternatively, comment is sought on whether, 
consistent with the Balanced Budget Act, the public interest would be 
served by having no minimum opening bid or reserve price.

C. Minimum Acceptable Bids and Bid Increments

    37. In each round, eligible bidders will be able to place bids on a 
given license in any of nine different amounts. The FCC Automated 
Auction System interface will list the nine acceptable bid amounts for 
each license. Until a bid has been placed on a license, the minimum 
acceptable bid for that license will be equal to its minimum opening 
bid. In the rounds after an acceptable bid is placed on a license, the 
minimum acceptable bid for that license will be equal to the standing 
high bid plus the defined increment.
    38. Once there is a standing high bid on a license, the FCC 
Automated Auction System will calculate a minimum acceptable bid for 
that license for the following round, as described. The difference 
between the minimum acceptable bid and the standing high bid for each 
license will define the bid increment. The nine acceptable bid amounts 
for each license consist of the minimum acceptable bid (the standing 
high bid plus one bid increment) and additional amounts calculated 
using multiple bid increments (i.e., the second bid amount equals the 
standing high bid plus two times the bid increment, the third bid 
amount equals the standing high bid plus three times the bid increment, 
etc.).
    39. Until a bid has been placed on a license, the minimum 
acceptable bid for that license will be equal to its minimum opening 
bid. The additional bid amounts for licenses that have not yet received 
a bid will be calculated differently, as explained.
    40. For Auction No. 53, the Bureau proposes to calculate minimum 
acceptable bids by using a smoothing methodology, as it has done in 
several other auctions. The smoothing formula calculates minimum 
acceptable bids by first calculating a percentage increment, not to be 
confused with the bid increment. The percentage increment for each 
license is based on bidding activity on that license in all prior 
rounds; therefore, a license which has received many bids throughout 
the auction will have a higher percentage increment than a license 
which has received few bids.
    41. The calculation of the percentage increment used to determine 
the minimum acceptable bids for each license for the next round is made 
at the end of each round. The computation is based on an activity 
index, which is a weighted average of the number of bids in that round 
and the activity index from the prior round. 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%). Hence, at these initial settings, the 
percentage increment will fluctuate between 10% and 20% depending upon 
the number of bids for the license.
Equations
Ai = (C *Bi) + ((1-C) *Ai-1)
Ii+1 = smaller of ((1 + Ai) *N) and M
Xi+1 = Ii+1 *Yi

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 increment for the next round (round i+1)
N = minimum percentage increment or percentage increment floor
M = maximum percentage increment or percentage increment ceiling
Xi+1 = dollar amount associated with the percentage 
increment
Yi = high bid from the current round

    42. Under the 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 high bid from the current round plus the 
dollar amount associated with the percentage increment, with the result 
rounded to the nearest thousand if it is over ten thousand or to the 
nearest hundred if it is under ten thousand.
Examples
License 1
C = 0.5, N = 0.1, M = 0.2

Round 1 (2 new bids, high bid = $1,000,000)

    i. Calculation of percentage increment for round 2 using the 
smoothing formula:

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. Calculation of dollar amount associated with the percentage 
increment for round 2 (using I2):

X2 = 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 the 
smoothing formula:

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. Calculation of dollar amount associated with the percentage 
increment for round 3 (using I3):

X3 = 0.2 * $2,000,000 = $400,000

    iii. Minimum acceptable bid for round 3 = $2,400,000


[[Page 6172]]



Round 3 (1 new bid, high bid = $2,400,000)

    i. Calculation of percentage increment for round 4 using the 
smoothing formula:

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. Calculation of dollar amount associated with the percentage 
increment for round 4 (using I4):

X4 = 0.2 * $2,400,000 = $480,000

    iii. Minimum acceptable bid for round 4 = $2,880,000
    43. As stated, until a bid has been placed on a license, the 
minimum acceptable bid for that license will be equal to its minimum 
opening bid. The additional bid amounts are calculated using the 
difference between the minimum opening bid times one plus the minimum 
percentage increment, rounded as described, and the minimum opening 
bid. That is, I = (minimum opening bid)(1 + N){rounded{time} -(minimum 
opening bid). Therefore, when N equals 0.1, the first additional bid 
amount will be approximately ten percent higher than the minimum 
opening bid; the second, twenty percent; the third, thirty percent; 
etc.
    44. In the case of a license for which the standing high bid has 
been withdrawn, the minimum acceptable bid will equal the second 
highest bid received for the license. The additional bid amounts are 
calculated using the difference between the second highest bid times 
one plus the minimum percentage increment, rounded, and the second 
highest bid.
    45. The Bureau retains the discretion to change the minimum 
acceptable bids and bid increments if it determines that circumstances 
so dictate. The Bureau will do so by announcement in the FCC Automated 
Auction System. The Bureau seeks comment on these proposals.

D. High Bids

    46. At the end of a bidding round, the high bids will be determined 
based on the highest gross bid amount received for each license. A high 
bid from a previous round is sometimes referred to as a ``standing high 
bid.'' A ``standing high bid'' will remain the high bid until there is 
a higher bid on the same license at the close of a subsequent round. 
Bidders are reminded that standing high bids confer bidding activity.
    47. In the event of identical high bids on a license in a given 
round (i.e., tied bids), the Bureau proposes to use a random number 
generator to select a high bid from among the tied bids. The remaining 
bidders, as well as the high bidder, will be able to submit a higher 
bid in a subsequent round. If no bidder submits a higher bid in a 
subsequent round, the high bid from the previous round will win the 
license. If any bids are received on the license in a subsequent round, 
the high bid again will be determined by the highest gross bid amount 
received for the license.

E. Information Regarding Bid Withdrawal and Bid Removal

    48. For Auction No. 53, the Bureau proposes the following bid 
removal and bid withdrawal procedures. Before the close of a bidding 
period, a bidder has the option of removing any bid placed in that 
round. By removing selected bids in the bidding system, 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 a withdrawal 
payment. Once a round closes, a bidder may no longer remove a bid.
    49. A high bidder may withdraw its standing high bids from previous 
rounds using the withdraw function in the bidding system. A high bidder 
that withdraws its standing high bid from a previous round is subject 
to the bid withdrawal payment provisions of the Commission rules. The 
Bureau seeks comment on these bid removal and bid withdrawal 
procedures.
    50. In the Part 1 Third Report and Order, 63 FR 770 (January 7, 
1998), the Commission explained that allowing bid withdrawals 
facilitates efficient aggregation of licenses and the pursuit of 
efficient backup strategies as information becomes available during the 
course of an auction. The Commission noted, however, that, in some 
instances, bidders may seek to withdraw bids for improper reasons. The 
Bureau, therefore, has discretion, in managing the auction, to limit 
the number of withdrawals to prevent any bidding abuses. The Commission 
stated that the Bureau should assertively exercise its discretion, 
consider limiting the number of rounds in which bidders may withdraw 
bids, and prevent bidders from bidding on a particular market if it 
finds that a bidder is abusing the Commission's bid withdrawal 
procedures.
    51. Applying this reasoning, the Bureau proposes to limit each 
bidder in Auction No. 53 to withdrawing 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 purposes. The 
two rounds in which withdrawals are utilized will be at the bidder's 
discretion; withdrawals otherwise must be in accordance with the 
Commission's rules. There is no limit on the number of standing high 
bids that may be withdrawn in either of the rounds in which withdrawals 
are utilized. Withdrawals will remain subject to the bid withdrawal 
payment provisions specified in the Commission's rules. The Bureau 
seeks comment on this proposal.

F. Stopping Rule

    52. The Bureau has discretion ``to establish stopping rules before 
or during multiple round auctions in order to terminate the auction 
within a reasonable time.'' For Auction No. 53, the Bureau proposes to 
employ a simultaneous stopping rule approach. A simultaneous stopping 
rule means that all licenses remain open until bidding closes 
simultaneously on all licenses.
    53. Bidding will close simultaneously on all licenses after the 
first round in which no new acceptable bids, proactive waivers, or 
withdrawals are received. Thus, unless circumstances dictate otherwise, 
bidding will remain open on all licenses until bidding stops on every 
license.
    54. However, the Bureau proposes to retain the discretion to 
exercise any of the following options during Auction No. 53:
    i. Utilize 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, 
withdrawal, or a new bid on any license on which it is not the standing 
high bidder. Thus, absent any other bidding activity, a bidder placing 
a new bid on a license for which it is the standing high bidder would 
not keep the auction open under this modified stopping rule. The Bureau 
further seeks comment on whether this modified stopping rule should be 
used at any time or only in stage three of the auction.
    ii. Keep the 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.
    iii. 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 specified

[[Page 6173]]

final round(s) only for licenses on which the high bid increased in at 
least one of a specified preceding number of rounds.
    55. The Bureau proposes to exercise these options 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 these options, the Bureau is likely to attempt 
to increase the pace of the auction by, for example, increasing the 
number of bidding rounds per day, and/or increasing the amount of the 
minimum bid increments for the limited number of licenses where there 
is still a high level of bidding activity. The Bureau seeks comment on 
these proposals.

IV. Conclusion

    56. Comments are due on or before February 13, 2003, and reply 
comments are due on or before February 20, 2003. Because of the 
disruption of regular mail and other deliveries in Washington, DC, the 
Bureau requires that all comments and reply comments 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. 53 Comments. The Bureau requests that 
parties format any attachments to electronic mail as Adobe[reg] 
Acrobat[reg] (pdf) or Microsoft[reg] Word documents. 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.
    57. Parties submitting comments in response to the Auction No. 49 
Comment Public Notice should file an additional copy of such comments 
in ET Docket No. 98-206. Comments may be filed in ET Docket No. 98-206 
using the Commission's Electronic Comment Filing System (ECFS) or by 
filing paper copies. See Electronic Filing of Documents in Rulemaking 
Proceedings, 63 FR 24121 (May 1, 1998). Commenters that wish 
confidential treatment of their submissions should request that their 
submission, or specific part thereof, be withheld from public 
inspection. See 47 CFR 0.459.
    58. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to <http://www.fcc.gov/e-file/ecfs.htm. Generally, only one copy of an electronic 
submission must be filed. Because multiple docket or rulemaking numbers 
appear in the caption of the MVDDS rulemaking proceeding, however, 
commenters must transmit one electronic copy of the comments to each 
docket or rulemaking number referenced in the caption. In completing 
the transmittal screen, commenters should include their full name, U.S. 
Postal Service mailing address, and the applicable docket or rulemaking 
number. Parties may also submit an electronic comment by Internet e-
mail. To get filing instructions for e-mail comments, commenters should 
send an e-mail to [email protected], and should include the following words 
in the body of the message, ``get form.'' A sample form and directions 
will be sent in reply. Parties who choose to file by paper must file an 
original and four copies of each filing. Because more than one docket 
or rulemaking number appears in the caption of the MVDDS rulemaking 
proceeding, commenters must submit two additional copies for each 
additional docket or rulemaking number. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail (although we continue to 
experience delays in receiving U.S. Postal Service mail). The 
Commission's contractor, Vistronix, Inc., will receive hand-delivered 
or messenger-delivered paper filings for the Commission's Secretary at 
236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The 
filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries 
must be held together with rubber bands or fasteners. Any envelopes 
must be disposed of before entering the building. Commercial overnight 
mail (other than U.S. Postal Service Express Mail and Priority Mail) 
must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. 
U.S. Postal Service first-class mail, Express Mail, and Priority Mail 
should be addressed to 445 12th Street, SW., Washington, DC 20554. All 
filings must be addressed to the Commission's Secretary, Office of the 
Secretary, Federal Communications Commission. Commenters also should 
send four (4) paper copies of their filings to Jennifer Burton, Federal 
Communications Commission, Room 4-C425, 445 12th Street, SW., 
Washington, DC 20554. 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.
    59. This proceeding and the MVDDS rulemaking proceeding have been 
designated as ``permit-but-disclose'' proceedings 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.
Louis J. Sigalos,
Deputy Chief, Auctions and Industry Analysis Division, WTB.
[FR Doc. 03-3039 Filed 2-5-03; 8:45 am]
BILLING CODE 6712-01-P