[Federal Register Volume 68, Number 77 (Tuesday, April 22, 2003)]
[Notices]
[Pages 19816-19820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10000]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-03-54-A (Auction No. 54); DA 03-1128]


Closed Broadcast Auction Scheduled for July 23, 2003; Comment 
Sought on Reserve Prices or Minimum Opening Bids and Other Auction 
Procedures

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of construction permits 
for Auction No. 54 scheduled to begin on July 23, 2003. This document 
also seeks comment on reserve prices or minimum opening bids and other 
auction procedures.

DATES: Comments are due on or before April 25, 2003 and reply comments 
are due on or before May 2, 2003.

ADDRESSES: Comments and reply comments must be sent by electronic mail 
to the following address: [email protected].

FOR FURTHER INFORMATION CONTACT: Auctions and Industry Analysis 
Division: Kenneth Burnley, Legal Branch at (202) 418-0660, Lyle Ishida, 
Operations Branch at (202) 418-0660 or Linda Sanderson, Operations 
Branch at (717) 338-2888. Audio Division: Lisa Scanlan at (202) 418-
2700. Video Division: Shaun Maher at (202) 418-1600.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 54 
Comment Public Notice released on April 11, 2003. The complete text of 
the Auction No. 54 Comment Public Notice, including the attachments, 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-B402, Washington, DC 20554. The Auction No. 54 
Comment Public Notice may also be purchased from the Commission's 
duplicating contractor,

[[Page 19817]]

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].

I. General Information

    1. By the Auction No. 54 Comment Public Notice, the Media Bureau 
(``MB'') and the Wireless Telecommunications Bureau (``WTB'') 
(collectively, the ``Bureaus'') announce the auction of construction 
permits for one full power television (TV), two low power television 
(LPTV), and four FM stations (Auction No. 54) scheduled to commence on 
July 23, 2003. A list of the locations of these stations is included as 
Attachment A of the Auction No. 54 Comment Public Notice. These new 
broadcast stations are the subject of pending, mutually exclusive 
applications for construction permits for the referenced broadcast 
services, for which the Commission has not approved a settlement 
agreement that obviates the need for an auction. Pursuant to the 
Broadcast First Report and Order, 63 FR 48615 (September 11, 1998), 
participation in Auction No. 54 will be limited to those applicants 
identified in Attachment A of the Auction No. 54 Comment Public Notice. 
Applicants will be eligible to bid on only those construction permits 
selected on their previously filed FCC Form 301 or 346.
    2. Attachment A of the Auction No. 54 Comment Public Notice sets 
forth all mutually exclusive applicant groups (``MX Groups'') on a 
service-by-service basis, accompanied by their respective minimum 
opening bids and upfront payments. All MX Groups identified in 
Attachment A of the Auction No. 54 Comment Public Notice have been 
subject to competition through the opening and closing of the relevant 
period for filing competing applications, either through two-step cut-
off list procedures or through an application filing window. All 
applications within an identified MX Group are directly mutually 
exclusive with one another, and therefore a single construction permit 
will be auctioned for each MX Group identified in Attachment A of the 
Auction No. 54 Comment Public Notice.
    3. 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 * * *.'' The Bureaus therefore seek comment on the following 
issues relating to Auction No. 54.

II. Auction Structure

A. Simultaneous Multiple Round (SMR) Auction Design

    4. The Bureaus propose to award all construction permits included 
in Auction No. 54 in a simultaneous multiple round auction. This 
methodology offers every construction permit for bid at the same time 
with successive bidding rounds in which bidders may place bids. The 
Bureaus seek comment on this proposal.

B. Upfront Payments and Initial Maximum Eligibility

    5. The Bureaus have delegated authority and discretion to determine 
an appropriate upfront payment for each construction permit being 
auctioned, taking into account such factors as the efficiency of the 
auction and the value of similar spectrum. The upfront payment is a 
refundable deposit made by each bidder to establish eligibility to bid 
on permits. 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. 54, the Bureaus propose to make the upfront payments equal 
to the minimum opening bids, which, as described in section III.B, are 
established based on various factors related to the efficiency of the 
auction and the potential value of the spectrum. The specific upfront 
payment for each construction permit is set forth in Attachment A of 
the Auction No. 54 Comment Public Notice. The Bureaus seek comment on 
this proposal.
    6. The Bureaus further propose 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 construction permit is assigned a 
specific number of bidding units equal to the upfront payment listed in 
Attachment A of the Auction No. 54 Comment Public Notice, on a bidding 
unit per dollar basis. This number does not change as prices rise 
during the auction. A bidder may place bids on multiple construction 
permits, if those construction permits were selected on its previously 
filed FCC Form 301 or 346, as long as the total number of bidding units 
associated with those construction permits does not exceed the bidder's 
eligibility. Eligibility cannot be increased during the auction. In 
order to bid on a construction permit, qualified bidders must have an 
eligibility level that meets the number of bidding units assigned to 
that permit. 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 Bureaus 
seek comment on this proposal.

C. Activity Rules

    7. In order to ensure that the auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively on a 
percentage of their current bidding eligibility during each round of 
the auction rather than waiting until the end to participate.
    8. The Bureaus propose a single stage auction with the following 
activity requirement: In each round of the auction, a bidder desiring 
to maintain its eligibility to participate in the auction is required 
to be active on one hundred (100) percent of its bidding eligibility. A 
bidder's activity will be the sum of the bidding units associated with 
the construction permit upon which it places a bid during the current 
round, or the construction permit upon which it is the standing high 
bidder. Failure to maintain the requisite activity level will result in 
the use of an activity rule waiver, if any remain, or a reduction in 
the bidder's bidding eligibility, possibly eliminating it from the 
auction. The Bureaus seek comment on this proposal.

D. Activity Rule Waivers and Reducing Eligibility

    9. 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 construction 
permit. Activity 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.

    10. 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

[[Page 19818]]

round in which a bidder's activity level is below the minimum required 
unless: (i) There are no activity rule waivers remaining; or (ii) 
bidders eligible to bid on more than one construction permit override 
the automatic application of a waiver by reducing eligibility, thereby 
meeting the minimum requirements. If a bidder that is eligible to bid 
on only one construction permit has no activity rule waivers available, 
the bidder's eligibility will be reduced, eliminating it from the 
auction. If a bidder that is eligible to bid on more than one 
construction permit 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.
    11. A bidder that is eligible to bid on more than one construction 
permit and has 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. 
Once eligibility has been reduced, a bidder will not be permitted to 
regain its lost bidding eligibility.
    12. 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 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 will not keep the auction open.
    13. The Bureaus propose that each bidder in Auction No. 54 be 
provided with three activity rule waivers that may be used at the 
bidder's discretion during the course of the auction. The Bureaus seek 
comment on this proposal.

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

    14. For Auction No. 54, the Bureaus propose 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 Bureaus, in their 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 Bureaus to delay or 
suspend the auction. The Bureaus emphasize 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 Bureaus seek comment on this proposal.

III. Bidding Procedures

A. Round Structure

    15. The Commission will conduct Auction No. 54 over the Internet. 
Telephonic Bidding will also be available, and 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 will be provided in the public notice announcing details of 
auction procedures.
    16. The initial bidding schedule will be announced in a public 
notice listing the qualified bidders, which is released approximately 
10 days before the start of the auction. 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 also be included in the qualified bidders 
public notice.
    17. The Bureaus have the 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 Bureaus 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 
Bureaus seek comment on this proposal.

B. Reserve Price or Minimum Opening Bid

    18. 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 or construction permits are subject to 
auction, unless the Commission determines that a reserve price or 
minimum opening bid is not in the public interest. 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.
    19. In light of the Balanced Budget Act's requirements, the Bureaus 
propose to establish minimum opening bids for Auction No. 54. For 
Auction No. 54, the proposed minimum opening bid prices were determined 
by taking into account various factors related to the efficiency of the 
auction and the potential value of the spectrum, including the type of 
service, proposed population coverage, market size, industry cash flow 
data and recent broadcast transactions. The specific minimum opening 
bid for each construction permit available in Auction No. 54 is set 
forth in Attachment A of the Auction No. 54 Comment Public Notice. 
Comment is sought on this proposal.
    20. If commenters believe that these minimum opening bids will 
result in unsold construction permits, 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. 
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

    21. In each round, eligible bidders will be able to place bids on a 
given construction permit in any of nine different amounts. The FCC 
Automated Auction System interface will list the nine acceptable bid 
amounts for each construction permit. Until a bid has been placed on a 
construction permit, the minimum acceptable bid for that permit will be 
equal to its minimum opening bid. In the rounds after an acceptable bid 
is placed on a construction permit, the minimum acceptable bid for that 
permit will be equal to the standing high bid plus the bid increment.
    22. Once there is a standing high bid on the construction permit, 
the FCC Automated Auction System will

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calculate a minimum acceptable bid for that construction permit for the 
following round. The difference between the minimum acceptable bid and 
the standing high bid for each construction permit will define the bid 
increment. The nine acceptable bid amounts for each construction permit 
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.).
    23. For Auction No. 54, the Bureaus propose to use a 10 percent bid 
increment. This means that the minimum acceptable bid for a 
construction permit will be approximately 10 percent greater than the 
previous standing high bid received on the construction permit. The 
minimum acceptable bid amount will be calculated by multiplying the 
standing high bid times one plus the increment percentage--i.e., 
(standing high bid) * (1.10). The Bureaus will round the result using 
our standard rounding procedure for minimum acceptable bid 
calculations: results above $10,000 are rounded to the nearest $1,000; 
results below $10,000 but above $1,000 are rounded to the nearest $100; 
and results below $1,000 are rounded to the nearest $10.
    24. The Bureaus retain the discretion to change the minimum 
acceptable bids and bid increments if they determine the circumstances 
so dictate. The Bureaus seek comment on these proposals.
    25. Until a bid has been placed on a construction permit, the 
minimum acceptable bid for that construction permit 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 
percentage increment, rounded, and the minimum opening bid. That is, 
the increment used to calculate additional bid amounts = (minimum 
opening bid)(1 + percentage increment)[rounded]--(minimum opening bid). 
Therefore, when the percentage increment equals 0.1 (i.e., 10%), the 
first additional bid amount will be approximately ten percent higher 
than the minimum opening bid; the second, twenty percent higher; the 
third, thirty percent higher; etc.
    26. The Bureaus retain the discretion to change the minimum 
acceptable bids and bid increments if they determine that circumstances 
so dictate. The Bureaus will do so by announcement in the FCC Automated 
Auction System. The Bureaus seek comment on these proposals.

D. High Bids

    27. At the end of a bidding round, the high bids will be determined 
based on the highest gross bid amount received for each construction 
permit. 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 construction permit at the 
close of a subsequent round. Bidders are reminded that standing high 
bids confer bidding activity.
    28. In the event of identical high bids on a construction permit in 
a given round (i.e., tied bids), the Bureaus propose 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 
construction permit. If any bids are received on the construction 
permit in a subsequent round, the high bid again will be determined by 
the highest gross bid amount received for the construction permit.

E. Information Regarding Bid Withdrawal and Bid Removal

    29. For Auction No. 54, the Bureaus propose 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. The 
Bureaus seek comment on this bid removal procedure.
    30. 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 construction permits 
and the pursuit of efficient backup strategies as information becomes 
available during the course of an auction. In Auction No. 54, however, 
aggregation of construction permits will not be possible because of the 
pre-established MX Groups. Accordingly, for this auction, the Bureaus 
propose that bidders not be permitted to withdraw bids in any round. 
The Bureaus seek comment on this proposal.

F. Stopping Rule

    31. The Bureaus have the discretion ``to establish stopping rules 
before or during multiple round auctions in order to terminate the 
auction within a reasonable time.'' For Auction No. 54, the Bureaus 
propose to employ a simultaneous stopping rule approach. A simultaneous 
stopping rule means that all construction permits remain open until 
bidding closes simultaneously on all construction permits.
    32. Bidding will close simultaneously on all construction permits 
after the first round in which no new acceptable bids or proactive 
waivers are received. Thus, unless circumstances dictate otherwise, 
bidding will remain open on all construction permits until bidding 
stops on every construction permit.
    33. However, the Bureaus propose to retain the discretion to 
exercise any of the following options during Auction No. 54:
    i. Utilize a modified version of the simultaneous stopping rule. 
The modified stopping rule would close the auction for all construction 
permits after the first round in which no bidder submits a proactive 
waiver, or a new bid on any construction permit on which it is not the 
standing high bidder. Thus, absent any other bidding activity, a bidder 
placing a new bid on a construction permit for which it is the standing 
high bidder would not keep the auction open under this modified 
stopping rule.
    ii. Keep the auction open even if no new acceptable bids or 
proactive waivers are submitted. 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 Bureaus invoke 
this special stopping rule, it will accept bids in the specified final 
round(s) only for construction permits on which the high bid increased 
in at least one of the preceding specified number of rounds.
    34. The Bureaus propose 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 Bureaus are likely to 
attempt to increase the pace of the auction by, for example,

[[Page 19820]]

increasing the number of bidding rounds per day, and/or increasing the 
amount of the minimum bid increments for the limited number of 
construction permits where there is still a high level of bidding 
activity. The Bureaus seek comment on these proposals.

IV. Due Diligence

    35. Potential bidders are solely responsible for investigating and 
evaluating all technical and market place factors that may have a 
bearing on the value of the broadcast facilities in this auction. 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 permittee in the 
broadcast service, subject to certain conditions and regulations. An 
FCC auction does not constitute an endorsement by the FCC of any 
particular service, technology, or product, nor does an FCC 
construction permit or license constitute a guarantee of business 
success. Applicants should perform their individual due diligence 
before proceeding as they would with any new business venture.
    36. Potential bidders are strongly encouraged to conduct their own 
research prior to Auction No. 54 in order to determine the existence of 
pending proceedings that might affect their decisions regarding 
participation in the auction. Participants in Auction No. 54 are 
strongly encouraged to continue such research during the auction.
    37. Potential bidders for the new television facility should note 
that, in November 1999, Congress enacted the Community Broadcasters 
Protection Act of 1999 (CBPA) which established a new Class A 
television service. In response to the enactment of the CBPA, the 
Commission adopted rules to establish the new Class A television 
service. In the Class A Report and Order, 65 FR 29985 (May 10, 2000), 
the Commission adopted rules to provide interference protection for 
eligible Class A television stations from new full power television 
stations. Given the Commission's ruling in the Class A Report and 
Order, the winning bidder in Auction No. 54, upon submission of its 
long-form application (FCC Form 301), will have to provide interference 
protection to qualified Class A television stations. Therefore, 
potential bidders are encouraged to perform engineering studies to 
determine the existence of Class A television stations and their effect 
on the ability to operate the full power television station proposed in 
this auction. Information about the identity and location of Class A 
television stations is available from the Media Bureau's Consolidated 
Database System (CDBS) (public access available at: http://www.fcc.gov/mb) and on the Media Bureau's Class A television web page: http://www.fcc.gov/mb/video/files/classa.html.
    38. Potential bidders for the new television facility are also 
reminded that full service television stations are in the process of 
converting from analog to digital operation and that stations may have 
pending applications to construct and operate digital television 
facilities, construction permits and/or licenses for such digital 
facilities. Bidders should investigate the impact such applications, 
permits and licenses may have on their ability to operate the 
facilities proposed in this auction.

V. Conclusion

    39. Comments are due on or before April 25, 2003, and reply 
comments are due on or before May 2, 2003. Because of the disruption of 
regular mail and other deliveries in Washington, DC, the Bureaus 
require 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. 54 Comments. The Bureaus request that parties 
format any attachments to electronic mail as Adobe[reg] Acrobat[reg] 
(pdf) or Microsoft[reg] 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.
    40. In addition, the Bureaus request that commenters fax a courtesy 
copy of their comments and reply comments to the attention of Kathryn 
Garland at (717) 338-2850.
    41. 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. 03-10000 Filed 4-21-03; 8:45 am]
BILLING CODE 6712-01-P