[Federal Register Volume 71, Number 26 (Wednesday, February 8, 2006)]
[Notices]
[Pages 6486-6495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1196]


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FEDERAL COMMUNICATIONS COMMISSION

[AU Docket No. 06-30; Report No. AUC-06-66-A (Auction No. 66); DA 06-
238]


Auction of Advanced Wireless Services Licenses Scheduled for June 
29, 2006 Comment Sought on Reserve Prices or Minimum Opening Bids and 
Other Procedures

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of Advance Wireless 
Services licenses in the 1710-1755 MHz and 2110-2155 MHz (AWS-1) bands. 
The auction is scheduled to commence on June 29, 2006. This document 
also seeks comments on reserve prices or minimum opening bids and other 
procedures for Auction No. 66.

DATES: Comments are due on or before February 14, 2006 and reply 
comments are due on or before February 28, 2006.

ADDRESSES: Comments and reply comments may be submitted using the 
Commission's electronic comment filing system (ECFS) at http://www.fcc.gov/cgb/ecfs/. The Wireless Telecommunications Bureau (Bureau) 
also requested that a copy of all comments and reply comments be 
submitted by electronic mail to the following address: 
[email protected].

FOR FURTHER INFORMATION CONTACT: For legal questions: Scott Mackoul at 
(202) 418-0660. For general auction questions: Lisa Stover at (717) 
338-2888.
    For service rules questions: Peter Corea at (202) 418-2487.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 66 
Comment Public Notice released on January 31, 2006. The complete text 
of the Auction No. 66 Comment Public Notice, including attachments and 
related Commission documents is available for public inspection and 
copying from 8 a.m. to 4:30 p.m. Monday through Thursday or from 8 a.m. 
to 11:30 a.m. on Friday at the FCC Reference Information Center, 
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. 
The Auction No. 66 Comment Public Notice and related Commission 
documents may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th 
Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-488-
5300, facsimile 202-488-5563, or you may contact BCPI at its Web site: 
http://www.BCPIWEB.com. When ordering documents from BCPI please 
provide the appropriate FCC document number for example, DA 06-238. The 
Auction No. 66 Comment Public Notice and related documents are also 
available on the Internet at the Commission's Web site: http://wireless.fcc.gov/auctions/66/.

I. Licenses To Be Offered at Auction

    1. The 90 megahertz of spectrum in the AWS-1 bands consists of 
1,122 licenses: 36 Regional Economic Area Grouping (REAG) licenses, 352 
Economic Area (EA) licenses, and 734 Cellular Market Area (CMA) 
licenses.
    2. License Descriptions. The following table describes the AWS-1 
licenses:

----------------------------------------------------------------------------------------------------------------
                                                                   Total
                Block                   Frequency bands (MHz)    bandwidth    Geographic area type    Number of
                                                                   (MHz)                               licenses
----------------------------------------------------------------------------------------------------------------
A....................................      1710-1720/2110-2120           20  CMA...................          734
B....................................      1720-1730/2120-2130           20  EA....................          176
C....................................      1730-1735/2130-2135           10  EA....................          176
D....................................      1735-1740/2135-2140           10  REAG..................           12
E....................................      1740-1745/2140-2145           10  REAG..................           12
F....................................      1745-1755/2145-2155           20  REAG..................           12
----------------------------------------------------------------------------------------------------------------


[[Page 6487]]

    The AWS-1 licenses available at auction are also listed in 
Attachment A of the Auction No. 66 Comment Public Notice.
    3. Incumbency Issues/Spectrum Relocation Fund. The lower half of 
paired frequencies for AWS-1 licenses, i.e., 1710-1755 MHz, is spectrum 
covered by a Congressional mandate that requires that auction proceeds 
fund the estimated relocation costs of incumbent federal entities. 
Specifically, the Commercial Spectrum Enhancement Act (CSEA) 
established a Spectrum Relocation Fund (SRF), to which the cash 
proceeds attributable to eligible frequencies in an auction of licenses 
involving such frequencies would be deposited.
    4. In addition to requiring that specified auction proceeds be 
deposited in the SRF, CSEA prohibits the Commission from concluding any 
auction of eligible frequencies if the total cash proceeds attributable 
to such spectrum are less than 110 percent of the estimated relocation 
costs provided to the Commission by the National Telecommunications and 
Information Administration (NTIA). NTIA has collected estimates of the 
relocation costs for the eligible frequencies in the AWS-1 bands.
    5. In 2005, the Commission opened a proceeding to address CSEA 
implementation. In the CSEA/Part 1 Declaratory Ruling, 70 FR 43372 
(July 27, 2005), the Commission determined, among other things, that 
total cash proceeds for purposes of meeting CSEA's revenue requirement 
means winning bids net of any applicable bidding credit discounts at 
the end of bidding. Thus, to determine whether CSEA's revenue 
requirements regarding eligible frequencies have been met at the end of 
a CSEA auction, the Commission will have to determine whether winning 
bids net of any applicable bidding credit discounts at the end of 
bidding that are attributable to such spectrum equal at least 110 
percent of estimated relocation costs. On January 24, 2006, the 
Commission released the CSEA/Part 1 Report and Order, FCC 06-4 (rel. 
January 24, 2006), addressing CSEA implementation. Among other 
provisions, the CSEA/Part 1 Report and Order modified the Commission's 
reserve price rules pursuant to CSEA to ensure that CSEA's revenue 
requirement will be met.

II. Seeking Comment on Auction Procedures

    6. Section 309(j)(3) of the Communications Act of 1934, as amended, 
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 section 309(j)(3) 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 following 
issues relating to the auction of AWS-1 licenses.

A. Proposals for Auction Design

i. Simultaneous Multiple Round Auction(s)--With or Without Package 
Bidding
    7. The Bureau proposes to auction all of the AWS-1 licenses in a 
single auction using the Commission's standard simultaneous multiple-
round (SMR) auction format. This type of auction offers every license 
for bid at the same time and consists of successive bidding rounds in 
which eligible bidders may place bids on individual licenses. A bidder 
may bid on, and potentially win, any number of licenses. Typically, 
bidding remains open on all licenses until bidding stops on every 
license, unless a modified stopping rule is invoked.
    8. Although the Bureau proposes to offer all of the AWS-1 licenses 
in a single auction using its standard SMR format, in the alternative, 
the Bureau seeks comment on the feasibility and desirability of 
allocating the AWS-1 licenses among two auctions, run concurrently, 
with one of the auctions using the standard SMR format and the other 
using the FCC's package bidding format (SMR-PB). The Bureau recommends 
that the two auctions be run concurrently, rather than sequentially, in 
order to permit bidders interested in winning licenses in both auctions 
to coordinate their bidding across auctions, and in order to facilitate 
the application of the aggregate reserve price.
    9. Under the SMR-PB format, bidders can place bids on groups of 
licenses they wish to win in combination, with the result that they win 
either all of the licenses in a group or none of them, in contrast to 
the license-by-license bidding in the FCC's SMR format. In the SMR-PB 
auction format, each bidder can have at most a single winning bid, so 
that in order to win any particular license combination, the bidder 
must have placed a package bid on that license or specific group of 
licenses.
    10. This option could allow bidders to better express the value of 
any synergies (i.e., benefits from combining complementary items) that 
may exist among licenses, and to avoid the risk of winning only part of 
a desired aggregation.
    11. At the same time the Bureau notes that package bidding under 
the SMR-PB format may be more complex for bidders if they wish to 
aggregate any or all of a number of licenses because they cannot win a 
group of licenses unless they have explicitly placed a bid on that 
exact combination. In an SMR-PB auction, bidders may need to place a 
large number of bids in order to completely express their interests. If 
they do not place the bids, the system may not be able to find a 
consistent set of smaller bids that collectively exceeds the amount of 
a large package bid, thereby potentially making it more difficult for 
bidders interested in small groups or single licenses to compete 
against bidders interested in large aggregations.
    12. The Bureau believes that offering all licenses in a single 
standard SMR auction will provide bidders with the simplest and most 
flexible means of obtaining single AWS-1 licenses or aggregations of 
AWS-1 licenses. A single auction will apply a single set of familiar 
rules to all bidders, bids and licenses. Bidders interested in licenses 
in several blocks will not have to try to manage their bidding activity 
and eligibility across two auctions, as they might if the different 
blocks were offered in two different auctions.
    13. Furthermore, the Bureau believes that an SMR auction format, 
together with a bandplan which offers bidders the option to bid on 
several blocks of large regional licenses, will provide bidders with 
the opportunity to create efficient aggregations of licenses without 
creating the difficulties that a package bidding format may introduce 
for bidders trying to win single licenses or smaller groups of 
licenses. The Bureau, therefore, proposes to offer the 1,122 AWS-1 
licenses in one SMR auction without package bidding.
    14. If commenters feel that it would be feasible and desirable to 
offer some of the licenses in the AWS-1 inventory in a concurrent but 
separate auction using the SMR-PB format, the Bureau seeks comment on 
which blocks of licenses should be included in the package bidding 
auction.

[[Page 6488]]

ii. Information Available to Bidders Before and During an Auction
    15. Economic theory and recent analysis suggest that the 
competitiveness and economic efficiency of an SMR auction may in some 
circumstances be enhanced if certain information about bids and bidder 
identities is not revealed publicly prior to and during the auction. 
Recognizing that there are benefits as well as potential harms from 
publicly revealing all information during the auction process, the 
Commission, in the past, reserved the option to limit the availability 
of information on an auction-by-auction basis, and retained discretion 
in the Bureau, under its existing delegated authority, to limit the 
information disclosed to bidders. With certain exceptions, the Bureau 
has generally opted to make bidders' license selections public at the 
conclusion of the application process, as well as to release the 
identities of all bidders and their bid amounts at the conclusion of 
each round during the auction.
    16. The particular circumstances of the AWS-1 auction, however, 
suggest that the Commission's statutory mandates under section 
309(j)(3) of the Communications Act would better be served by 
withholding, until after the auction closes, the public release of (1) 
information on bidder interests, normally made available prior to the 
start of the auction, and (2) the identities of bidders placing bids 
and the amounts of non-winning bids, normally released after each 
bidding round. In the years since the Commission's SMR auction design 
was first developed, economists have observed, as a potential drawback 
to disclosing information, that bidders could use the information 
revealed over the multiple rounds to signal each other and implement a 
division of the licenses at lower than market prices, and in some 
cases, to retaliate against competing bidders. In particular, the 
potential for such anti-competitive bidding behavior is greater when an 
auction offers multiple, substitutable blocks of licenses for sale and 
when the number of bidders is expected to be relatively low compared to 
the number of licenses offered. Given that the AWS-1 auction is likely 
to meet these criteria--i.e., there are multiple spectrum blocks 
offered with over 1100 licenses and perceived license values may limit 
the number of potential bidders--the Bureau believes that the potential 
harm from coordinated behavior that is facilitated by full information 
on bidders' interests and bidding behavior is likely to outweigh the 
benefits.
    17. Moreover, the Bureau also believes that the potential benefits 
from fully revealing bid and bidder information are less likely to be 
important in the AWS-1 auction than they have been in other FCC 
auctions, particularly in early auctions. The Commission previously 
identified certain benefits to disclosing bidder identities and other 
information during an auction, including: Bidders may bid more 
confidently if they know the bids of their potential competitors; 
information on the identities of likely other licensees may provide 
useful technical information, such as the degree of possible signal 
interference or the potential for negotiating roaming agreements; and 
full transparency during an auction promotes confidence in the 
Commission's auction process.
    18. The Bureau believes these benefits may be less significant in 
an auction of AWS-1 licenses. With respect to the argument that bidders 
will have more confidence in their bids if they know against whom they 
are bidding, the Bureau notes that the evolving market for wireless 
services and a record of spectrum license sales gives bidders far more 
information about how they should value spectrum licenses than bidders 
in early spectrum auctions had. Furthermore, the Bureau notes that even 
under the proposal to limit bid information, the number of bids placed 
on a license in a round will continue to be publicly available as well 
as the amount of the provisionally winning bid. With respect to the 
benefit of knowing bidders' identities to account for technical 
information, the Bureau expects that the flexible and sophisticated 
technologies employed by successful bidders for the AWS-1 spectrum 
licenses will make any technical information conveyed through bidder 
identities of limited value relative to its value in certain other 
services or at an earlier stage in the development of the wireless 
industry. Finally, confidence in the Commission's auctions has been 
established over the course of many auctions, and is likely to be 
enhanced further by a procedure that reduces the potential for anti-
competitive bidding behavior.
    19. Based on the increased likelihood that fully revealing bid and 
bidder information may lead to anti-competitive bidding behavior under 
the particular circumstances of the AWS-1 auction and the belief that 
any potential benefits to the auction process from fully revealing such 
information are unlikely to be significant, the Bureau believes that 
the competitive bidding for AWS-1 licenses would be enhanced by not 
releasing certain information about bids and bidders until after 
bidding in the auction closes. In particular, in contrast to its 
general practice, the Bureau proposed not to reveal until the close of 
the auction: (1) Bidders' license selections on their short form 
applications and the amount of their upfront payments; (2) the amounts 
of non-provisionally winning bids and the identities of bidders placing 
those bids; and (3) the identities of bidders making provisionally 
winning bids. Thus, during the auction, the only information about bids 
that the Bureau proposes to reveal to the public is the gross, not the 
net, amount of any provisionally winning bids. However, as in past 
auctions, after each round each bidder individually may access reports 
regarding whether their own bids are provisionally winning bids. This 
proposed approach will strike a balance between withholding information 
that is likely to foster anticompetitive behavior, and making essential 
information available to bidders so that the multiple round structure 
of the auction enables efficient outcomes to emerge.
    20. In the event that the Bureau decides to allocate the AWS-1 
licenses between two auctions, one with package bidding, the Bureau 
proposes to limit information only in the SMR auction without package 
bidding. The Bureau proposes to disclose full information about bids 
and bidders in an SMR-PB auction because, among other things, the 
Bureau have not yet analyzed the role of revealing information in an 
SMR-PB auction and both the Commission and bidders have only limited 
experience with this type of auction. The Bureau seeks comment on this 
approach.

B. Auction Structure

i. Round Structure
    21. The Commission will conduct the AWS-1 auction(s) over the 
Internet. Alternatively, telephonic bidding will also be available via 
the Auction Bidder Line. The toll-free telephone number for telephonic 
bidding will be provided to qualified bidders.
    22. The auction(s) will consist of sequential bidding rounds. The 
initial bidding schedule(s) will be announced in a public notice to be 
released at least one week before the start of the auction.
    23. The Bureau retains the discretion to change the bidding 
schedule(s) 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

[[Page 6489]]

amount of time for the bidding rounds and review periods, or the number 
of rounds per day, depending upon bidding activity levels and other 
factors.
    24. In the event that two auctions are run concurrently, the Bureau 
will make an effort to structure the timing of the rounds so as to 
facilitate the participation of bidders potentially interested in 
winning licenses in both auctions. The Bureau seeks comment on this 
approach.
ii. Stopping Rule
    25. The Bureau has discretion to establish stopping rules before or 
during multiple round auctions in order to terminate the auction within 
a reasonable time. The Bureau proposes two different stopping rules for 
the auction of AWS-1 licenses, the first in the event there is a single 
auction of AWS-1 licenses, and the second in the event there are two 
concurrent auctions of AWS-1 licenses.
    26. Single Auction--For a single auction of AWS-1 licenses, the 
Bureau proposes to employ a simultaneous stopping rule approach. A 
simultaneous stopping rule means that all licenses remain available for 
bidding until bidding closes simultaneously on all licenses. More 
specifically, bidding will close simultaneously on all licenses after 
the first round in which no bidder submits any new bids, applies a 
proactive waiver, or submits a withdrawal. Thus, unless circumstances 
dictate otherwise, bidding will remain open on all licenses until 
bidding stops on every license.
    27. Further, the Bureau proposes to retain the discretion to 
exercise any of the following options during a single AWS-1 auction: 
(a) Use 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 applies a waiver, places a 
withdrawal, or submits any new bids on any license for which it is not 
the provisionally winning bidder. Thus, absent any other bidding 
activity, a bidder placing a new bid on a license for which it is the 
provisionally winning bidder would not keep the auction open under this 
modified stopping rule; (b) keep the auction open even if no bidder 
submits any new bids, applies a waiver, or submits a withdrawal. In 
this event, the effect will be the same as if a bidder had applied a 
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; (c) 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 final round(s) after which the auction will close.
    28. The Bureau proposes to exercise these options only in certain 
circumstances, 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 changing the minimum acceptable bid 
percentage. The Bureau seeks comment on these proposals.
    29. Two Auctions--In the event that the Commission holds two 
concurrent auctions of AWS-1 licenses, the Bureau proposes that all 
licenses in both auctions will remain available for bidding until 
bidding closes simultaneously on all licenses in both auctions. 
Accordingly, even though there may be a round in one auction in which 
no bidder submits any new bids, applies a proactive waiver or submits a 
withdrawal, that auction will remain open so long as there are new 
bids, proactive waivers applied, or withdrawals submitted in the other 
concurrent AWS-1 auction.
    30. This proposal reflects two connections between two concurrent 
AWS-1 auctions. First, concurrent auctions offering AWS-1 licenses will 
be offering licenses that may be used together. Individual applicants 
may seek combinations of licenses offered in separate concurrent 
auctions. If one auction of AWS-1 licenses stops while another 
continues, bids in the first will become final before bids in the 
second. In contrast, if the bidding remains open in both auctions, 
bidders may better be able to achieve their desired aggregations, which 
may facilitate the assignment of licenses to the parties that value 
them most highly.
    31. Second, two auctions offering AWS-1 licenses will be subject to 
an aggregate reserve price, as fully described below. Congress provided 
in CSEA that an auction for licenses authorizing use of eligible 
frequencies, which includes frequencies from 1710-1755 MHz, may 
conclude only if the total cash proceeds attributable to such spectrum 
are at least 110 percent of the total estimated relocation costs of 
federal entities previously assigned to the spectrum. The Commission 
has determined that total cash proceeds in an auction for purposes of 
the CSEA shall be measured by the winning bids net of applicable 
discounts at the end of bidding. If an aggregate reserve price applies 
to both auctions and one auction stops first, applicants in the first 
auction would be unable to raise their bids to meet the reserve price 
in the event that bidding in the second auction did not satisfy the 
reserve price. Of course, if the reserve price is satisfied by the 
first auction in which bidding stops, it will not be necessary to hold 
that auction open to assure that the reserve price is met.
    32. The Bureau seeks comment on its proposal. Comments regarding 
the appropriate stopping rule for two concurrent auctions should 
specify whether the comments apply regardless of how AWS-1 licenses are 
divided between the auctions.
    33. The Bureau also seeks comment on an alternative stopping rule 
for two concurrent auctions. In this alternative, if the first auction 
to have a round with no new bids, proactive waivers or withdrawals 
satisfies the reserve price by itself, bidding will close 
simultaneously on all licenses in that auction, even though bidding 
will continue in the second auction.
    34. Finally, the Bureau proposes to retain the discretion to 
exercise any of the following options during two concurrent AWS-1 
auctions: (a) Use a modified version of the simultaneous stopping rule. 
The modified stopping rule would close the auctions for all licenses 
after the first round in which no bidder applies a waiver, places a 
withdrawal, or submits any new bids on any license or package of 
licenses for which it is not the provisionally winning bidder. Thus, 
absent any other bidding activity, a bidder placing a new bid on a 
license for which it is the provisionally winning bidder would not keep 
the auctions open under this modified stopping rule; (b) keep the 
auctions open even if no bidder submits any new bids, applies a waiver, 
or makes a withdrawal. In this event, the effect will be the same as if 
a bidder had applied a 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; (c) 
declare that the auctions 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 final 
round(s) after which the auctions will close.
    35. The Bureau proposes to exercise these options only in certain 
circumstances, for example, where the auctions are proceeding very 
slowly, there is minimal overall bidding

[[Page 6490]]

activity, or it appears likely that the auctions 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 
changing the minimum acceptable bid percentage. The Bureau seeks 
comment on these proposals.
iii. Information Relating to Auction Delay, Suspension, or Cancellation
    36. For the AWS-1 auction(s), the Bureau proposes that, by public 
notice or by announcement during the auction, the Bureau may delay, 
suspend, or cancel the auction(s) 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(s) starting from the beginning of the current 
round(s), resume the auction(s) starting from some previous round(s), 
or cancel the auction(s) in their entirety. Network interruption may 
cause the Bureau to delay or suspend the auction(s). The Bureau 
emphasizes that exercise of this authority is solely within the 
discretion of the Bureau, and its use is not intended to be a 
substitute for situations in which bidders may wish to apply their 
activity rule waivers. The Bureau seeks comment on this proposal.

C. Bidding Procedure Considerations

    37. In the sections that follow, there are considerations that 
apply regardless of auction format and others that are specific to 
either the SMR or the SMR-PB format. Similarly, there are 
considerations that differ based on whether a single auction of all the 
AWS-1 licenses is held, or whether the Bureau conduct two concurrent 
auctions. In each section, the Bureau first discusses the procedures 
that apply generally and then the Bureau discusses format-specific (SMR 
or SMR-PB), or auction number-specific, procedures separately. The 
Bureau seeks comment on the options set forth below.
i. Upfront Payments and Bidding Eligibility
    38. The Bureau has delegated authority and discretion to determine 
an appropriate upfront payment for each license being auctioned, taking 
into account such factors as the population in each geographic license 
area and the value of similar spectrum. A bidder's upfront payment is a 
refundable deposit to establish eligibility to bid on licenses. Upfront 
payments related to licenses for 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 AWS-1 
auction(s), the Bureau proposes to calculate upfront payments on a 
license-by-license basis using the following formula: $0.05 * MHz * 
License Area Population.
    39. Consistent with the Bureau's usual practice, the Bureau further 
proposes that the amount of the upfront payment submitted by a bidder 
will determine the bidder's initial bidding eligibility in bidding 
units. Eligibility cannot be increased during the auction; it can only 
remain the same or decrease. Each license is assigned a specific number 
of bidding units equal to the upfront payment listed in Attachment A of 
the Auction No. 66 Comment Public Notice, on a bidding unit per dollar 
basis. The number of bidding units for a given license is fixed and 
does not change during the auction as prices change. A bidder's upfront 
payment is not attributed to specific licenses. If there are two 
concurrent auctions and bidders wish to participate in both, they must 
submit separate upfront payments.
    40. The proposed upfront payment and number of bidding units for 
each AWS-1 license are set forth in Attachment A of the Auction No. 66 
Comment Public Notice.
    41. SMR--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 its current eligibility. Thus, in calculating 
its upfront payment amount and hence its initial bidding eligibility, 
an applicant must determine the maximum number of bidding units it may 
wish to bid on (or hold provisionally winning bids on) in any single 
round, and submit an upfront payment amount covering that total number 
of bidding units. Provisionally winning bids are bids that would become 
final winning bids if the auction were to close in that given round.
    42. SMR-PB--With package bidding, bidders can submit bids on groups 
of one or more licenses, but each bidder can have at most one 
provisionally winning bid. The number of bidding units associated with 
each bid in an SMR-PB auction is the sum of the bidding units assigned 
to the individual licenses comprising the package. As in an SMR 
auction, a bidder's eligibility limits the total number of bidding 
units that a bidder can win. However, because any licenses that a 
bidder wins in a package bidding auction must be packaged together in a 
single bid, the bidder's eligibility limits the total number of bidding 
units that can be included in the bidder's largest (in terms of bidding 
units) single bid. Therefore, to calculate its upfront payment amount 
and initial bidding eligibility, an applicant must determine the 
largest number of bidding units associated with licenses it may wish to 
include in a single package bid, and submit an upfront payment amount 
covering that total number of bidding units. Bidders should note that 
the eligibility rules will permit them to place multiple package bids, 
as long as the number of bidding units associated with any one bid does 
not exceed their current eligibility.
ii. Activity Rule
    43. In order to ensure that an auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively 
throughout the auction, rather than wait until late in the auction 
before participating.
    44. Bidders are required to be active on a specific percentage of 
their current bidding eligibility during each round of the auction. 
Failure to maintain the required activity level will result in the use 
of an activity rule waiver, if any remain, or a reduction in the 
bidder's eligibility, possibly curtailing or eliminating the bidder's 
ability to place bids in the auction.
    45. The Bureau proposes to divide the auction into two stages, each 
characterized by a different activity requirement. The auction will 
start in Stage One. The Bureau proposes that the auction generally will 
advance from Stage One to Stage Two when the auction activity level, as 
measured by the percentage of bidding units receiving new provisionally 
winning bids, is approximately twenty percent or below for three 
consecutive rounds of bidding. However, the Bureau further proposes 
that it retains 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 of increase in 
revenue.
    46. In the event there are two concurrent auctions for the AWS-1 
licenses, bidders will be required to manage their eligibility and 
activity separately for each auction.
    47. Commenters that believe these activity rules should be modified 
should

[[Page 6491]]

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.
    48. SMR--A bidder's activity in a round will be the sum of the 
bidding units associated with any licenses upon which it places bids 
during the current round and the bidding units associated with any 
licenses for which it holds provisionally winning bids.
    49. For an SMR auction for AWS-1 licenses, 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 bidding eligibility is required 
to be active on licenses representing at least 80 percent of its 
current bidding eligibility. Failure to maintain the required 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, a bidder's reduced eligibility for the next round 
will be calculated by multiplying the bidder's current round activity 
by five-fourths (\5/4\).
    Stage Two: In each round of the second stage, a bidder desiring to 
maintain its current bidding eligibility is required to be active on 95 
percent of its current bidding eligibility. Failure to maintain the 
required 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 Two, a bidder's reduced eligibility 
for the next round will be calculated by multiplying the bidder's 
current round activity by twenty-nineteenths (\20/19\).
    50. SMR-PB--A bidder's activity in a round will be the number of 
bidding units associated with the bidder's largest (in terms of bidding 
units) active bid. Active bids include current provisionally winning 
bids, new bids and any bids from previous rounds which are at or above 
the current minimum acceptable bid.
    51. For an SMR-PB auction, the Bureau proposes the following 
activity requirements, while noting again that it retains the 
discretion to change stages unilaterally by announcement during the 
auction:
    Stage One: In each round of the first stage of the auction, a 
bidder desiring to maintain its current bidding eligibility is required 
to be active on licenses representing at least 60 percent (three-
fifths) of its current bidding eligibility. Failure to maintain the 
required 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, a bidder's reduced eligibility 
for the next round will be calculated by multiplying the bidder's 
current round activity by five-thirds (\5/3\).
    Stage Two: In each round of the second stage, a bidder desiring to 
maintain its current bidding eligibility is required to be active on 90 
percent of its current bidding eligibility. Failure to maintain the 
required 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 Two, a bidder's reduced eligibility 
for the next round will be calculated by multiplying the bidder's 
current round activity by ten-ninths (\10/9\). The Bureau maintains the 
discretion not to transition to Stage Two if the Bureau believes the 
auction is progressing satisfactorily under the Stage One activity 
requirement, and in the alternative, to transition to Stage Two with an 
activity requirement that is lower than the 90 percent proposed herein, 
by announcement during the auction.
iii. Activity Rule Waivers
    53. Use of an activity rule waiver preserves the bidder's 
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. Activity rule waivers can be either proactive 
or automatic and are principally a mechanism for auction participants 
to avoid the loss of bidding eligibility in the event that exigent 
circumstances prevent them from placing a bid in a particular round.
    54. The FCC Auction System assumes that a bidder that does not meet 
the activity requirement would prefer to apply an activity rule waiver 
(if available) rather than lose bidding eligibility. Therefore, the 
system will automatically apply a waiver at the end of any bidding 
round where a bidder's activity level is below the minimum required 
unless: (1) The bidder has no activity rule waivers available; or (2) 
the bidder overrides the automatic application of a waiver by reducing 
eligibility, thereby meeting the minimum requirement. If a bidder has 
no waivers remaining and does not satisfy the required activity level, 
its eligibility will be permanently reduced, possibly curtailing or 
eliminating the bidder's ability to place additional bids in the 
auction.
    55. 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 round by using the reduce eligibility function in 
the FCC Auction System. In this case, the bidder's eligibility is 
permanently reduced to bring the bidder into compliance with the 
activity rules as described above. Reducing eligibility is an 
irreversible action. Once eligibility has been reduced, a bidder will 
not be permitted to regain its lost bidding eligibility, even if the 
round has not yet closed.
    56. A bidder may apply an activity rule waiver proactively as a 
means to keep the auction open without placing a bid. If a bidder 
proactively applies an activity rule waiver (using the apply waiver 
function in the FCC Auction System) during a bidding round in which no 
bids or withdrawals are submitted, the auction will remain open and the 
bidder's eligibility will be preserved. An automatic waiver applied by 
the FCC Auction System in a round in which there are no new bids or 
withdrawals will not keep the auction open. A bidder cannot submit a 
proactive waiver after submitting a bid in a round, and submitting a 
proactive waiver will preclude a bidder from placing any bids in that 
round. Applying a waiver is irreversible; once a proactive waiver is 
submitted, that waiver cannot be unsubmitted, even if the round has not 
yet closed.
    57. The Bureau proposes that each bidder in the AWS-1 auction(s) be 
provided with three activity rule waivers that may be used at the 
bidder's discretion during the course of the auction as set forth 
above. Waivers apply to a specific auction.
iv. Reserve Price or Minimum Opening Bid
    58. Section 309(j) calls upon the Commission to prescribe methods 
for establishing a reasonable reserve price or a minimum opening bid 
amount when FCC licenses are subject to auction, unless the Commission 
determines that a reserve price or minimum opening bid amount 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 
amount and/or reserve price prior to the start of each auction.
a. Reserve Price
    59. In CSEA, Congress requires the Commission to prescribe methods 
by which the total cash proceeds from any auction of licenses 
authorizing use of eligible frequencies, such as 1710-1755 MHz, shall 
equal at least 110 percent of the total estimated relocation costs 
provided to the Commission pursuant to

[[Page 6492]]

CSEA. For purposes of determining whether a CSEA revenue requirement 
has been met, the Commission has determined that total cash proceeds 
means winning bids net of any applicable bidding credit discounts at 
the end of bidding.
    60. CSEA also requires that the total cash proceeds attributable to 
eligible spectrum must be at least 110 percent of the total estimated 
relocation costs before the Commission may conclude the auction. If 
this condition is not met, CSEA requires that the Commission shall 
cancel the auction. One-half of the frequencies covered by the AWS-1 
licenses authorize use of CSEA eligible spectrum. Accordingly, the 
Bureau proposes that one-half of each winning bid net of any applicable 
bidding credit discounts at the end of bidding will be counted toward 
meeting the reserve price. In light of the proposed procedures on 
information available to bidders, the Bureau also seeks comment on 
whether the Commission should announce before the close of bidding 
whether the reserve price has been met.
    61. On December 27, 2005, pursuant to CSEA, NTIA notified the 
Commission of the estimated relocation costs and timelines for 
relocation of eligible Federal entities assigned to frequencies from 
1710 to 1755 MHz. NTIA reported that the total estimated relocation 
costs equal $935,940,312. This information can be found at http://www.ntia.doc.gov/osmhome/reports/specrelo/index.htm.
    62. Single Auction--The Bureau proposes to establish an aggregate 
reserve price of $1,029,534,343.20 for all AWS-1 licenses. This 
aggregate reserve price, $1,029,534,343.20, is 110 percent of total 
estimated relocation costs of $935,940,312 and therefore the minimum 
reserve price required by CSEA. This reserve price will be met if half 
of the total winning bids for AWS-1 licenses net of any applicable 
bidding credit discounts at the end of bidding equals 
$1,029,534,343.20.
    63. Two Auctions--In the event that the Commission conducts two 
auctions of AWS-1 licenses, the aggregate reserve price will apply 
jointly to both auctions. In other words, half of the total winning 
bids for all AWS-1 licenses net of any applicable bidding credit 
discounts at the end of bidding must equal at least $1,029,534,343.20 
to meet the reserve price. If the reserve price is not met, the 
Commission will cancel both auctions pursuant to CSEA.
b. Minimum Opening Bid
    64. In contrast to a reserve price, a minimum opening bid amount 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. The auctioneer, however, often has the 
discretion to lower the minimum opening bid amount during the course of 
the auction. It is also possible for the minimum opening bid amount and 
the reserve price to be the same amount.
    65. In light of section 309(j)'s requirements, the Bureau proposes 
to establish minimum opening bid amounts for the AWS-1 auction(s). The 
Bureau believes a minimum opening bid amount, which has been used in 
other auctions, is an effective bidding tool for accelerating the 
competitive bidding process.
    66. Specifically, for the AWS-1 auction(s), the Commission proposes 
the following license-by-license formula for calculating minimum 
opening bids: $0.05 * MHz * License Area Population.
    67. The specific proposed minimum opening bid for each AWS-1 
license available at auction is set forth in Attachment A of the 
Auction No. 66 Comment Public Notice.
    68. If commenters believe that these minimum opening bid amounts 
will result in unsold licenses, or are not reasonable amounts, 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 minimum opening bid amount levels 
or formulas. In establishing the minimum opening bid amounts, 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, issues of interference with other 
spectrum bands and any other relevant factors that could reasonably 
have an impact on valuation of the AWS-1 licenses. The Bureau also 
seeks comment on whether, consistent with section 309(j), the public 
interest would be served by having no minimum opening bid amounts.
v. Bid Amounts
    69. The Bureau proposes that, in each round, eligible bidders be 
able to place bids in any of nine different amounts. Under this 
proposal, the FCC Auction System interface will list the nine 
acceptable bid amounts for each license (or package). The first of the 
nine acceptable bid amounts, called the minimum acceptable bid amount, 
is calculated using a formula that takes into account the amount of 
bidding activity on the license (or package). The eight additional bid 
amounts are determined by adding successively higher multiples of a 
fixed bid increment amount to the minimum acceptable bid.
    70. The Bureau retains the discretion to change the minimum 
acceptable bid amounts, the parameters of the formula to determine the 
percentage increment, and the bid increment percentage if it determines 
that circumstances so dictate. If it does make any of these changes, 
the Bureau will do so by announcement in the FCC Auction System during 
the auction.
    71. SMR--The minimum acceptable bid amount for a license will be 
equal to its minimum opening bid amount until there is a provisionally 
winning bid for the license. After there is a provisionally winning bid 
for a license, the minimum acceptable bid amount for that license will 
be equal to the amount of the provisionally winning bid plus an 
additional amount calculated using the formula described below. The 
Bureau will round the result using its standard rounding procedures.
    72. The Bureau proposes to calculate minimum acceptable bid amounts 
by using an activity-based formula, as it has done in several other 
auctions. The formula calculates minimum acceptable bid amounts by 
first calculating a percentage increment. The percentage increment for 
each license is a function of bidding activity on that license in prior 
rounds; therefore, a license that has received many bids will have a 
higher percentage increment than a license that has received few bids.
    73. The calculation of the percentage increment used to determine 
the minimum acceptable bid amounts 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 
bidders that submit bids 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 and 
examples are

[[Page 6493]]

shown in Attachment C of the Auction No. 66 Comment Public Notice.
    74. In the case of a license for which the provisionally winning 
bid has been withdrawn, the minimum acceptable bid amount will equal 
the second highest bid received for the license.
    75. The acceptable bid amounts in addition to the minimum 
acceptable bid amount for each license are calculated using a bid 
increment percentage. The first additional acceptable bid amount equals 
the minimum acceptable bid amount times one plus the bid increment 
percentage, rounded--e.g., if the increment percentage is 10 percent, 
the calculation is (minimum acceptable bid amount) * (1 + 0.10), 
rounded, or (minimum acceptable bid amount) * 1.10, rounded; the second 
additional acceptable bid amount equals the minimum acceptable bid 
amount times one plus two times the bid increment percentage, rounded, 
or (minimum acceptable bid amount) * 1.20, rounded; the third 
additional acceptable bid amount equals the minimum acceptable bid 
amount times one plus three times the bid increment percentage, 
rounded, or (minimum acceptable bid amount) * 1.30, rounded; etc.
    76. SMR-PB--Because bids are submitted on groups of licenses in 
SMR-PB, there generally are not provisionally winning bid amounts 
associated with individual licenses, as there are in an SMR auction 
where bids are submitted on a license-by-license basis. Consequently, 
in order to determine license-specific acceptable bid amounts for the 
next round, after each round the auction system will assign a price to 
each license using an algorithm that takes into account the bids placed 
so far in the auction that include that license. These prices, or 
current price estimates (CPEs), form the basis for calculating minimum 
acceptable bids and the additional increment bid amounts, much as the 
per-license provisionally winning bids do in the SMR format. The 
algorithm for computing CPEs is described in detail in Attachment B of 
the Auction No. 66 Comment Public Notice.
    77. Once CPEs are determined following a round, the minimum 
acceptable bids for each license will be calculated as the CPE plus a 
percentage of the CPE. This percentage (known as the percentage 
increment) is determined according to a formula based on the number of 
bids placed that included a given license. The percentage increment 
will be higher for licenses that have been included in many bids than 
for licenses receiving little bidding activity.
    78. As in an SMR auction, the computation of the percentage 
increment for each license 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 bidders that submit bids on 
packages that include 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 and examples are 
shown in Attachment C of the Auction No. 66 Comment Public Notice.
    79. The percentage increment is added to the CPE in order to 
determine minimum acceptable bids for each license. The minimum 
acceptable bid amount for a package will be the sum of the minimum 
acceptable bid amounts for the license(s) comprising the package. Once 
the minimum acceptable bids have been calculated for a package, the 
additional eight bid amounts will be calculated by adding successively 
higher multiples of a fixed bid increment amount to the minimum 
acceptable bid.
vi. Provisionally Winning Bids
    80. SMR--At the end of a bidding round, a provisionally winning bid 
amount for each license will be determined based on the highest bid 
amount received for the license. In the event of identical high bid 
amounts being submitted on a license in a given round (i.e., tied 
bids), the Bureau will use a random number generator to select a single 
provisionally winning bid from among the tied bids. (Each bid is 
assigned a random number, and the tied bid with the highest random 
number wins the tiebreaker.) The remaining bidders, as well as the 
provisionally winning bidder, can submit higher bids in subsequent 
rounds. However, if the auction were to end with no other bids being 
placed, the winning bidder would be the one that placed the selected 
provisionally winning bid. If any bids are received on the license in a 
subsequent round, the provisionally winning bid again will be 
determined by the highest bid amount received for the license.
    81. A provisionally winning bid will remain the provisionally 
winning bid until there is a higher bid on the same license at the 
close of a subsequent round, unless the provisionally winning bid is 
withdrawn. Bidders are reminded that provisionally winning bids count 
toward activity for purposes of the activity rule.
    82. SMR-PB--At the end of each bidding round in an SMR-PB auction, 
the FCC Auction System will determine the set of provisionally winning 
bids by considering all of the bids that have been placed in the 
auction and determining which combination of non-overlapping bids 
yields the highest aggregate gross bid amount while not allowing a 
bidder to have more than one provisionally winning bid.
    83. If more than one set of bids generates the same highest 
aggregate gross bid amount (i.e., the sets of bids are tied), the 
Bureau will randomly select a provisionally winning set of bids from 
among the tied sets. Specifically, each license in each bid will be 
assigned a random number. The sum of random numbers for the licenses 
comprising the bid will determine a selection number for each bid. The 
provisionally winning set of bids will be that set of bids that 
generates the highest aggregate gross bid amount and that maximizes the 
sum of selection numbers for the bids in the set. Bidders, regardless 
of whether they hold a provisionally winning bid, can submit higher 
bids in subsequent rounds. However, if the auction were to end, the 
winning bidders would be those that placed the provisionally winning 
bids.
    84. In the SMR-PB format, all bids placed in the auction will be 
considered when determining the provisionally winning set of bids. This 
contrasts with the SMR format in which only provisionally winning bids 
from the previous round and bids placed during the current round are 
considered when determining new provisionally winning bids. As a 
consequence, in SMR-PB a bid that does not become a provisionally 
winning bid at the conclusion of the round in which it was placed may 
become a provisionally winning bid at the conclusion of a subsequent 
round. This may occur even if the bidder no longer has the bidding 
eligibility to cover the newly-provisionally winning bid. Bids cannot 
be withdrawn in an SMR-PB auction.
    85. The rule that a bidder can hold only one of the bids in the 
provisionally winning set of bids may increase the likelihood that bids 
placed in previous rounds may appear in the provisionally

[[Page 6494]]

winning set for the first time many rounds later. Bids at very 
competitive prices may have been excluded from the provisionally 
winning set because the bidder placed another bid which, in combination 
with the bids of others, yielded a higher aggregate gross bid amount. 
However, if a bid placed by another bidder displaces the bidder's 
provisionally winning bid from the set of provisionally winning bids, 
an old bid by that bidder may fit better into the new set of winning 
bids.
    86. The set of provisionally winning bids is determined after every 
round in which new bids are submitted.
vii. Bid Removal and Bid Withdrawal
    87. SMR--Before the close of a bidding round, a bidder has the 
option of removing any bid placed in that round. By removing selected 
bids in the FCC Auction System, a bidder may effectively unsubmit any 
bid placed within that round. In contrast to the bid withdrawal 
provisions described below, 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.
    88. A bidder may withdraw its provisionally winning bids using the 
withdraw bids function in the FCC Auction System. A bidder that 
withdraws its provisionally winning bid(s) is subject to the bid 
withdrawal payment provisions of the Commission rules. The Bureau seeks 
comment on these bid removal and bid withdrawal procedures.
    89. In the Part 1 Third Report and Order, 65 FR 13540 (May 21, 
1997), the Commission explained that allowing bid withdrawals 
facilitates efficient aggregation of licenses and the pursuit of backup 
strategies as information becomes available during the course of an 
auction. The Commission noted, however, that in some instances bidders 
may seek to withdraw bids for improper reasons. The Bureau, therefore, 
has discretion in managing the auction to limit the number of 
withdrawals to prevent any bidding abuses. The Commission stated that 
the Bureau should assertively exercise its discretion, consider 
limiting the number of rounds in which bidders may withdraw bids, and 
prevent bidders from bidding on a particular market if the Bureau finds 
that a bidder is abusing the Commission's bid withdrawal procedures.
    90. Applying this reasoning, the Bureau proposes to limit each 
bidder in an auction using the SMR format to withdrawing provisionally 
winning 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 
may encourage insincere bidding or the use of withdrawals for anti-
competitive purposes. The two rounds in which withdrawals may be used 
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 provisionally winning bids that may be withdrawn in either of the 
rounds in which withdrawals are used. Withdrawals will remain subject 
to the bid withdrawal payment provisions specified in the Commission's 
rules.
    91. SMR-PB--As in the SMR format, before the close of a round a 
bidder has the option of removing any bid placed in that round, 
effectively unsubmitting any bid placed in the round. Once a round 
closes, a bidder may no longer remove a bid. However, in contrast to 
SMR, bidders will not be permitted to withdraw any bids after a round 
has closed.
    92. As discussed above, the Part 1 Third Report and Order permits 
withdrawals in the SMR format in part to allow bidders to avoid being 
the winning bidder on some, but not all, of a desired set of licenses. 
In contrast to the license-by-license bidding of SMR, the SMR-PB format 
does not expose bidders to the risk of winning incomplete aggregations. 
In SMR-PB, bidders can only win licenses that were submitted as part of 
a single package bid and therefore, withdrawals are not needed to avoid 
winning an incomplete set of licenses.
    93. Bids in an SMR-PB auction are much more interdependent than in 
an SMR auction. In an SMR auction, whether a bid on a license becomes 
provisionally winning depends only upon whether it is the highest bid 
submitted for the license and, in the case of ties, on its random 
number assignment. In contrast, in the SMR-PB format, whether a bid 
becomes part of the provisionally winning set depends in part upon the 
particular configuration of package bids submitted by other bidders and 
upon the identities of the bidders submitting them, because a given 
bidder can only have one bid in the provisionally winning set. 
Consequently, a withdrawn bid in an SMR-PB auction may significantly 
change the current set of provisionally winning bids and seriously 
disrupt the bidding strategies of other bidders.
    94. Hence, because the potential benefits to bidders from being 
able to withdraw bids are much lower in an SMR-PB auction than in an 
SMR auction and because the potential harms to other bidders from 
withdrawn bids are potentially much greater, no withdrawals will be 
permitted in an auction using the SMR-PB format.

D. Considerations Relating to Certain Post-Auction Payment Rules

i. Apportioning Package Bids
    95. In the event that it offers AWS-1 licenses in an auction using 
SMR-PB, the Bureau seeks comment on the appropriate mechanism for 
apportioning package bids among the individual licenses comprising the 
package. In package bidding, when bidders place winning all-or-nothing 
bids on groups of licenses, there will be no identifiable bid amounts 
on the individual licenses that comprise packages of more than one 
license. However, the Commission's competitive bidding rules and 
procedures assume that the amount of each bid on an individual license 
always is known.
    96. In the event that it offers AWS-1 licenses in an auction using 
SMR-PB, the Bureau proposes to use final current price estimates as a 
mechanism for apportioning package bids among the individual licenses 
comprising the package when regulatory calculations require a bid 
amount on an individual license. As summarized below and described in 
detail in Attachment B of the Auction No. 66 Comment Public Notice, 
current price estimates (CPEs) for each license in an SMR-PB auction 
reflect the demand expressed by bids in the auction that include the 
license. CPEs are calculated in each round of the auction using an 
algorithm that takes into account all the bids placed in the auction 
that include that license, whether the bids are for the individual 
license or include the license in a package with other licenses. The 
algorithm assures that the sum of CPEs for individual licenses in a 
package that is part of the provisionally winning set equals the 
provisionally winning bid amount for the package. Thus, CPEs in effect 
apportion the provisionally winning bid amount for a package in the 
provisionally winning set among the individual licenses in the package 
based on the relative demand for each license as expressed by bids in 
the auction. Final CPEs, or final price estimates (FPEs), are the CPEs 
from the final round of the auction. Accordingly, FPEs reflect all bids 
made in the auction and can be used to apportion a winning bid on a 
package. The Bureau seeks comment on this proposal.
ii. Establishing the Interim Withdrawal Payment Percentage
    97. The Bureau seeks comment on the appropriate percentage of a 
withdrawn

[[Page 6495]]

bid that should be assessed as an interim withdrawal payment, in the 
event that a final withdrawal payment cannot be determined at the close 
of the auction. In general, the Commission's rules provide that a 
bidder that withdraws a bid during an auction is subject to a 
withdrawal payment equal to the difference between the amount of the 
withdrawn bid and the amount of the winning bid in the same or 
subsequent auction(s). However, if a license for which there has been a 
withdrawn bid is neither subject to a subsequent higher bid nor won in 
the same auction, the final withdrawal payment cannot be calculated 
until a corresponding license is subject to a higher bid or won in a 
subsequent auction. When that final payment cannot yet be calculated, 
the bidder responsible for the withdrawn bid is assessed an interim bid 
withdrawal payment, which will be applied toward any final bid 
withdrawal payment that is ultimately assessed. The Commission recently 
amended its rules to provide that in advance of the auction, the 
Commission shall establish the percentage of the withdrawn bid to be 
assessed as an interim bid withdrawal payment between three percent 
(3%) and twenty percent (20%).
    98. When it adopted the new rule, the Commission indicated that the 
level of the interim withdrawal payment in a particular auction will be 
based on the nature of the service and the inventory of the licenses 
being offered. The Commission noted that it may impose a higher interim 
withdrawal payment percentage to deter the anti-competitive use of 
withdrawals when, for example, bidders likely will not need to 
aggregate licenses offered, such as when few licenses are offered that 
are not on adjacent frequencies or in adjacent areas, or there are few 
synergies to be captured by combining licenses.
    99. With respect to an auction of AWS-1 licenses, the service rules 
permit a wide range of advanced services, some of which may best be 
offered by combining licenses on adjacent frequencies or in adjacent 
areas. In addition, an auction of AWS-1 licenses will make available 
multiple licenses on adjacent frequencies in geographic areas of 
varying sizes. Given the availability of so many different licenses and 
the Bureau's interest in deterring strategic withdrawals, the Bureau 
proposes a percentage above the 3 percent (3%) previously provided by 
the Commission's rules. Specifically, taking into account the factors 
discussed above, the Bureau proposes to establish the percentage of the 
withdrawn bid to be assessed as an interim bid withdrawal payment at 
ten percent (10%) for the AWS-1 auction. The Bureau seeks comment on 
this proposal.
iii. Establishing the Additional Default Payment Percentage
    100. The Bureau seeks comment on the appropriate percentage of an 
applicable bid that should be assessed as an additional default payment 
in an auction under the SMR format. If, after the close of an auction, 
a winning bidder defaults on a down payment or final payment obligation 
or is disqualified, the bidder is liable for a default payment. This 
payment consists of a deficiency portion, equal to the difference 
between the amount of the bidder's bid and the amount of the winning 
bid the next time a license covering the same spectrum is won in an 
auction, plus an additional payment equal to a percentage of the 
defaulter's bid or of the subsequent winning bid, whichever is less. 
Under both prior and recently adopted Commission rules, in an auction 
under the SMR-PB format, the additional default payment will be twenty-
five percent (25%) of the defaulted bid. However, the Commission's 
recently adopted new rule provides that in auctions under the SMR 
format, the Commission shall establish in the advance of the auction 
the percentage of the applicable bid to be assessed as an additional 
payment between three percent (3%) and twenty percent (20%).
    101. When it adopted the new rule, the Commission indicated that 
the level of the additional default payment in a particular SMR auction 
will be based on the nature of the service and the inventory of the 
licenses being offered. In this regard, the Bureau believes that it is 
significant that the auction of AWS-1 licenses will be the first 
opportunity for bidders to obtain licenses to provide advanced wireless 
services. This context heightens the public interest in avoiding any 
delay in providing access to the spectrum that might result from 
defaults on winning bids. Furthermore, the public interest in rapid 
deployment of new advanced wireless services might be adversely 
affected by defaults.
    102. Given its interest in deterring defaults, the Bureau proposes 
a percentage above the 3 percent (3%) minimum previously provided by 
the Commission's rules. The Bureau proposes to set the additional 
default payment for the auction of AWS-1 licenses at ten percent (10%) 
of the applicable bid. The Bureau seeks comment on this proposal.

III. Conclusion

    103. Comments are due on or before February 14, 2006, and reply 
comments are due on or before February 28, 2006. All filings related to 
the auction(s) of AWS-1 licenses should refer to AU Docket No. 06-30. 
Comments may be submitted using the Commission's Electronic Comment 
Filing System (ECFS) or by filing paper copies. The Bureau encourages 
interested parties to file electronically.
    104. Electronic Filers: Parties who choose to file electronically 
through ECFS need submit only one copy. Comments may be filed 
electronically using the Internet by accessing the ECFS at http://www.fcc.gov/cgb/ecfs/. Filers should follow the instructions provided 
on the website for submitting comments. In completing the transmittal 
screen, filers 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, filers should send an e-mail to [email protected], 
and include the following words in the body of the message, ``get 
form.'' A sample form and directions will be sent in response.
    105. Paper Filers: Parties who choose to file by paper must file an 
original and four copies of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary Attn: WTB/ASAD, Office of the Secretary, 
Federal Communications Commission.
    106. 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.
Gary D. Michaels,
Deputy Chief, Auctions Spectrum and Access Division.
[FR Doc. 06-1196 Filed 2-7-06; 8:45 am]
BILLING CODE 6712-01-P