[Federal Register Volume 84, Number 89 (Wednesday, May 8, 2019)]
[Proposed Rules]
[Pages 20077-20088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09431]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 30

[AU Docket No. 19-59; FCC 19-35]


Incentive Auction of Upper Microwave Flexible Use Service 
Licenses in the Upper 37 GHz, 39 GHz, and 47 GHz Bands for Next-
Generation Wireless Services; Comment Sought on Competitive Bidding 
Procedures for Auction 103

AGENCY: Federal Communications Commission.

ACTION: Proposed rule; proposed auction procedures.

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SUMMARY: In this document, the Commission announces auctions of Upper 
Microwave Flexible Use Service licenses in the Upper 37 GHz (37.6-38.6 
GHz), 39 GHz (38.6-40 GHz), and 47 GHz (47.2-48.2 GHz) bands, 
designated as Auction 103. This document proposes and seeks comment on 
competitive bidding procedures to be used for Auction 103.

DATES: Comments are due on or before May 15, 2019, and reply comments 
are due on or before May 30, 2019.

ADDRESSES: Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS) or by filing paper copies. Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 
1998). All filings in response to the Auction 103 Comment Public Notice 
must refer to AU Docket No. 19-59. The Commission strongly encourages 
interested parties to file comments electronically and requests that an 
additional copy of all comments and reply comments be submitted 
electronically to the following email address: [email protected].
    Electronic Filers: Comments may be filed electronically using the 
internet by accessing the ECFS: https://www.fcc.gov/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 number, AU Docket No. 19-59.
    Paper Filers: Parties who choose to file by paper must file an 
original and

[[Page 20078]]

one copy of each filing. If more than one docket or rulemaking number 
appears in the caption of this proceeding, filers must submit two 
additional copies for each additional docket or rulemaking number. 
Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
    All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    Commercial overnight mail (other than U.S. Postal Service Express 
Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis 
Junction, MD 20701.
    U.S. Postal Service first-class, Express, and Priority mail must be 
addressed to 445 12th Street SW, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: For auction legal questions, Mark 
Montano or Erik Beith in the Auctions Division of the Office of 
Economics and Analytics at (202) 418-0660. For general auction 
questions, the Auctions Hotline at (717) 338-2868. For Upper Microwave 
Flexible Use Service questions, Simon Banyai in the Wireless 
Telecommunications Bureau's Broadband Division at (202) 418-2487.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction 103 Comment 
Public Notice, AU Docket No. 19-59, FCC 19-35, adopted on April 12, 
2019 and released on April 15, 2019. The Auction 103 Comment Public 
Notice includes the following attachment: Attachment A, Summary of MHz 
pops by PEA. The complete text of the Auction 103 Comment Public 
Notice, including its attachment, is available for public inspection 
and copying from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) Monday 
through Thursday or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the 
FCC Reference Information Center, 445 12th Street SW, Room CY-A257, 
Washington, DC 20554. The complete text is also available on the 
Commission's website at www.fcc.gov/auction/103/ or by using the search 
function for AU Docket No. 19-59 on the Commission's ECFS web page at 
www.fcc.gov/ecfs/. Alternative formats are available to persons with 
disabilities by sending an email to [email protected] or by calling the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 
418-0432 (TTY). Pursuant to sections 1.415 and 1.419 of the 
Commission's rules, 47 CFR 1.415, 1.419, interested parties may file 
comments and reply comments on or before the dates indicated in the 
Auction 103 Comment Public Notice in AU Docket No. 19-59.

I. Introduction

    1. By the Auction 103 Comment Public Notice, the Commission seeks 
comment on the procedures to be used for Auction 103, the incentive 
auction of Upper Microwave Flexible Use Service (UMFUS) licenses in the 
Upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz), and 47 GHz (47.2-
48.2 GHz) bands. The Commission proposes to use an ascending clock 
auction format for the licenses offered in Auction 103 and then hold a 
sealed bid assignment phase. The clock phase of Auction 103 serves as 
both the forward and reverse portions of the incentive auction by 
determining the prices and winners of new flexible use licenses as well 
as determining the amount of incentive payments to those incumbent 
licensees that relinquish spectrum usage rights.

II. Licenses To Be Offered in Auction 103

    2. Auction 103 will offer UMFUS licenses for all available spectrum 
in the Upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz), and 47 GHz 
(47.2-48.2 GHz) bands. The Commission will offer 100 megahertz blocks 
of spectrum licensed by Partial Economic Area (PEA) service area. In 
combination, the Upper 37 GHz and the 39 GHz bands offer the largest 
amount of contiguous spectrum in the millimeter wave bands for 
flexible-use wireless services--a total of 2,400 megahertz--and the 47 
GHz band will provide an additional 1,000 megahertz of millimeter wave 
spectrum for such services. The Commission proposes to limit Auction 
103 to only these bands because licenses for no other UMFUS spectrum 
bands are ready and/or suitable to be auctioned at this same time.
    3. The specific number of Upper 37 and 39 GHz licenses to be 
auctioned in each PEA will be determined by the reconfiguration 
process, which concludes with the Initial Commitments of 39 GHz 
incumbents as described in the Spectrum Frontiers Fourth R&O, 84 FR 
1618, February 2, 2019, and the Initial Reconfiguration Procedures 
Public Notice, 84 FR 11723, March 28, 2019. The licenses that will be 
available in the auction depend, in part, on upcoming decisions by 
those entities that currently hold 39 GHz licenses (referred to as 
``incumbents'') to either accept modified licenses, reconfigured to 
conform with the new band plan and service areas, or to relinquish all 
their existing spectrum usage rights in exchange for a share of the 
auction proceeds. If all incumbents choose to relinquish their 
licenses, the Commission will offer new licenses for 3,400 megahertz of 
spectrum across all three spectrum bands, or 34 licenses in every PEA. 
Following incumbents' binding commitments, a public notice will 
announce the specific licenses available in the Upper 37 and 39 GHz 
bands for auction. This public notice will be released well in advance 
of the deadline for the submission of short-form applications to bid in 
Auction 103 so that potential applicants can make informed decisions 
whether to apply.
    4. It is possible that an incumbent that chooses to receive 
modified licenses will decide to retain its partial PEA holding (i.e., 
covering less than the full geographic area of a PEA). The remaining 
portion of the spectrum block will thus have unassigned spectrum usage 
rights. The Commission does not propose to make this ``white space'' 
available in the auction.
    5. Each of the bands available in Auction 103 will be licensed on 
an unpaired basis in 100 megahertz channel blocks by PEA. A licensee in 
these bands may provide any services permitted under a fixed or mobile 
allocation, as set forth in the non-Federal Government column of the 
Table of Frequency Allocations in section 2.106 of the Commission's 
rules.

III. Proposed Pre-Bidding Procedures

    6. In the 2016 Spectrum Frontiers Order, 81 FR 79894, November 14, 
2016, the Commission decided to conduct any auction of UMFUS licenses 
in conformity with the amended Part 1 rules. The Commission's Part 1 
rules require each applicant seeking to bid to acquire licenses in a 
spectrum auction to provide certain information in a short-form 
application (FCC Form 175), including ownership details and numerous 
certifications. This is a separate and distinct application from the 
application (FCC Form 175-A) that incumbents must file concerning their 
existing license holdings. In other words, an incumbent wishing to bid 
to acquire licenses in the auction must file both applications. For 
Auction 103, the Commission is not proposing that short-form applicants 
provide any additional categories of information than those already 
required by its rules.

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    7. Prohibited Communications. In connection with the application 
process, the Initial Reconfiguration Procedures Public Notice discusses 
certain issues that are also applicable to entities that wish to 
acquire licenses in Auction 103. In particular, the Initial 
Reconfiguration Procedures Public Notice addresses the applicability to 
39 GHz incumbents of section 1.2105(c)(1), which prohibits applicants 
from engaging in certain communications relating to bids and bidding 
strategies. As the public notice explains, the rule would apply not 
only to a short-form applicant's communication to another applicant, 
but also to (i) a specific entity that is considered a nationwide 
provider (here, AT&T, Sprint, T-Mobile, and Verizon Wireless) and (ii) 
an incumbent that files an application (FCC Form 175-A) as part of the 
process for it to select whether to retain or relinquish its existing 
license(s).
    8. Joint Bidding Arrangements. That same analysis applies to the 
Part 1 rules' prohibition of joint bidding arrangements. To implement 
the prohibition on joint bidding arrangements, the Commission's rules 
require each auction applicant to certify in its short-form application 
that it has disclosed any arrangements or understandings of any kind 
relating to the licenses being auctioned to which it (or any party that 
controls or is controlled by it) is a party; the applicant must also 
certify that it (or any party that controls or is controlled by it) has 
not entered and will not enter into any arrangement or understanding of 
any kind relating directly or indirectly to bidding at auction with, 
among others, ``any other applicant'' or a nationwide provider. For 
Auction 103, therefore, a short-form applicant's certifications with 
respect to its arrangements or understandings will necessarily 
encompass an incumbent that files an FCC Form 175-A application (or any 
party that controls or is controlled by it).

A. Bidding Credit Caps

    9. The Commission seeks comment on establishing reasonable caps on 
the total amount of bidding credits that an eligible small business or 
rural service provider may be awarded for Auction 103.
    10. In the 2016 Spectrum Frontiers Order, the Commission determined 
that an entity with average annual gross revenues for the preceding 
three years not exceeding $55 million would be designated as a ``small 
business'' eligible for a 15% bidding credit, and that an entity with 
average annual gross revenues for the preceding three years not 
exceeding $20 million would be designated as a ``very small business'' 
eligible for a 25% bidding credit. The Commission further determined 
that entities providing commercial communication services to a customer 
base of fewer than 250,000 combined wireless, wireline, broadband, and 
cable subscribers in primarily rural areas would be eligible for the 
15% rural service provider bidding credit.
    11. The Commission, in the 2015 Part 1 Report and Order, 80 FR 
56764, September 18, 2015, established a process to implement a 
reasonable cap on the total amount of bidding credits that an eligible 
small business or rural service provider may be awarded in any auction, 
based on an evaluation of the expected capital requirements presented 
by the particular service and inventory of licenses being auctioned. 
The Commission determined that bidding credit caps would be implemented 
on an auction-by-auction basis, but resolved that, for any particular 
auction, the total amount of the bidding credit cap for small 
businesses would not be less than $25 million, and the bidding credit 
cap for rural service providers would not be less than $10 million. For 
Auction 101 and Auction 102, the Commission adopted a $25 million cap 
on the total amount of bidding credits that may be awarded to an 
eligible small business in each auction (i.e., $25 million in each 
auction) and a $10 million cap on rural service provider bidding 
credits in each auction.
    12. The Commission proposes to adopt the same bidding credit caps 
for Auction 103. Like Auction 101 and Auction 102, Auction 103 will 
offer licenses in the millimeter wave spectrum, and the Commission 
anticipates that the range of potential use cases suitable for the 
UMFUS bands, including localized fiber replacement and IoT, combined 
with the small license areas in these bands, may permit deployment of 
smaller scale networks with lower total costs. Further, based on past 
auction data, the Commission expects that a $25 million cap on small 
business bidding credits will allow the substantial majority of small 
businesses in the auction to take full advantage of the bidding credit 
program. The Commission therefore believes that its proposed cap will 
promote the statutory goals of providing meaningful opportunities for 
bona fide small businesses to compete in auctions and in the provision 
of spectrum-based services, without compromising the Commission's 
responsibility to prevent unjust enrichment and ensure efficient and 
intensive use of spectrum.
    13. The Commission proposes to adopt a $10 million cap on the total 
amount of bidding credits that may be awarded to an eligible rural 
service provider in Auction 103. The Commission anticipates that a $10 
million cap on rural service provider bidding credits will not 
constrain the ability of any rural service provider to participate 
fully and fairly in Auction 103. In addition, to create parity in 
Auction 103 among eligible small businesses and rural service providers 
competing against each other in smaller markets, the Commission 
proposes a $10 million cap on the overall amount of bidding credits 
that any winning small business bidder may apply to winning licenses in 
markets with a population of 500,000 or less.
    14. The Commission seeks comment on these proposed caps. 
Specifically, do the expected capital requirements associated with 
operating in the UMFUS bands, the potential number and value of UMFUS 
licenses, past auction data, or any other considerations justify a 
higher or lower cap for either type of bidding credit? Moreover, are 
there convincing reasons why the Commission should not achieve parity 
with the bidding credit caps in Auctions 101 and 102? Commenters are 
encouraged to identify unique circumstances and characteristics of this 
millimeter wave auction that should guide the Commission in 
establishing bidding credit caps, and to provide specific, data-driven 
arguments in support of their proposals.
    15. The Commission reminds applicants applying for designated 
entity bidding credits that they should take due account of the 
requirements of the Commission's rules and implementing orders 
regarding de jure and de facto control of such applicants. These rules 
include a prohibition, which applies to all applicants (whether or not 
seeking bidding credits), against changes in ownership of the applicant 
that would constitute an assignment or transfer of control. Applicants 
should not expect to receive any opportunities to revise their 
ownership structure after the filing of their short- and long-form 
applications, including making revisions to their agreements or other 
arrangements with interest holders, lenders, or others in order to 
address potential concerns relating to compliance with the designated 
entity bidding credit requirements.

B. Information Procedures During the Auction Process

    16. As with most recent Commission spectrum license auctions, the 
Commission proposes to limit information available in Auction 103 in 
order to prevent the identification of

[[Page 20080]]

bidders placing particular bids until after the bidding has closed. 
More specifically, the Commission proposes to not make public until 
after bidding has closed: (1) The license areas that an applicant 
selects for bidding in its short-form application (FCC Form 175), (2) 
the amount of any upfront payment made by or on behalf of an applicant 
for Auction 103, (3) any applicant's bidding eligibility, and (4) any 
other bidding-related information that might reveal the identity of the 
bidder placing a bid.
    17. Once the bidding in Auction 103 starts, under these proposed 
limited information procedures (sometimes also referred to as anonymous 
bidding), information to be made public after each round of bidding 
would include for each category of license in each geographic area, the 
supply, the aggregate demand, the price at the end of the last 
completed round, and the price for the next round. However, the 
identities of bidders placing specific bids and the net bid amounts 
(reflecting bidding credits) would not be disclosed until after the 
close of bidding.
    18. Bidders would have access through the bidding system to 
additional information related to their own bidding and bid 
eligibility. For example, bidders would be able to view their own level 
of eligibility, before and during the auction, through the FCC auction 
bidding system.
    19. After the close of bidding, bidders' PEA selections, upfront 
payment amounts, bidding eligibility, bids, and other bidding-related 
actions would be made publicly available.
    20. The Commission seeks comment on the details of its proposal for 
implementing limited information procedures, or anonymous bidding, in 
Auction 103. Commenters opposing the use of anonymous bidding in 
Auctions 103 should explain their reasoning and propose alternative 
information rules.

IV. Due Diligence

    21. Each potential bidder is solely responsible for investigating 
and evaluating all technical and marketplace factors that may have a 
bearing on the value of the licenses that it is seeking in Auction 103. 
Each bidder is responsible for assuring that, if it wins a license, it 
will be able to build and operate facilities in accordance with the 
Commission's rules. The Commission makes no representations or 
warranties about the use of this spectrum for particular services. Each 
applicant should be aware that a Commission auction represents an 
opportunity to become a Commission licensee, subject to certain 
conditions and regulations. This includes the established authority of 
the Commission to alter the terms of existing licenses by rulemaking, 
which is equally applicable to licenses awarded by auction. A 
Commission auction does not constitute an endorsement by the Commission 
of any particular service, technology, or product, nor does a 
Commission license constitute a guarantee of business success.
    22. An applicant should perform its due diligence research and 
analysis before proceeding, as it would with any new business venture. 
Each potential bidder should perform technical analyses and/or refresh 
any previous analyses to assure itself that, should it become a winning 
bidder for any Auction 103 license, it will be able to build and 
operate facilities that will comply fully with all applicable technical 
and regulatory requirements. For example, licensees operating in the 
Upper 37 GHz band near specific Federal sites must coordinate with 
those Federal operations. The Commission strongly encourages each 
applicant to inspect any prospective sites for communications 
facilities located in, or near, the geographic area for which it plans 
to bid; confirm the availability of such sites; and familiarize itself 
with the Commission's rules regarding the National Environmental Policy 
Act.
    23. The Commission strongly encourages each applicant to conduct 
its own research prior to Auction 103 in order to determine the 
existence of pending administrative, rulemaking, or judicial 
proceedings that might affect its decisions regarding participation in 
the auction.
    24. The Commission also strongly encourages participants in Auction 
103 to continue such research throughout the auction. The due diligence 
considerations mentioned in the document do not constitute an 
exhaustive list of steps that should be undertaken prior to 
participating in this auction. As always, the burden is on the 
potential bidder to determine how much research to undertake, depending 
upon the specific facts and circumstances related to its interests.
    25. The Commission also reminds bidders of the Commission's mobile 
spectrum holding policies applicable to the millimeter wave bands. 
Specifically, for purposes of reviewing proposed secondary market 
transactions, the Commission adopted a threshold of 1850 megahertz of 
combined millimeter wave spectrum in the 24 GHz, 28 GHz, 37 GHz, 39 
GHz, and 47 GHz bands. In addition, the Commission found that it is in 
the public interest to review applications for initial licenses filed 
post-auction on a case-by-case basis using this same 1850 megahertz 
threshold.

V. Proposed Bidding Procedures

A. Clock Phase

1. Clock Auction Design
    26. The Commission will conduct Auction 103 using an ascending 
clock auction design that will offer licenses for spectrum held by the 
Commission and for spectrum relinquished by incumbent licensees, and 
which will also determine incentive payments for relinquishing 
licensees. The first phase of the incentive auction will consist of 
successive clock bidding rounds in which bidders indicate their demands 
for categories of generic license blocks in specific partial economic 
areas (PEAs), followed by a second phase with bidding for frequency-
specific license assignments, as the Commission decided in the Spectrum 
Frontiers Fourth R&O. The Commission seeks comment on the specific 
clock auction procedures it proposes to use for Auction 103. The 
Commission directs the Office, in conjunction with the Bureau, to 
release, concurrent with the Public Notice, technical guides that 
provide the mathematical details of the proposed auction procedures and 
algorithms for the clock and assignment phases of Auction 103. The 
information in the technical guides supplements the proposals in the 
Public Notice.
    27. As in the clock auction used in the forward auction portion of 
the Broadcast Incentive Auction (Auction 1002) and the auction of 
licenses in the 24 GHz Band (Auction 102), the clock auction for 
Auction 103 will incorporate bidding for categories of generic spectrum 
blocks. The auction will proceed in a series of rounds, with bidding 
being conducted simultaneously for all spectrum blocks available in the 
auction. During the clock phase, the FCC auction bidding system will 
announce prices for blocks in each category in each PEA, and qualified 
bidders will submit quantity bids for the number of blocks they seek. 
Bidding rounds will be open for predetermined periods of time, during 
which bidders will indicate their demands for blocks at the clock 
prices associated with the current round. As in SMR auctions, bidders 
will be subject to activity and eligibility rules that govern the pace 
at which they participate in the auction.
    28. Under the ascending clock auction format adopted by the 
Commission, in each PEA, the clock price for a license category will 
increase from round to round if bidders indicate total demand that 
exceeds the number of blocks

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available in the category. The clock rounds will continue until, for 
all categories of blocks in all PEAs, the number of blocks demanded 
does not exceed the supply of available blocks. At that point, those 
bidders indicating demand for a block in a category at the final clock 
phase price will be deemed winning bidders. The final clock phase price 
for a generic block in a PEA will determine the incentive payment 
associated with a relinquished block of spectrum in the PEA.
    29. Following the clock phase, the assignment phase will offer 
clock phase winners the opportunity to bid an additional amount for 
licenses with specific frequencies. All winning bidders, regardless of 
whether they bid in the assignment phase, will be assigned licenses for 
contiguous blocks within a category in a PEA.
    30. The Commission seeks comment on specific procedures to 
implement this ascending clock auction and on alternative procedures 
for conducting, in a timely manner, an auction of Upper 37 GHz, 39 GHz, 
and 47 GHz licenses.
2. Determining Categories of Generic Blocks for Bidding
    31. The Spectrum Frontiers Fourth R&O determined that the Upper 37 
GHz, 39 GHz, and 47 GHz bands would be reconfigured and licensed in 
uniform 100 megahertz blocks in each of 416 PEAs. To facilitate bidding 
in the clock phase, the Commission proposes to establish two categories 
of generic blocks in each PEA.
    32. The Commission proposes that the first category will consist of 
the available blocks between 37.6-40 GHz. This category, designated 
Category M/N, will comprise a total of twenty-four blocks: Ten in the 
Upper 37 GHz band (Blocks M1-M10) and 14 in the 39 GHz band (Blocks N1-
N14). These 24 blocks represent a continuous swath of spectrum, and 
including them in a single bidding category should speed up the auction 
and give bidders greater flexibility to aggregate multiple contiguous 
spectrum blocks. A second category, Category P, will consist of the ten 
blocks between 47.2-48.2 GHz (Blocks P1-P10).
    33. In each bidding round, a bidder will have the opportunity to 
bid for the quantity of generic blocks it demands in each of the two 
bidding categories. Bidding in the clock phase will determine a single 
price for all the generic blocks in each category in each PEA.
    34. If an incumbent, in the Initial Commitment phase, chooses to 
accept a reconfigured license (full or partial) in one or more PEAs, 
the number of generic blocks available for bidding in the M/N category 
in those PEAs will be reduced accordingly. As a result, under this 
proposed procedure, there may be fewer than 24 blocks available for 
bidding in some PEAs in the M/N category. The Commission proposes to 
announce the full auction inventory--i.e., the number of blocks 
available in each category in each PEA--after the Initial Commitment 
phase has closed.
    35. The Commission's proposal for bidding on generic blocks in two 
categories is based on the close similarity of the blocks within each 
bidding category. To the extent a bidder has a preference for specific 
frequency licenses, the bidder may bid for its preferred blocks in the 
assignment phase. However, a bidder for a generic block cannot be 
assured that it will be assigned, or not be assigned, any particular 
frequency block. The Commission asks that commenters explain any 
concerns they may have about the interchangeability of generic blocks 
within the two proposed categories of generic blocks, bearing in mind 
potential tradeoffs between the number of categories and auction 
length, the ability of the auction system to assign contiguous blocks 
to winners of multiple blocks, and bidder manageability.
3. Determining Incentive Payments
    36. The final clock phase price for a generic licensing block in 
Category M/N in a given PEA will determine the incentive payment 
associated with 100 megahertz of relinquished spectrum rights in that 
PEA. Further, an incumbent that relinquishes spectrum rights equivalent 
to fewer than 100 megahertz in the full geography of the PEA will be 
entitled to an incentive payment equal to the final clock phase price 
for a Category M/N block times the fraction of its relinquished rights, 
measured in MHz-pops, relative to the full number of MHz-pops in the 
PEA.
    37. An incumbent that both relinquishes the equivalent of a full 
block of spectrum rights in Category M/N in a PEA and wins a generic 
block in the category in the same PEA will, in effect, receive an 
incentive payment credit equal to the final clock phase price and incur 
an obligation in the same amount, for a net clock phase payment of 
zero. If an incumbent chooses to bid for specific frequencies in the 
assignment phase, the incumbent will be obligated to pay any additional 
payment.
    38. An incumbent that is eligible for bidding credits and that both 
relinquishes spectrum and bids for new licenses will receive a bidding 
credit discount only on its net cash payment for new licenses.
4. Bidding Rounds
    39. Under this proposal, Auction 103 will consist of sequential 
bidding rounds, each followed by the release of round results. The 
initial bidding schedule will be announced in a public notice to be 
released at least one week before the start of bidding.
    40. Auction 103 will be conducted over the internet using the FCC 
auction bidding system. Bidders will also have the option of placing 
bids by telephone through a dedicated auction bidder line. The toll-
free telephone number for the auction bidder line will be provided to 
qualified bidders prior to the start of bidding in the auction.
    41. The Commission proposes that the initial bidding schedule may 
be adjusted in order to foster an auction pace that reasonably balances 
speed with the bidders' need to study round results and adjust their 
bidding strategies. Such changes may include the amount of time for 
bidding rounds, the amount of time between rounds, or the number of 
rounds per day, depending upon bidding activity and other factors. The 
Commission seeks comment on this proposal. Commenters on this issue 
should address the role of the bidding schedule in managing the pace of 
the auction, specifically discussing the tradeoffs in managing auction 
pace by bidding schedule changes, by changing the activity requirement 
or the increment percentage, or by using other means.
5. Net Revenue Requirement
    42. The Commission proposes an aggregate net revenue requirement to 
ensure that the proceeds from Auction 103, net of bidding credits, are 
sufficient to cover incentive payment obligations to incumbents 
relinquishing spectrum. Under this proposal, the Commission will 
consider revenues from licenses in the Upper 37 GHz, 39 GHz, and the 47 
GHz bands in determining whether the net revenue requirement has been 
met. The Commission proposes to make available to bidders an estimate 
of the current shortfall for meeting the net revenue requirement, 
updated after each round of bidding, until the requirement is met. The 
Commission proposes to indicate on the Public Reporting System (PRS) 
whether the requirement has been met. The Commission further proposes 
to consider only clock phase revenues in determining whether the net 
revenue requirement is met.
    43. Under this proposal, the shortfall figure the Commission makes 
available prior to the close of bidding in the clock

[[Page 20082]]

phase will be a conservative estimate. It will not be known whether the 
clock phase winners will be designated entities that can claim a 
bidding credit until the clock phase bidding has ended. Consequently, 
the revenue estimate that is used to calculate the shortfall for rounds 
before the net revenue requirement has been met will assume, for a 
category in a PEA with excess demand, that blocks are won by the 
bidders with the highest bidding credit percentages, to the extent that 
designated entities are among the bidders still demanding blocks in the 
category in the PEA. This includes a check to consider bidding credit 
caps. In so doing, the Commission avoids a potential situation whereby 
the net revenue requirement appears to be met, but then actual net 
revenues are insufficient to cover incentive payments when bidding 
credits are considered. For a category in a PEA without excess demand, 
the requirement will be evaluated based on a true calculation of net 
revenue after bid processing, rather than on the estimate, since 
information on how to apply bidding credits precisely will be available 
in that case. If the net revenue requirement has not been met after a 
round, the estimated shortfall will be calculated as the incentive 
payments across all incumbents after the round minus the revenue 
estimate across all categories and PEAs, rounded up to the nearest $1 
million.
    44. The Commission proposes to consider only clock phase revenues--
not assignment phase revenues--in determining whether the net revenue 
requirement is met. Revenues from assignment phase payments are 
expected to be small relative to those from the clock phase and 
therefore less likely to contribute significantly to meeting the 
revenue requirement. Because assignment phase payments are determined 
using a second-price rule, an individual bidder wishing to boost 
revenues intentionally will have little ability to do so. In addition, 
the Commission is mindful of the additional time required to conduct 
assignment rounds, and it does not wish to require bidders or 
Commission staff to invest the additional time in the assignment phase 
if ultimately no licenses will be assigned.
    45. If the net revenue requirement has been satisfied at the time 
that the clock phase bidding stops for both categories of blocks, the 
auction system will determine the winning bidders of generic blocks, 
and the auction will proceed to the assignment phase. If the net 
revenue requirement has not been satisfied at the time bidding stops in 
the clock phase, the auction will end, and no new licenses will be 
assigned. Incumbents in the 39 GHz band will retain their original 
licenses pending further decisions by the Commission.
    46. The Commission seeks comment on its proposed net revenue 
requirement and on its proposals to make available a conservative 
estimate of the shortfall after each round and to consider only clock 
phase revenues in determining whether the requirement has been met.
6. Stopping Rule
    47. The Commission proposes a simultaneous stopping rule for the 
clock phase of Auction 103, under which both categories of licenses in 
all PEAs will remain available for bidding until the bidding stops on 
both categories. Specifically, the Commission proposes that the clock 
phase of bidding will end for both categories of blocks after the first 
round in which there is no excess demand in any category in any PEA. 
Consequently, under this approach, it is not possible to determine in 
advance how long Auction 103 would last.
    48. The Commission seeks comment on its proposed simultaneous 
stopping rule.
7. Upfront Payments and Bidding Eligibility
    49. In keeping with the Commission's usual practice in spectrum 
license auctions, the Commission proposes that applicants be required 
to submit upfront payments as a prerequisite to becoming qualified to 
bid. The upfront payment is a refundable deposit made by an applicant 
to establish its eligibility to bid on licenses. Upfront payments that 
are related to the inventory of licenses being auctioned 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 
bidding.
    50. The Commission proposes to assign each PEA a specific number of 
bidding units, equal to one bidding unit per $10 of the upfront 
payment. The number of bidding units for a given PEA is fixed and does 
not change during the auction as prices change. The bidding unit amount 
assigned to a specific PEA will apply to a single generic block for 
that PEA. Bidding units will be used for purposes of measuring bidder 
eligibility and bidding activity. The Commission further proposes to 
determine the bidding units for a PEA based on the same weights it will 
use in the reconfiguration process and in Round Zero to quantify the 
weighted MHz-pops of an incumbent's spectrum holdings. Since weights 
are not yet determined, Attachment A to the document lists the MHz-pops 
of each PEA, and the Commission will update Attachment A with bidding 
units and upfront payment amounts when the weights are available.
    51. Taking into account the various purposes of upfront payments, 
the Commission proposes to use a tiered approach, under which upfront 
payment amounts will vary by market population. The Commission proposes 
upfront payments for a generic block in a PEA based on $0.001 per 
weighted MHz-pop for PEAs 1-50, $0.0002 per weighted MHz-pop for PEAs 
51-100, and $0.0001 per weighted MHz-pop in other PEAs. The proposed 
upfront payments equal approximately half the proposed minimum opening 
bids. The Commission seeks comment on the proposed method for 
calculating upfront payment amounts. For informational purposes, 
Attachment A shows the unweighted MHz-pops per each PEA and the result 
of multiplying the unweighted MHz-pops by $0.001, $0.0002, or $0.0001 
depending on the PEA.
    52. The Commission further proposes that the amount of the upfront 
payment submitted by a bidder will determine its initial bidding 
eligibility in bidding units. To the extent that bidders wish to bid on 
multiple generic blocks simultaneously, they will need to ensure that 
their upfront payment provides enough eligibility to cover multiple 
blocks. Under the proposed approach to calculating bidding units, the 
generic Category M/N and Category P blocks in a PEA will be assigned 
the same number of bidding units, which will facilitate bidding across 
categories.
    53. Under the proposed approach, a bidder's upfront payment will 
not be attributed to blocks in a specific PEA or PEAs. If an applicant 
is found to be qualified to bid on more than one block being offered in 
Auction 103, such a bidder may place bids on multiple blocks, provided 
that the total number of bidding units associated with those blocks 
does not exceed its current eligibility. A bidder cannot increase its 
eligibility during the auction; it can only maintain its eligibility or 
decrease its eligibility. Thus, in calculating its upfront payment 
amount and hence its initial bidding eligibility, an applicant must 
determine the maximum number of bidding units on which it may wish to 
bid in any single round and submit an upfront payment amount covering 
that total number of bidding units. The Commission seeks comment on 
these proposals.
    54. In connection with the proposed upfront payment amounts and 
corresponding bidding eligibility, the Commission tentatively concludes 
that

[[Page 20083]]

it will not adopt a different upfront payment procedure for incumbent 
bidders relinquishing spectrum rights. The Commission asks any 
commenter that disagrees with this tentative conclusion not to adopt 
procedures that would allow incumbents to make their upfront payment 
with significantly less cash to consider whether such an approach would 
give the Commission sufficient funds from which to collect default 
payments, given that defaults may occur for reasons other than non-
payment of winning bids. In addition, would the approach serve to deter 
insincere bidding, given that an incumbent's bidding eligibility would 
derive from its intended relinquishments rather than from its intended 
bidding for new licenses? If license relinquishments could be credited 
toward upfront payments, would the associated bidding eligibility apply 
to any PEA or just to the PEA in which a license is relinquished, and 
if the latter, how would that comport with eligibility accruing from 
cash upfront payments, which is not PEA-specific?
8. Activity Rule, Activity Rule Waivers, and Reducing Eligibility
    55. In order to ensure that the 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. For a clock auction, a bidder's activity in a 
round for purposes of the activity rule will be the sum of the bidding 
units associated with the bidder's demands as applied by the auction 
system during bid processing. 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 requisite activity level 
will result in a reduction in the bidder's eligibility, possibly 
curtailing or eliminating the bidder's ability to place additional bids 
in the auction.
    56. The Commission proposes to require that bidders maintain a 
fixed, high level of activity in each round of Auction 103 in order to 
maintain bidding eligibility. Specifically, the Commission proposes to 
require that bidders be active on between 90 and 100% of their bidding 
eligibility in all clock rounds, with an initial activity requirement 
of 95%. Thus, the activity rule would be satisfied when a bidder has 
bidding activity on blocks with bidding units that total 90 to 100% of 
its current eligibility in the round. If the activity rule is met, then 
the bidder's eligibility does not change in the next round. The 
Commission proposes to calculate bidding activity based on the bids 
that are applied by the FCC auction bidding system. That is, if a 
bidder requests a reduction in the quantity of blocks it demands in a 
category, but the FCC auction bidding system does not apply the request 
because demand for the category would fall below the available supply, 
the bidder's activity will reflect its unreduced demand. If the 
activity rule is not met in a round, a bidder's eligibility 
automatically would be reduced. The activity requirements may be 
changed during the auction.
    57. The Commission invites comment on this proposal, in particular 
on whether to set the activity requirement between 90% and 100%. 
Commenters may wish to address the relationship between the proposed 
activity rule and the ability of bidders to switch their demands across 
PEAs or across categories of blocks within a PEA. The Commission 
encourages any commenters that oppose an activity rule in this range to 
explain their reasons with specificity.
    58. The Commission points out that under its proposed clock 
auction, bidders are required to indicate their demands in every round, 
even if their demands at the new round's prices are unchanged from the 
previous round. Missing bids--bids that are not reconfirmed--are 
treated by the auction bidding system as requests to reduce to a 
quantity of zero blocks for the category. If these requests are 
applied, or applied partially, a bidder's bidding activity, and hence 
its bidding eligibility for the next round, will be reduced.
    59. For Auction 103, the Commission does not propose to provide for 
activity rule waivers to preserve a bidder's eligibility. This proposal 
is consistent with the ascending clock auction procedures adopted for 
Auctions 1002 and 102. In previous Commission multiple round auctions, 
when a bidder's eligibility in the current round was below a required 
minimum level, the bidder was able to preserve its current level of 
eligibility with a limited number of activity rule waivers. The clock 
auction, however, relies on precisely identifying the point at which 
demand falls to equal supply to determine winning bidders and final 
prices. Allowing waivers would create uncertainty with respect to the 
exact level of bidder demand, interfering with the basic clock price-
setting and winner determination mechanisms. Moreover, uncertainty 
about the level of demand would affect the way bidders' requests to 
reduce demand are processed by the FCC auction bidding system. The 
Commission seeks comment on this proposal.
9. Acceptable Bids
a. Reserve Price or Minimum Opening Bids
    60. The Commission seeks comment on the use of a minimum opening 
bid amount and/or reserve price for Auction 103, as it does prior to 
the start of each auction.
    61. A reserve price is an absolute minimum price below which a 
construction permit or license will not be sold in a given auction. 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. In 
Auction 103, if there are any PEAs in which demand for blocks never 
exceeds the supply of blocks, the minimum opening bid will serve as the 
basis for determining incentive payments to incumbents relinquishing 
spectrum in a PEA (because the final clock phase price will be equal to 
the minimum opening bid).
    62. The Commission proposes to establish minimum opening bid 
amounts for Auction 103. Based on the Commission's experience in past 
auctions, a minimum opening bid amount is an effective bidding tool for 
accelerating the competitive bidding process. At the beginning of the 
clock phase, a bidder will indicate how many blocks in a generic 
license category in a PEA it demands at the minimum opening bid price. 
For Auction 103, the Commission proposes to establish initial clock 
prices, or minimum opening bids, as set forth in the following 
paragraph. The Commission does not propose to establish license-
specific reserve prices that are different from minimum opening bid 
amounts for the licenses to be offered in Auction 103.
    63. For Auction 103, the Commission proposes to calculate minimum 
opening bid amounts using a formula based on bandwidth and license area 
population, incorporating the same weights it will use in the 
reconfiguration process and Round Zero to quantify the weighted MHz-
pops of an incumbent's spectrum holdings. This is similar to the 
Commission's approach in many previous spectrum auctions of weighting 
by an index of relative prices from prior auctions. Since weights are 
not yet determined, Attachment A of the document lists the MHz-pops of 
each PEA, and the Commission will update Attachment A with bidding 
units and upfront payment amounts when the weights are available.
    64. The Commission proposes to use a tiered approach, under which 
minimum opening bid amounts will vary by market population. The 
Commission proposes minimum

[[Page 20084]]

opening bid amounts for a generic block in a PEA based on $0.002 per 
weighted MHz-pop for PEAs 1-50, $0.0004 per weighted MHz-pop for PEAs 
51-100, and $0.0002 per weighted MHz-pop in other PEAs. For 
informational purposes, Attachment A shows the unweighted MHz-pops per 
each PEA and the result of multiplying the unweighted MHz-pops by 
$0.002, $0.0004, or $0.0002 depending on the PEA. The Commission seeks 
comment on the proposed method for calculating minimum opening bid 
amounts. If commenters believe that the minimum opening bid amounts 
will result in unsold licenses or are not reasonable amounts at which 
to start bidding or as a minimum for incentive payments, they should 
explain why this is so and comment on the desirability of an 
alternative approach. Commenters should support their claims with 
valuation analyses and suggested amounts or formulas for reserve prices 
or minimum opening bids.
    65. In establishing minimum opening bid amounts, the Commission 
particularly seeks comment on factors that could reasonably have an 
impact on bidders' valuation of the spectrum, including the type of 
service offered, market size, population covered, any other relevant 
factors.
    66. Commenters may also wish to address the general role of minimum 
opening bids in managing the pace of the auction. For example, 
commenters could compare using minimum opening bids--e.g., by setting 
higher minimum opening bids to reduce the number of rounds it takes 
licenses to reach their final prices--to other means of controlling 
auction pace, such as changes to bidding schedules, percentage 
increments, or activity requirements.
b. Clock Price Increments
    67. Under the proposed clock auction format for Auction 103, after 
bidding in the first round and before each subsequent round, the FCC 
auction bidding system will announce a clock price for the next round, 
which is the highest price to which bidders can respond during the 
round. The Commission proposes to set the clock price for each category 
in each specific PEA for a round by adding a fixed percentage increment 
to the price for the previous round. As long as total demand for blocks 
in a category exceeds the supply of blocks, the percentage increment 
will be added to the clock price from the prior round. If demand 
equaled supply at an intra-round bid price in a previous round, then 
the clock price for the next round will be set by adding the percentage 
increment to the intra-round bid price.
    68. The Commission proposes to apply an increment that is between 
5% and 20% and generally to apply the same increment percentage to all 
categories in all PEAs. The Commission proposes to set the initial 
increment within this range, and to adjust the increment as rounds 
continue. The proposed 5-20% increment range will allow the FCC to set 
a percentage that manages the auction pace, taking into account 
bidders' needs to evaluate their bidding strategies while moving the 
auction along quickly. The Commission also proposes that increments may 
be changed during the auction on a PEA-by-PEA or category-by-category 
basis based on bidding activity to assure that the system can offer 
appropriate price choices to bidders.
c. Intra-Round Bids
    69. The Commission proposes to permit a bidder to make intra-round 
bids by indicating a point between the previous round's price and the 
new clock price at which its demand for blocks in a category changes. 
In placing an intra-round bid, a bidder would indicate a specific price 
and a quantity of blocks it demands if the price for blocks in the 
category should increase beyond that price.
    70. Intra-round bids would be optional; a bidder may choose to 
express its demands only at the clock prices. This proposal to permit 
intra-round bidding would allow the auction system to use relatively 
large clock increments, thereby speeding the clock phase, without 
running the risk that a jump in the clock price will overshoot the 
market clearing price--the point at which demand for blocks equals the 
available supply.
10. Changing Demand, Bid Types, and Bid Processing
    71. The Commission proposes that the FCC auction bidding system not 
apply a bidder's request to reduce the quantity of blocks it demands in 
a category if the reduction will result in aggregate demand falling 
below the available supply of blocks in the category.
    72. Under the ascending clock format proposed for Auction 103, a 
bidder will indicate in each round the quantity of blocks in each 
category in each PEA that it demands starting at a given price, 
indicating that at prices above the bid price it is willing to get the 
changed quantity. A bidder can express its demands at the clock price 
or at an intra-round price, and bid quantities can represent an 
increase or a decrease over the bidder's previous demands for blocks in 
a category.
    73. If a bidder demands fewer blocks in a category than it did in 
the previous round, the FCC auction bidding system will treat the bid 
as a request to reduce demand that will be implemented only if 
aggregate demand would not fall below the available supply of blocks in 
the category. In addition, if a bidder demands more blocks in a 
category than it did in the previous round, the FCC auction bidding 
system will treat the bid as a request to increase demand that will be 
implemented only if the bidder has sufficient bidding eligibility to 
cover the increase.
    74. The Commission also proposes to process bids after a round ends 
in order of price point, where the price point represents the 
percentage of the bidding interval for the round. Under this proposal, 
once a round ends, the FCC auction bidding system will process bids in 
ascending order of price point, first considering intra-round bids in 
order of price point and then bids at the clock price. The system will 
consider bids at the lowest price point for all categories in all PEAs, 
then look at bids at the next price point in all areas, and so on. In 
processing the bids submitted in the round, the FCC auction bidding 
system will determine the extent to which there is excess demand for 
each category in each PEA in order to determine whether a bidder's 
requested reduction in demand can be implemented.
    75. For a given category in a given PEA, the uniform price for all 
blocks in the category will stop increasing when aggregate demand no 
longer exceeds the available supply of blocks in the category. If no 
further bids are placed, the final clock phase price for the category 
will be the stopped price.
    76. In order to facilitate bidding for multiple blocks in a PEA, 
the Commission proposes that bidders will be permitted to make two 
types of bids: Simple bids and switch bids.
    77. A ``simple'' bid indicates a desired quantity of licenses in a 
category at a price (either the clock price or an intra-round price). 
Simple bids may be applied partially. A simple bid that involves a 
reduction from the bidder's previous demands may be implemented 
partially if aggregate excess demand is insufficient to support the 
entire reduction. A simple bid to increase a bidder's demand in a 
category may be applied partially if the total number of bidding units 
associated with the bidder's demand, given all changes in demand that 
have been applied so far in the bid processing, exceeds the bidder's 
bidding eligibility for the round.

[[Page 20085]]

    78. A ``switch'' bid allows the bidder to request to move its 
demand for a quantity of licenses from the M/N category to the P 
category, or vice versa, within the same PEA. A switch bid may be 
applied partially, but the increase in demand in the ``to'' category 
will always match in quantity the reduction in the ``from'' category.
    79. The proposed bid types will allow bidders to express their 
demand for blocks in the next clock round without running the risk that 
they will be forced to purchase more spectrum at a higher price than 
they wish. When a bid to reduce demand can be applied only partially, 
the uniform price for the category will stop increasing at that point, 
since the partial application of the bid results in demand falling to 
equal supply. Hence, a bidder that makes a simple bid or a switch bid 
that cannot be fully applied will not face a price for the remaining 
demand that is higher than its bid price.
    80. Because in any given round some bidders may increase demands 
for licenses in a category while others may request reductions, the 
price point at which a bid is considered by the auction bidding system 
can affect whether it is applied. In addition to proposing that bids be 
considered by the system in order of increasing ``price point,'' the 
Commission further proposes that bids not applied because of 
insufficient aggregate demand or insufficient eligibility be held in a 
queue and considered, again in order, if there should be excess demand 
(in the case of a bid to reduce demand) or if the bidder's demand in 
other categories and PEAs is reduced (in the case of a bid to increase 
demand) later in the processing after other bids are processed.
    81. More specifically, under the proposed procedures, once a round 
closes, the FCC auction bidding system will process the bids by first 
considering the bid submitted at the lowest price point and determine 
whether it can be applied given aggregate demand as determined most 
recently and given the associated bidder's eligibility. If the bid can 
be applied, or partially applied, the number of licenses the bidder 
demands will be adjusted, and aggregate demand will be recalculated 
accordingly. If the bid cannot be applied in part or in full, the 
unfulfilled bid, or portion thereof, will be held in a queue to be 
considered later during bid processing for that round. The FCC auction 
bidding system will then consider the bid submitted at the next highest 
price point, accepting it in full, in part, or not at all, given 
recalculated aggregate demand and given the associated bidder's 
eligibility. Any unfulfilled requests will again be held in a queue, 
and aggregate demand will again be recalculated. Every time a bid or 
part of a bid is applied and aggregate demand has been recalculated, 
the unfulfilled bids held in queue will be reconsidered, in the order 
of their original price points (and by pseudo-random number, in the 
case of tied price points). The auction bidding system will not carry 
over unfulfilled bid requests to the next round, however. The bidding 
system will advise bidders of the status of their bids when round 
results are released.
    82. After the bids are processed in each round, the FCC auction 
bidding system will announce new clock prices to indicate a range of 
acceptable bid prices for the next round. Each bidder will be informed 
of the number of blocks in a category on which it holds bids, the 
aggregate demand for each category in a PEA, and, if demand fell to 
equal supply during the round, the intra-round price point at which 
that occurred.
    83. No Bidding Aggregation. The Commission does not propose to 
incorporate any form of package bidding procedures into the clock phase 
of Auction 103. Package bidding would add complexity to the bidding 
process, and the Commission does not see significant benefit from such 
procedures, given the proposed clock auction and assignment phase 
format. A bidder may bid on multiple blocks in a PEA and in multiple 
PEAs. The Commission proposes that the assignment phase will assign 
contiguous blocks to winners of multiple blocks in a category in a PEA 
and give bidders an opportunity to express their preferences for 
specific frequency blocks, thereby facilitating aggregations of 
licenses.
    84. The Commission seeks comment on its proposals regarding 
reducing demand, bid types, and bid processing for Auction 103.
11. Winning Bids in the Clock Phase
    85. Under the proposed clock auction format for Auction 103, as 
long as the net revenue requirement has been satisfied, bidders that 
are still expressing demand for a quantity of blocks in a category in a 
PEA at the time the stopping rule is met will become the winning 
bidders and will be assigned specific frequencies in the assignment 
phase.
12. Bid Removal and Bid Withdrawal
    86. The FCC auction bidding system allows each bidder to remove any 
of the bids it placed in a round before the close of that round. By 
removing a bid placed within a round, a bidder effectively 
``unsubmits'' the bid. Once a round closes, a bidder may no longer 
remove a bid.
    87. Unlike an SMR auction, there are no provisionally winning bids 
in a clock auction. As a result, the concept of bid withdrawals is 
inapplicable to a clock auction. As proposed, however, bidders in 
Auction 103 may request to reduce demand for generic blocks.

B. Assignment Phase

1. Sequencing and Grouping of PEAs
    88. The Commission proposes to sequence assignment rounds to make 
it easier for bidders to incorporate frequency assignments from 
previously assigned areas into their bid preferences for other areas, 
recognizing that bidders winning multiple blocks of licenses generally 
will prefer contiguous blocks across adjacent PEAs. The Commission 
proposes to conduct rounds for the largest markets first to enable 
bidders to establish a ``footprint'' from which to work.
    89. Specifically, the Commission proposes to conduct a separate 
assignment round for each of the top 20 PEAs and to conduct these 
assignment rounds sequentially, beginning with the largest PEAs. Once 
the top 20 PEAs have been assigned, the Commission proposes to conduct, 
for each Regional Economic Area Grouping (REAG), a series of assignment 
rounds for the remaining PEAs within that region. The Commission 
further proposes, where feasible, to group into a single market for 
assignment any non-top 20 PEAs within a region in which the supply of 
blocks is the same in each category, the same entities (winning bidders 
and incumbents keeping modified licenses) need to be assigned the same 
number of blocks in each category, and all are subject to the small 
markets bidding cap or all are not subject to the cap, which will also 
help maximize contiguity across PEAs. The Commission proposes to 
sequence the assignment rounds within a REAG in descending order of 
population for a PEA group or individual PEA. The Commission further 
proposes to conduct the bidding for the different REAGs in parallel in 
order to reduce the total amount of time required to complete the 
assignment phase.
    90. The Commission seeks comment on these proposals for sequencing 
assignment rounds, including conducting separate rounds for the top 20 
PEAs, and on the proposal to group PEAs for bidding under some 
circumstances within REAGs.

[[Page 20086]]

2. Acceptable Bids and Bid Processing
    91. In each assignment round, a bidder will be asked to assign a 
price to one or more possible frequency assignments for which it wishes 
to express a preference, consistent with its winnings for generic 
blocks in the clock phase. The price will represent a maximum payment 
that the bidder is willing to pay, in addition to the base price 
established in the clock phase for the generic blocks, for the 
frequency-specific license or licenses in its bid. The Commission 
proposes that a bidder will submit its preferences for blocks it won in 
the Upper 37 and 39 GHz bands and the 47 GHz band separately, rather 
than submitting bids for preferences that include blocks in both 
categories. That is, if a bidder won one block in category M/N and two 
blocks in category P, it would not be able to submit a single bid 
amount for an assignment that included all three blocks. Instead, it 
would submit its bid or bids for assignments in category M/N separately 
from its bid or bids for assignments in category P.
    92. The Commission proposes to use an optimization approach to 
determine the winning frequency assignment for each category in each 
PEA or PEA group. The Commission proposes that the auction system will 
select the assignment that maximizes the sum of bid amounts among all 
assignments that satisfy the contiguity requirements. The Commission 
proposes that the additional price a bidder will pay for a specific 
frequency assignment (above the base price) will be calculated 
consistent with a generalized ``second price'' approach--that is, the 
winner will pay a price that would be just sufficient to result in the 
bidder receiving that same winning frequency assignment while ensuring 
that no group of bidders is willing to pay more for an alternative 
assignment that satisfies the contiguity restrictions. This price will 
be less than or equal to the price the bidder indicated it was willing 
to pay for the assignment. The Commission proposes to determine prices 
in this way because it facilitates bidding strategy for the bidders, 
encouraging them to bid their full value for the assignment, knowing 
that if the assignment is selected, they will pay no more than would be 
necessary to ensure that the outcome is competitive.
    93. The Commission seeks comment on these proposed procedures. In 
particular, the Commission asks whether bidders would find it useful to 
be able to submit a single bid for assignments that include frequencies 
in both categories, in cases where the bidder won blocks in both 
category M/N and category P.

VI. Post-Auction Process

A. Additional Default Payment Percentage

    94. Any winning bidder that defaults or is disqualified after the 
close of an auction (i.e., fails to remit the required down payment by 
the specified deadline, fails to submit a timely long-form application, 
fails to make full and timely final payment, or is otherwise 
disqualified) is liable for a default payment under Section 
1.2104(g)(2) of the rules. This payment consists of a deficiency 
payment, equal to the difference between the amount of the bidder's 
winning 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.
    95. The Commission's rules provide that, in advance of each 
auction, it will establish a percentage between 3% and 20% of the 
applicable winning bid to be assessed as an additional default payment. 
As the Commission has indicated, the level of this additional payment 
in each auction will be based on the nature of the service and the 
licenses being offered.
    96. For Auction 103, the Commission proposes to establish an 
additional default payment of 15%, which is consistent with that 
adopted for Auctions 101 and 102. As noted in the CSEA/Part 1 Report 
and Order, 71 FR 6214, February 7, 2006, defaults weaken the integrity 
of the auction process and may impede the deployment of service to the 
public, and an additional default payment of up to 20% will be more 
effective in deterring defaults than the 3% used in some earlier 
auctions. At the same time, the Commission does not believe the 
detrimental effects of any defaults in Auction 103 are likely to be 
unusually great. In light of these considerations, the Commission 
proposes for Auction 103 an additional default payment of 15% of the 
relevant bid. The Commission seeks comment on this proposal.
    97. In case they are needed for post-auction administrative 
purposes, the bidding system will calculate individual per-license 
prices that are separate from final auction payments, which are 
calculated on an aggregate basis. The bidding system will apportion to 
individual licenses any assignment phase payments and any capped 
bidding credit discounts, since in both cases, a single amount may 
apply to multiple licenses.

VII. Tutorial and Additional Information for Applicants

    98. The Commission intends to provide additional information on the 
bidding system and to offer demonstrations and other educational 
opportunities for applicants in Auction 103 to familiarize themselves 
with the FCC auction application system and the auction bidding system. 
For example, the Commission intends to release an online tutorial that 
will help applicants understand the procedures to be followed in the 
filing of their auction short-form applications (FCC Form 175) for 
Auction 103.

VIII. Procedural Matters

    99. Supplemental Initial Regulatory Flexibility Analysis. As 
required by the Regulatory Flexibility Act of 1980, as amended (RFA), 
the Commission has prepared a Supplemental Initial Regulatory 
Flexibility Analysis (Supplemental IRFA) of the possible significant 
economic impact on small entities of the policies and rules addressed 
in the document to supplement the Commission's Initial and Final 
Regulatory Flexibility Analyses completed in the Spectrum Frontiers 
Fourth R&O, 2017 Spectrum Frontiers Order, 83 FR 37, January 2, 2018, 
2016 Spectrum Frontiers Order, and other Commission orders pursuant to 
which Auction 103 will be conducted. Written public comments are 
requested on the Supplemental IRFA. Comments must be identified as 
responses to the Supplemental IRFA and must be filed by the same 
deadline for comments on the proposals in the Public Notice. The 
Commission will send a copy of the Public Notice, including the 
Supplemental IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the document and 
Supplemental IRFA (or summaries thereof) will be published in the 
Federal Register.
    100. Need for, and Objectives of, the Proposed Rules. The document 
sets forth the proposed auction procedures for those entities that seek 
to bid to acquire licenses in Auction 103. The document seeks comment 
on proposed procedural rules to govern Auction 103, which will auction 
Upper Microwave Flexible Use Service (UMFUS) licenses in the Upper 37 
GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz), and 47 GHz (47.2-48.2 GHz) 
bands. This process is intended to provide notice of and adequate time 
for potential applicants to comment on proposed auction

[[Page 20087]]

procedures. To promote the efficient and fair administration of the 
competitive bidding process for all Auction 103 participants, the 
Commission seeks comment on the following proposed procedures: (1) 
Establishment of bidding credit caps for eligible small businesses and 
rural service providers in Auction 103; (2) use of a clock auction 
format for Auction 103 under which each qualified bidder will indicate 
in successive clock bidding rounds its demands for categories of 
generic blocks in specific geographic areas; (3) a specific minimum 
opening bid amount for generic blocks in each PEA available in Auction 
103; (4) a specific upfront payment amount for generic blocks in each 
PEA available in Auction 103; (5) establishment of a bidder's initial 
bidding eligibility in bidding units based on that bidder's upfront 
payment through assignment of a specific number of bidding units for 
each generic block; (6) use of an activity rule that would require 
bidders to bid actively during the auction rather than waiting until 
late in the auction before participating; (7) a requirement that 
bidders be active on between 90% and 100% of their bidding eligibility 
in all regular clock rounds; (8) establishment of acceptable bid 
amounts, including clock price increments and intra-round bids, along 
with a proposed methodology for calculating such amounts; (9) a 
proposed methodology for processing bids and requests to reduce demand; 
(10) a procedure for breaking ties if identical high bid amounts are 
submitted on a license in a given round; (11) establishment of an 
assignment phase that will determine which frequency-specific licenses 
will be won by the winning bidders of generic blocks during the clock 
phase; and (12) establishment of an additional default payment of 15% 
under section 1.2104(g)(2) of the rules in the event that a winning 
bidder defaults or is disqualified after the auction.
    101. The proposed procedures for the conduct of Auction 103 
constitute the more specific implementation of the competitive bidding 
rules contemplated by Parts 1 and 30 of the Commission's rules and the 
underlying rulemaking orders, including the Spectrum Frontiers Fourth 
R&O, 2017 Spectrum Frontiers Order, 2016 Spectrum Frontiers Order, and 
relevant competitive bidding orders, and are fully consistent 
therewith.
    102. Legal Basis. The Commission's statutory obligations to small 
businesses under the Communications Act of 1934, as amended, are found 
in Sections 309(j)(3)(B) and 309(j)(4)(D). The statutory basis for the 
Commission's competitive bidding rules is found in various provisions 
of the Communications Act of 1934, as amended, including 47 U.S.C. 
154(i), 301, 302, 303(e), 303(f), 303(r), 304, 307, and 309(j). The 
Commission has established a framework of competitive bidding rules, 
updated most recently in 2015, pursuant to which it has conducted 
auctions since the inception of the auction program in 1994 and would 
conduct Auction 103.
    103. Description and Estimate of the Number of Small Entities to 
Which the Proposed Rules Will Apply. The RFA directs agencies to 
provide a description of, and, where feasible, an estimate of the 
number of small entities that may be affected by the proposed rules and 
policies, if adopted. The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act. A ``small 
business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.
    104. As noted above, Regulatory Flexibility Analyses were 
incorporated into the Spectrum Frontiers Fourth R&O, 2017 Spectrum 
Frontiers Order, and 2016 Spectrum Frontiers Order. In those analyses, 
the Commission described in detail the small entities that might be 
significantly affected. In the Public Notice, the Commission 
incorporates by reference the descriptions and estimates of the number 
of small entities from the previous Regulatory Flexibility Analyses in 
the Spectrum Frontiers Fourth R&O, 2017 Spectrum Frontiers Order, and 
2016 Spectrum Frontiers Order.
    105. Based on the information available in the Commission's public 
Universal Licensing System (ULS), the Commission estimates there are 
currently 16 incumbent 39 GHz licensees. Of these incumbent 39 GHz 
licensees, the Commission estimates that up to 8 could be considered a 
``small entity'' under the RFA.
    106. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities. The Commission designed the 
auction application process itself to minimize reporting and compliance 
requirements for applicants, including small business applicants. In 
the first part of the Commission's two-phased auction application 
process, parties desiring to participate in an auction file 
streamlined, short-form applications in which they certify under 
penalty of perjury as to their qualifications. Eligibility to 
participate in bidding is based on an applicant's short-form 
application and certifications, as well as its upfront payment. In the 
second phase of the process, winning bidders file a more comprehensive 
long-form application. Thus, an applicant which fails to become a 
winning bidder does not need to file a long-form application and 
provide the additional showings and more detailed demonstrations 
required of a winning bidder.
    107. The Commission does not expect the processes and procedures 
proposed in the document will require small entities to hire attorneys, 
engineers, consultants, or other professionals to participate in 
Auction 103 and comply with the procedures the Commission ultimately 
adopts because of the information, resources, and guidance the 
Commission makes available to potential and actual participants. For 
example, the Commission intends to release an online tutorial that will 
help applicants understand the procedures for filing of the auction 
short-form applications (FCC Form 175). The Commission also intends to 
make information on the bidding system available and offer 
demonstrations and other educational opportunities for applicants in 
Auction 103 to familiarize themselves with the FCC auction application 
system and the auction bidding system. By providing these resources, 
the Commission expects small business entities who utilize the 
available resources to experience lower participation and compliance 
costs.
    108. Steps Taken to Minimize the Significant Economic Impact on 
Small Entities, and Significant Alternatives Considered. The RFA 
requires an agency to describe any significant, specifically small 
business, alternatives that it has considered in reaching its proposed 
approach, which may include the following four alternatives (among 
others): ``(1) the establishment of differing compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities; (2) the clarification, consolidation, or 
simplification of compliance and reporting requirements under the rule 
for such small entities; (3) the use of performance rather than design 
standards; and (4) an exemption from coverage of the rule, or any part 
thereof, for such small entities.''
    109. The Commission has taken steps to minimize any economic impact 
of its auction procedures on small businesses

[[Page 20088]]

through among other things, the many resources it provides potential 
auction participants. Small entities and other auction participants may 
seek clarification of or guidance on complying with competitive bidding 
rules and procedures, reporting requirements, and the FCC's auction 
bidding system. An FCC Auctions Hotline provides access to Commission 
staff for information about the auction process and procedures. The FCC 
Auctions Technical Support Hotline is another resource which provides 
technical assistance to applicants, including small business entities, 
on issues such as access to or navigation within the electronic FCC 
Form 175 and use of the FCC's auction bidding system. Small entities 
may also use the web-based, interactive online tutorial produced by 
Commission staff to familiarize themselves with auction procedures, 
filing requirements, bidding procedures, and other matters related to 
an auction.
    110. The Commission also makes various databases and other sources 
of information, including the Auctions program websites, and copies of 
Commission decisions, available to the public without charge, providing 
a low-cost mechanism for small businesses to conduct research prior to 
and throughout the auction. Prior to and at the close of Auction 103, 
the Commission will post public notices on the Auctions website, which 
articulate the procedures and deadlines for the auction. The Commission 
makes this information easily accessible and without charge to benefit 
all Auction 103 applicants, including small businesses, thereby 
lowering their administrative costs to comply with the Commission's 
competitive bidding rules.
    111. Prior to the start of bidding, eligible bidders are given an 
opportunity to become familiar with auction procedures and the bidding 
system by participating in a mock auction. Further, the Commission 
intends to conduct Auction 103 electronically over the internet using 
its web-based auction system that eliminates the need for bidders to be 
physically present in a specific location. Qualified bidders also have 
the option to place bids by telephone. These mechanisms are made 
available to facilitate participation in Auction 103 by all eligible 
bidders and may result in significant cost savings for small business 
entities who use these alternatives. Moreover, the adoption of bidding 
procedures in advance of the auction, consistent with statutory 
directive, is designed to ensure that the auction will be administered 
predictably and fairly for all participants, including small 
businesses.
    112. For Auction 103, the Commission proposes a $25 million cap on 
the total amount of bidding credits that may be awarded to an eligible 
small business and a $10 million cap on the total amount of bidding 
credits that may be awarded to a rural service provider. In addition, 
the Commission proposes a $10 million cap on the overall amount of 
bidding credits that any winning small business bidder may apply to 
winning licenses in markets with a population of 500,000 or less. Based 
on the technical characteristics of the UMFUS bands and the 
Commission's analysis of past auction data, the Commission anticipates 
that the proposed caps will allow the majority of small businesses to 
take full advantage of the bidding credit program, thereby lowering the 
relative costs of participation for small businesses.
    113. These proposed procedures for the conduct of Auction 103 
constitute the more specific implementation of the competitive bidding 
rules contemplated by Parts 1 and 30 of the Commission's rules and the 
underlying rulemaking orders, including the Spectrum Frontiers Fourth 
R&O, 2017 Spectrum Frontiers Order, 2016 Spectrum Frontiers Order, and 
relevant competitive bidding orders, and are fully consistent 
therewith.
    114. Federal Rules that May Duplicate, Overlap, or Conflict with 
the Proposed Rules. None.
    115. Ex Parte Rules. 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 must file a 
copy of any written presentations or memoranda summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine Period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentations must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda, or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to the Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

Federal Communications Commission.
Marlene Dortch,
Secretary.
[FR Doc. 2019-09431 Filed 5-7-19; 8:45 am]
BILLING CODE 6712-01-P