[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Proposed Rules]
[Pages 23287-23299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06451]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[AU Docket No. 20-25; FCC 20-23; FRS 16583]


Auction of Flexible-Use Service Licenses in the 3.7-3.98 GHz Band 
for Next-Generation Wireless Services; Comment Sought on Competitive 
Bidding Procedures for Auction 107

AGENCY: Federal Communications Commission.

ACTION: Proposed rule; proposed auction procedures.

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SUMMARY: In this document, the Commission announces an auction of 
flexible-use overlay licenses in the 3.7-3.98 GHz band (the 3.7 GHz 
Service), designated as Auction 107. This document proposes and seeks 
comment on competitive bidding procedures to be used for Auction 107.

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DATES: Comments are due on or before May 1, 2020, and reply comments 
are due on or before May 15, 2020.

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 107 Comment Public Notice 
must refer to AU Docket No. 20-25. 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. 20-25.
    Paper Filers: Parties who choose to file by paper must file an 
original and 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, Erik 
Beith or Tajma Rahimic 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 3.7 GHz Service 
legal questions, Anna Gentry in the Wireless Telecommunications 
Bureau's Mobility Division at (202) 418-1991. For 3.7 GHz Service 
technical questions, Janet Young in the Wireless Telecommunications 
Bureau's Broadband Division at (202) 418-0837.

SUPPLEMENTARY INFORMATION: This is a summary of the Public Notice 
(Auction 107 Comment Public Notice), AU Docket No. 20-25, FCC 20-23, 
adopted on February 28, 2020 and released on March 3, 2020. The Auction 
107 Comment Public Notice includes the following attachment: Attachment 
A, Proposed Upfront Payment and Minimum Opening Bid Amounts. The 
complete text of the Auction 107 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/107 or by using the search function for AU Docket 
No. 20-25 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 107 Comment 
Public Notice in AU Docket No. 20-25.

I. Introduction

    1. By the Auction 107 Comment Public Notice, the Commission seeks 
comment on the procedures to be used for Auction 107, the auction of 
new flexible-use overlay licenses in the 3.7-3.98 GHz band (the 3.7 GHz 
Service). The Commission expects the bidding for licenses in Auction 
107 to commence on December 8, 2020. The Commission proposes to use an 
ascending clock auction format for the licenses offered in Auction 107 
and then hold a sealed bid assignment phase. The Auction 107 Comment 
Public Notice seeks comment on proposed auction procedures for bidding 
to acquire licenses in Auction 107.

II. Licenses To Be Offered in Auction 107

    2. Auction 107 will offer 5,684 new flexible-use overlay licenses 
for spectrum in the 3.7-3.98 GHz band throughout the contiguous United 
States subject to clearing requirements. The Commission adopted the 3.7 
GHz Report and Order, [April 23, 2020], which describes in detail the 
rules applicable to the licenses offered in these 280 megahertz of 
spectrum. The Commission will offer up to 280 megahertz of spectrum 
licensed on an unpaired basis in three blocks divided into 20-megahertz 
sub-blocks by partial economic area (PEA) in the contiguous states and 
the District of Columbia (PEAs 1-41, 43-211, 213-263, 265-297, 299-359, 
and 361-411). The Commission will not issue flexible-use overlay 
licenses for Honolulu, Anchorage, Kodiak, Fairbanks, Juneau, Puerto 
Rico, Guam-Northern Mariana Islands, U.S. Virgin Islands, American 
Samoa, and the Gulf of Mexico (PEAs numbers 42, 212, 264, 298, 360, 
412-416). Specifically, the A Block will cover 100 megahertz from 3.7-
3.8 GHz in five 20-megahertz sub-blocks: 3700-3720 MHz (A1), 3720-3740 
MHz (A2), 3740-3760 MHz (A3), 3760-3780 MHz (A4), and 3780-3800 MHz 
(A5). The B Block will cover 100 megahertz from 3.8-3.9 GHz in five 20-
megahertz sub-blocks: 3800-3820 MHz (B1), 3820-3840 MHz (B2), 3840-3860 
MHz (B3), 3860-3880 MHz (B4), and 3880-3900 MHz (B5). The C Block will 
cover 80 megahertz from 3.9-3.98 GHz, and four 20-megahertz sub-blocks 
will be licensed for flexible use: 3900-3920 MHz (C1), 3920-3940 MHz 
(C2), 3940-3960 MHz (C3), and 3960-3980 MHz (C4). The 20 megahertz at 
3980-4000 MHz will be a guard band and not available for auction. All 
3.7 GHz Service licenses will be issued for 15-year, renewable license 
terms. A licensee in the 3.7-3.98 GHz band may provide any services 
permitted under terrestrial fixed or mobile allocations, as set forth 
in the non-Federal Government column of the Table of Frequency 
Allocations in section 2.106 of the Commission's rules, as modified by 
the 3.7 GHz Report and Order.
    3. A list of markets in which licenses will be offered in Auction 
107, including proposed upfront payment and minimum opening bid 
amounts, is available in Attachment A to the Auction 107 Comment Public 
Notice.
    4. Transition of Incumbent Operations. The 3.7-4.2 GHz band 
currently is allocated in the United States exclusively for non-Federal 
use on a primary basis for Fixed Satellite

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Service (FSS) and Fixed Service (FS) services. In the 3.7 GHz Report 
and Order, the Commission modified the licenses and market access 
authorizations of incumbent FSS operators and FS licensees to clear the 
3.7-4.0 GHz band for new flexible-use terrestrial operations. For 
additional information about clearing and conditions on the licenses to 
be offered in Auction 107, potential bidders should carefully review 
the 3.7 GHz Report and Order.
    5. Each potential bidder is solely responsible for investigating 
and evaluating all technical and marketplace factors that may have a 
bearing on the potential uses of a license that it may seek in Auction 
107. In addition to the typical due diligence considerations that the 
Commission encourages of bidders in all auctions, the Commission calls 
particular attention in Auction 107 to the clearing process and license 
conditions described in the 3.7 GHz Report and Order. Each applicant 
should closely follow releases from the Commission concerning these 
issues and consider carefully the technical and economic implications 
for commercial use of the 3.7-3.98 GHz band. 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.

III. Proposed Pre-Bidding Procedures

    6. In the 3.7 GHz Report and Order, the Commission decided to 
conduct any auction of new flexible-use licenses for the 3.7 GHz 
Service 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.
    7. Prohibition of Certain Communications. Section 1.2105(c)(1) of 
the Commission's rules provides that, subject to specified exceptions, 
after the short-form application filing deadline, all applicants are 
prohibited from cooperating or collaborating with respect to, 
communicating with or disclosing, to each other or any nationwide 
provider of communications services that is not an applicant, or, if 
the applicant is a nationwide provider, any non-nationwide provider 
that is not an applicant, in any manner the substance of their own, or 
each other's, or any other applicants' bids or bidding strategies 
(including post-auction market structure), or discussing or negotiating 
settlement agreements, until after the down payment deadline. Section 
1.2105(c)(5)(i) defines ``applicant'' as including all officers and 
directors of the entity submitting a short-form application to 
participate in the auction, all controlling interests of that entity, 
as well as all holders of partnership and other ownership interests and 
any stock interest amounting to 10% or more of the entity, or 
outstanding stock, or outstanding voting stock of the entity submitting 
a short-form application.
    8. The operation of the rule prohibiting certain communications 
requires that the Commission identify nationwide providers in 
connection with each auction. Because the applicable service rules for 
the 3.7-3.98 GHz band will allow a licensee to provide flexible 
terrestrial wireless services, including mobile services, the 
Commission's identification of four nationwide providers in the 
Communications Marketplace Report suggests that it should identify 
those same entities as nationwide providers for purposes of 3.7 GHz 
licenses and Auction 107. This is consistent with the Commission's 
identification of ``nationwide providers'' for the purpose of 
implementing its competitive bidding rules in Auctions 101, 102, 103 
and the forward auction portion of the Broadcast Incentive Auction. 
Accordingly, consistent with the procedures adopted for prior auctions 
of flexible-use licenses for advanced wireless services, the Commission 
proposes to identify AT&T, Sprint, T-Mobile, and Verizon Wireless as 
``nationwide providers'' for the purpose of implementing the 
Commission's competitive bidding rules in Auction 107, including 
section 1.2105(c), the rule prohibiting certain communications. The 
Commission seeks comment on this proposal.

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, 
very small business, or rural service provider may be awarded for 
Auction 107.
    10. Eligibility for the small business bidding credit is determined 
according to a tiered schedule of small business size definitions that 
are based on an applicant's average annual gross revenues for the 
relevant preceding period, and which determine the size of the bidding 
credit discount. In the 3.7 GHz Report and Order, the Commission 
determined that eligibility for the small business bidding credit in 
the auction of licenses in the 3.7-3.98 GHz band would be defined using 
two of the thresholds of the standardized schedule of small business 
sizes. Specifically, the Commission determined that an entity with 
average annual gross revenues for the preceding five 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 five 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. The Commission defined rural 
area as a county with a population density of 100 persons or fewer per 
square mile.
    11. In the Updating Part 1 Report and Order, 80 FR 56764, September 
18, 2015, the Commission 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 
Auctions 101, 102, and 103, 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 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 107. Like Auctions 101, 102, and 103, the Commission 
believes that the range of potential use cases suitable

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for spectrum in the 3.7-3.98 GHz band, combined with the relatively 
small geographic areas for new flexible-use overlay licenses in the 3.7 
GHz Service, may permit deployment of smaller scale networks with lower 
total costs. Moreover, past auction data suggests that the proposed 
caps will allow the substantial majority of eligible small businesses 
in the auction to take advantage of the bidding credit program. The 
Commission therefore believes that its proposed caps 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. Similarly, 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 107. An entity is not 
eligible for a rural service provider bidding credit if it has already 
claimed a small business bidding credit. 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 107. No rural service provider exceeded the 
$10 million cap in the Broadcast Incentive Auction, Auction 101, or 
Auction 102. In addition, to create parity in Auction 107 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. This proposal is consistent with the 
approach adopted by the Commission in the Broadcast Incentive Auction, 
Auction 101, Auction 102, and Auction 103.
    14. The Commission seeks comment on these proposed caps. 
Specifically, do the expected capital requirements associated with 
operating in the 3.7-3.98 GHz band, the potential number and value of 
3.7 GHz Service licenses, past auction data, or any other 
considerations justify a higher cap for either type of bidding credit? 
Moreover, are there convincing reasons for not maintaining parity with 
the bidding credit caps in Auctions 101, 102, and 103? Commenters are 
encouraged to identify unique circumstances and characteristics of this 
mid-band 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 
they are 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. Applicants will not be 
permitted to change their bidding credit type selection (i.e., from 
small business to rural service provider, or vice versa) after the 
short-form deadline.

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 107 in 
order to prevent the identification of 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 
PEAs 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 107, (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. Bidders would have access 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.
    18. After the close of bidding, bidders' PEA selections, upfront 
payment amounts, bidding eligibility, bids, and other bidding-related 
information would be made publicly available.
    19. The Commission seeks comment on the details of its proposal for 
implementing limited information procedures, or anonymous bidding, in 
Auction 107. Commenters opposing the use of anonymous bidding in 
Auction 107 should explain their reasoning and propose alternative 
information rules.

C. Upfront Payments and Bidding Eligibility

    20. 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 
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. The Commission's rules require that any 
auction applicant that, pursuant to 47 CFR 1.2105(a)(2)(xii), certifies 
that it is a former defaulter must submit an upfront payment equal to 
50% more than the amount that otherwise would be required. The 
Commission proposes upfront payments based on $0.015 per MHz-pop. The 
results of these calculations will be rounded using the Commission's 
standard rounding procedures for auctions: Results above $10,000 are 
rounded to the nearest $1,000; results below $10,000 but above $1,000 
are rounded to the nearest $100; and results below $1,000 are rounded 
to the nearest $10. The proposed upfront payments equal approximately 
half the proposed minimum opening bids, which are established as 
described in Section IV.A.7.a of the Auction 107 Comment Public Notice. 
The Commission seeks comment on these upfront payment amounts, which 
are specified in Attachment A to the Auction 107 Comment Public Notice. 
If commenters believe that these upfront payment amounts are not 
reasonable amounts, they should explain their reasoning and suggest an 
alternative approach. Commenters may wish to suggest other 
modifications to our proposal, such as weighting the minimum opening 
bid calculation using past auction prices.
    21. The Commission further proposes that the amount of the upfront 
payment submitted by a bidder would determine its initial bidding 
eligibility in bidding units, which are a measure of bidder eligibility 
and bidding activity. The Commission proposes to assign each generic 
spectrum block in a given PEA a specific number of bidding units, equal 
to one bidding unit per $10 of the upfront payment listed in Attachment 
A to the Auction 107 Comment Public Notice. The number of bidding units 
for one block in a given PEA is fixed, since it is based on the MHz-
pops in the block, and does not change during the

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auction as prices change. To the extent that bidders wish to bid on 
multiple generic blocks simultaneously, whether within the same PEA or 
in different PEAs, they would need to ensure that their upfront payment 
provides enough eligibility to cover multiple blocks.
    22. Under the Commission's proposed approach, a bidder's upfront 
payment would not be attributed to blocks in a specific PEA or PEAs, or 
to particular categories of blocks, if there is more than one. A bidder 
may place bids on multiple blocks in PEAs that it selected for bidding 
in its FCC Form 175, provided that the total number of bidding units 
associated with those blocks does not exceed its eligibility-based 
limit for the round. 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.

D. Auction Delay, Suspension, or Cancellation

    23. For Auction 107, the Commission proposes that, at any time 
before or during the bidding process, the Office of Economics and 
Analytics (OEA), in conjunction with the Wireless Telecommunications 
Bureau (WTB), may delay, suspend, or cancel bidding in Auction 107 in 
the event of a natural disaster, technical obstacle, network 
interruption, administrative or weather necessity, evidence of an 
auction security breach or unlawful bidding activity, or for any other 
reason that affects the fair and efficient conduct of competitive 
bidding. In such a case, OEA would notify participants of any such 
delay, suspension, or cancellation by public notice and/or through the 
FCC auction bidding system's announcement function. If the bidding is 
delayed or suspended, OEA, in its sole discretion, may elect to resume 
the auction starting from the beginning of the current round or from 
some previous round, or it may cancel the auction in its entirety. The 
Commission emphasizes that OEA and WTB would exercise this authority 
solely at their discretion. The Commission seeks comment on this 
proposal.

IV. Proposed Bidding Procedures

    24. The Commission proposes to conduct Auction 107 using an 
ascending clock auction design. Under the proposed auction format, 
bidding would take place in two phases. The first phase of the 
auction--the clock phase--would consist of successive clock bidding 
rounds in which bidders indicate their demands for categories of 
generic license blocks in specific PEAs, followed by a second phase--
the assignment phase--with bidding for frequency-specific license 
assignments. The Commission seeks comment on bidding procedures for the 
two phases of Auction 107.
    25. The Commission directs OEA, in conjunction with WTB, to prepare 
and release a technical guide supplementing the information in the 
Auction 107 Comment Public Notice and including the mathematical 
details and algorithms of the proposed auction design.

A. Clock Phase

1. Clock Auction Design
    26. During the clock phase of Auction 107, bidders will indicate 
their demands for generic license blocks in two bidding categories in 
specific geographic areas--in this case, PEAs. The Commission's 
proposed clock auction format would proceed in a series of rounds, with 
bidding being conducted simultaneously for all spectrum blocks in all 
PEAs available in the auction. During each bidding round, the bidding 
system would announce a per-block clock price for each category in each 
PEA, and qualified bidders would submit, for each category and PEA for 
which they wish to bid, the number of blocks they seek at the clock 
prices associated with the current round. Bidding rounds would be open 
for predetermined periods of time. Bidders would be subject to activity 
and eligibility rules that govern the pace at which they participate in 
the auction.
    27. Under the Commission's proposal, for each product--a category 
in a PEA--the clock price for a generic license block would increase 
from round to round if bidders indicate total demand for blocks in that 
product that exceeds the number of blocks available. The bidding rounds 
would continue until, for all products, the total number of blocks that 
bidders demand does not exceed the supply of available blocks. At that 
point, those bidders indicating demand for a product at the final price 
would be deemed winning bidders.
    28. 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.
    29. 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 3.7-3.98 GHz 
licenses.
2. Generic License Blocks in Two Categories
    30. The 3.7 GHz Report and Order determined that the 3.7-3.98 GHz 
band will be reconfigured and licensed in uniform 20-megahertz sub-
blocks in each of 406 PEAs. The 3.7 GHz Report and Order also 
establishes a two-phase accelerated relocation process. In Phase I, 
participating incumbent space station operators would relocate their 
services out of blocks A1-A5 and relocate incumbent earth stations in 
the 46 PEAs that are subject to the Phase I deadline out of those 
blocks. In Phase II, participating space station operators would 
relocate their services out of blocks B1-B5 and C1-C4 and transition 
all incumbent earth stations out of all the blocks. To facilitate 
bidding in the clock phase, the Commission proposes to establish two 
categories of generic blocks in each PEA.
    31. The Commission proposes that the first category of generic 
blocks will consist of the 20-megahertz subblocks between 3.7-3.8 GHz. 
This category, designated Category A, will comprise a total of five 
blocks: A1-A5. A second category, Category BC, will consist of the 
remaining sub-blocks between 3.8-3.98 GHz for a total of nine blocks: 
(B1-B5, C1-C4).
    32. 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.
    33. 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. The Commission distinguishes between Category A and 
Category BC to recognize that bidders may value early access to blocks 
A1-A5, both in the 46 PEAs subject to the Phase I incumbent earth 
station deadline and in other PEAs where a bidder might seek voluntary 
early transition of incumbent earth stations. 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,

[[Page 23292]]

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.
    34. The Commission also seeks comment on an alternative approach to 
establishing bidding categories, grouping the available blocks 
according to the specific clearing deadline to which incumbent earth 
stations are subject, i.e., Phase I or Phase II. Specifically, the 
Commission could designate blocks A1-A5 in the 46 PEAs that are subject 
to the Phase I deadline as Category P1 for clock phase bidding. And the 
Commission could designate all other blocks as Category P2 for clock 
phase bidding. Thus, under this alternative approach, the 46 PEAs that 
are subject to the Phase I deadline would each have two bidding 
categories and the 360 PEAs that are not subject to the Phase I 
incumbent earth station deadline would each have a single bidding 
category. The Commission asks commenters to consider whether the A 
Block licenses that would not be subject to the Phase I deadline are 
sufficiently interchangeable with the B and C Block licenses to be bid 
as a single bidding category in the clock phase, and whether this 
categorization would facilitate contiguous assignment across all blocks 
in the assignment phase.
3. Bidding Rounds
    35. Under the proposed clock auction format, Auction 107 would 
consist of sequential bidding rounds, each followed by the release of 
round results. The Commission proposes to conduct bidding 
simultaneously for all spectrum blocks in both bidding categories for 
all PEAs available in the auction. In the first bidding round of 
Auction 107, a bidder would indicate, for each product, how many 
generic license blocks it demands at the minimum opening bid price. 
During each subsequent bidding round, the bidding system would announce 
a per-block clock price for each product, and qualified bidders would 
submit, for each product for which they wish to bid, the number of 
blocks they seek at the clock prices associated with the current round. 
Bidding rounds would be open for predetermined periods of time. Bidders 
would be subject to activity and eligibility rules that govern the pace 
at which they participate in the auction.
    36. For each product, the clock price for a generic license block 
would increase from round to round if bidders indicate total demand for 
that product that exceeds the number of blocks available. The bidding 
rounds would continue until, for all products, the total number of 
blocks that bidders demand does not exceed the supply of available 
blocks. At that point, those bidders indicating demand for a block at 
the final price would be deemed winning bidders.
    37. The initial bidding schedule would be announced in a public 
notice to be released at least one week before the start of bidding. 
Under the Commission's proposal, OEA would retain the discretion to 
adjust the bidding schedule in order to foster an auction pace that 
reasonably balances speed with the bidders' need to study round results 
and adjust their bidding strategies. Such adjustments may include 
changes in the amount of time for bidding rounds, the amount of time 
between rounds, or the number of rounds per day, and would depend upon 
bidding activity and other factors. The Commission seeks comment on 
this proposal. Commenters should address the role of the bidding 
schedule in managing the pace of the auction and should specifically 
discuss the tradeoffs in managing auction pace by bidding schedule 
changes, by changing the activity requirement percentage or the bid 
increment percentage, or by using other means.
    38. The Commission proposes to conduct Auction 107 over the 
internet. A bidder would be able to submit its bids using the bidding 
interface screens and/or using the bidding system's upload function 
that allows bid files in a CSV format to be uploaded. The bidding 
system would not allow bids to be submitted unless the bidder selected 
the PEAs on its FCC Form 175 and the bidder has sufficient bidding 
eligibility.
    39. During each round of the bidding, a bidder would also be able 
to remove bids placed in the current bidding round. If a bidder 
modifies its bids for blocks in a PEA in a round, the system would take 
the last bid submission as that bidder's bid for the round. No bids may 
be withdrawn after the close of a round.
4. Stopping Rule
    40. The Commission proposes a simultaneous stopping rule for 
Auction 107, under which all blocks in both categories in all PEAs 
would remain available for bidding until the bidding stops in every 
PEA. Specifically, the Commission proposes that bidding close for all 
blocks after the first round in which there is no excess demand in any 
product. Excess demand is calculated as the difference between the 
number of blocks of aggregate demand and supply. Consequently, under 
this approach, it is not possible to determine in advance how long 
Auction 107 would last. The Commission seeks comment on its proposed 
simultaneous stopping rule.
5. Availability of Bidding Information
    41. The Commission proposes to make public after each round of 
Auction 107, for each category in each PEA: The supply; the aggregate 
demand; the posted price of the last completed round; and the clock 
price for the next round. The posted price of the previous round is, 
generally: The start-of-round price if supply exceeds demand; the clock 
price of the previous round if demand exceeds supply; or the price at 
which a reduction caused demand to equal supply. The identities of 
bidders demanding blocks in a specific category or PEA would not be 
disclosed until after Auction 107 concludes (i.e., after the close of 
bidding).
    42. Under the Commission's proposal, each bidder would have access 
to additional information related to its own bidding and bid 
eligibility. Specifically, after the bids of a round have been 
processed, the bidding system would inform each bidder of the number of 
blocks it holds after the round (its processed demand) for every PEA 
and its eligibility for the next round.
    43. Limiting the availability of bidding information during the 
auction balances the Commission's interest in providing bidders with 
sufficient information about the status of their own bids and the 
general level of bidding in all areas and license categories to allow 
them to bid confidently and effectively, while restricting the 
availability of information that may facilitate identification of 
bidders placing particular bids, which could potentially lead to 
undesirable strategic bidding.
6. Activity Rule, Activity Upper Limit, and Reducing Eligibility
    44. 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 this clock auction, a bidder's activity in a round 
for purposes of the activity rule would 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 (the activity

[[Page 23293]]

requirement percentage) of their current bidding eligibility during 
each round of the auction. Failure to maintain the requisite activity 
level would result in a reduction in the bidder's eligibility, possibly 
curtailing or eliminating the bidder's ability to place additional bids 
in the auction.
    45. The Commission proposes to require that bidders maintain a 
fixed, high level of activity in each round of Auction 107 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 the specific percentage within 
this range to be set for each round. 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 for the next round. If the activity rule is not met in a round, 
the bidder's eligibility would be reduced. 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 PEA, but the FCC auction 
bidding system cannot apply the request because demand would fall below 
the available supply, then the bidder's activity would reflect its 
unreduced demand. Under the ascending clock auction format, the FCC 
auction bidding system will not allow a bidder to reduce the quantity 
of blocks it demands in an individual PEA if the reduction would result 
in aggregate demand falling below (or further below) the available 
supply of blocks in the PEA.
    46. Because a bidder's eligibility for the next round is calculated 
based on the bidder's demands as applied by the auction system during 
bid processing, a bidder's eligibility may be reduced even if the 
bidder submitted bids with activity that exceeds the required activity 
for the round. This may occur, for example, if the bidder bids to 
reduce its demand in PEA X by two blocks (with 10 bidding units each) 
and bids to increase its demand by one block (with 20 bidding units) in 
PEA Y. If the bidder's demand can only be reduced by one block in PEA X 
(because there is only one block of excess demand), the increase in PEA 
Y cannot be applied, and absent other bidding activity the bidder's 
eligibility would be reduced. To potentially help a bidder avoid having 
its eligibility reduced as a result of submitted bids that could not be 
accepted during bid processing, the Commission seeks comment on 
additional procedures that would allow a bidder to submit bids with 
associated bidding activity greater than its current bidding 
eligibility. For example, depending upon the bidder's overall bidding 
eligibility and the activity limit percentage, a bidder could submit an 
``additional'' bid or bids that would be considered (in price point 
order with its other bids) and applied as available eligibility permits 
during the bid processing. However, under these additional procedures, 
the bidder's activity as applied by the auction system during bid 
processing would not exceed the bidder's current bidding eligibility. 
That is, if a bidder were allowed to submit bids with associated 
bidding units exceeding 100% of its current bidding eligibility, its 
processed activity would never exceed its eligibility.
    47. Specifically, the Commission seeks comment on additional 
procedures by which, after Round 1, a bidder may submit bids with 
bidding units totaling up to an activity upper limit equal to the 
bidder's current bidding eligibility for the round times a percentage 
(the activity limit percentage) equal to or greater than 100%. For 
Round 1, the activity upper limit would be 100% of the bidder's initial 
bidding eligibility. The Commission seeks comment on setting an initial 
activity limit percentage of 120% to apply to Round 2 and subsequent 
rounds (potentially changing it during the auction within a range of 
100% and 140%), in which the Commission would implement this approach. 
In any bidding round, the auction bidding system would advise the 
bidder of its current bidding eligibility, its required bidding 
activity, and its activity upper limit.
    48. Under the Commission's proposed procedures, OEA would retain 
the discretion to change the activity requirement percentage during the 
auction, and the Commission seeks comment in connection with potential 
additional procedures on whether OEA should similarly retain the 
discretion to change the activity limit percentage during the auction. 
The bidding system would announce any such changes in advance of the 
round in which they would take effect, giving bidders adequate notice 
to adjust their bidding strategies.
    49. The Commission invites comment on this activity rule proposal 
and it further seeks comment on using an activity upper limit to 
address the potential for loss of bidding eligibility under some 
circumstances. The Commission also encourages commenters to address 
whether the Commission should set the activity requirement percentage 
between 90% and 100% for each round and, should the Commission adopt an 
activity upper limit, whether to set the activity limit percentage 
between 100% and 140%. Further, the Commission seeks comment on where 
to set these percentages initially. The Commission also seeks comment 
on the relationship between the proposed activity rules and the ability 
of bidders to switch their demands across PEAs. The Commission 
encourages any commenters that oppose the proposed range for the 
activity requirement percentage and the activity limit percentage range 
described herein to explain their reasons with specificity.
    50. Missing bids. The Commission points out that under the proposed 
clock auction format, 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 product. If these requests 
are applied, or applied partially, then a bidder's bidding activity, 
and its bidding eligibility for the next round, may be reduced.
    51. For Auction 107, the Commission does not propose to provide for 
activity rule waivers to preserve a bidder's eligibility. The 
Commission notes that its proposal to permit a bidder to submit bids 
with bidding activity greater than its eligibility, within the precise 
limits described herein, would address some of the circumstances under 
which a bidder risks losing bidding eligibility and otherwise could 
wish to use a bidding activity waiver, while minimizing any potential 
adverse impacts on bidder incentives to bid sincerely and on the price 
setting mechanism of the clock auction. This approach not to allow 
waivers is consistent with the ascending clock auction procedures used 
in other FCC clock auctions. The clock auction relies on precisely 
identifying the point at which demand decreases to equal supply to 
determine winning bidders and final prices. Allowing waivers would 
create uncertainty with respect to the exact level of bidder demand and 
interfere with the basic clock price-setting and winner determination 
mechanism. Moreover, uncertainty about the level of demand would affect 
the way bidders' requests to reduce demand are processed by the bidding 
system. The Commission seeks comment on this approach.

[[Page 23294]]

7. Acceptable Bids
a. Minimum Opening Bids
    52. As part of the pre-bidding process for each auction, the 
Commission seeks comment on the use of a minimum opening bid amount 
and/or reserve price, as mandated by section 309(j) of the 
Communications Act of 1934, as amended.
    53. The Commission proposes to establish minimum opening bid 
amounts for Auction 107. The bidding system will not accept bids lower 
than these amounts. Based on the Commission's experience in past 
auctions, setting minimum opening bid amounts judiciously is an 
effective tool for accelerating the competitive bidding process. For 
Auction 107, the Commission proposes to establish initial clock prices, 
or minimum opening bids, by PEA.
    54. The Commission does not propose to establish any aggregate 
reserve price in Auction 107. The Commission is not aware at this time 
of circumstances that require establishment of an aggregate reserve 
price in the public interest for the auction of 3.7 GHz Service 
licenses and propose only the per product minimum opening bids that it 
discusses here. The Commission seeks comment on this issue.
    55. For Auction 107, the Commission proposes to calculate minimum 
opening bid amounts using a formula based on bandwidth and license area 
population, which is similar to its approach in many previous spectrum 
auctions. The Commission proposes to use a calculation based on $0.03 
per MHz-pop. The Commission seeks comment on these minimum opening bid 
amounts, which are specified in Attachment A to the Auction 107 Comment 
Public Notice. If commenters believe that these minimum opening bid 
amounts would result in unsold licenses, are not reasonable amounts, or 
should instead operate as reserve prices, they should explain their 
reasoning and propose an alternative approach. Commenters may wish to 
suggest other modifications to the Commission's proposal, such as 
weighting the minimum opening bid calculation using past auction 
prices. Commenters should support their claims with valuation analyses 
and suggested amounts or formulas for reserve prices or minimum opening 
bids.
    56. In establishing minimum opening bid amounts, the Commission 
particularly seeks comment on factors that could reasonably affect 
bidders' valuation of the spectrum, including the type of service 
offered, market size, population covered by the proposed facility, and 
any other relevant factors.
    57. 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 changing the bidding schedule, the activity 
requirement percentage, or the bid increment percentage.
b. Clock Price Increments
    58. Under the Commission's proposed clock phase procedures for 
Auction 107, after bidding in the first round and before each 
subsequent round, the FCC auction bidding system would announce the 
start-of-round price and the clock price for the upcoming round--that 
is, the lowest price and the highest price at which bidders can specify 
the number of blocks they demand during the round. The start-of-round 
price is also referred to as the posted price of the previous round. As 
long as aggregate demand for blocks in the product exceeds the supply 
of blocks, the start-of-round price would be equal to the clock price 
from the prior round. If demand equaled supply at a price in a previous 
round, then the start-of-round price for the next round would be equal 
to the price at which demand equaled supply. If demand was less than 
supply in the previous round, then the start-of-round price for the 
next round would not increase.
    59. The Commission proposes to set the clock price for blocks in a 
specific product for a round by adding a percentage increment to the 
start-of-round price. For example, if the start-of-round price for a 
block in a given PEA is $10,000, and the percentage increment is 20%, 
then the clock price for the round will be $12,000. The result will be 
rounded up to the nearest $1,000.
    60. The Commission proposes to set the increment percentage within 
a range of 5% to 20% inclusive, to set the initial increment percentage 
at 10%, and potentially to adjust the increment as rounds continue. The 
proposed 5% to 20% increment range will allow the Commission to set a 
percentage that manages the auction pace and takes into account 
bidders' needs to evaluate their bidding strategies while moving the 
auction along quickly.
    61. The Commission seeks comment on these proposed procedures.
c. Intra-Round Bids
    62. The Commission proposes generally to permit a bidder to make 
intra-round bids by indicating a point between the start-of-round price 
and the clock price at which its demand for blocks 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 should increase 
beyond that price. For example, if a bidder has processed demand of 3 
blocks at the start of the round price of $200, but wishes to hold only 
2 blocks if the price increases by more than $10 (assuming the bid 
increment is more than $10), the bidder will indicate a bid quantity of 
2 at a price of $210 ($200+$10). Similarly, if the bidder wishes to 
reduce its demand to 0 if the price increases above $200 at all, the 
bidder will indicate a bid quantity of 0 at the start-of-round price of 
$200.
    63. 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 increments, thereby speeding the auction, 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. The Commission seeks comment on the proposal to allow intra-
round bids.
8. Bids To Change Demand, Bid Types, and Bid Processing
    64. Under the ascending clock auction format the Commission 
proposes for Auction 107, a bidder would indicate in each round the 
number of blocks in each product that it demands at a given price. A 
bidder that wishes to change the quantity it demands (relative to its 
demands from the previous round as processed by the bidding system) 
would express its demands at the clock price or at an intra-round 
price. A bidder that is willing to maintain the same demand in a 
product at the new clock price would bid for that quantity at the clock 
price, indicating that it is willing to pay up to that price, if need 
be, for the specified quantity. Bids to maintain demand would always be 
applied by the auction bidding system.
    65. 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. A ``simple'' bid indicates 
a desired quantity of blocks in a category at a price (either the clock 
price or an intra-round price). A ``switch'' bid allows the

[[Page 23295]]

bidder to request to move its demand for a quantity of blocks from the 
A category to the BC category, or vice versa, within the same PEA at a 
price for the ``from'' category (either the clock price or an intra-
round price).
    66. The Commission does not propose to incorporate any form of 
package bidding procedures into the clock phase of Auction 107. Package 
bidding would add complexity to the bidding process, and the Commission 
does not see significant benefit from such procedures, given the clock 
auction and assignment phase format it is proposing. 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.
    67. The Commission proposes bid processing procedures that the 
auction bidding system would use, after each bidding round, to process 
bids to change demand to determine the processed demand of each bidder 
for each product and a posted price for each product that would serve 
as the start-of-round price for the next round.
a. No Excess Supply Rule for Bids To Reduce Demand
    68. Under the ascending clock auction format, the FCC auction 
bidding system will not allow a bidder to reduce the quantity of blocks 
it demands in a product if the reduction would result in aggregate 
demand falling below (or further below) the available supply of blocks 
in the product. Therefore, if a bidder submits a simple bid to reduce 
the number of blocks for which it has processed demand as of the 
previous round, the FCC auction bidding system will treat the bid as a 
request to reduce demand that will be applied only if the ``no excess 
supply'' rule would be satisfied. Similarly, if a bidder submits a 
switch bid to move its demand for a quantity of blocks from the A 
category to the BC category within the same PEA, the FCC auction 
bidding system will treat the bid as a request that will be applied 
only if the ``no excess supply'' rule would be satisfied for the A 
category in the PEA.
b. Eligibility Rule for Bids To Increase Demand
    69. The bidding system will not allow a bidder to increase the 
quantity of blocks it demands in a product if the total number of 
bidding units associated with the bidder's demand exceeds the bidder's 
bidding eligibility for the round. Therefore, if a bidder submits a 
simple bid to increase the number of blocks for which it has processed 
demand as of the previous round, the FCC auction bidding system will 
treat the bid as a request to increase demand that will be applied only 
if that would not cause the bidder's activity to exceed its 
eligibility. The eligibility rule for bids to increase demand does not 
apply to switch bids because the bidder's processed activity does not 
change when a switch bid is applied.
c. Partial Application of Bids
    70. Under our proposed bid processing procedures, a bid (simple bid 
or switch bid) that involves a reduction from the bidder's previous 
demands could be applied partially--that is, reduced by fewer blocks 
than requested in the bid--if excess demand is insufficient to support 
the entire reduction. 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. A simple bid to increase a 
bidder's demand could be applied partially if the total number of 
bidding units associated with the bidder's demand exceeds the bidder's 
bidding eligibility for the round.
d. Processed Demands
    71. The Commission proposes to process bids to change demand in 
order of price point after a round ends, where the price point 
represents the percentage of the bidding interval for the round. For 
example, if the start-of-round price is $5,000 and the clock price is 
$6,000, a price of $5,100 will correspond to the 10% price point, since 
it is 10% of the bidding interval between $5,000 and $6,000. Bids to 
maintain demand are always applied before the bidding system considers 
bids to change demand. Under this proposal, the FCC auction bidding 
system would process bids to change demand 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 would consider bids at the 
lowest price point across all PEAs, then look at bids at the next price 
point in all areas, and so on. The Commission proposes that, if there 
are multiple bids at a single price point, the system will process bids 
in order of a bid-specific pseudo-random number. As it considers each 
submitted bid during bid processing, the FCC auction bidding system 
would determine the extent to which there is excess demand in each PEA 
at that point in the processing in order to determine whether a 
bidder's request to reduce demand can be applied. Likewise, the auction 
bidding system would evaluate the activity associated with the bidder's 
most recently determined demands at that point in the processing to 
determine whether a request to increase demand can be applied.
    72. Because in any given round some bidders may request to increase 
demands for licenses 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 increasing order of 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 
or sufficient eligibility later in the processing after other bids are 
processed.
    73. Therefore, under the Commission's proposed procedures, once a 
round closes, the auction system would process bids to change demand by 
first considering the bid submitted at the lowest price point and 
determining the maximum extent to which that bid can be applied given 
bidders' demands as determined at that point in the bid processing. If 
the bid can be applied (either in full or partially), the number of 
licenses the bidder holds at that point in the processing would be 
adjusted, and aggregate demand would be recalculated accordingly. If 
the bid cannot be applied in full, the unfulfilled bid, or portion 
thereof, would be held in a queue to be considered later during bid 
processing for that round. The FCC auction bidding system would then 
consider the bid submitted at the next highest price point, applying it 
in full, in part, or not at all, given the most recently determined 
demands of bidders. Any unfulfilled requests would again be held in the 
queue, and aggregate demand would again be recalculated. Every time a 
bid or part of a bid is applied, the unfulfilled bids held in the queue 
would be reconsidered, in the order of the original price points of the 
bids (and by pseudo-random number, in the case of tied price points). 
The auction bidding system would not carry over unfulfilled bid 
requests to the next round, however. The bidding system would advise 
bidders of the status of their bids when round results are released.
e. Price Determination
    74. The Commission further proposes bid processing procedures that 
would determine, based on aggregate demand, the posted price for each 
product for the

[[Page 23296]]

round that will serve as the start-of-round price for the next round. 
Under the Commission's proposal, the uniform price for all of the 
blocks in a product would increase from round to round as long as there 
is excess demand for blocks in the product but would not increase if 
aggregate demand does not exceed the available supply of blocks.
    75. The Commission proposes that if, at the end of a round, the 
aggregate demand for blocks in the product exceeds the supply of 
blocks, the posted price would equal the clock price for the round. If 
a reduction in demand was applied during the round and caused demand in 
the product to equal supply, the posted price would be the price at 
which the reduction was applied. If aggregate demand is less than or 
equal to supply and no bid to reduce demand was applied for the 
product, then the posted price would equal the start-of-round price for 
the round. The range of acceptable bid amounts for the next round would 
be set by adding the percentage increment to the posted price.
    76. When a bid to reduce demand can be applied only partially, the 
uniform price for the product would stop increasing at that point, 
since the partial application of the bid would result in demand falling 
to equal supply. Hence, a bidder that makes a bid to reduce demand that 
cannot be fully applied would not face a price for the remaining demand 
that is higher than its bid price.
    77. After the bids of the round have been processed, if the 
stopping rule has not been met, the FCC auction bidding system would 
announce clock prices to indicate a range of acceptable bids for the 
next round. Each bidder would be informed of its processed demand and 
the extent of excess demand for blocks in each product.
    78. The Commission seeks comment on its proposals regarding bid 
processing for Auction 107.
9. Winning Bids in the Clock Phase
    79. Under the Commission's proposed clock auction format for 
Auction 107, bidders with processed demand for a product at the time 
the stopping rule is met will become the winning bidders of licenses 
corresponding to that number of blocks and will be assigned specific 
frequencies in the assignment phase. The final clock phase price for a 
generic block in a product would be the posted price for the final 
round. This and other Auction 107 bid processing details are addressed 
in the Clock Phase Technical Guide.

B. Assignment Phase

    80. Following the conclusion of the clock phase, the Commission 
proposes to conduct an assignment phase using a series of single-round 
sealed-bid bidding rounds, where each clock phase winning bidder will 
have the opportunity to indicate its preferences for specific frequency 
licenses corresponding to the generic blocks it won in the clock phase. 
A bidder will be assigned contiguous frequencies for blocks it wins 
within each category and PEA regardless of whether it chose to bid in 
the assignment phase.
1. Sequencing and Grouping of PEAs
    81. 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. To that end, the 
Commission proposes to conduct rounds for the largest markets first to 
enable bidders to establish a ``footprint'' from which to work.
    82. 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. In Auction 1002, the 
Commission conducted sequential rounds for the top 40 PEAs and for 
Auction 102, it did the same. The Commission altered its proposal for 
Auction 103, in order to further speed up the assignment phase by 
including PEAs 21-40 in the simultaneous REAG assignment rounds. The 
Commission's experience in Auction 1002 and Auction 102 suggests that 
this proposed change will not adversely affect bidders. The Commission 
will consider the results of Auction 103, as well as any commenter 
input, before determining its final procedures. The six REAGs are: 
Northeast, Southeast, Great Lakes, Mississippi Valley, Central, and 
West.
    83. 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 same winning bidders 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.
    84. The Commission seeks comment on these proposals for sequencing 
assignment rounds, including conducting separate rounds for the top 20 
PEAs, and on our proposal to group PEAs for bidding under some 
circumstances within REAGs.
2. Acceptable Bids and Bid Processing
    85. Under the Commission's proposal, 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. If there are two categories, the Commission proposes that a 
bidder will submit its preferences for blocks it won in the 3.7-3.8 GHz 
and 3.8-3.98 GHz bands separately, rather than submitting bids for 
preferences that include blocks in both categories. That is, if a 
bidder won one block in Category A and two blocks in Category BC, it 
would not be able to submit a single bid amount for an assignment that 
included both categories. Instead, it would submit its bid or bids for 
assignments in Category A separately from its bid or bids for 
assignments in Category BC.
    86. 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. Furthermore, if 
multiple blocks in a category in a PEA remain unsold, the unsold 
licenses will be contiguous. 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

[[Page 23297]]

for an alternative assignment that satisfies the contiguity 
restrictions. The Assignment Phase Technical Guide provides 
mathematical details of this proposal. 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. The Commission proposes to 
determine prices using the Vickrey-nearest approach, which is described 
in the Assignment Phase Technical Guide.
    87. The Commission seeks comment on these proposed procedures.

V. Post-Auction Process

A. Deficiency Payments and Additional Default Payment Percentage

    88. 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 Commission's 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.
    89. 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.
    90. For Auction 107, the Commission proposes to establish an 
additional default payment of 15%, which is consistent with that 
adopted for Auctions 101, 102, and 103. 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 107 are likely to be 
unusually great. In light of these considerations, the Commission 
proposes for Auction 107 an additional default payment of 15% of the 
relevant bid. The Commission seeks comment on this proposal.
    91. 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.

VI. Tutorials and Additional Information for Applicants

    92. The Commission intends to provide additional information on the 
bidding system and to offer demonstrations and other educational 
opportunities for applicants in Auction 107 to familiarize themselves 
with the FCC auction application system and the auction bidding system. 
For example, the Commission intends to release online tutorials that 
will help applicants understand the procedures to be followed in the 
filing of their auction short-form applications (FCC Form 175) and on 
the bidding procedures for Auction 107.

VII. Procedural Matters

    93. 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 Auction 107 Comment Public Notice to supplement the Commission's 
Initial and Final Regulatory Flexibility Analyses completed in the 3.7 
GHz NPRM and 3.7 GHz Report and Order, and other Commission orders 
pursuant to which Auction 107 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 specified on the first page of the 
Auction 107 Comment Public Notice. The Commission will send a copy of 
the Auction 107 Comment Public Notice, including the Supplemental IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the Auction 107 Comment Public Notice and 
Supplemental IRFA (or summaries thereof) will be published in the 
Federal Register.
    94. Need for, and Objectives of, the Proposed Rules. The Auction 
107 Comment Public Notice sets forth the proposed auction procedures 
for those entities that seek to bid to acquire licenses in Auction 107. 
The Auction 107 Comment Public Notice seeks comment on proposed 
procedural rules to govern Auction 107, which will auction flexible-use 
overlay licenses for the 3.7 GHz Service in the 3.7-3.98 GHz band. This 
process is intended to provide notice of and adequate time for 
potential applicants to comment on proposed auction procedures. To 
promote the efficient and fair administration of the competitive 
bidding process for all Auction 107 participants, the Commission seeks 
comment on the following proposed procedures:
     Use of anonymous bidding/limited information procedures 
which will not make public: (1) The license areas that an applicant 
selects for bidding in its auction application (FCC Form 175); (2) the 
amount of any upfront payment made by or on behalf of an applicant for 
Auction 107; (3) an applicant's bidding eligibility; and (4) any other 
bidding-related information that might reveal the identity of the 
bidder placing a bid, until after bidding has closed;
     Establishment of bidding credit caps for eligible small 
businesses and rural service providers in Auction 107;
     Retention by OEA of discretion to adjust the bidding 
schedule in order to manage the pace of Auction 107;
     Use of a simultaneous stopping rule for Auction 107, under 
which all blocks in both categories in all PEAs would remain available 
for bidding until the bidding stops in every PEA;
     Provision of discretionary authority to OEA, in 
conjunction with WTB, to delay, suspend, or cancel bidding in Auction 
107 for any reason that affects the ability of the competitive bidding 
process to be conducted fairly and efficiently;
     Use of a clock auction format for Auction 107 under which 
each qualified bidder will indicate in successive clock bidding rounds 
its demands for categories of generic blocks in specific geographic 
areas;
     Use of an activity rule that would require bidders to be 
active on between 90% and 100% of their bidding eligibility in all 
regular clock rounds;
     Use of an activity rule that does not include a waiver of 
the rule to preserve a bidder's eligibility;

[[Page 23298]]

     A specific minimum opening bid amount for products 
available in Auction 107;
     A specific upfront payment amount for products available 
in Auction 107;
     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;
     Establishment of acceptable bid amounts, including clock 
price increments and intra-round bids, along with a proposed 
methodology for calculating such amounts;
     A proposed methodology for processing bids and requests to 
reduce and increase demand;
     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
     Establishment of an additional default payment of 15% 
under section 1.2104(g)(2) of the Commission's rules in the event that 
a winning bidder defaults or is disqualified after the auction.
    95. The proposed procedures for the conduct of Auction 107 
constitute the more specific implementation of the competitive bidding 
rules contemplated by Parts 1 and 30 of the Commission's rules, the 3.7 
GHz Report and Order, and relevant competitive bidding orders, and are 
fully consistent therewith.
    96. 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 auctions program in 1994 and would 
conduct Auction 107. In promulgating those rules, the Commission 
conducted numerous RFA analyses to consider the possible impact of 
those rules on small businesses that might seek to participate in 
Commission auctions. In addition, a Final Regulatory Flexibility 
Analysis (FRFA) is included in the concurrent rulemaking order that 
adopts rule provisions relevant to the Auction 107 Comment Public 
Notice.
    97. 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. Pursuant to 5 
U.S.C. 601(3), the statutory definition of a small business applies 
unless an agency, after consultation with the Office of Advocacy of the 
Small Business Administration and after opportunity for public comment, 
establishes one or more definitions of such term which are appropriate 
to the activities of the agency and publishes such definition(s) in the 
Federal Register. 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.
    98. Regulatory Flexibility Analyses were incorporated into the 3.7 
GHz NPRM and the 3.7 GHz Report and Order. In those analyses, the 
Commission describes in detail the small entities that might be 
significantly affected. In the Auction 107 Comment Public Notice, the 
Commission incorporated by reference the descriptions and estimates of 
the number of small entities from the previous Regulatory Flexibility 
Analyses in the 3.7 GHz NPRM and the 3.7 GHz Report and Order.
    99. 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.
    100. The Commission does not expect the processes and procedures 
proposed in the Auction 107 Comment Public Notice will require small 
entities to hire attorneys, engineers, consultants, or other 
professionals to participate in Auction 107 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 application (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 107 to familiarize themselves with the FCC 
auction application system and the auction bidding system. By providing 
these resources as well as the resources discussed in the Auction 107 
Comment Public Notice, the Commission expects small business entities 
who use the available resources to experience lower participation and 
compliance costs. Nevertheless, while the Commission cannot quantify 
the cost of compliance with the proposed procedures, it does not 
believe that the costs of compliance will unduly burden small entities 
that choose to participate in the auction because the proposals for 
Auction 107 are similar in many respects to the procedures in recent 
auctions conducted by the Commission.
    101. 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.
    102. The Commission has taken steps to minimize any economic impact 
of its auction procedures on small businesses through, among other 
things, the many resources the Commission provides potential auction 
participants. Small entities and other auction participants

[[Page 23299]]

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 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.
    103. 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 entities to conduct research prior to 
and throughout the auction. Prior to and at the close of Auction 107, 
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 107 applicants, including small entities, thereby lowering 
their administrative costs to comply with the Commission's competitive 
bidding rules.
    104. 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 107 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 107 by all eligible 
bidders and may result in significant cost savings for small business 
entities that 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 entities.
    105. For Auction 107, 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 propose 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 3.7-3.98 band and the 
Commission's analysis of past auction data, the Commission anticipates 
that its 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.
    106. The proposed procedures for the conduct of Auction 107 
constitute the more specific implementation of the competitive bidding 
rules contemplated by Parts 1 and 30 of the Commission's rules, the 3.7 
GHz Report and Order, and relevant competitive bidding orders, and are 
fully consistent therewith.
    107. Federal Rules that May Duplicate, Overlap, or Conflict with 
the Proposed Rules. None.
    108. 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 Commission rule 1.1206(b). In proceedings 
governed by Commission 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.
Cecilia Sigmund,
Federal Register Liaison Officer.
[FR Doc. 2020-06451 Filed 4-24-20; 8:45 am]
BILLING CODE 6712-01-P