[Federal Register: September 28, 2006 (Volume 71, Number 188)]
[Notices]
[Page 56977-56982]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se06-60]
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FEDERAL COMMUNICATIONS COMMISSION
[Report No. AUC-06-70-A (Auction No. 70); AU Docket No. 06-170; DA 06-
1810]
Auction of FM Broadcast Construction Permits Scheduled for March
7, 2007; Comments Sought on Competitive Bidding Procedures for Auction
No. 70
AGENCY: Federal Communications Commission.
ACTION: Notice.
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SUMMARY: This document announces the auction of certain FM broadcast
construction permits scheduled to commence on March 7, 2007 (Auction
No. 70). This document also seeks comments on minimum opening bids and
other procedures for Auction No. 70.
DATES: Comments are due on or before October 5, 2006, and reply
comments are due on or before October 13, 2006.
ADDRESSES: Comments and reply comments must be identified by AU Docket
No. 06-170; DA 06-1810. The Bureaus request that a copy of all comments
and reply comments be submitted electronically to the following
address: auction70@fcc.gov. In addition, comment and reply comments may
be submitted by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web site: http://www.fcc.gov/cgb/ecfs/.
Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
Paper Filers: Parties who choose to file by paper must
file an original and four copies of each filing. Filings can be sent by
hand or messenger delivery, by commercial overnight courier, or by
first-class or overnight U.S. Postal Service mail (although the Bureaus
continues to experience delays in receiving U.S. Postal Service mail).
All filings must be addressed to the Commission's Secretary, Attn: WTB/
ASAD, Office of the Secretary, Federal Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. eastern time (ET). All hand
deliveries must be held together with rubber bands or fasteners.
Commercial overnight mail (other than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol
Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: Media Bureau, Audio Division, for
rules service questions: Lisa Scanlan or Tom Nessinger at (202) 418-
2700 Wireless Telecommunications Bureau, Auctions
[[Page 56978]]
and Spectrum Access Division, for auctions legal questions: Lynne Milne
at (202) 418-0660. For general auction questions: Jeff Crooks at (202)
418-0660 or Linda Sanderson at (717) 338-2888.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Auction No. 70 Comment Public Notice released on September 21, 2006.
The complete text of the Auction No. 70 Comment Public Notice,
including attachments and related Commission documents, is available
for public inspection and copying from 8 a.m. to 4:30 p.m. ET Monday
through Thursday or from 8 a.m. to 11:30 a.m. ET on Fridays in the FCC
Reference Information Center, Portals II, 445 12th Street, SW., Room
CY-A257, Washington, DC 20554. The Auction No. 70 Comment Public
Notice, including attachments and related Commission documents also may
be purchased from the Commission's duplicating contractor, Best Copy
and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554, telephone 202-488-5300, facsimile 202-488-
5563, or you may contact BCPI at its Web site: http://www.BCPIWEB.com.
When ordering documents from BCPI, please provide the appropriate FCC
document number for example, DA 06-1810. The Auction No. 70 Comment
Public Notice and related documents also are available on the Internet
at the Commission's Web site: http://wireless.fcc.gov/ auctions/70/.
I. Constuction Permits to be Offered in Auction No. 70
1. The Media and Wireless Telecommunications Bureaus (Bureaus)
announce that Auction No. 70 will offer 124 construction permits in the
FM broadcast service as listed in Attachment A of the Auction No. 70
Comment Public Notice.
2. Attachment A of the Auction No. 70 Comment Public Notice lists
vacant FM allotments, reflecting FM channels assigned to the Table of
FM Allotments, 47 CFR 73.202(b), pursuant to the Commission's
established rulemaking procedures, designated for use in the indicated
community. Pursuant to the policies established in the Broadcast First
Report and Order, 64 FR 24523, May 7, 1999, applicants may apply for
any vacant FM allotment, as specified in Attachment A. Applications
specifying the same FM allotment will be considered mutually exclusive
and, thus, the construction permit for the FM allotment will be awarded
by competitive bidding procedures.
II. Bureaus Seek Comment on Auction Procedures
3. Consistent with the provisions of section 309(j)(3) of the
Communications Act of 1934, as amended, and to ensure that potential
bidders have adequate time to familiarize themselves with the specific
rules that will govern the day-to-day conduct of an auction, the
Bureaus seek comment on the following issues relating to Auction No.
70.
A. Auction Structure
i. Simultaneous Multiple Round Auction Design
4. The Bureaus propose to award all construction permits included
in Auction No. 70 in a simultaneous multiple-round (SMR) auction. This
type of auction offers every construction permit for bid at the same
time and consists of successive bidding rounds in which eligible
bidders may place bids on individual construction permits. A bidder may
bid on, and potentially win, any number of construction permits.
Typically, bidding remains open on all construction permits until
bidding stops on every construction permit, unless a modified stopping
rule is invoked. The Bureaus seek comment on this proposal.
ii. Round Structure
5. The Commission will conduct Auction No. 70 over the Internet.
Alternatively, telephonic bidding also will be available.
6. The initial bidding schedule will be announced in a public
notice to be released at least one week before the start of the
auction. The SMR format will consist of sequential bidding rounds, each
followed by the release of round results.
7. The Bureaus have the discretion to change the bidding schedule
in order to foster an auction pace that reasonably balances speed with
the bidders' need to study round results and adjust their bidding
strategies. The Bureaus may increase or decrease the amount of time for
the bidding rounds and review periods, or the number of rounds per day,
depending upon the bidding activity level and other factors. The
Bureaus seek comment on this proposal.
iii. Stopping Rule
8. The Bureaus have discretion to establish stopping rules before
or during multiple round auctions in order to terminate the auction
within a reasonable time. For Auction No. 70, the Bureaus propose to
employ a simultaneous stopping rule approach. A simultaneous stopping
rule means that all construction permits remain available for bidding
until bidding closes simultaneously on all construction permits. More
specifically, bidding will close simultaneously on all construction
permits after the first round in which no bidder submits any new bids,
applies a proactive waiver, or, if applicable, withdraws any
provisionally winning bids. Thus, unless circumstances dictate
otherwise, bidding will remain open on all construction permits until
bidding stops on every construction permit.
9. The Bureaus propose to retain the discretion to exercise any of
the following options during Auction No. 70: (a) Use a modified version
of the simultaneous stopping rule, based on the failure to submit
during a prior round of a waiver or a new bid by a bidder who is not a
provisionally winning bidder for that construction permit, as described
in the Auction No. 70 Comment Public Notice; (b) keep the auction open
even if no bidder submits any new bids or applies a waiver; and (c)
declare that the auction will end after a specified number of
additional rounds (special stopping rule).
10. The Bureaus propose to exercise these options only in certain
circumstances, for example, where the auction is proceeding very
slowly, there is minimal overall bidding activity, or it appears likely
that the auction will not close within a reasonable period of time.
Before exercising these options, the Bureaus are likely to attempt to
increase the pace of the auction by, for example, increasing the number
of bidding rounds per day, and/or changing the minimum acceptable bids.
The Bureaus seek comment on these proposals.
iv. Information Relating to Auction Delay, Suspension, or Cancellation
11. For Auction No. 70, the Bureaus propose that, by public notice
or by announcement during the auction, the Bureaus may delay, suspend,
or cancel the auction in the event of natural disaster, technical
obstacle, evidence of an auction security breach, unlawful bidding
activity, administrative or weather necessity, or for any other reason
that affects the fair and efficient conduct of competitive bidding. In
such cases, the Bureaus, in their sole discretion, may elect to resume
the auction starting from the beginning of the current round, resume
the auction starting from some previous round, or cancel the auction in
its entirety. Network interruption may cause the Bureaus to delay or
suspend the auction. The Bureaus emphasize that exercise of this
authority is solely within the discretion of the Bureaus, and its use
is not intended to be a substitute for situations in which
[[Page 56979]]
bidders may wish to apply their activity rule waivers. The Bureaus seek
comment on this proposal.
B. Bidding Procedures
i. Upfront Payments and Bidding Eligibility
12. The Bureaus have delegated authority and discretion to
determine an appropriate upfront payment for each FM construction
permit being auctioned, taking into account such factors as the
efficiency of the auction process and the potential value of similar
spectrum. The upfront payment is a refundable deposit made by each
bidder to establish eligibility to bid on construction permits. Upfront
payments related to the specific spectrum subject to auction protect
against frivolous or insincere bidding and provide the Commission with
a source of funds from which to collect payments owed at the close of
the auction. With these guidelines in mind, the Bureaus propose the
schedule of upfront payments for each construction permit as set forth
in Attachment A of the Auction No. 70 Comment Public Notice. The
Bureaus seek comment on this proposal.
13. The Bureaus further propose that the amount of the upfront
payment submitted by a bidder will determine the maximum number of
bidding units on which a bidder may place bids. This limit is a
bidder's initial bidding eligibility. Each FM construction permit is
assigned a specific number of bidding units equal to the upfront
payment listed in Attachment A of the Auction No. 70 Comment Public
Notice, on a bidding unit per dollar basis. Bidding units for a given
construction permit do not change as prices rise during the auction. A
bidder's upfront payment is not attributed to specific construction
permits. Rather, a bidder may place bids on any combination of
construction permits that it selected in its short form application
(FCC Form 175), as long as the total number of bidding units associated
with those construction permits does not exceed the bidder's current
eligibility. In order to bid on a construction permit, qualified
bidders must have an eligibility level that meets or exceeds the number
of bidding units assigned to that construction permit. Eligibility
cannot be increased during the auction; it can only remain the same or
decrease. Thus, in calculating its upfront payment amount, an applicant
must determine the maximum number of bidding units it may wish to bid
on (or hold provisionally winning bids on) in any single round, and
submit an upfront payment amount covering that total number of bidding
units. The Bureaus seek comment on this proposal.
ii. Activity Rule
14. In order to ensure that an auction closes within a reasonable
period of time, an activity rule requires bidders to bid actively
throughout the auction, rather than wait until late in the auction
before participating. A bidder's activity in a round will be the sum of
the bidding units associated with any construction permits upon which
it places bids during the current round and the bidding units
associated with any construction permits for which it holds
provisionally winning bids. 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 the use of an activity rule waiver, if any remain, or a
reduction in the bidder's eligibility, possibly curtailing or
eliminating the bidder's ability to place bids in the auction.
15. The Bureaus propose to divide the auction into two stages, each
characterized by a different activity requirement. The auction will
start in Stage One. It proposes that the auction generally will advance
from Stage One to Stage Two when the auction activity level, as
measured by the percentage of bidding units receiving new provisionally
winning bids, is approximately twenty percent or below for three
consecutive rounds of bidding. However, the Bureaus further propose
that it retain the discretion to change stages unilaterally by
announcement during the auction. In exercising this discretion, the
Bureaus will consider a variety of measures of bidder activity,
including, but not limited to, the auction activity level, the
percentage of construction permits (as measured in bidding units) on
which there are new bids, and the number of new bids.
16. For Auction No. 70, the Bureaus propose the following activity
requirements: Stage One: In each round of the first stage of the
auction, a bidder desiring to maintain its current bidding eligibility
is required to be active on construction permits representing at least
75 percent of its current bidding eligibility. Failure to maintain the
requisite activity level will result in a reduction in the bidder's
bidding eligibility in the next round of bidding (unless an activity
rule waiver is used). During Stage One, a bidder's reduced eligibility
for the next round will be calculated by multiplying the bidder's
current round activity by four-thirds (\4/3\). Stage Two: In each round
of the second stage, a bidder desiring to maintain its current bidding
eligibility is required to be active on 95 percent of its current
bidding eligibility. Failure to maintain the requisite activity level
will result in a reduction in the bidder's bidding eligibility in the
next round of bidding (unless an activity rule waiver is used). During
Stage Two, a bidder's reduced eligibility for the next round will be
calculated by multiplying the bidder's current round activity by
twenty-nineteenths (\20/19\).
17. The Bureaus seek comment on this proposal. Commenters that
believe this activity rule should be modified should explain their
reasoning and comment on the desirability of an alternative approach.
The Bureaus also invite comment on, in the alternative, conducting the
auction with a single stage that would use an activity requirement of
100 percent. Commenters are advised to support their claims with
analyses and suggested alternative activity rules.
iii. Activity Rule Waivers and Reducing Eligibility
18. Use of an activity rule waiver preserves the bidder's
eligibility despite the bidder's activity in the current round being
below the required minimum level. An activity rule waiver applies to an
entire round of bidding and not to a particular construction permit.
Activity rule waivers can be either proactive or automatic and are
principally a mechanism for auction participants to avoid the loss of
bidding eligibility in the event that exigent circumstances prevent
them from placing a bid in a particular round.
19. The Commission's Integrated Spectrum Auction System (``ISAS''
or ``FCC Auction System'') assumes that a bidder that does not meet the
activity requirement would prefer to apply an activity rule waiver (if
available) rather than lose bidding eligibility. Therefore, the system
will automatically apply a waiver at the end of any bidding round where
a bidder's activity level is below the minimum required unless: (1) The
bidder has no activity rule waivers available; or (2) the bidder
overrides the automatic application of a waiver by reducing
eligibility, thereby meeting the minimum requirement. If a bidder has
no waivers remaining and does not satisfy the required activity level,
its eligibility will be permanently reduced, possibly curtailing or
eliminating the bidder's ability to place additional bids in the
auction.
20. A bidder with insufficient activity may wish to reduce its
bidding eligibility rather than use an activity rule waiver. If so, the
bidder must affirmatively override the automatic
[[Page 56980]]
waiver mechanism during the bidding round by using the reduce
eligibility function in the FCC Auction System. In this case, the
bidder's eligibility is permanently reduced to bring the bidder into
compliance with the activity rules as described above. Reducing
eligibility is an irreversible action. Once eligibility has been
reduced, a bidder will not be permitted to regain its lost bidding
eligibility, even if the round has not yet closed.
21. A bidder may apply an activity rule waiver proactively as a
means to keep the auction open without placing a bid. If a bidder
proactively applies an activity rule waiver (using the apply waiver
function in the FCC Auction System) during a bidding round in which no
bids or withdrawals (if permitted) are submitted, the auction will
remain open and the bidder's eligibility will be preserved. An
automatic waiver applied by the FCC Auction System in a round in which
there are no new bids or withdrawals (if permitted) will not keep the
auction open. A bidder cannot submit a proactive waiver after
submitting a bid in a round, and submitting a proactive waiver will
preclude a bidder from placing any bids in that round. Applying a
waiver is irreversible; once a proactive waiver is submitted, that
waiver cannot be unsubmitted, even if the round has not yet closed.
22. The Bureaus propose that each bidder in Auction No. 70 be
provided with three activity rule waivers that may be used at the
bidder's discretion during the course of the auction. The Bureaus seek
comment on this proposal.
iv. Reserve Price or Minimum Opening Bid
23. The Bureaus seek comment on the use of a minimum opening bid
amount and/or a reserve price in Auction No. 70. Normally, a reserve
price is an absolute minimum price below which an item will not be sold
in a given auction. Reserve prices can be either published or
unpublished. A minimum opening bid amount, on the other hand, is the
minimum bid price set at the beginning of the auction below which no
bids are accepted. It is generally used to accelerate the competitive
bidding process. The auctioneer has the discretion to lower minimum
opening bid amounts during the course of the auction. It is also
possible for the minimum opening bid amount and the reserve price to be
the same amount.
24. The Bureaus propose to establish minimum opening bid amounts
for Auction No. 70. The Bureaus believe a minimum opening bid amount,
which has been used in other auctions, is an effective bidding tool for
accelerating the competitive bidding process. The Bureaus do not
propose a separate reserve price for the construction permits to be
made available in Auction No. 70.
25. For Auction No. 70, the proposed minimum opening bids were
determined by taking into account various factors related to the
efficiency of the auction and the potential value of the spectrum,
including the type of service and class of facility offered, market
size, population covered by the proposed FM broadcast facility,
industry cash flow data and recent broadcast transactions. The specific
minimum opening bid for each construction permit available in Auction
No. 70 is set forth in Attachment A of the Auction No. 70 Comment
Public Notice. The Bureaus seek comment on this proposal.
26. If commenters believe that these minimum opening bid amounts
will result in unsold construction permits, or are not reasonable
amounts, they should explain why this is so, and comment on the
desirability of an alternative approach. Commenters are advised to
support their claims with valuation analyses and suggested reserve
prices or minimum opening bid amount levels or formulas. In
establishing the minimum opening bid amounts, the Bureaus particularly
seek comment on such factors as the potential value of the spectrum
being auctioned, including the type of service and class of facility
offered, market size, population covered by the proposed FM broadcast
facility and other relevant factors that could reasonably have an
impact on valuation of the broadcast spectrum. The Bureaus also seek
comment on whether, consistent with section 309(j), the public interest
would be served by having no minimum opening bid amount or reserve
price.
v. Bid Amounts
27. The Bureaus propose that, in each round, eligible bidders be
able to place bids on a given construction permit in any of nine
different amounts, if a bidder has sufficient eligibility to place a
bid on that construction permit. Under this proposal, the FCC Auction
System interface will list the nine acceptable bid amounts for each
construction permit.
28. The first of the nine acceptable bid amounts is called the
minimum acceptable bid amount. The minimum acceptable bid amount for a
construction permit will be equal to its minimum opening bid amount
until there is a provisionally winning bid for the construction permit.
After there is a provisionally winning bid for a construction permit,
the minimum acceptable bid amount will be calculated by multiplying the
provisionally winning bid amount times one plus the minimum acceptable
bid percentage. If, for example, the minimum acceptable bid percentage
is 10 percent, the minimum acceptable bid amount will equal
(provisionally winning bid amount) * (1.10), rounded.
29. The eight additional bid amounts are calculated using the
minimum acceptable bid amount and a bid increment percentage, which
need not be the same as the percentage used to calculate the minimum
acceptable bid amount. The first additional acceptable bid amount
equals the minimum acceptable bid amount times one plus the bid
increment percentage, rounded. If, for example, the bid increment
percentage is 10 percent, the calculation is (minimum acceptable bid
amount) * (1 + 0.10), rounded, or (minimum acceptable bid amount) *
1.10, rounded; the second additional acceptable bid amount equals the
minimum acceptable bid amount times one plus two times the bid
increment percentage, rounded, or (minimum acceptable bid amount) *
1.20, rounded; the third additional acceptable bid amount equals the
minimum acceptable bid amount times one plus three times the bid
increment percentage, rounded, or (minimum acceptable bid amount) *
1.30, rounded; etc. The Bureaus will round the result using our
standard rounding procedures.
30. For Auction No. 70, the Bureaus propose to use a minimum
acceptable bid percentage of 10 percent. This means that the minimum
acceptable bid amount for a construction permit will be approximately
10 percent greater than the provisionally winning bid amount for the
construction permit. The Bureaus also propose to use a bid increment
percentage of 10 percent to calculate the eight additional acceptable
bid amounts.
31. The Bureaus retain the discretion to change the minimum
acceptable bid amounts, the minimum acceptable bid percentage, and the
bid increment percentage if they determine that circumstances so
dictate. The Bureaus will do so by announcement in the FCC Auction
System during the auction. The Bureaus seek comment on these proposals.
vi. Provisionally Winning Bids
32. Provisionally winning bids are bids that would become final
winning bids if the auction were to close in that given round. At the
end of a bidding round, a provisionally winning bid
[[Page 56981]]
amount for each construction permit will be determined based on the
highest bid amount received for the construction permit. In the event
of identical high bid amounts being submitted on a construction permit
in a given round (i.e., tied bids), the Bureaus will use a random
number generator to select a single provisionally winning bid from
among the tied bids. (Each bid is assigned a random number, and the
tied bid with the highest random number wins the tiebreaker.) The
remaining bidders, as well as the provisionally winning bidder, can
submit higher bids in subsequent rounds. However, if the auction were
to end with no other bids being placed, the winning bidder would be the
one that placed the selected provisionally winning bid. If any bids are
received on the construction permit in a subsequent round, the
provisionally winning bid again will be determined by the highest bid
amount received for the construction permit.
33. A provisionally winning bid will remain the provisionally
winning bid until there is a higher bid on the same construction permit
at the close of a subsequent round. Bidders are reminded that
provisionally winning bids count toward activity for purposes of the
activity rule.
vii. Bid Removal and Bid Withdrawal
34. For Auction No. 70, the Bureaus propose the following bid
removal procedures. Before the close of a bidding round, a bidder has
the option of removing any bid placed in that round. By removing
selected bids in the FCC Auction System, a bidder may effectively
unsubmit any bid placed within that round. In contrast to the bid
withdrawal provisions described below, a bidder removing a bid placed
in the same round is not subject to any penalties. Once a round closes,
a bidder may no longer remove a bid.
35. The Bureaus also seek comment on bid withdrawal procedures to
be used for Auction No. 70. Where permitted, bid withdrawals provide a
bidder with the option of withdrawing bids placed in prior rounds that
have become provisionally winning bids. A bidder that withdraws any of
its provisionally winning bids is subject to the bid withdrawal payment
provisions of the Commission rules.
36. For Auction No. 70, the Bureaus propose to prohibit bidders
from withdrawing any bids after the round in which bids were placed has
closed. The Bureaus proposal is made in recognition of the site-
specific nature and wide geographic dispersion of the permits available
in this auction, which suggests that FM broadcast interests may have
fewer incentives to aggregate permits through the auction process (as
compared with bidders in many auctions of wireless licenses). The
Bureaus also remain mindful that withdrawals, particularly those made
in late stages of an auction, could result in delays in licensing new
FM stations and attendant delays in the offering of new broadcast
service to the public.
37. As an alternative, the Bureaus seek comment on whether to
permit each bidder to withdraw provisionally winning bids in no more
than one round during the course of the auction. To permit a bidder to
withdraw bids in more than one round may encourage insincere bidding or
the use of withdrawals for anti-competitive purposes. The round in
which a withdrawal may be used would be at the bidder's discretion; bid
withdrawal otherwise must be in accordance with the Commission's rules.
Should this approach be adopted, there would no limit on the number of
provisionally winning bids that may be withdrawn in the round in which
a withdrawal is used. Any withdrawal would remain subject to the bid
withdrawal payment provisions specified in the Commission's rules.
38. If permitted, a bidder would have the option to withdraw its
provisionally winning bids using the ``withdraw bids'' function in the
FCC Auction System. A bidder that withdraws its provisionally winning
bid(s) would be subject to the bid withdrawal payment provisions of the
Commission rules.
C. Due Diligence
39. Potential bidders are solely responsible for investigating and
evaluating all technical and market place factors that may have a
bearing on the value of the broadcast facilities in this auction. The
FCC makes no representations or warranties about the use of this
spectrum for particular services. Applicants should be aware that an
FCC auction represents an opportunity to become an FCC permittee in the
broadcast service, subject to certain conditions and regulations. An
FCC auction does not constitute an endorsement by the FCC of any
particular service, technology, or product, nor does an FCC
construction permit or license constitute a guarantee of business
success. Applicants should perform their individual due diligence
before proceeding as they would with any new business venture. In
particular, potential bidders are strongly encouraged to review all
underlying Commission orders, such as the specific Report and Order
amending the FM Table of Allotments and allotting the FM channel(s) on
which they plan to bid. Reports and Orders adopted in FM allotment
rulemaking proceedings often include anomalies such as site
restrictions or expense reimbursement requirements. Additionally,
potential bidders should perform technical analyses sufficient to
assure them that, should they prevail in competitive bidding for a
given FM construction permit, they will be able to build and operate
facilities that will fully comply with the Commission's technical and
legal requirements. Applicants are strongly encouraged to inspect any
prospective transmitter sites located in, or near, the service area for
which they plan to bid, and also to familiarize themselves with the
Commission's rules regarding the National Environmental Policy Act.
40. Potential bidders are strongly encouraged to conduct their own
research prior to Auction No. 70 in order to determine the existence of
pending proceedings, including pending rulemaking proceedings that
might affect their decisions regarding participation in the auction.
Participants in Auction No. 70 are strongly encouraged to continue such
research during the auction.
D. Post-Auction Procedures
i. Establishing the Interim Withdrawal Payment Percentage
41. As noted above, the Bureaus propose not to permit bids to be
withdrawn in Auction No. 70. However, in the event that Bureaus choose
to permit bidders to withdraw bids in Auction No. 70, we seek comment
on the appropriate percentage of a withdrawn bid that should be
assessed as an interim withdrawal payment, which is an amount that is
assessed in the event that a final withdrawal payment cannot be
determined at the close of the auction. In general, the Commission's
rules provide that a bidder that withdraws a bid during an auction is
subject to a withdrawal payment equal to the difference between the
amount of the withdrawn bid and the amount of the winning bid in the
same or subsequent auction(s). However, if a permit for which there has
been a withdrawn bid is neither subject to a subsequent higher bid nor
won in the same auction, the final withdrawal payment cannot be
calculated until a corresponding permit is subject to a higher bid or
won in a subsequent auction. When that final payment cannot yet be
calculated, the bidder responsible for the withdrawn bid is assessed an
interim bid withdrawal payment, which will be applied toward
[[Page 56982]]
any final bid withdrawal payment that is ultimately assessed. The
Commission's recently adopted rules provide that in advance of the
auction, the Commission shall establish the percentage of the withdrawn
bid to be assessed as an interim bid withdrawal payment between three
percent and twenty percent.
42. When it adopted the new rule, the Commission indicated that the
level of the interim withdrawal payment in a particular auction will be
based on the nature of the service and the inventory of the
authorizations being offered. The Commission noted that it may impose a
higher interim withdrawal payment percentage to deter the anti-
competitive use of withdrawals when, for example, bidders likely will
not need to aggregate permits offered, such as when few permits are
offered that are not on adjacent frequencies or in adjacent areas, or
there are few synergies to be captured by combining permits.
43. The Commission has observed that it may be appropriate to
impose a higher interim withdrawal payment percentage to deter the
anti-competitive use of withdrawals in auctions where it is much less
likely that bidders will need to assemble complete sets of licenses.
With respect to the permits being offered in Auction No. 70, the
Bureaus have little evidence that bidders have a significant need to
use withdrawals to avoid incomplete combinations of licenses. Citing
experience with FM Auction No. 37, among others, the Commission has
``observed a disproportionate number of withdrawals late in our
auctions, indicating that some bidders have been placing and then
withdrawing bids primarily to discourage potential or existing market
competitors from seeking to acquire licenses.'' Consistent with its
interest in deterring strategic withdrawals, the Bureaus propose to
establish the percentage of the withdrawn bid to be assessed as an
interim bid withdrawal payment at the maximum twenty percent permitted
under the Commission's rules. The Bureaus seek comment on this
proposal.
ii. Establishing the Additional Default Payment Percentage
44. Any winning bidder that defaults or is disqualified after the
close of an auction (i.e., fails to remit the required down payment
within the prescribed period of time, fails to submit a timely long-
form application, fails to make full payment, or is otherwise
disqualified) is liable for a default payment under 47 CFR
1.2104(g)(2). This payment consists of a deficiency payment, equal to
the difference between the amount of the bidder's bid and the amount of
the winning bid the next time a construction permit 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. Until recently, this additional payment for most
auctions has been set at three percent of the defaulter's bid or of the
subsequent winning bid, whichever is less.
45. On January 24, 2006, the Commission released the Commercial
Spectrum Enhancement Act Report and Order (CSEA/Part 1 Report and
Order), 71 FR 6214, February 7, 2006, in which it modified Sec.
1.2104(g)(2) by increasing the three percent limit on the additional
default payment for non-combinatorial auctions to twenty percent. Under
the modified rule, the Commission will, in advance of each auction,
establish an additional default payment for that auction of three
percent up to a maximum of twenty percent. The level of this payment in
each case will be based on the nature of the service and the inventory
of the construction permits being offered.
46. For Auction No. 70, the Bureaus propose to establish additional
default payment of twenty percent. As noted in the CSEA/Part 1 Report
and Order, defaults weaken the integrity of the auctions process and
may impede the deployment of service to the public, and an additional
default payment of more than the previous three percent will be more
effective in deterring defaults. In light of its proposal for the
interim bid withdrawal payment amount as discussed above, the Bureaus
are concerned that setting an additional default payment of less than
the twenty percent maximum amount may encourage post-auction defaults,
which further undermine the integrity of the auction process. In light
of these considerations for Auction No. 70, the Bureaus propose an
additional default payment of twenty percent of the relevant bid. The
Bureaus seek comment on this proposal.
III. Conclusion
47. This proceeding has been designated as a permit-but-disclose
proceeding in accordance with the Commission's ex parte rules. Persons
making oral ex parte presentations are reminded that memoranda
summarizing the presentations must contain summaries of the substance
of the presentations and not merely a listing of the subjects
discussed. More than a one or two sentence description of the views and
arguments presented is generally required. Other rules pertaining to
oral and written ex parte presentations in permit-but-disclose
proceedings are set forth in 47 CFR 1.1206(b).
Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. 06-8366 Filed 9-27-06; 8:45 am]
BILLING CODE 6712-01-P