[Federal Register: November 2, 2007 (Volume 72, Number 212)]
[Notices]
[Page 62359-62392]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no07-102]
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Part IV
Federal Communications Commission
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Auction of 700 MHz Band Licenses Scheduled for January 24, 2008; Notice
and Filing Requirements, Minimum Opening Bids, Reserved Prices, Upfront
Payments and Other Procedures for Auctions 73 and 76; Notice
[[Page 62360]]
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FEDERAL COMMUNICATIONS COMMISSION
[AU Docket No. 07-157; Report No. AUC-07-73-B (Auctions 73 and 76); DA
07-4171]
Auction of 700 MHz Band Licenses Scheduled for January 24, 2008;
Notice and Filing Requirements, Minimum Opening Bids, Reserved Prices,
Upfront Payments and Other Procedures for Auctions 73 and 76
AGENCY: Federal Communications Commission.
ACTION: Notice.
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SUMMARY: This document announces the procedures and minimum opening
bids for the upcoming auction of certain 700 MHz Band Licenses
(Auctions 73 and 76). This document is intended to familiarize
prospective bidders with the procedures and minimum opening bids for
these auctions.
DATES: Applications to participate in 700 MHz Band Licenses Auctions 73
and 76 must be filed before 6 p.m. ET on December 3, 2007. Bidding for
Auction No. 73 is scheduled to begin on January 24, 2008. Contingent
subsequent bidding in Auction 76, if necessary, will begin on a date to
be announced after Auction 73 has closed.
FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau,
Auctions Spectrum and Access Division: For legal questions: Scott
Mackoul, Stephen Johnson or Howard Davenport at (202) 418-0660. For
general auction questions: Lisa Stover at (717) 338-2868. Mobility
Division: For service rule questions: Erin McGraft (legal), Keith
Harper (engineering) and Denise Walter (licensing) at (202) 418-0620.
To request materials in accessible formats (Braille, large print,
electronic files or audio format) for people with disabilities, send an
e-mail to fcc504@fcc.gov or call the Consumer and Governmental Affairs
Bureau at (202) 418-0530 or (202) 418-0432 (TTY).
SUPPLEMENTARY INFORMATION: This is a summary of the Auctions 73 and 76
Procedures Public Notice released on October 5, 2007. The complete text
of the Auctions 73 and 76 Procedures Public Notice, including
attachments, as well as related Commission documents are available for
public inspection and copying from 8 a.m. to 4:30 p.m. Eastern Time
(ET) Monday through Thursday or from 8 a.m. to 11:30 a.m. on Friday at
the FCC Reference Information Center, Portals II, 445 12th Street, SW.,
Room CY-A257, Washington, DC 20554. On October 19, 2007, a Public
Notice was released announcing a change in the date of the bidders'
seminar for Auctions 73 and 76 from November 19, 2007 to November 20,
2007. The Auctions 73 and 76 Procedures Public Notice and related
Commission documents may also be purchased from the Commission's
duplicating contractor, Best Copy and Printing, Inc. (BCPI), Portals
II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554,
telephone 202-488-5300, facsimile 202-488-5563, or Web site: http://www.BCPIWEB.com.
When ordering documents from BCPI, please provide the
appropriate FCC document number, for example, DA 07-4171 for the
Auctions 73 and 76 Procedures Public Notice. The Auctions 73 and 76
Procedures Public Notice and related documents are also available on
the Internet at the Commission's Web site: http://wireless.fcc.gov/auctions/73/
.
I. General Information
A. Introduction
1. The Wireless Telecommunications Bureau (the Bureau) announces
the procedures and minimum opening bid amounts for the upcoming auction
of licenses for services in the 698-806 MHz band (700 MHz Band)
scheduled to begin on January 24, 2008. This auction is designated as
Auction 73. Auction 73 will offer 700 MHz Band licenses for initial
bidding and the 700 MHz Band licenses may be offered in contingent
subsequent bidding. In the event that any licenses are offered in
contingent subsequent bidding, that event will be designated as Auction
76. On August 17, 2007, in accordance with Section 309(j)(3) of the
Communications Act of 1934, as amended, the Bureau released a public
notice seeking comment on competitive bidding procedures for both the
initial bidding and the contingent subsequent bidding for 700 MHz Band
licenses. Interested parties submitted 12 comments and 8 reply comments
in response to the 700 MHz Auction Public Notice, 72 FR 48272, August
23, 2007, as well as a number of ex parte communications.
2. In the 700 MHz Auction Public Notice, the Bureau proposed to
include all available, commercial 700 MHz Band licenses (1,099
licenses) for initial bidding in Auction 73 using the Commission's
standard simultaneous multiple-round (SMR) auction format for the A, B,
D, and E block licenses and an auction design with hierarchical package
bidding (HPB) for the C Block licenses. The 700 MHz Auction Public
Notice also proposed procedures for the contingent subsequent bidding,
now designated Auction 76, on licenses for spectrum associated with any
initially offered licenses for which the Auction 73 results do not
satisfy applicable reserve prices. Based on the record and after
considering comments provided in response to the 700 MHz Auction Public
Notice, the Bureau hereby announces the final procedures for Auctions
73 and Auction 76.
3. The Auctions 73 and 76 Procedures Public Notice provides, among
other things, procedures for the following: (1) Anonymous bidding, to
enhance competition by safeguarding against potential anti-competitive
auction strategies; (2) package bidding, to enable bidders trying to
combine multiple C Block licenses to place bids on packages of those
licenses; (3) block-specific aggregate reserve prices, to help assure
that the public recovers a portion of the value of the spectrum
resource; and (4) prompt subsequent bidding in Auction 76, to offer
licenses for relevant block(s) in the event Auction 73 results do not
satisfy applicable reserve prices.
4. Anonymous Bidding. In the 700 MHz Second Report and Order, 65 FR
17594, April, 4, 2000, the Commission found that the public interest
would be served if the auction for new 700 MHz Band licenses is
conducted using anonymous (or limited information) bidding procedures,
regardless of any pre-auction measurement of likely auction
competition. Such information procedures are intended to reduce the
potential for anti-competitive bidding behavior, including bidding
activity that aims to prevent the entry of new competitors. Having
proposed and sought comment on more detailed procedures for employing
anonymous bidding for the upcoming auction, the Bureau now announces
the anonymous bidding procedures.
5. Package Bidding for C Block Licenses. The Commission also
determined in the 700 MHz Second Report and Order that providing for
package bidding for C Block licenses would serve the public interest.
The Commission found that package bidding for these licenses should
facilitate the entry of entities seeking to create a nationwide
footprint and whose business plans require the economies of scale that
only can be obtained with nationwide operation. At Commission
direction, the Bureau previously proposed and sought comment on
detailed procedures for implementing package bidding for the C Block
licenses and not for licenses in the other blocks to be auctioned. In
the Auctions 73 and 76 Procedures Public Notice, the Bureau detailed
the process for package bidding for the C Block licenses.
6. Block-Specific Aggregate Reserve Prices. The Commission also
decided to
[[Page 62361]]
provide for aggregate reserve prices for licenses authorizing the use
of each block of the commercial 700 MHz Band yet to be licensed. The
Commission concluded that, consistent with its statutory mandate,
disclosed reserve prices would promote the recovery of a portion of the
value of the public spectrum resource. The Commission directed the
Bureau to adopt aggregate reserve prices reflecting the potential
market value of this spectrum based on a variety of factors including,
but not limited to, the characteristics of this band and the auction
prices of other recently auctioned licenses, such as licenses for
Advanced Wireless Services in the 1710-1755 MHz and 2110-2155 MHz bands
(AWS-1). Accordingly, the Bureau proposed and sought comment on the
following block-specific aggregate reserve prices: Block A, $1.807380
billion; Block B, $1.374426 billion; Block C, $4.637854 billion; Block
D, $1.330000 billion; Block E, $0.903690 billion. Further, the Bureau
proposed that if the sum of the provisionally winning bids for the
licenses in a block does not satisfy the relevant aggregate reserve
price, none of the relevant licenses for the particular block will be
assigned based on the auction results. In the Auctions 73 and 76
Procedures Public Notice, the Bureau adopted this proposal.
7. Auction 76 Overview. The Commission decided that, if licenses
initially offered for the A, B, C, or E Blocks are not assigned because
the auction results do not satisfy the applicable aggregate reserve
price(s) for those licenses, the Commission promptly will offer
alternative licenses for those blocks. More specifically, the
Commission will offer licenses for the A, B, and E Blocks subject to
alternative performance requirements. With respect to the C Block, the
Commission will offer alternative licenses without the open platform
conditions and based on different geographic areas and spectrum
bandwidth. If the D Block license is not assigned because the auction
results do not satisfy the D Block reserve price, the Commission may
re-offer that license subject to the same rules or reconsider the
applicable rules. For administrative purposes, the Bureau will
designate as Auction 76 any subsequent bidding for alternative licenses
for the A, B, C or E Blocks or for the D Block license that occurs
because Auction 73 results for licenses initially offered for the
relevant blocks do not satisfy the applicable aggregate reserve
price(s). In the Auctions 73 and 76 Procedures Public Notice, the
Bureau announced detailed procedures for conducting Auction 76, if
necessary.
8. The Commission will conduct bidding in Auction 73 and any
contingent subsequent bidding in Auction 76 for 700 MHz Band licenses
as a single auction to the extent possible, given the strong public
interest in promptly assigning all 700 MHz Band licenses for recovered
analog spectrum and the related nature of the licenses being offered in
Auctions 73 and 76. Thus, pursuant to the 700 MHz Second Report and
Order, the Bureau will permit only qualified bidders in the initial
auction to participate in the contingent subsequent auction. To enable
a prompt start to Auction 76 after Auction 73, applicants must select
any licenses on which they may bid in Auction 76 by the deadline for
filing their Auction 73 application. Applicants must select those
licenses by submitting a separate abbreviated short-form application to
participate in Auction 76. The abbreviated Auction 76 application must
be filed together with the applicant's standard application for Auction
73, following procedures described in the Auctions 73 and 76 Procedures
Public Notice. In the event that Auction 76 takes place, bidder
identity and other information on the applicant's completed Auction 73
short-form application will be combined with the licenses selected in
the abbreviated Auction 76 application to create the applicant's
Auction 76 application. This process will minimize the time period
between auctions by eliminating any need for applicants to take time
following Auction 73 to file new applications or select additional
licenses, and for the Commission to review newly-filed short-form
applications. Applicants in Auction 76, however, will have an
opportunity after Auction 73 to obtain additional eligibility for any
licenses offered in Auction 76 by supplementing their upfront monies on
deposit with the Commission pursuant to the procedures as provided for
in the 700 MHz Second Report and Order.
9. The Bureau also will use the Auction 73 design in Auction 76,
including an aggregate reserve price for each block that matches the
applicable initial reserve price. In the event that alternative
licenses for the C Block are offered for Blocks C1 and C2, the Bureau
will conduct package bidding for the C2 Block only, using the pre-
determined packages. Alternative licenses for Blocks C1 and C2 will be
subject to reserve prices. There will be a joint aggregate reserve
price equal to the initial auction C Block aggregate reserve price, and
separate aggregate reserve prices for the C1 and C2 Blocks that add to
the joint aggregate reserve price. Licenses in both blocks will be
assigned if the joint aggregate reserve price is met. If the joint
aggregate reserve price is not met but one of the block-specific
reserve prices is met, licenses in the block for which the reserve
price is met will be assigned. Licenses in the other block will not be
assigned. This will assure the aggregate reserve price in the initial
auction continues to apply while maximizing the opportunity for
licenses for either Block C1 or C2 to be assigned.
i. Background of Proceeding
10. The Commission is offering the licenses in Auction 73
consistent with the requirements of the Digital Television Transition
and Public Safety Act of 2005 (DTV Act). Pursuant to the DTV Act the
Commission must conduct the auction of licenses for recovered analog
spectrum by commencing the bidding not later than January 28, 2008. A
number of incumbent broadcasters are licensed and operating on these
frequencies (TV Channels 52-53, 56-58, 60-62, and 65-67) and adjacent
channels.
ii. Licenses To Be Offered in Auction 73
11. Auction 73 will offer a total of 1,099 licenses: 176 Economic
Area (EA) licenses in each of the A and E Blocks, 734 Cellular Market
Area (CMA) licenses in the B Block, 12 Regional Economic Area Grouping
(REAG) licenses in the C Block, and one nationwide license, to be used
as part of the 700 MHz Public/Private Partnership, in the D Block.
B. Rules and Disclaimers
i. Relevant Authority
12. Prospective applicants must familiarize themselves thoroughly
with the Commission's general competitive bidding rules set forth in
Title 47, part 1, of the CFR, including recent amendments and
clarifications; rules relating to the 700 MHz Band contained in Title
47, part 27, of the CFR; rules relating to the public/private
partnership applicable to the D Block contained in Title 47, part 90,
of the CFR; and rules relating to applications, environment, practice
and procedure contained in Title 47, part 1, of the CFR. Prospective
applicants must also be thoroughly familiar with the procedures, terms
and conditions (terms) contained in the Auctions 73 and 76 Procedures
Public Notice and the Commission's decisions in proceedings regarding
competitive bidding procedures, application requirements, and
obligations of
[[Page 62362]]
Commission licensees. For example, among other Commission orders,
prospective bidders should be familiar with the 700 MHz First Report
and Order, 65 FR 3139, January 20, 2000, and the 700 MHz Second Report
and Order.
13. The terms contained in the Commission's rules, relevant orders,
and public notices are not negotiable. The Commission may amend or
supplement the information contained in its public notices at any time,
and will issue public notices to convey any new or supplemental
information to applicants. It is the responsibility of all applicants
to remain current with all Commission rules and with all public notices
pertaining to Auctions 73 and 76.
ii. Prohibition of Collusion; Compliance With Antitrust Laws
14. To ensure the competitiveness of the auction process, Sec.
1.2105(c) of the Commission's rules prohibits auction applicants for
licenses in any of the same geographic license areas from communicating
with each other about bids, bidding strategies, or settlements 9 unless
such applicants have identified each other on their short-form
applications (FCC Forms 175) as parties with whom they have entered
into agreements pursuant to Sec. 1.2105(a)(2)(viii).
a. Entities Subject to Anti-Collusion Rule
15. The anti-collusion rule will apply to any applicants that
submit short-form applications for Auctions 73 or 76 and select
licenses in the same or overlapping CMAs, EAs, REAGs or the nationwide
license in the D Block. For example, assume that one applicant applies
for a REAG license and a second applicant applies for an EA license
covering any area within that REAG. The two entities will have applied
for licenses covering the same geographic areas and would be precluded
from communicating with each other under the rule. The rule also
applies where one applicant has selected a license in Auction 73 and
another applicant selects a license in Auction 76 that covers any of
the same geographic area. In addition, the rule precludes applicants
that apply to bid for the nationwide license in the D Block, or all the
licenses in any other block, from communicating with all other
applicants. Thus, applicants that have applied for licenses covering
the same markets (unless they have identified each other on their FCC
Form 175 applications as parties with whom they have entered into
agreements under Sec. 1.2105(a)(2)(viii)) must affirmatively avoid all
communications with or disclosures to each other that affect or have
the potential to affect bids or bidding strategy, which may include
communications regarding the post-auction market structure. This
prohibition applies to all applicants regardless of whether such
applicants become qualified bidders or actually bid. Information
concerning applicants' license selections will not be available to the
public. Therefore, the Commission will inform each applicant by letter
of the identity of each of the other applicants that has applied for
licenses covering any of the same geographic areas as the licenses that
it has selected in its short-form application.
16. For purposes of this prohibition, Sec. 1.2105(c)(7)(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 percent or more of the entity, or outstanding stock, or
outstanding voting stock of the entity submitting a short-form
application.
17. Entities and parties subject to the anti-collusion rule should
take special care in circumstances where their employees may receive
information directly or indirectly from a competing applicant relating
to any competing applicant's bids or bidding strategies. In situations
where the anti-collusion rule views the same person as the applicant
with respect to two different entities filing competing applications,
under Bureau precedent the bids and bidding strategies of one applicant
are necessarily conveyed to the other and, absent a disclosed bidding
agreement, an apparent violation of the anti-collusion rule occurs. The
Bureau has not addressed situations where employees who do not qualify
as the applicant, (e.g., are not officers or directors) receive
information regarding a competing applicant's bids or bidding
strategies and whether that information might be deemed to necessarily
convey to the applicant. The Bureau notes that the exception to the
anti-collusion rule providing that non-controlling interest holders may
have interests in more than one competing bidder without violating the
anti-collusion rule, provided specified conditions are met (including a
certification that no prohibited communications have occurred or will
occur), does not extend to controlling interest holders.
b. Prohibition Applies Until Down Payment Deadline
18. Section 1.2105(c)'s anti-collusion prohibition begins at the
short-form application filing deadline and ends at the down payment
deadline after the auction. In recognition of the related nature of the
initial auction and any contingent auction of alternative licenses, the
Commission concluded in the 700 MHz Second Report and Order that the
provisions of the anti-collusion rule would continue to apply until the
down payment deadline for the subsequent auction.
19. Some commenters argue that the Bureau should allow applicants
to opt-out from the anti-collusion prohibition in the event Auction 76
is conducted. A commenter proposed that an applicant that has no
intention to bid in the subsequent auction could inform the Commission
of its intent in writing with a certification that its decision is not
based on any discussion with other competing bidders of auction
strategy or post-auction market structure. As one commenter
acknowledges, changing the application of the rule in this way is
beyond the Bureau's delegated authority and beyond the scope of this
non-rulemaking proceeding and would require action by the Commission to
reconsider its determination in the 700 MHz Second Report and Order.
Thus, the Bureau is unable to adopt the proposed opt-out certification
procedure. If it is necessary to conduct Auction 76, the provisions of
the anti-collusion rule will apply to all applicants until the down
payment deadline, which will occur after the close of bidding on
licenses offered in Auction 76.
c. Prohibited Communications
20. Prospective applicants for upcoming Auctions 73 and 76 and
other parties that may be engaged in discussion with such prospective
applicants are cautioned of the need to comply with the Commission's
anti-collusion rule, Sec. 1.2105(c). The anti-collusion rule prohibits
not only a communication about an applicant's own bids or bidding
strategy, but also a communication of another applicant's bids or
bidding strategy. While the anti-collusion rule provisions do not
prohibit business negotiations among auction applicants, applicants
must remain vigilant so as not to communicate directly or indirectly
information that affects, or could affect, bids or bidding strategy, or
the negotiation of settlement agreements.
21. The Commission remains vigilant about prohibited communications
[[Page 62363]]
taking place in other situations. For example, the Commission has
warned that prohibited communications concerning bids and bidding
strategies may include communications regarding capital calls or
requests for additional funds in support of bids or bidding strategies
to the extent such communications convey information concerning the
bids and bidding strategies directly or indirectly.
22. Applicants are hereby placed on notice that public disclosure
of information relating to bidder interests and bidder identities that
is confidential in both Auctions 73 and 76 at the time of disclosure
may violate the anti-collusion rule. This is so even though similar
types of information were revealed prior to and during other Commission
auctions subject to different information procedures. Bidders should
use caution in their dealings with other parties, such as members of
the press, financial analysts, or others who might become a conduit for
the communication of prohibited bidding information. For example, where
limited information disclosure procedures are in place, as for Auctions
73 and 76, a qualified bidder's statement to the press that it has lost
bidding eligibility and stopped bidding in the auction could give rise
to a finding of an anti-collusion rule violation. Similarly, an
applicant's public statement of intent not to participate in Auction 76
bidding could also violate the rule.
23. Applicants for licenses for any of the same geographic license
areas must not communicate directly or indirectly about bids or bidding
strategy. Accordingly, such applicants are encouraged not to use the
same individual as an authorized bidder. A violation of the anti-
collusion rule could occur if an individual acts as the authorized
bidder for two or more competing applicants, and conveys information
concerning the substance of bids or bidding strategies between such
applicants. Also, if the authorized bidders are different individuals
employed by the same organization (e.g., law firm or engineering firm
or consulting firm), a violation similarly could occur. In such a case,
at a minimum, applicants should certify on their applications that
precautionary steps have been taken to prevent communication between
authorized bidders and that applicants and their bidding agents will
comply with the anti-collusion rule. A violation of the anti-collusion
rule could occur in other contexts, such as an individual serving as an
officer for two or more applicants. Moreover, the Commission has found
a violation of the anti-collusion rule where a bidder used the
Commission's bidding system to disclose its bidding strategy in a
manner that explicitly invited other auction participants to cooperate
and collaborate in specific markets, and has placed auction
participants on notice that the use of its bidding system to disclose
market information to competitors will not be tolerated and will
subject bidders to sanctions.
24. In addition, when completing short-form applications,
applicants should avoid any statements or disclosures that may violate
the Commission's anti-collusion rule, particularly in light of the
Commission's procedures for limited information. Specifically,
applicants should avoid including any information in their short-form
applications that might convey information regarding their license
selection, such as using applicant names that refer to licenses being
offered, referring to certain licenses or markets in describing bidding
agreements, or including any information in attachments that may
otherwise disclose applicants' license selections.
d. Disclosure of Bidding Agreements and Arrangements
25. The Commission's rules do not prohibit applicants from entering
into otherwise lawful bidding agreements before filing their short-form
applications, as long as they disclose the existence of the
agreement(s) in their short-form application. If parties agree in
principle on all material terms prior to the short-form filing
deadline, each party to the agreement must identify the other party or
parties to the agreement on its short-form application under Sec.
1.2105(c), even if the agreement has not been reduced to writing. If
the parties have not agreed in principle by the short-form filing
deadline, they should not include the names of parties to discussions
on their applications, and they may not continue negotiations,
discussions or communications with any other applicants for licenses
covering any of the same or overlapping geographic areas after the
short-form filing deadline.
e. Anti-Collusion Certification
26. By electronically submitting a short-form application following
the electronic filing procedures set forth in Attachments D and E to
the Auctions 73 and 76 Procedures Public Notice, each applicant
certifies its compliance with Sec. 1.2105(c). However, the Bureau
cautions that merely filing a certifying statement as part of an
application will not outweigh specific evidence that collusive behavior
has occurred, nor will it preclude the initiation of an investigation
when warranted. The Commission has stated that it intends to scrutinize
carefully any instances in which bidding patterns suggest that
collusion may be occurring. Any applicant found to have violated the
anti-collusion rule may be subject to sanctions.
f. Antitrust Laws
27. Applicants are also reminded that, regardless of compliance
with the Commission's rules, they remain subject to the antitrust laws,
which are designed to prevent anticompetitive behavior in the
marketplace. Compliance with the disclosure requirements of the
Commission's anti-collusion rule will not insulate a party from
enforcement of the antitrust laws. For instance, a violation of the
antitrust laws could arise out of actions taking place well before any
party submits a short-form application. The Commission has cited a
number of examples of potentially anticompetitive actions that would be
prohibited under antitrust laws: For example, actual or potential
competitors may not agree to divide territories horizontally in order
to minimize competition, regardless of whether they split a market in
which they both do business, or whether they merely reserve one market
for one and another for the other. Similarly, the Bureau has long
reminded potential applicants and others that even where the applicant
discloses parties with whom it has reached an agreement on the short-
form application, thereby permitting discussions with those parties,
the applicant is nevertheless subject to existing antitrust laws. To
the extent the Commission becomes aware of specific allegations that
suggest that violations of the federal antitrust laws may have
occurred, the Commission may refer such allegations to the United
States Department of Justice for investigation. If an applicant is
found to have violated the antitrust laws or the Commission's rules in
connection with its participation in the competitive bidding process,
it may be subject to forfeiture of its upfront payment, down payment,
or full bid amount and may be prohibited from participating in future
auctions, among other sanctions.
28. One commenter urges the Commission to adopt an auction rule
that states that a bidder cannot release any bidding information to the
public during the course of the auction, and provide notice that all
parties remain subject to the antitrust laws. As another commenter
points out, however, the
[[Page 62364]]
Commission has consistently provided such guidance in prior auctions.
The Bureau does so again here: All parties remain subject to the
antitrust laws.
g. Duty to Report Prohibited Communications
29. If an applicant makes or receives a communication that appears
to violate the anti-collusion rule, it must report such communication
in writing to the Commission immediately and in no case later than five
business days after the communication occurs. The Commission recently
clarified that each applicant's obligation to report any such
communication continues beyond the five-day period after the
communication is made, even if the report is not made within the five
day period.
30. Section 1.65 of the Commission's rules requires an applicant to
maintain the accuracy and completeness of information furnished in its
pending application and to notify the Commission within 30 days of any
substantial change that may be of decisional significance to that
application. Thus, Sec. 1.65 requires an auction applicant to notify
the Commission of any substantial change to the information or
certifications included in its pending short-form application.
Applicants are therefore required by Sec. 1.65 to report to the
Commission any communications they have made to or received from
another applicant after the short-form filing deadline that affect or
have the potential to affect bids or bidding strategy unless such
communications are made to or received from parties to agreements
identified under Sec. 1.2105(a)(2)(viii).
31. Applicants must be aware that failure to comply with the
Commission's rules can result in enforcement action.
h. Winning Bidders Must Disclose Terms of Agreements
32. Applicants that are winning bidders will be required to
disclose in their long-form applications the specific terms,
conditions, and parties involved in any bidding consortia, joint
ventures, partnerships, and other arrangements entered into relating to
the competitive bidding process.
i. Additional Information Concerning Anti-Collusion Rule
33. A summary listing of documents issued by the Commission and the
Bureau addressing the application of the anti-collusion rule may be
found in Attachment I of the Auctions 73 and 76 Procedures Public
Notice. These documents are available on the Commission's auction anti-
collusion Web page.
iii. Protection of Incumbent Operations
34. A number of incumbent broadcasters are licensed and operating
on these frequencies (TV Channels 52-53, 56-58, 60-62, and 65-67) and
adjacent channels. In accordance with the Commission's rules, 700 MHz
Band licensees must protect analog and digital TV incumbents from
harmful interference through February 17, 2009, the end of the DTV
transition period. After February 17, 2009, 700 MHz licensees must
continue to operate in accordance with the Commission's rules to reduce
the potential for interference to public reception of the signals of
DTV broadcast stations transmitting on DTV Channel 51. These
limitations may restrict the ability of such geographic area licensees
to use certain portions of the electromagnetic spectrum or provide
service to some parts of their geographic license areas.
35. In the 700 MHz Second Report and Order, the Commission
grandfathered an incumbent guard band B Block licensee in Major
Economic Areas (MEAs) 21 and 39 at 761-763 MHz and 791-793 MHz of the D
Block. The new D Block licensee will be authorized on a secondary basis
at 761-763 MHz and 791-793 MHz in these markets, and it may not cause
interference to the primary operations of the grandfathered licensee.
If the grandfathered licensee, or a successor or assignee, cancels
either of the grandfathered licenses, or if either license cancels
automatically, is terminated by the Commission, or expires, then the
licensed geographic area will revert to the D Block licensee
automatically.
a. International Coordination
36. Potential bidders seeking licenses for geographic areas that
are near the Canadian or Mexican borders are subject to international
agreements with Canada and Mexico. Pursuant to these agreements, the
U.S. must protect the signals of Canadian and Mexican television
broadcast stations located in the border area. Unless otherwise
modified by international treaty, licensees must not cause interference
to, and must accept harmful interference from, television broadcast
operations in Mexico and Canada. Further, until such time as existing
agreements are replaced or modified to reflect the new uses, licensees
in the band will be subject to existing agreements.
b. Quiet Zones
37. 700 MHz Band licensees must protect the radio quiet zones set
forth in the Commission's rules. Licensees are cautioned that they must
receive the appropriate approvals directly from the relevant quiet zone
entity prior to operating within the areas described in the
Commission's rules.
iv. Due Diligence
38. The Bureau cautions potential applicants formulating their
bidding strategies to investigate and consider the extent to which 700
MHz Band frequencies are occupied. Applicants and their investors
should also understand that Commission rules and requirements place
limitations on the ability of 700 MHz Band licensees to use this
spectrum. There are a number of incumbent broadcast television
licensees already licensed and operating in the band that will be
subject to the upcoming auction. Geographic area licensees operating on
the spectrum associated with Channels 52-53, 56-58, 60-62, and 65-67
must comply with the co-channel and the adjacent channel provision of
Sec. 27.60 of the Commission's rules. These limitations may restrict
the ability of such geographic area licensees to use certain portions
of the electromagnetic spectrum or provide service to certain areas in
their geographic license areas. For example, bidders should become
familiar with any petitions or other pleadings filed in response to the
700 MHz First Report and Order, 700 MHz Second Report and Order, and
any other orders that have been or may be released affecting the 700
MHz Band.
39. Potential bidders are reminded that they are solely responsible
for investigating and evaluating all technical and marketplace factors
that may have a bearing on the value of 700 MHz Band licenses. 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 licensee in the 700 MHz Band
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 license constitute a guarantee
of business success. Applicants should perform their individual due
diligence before proceeding as they would with any new business
venture.
40. Potential bidders are strongly encouraged to conduct their own
research prior to the beginning of
[[Page 62365]]
bidding in Auction 73 in order to determine the existence of any
pending legislative, administrative or judicial proceedings that might
affect their decision regarding participation in the auction, including
any subsequent auction (if necessary). Participants in Auctions 73 and
76 are strongly encouraged to continue such research throughout the
auction. In addition, potential bidders should perform technical
analyses sufficient to assure themselves that, should they prevail in
competitive bidding for a specific license, they will be able to build
and operate facilities that will fully comply with the Commission's
technical and legal requirements as well as other applicable Federal,
state, and local laws.
41. Applicants should also be aware that certain pending and future
proceedings, including rulemaking proceedings or petitions for
rulemaking, applications (including those for modification), requests
for special temporary authority, waiver requests, petitions to deny,
petitions for reconsideration, informal oppositions, and applications
for review, before the Commission may relate to particular applicants
or incumbent licensees or the licenses available in Auctions 73 and 76.
For example, bidders should note that petitions have been filed for
reconsideration of certain decisions made in the 700 MHz First Report
and Order and the 700 MHz Second Report and Order. In addition,
applicants should be aware that the Commission has sought comment on a
range of proposals concerning consumer education about the DTV
transition, including the possible imposition of reporting requirements
on winning bidders for 700 MHz band licenses. Of course, pending and
future judicial proceedings may relate to particular applicants or
incumbent licensees, or the licenses available in Auctions 73 and 76.
Prospective bidders are responsible for assessing the likelihood of the
various possible outcomes, and considering their potential impact on
spectrum licenses available in Auctions 73 and 76.
42. Applicants should perform due diligence to identify and
consider all proceedings that may affect the spectrum licenses being
auctioned and that could have an impact on the availability of spectrum
for Auction 73. In addition, although the Commission may continue to
act on various pending applications, informal objections, petitions,
and other requests for Commission relief, some of these matters may not
be resolved by the beginning of bidding in the auction.
43. Applicants are solely responsible for identifying associated
risks and for investigating and evaluating the degree to which such
matters may affect their ability to bid on, otherwise acquire, or make
use of licenses being offered.
44. Applicants may use the licensing database for the Media Bureau
on the Internet in order to determine which frequencies are already
licensed to incumbent licensees. Licensing records for the Media Bureau
are contained in the Media Bureau's Consolidated Data Base System
(CDBS) and may be researched on the Internet at http://www.fcc.gov/mb/cdbs.html.
Potential bidders should direct questions regarding the
search capabilities of CDBS to the Media Bureau help line at (202) 418-
2662, or via e-mail at cdbshelp@fcc.gov.
45. The Commission makes no representations or guarantees regarding
the accuracy or completeness of information in its databases or any
third party databases, including, for example, court docketing systems.
To the extent the Commission's databases may not include all
information deemed necessary or desirable by an applicant, applicants
may obtain or verify such information from independent sources or
assume the risk of any incompleteness or inaccuracy in said databases.
Furthermore, the Commission makes no representations or guarantees
regarding the accuracy or completeness of information that has been
provided by incumbent licensees and incorporated into its databases.
46. Potential applicants are strongly encouraged to physically
inspect any prospective sites located in, or near, the geographic area
for which they plan to bid, and also to familiarize themselves with the
environmental review obligations.
v. Use of Integrated Spectrum Auction System
47. The Commission will make available a browser-based bidding
system to allow bidders to participate in Auction 73 over the Internet
using the Commission's Integrated Spectrum Auction System (ISAS or FCC
Auction System). The Commission makes no warranty 21 whatsoever with
respect to the FCC Auction System. In no event shall the Commission, or
any of its officers, employees or agents, be liable for any damages
whatsoever (including, but not limited to, loss of business profits,
business interruption, loss of business information, or any other loss)
arising out of or relating to the existence, furnishing, functioning or
use of the FCC Auction System that is accessible to qualified bidders
in connection with Auctions 73 and 76. Moreover, no obligation or
liability will arise out of the Commission's technical, programming or
other advice or service provided in connection with the FCC Auction
System.
vi. Fraud Alert
48. As is the case with many business investment opportunities,
some unscrupulous entrepreneurs may attempt to use Auction 73 to
deceive and defraud unsuspecting investors. Information about deceptive
telemarketing investment schemes is available from the Commission as
well as the FTC and SEC. Complaints about specific deceptive
telemarketing investment schemes should be directed to the FTC, the
SEC, or the National Fraud Information Center at (800) 876-7060.
vii. Environmental Review Requirements
49. Licensees must comply with the Commission's rules regarding
implementation of the National Environmental Policy Act and other
federal environmental statutes. The construction of a wireless antenna
facility is a federal action and the licensee must comply with the
Commission's environmental rules for each such facility. The
Commission's environmental rules require, among other things, that the
licensee consult with expert agencies having environmental
responsibilities, including the U.S. Fish and Wildlife Service, the
State Historic Preservation Office, the Army Corps of Engineers and the
Federal Emergency Management Agency (through the local authority with
jurisdiction over floodplains). In assessing the effect of facilities
construction on historic properties, the licensee must follow the
provisions of the Nationwide Programmatic Agreement Regarding the
Section 106 National Historic Preservation Act Review Process. The
licensee must prepare environmental assessments for facilities that may
have a significant impact in or on wilderness areas, wildlife
preserves, threatened or endangered species or designated critical
habitats, historical or archaeological sites, Indian religious sites,
floodplains, and surface features. The licensee also must prepare
environmental assessments for facilities that include high intensity
white lights in residential neighborhoods or excessive radio frequency
emission.
[[Page 62366]]
C. Auction Specifics
i. Auction 73 Start Date
50. Bidding in Auction 73 will begin on Thursday, January 24, 2008.
51. This change of the previously-announced start date for Auction
73 will provide interested parties with additional time after this
announcement of competitive bidding procedures to develop business
plans, assess market conditions, and evaluate the availability of
equipment for new 700 MHz Band services.
52. Some commenters had sought a postponement of the previously-
announced start date until January 25 or 28, 2008. Pursuant to the
Congressional mandate, the Commission must conduct the auction of
licenses for recovered analog spectrum in the 700 MHz Band by
commencing the bidding not later than January 28, 2008. Starting the
auction on the statutory deadline for commencing the auction, or one
business day prior to the deadline would provide insufficient time to
address unexpected matters that might arise just prior to the start of
bidding.
53. The initial schedule for bidding will be announced by public
notice at least one week before the start of the auction. Moreover,
unless otherwise announced, bidding on all licenses and packages will
be conducted on each business day until bidding has stopped on all
licenses and packages.
ii. Auction Title
54. The auction in which the 700 MHz Band licenses will initially
be offered is designated as Auction 73--700 MHz Band. In the event that
any licenses, including alternative licenses, are offered in contingent
subsequent bidding, that will be designated as Auction 76.
iii. Bidding Methodology
55. The bidding methodology for Auction 73 will be simultaneous
multiple round (SMR) bidding for the A, B, D, and E Block licenses and
an auction design with hierarchical package bidding (HPB) for the C
Block licenses. The Commission will conduct Auctions 73 and 76 over the
Internet using the FCC Auction System, and telephonic bidding will be
available as well. Qualified bidders are permitted to bid
electronically via the Internet or by telephone. All telephone calls
are recorded.
iv. Pre-Auction Dates and Deadlines
56. The following dates and deadlines apply:
Auction Seminar........................ November 20, 2007.
Auction 73 and 76 Short-Form November 19, 2007; 12 noon ET.
Application (FCC Form 175) Filing
Window Opens.
Auction 73 and 76 Short-Form December 3, 2007; prior to 6 p.m. ET.
Application (FCC Form 175) Filing
Window Deadline.
Auction 73 Upfront Payments (via wire December 28, 2007; 6 p.m. ET.
transfer).
Mock Auction........................... January 18, 2008.
Auction 73 Begins...................... January 24, 2008.
57. If contingent subsequent bidding is necessary, the Bureau
intends to announce the start date for Auction 76 and the deadline for
additional upfront payments within five business days after the end of
bidding in Auction 73. The Bureau expects that Auction 76 would begin
within three weeks of that announcement.
v. Requirements for Participation in Auction 73 and 76
58. Those wishing to participate in Auction 73 and 76 (should any
subsequent auction become necessary), must: (1) For Auction 73, submit
a short-form application (FCC Form 175) electronically prior to 6 p.m.
ET, December 3, 2007, following the electronic filing procedures set
forth in Attachment D to the Auctions 73 and 76 Procedures Public
Notice; (2) for Auction 76, submit short-form applications (FCC Form
175) electronically prior to 6 p.m. ET, December 3, 2007, for each
auction following the electronic filing procedures set forth in
Attachments D and E to the Auctions 73 and 76 Procedures Public Notice.
Bidding in Auction 76 is open only to applicants that qualify to
participate in Auction 73, and that comply with all of the requirements
for participating in Auction 76, including submitting a separate short-
form application; (3) for Auction 73, submit a sufficient upfront
payment and an FCC Remittance Advice Form (FCC Form 159) by 6 p.m. ET,
December 28, 2007, following the procedures and instructions set forth
in Attachment F to the Auctions 73 and 76 Procedures Public Notice; (4)
for Auction 76 (if necessary), submit a sufficient upfront payment and
an FCC Remittance Advice Form (FCC Form 159) by the deadline to be
announced following the end of bidding in Auction 73; and (5) comply
with all provisions outlined in this Public Notice and applicable
Commission rules.
D. Other Issues Raised by Commenters
59. Two commenters raised issues that are unrelated to those raised
in the 700 MHz Auction Public Notice. One commenter proposes that the
Commission should require that all licenses offered in Auction 73 be
made available to public safety personnel for priority use during
critical emergencies. The commenter also suggests that such a
requirement be considered in the event of a contingent auction, if any.
Another commenter urges the Commission to require applicants to
disclose on their short-form applications whether winning the licenses
they have selected would cause their spectrum holdings to exceed 70 MHz
of spectrum in the markets of the selected licenses. In the event that
any applicants indicate that their spectrum holdings would exceed this
amount, the commenter proposed that their short-form applications
should be dismissed before the commencement of Auction 73. The
commenter also requests that the Commission investigate alleged
violations of the Commission's ex parte rules by a wireless company
concerning policy on the open platform provisions for C Block licenses,
and proposes excluding that company from Auction 73 as a possible
sanction for violating the Commission's rules.
60. These issues are outside the scope of this non-rulemaking
proceeding, which is confined to establishing competitive bidding
procedures for Auction 73. The Bureau notes that some of these issues
have been presented to the Commission in petitions for reconsideration
of the 700 MHz Second Report and Order and will be addressed in that
proceeding.
II. Short-Form Application (FCC Form 175) Requirements
61. Entities seeking licenses available in Auction 73 must file a
short-form application electronically via the FCC Auction System prior
to 6 p.m. ET on December 3, 2007, following the procedures prescribed
in Attachment D to the Auctions 73 and 76 Procedures Public Notice.
Applicants filing a short-form application are subject to the
Commission's anti-collusion rules beginning on the deadline for filing.
For Auctions 73 and 76, applicants filing a short-form application for
Auction 73 will remain subject to the Commission's anti-collusion rules
through the
[[Page 62367]]
completion of Auction 76, if conducted. If an applicant claims
eligibility for a bidding credit, the information provided in its FCC
Form 175 will be used in determining whether the applicant is eligible
for the claimed bidding credit. Applicants bear full responsibility for
submitting accurate, complete and timely short-form applications. All
applicants must certify on their short-form applications under penalty
of perjury that they are legally, technically, financially and
otherwise qualified to hold a license. Applicants should read the
instructions set forth in Attachment D to the Auctions 73 and 76
Procedures Public Notice carefully and should consult 26 the
Commission's rules to ensure that all the information that is required
under the Commission's rules is included with their short-form
applications.
62. Entities seeking licenses that may be offered in Auction 76, if
Auction 76 is conducted, must file electronically via the FCC Auction
System prior to 6 p.m. ET on December 3, 2007 both a short-form
application for Auction 73, following the procedures prescribed in
Attachment D to the Auctions 73 and 76 Procedures Public Notice, and an
abbreviated short-form application for Auction 76, following the
procedures prescribed in Attachment E to the Auctions 73 and 76
Procedures Public Notice. Applicants filing short-form applications for
both Auctions 73 and 76 are subject to the Commission's anti-collusion
rules beginning on the deadline for filing both applications.
63. To streamline the application process, other than license
selection requirements, all relevant information for the application to
participate in Auction 76 must be submitted as part of the application
to participate in Auction 73. The Auction 76 abbreviated application
will request--and will accept--only information that the FCC Auction
System requires in order to enable applicants to submit license
selections for Auction 76. For example, applicants seeking to submit
information regarding bidding agreements with respect to licenses
offered in Auction 76 will not be able to access the bidding agreement
screens that are usually part of the short-form application in the
Auction 76 abbreviated application. Instead, such applicants must
submit information regarding those agreements as part of their Auction
73 short-form application.
64. To comply with FCC Auction System requirements, however,
applicants will be required to repeat some information submitted in
their Auction 73 application, e.g., their FCC Registration Number
(FRN), their name and address, certification of the form's contents,
etc. As noted in the procedures for filing the abbreviated short-form
application for Auction 76, applicants must provide the same
information submitted in their application for Auction 73 as they
provide in their Auction 76 application. Most importantly, if an entity
wishes to submit a short-form application for Auction 76, it must do so
using the same FRN that it uses for its short-form application for
Auction 73. In addition, the same person must certify both
applications, as the certification applies to information submitted in
both applications.
65. An entity may not submit more than one short-form application
for Auction 73. Similarly, an entity may not submit more than one
short-form application for Auction 76. If a party submits multiple
short-form applications for either Auction 73 or Auction 76, only one
application for each will be accepted for filing.
66. Applicants also should note that submission of a short-form
application (and any amendments thereto) constitutes a representation
by the certifying official that he or she is an authorized
representative of the applicant, that he or she has read the form's
instructions and certifications, and that the contents of the
application, its certifications, and any attachments are true and
correct. Applicants are not permitted to make major modifications to
their applications; such impermissible changes include a change of the
certifying official to the application. Submission of a false
certification to the Commission may result in penalties, including
monetary forfeitures, license forfeitures, ineligibility to participate
in future auctions, and/or criminal prosecution.
A. Preferences for Small Businesses and Others
i. Size Standards for Bidding Credits
67. A bidding credit represents the amount by which a bidder's
winning bid will be discounted. For Auction 73 and Auction 76, bidding
credits will be available to small businesses and very small
businesses, and consortia thereof, as follows: (1) A bidder with
attributed average annual gross revenues that exceed $15 million and do
not exceed $40 million for the preceding three years (small business)
will receive a 15 percent discount on its winning bid; and (2) a bidder
with attributed average annual gross revenues that do not exceed $15
million for the preceding three years (very small business) will
receive a 25 percent discount on its winning bid.
68. Bidding credits are not cumulative; a qualifying applicant
receives either the 15 percent or 25 percent bidding credit on its
winning bid, but not both.
69. Every applicant that claims eligibility for a bidding credit as
either a small business or a very small business, or a consortium of
small businesses or very small businesses, will be required to provide
information regarding revenues attributable to the applicant, its
affiliates, its controlling interests, and the affiliates of its
controlling interests on its FCC Form 175 short-form application for
Auction 73 to establish that it satisfies the applicable eligibility
requirement. An applicant's disclosure of this information in the
short-form application for Auction 73 will become part of the
applicant's Auction 76 application, in the event the Commission
conducts Auction 76. Accordingly, applicants are not required--and will
not be able to--submit this information in their abbreviated Auction 76
application. Applicants claiming eligibility as a designated entity in
Auction 73 and Auction 76 should review carefully the CSEA/Part 1
Report and Order, 71 FR 6992, February 10, 2006, the Designated Entity
Second Report and Order, 71 FR 26245, May 5, 2006, and the Order on
Reconsideration of the Designated Entity Second Report and Order, 71 FR
34272, June 14, 2006. In that connection, the Commission adopted rules
governing eligibility for designated entity benefits in the Designated
Entity Second Report and Order. The Commission's rules regarding
applicants seeking eligibility for designated entity benefits require
the disclosure of: (1) All parties with which the applicant has entered
into arrangements for the lease or resale (including wholesale
agreements) of any of the capacity of any of the applicant's spectrum;
and (2) the gross revenues, separately and in the aggregate, of
entities with which the applicant has an attributable material
relationship, as defined in Sec. 1.2110(b)(3)(iv)(B).
70. The Commission has adopted a narrow exemption from the
attribution rule for the officers and directors of a rural telephone
cooperative pursuant to which the gross revenues of the affiliates of
the cooperative's officers and directors are not attributed to the
applicant. An applicant (or controlling interest) seeking to claim this
exemption must include in its short-form application a certification
that it is validly organized under the most
[[Page 62368]]
closely applicable organizing statute for a cooperative, and that such
organization is reflected in its articles of incorporation, bylaws,
and/or other relevant organic documents. Applicants seeking to claim
this exemption must meet all of the conditions specified in Sec.
1.2110(b)(3)(iii) of the Commission's rules. Additional guidance on
completing the FCC Form 175 to claim this exemption may be found in
Attachment D to the Auctions 73 and 76 Procedures Public Notice.
ii. Tribal Lands Bidding Credit
71. To encourage the growth of wireless services in federally
recognized tribal lands, the Commission has implemented a tribal lands
bidding credit. Applicants do not provide information regarding tribal
lands bidding credits on their FCC Form 175 short-form applications.
Instead, winning bidders may apply for the tribal lands bidding credit
after the auction when they file their FCC Form 601 long-form
applications.
iii. Installment Payments
72. Installment payment plans will not be available in Auction 73
or in Auction 76.
B. License Selection
73. An applicant must select the initially offered licenses on
which it wants to bid individually or as part of a pre-defined package
in Auction 73 from the Eligible Licenses list on its short-form
application for Auction 73. An applicant interested in bidding on
licenses in the contingent subsequent auction must select those
licenses from the Eligible Licenses list on its short-form application
for Auction 76. Applicants will be able to bid on pre-defined packages
of initially offered C Block licenses and alternative C2 Block
licenses, if offered in subsequent bidding, pursuant to the package
bidding procedures, only if they have selected all the individual
licenses that comprise the relevant package on their respective short-
form applications.
74. To assist applicants in identifying licenses of interest that
will be available in Auctions 73 and 76, FCC Form 175 will include a
filtering mechanism that allows an applicant to filter the Eligible
Licenses list. The applicant will make selections for one or more of
the filter criteria and the system will produce a list of licenses
satisfying the specified criteria. The applicant may select all the
licenses in the customized list or select individual licenses from the
list. Applicants also will be able to select licenses from one
customized list and then create additional customized lists to select
additional licenses.
75. Applicants will not be able to change their license selections
for either Auction 73 or Auction 76 after the short-form application
filing deadline. Applicants interested in participating in Auctions 73
and 76 must have selected license(s) available in the respective
auction by the short-form application deadline. Applicants must confirm
their license selections before the deadline for submitting FCC Form
175. The FCC Auction System will not accept bids from an applicant on
individual licenses that the applicant has not selected on its FCC Form
175. In addition, the FCC Auction System will not accept bids from an
applicant on a pre-defined hierarchical package unless the applicant
selected on its FCC Form 175 all the individual licenses that comprise
the package.
C. Disclosure of Bidding Arrangements
76. Applicants will be required to identify in their short-form
application for Auction 73 all parties with whom they have entered into
any agreements, arrangements, or understandings of any kind relating to
the licenses being auctioned in Auctions 73 and 76, including any
agreements relating to post-auction market structure. The agreements
identified in the short-form application for Auction 73 will become
part of the applicant's Auction 76 application, in the event the 31
Commission conducts Auction 76. Accordingly, applicants are not
required--and will not be able to--disclose bidding agreements in their
abbreviated Auction 76 application.
77. Applicants also will be required to certify under penalty of
perjury in their short-form applications that they have not entered and
will not enter into any explicit or implicit agreements, arrangements
or understandings of any kind with any parties, other than those
identified in the application to participate in Auction 73, regarding
the amount of their bids, bidding strategies, or the particular
licenses on which they will or will not bid. If an applicant has had
discussions, but has not reached an agreement by the short-form
application filing deadline, it would not include the names of parties
to the discussions on its application and may not continue such
discussions with any applicants after the deadline.
78. After the filing of short-form applications, the Commission's
rules do not prohibit a party holding a non-controlling, attributable
interest in one applicant from acquiring an ownership interest in or
entering into a joint bidding arrangement with other applicants,
provided that: (1) The attributable interest holder certifies that it
has not and will not communicate with any party concerning the bids or
bidding strategies of more than one of the applicants in which it holds
an attributable interest, or with which it has entered into a joint
bidding arrangement; and (2) the arrangements do not result in a change
in control of any of the applicants. While the anti-collusion rules do
not prohibit non-auction-related business negotiations among auction
applicants, applicants are reminded that certain discussions or
exchanges could touch upon impermissible subject matters because they
may convey pricing information and bidding strategies. Compliance with
the disclosure requirements of the Commission's anti-collusion rule
will not insulate a party from enforcement of the antitrust laws.
D. Ownership Disclosure Requirements
79. All applicants must comply with the uniform part 1 ownership
disclosure standards and provide information required by Sec. 1.2105
and 1.2112 of the Commission's rules. Specifically, in completing the
short-form application for Auction 73, applicants will be required to
fully disclose information on the real party or parties-in-interest and
ownership structure of the applicant. The ownership disclosure
standards for the short-form application are prescribed in Sec. 1.2105
and 1.2112 of the Commission's rules. Each applicant is responsible for
information submitted in its short-form application being complete and
accurate. An applicant's disclosure of ownership information in the
short-form application for Auction 73 will become part of the
applicant's Auction 76 application, in the event the Commission
conducts Auction 76. Accordingly, applicants are not required--and will
not be able to--submit ownership disclosure information in their
abbreviated Auction 76 application.
80. An applicant's most current ownership information on file with
the Commission, if in an electronic format compatible with the short-
form application (FCC Form 175) (such as information submitted in an
online FCC Form 602 or in an FCC Form 175 filed for a previous auction
using ISAS) will automatically be entered into the applicant's short-
form application. An applicant is responsible for ensuring that the
information submitted in its short-form application for Auction 73 is
complete and accurate. Accordingly, applicants should carefully review
any information automatically entered to confirm that it is complete
and accurate
[[Page 62369]]
as of the deadline for filing the short-form application. Applicants
can update any information that was entered automatically and needs to
be changed directly in the short-form application.
E. Bidding Credit Revenue Disclosures
81. To determine which applicants qualify for bidding credits as
small businesses or very small businesses, the Commission considers the
gross revenues of the applicant, its affiliates, its controlling
interests, and the affiliates of its controlling interests. Therefore,
entities applying to bid as small businesses or very small businesses
(or consortia of small businesses or very small businesses) will be
required to disclose on their short-form applications for Auction 73
the gross revenues of the preceding three years for each of the
following: (1) The applicant; (2) its 33 affiliates; (3) its
controlling interests; and (4) the affiliates of its controlling
interests. Certification that the average annual gross revenues of such
entities and individuals for the preceding three years do not exceed
the applicable limit is not sufficient. Applicants must also disclose
the gross revenues of the entities with which they have attributable
material relationships, as defined by the Commission's rules.
Additionally, if an applicant is applying as a consortium of small
businesses or very small businesses, this information must be provided
for each consortium member. An applicant's disclosure of bidding credit
revenue information in the short-form application for Auction 73 will
become part of the applicant's Auction 76 application, in the event the
Commission conducts Auction 76. Accordingly, applicants are not
required and will not be able to submit bidding credit revenue
information in their abbreviated Auction 76 application.
82. Controlling interests of an applicant include individuals and
entities with either de facto or de jure control of the applicant.
Typically, ownership of at least 50.1 percent of an entity's voting
stock evidences de jure control. De facto control is determined on a
case-by-case basis. The following are some common indicia of de facto
control: (1) The entity constitutes or appoints more than 50 percent of
the board of directors or management committee; (2) the entity has
authority to appoint, promote, demote, and fire senior executives that
control the day-to-day activities of the licensee; and (3) the entity
plays an integral role in management decisions.
83. Officers and directors of an applicant are also considered to
have controlling interest in the applicant. The Commission does not
impose specific equity requirements on controlling interest holders.
Once the principals or entities with a controlling interest are
determined, only the revenues of those principals or entities; the
affiliates of those principals or entities; the applicant and its
affiliates; and any parties having an attributable material
relationship with the applicant will be counted in determining small
business eligibility.
84. In the Designated Entity Second Report and Order, the
Commission adopted material relationship rules. The Commission now
requires the consideration of certain leasing and resale (including
wholesale) relationships--material relationships--in determining
designated entity eligibility. Material relationships fall into two
categories: impermissible and attributable. An applicant or licensee
has an impermissible material relationship when it has agreements with
one or more other entities for the lease or resale (including under a
wholesale agreement) of, on a cumulative basis, more than 50 percent of
the spectrum capacity of any of its licenses. If an applicant or a
licensee has an impermissible material relationship, it is, as a
result, (1) ineligible for the award of designated entity benefits, and
(2) subject to unjust enrichment on a license-bylicense basis.
85. An applicant or licensee has an attributable material
relationship when it has one or more agreements with any individual
entity for the lease or resale (including under a wholesale agreement)
of, on a cumulative basis, more than 25 percent of the spectrum
capacity of any individual license held by the applicant or licensee.
The attributable material relationship will cause the gross revenues
and, if applicable, total assets of that entity and its attributable
interest holders to be attributed to the applicant or licensee for the
purposes of determining the applicant's or licensee's (1) eligibility
for designated entity benefits and (2) liability for unjust enrichment
on a license-by-license basis.
86. The Commission grandfathered material relationships in
existence before the release of the Designated Entity Second Report and
Order, meaning that those preexisting relationships would not alone
cause the Commission to examine a designated entity's ongoing
eligibility for benefits or its liability for unjust enrichment. The
Commission did not, however, grandfather preexisting material
relationships for determinations of an applicant's or licensee's
designated entity eligibility for future auctions or in the context of
future assignments, transfers of control, spectrum leases, or other
reportable eligibility events. Rather, the occurrence of any of those
35 eligibility events after the release date of the Designated Entity
Second Report and Order triggers a reexamination of the applicant's or
licensee's designated entity eligibility, taking into account all
existing material relationships, including those previously
grandfathered.
87. In recent years the Commission has also made other
modifications to its rules governing the attribution of gross revenues
for purposes of determining small business eligibility. These changes
include exempting the gross revenues of the affiliates of a rural
telephone cooperative's officers and directors from attribution to the
applicant if certain specified conditions are met. The Commission has
also clarified that, in calculating an applicant's gross revenues under
the controlling interest standard, it will not attribute the personal
net worth, including personal income, of its officers and directors to
the applicant.
88. A consortium of small businesses or very small businesses is a
conglomerate organization composed of two or more entities, each of
which individually satisfies the definition of a small business or very
small business as those terms are defined in the service-specific
rules. Thus, each member of a consortium of small or very small
businesses that applies to participate in Auction 73 must individually
meet the definition of small business or very small business adopted by
the Commission for the 700 MHz Band. Each consortium member must
disclose its gross revenues along with those of its affiliates, its
controlling interests, the affiliates of its controlling interests, and
any entities having an attributable material relationship with the
member. Although the gross revenues of the consortium members will not
be aggregated for purposes of determining the consortium's eligibility
as a small business or very small business, this information must be
provided to ensure that each individual consortium member qualifies for
any bidding credit awarded to the consortium.
F. Provisions Regarding Former and Current Defaulters
89. Each applicant must state under penalty of perjury on its
short-form application whether or not the applicant, its affiliates,
its controlling interests, and the affiliates of its 36 controlling
interests, as defined by Sec. 1.2110, have ever been in default on any
Commission licenses or have ever
[[Page 62370]]
been delinquent on any non-tax debt owed to any Federal agency. In
addition, each applicant must certify under penalty of perjury on its
short-form application that, as of the short-form filing deadline, the
applicant, its affiliates, its controlling interests, and the
affiliates of its controlling interests, as defined by Sec. 1.2110,
are not in default on any payment for Commission licenses (including
down payments) and that they are not delinquent on any non-tax debt
owed to any Federal agency. Prospective applicants are reminded that
submission of a false certification to the Commission is a serious
matter that may result in severe penalties, including monetary
forfeitures, license revocations, exclusion from participation in
future auctions, and/or criminal prosecution. These statements and
certifications are prerequisites to submitting an application in the
FCC Auction System. Accordingly, applicants seeking licenses that may
be offered in Auction 76 will be required to make these statements and
certifications in both their short-form application for Auction 73 and
their abbreviated Auction 76 application.
90. Former defaulters--i.e., applicants, including any of their
affiliates, any of their controlling interests, or any of the
affiliates of their controlling interests, that in the past have
defaulted on any Commission licenses or been delinquent on any non-tax
debt owed to any Federal agency, but that have since remedied all such
defaults and cured all of their outstanding non-tax delinquencies--are
eligible to bid in Auctions 73 and 76, provided that they are otherwise
qualified. Former defaulters are required to pay upfront payments that
are fifty percent more than the normal upfront payment amounts.
91. Current defaulters--i.e., applicants, including any of their
affiliates, any of their controlling interests, or any of the
affiliates of their controlling interests, that are in default on any
payment for any Commission licenses (including down payments) or are
delinquent on any non-tax debt owed to any Federal agency as of the
filing deadline for short-form applications--are not eligible to bid in
either Auction 73 or Auction 76.
92. Applicants are encouraged to review the Bureau's previous
guidance on default and delinquency disclosure requirements in the
context of the short-form application process. For example, it has been
determined that to the extent that Commission rules permit late payment
of regulatory or application fees accompanied by late fees, such debts
will become delinquent for purposes of Sec. 1.2105(a) and 1.2106(a)
only after the expiration of a final payment deadline. Therefore, with
respect to regulatory or application fees, the provisions of Sec.
1.2105(a) and 1.2106(a) regarding default and delinquency in connection
with competitive bidding are limited to circumstances in which the
relevant party has not complied with a final Commission payment
deadline.
93. The Commission considers outstanding debts owed to the United
States Government, in any amount, to be a serious matter. The
Commission adopted rules, including a provision referred to as the red
light rule, that implement the Commission's obligations under the Debt
Collection Improvement Act of 1996, which governs the collection of
claims owed to the United States. Under the red light rule, the
Commission will not process applications and other requests for
benefits filed by parties that have outstanding debts owed to the
Commission. In the same rulemaking order, the Commission explicitly
declared, however, that the Commission's competitive bidding rules are
not affected by the red light rule. As a consequence, the Commission's
adoption of the red light rule does not alter the applicability of any
of the Commission's competitive bidding rules, including the provisions
and certifications of Sec. 1.2105 and 1.2106, with regard to current
and former defaults or delinquencies. Applicants are reminded, however,
that the Commission's Red Light Display System, which provides
information regarding debts owed to the Commission, may not be
determinative of an auction applicant's ability to comply with the
default and delinquency disclosure requirements of Sec. 1.2105. Thus,
while the red light rule ultimately may prevent the processing of long-
form 38 applications by auction winners, an auction applicant's red
light status is not necessarily determinative of its eligibility to
participate in an auction or of its upfront payment obligation.
94. Prospective applicants should note that any long-form
applications filed after the close of competitive bidding will be
reviewed for compliance with the Commission's red light rule, and such
review may result in the dismissal of a winning bidder's long-form
application.
G. Other Information
95. Applicants owned by members of minority groups and/or women, as
defined in Sec. 1.2110(c)(3), may identify themselves in filling out
their short-form applications regarding this status. This applicant
status information is collected for statistical purposes only and
assists the Commission in monitoring the participation of designated
entities in its auctions.
H. Minor Modifications to Short-Form Applications (FCC Form 175)
96. Applicants are not permitted to make major modifications to
their short-form applications (e.g., change their license selections,
change control of the applicant, change the certifying official, or
change their size to claim eligibility for a higher bidding credit)
after the short-form application deadline. Thus, any change in control
of an applicant, resulting from a merger for example, will be
considered a major modification to the applicant's FCC Form 175, which
will consequently be dismissed.
97. Applicants are, however, permitted to make only minor changes
to their FCC Form 175 after the short-form application deadline.
Permissible minor changes include, for example, deletion and addition
of authorized bidders (to a maximum of three) and revision of addresses
and telephone numbers of the applicants and their contact persons.
98. If an applicant wishes to make permissible minor changes to its
short-form application, such changes should be made electronically to
its Auction 73 short-form application using the FCC Auction System.
Applicants should not make changes to short-form applications 39
associated with Auction 76. Applicants are reminded to click on the
SUBMIT button in the FCC Auction System for the changes to be submitted
and considered by the Commission. After the revised application has
been submitted, a confirmation page will be displayed that states the
submission time and date, along with a unique file number.
99. In addition, during those periods outside of the initial and
resubmission filing windows (i.e., when an applicant cannot
electronically update its FCC Form 175), an applicant should submit a
letter briefly summarizing the changes and subsequently update its
short-form applications in ISAS as soon as possible. After the filing
window has closed, the auction system will not permit applicants to
make certain changes, such as legal classification and bidding credit.
Any letter describing changes to an applicant's short-form application
should be submitted by electronic mail to the following address:
auction73@fcc.gov. The electronic mail summarizing the changes must
include a subject or caption referring to Auction 73 and the name of
the applicant (e.g.,
[[Page 62371]]
RE: Changes to Auction 73 Short-Form Application of ABC Corp.), and
should not reference Auction 76.
100. Applicants must not submit application-specific material
through the Commission's Electronic Comment Filing System (ECFS).
I. Maintaining Current Information in Short-Form Applications (FCC Form
175)
101. Section 1.65 of the Commission's rules requires an applicant
to maintain the accuracy and completeness of information furnished in
its pending application and to notify the Commission within 30 days of
any substantial change that may be of decisional significance to that
application. Changes that cause a loss of or reduction in eligibility
for a bidding credit must be reported immediately. If an amendment
reporting substantial changes is a major amendment as defined by Sec.
1.2105, the major amendment will not be accepted and may result in the
dismissal of the short-form application.
102. After the short-form filing deadline, applicants may make only
minor changes to their short-form applications, such as deleting or
adding authorized bidders (to a maximum of three). Applicants must
click on the SUBMIT button in the FCC Auction System for the changes to
be submitted and considered by the Commission. In addition, applicants
must submit a letter, briefly summarizing the changes, by electronic
mail at the following address: auction73@fcc.gov. The electronic mail
summarizing the changes must include a subject or caption referring to
Auction 73 and the name of the applicant. Applicants must not submit
application-specific material through ECFS.
III. Pre-Auction Procedures
A. Auction Seminar--November 20, 2007
103. On Tuesday November 20, 2007, the FCC will sponsor a free
seminar for parties interested in participating in Auctions 73 and 76
at the FCC headquarters, located at 445 12th Street, SW., Washington,
DC. The seminar will provide attendees with information about pre-
auction procedures, completing FCC Form 175, auction conduct, the FCC
Auction System, auction rules, and the 700 MHz Band service rules. The
seminar will also provide an opportunity for prospective bidders to ask
questions of FCC staff concerning the auction, auction procedures,
filing requirements and other matters related to Auctions 73 and 76.
104. To register, please provide the information listed on the
Auctions 73 and 76 Public Notice released October 19, 2007 (DA 07-
4236), by fax (717) 338-2850, e-mail Auchelp@fcc.gov or telephone (717)
338-2868 to the FCC by Friday, November 16, 2007. For individuals who
are unable to attend, an Audio/Video webcast of this seminar will be
available from the FCC's Auction 73 Web page at http://wireless.fcc.gov/auctions/73/
.
B. Short-Form Applications (FCC Form 175)--Due Prior to 6 p.m. ET on
December 3, 2007
105. In order to be eligible to bid in Auction 73 or Auction 76,
applicants must first follow the procedures set forth in Attachments D
and E to the Auctions 73 and 76 Procedures Public Notice to submit an
FCC Form 175 application electronically via the FCC Auction System. The
application must be received at the Commission prior to 6 p.m. ET on
December 3, 2007. Late applications will not be accepted. There is no
application fee required when filing an FCC Form 175, but an applicant
must submit an upfront payment to be eligible to bid.
106. Applications may generally be filed at any time beginning at
noon ET on November 19, 2007, and the filing window will close prior to
6 p.m. ET on December 3, 2007. Applicants are strongly encouraged to
file early and are responsible for allowing adequate time for filing
their applications. Applicants may update or amend their applications
multiple times until the filing deadline on December 3, 2007.
107. Applicants must always click on the SUBMIT button on the
Certify & Submit screen of the electronic form to successfully submit
or modify their FCC Form 175. Any form that is not submitted will not
be reviewed by the FCC. Additional information about accessing,
completing, and viewing the FCC Form 175 is included in Attachments D
and E of the Auctions 73 and 76 Procedures Public Notice. FCC Auctions
Technical Support is available at (877) 480-3200, or (202) 414-1255
(text telephone (TTY)); hours of service are Monday through Friday,
from 8 a.m. to 6 p.m. ET.
C. Application Processing and Minor Corrections
108. After the deadline for filing short-form applications, the
Commission will process all timely submitted applications to determine
which are acceptable for filing, and subsequently will issue a public
notice identifying: (1) Those applications accepted for filing; (2)
those applications rejected; and (3) those applications which have
minor defects that may be corrected, and the deadline for resubmitting
corrected applications.
109. After the December 3, 2007, short-form filing deadline,
applicants may make only minor corrections to their applications.
Applicants will not be permitted to make major modifications to their
applications (e.g., change their license selections, change control of
the applicant, change certifying official, or change their size to
claim eligibility for a higher bidding credit). Accordingly, applicants
interested in participating in any potential contingent subsequent
bidding must have selected license(s) available in the initial bidding
as well as licenses that may be available in contingent subsequent
bidding, including alternative licenses, by the deadline for submitting
their application to participate in Auction 73. FCC personnel will
communicate regarding a short-form application only with an applicant's
contact person or certifying official, as designated on the applicant's
FCC Form 175, unless the applicant's certifying official or contact
person notifies the Commission in writing that applicant's counsel or
other representative is authorized to speak on its behalf.
D. Upfront Payments--Due December 28, 2007
110. In order to be eligible to bid in Auction 73 and any
contingent subsequent auction, applicants must submit an upfront
payment accompanied by an FCC Remittance Advice Form (FCC Form 159).
Only applicants that become qualified bidders in Auction 73, by, among
other things, making upfront payments to be eligible to bid in Auction
73, will be eligible to participate in any contingent subsequent
auction. However, qualified bidders in Auction 73 will be permitted to
make additional upfront payments with respect to licenses being offered
in any contingent subsequent auction at a later date. After completing
the FCC Form 175, filers will have access to an electronic version of
the FCC Form 159 that can be printed and sent by facsimile to Mellon
Bank in Pittsburgh, PA. All upfront payments for Auction 73 must be
received in the proper account at Mellon Bank by 6 p.m. ET on December
28, 2007.
i. Making Upfront Payments by Wire Transfer
111. Wire transfer payments for Auction 73 must be received by 6
p.m.
[[Page 62372]]
ET on December 28, 2007. No other payment method is acceptable. To
avoid untimely payments, applicants should discuss arrangements
(including bank closing schedules) with their banker several days
before they plan to make the wire transfer, and allow sufficient time
for the transfer to be initiated and completed before the deadline. The
BNF and Lockbox number are specific to the upfront payments for Auction
73. Do not use BNF or Lockbox numbers from previous auctions. Wire
transfer information for Auction 76 will be made available in a future
public notice.
112. At least one hour before placing the order for the wire
transfer (but on the same business day), applicants must send by
facsimile a completed FCC Form 159 (Revised 2/03) to Mellon Bank at
(412) 209-6045. On the cover sheet of the facsimile, write Wire
Transfer--Auction Payment for Auction 73. In order to meet the
Commission's upfront payment deadline, an applicant's payment must be
credited to the Commission's account before the deadline. Applicants
are responsible for obtaining confirmation from their financial
institution that Mellon Bank has timely received their upfront payment
and deposited it in the proper account.
113. Please note that: (1) All payments must be made in U.S.
dollars; (2) all payments must be made by wire transfer; (3) upfront
payments for Auction 73 go to a lockbox number different from the
lockboxes used in previous FCC auctions, and different from the lockbox
number to be used for post-auction payments; and (4) failure to deliver
the upfront payment as instructed by the December 28, 2007, deadline
will result in dismissal of the application and disqualification from
participation in the auction as well as ineligibility for participation
in any contingent subsequent bidding for 700 MHz Band licenses.
ii. FCC Form 159
114. A completed FCC Remittance Advice Form (FCC Form 159, Revised
2/03) must be sent by facsimile to Mellon Bank to accompany each
upfront payment. Proper completion of FCC Form 159 (Revised 2/03) is
critical to ensuring correct crediting of upfront payments. Detailed
instructions for completion of FCC Form 159 are included in Attachment
F to the Auctions 73 and 76 Procedures Public Notice. An electronic
pre-filled version of the FCC Form 159 is available after submitting
the FCC Form 175. Payors using a pre-filled FCC Form 159 are
responsible for ensuring that all of the information on the form,
including payment amounts, is accurate. The FCC Form 159 can be
completed electronically, but must be filed with Mellon Bank via
facsimile.
iii. Upfront Payments and Bidding Eligibility
115. In the 700 MHz Auction Public Notice, the Bureau proposed that
the amount of the upfront payment would determine a bidder's initial
bidding eligibility, the maximum number of bidding units on which a
bidder may place bids. In addition, consistent with the Commission's
direction in the 700 MHz Second Report and Order, the Bureau proposed
that qualified bidders in Auction 73 would have an opportunity to
submit additional upfront payments to obtain bidding eligibility for
licenses in any contingent subsequent auction (Auction 76).
116. Under the Bureau's proposal, in order to bid on a particular
license or package, qualified bidders must have selected the license(s)
on FCC Form 175 and must have a current eligibility level that meets or
exceeds the number of bidding units assigned to that license or
package. For a package, the bidding units are calculated by adding
together the bidding units of the individual licenses that make up the
package. At a minimum, therefore, an applicant's total upfront payment
must be enough to establish eligibility to bid on at least one of the
licenses selected on its FCC Form 175 for Auction 73, or else the
applicant will not be eligible to participate in Auction 73 or in
Auction 76. An applicant does not have to make an upfront 45 payment to
cover all licenses the applicant selected on its FCC Form 175, but
rather to cover the maximum number of bidding units that are associated
with licenses on which the bidder wishes to place bids and hold
provisionally winning bids (via bids on licenses and/or packages) at
any given time in Auction 73. If contingent subsequent bidding is
necessary, qualified bidders for Auction 73 will be given an
opportunity to supplement their upfront payments in order to increase
their bidding eligibility for Auction 76.
117. In the 700 MHz Auction Public Notice, the Bureau proposed to
calculate upfront payments as follows: (1) For licenses covering CMAs
in the 50 states in which the licenses offered in Auction 66 were sold,
$0.05 per MHz per population (MHz-pop) for Metropolitan Statistical
Area (MSA) licenses and $0.03/MHz-pop for Rural Service Area (RSA)
licenses; (2) for licenses covering EAs in the 50 states in which the
corresponding licenses in both EA blocks offered in Auction 66 were
sold, the sum of $0.05/MHz-pop for counties contained within an MSA and
$0.03/MHz-pop for counties contained within an RSA; (3) for licenses
covering REAGs in the 50 states in which the corresponding licenses in
all three REAG blocks offered in Auction 66 were sold, the sum of
$0.05/MHz-pop for counties contained within an MSA and $0.03/MHz-pop
for counties contained within an RSA; (4)for licenses covering
geographic areas for which an Auction 66 license was unsold, $0.01/MHz-
pop; (5)for licenses covering the Gulf of Mexico, $1,000 per MHz; and
(6) for all remaining licenses, $0.01/MHz-pop. For all licenses, the
results of the above calculations are subject to a minimum of $500 per
license and are rounded using its standard rounding procedure.
118. The Bureau set forth the specific upfront payments and bidding
units for each license in Attachment A of the 700 MHz Auction Public
Notice and sought comment on this proposal. The Bureau did not receive
any comments in response to the proposed upfront payments, or on its
proposal that the upfront payment amount would determine a bidder's
initial bidding eligibility. Therefore, the Bureau adopt the upfront
payments and bidding units for each 46 license in Auction 73 as
proposed and set forth in Attachment A of the Auctions 73 and 76
Procedures Public Notice.
119. In calculating its upfront payment amount, an applicant
interested in bidding only on individual licenses should determine the
maximum number of bidding units on which it may wish to be active (bid
on or hold provisionally winning bids on) in any single round in
Auction 73, and submit an upfront payment amount covering that number
of bidding units. Applicants interested in bidding on packages should
determine their upfront payment amount by calculating the sum of
bidding units associated with each discrete license they wish to
include in new bids (package or individual bids) or have included in
provisionally winning bids in any single round. The bidding units
associated with a given license, even if the license is included in
more than one bid, will be counted only once per bidder per round. In
order to make this calculation, an applicant should add together the
upfront payments for all licenses comprising all combinations of
licenses and packages of licenses on which it seeks to be active in any
given round. If a bidder has enough eligibility to bid on certain
licenses, it can place bids on the licenses individually and on
packages containing those licenses without needing additional
eligibility. For example, if licenses A, B, and C
[[Page 62373]]
each have 10,000 bidding units, and a bidder wishes in a single round
to be able to bid on licenses A, B, and C individually and on packages
AB and ABC, the bidder needs 30,000 bidding units of eligibility.
Applicants should check their calculations carefully, as there is no
provision for increasing a bidder's eligibility for Auction 73 after
the upfront payment deadline.
120. The Bureau reiterates that, in the event it is necessary to
conduct Auction 76, bidders will have an opportunity to supplement
their upfront payments in order to increase their bidding eligibility
for Auction 76. The instructions and deadline for doing so would be
announced within five business days after the end of bidding in Auction
73.
121. For Auction 73 and any contingent subsequent auction, former
defaulters must calculate their upfront payment for all licenses and
packages by multiplying the number of bidding units on which they wish
to be active by 1.5. In order to calculate the number of bidding units
to assign to former defaulters, the Commission will divide the upfront
payment received by 1.5 and round the result up to the nearest bidding
unit.
iv. Applicant's Wire Transfer Information for Purposes of Refunds of
Upfront Payments
122. To ensure that refunds of upfront payments are processed in an
expeditious manner, the Commission is requesting that all pertinent
information be supplied to the FCC. Applicants can provide the
information electronically during the initial short-form application
filing window after the form has been submitted. Applicants are
reminded that information submitted as part of an FCC Form 175 will be
available to the public; for that reason, wire transfer information
should not be included in an FCC Form 175.
E. Auction Registration
123. Approximately ten days before the auction, the FCC will issue
a public notice announcing all qualified bidders for Auction 73.
Qualified bidders are those applicants whose FCC Form 175 applications
have been accepted for filing and have timely submitted upfront
payments sufficient to make them eligible to bid on license(s)
initially offered in Auction 73.
124. All qualified bidders are automatically registered for the
auction. Registration materials will be distributed prior to the
auction by overnight mail. The mailing will be sent only to the contact
person at the contact address listed in the FCC Form 175 and will
include the SecurID [supreg] tokens that will be required to place
bids, the Integrated Spectrum Auction System (ISAS) Bidder's Guide, and
the Auction Bidder Line phone number.
125. Qualified bidders that do not receive this registration
mailing will not be able to submit bids. Therefore, any qualified
bidder that has not received this mailing by noon on Tuesday, January
15, 2008, should call (717) 338-2868. Receipt of this registration
mailing is critical to participating in the auction, and each applicant
is responsible for ensuring it has received all of the registration
material.
126. In the event that SecurID [supreg] tokens are lost or damaged,
only a person who has been designated as an authorized bidder, the
contact person, or the certifying official on the applicant's short-
form application may request replacement registration material.
Qualified bidders requiring the replacement of these items must call
Technical Support at (877) 480-3201 or (202) 414-1255 (TTY).
F. Remote Electronic Bidding
127. The Commission will conduct Auctions 73 and 76 over the
Internet and telephonic bidding will be available as well. Qualified
bidders are permitted to bid electronically and telephonically. Each
applicant should indicate its bidding preference--electronic or
telephonic--on the FCC Form 175. In either case, each authorized bidder
must have its own SecurID [supreg] token, which the FCC will provide at
no charge. Each applicant with one authorized bidder will be issued two
SecurID [supreg] tokens, while applicants with two or three authorized
bidders will be issued three tokens. For security purposes, the SecurID
[supreg] tokens, the telephonic bidding telephone number, and the
Integrated Spectrum Auction System (ISAS) Bidder's Guide are only
mailed to the contact person at the contact address listed on the FCC
Form 175. Please note that each SecurID [supreg] token is tailored to a
specific auction; therefore, SecurID [supreg] tokens issued for other
auctions or obtained from a source other than the FCC will not work for
Auction 73. In the event that it is necessary to conduct Auction 76,
qualified bidders for Auction 76 will use the same SecurID [supreg]
tokens as they used for Auction 73.
128. Please note that the SecurID [supreg] tokens can be recycled,
and the Bureau encourages bidders to return the tokens to the FCC. The
Bureau will provide pre-addressed envelopes that bidders may use to
return the tokens once the auction is closed.
G. Mock Auction--January 18, 2008
129. All qualified bidders will be eligible to participate in a
mock auction on Friday, January 18, 2008. The mock auction will enable
applicants to become familiar with the FCC Auction System prior to the
auction. Participation by all bidders is strongly recommended. Details
will be announced by public notice.
IV. Auction 73
130. The first round of bidding for Auction 73 will begin on
Thursday, January 24, 2008. The initial bidding schedule will be
announced in a public notice listing the qualified bidders, which is to
be released approximately 10 days before the start of the auction.
A. Auction 73 Structure
i. Simultaneous Multiple Round Auction With Package Bidding on C Block
Licenses
131. In the 700 MHz Auction Public Notice, the Bureau proposed
using the Commission's standard simultaneous multiple-round (SMR)
auction format for the A, B, D, and E Block licenses, while enabling
package bidding for C Block licenses using an auction design with
hierarchical package bidding (HPB). An SMR-HPB auction format offers
every license for bid at the same time and consists of successive
bidding rounds in which eligible bidders may place bids on individual
licenses and on certain pre-defined packages of specified licenses,
which, for Auction 73, only include C Block licenses. A bidder may bid
on, and potentially win, any number of licenses and/or packages.
Typically, bidding remains open on all licenses until bidding stops on
every license, unless an alternative version of the stopping rule is
invoked.
132. The 700 MHz Auction Public Notice proposed pre-defined
packages for C Block licenses according to a hierarchical structure.
The initial level consists of individual licenses, and the next level
consists of non-overlapping packages of those licenses, such that a
given license is included only once in each level. The winning set of
bids could therefore consist of bids from various levels as long as
each license is included in only one winning bid. The Bureau proposed
to accept individual bids on C Block licenses for REAGs 1-12 (Level 1)
and package bids on the following combinations of C Block REAG licenses
(Level 2): (1) REAGs 1-8 (the 50 States package); (2) REAGs 10 and 12,
comprising Puerto Rico, the U.S. Virgin Islands and the Gulf of Mexico
(the Atlantic package); and (3) REAGs 9
[[Page 62374]]
and 11, comprising the U.S. Pacific territories (the Pacific package).
133. The Bureau also sought comment on alternative levels or
alternative ways of packaging licenses within levels. Additionally, the
Bureau proposed to conduct the auction using standard SMR procedures
for all of the licenses, including the C Block licenses in the event
that currently unforeseen difficulties make it impracticable to
implement package bidding.
134. The majority of commenters support package bidding for C Block
licenses either in general or for the HPB auction format specifically.
Some commenters, however, urge the Bureau to abandon package bidding
for Auction 73 under the unforeseen difficulties exception to the
Commission's directive to use package bidding for the C Block licenses.
These parties assert that the SMR-HPB format is too complex, will
disadvantage bidders interested in only individual licenses, and will
not be fully understood by bidders or implemented by the Bureau in time
for the start of the auction. When the Commission directed the Bureau
to adopt package bidding for the C Block, it noted that package bidding
minimizes exposure risk for applicants whose business plans require the
economies of scale that only can be obtained with nationwide operation,
but would not preclude the participation of entities wishing to bid on
individual licenses. The HPB auction format was chosen in part because
it mitigates issues inherent in some other package bidding formats that
give bidders interested in large packages an advantage over bidders
interested in individual licenses. Of course, to the extent that
providing bidders the option of package bidding favors those bidders
seeking packages over those seeking individual licenses, the Bureau
notes that the same argument could be applied in reverse to the other
1,087 licenses in Auction 73 that bidders will not have the option to
package in order to decrease their exposure risk. After review of the
record, the Bureau concluded that considerations raised in the comments
opposing package bidding are not the kinds of unforeseen difficulties
regarding the feasibility of package bidding for the C Block licenses
that the Commission envisioned in the 700 MHz Second Report and Order.
135. Therefore, the Bureau concludes that the SMR format for A, B,
E and D Block licenses, and the HPB auction format for the C Block
licenses, will best meet the needs of bidders in Auction 73, and
therefore adopt them as proposed. As is typical with both formats, bids
will be accepted on all individual licenses and on pre-defined packages
of licenses in each round of the auction until bidding stops on every
license, allowing bidders to take advantage of synergies that exist
among licenses.
136. With regard to the proposed pre-defined packages for C Block
licenses, the Bureau declines to adopt the alternate packages suggested
by two commenters. One commenter asserts that it sees value in adopting
a 12 REAG package or even allowing bidders to choose their own package.
The second commenter proposed adopting packages of regions larger than
REAGs (e.g., East, Midwest, West Coast) and a package of only the lower
48 States. The commenter bases its proposal for a lower 48 State
package on the premise that prospective nationwide bidders have limited
interest in Hawaii and Alaska, and that these states would be better
served if they are not included in a nationwide package. The State of
Hawaii submitted reply comments challenging the assertion that
nationwide carriers have little interest in providing coverage to
Hawaii, noting several major carriers already do in fact operate in
Hawaii. The State of Hawaii also asserts that any nationwide package
without Hawaii and Alaska unfairly discriminates against these states
and its inhabitants, which would not only be inconsistent with the
Communications Act, but also with Commission precedent. The commenter
also suggests that the Bureau eliminate the Atlantic and Pacific
packages on the grounds that bidders would not obtain any benefits from
bidding on the licenses as packages. The Bureau sees no disadvantages
to including the packages.
137. The Commission adopted package bidding for C Block licenses to
reduce the exposure problem that might otherwise inhibit bidders
seeking to create a nationwide footprint. At the same time, the
Commission directed the Bureau to implement package bidding without
imposing disadvantages on parties that wish to bid on individual
licenses comprising the nationwide footprint. The Bureau finds that
offering three packages--the 50 States, Atlantic, and Pacific
packages--meets this balance by reducing exposure risk of bidders
seeking to provide nationwide coverage without disadvantaging those
bidders seeking individual licenses. Therefore, the Bureau adopts the
pre-defined packages as proposed in the 700 MHz Auction Public Notice.
ii. Information Available to Bidders Before and During the Auctions
138. In the 700 MHz Second Report and Order, the Commission found
that the public interest would be served if the auction for new 700 MHz
Band licenses is conducted using anonymous (or limited information)
bidding procedures, regardless of any pre-auction measurement of likely
auction competition. Such information procedures are intended to reduce
the potential for anti-competitive bidding behavior, including bidding
activity that aims to prevent the entry of new competitors. The
Commission therefore directed the Bureau to propose and seek comment on
more detailed procedures for employing anonymous bidding for the 700
MHz auction.
139. In the 700 MHz Auction Public Notice, the Bureau proposed to
withhold, until after the close of bidding, public release of (1)
bidders' license selections on their short-form applications, (2) the
amounts of bidders' upfront payments and bidding eligibility, and (3)
information that may reveal the identities of bidders placing bids and
taking other bidding-related actions. In contrast to procedures
implemented for anonymous bidding in past auctions, and consistent with
the 700 MHz Second Report and Order, the Bureau proposed to withhold
this information irrespective of any pre-auction measurement of likely
auction competition.
140. Commenters generally support the proposal to implement limited
information disclosure procedures for the 700 MHz auction, though they
differ on the disclosure of specific data elements. Some commenters
suggest that the Commission should inform bidders of the license(s) or
license block(s) for which an overlap occurs with other applicants,
citing fundamental differences between the different 700 MHz license
blocks and the particular needs of small and rural bidders to better
identify those bidders interested in nationwide/open access licenses. A
commenter opposes disclosure of this information. The Bureau finds that
revealing information on license blocks selected by competing
applicants would be inconsistent with the goals of limiting information
disclosure. Thus, the Bureau will not release information on licenses
or license blocks selected until after the close of bidding.
141. Commenters also recommend releasing each bidder's upfront
payment amount and initial bidding eligibility before the auction on
the grounds that this information would help small companies better
gauge the level of competition. Some entities also seek disclosure of
an aggregate eligibility ratio after each round. A commenter advocates
releasing the total number of
[[Page 62375]]
active bidders and, for each license and package, the number of bids
and amount of the bids after each round. While these parties contend
that release of this information would not facilitate anticompetitive
practices and would not disclose bidder identities, the Bureau
disagrees. As a commenter notes, release of bidder eligibility before
the auction could be used by incumbents to block new entrants or for
other strategic purposes. Similarly, a commenter contends that release
of this information weakens anonymous bidding. This information could
potentially be used to discern the identities of individual bidders.
Moreover, the Bureau is particularly concerned that release of such
information could foster anticompetitive bidding activity, particularly
in light of the use of reserve prices in this auction.
142. Two commenters urge the Commission to release names of auction
applicants and provide access to the ownership information in
applicants' short form applications. This information has been made
publicly available in past auctions even where limited information
procedures have been implemented. The Bureau plans to continue to make
available the names of applicants and their ownership information, as
release of that information is necessary for other applicants to comply
with the anti-collusion rules and does not undermine the purpose of its
anonymous bidding procedures. To enable applicants to comply with the
Commission's anti-collusion rules, once the Bureau has conducted its
initial review of applications to participate in Auction 73 and Auction
76, each applicant will receive a letter that lists the other
applicants in Auction 73 and Auction 76 that have applied for licenses
in any of the same geographic areas as the applicant.
143. The Bureau adopts the proposals set out in the 700 MHz Auction
Public Notice. Thus, the Bureau will disclose after the conclusion of
each round the amount of every bid placed and whether a bid was
withdrawn. More generally, the Bureau will disclose, after the
conclusion of each round, all relevant information about all bids
placed, withdrawn, or dropped except for the identities of the bidders
performing the actions and the net amounts of the bids placed,
withdrawn, or dropped. As in past auctions conducted with limited
information procedures, for each license the Bureau will indicate the
minimum acceptable bid amount for the next round and whether the
license has a provisionally winning bid. After each round, the Bureau
will also release for each license the number of bidders that placed a
bid on the license. Furthermore, the Bureau will indicate whether any
proactive waivers were submitted in each round, and the Bureau will
release the stage transition percentage--the percentages of licenses
(as measured in bidding units) on which there were new bids--for the
round. In addition, after each round, bidders logged in to the FCC
Auction System will be able to see whether their own bids are
provisionally winning. The Bureau will provide samples of publicly-
available and bidder-specific (non-public) results files prior to the
start of the auction.
144. Several commenters argue that information about the initial
auction results (for Auction 73) should not be withheld in the event
that a contingent auction (Auction 76) must be conducted. Some
commenters urge disclosure of initial auction results for blocks that
meet their reserve prices before the contingent auction, claiming that
such information may be necessary to meet Securities and Exchange
Commission and other regulatory requirements, to allow bidders to
communicate with financial institutions, and to facilitate network
build-out. Similarly, other commenters favor allowing bidders to
announce that they won licenses in a block that has met its reserve
price if required by law or regulation. These parties do not, however,
cite any specific regulatory requirements that would compel such
disclosures, and the Bureau is not aware of any such regulations. To
the extent that any such requirements are related to winning bidders'
payments, the Bureau notes that if Auction 76 were to be held, winning
bidders in Auction 73 of licenses in the A, B, C, or E Blocks will not
be required to make down payments until after the subsequent bidding.
The Bureau finds that premature disclosure to financial institutions,
vendors, and others of identities of successful bidders in Auction 73
would undermine the purposes of the limited information procedures.
145. Regarding Auction 76 and the timing of information disclosure,
the Bureau adopts its proposal not to release until after the close of
bidding in both auctions: (a) Information on the winning bidders for
licenses in blocks for which the reserve price was met in the first
auction, (b) information on bidder license selections and eligibility,
and (c) any other information that may reveal the identities of bidders
placing bids and taking other bidding-related actions on licenses in
all blocks. For the D Block, however, in the event there is a winning
bidder for the D Block license in Auction 73, the Bureau will make
public before the close of bidding in an Auction 76 only such
information as may be necessary to proceed with promptly facilitating
the D Block winner's obligations to negotiate a Network Sharing
Agreement with the national Public Safety Broadband Licensee in the
adjacent spectrum block.
146. Commenting parties also urge the Commission to allow
applicants to opt-out of Auction 76 in order to be free of anti-
collusion prohibition, so long as bidder certifies that its decision
has not been based on discussion with other parties concerning auction
strategy or post-auction market structure. As one commenter
acknowledges, reversal of the Commission's determination on this issue
would need to be addressed by full Commission. As such, the Bureau
cannot implement such a change in this proceeding.
147. Other Issues. The Bureau concluded in the rulemaking
proceeding that the information disclosure procedures established for
this auction will not interfere with the administration of or
compliance with the Commission's anti-collusion rule. Section
1.2105(c)(1) of the Commission's rules provides that after the short-
form application filing deadline, all applicants for licenses in any of
the same geographic license areas are prohibited from disclosing to
each other in any manner the substance of bids or bidding strategies
until after the down payment deadline, subject to specified exceptions.
When limited information procedures are not in effect for a particular
auction, each applicant's selection of licenses has been publicly
available through the Commission's online short-form application
database. In Auction 73 and Auction 76, however, the Commission will
not disclose information regarding license selection or the amounts of
bidders'' upfront payments and bidding eligibility. As in the past, the
Commission will disclose the other portions of applicants'' short-form
applications, through its online database and certain application-based
information through public notices. Thus, even without information
regarding license selection, applicants would be able to comply with
Sec. 1.2105(c) by not disclosing bids or bidding strategies to any
other applicants in the auction. This approach, however, could inhibit
otherwise lawful communications with applicants for licenses in other
geographic license areas, which the Commission's anti-collusion rule
permits.
[[Page 62376]]
148. Consequently, the Bureau will notify separately each applicant
with short-form applications to participate in a pending auction
whether applicants in Auction 73 and Auction 76 have applied for
licenses in any of the same geographic areas as that applicant.
Specifically, after the Bureau conducts its initial review of
applications to participate in Auction 73 and Auction 76, each
applicant with a pending short-form application will receive a letter
that lists the applicants in Auction 73 and Auction 76 that have
applied for licenses in any of the same geographic areas as the
applicant. The list will identify the Auction 73 and Auction 76
applicant(s) by name but will not list the license selections of the
Auction 73 and Auction 76 applicant(s). As in past auctions, additional
information regarding applicants in Auction 73 and Auction 76 that is
needed to comply with Sec. 1.2105(c), e.g., the identities of
controlling interest(s) in an applicant and ownership interests greater
than ten percent, will be available through the publicly accessible
online short-form application database.
149. When completing short-form applications, applicants should
avoid any statements or disclosures that may violate the Commission's
anti-collusion rule, particularly in light of the Commission's
procedures regarding the availability of certain information in Auction
73 and Auction 76. While applicants'' license selection will not be
disclosed until after Auction 73 and Auction 76 close, the Commission
will disclose other portions of short-form applications through its on-
line database and public notices. Accordingly, applicants should avoid
including any information in their short-form applications that might
convey information regarding license selections. For example,
applicants should avoid using applicant names that refer to licenses
being offered, referring to certain licenses or markets in describing
bidding agreements, or including any information in attachments that
may otherwise disclose applicants'' license selections. If an applicant
is found to have violated the Commission's rules or antitrust laws in
connection with its participation in the competitive bidding process,
the applicant may be subject to various sanctions, including forfeiture
of its upfront payment, down payment, or full bid amount and
prohibition from participating in future auctions.
iii. Eligibility and Activity Rules
150. The Bureau will use upfront payments to determine initial
(maximum) eligibility (as measured in bidding units) for Auction 73.
The amount of the upfront payment submitted by a bidder determines
initial bidding eligibility, the maximum number of bidding units on
which a bidder may be active. Each license is assigned a specific
number of bidding units listed in Attachment A of the Auctions 73 and
76 Procedures Public Notice. Bidding units for a given license do not
change as prices rise during the auction. A bidder's upfront payment is
not attributed to specific licenses or packages. Rather, a bidder may
place bids on any of the licenses selected on its FCC Form 175 as long
as the total number of bidding units associated with those licenses
does not exceed its current eligibility. Eligibility cannot be
increased during Auction 73; 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. At
a minimum, an applicant's upfront payment must cover the bidding units
for at least one of the licenses it selected on its FCC Form 175 for
Auction 73. The total upfront payment does not affect the total dollar
amount a bidder may bid on any given license or package of licenses.
151. A bidder is eligible to bid on a package of licenses if it
selected all the licenses in the package on its FCC Form 175 and has
sufficient eligibility. The bidding units for a package are calculated
by adding together the bidding units of the individual licenses that
make up the package.
152. 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. Bidders are required to be active on a specific
minimum percentage of their current bidding eligibility during each
round of the auction.
153. A bidder's activity level in a round is the sum of the bidding
units associated with any licenses covered by new and provisionally
winning bids. The bidding units associated with a given license will be
counted only once in a bidder's activity calculation for the round,
even if the bidder places a bid on the license and a bid on a package
containing the license. For example, consider two licenses, A and B,
each having 10,000 bidding units. Assuming a bidder bids on license A
as well as the package AB in a given round, the bidder's activity would
be 20,000 bidding units, calculated as the sum of the bidding units of
licenses A and B. Note that the bidding units for license A are not
counted twice. A bidder is considered active on a license in the
current round if it is either the provisionally winning bidder at the
end of the previous bidding round and does not withdraw the
provisionally winning bid in the current round, or if it submits a bid
in the current round.
154. The minimum required activity is expressed as a percentage of
the bidder's current eligibility, and increases by stage as the auction
progresses. Because these procedures have proven successful in
maintaining the pace of previous auctions, the Commission adopts them
for Auction 73. 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 additional bids in the
auction.
155. With package bidding in the C Block, it is possible that a
bidder may have an activity level that exceeds its eligibility, since
the FCC Auction System considers bids placed in 60 previous rounds when
determining the provisionally winning set. If a non-winning bid placed
in a previous round later becomes provisionally winning, the bidder
will receive activity for the newly provisionally winning bid. When
added to the activity for the bidder's provisionally winning bids from
the previous round and its new bids--which were limited by the bidder's
current bidding eligibility--the total activity may exceed the bidder's
current bidding eligibility. If this occurs, the bidder's current
bidding eligibility will not increase to accommodate the additional
activity. In subsequent rounds, the bidder will not be permitted to
place new bids if its total activity from provisionally winning bids
exceeds its bidding eligibility.
156. A commenter argues that the Bureau should allow bidders
limited additional eligibility so that they can continue to bid on
licenses or packages that become provisionally winning in later rounds.
The Bureau finds that allowing maximum eligibility to be increased in
this way may provide an incentive for bidders to intentionally place
bids that are likely to become provisionally winning in later rounds,
so as to increase their eligibility outside of the usual pre-auction
process that requires them to purchase eligibility with upfront
payments. Thus, the Bureau will not modify its procedures as suggested.
[[Page 62377]]
157. A commenter proposes that the Bureau modify the activity rules
to reduce the difference between the number of bidding units associated
with the C Block licenses and the bidding units associated with the D
Block license. It maintains that the C and D Blocks are in many ways
substitutes, but notes that since the C Block has a bandwidth of 22 MHz
compared to 10 MHz for the D Block, the C Block has many more bidding
units. The commenter contends that because of the activity rule, the
effect of this difference is to harm bidders that alternatively bid in
the C and D Blocks. It therefore favors the modification of the
activity rules through the attribution of a total bandwidth of 22 MHz
to the D Block. The commenter maintains that this would enable bidders
to freely alternate between the C and D Blocks, increasing auction
efficiency and revenues. Another commenter criticizes this proposal on
several grounds, including arguing that the proposal would depart from
established auction practice and is inconsistent with the reserve
prices. The Bureau declines to adopt the proposal. The Bureau finds
that its current method of determining bidding units, combined with its
activity and eligibility rules, offer bidders adequate opportunities to
change bidding strategies.
iv. Auction Stages
158. In the 700 MHz Auction Public Notice, the Bureau proposed to
conduct the auction in two stages and employ an activity rule. The
Bureau further proposed that, in each round of Stage One, a bidder
desiring to maintain its current bidding eligibility would be required
to be active on licenses representing at least 80 percent of its
current bidding eligibility. Finally, the Bureau proposed that in each
round of Stage Two, a bidder desiring to maintain its current bidding
eligibility would be required to be active on at least 95 percent of
its current bidding eligibility.
159. Some commenters favor the addition of a third stage with
either a reduced eligibility threshold (before the two proposed stages)
or a higher threshold (after the two proposed stages). According to a
commenter small and regional bidders need time to acquaint themselves
with the many new features and procedures in Auction 73. Therefore, the
commenter proposes creating a new Stage One with a 60 percent activity
threshold and moving the 80 percent and 95 percent activity thresholds
to Stages Two and Three, respectively. While some other commenters
support adopting a 60 percent activity threshold for Stage One, one
commenter opposes any minimum activity level decrease and instead
proposes a Stage Three with a 98 percent activity threshold.
160. The Bureau finds that adding a new initial first stage with a
lower eligibility threshold is at this time unnecessary. When
determining the bidding schedule, the Bureau needs to balance the
desirability of concluding the auction reasonably swiftly with the
benefit in giving bidders sufficient time for placing bids during
rounds and for analysis between rounds. The Bureau finds no compelling
reason to create a new first stage that requires only a 60 percent
eligibility requirement. Such a lower activity requirement would
unnecessarily prolong the auction by allowing bidders to postpone
bidding activity until the later rounds of the auction. Establishing an
80 percent activity threshold to start the auction, and retaining the
discretion to make changes as circumstances warrant represents the best
compromise between allowing auction participants time to learn from the
information revealed in the auction, and requiring them to participate
actively throughout the auction.
161. The Bureau likewise sees no need to establish, at this time, a
third stage with a 98 percent eligibility requirement, finding that a
95 percent threshold should be a sufficiently high activity requirement
for the final stage of the auction. In past auctions, the Bureau
established three stages using 80 percent, 90 percent, and 98 percent
activity requirements. In many of these auctions, however, implementing
Stage Two had little effect in terms of increasing bidding activity,
and Stage Three was implemented shortly thereafter. Based on this
experience, the Bureau has generally moved away from three-stage
auctions in favor of two-stage auctions. Moreover, a 95 percent
threshold allows bidders a little more flexibility in fulfilling their
activity requirements during the final stage of the auction. Therefore,
the Bureau declines to establish a 98 percent activity threshold at
this time. The Bureau has the discretion to further alter the activity
requirements before and/or during the auction as circumstances warrant,
and also has other mechanisms by which it may influence the speed of an
auction. The Bureau finds that, for now, two stages for an activity
requirement adequately balances the desire to conclude the auction
quickly with giving sufficient time for bidders to consider the status
of the bidding and to place bids. Therefore, the Bureau adopts the two
stages.
162. Stage One: During the first stage of the auction, a bidder
desiring to maintain its current bidding eligibility will be required
to be active on licenses representing at least 80 percent of its
current bidding eligibility in each bidding round. Failure to maintain
the required activity level will result in the use of an activity rule
waiver or, if the bidder has no activity rule waivers remaining, a
reduction in the bidder's bidding eligibility in the next round. During
Stage One, reduced eligibility for the next round will be calculated by
multiplying the bidder's current round activity (the sum of bidding
units of the bidder's provisionally winning bids and bids during the
current round) by five-fourths (5/4).
163. Stage Two: During the second stage of the auction, a bidder
desiring to maintain its current bidding eligibility is required to be
active on 95 percent of its current bidding eligibility. Failure to
maintain the required activity level will result in the use of an
activity rule waiver or, if the bidder has no activity rule waivers
remaining, a reduction in the bidder's bidding eligibility in the next
round. During Stage Two, reduced eligibility for the next round will be
calculated by multiplying the bidder's current round activity (the sum
of bidding units of the bidder's provisionally winning bids and bids
during the current round) by twenty-nineteenths (20/19). Since activity
requirements increase in Stage Two, bidders must carefully check their
activity during the first round following a stage transition to ensure
that they are meeting the increased activity requirement. This is
especially critical for bidders that have provisionally winning bids
and do not plan to submit new bids. In past auctions, some bidders have
inadvertently lost bidding eligibility or used an activity rule waiver
because they did not re-verify their activity status at stage
transitions. Bidders may check their activity against the required
activity level by logging into the FCC Auction System.
164. Because the foregoing procedures have proven successful in
maintaining the proper pace in previous auctions, the Bureau adopts
them for Auction 73.
v. Stage Transitions
165. In the 700 MHz Auction Public Notice, the Bureau proposed that
the auction would advance to the next stage (i.e., from Stage One to
Stage Two) after considering a variety of measures of auction activity,
including, but not limited to, the percentages of licenses (as measured
in bidding units) on which there are new bids, the number of new bids,
and the increase in revenue. The
[[Page 62378]]
Bureau further proposed that the Bureau would retain the discretion to
change the activity requirements during the auction. For example, the
Bureau could decide not to transition to Stage Two if it believes the
auction is progressing satisfactorily under the Stage One activity
requirement, or to transition to Stage Two with an activity requirement
that is higher or lower than the 95 percent. The Bureau proposed to
alert bidders of stage advancements by announcement during the auction.
166. The Bureau adopts this proposal for stage transitions. Thus,
the auction will start in Stage One. The Bureau will regulate the pace
of the auction by announcement. The Bureau retains the discretion to
transition the auction to Stage Two, add an additional stage with a
higher activity requirement, not to transition to Stage Two, or to
transition to Stage Two with an activity requirement that is higher or
lower than 95 percent. This determination will be based on a variety of
measures of auction activity, including, but not limited to, the number
of new bids and the percentages of licenses (as measured in bidding
units) on which there are new bids.
vi. Activity Rule Waivers
167. In the 700 MHz Auction Public Notice, the Bureau proposed that
each bidder in the auction be provided with three activity rule
waivers. Commenters proposed two variations on the Bureau's proposal
regarding activity rule waivers. The Bureau declines to adopt these
alternatives and adopts the proposed three activity rule waivers per
bidder.
168. One commenter advocates providing bidders with two additional
activity rule waivers to allow more time for decision-making during the
auction. The commenter suggests that the two additional waivers would
provide bidders, especially those that are consortia, greater
flexibility during the auction. Another commenter opposes any
additional activity rule waivers because, it argues, no clear
connection exists between having additional waivers and decision-
making. The Bureau agrees with the opposing commenter that the request
for additional waivers does not demonstrate why the proposed three
waivers are insufficient, or why consortia might have a greater need
for flexibility than any other bidder. The Bureau is satisfied that
providing three waivers over the course of the auction will give
bidders a sufficient number of waivers and flexibility, while also
safeguarding the integrity of the auction.
169. Another commenter proposes a limit on activity rule waivers
for bidders that are closely affiliated. That commenter expresses
concern with bidders entering more than one entity in the auction in
order to receive more than standard three activity rule waivers,
allowing it to preserve bidding eligibility for later in the auction.
The commenter proposes a total limit of three activity rule waivers for
all closely affiliated applicants, i.e., under common control, applying
for overlapping licenses. Still another commenter disagrees noting
that, while affiliated bidders may get twice the number of waivers,
they would use them twice as fast as a single bidder in rounds in which
they were not bidding. The Bureau agrees with the other commenter that
no clear advantage seems possible. The Bureau also adds that entities
are prohibited from submitting more than one application. This measure
prevents bidders from entering multiple entities while permitting
legitimate business plans that entail common control among more than
one applicant.
170. Therefore, the Bureau adopts its proposal to provide bidders
with three activity rule waivers. Bidders may use an activity rule
waiver in any round during the course of the auction. Use of an
activity rule waiver preserves the bidder's current bidding eligibility
despite the bidder's activity in the current round being below the
required minimum activity level. An activity rule waiver applies to an
entire round of bidding and not to a particular license. Activity rule
waivers can be either applied proactively by the bidder (a proactive
waiver) or applied automatically by the FCC Auction System (an
automatic waiver) 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.
171. The FCC Auction System assumes that bidders with insufficient
activity 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) There
are no activity rule waivers available; or (2) the bidder overrides the
automatic application of a waiver by reducing eligibility. If a bidder
has no waivers remaining and does not satisfy the activity requirement,
the FCC Auction System will permanently reduce the bidder's
eligibility, possibly curtailing or eliminating the bidder's ability to
place additional bids in the auction.
172. A bidder with insufficient activity that wants to reduce its
bidding eligibility rather than use an activity rule waiver must
affirmatively override the automatic waiver mechanism during the
bidding round by using the reduce eligibility function in the FCC
Auction System. In this case, the bidder's eligibility is permanently
reduced to bring the bidder into compliance with the activity rules.
Once eligibility has been reduced, a bidder will not be permitted to
regain its lost bidding eligibility even if the round has not yet
ended.
173. Finally, 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 waiver (using the apply
waiver function in the FCC Auction System) during a bidding round in
which no bids are placed or withdrawn, the auction will remain open and
the bidder's eligibility will be preserved. However, an automatic
waiver applied by the FCC Auction System in a round in which there are
no new bids, withdrawals, or proactive waivers 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. It is important
for bidders to understand that applying a waiver is irreversible. Once
a bidder submits a proactive waiver, the bidder cannot unsubmit the
waiver even if the round has not yet ended.
vii. Auction Stopping Rules
174. For Auction 73, the Bureau proposed to employ a simultaneous
stopping rule approach. A simultaneous stopping rule means that all
licenses remain available for bidding until bidding closes
simultaneously on all licenses. More specifically, bidding will close
simultaneously on all licenses and packages after the first round in
which no bidder submits any new bids, applies a proactive waiver, or
withdraws any provisionally winning bids.
175. The Bureau also sought comment on alternative versions of the
simultaneous stopping rule for Auction 73: Option 1. The auction would
close for all licenses after the first round in which no bidder applies
a waiver, withdraws a provisionally winning bid, or places any new bids
on any license or package on which it is not the provisionally winning
bidder. Thus, absent any other bidding activity, a bidder placing a new
bid on a license or a package of licenses for which it is the
provisionally winning bidder would not keep the auction open under this
modified stopping rule; Option 2. The auction would end after a
specified
[[Page 62379]]
number of additional rounds. If the Bureau invokes this special
stopping rule, it will accept bids in the specified final round(s) and
the auction will close; and Option 3. The auction would remain open
even if no bidder places any new bids, applies a proactive waiver, or
withdraws any provisionally winning bids in a round. In this event, the
effect will be the same as if a bidder had applied a waiver. Thus, the
activity rule will apply as usual, and a bidder with insufficient
activity will either use an activity rule waiver (if it has any left)
or lose bidding eligibility.
176. The Bureau proposed to exercise these options only in
circumstances such as where the auction is proceeding unusually slowly
or quickly, where there is minimal overall bidding activity, or where
it appears likely that the auction will not close within a reasonable
period of time or will close prematurely, e.g., before bidders have had
an adequate opportunity to satisfy any applicable reserve prices. The
Bureau noted that before exercising these options, it is likely to
attempt to increase the pace of the auction by, for example, changing
the number of bidding rounds per day and/or changing the minimum
acceptable bids.
177. One commenter advocates explicitly adopting an alternate
stopping rule that would give bidders one final opportunity to place
bids that would meet the reserve prices. The commenter believes
adopting this measure will curb any incentive by some to bid in such a
way to avoid the reserves being met. Another commenter opposes the
proposal, given the unique nature of this auction and the complexity of
the eligibility management issues.
178. The Bureau finds that the stopping rules as proposed are
appropriate for Auction 73. The Bureau's experience in prior auctions
demonstrates that these stopping rules balance interests of
administrative efficiency and maximum bidder participation. Therefore,
Auction 73 will begin under the simultaneous stopping rule approach.
179. While the Bureau declines to adopt any of the alternate
stopping rules at this time, the Bureau retains the discretion to
employ the alternative versions of the stopping rule, with or without
prior announcement during the auction. The Bureau will not, however,
employ the first alternative (i.e., Option 1) until the reserve prices
have been met. This will allow bidders to continue to place new bids
even if they are the provisional winning bidders. Bidders, therefore,
will continue to have the opportunity to place bids until the reserve
prices are met.
viii. Auction Delay, Suspension, or Cancellation
180. In the 700 MHz Auction Public Notice, the Bureau proposed
that, by public notice or by announcement during the auction, the
Bureau may delay, suspend, or cancel the auction in the event of
natural disaster, technical obstacle, 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. The Bureau received no comment on this
issue.
181. Because the Bureau's approach to notification of delay during
an auction has proven effective in resolving exigent circumstances in
previous auctions, the Bureau adopts its proposed rules regarding
auction delay, suspension, or cancellation. By public notice or by
announcement during the auction, the Bureau may delay, suspend, or
cancel the auction in the event of natural disaster, technical
obstacle, 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 cases, the Bureau, in its 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 Bureau to delay or suspend
the auction. The Bureau emphasize that exercise of this authority is
solely within the discretion of the Bureau, and its use is not intended
to be a substitute for situations in which bidders may wish to apply
their activity rule waivers.
B. Bidding Procedures
i. Round Structure
182. The initial schedule of bidding rounds will be announced in
the public notice listing the qualified bidders, which is released
approximately 10 days before the start of the auction. Each bidding
round is followed by the release of round results. Multiple bidding
rounds may be conducted in a given day. Details regarding round results
formats and locations will also be included in the qualified bidders
public notice.
183. The Bureau has 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 Bureau may increase or decrease the amount of time for
the bidding rounds, the amount of time between rounds, or the number of
rounds per day, depending upon bidding activity and other factors.
184. A commenter advocates limiting the number of rounds per day in
the first phase (Stage One) of Auction 73. More than four rounds in the
auction's early stage would place substantial strains on consortia's
more deliberate decision-making processes. The commenter, however,
suggests lifting the limit for Stage Two. Another commenter opposes
limiting the number of rounds per day. The Bureau agrees with the
opposing commenter that lifting the limited for Stage Two fails to
demonstrate why consortia would be disadvantaged vis-[agrave]-vis other
bidders unless Stage One had a maximum of four rounds per day. The
Bureau add that the commenter does not provide any rationale why, if a
limit were necessary to allow effective decision-making amongst
consortia members, it would not hold true in Stage Two of the auction,
particularly when the stakes are even higher. Therefore, the Bureau
declines to adopt any limit on rounds per day. Rather, the Bureau will
continue to exercise discretion with regard to the number of rounds per
day under the particular circumstances of the auction.
ii. Reserve Price and Minimum Opening Bids
185. Section 309(j) of the Communications Act of 1934, as amended,
calls upon the Commission to prescribe methods by which a reasonable
reserve price will be required or a minimum opening bid established
when applications for FCC licenses are subject to auction (i.e.,
because they are mutually exclusive), unless the Commission determines
that a reserve price or minimum opening bid is not in the public
interest. Consistent with this mandate, the Commission directed the
Bureau to seek comment on the use of a minimum opening bid and/or
reserve price prior to the start of each auction. Among other factors,
the Bureau must consider the amount of spectrum being auctioned, levels
of incumbency, the availability of technology to provide service, the
size of the geographic service areas, the extent of interference with
other spectrum bands, and any other relevant factors that could have an
impact on the spectrum being auctioned. The Commission concluded that
the Bureau should have the discretion to employ either or both of these
mechanisms for future auctions.
a. Reserve Price
186. In the 700 MHz Second Report and Order, the Commission
concluded
[[Page 62380]]
that establishing separate aggregate reserve prices for all the
licenses in each block of the 700 MHz Band spectrum to be offered in
Auction 73 will serve the public interest. More specifically, the
Commission directed the Bureau to adopt and publicly disclose block-
specific aggregate reserve prices, pursuant to its existing delegated
authority and the regular pre-auction process and consistent with the
Commission's conclusions in the 700 MHz Second Report and Order. In the
700 MHz Auction Public Notice, the Bureau proposed that the sum of the
provisionally winning gross bids for all licenses in each block must
equal or exceed the disclosed aggregate reserve price for the block
before the Commission will assign licenses in that block. More
specifically, the Bureau proposed the following block-specific
aggregate reserve prices to be used under this proposal: Block A,
$1.807380 billion; Block B, $1.374426 billion; Block C, $4.637854
billion; Block D, $1.330000 billion; Block E, $0.903690 billion. The
Bureau adopts this proposal.
187. Background. In the 700 MHz Second Report and Order, the
Commission concluded that the block-specific aggregate prices should
reflect current assessments of the potential market value of licenses
for the 700 MHz Band. The Commission directed that this assessment be
based on various factors including, but not limited to, the
characteristics of this band and the value of other recently auctioned
licenses, such as licenses for Advanced Wireless Services. The
Commission reasoned that using AWS-1 auction results might be an
appropriate guide for setting block-specific reserve prices reflecting
a conservative estimate of final market value. Spectrum in the 700 MHz
Band possesses superior propagation characteristics to AWS-1 spectrum.
In addition, as of February 18, 2009, the 700 MHz Band spectrum will be
unencumbered, while full access to AWS-1 spectrum requires the
relocation of both Government and commercial incumbent users. Thus,
other factors aside, 700 MHz Band licenses with comparable geographic
service areas and bandwidth should have a higher market value than AWS-
1 licenses.
188. The Commission expressly noted that the detailed rules
regarding the D Block license, the D Block licensee's required
construction of a network to be shared by public safety service users,
and the resulting limitations on the flexibility of the D Block
licensee, should be given weight in assessing the D Block's potential
market value. Based solely on geographic area and spectrum block size,
AWS-1 auction results might suggest a D Block reserve price of $1.7
billion. However, in light of the D Block license conditions essential
to the public safety purpose of the public/private partnership, it
might be appropriate to expect bidders to bid only about 75 percent to
80 percent of such an amount, or about $1.33 billion. In addition, when
determining relative valuation of other blocks, the Bureau should
consider the relative valuation of differing blocks in the recent
auction of AWS-1 licenses.
189. The Commission further noted that in setting block-specific
reserve prices, the Bureau should also give consideration to Congress's
view as to the value of the spectrum, as reflected in Congressional
mandates regarding the uses for revenues from this auction.
190. Comments. A commenter contends that the proposed reserve
prices are excessive and proposes an alternative set of reserve prices
roughly equal to one-fifth the reserve prices proposed by the Bureau.
The commenter asserts that the Bureau's proposed reserve price
represent an estimate of final license values and that establishing
such a reserve, particularly in light of the potential subsequent
auction of alternative licenses, is misguided. The commenter further
argues that the Bureau's reliance on bidding for AWS licenses is
misplaced in that it does not take into account subsequent changes in
the credit markets or significant differences between AWS licenses and
700 MHz licenses, which should reduce the relative value of the 700 MHz
licenses.
191. In reply, and in opposition to the comments, two commenters
echo the Commission's observation that that the value of the 700 MHz
licenses in fact should be greater than the AWS licenses and contend
that the Bureau's proposed reserve prices reflect a conservative
estimate of the likely value of the 700 MHz licenses. As one commenter
notes, attempts to take into account the fluctuating state of the
credit market are not appropriate, given the degree of uncertainty
inherent in such attempts. While another commenter notes that the
Bureau's proposal takes into account conditions placed on the various
blocks of 700 MHz spectrum. Finally, the same commenter notes that the
proposed reserves are consistent with Congressional expectations.
192. Discussion. The Bureau does not find the commenters arguments
for reducing the proposed reserve prices persuasive. The commenter errs
in asserting that the Bureau's proposed reserves seek to estimate the
final value of the licenses. The Bureau has not attempted to determine
the value of the licenses but will rely on the auction process to do
so. Rather, pursuant to statutory mandate and Commission direction, the
Bureau proposed reserve prices intended to represent a likely low end
of the licenses' potential value, in order to assure that the public
recovers a portion of the value of the public spectrum resource.
Consistent with the guidance of the Commission, the Bureau adopts the
proposal and will use the following block-specific aggregate reserve
prices for Auction 73: Block A, $1.807380 billion; Block B, $1.374426
billion; Block C, $4.637854 billion; Block D, $1.330000 billion; Block
E, $0.903690 billion. Together, these block-specific aggregate reserves
sum to $10.053350 billion.
193. The D Block reserve price of $1.33 billion is discounted from
an amount based more closely on AWS-1 bids because of the unique
service rules and related obligations imposed upon the D Block
licensee. For the A, B, C, and E Blocks, the Bureau based the reserve
prices on the respective market value reflected in AWS-1 bids, adding
one percent, and rounding to the nearest thousand dollars. Because of
the value-enhancing propagation characteristics and relatively
unencumbered nature of the 700 MHz Band spectrum, the Bureau believes
these are conservative estimates, at the low end of the spectrum's
potential value. Given this approach, there is no need to further
reduce the proposed reserves based on the specific rules applicable to
licenses for the A, B, C, and E Blocks.
194. As proposed in the 700 MHz Auction Public Notice, the Bureau
will use gross bid amounts rather than net bid amounts in determining
whether the block-specific reserve prices have been met. No commenter
suggested any alternative to this aspect of the Bureau's reserve price
procedures. Anonymous bidding procedures that will be used in Auction
73 preclude disclosing the identity of bidders and the net amounts of
bids made until after the close of bidding. Consequently, if net bids
determined whether or not reserves had been met, publicly disclosing
whether reserves had been met might inadvertently disclose whether
applicants eligible for bidding credits held certain provisionally
winning bids, potentially disclosing the identity of the bidders. For
example, presuming net bids determined whether or not the reserve is
met, for the reserve not to be met when the provisionally winning bid
on the D Block license is for $1.5 billion dollars, the party making
the bid must be an applicant eligible for a bidding credit. Depending
on the number of
[[Page 62381]]
parties eligible for a bidding credit competing for the D Block
license, this information might disclose the identity of the
provisionally winning bidder, thwarting the Commission's anonymous
bidding procedures. Moreover, net bid amounts, unlike gross bid
amounts, may decline even as the gross bids increase. For example, a
party not eligible for a bidding credit might hold a provisionally
winning bid of $1.4 billion on the D Block license, in which case the
reserve would be met. However, in the next round, a party eligible for
a bidding credit might place a provisionally winning bid of $1.5
billion, increasing the value bid for the license. However, because the
party eligible for a bidding credit might have a net bid less than the
reserve, now the reserve would not be met. The Bureau believes that it
serves the public interest for bidders to know when the reserve is met
and to know that once a reserve is met that fact will not change. This
certainty will give bidders greater confidence in the significance of
their bids and therefore may enhance competition. For these reasons,
the Bureau will use gross bid amounts rather than net bid amounts in
determining whether block-specific reserve prices have been met.
195. The Bureau will count the gross amount of any withdrawn bids
for licenses toward meeting the reserve prices for several reasons.
First, withdrawn bids presumably reflect sincere valuations of the
license, notwithstanding the withdrawal and the reserve is intended to
measure that valuation. Second, counting withdrawn bids assures that
once a reserve is met that fact will not change. Third, if the Bureau
did not count withdrawn bids, bidders could attempt to use bid
withdrawals as a strategic mechanism to prevent auction results from
satisfying a reserve in order to force an auction of alternative
licenses.
196. The Commission's rules and the procedures for Auction 73 allow
each bidder one round in which the bidder may withdraw provisionally
winning bids for licenses not subject to package bidding. Allowing
bidders to withdraw provisionally winning bids enables bidders to
respond to price discovery as the auction develops by adopting
alternative plans, thereby encouraging bidders to compete at early
stages in the auction. Accordingly, the Bureau presumes that bids
placed and withdrawn reflect bidders' sincere valuations of the
relevant licenses. Consistent with this presumption, the Commission's
rules require bidders to cover any shortfall if a subsequent winning
bid for a license is less than a withdrawn provisionally winning bid.
197. Second, counting withdrawn bids is essential to assuring that
once a reserve price is met, that fact does not change. With regards to
bid withdrawals, when a bid is withdrawn, there is no provisionally
winning bid on that license until a new high bid is placed on it in a
subsequent round. Accordingly, if the Bureau does not count withdrawn
bids, then the amount counted for a particular license toward meeting
the reserve price could drop from whatever the withdrawn bid is to
zero. For example, if a provisionally winning bid on the D Block
license of $2.66 billion is withdrawn and only a provisionally winning
high bid is counted toward the reserve, the reserve will not be met,
notwithstanding the fact that a round before there was a provisionally
winning bid in an amount equal to twice the reserve.
198. Third, if the Bureau does not count a withdrawn bid toward
meeting the reserve, the Bureau would allow a bidder's decision to
withdraw a bid to affect whether or not the reserve price has been met.
As the foregoing example indicates, a bidder could outbid rivals for a
license in amounts far in excess of the reserve and then, at the last
minute, withdraw its bid in an attempt to prevent the auction results
from meeting the applicable reserve price. If the withdrawing bidder's
competitors had moved to other blocks due to the withdrawn bid, they
may no longer have an interest or the budget to return and bid again on
the license subject to the withdrawal. In that event, the withdrawal
might succeed at preventing the reserve from being met and at forcing
an auction of alternative licenses.
199. The Bureau will count the gross amount of either the
provisionally winning bid on a license, or on a package that includes
the license, or, if higher, the highest withdrawn provisionally winning
bid on a license when determining whether a reserve price has been met.
The Bureau will not count more than one bid per license, be it a
provisionally winning or withdrawn bid, towards meeting the relevant
reserve price. In the case of licenses with multiple withdrawn bids or
a withdrawn bid and a provisionally winning bid, the Bureau will count
the highest of the gross bid amounts toward the reserve price. Other
than the gross amounts of withdrawn bids, licenses without
provisionally winning bids will not count towards meeting a reserve
price.
200. Finally, the Bureau will issue an announcement in the FCC
Auction System stating that a reserve has been met immediately
following the first round in which that occurs. Both the registered
bidders and the general public will be able to view such announcements
through the Commission's Web site. The current total of relevant
provisionally winning bids may not determine whether or not the reserve
has been met, given that the Bureau also will count withdrawn bids
toward meeting the reserve. By making an announcement when the reserve
is met, the Bureau will free auction observers and participants
therefore from a need to monitor withdrawn bids over the course of the
auction in order to determine whether the reserve has been met and
avoid any uncertainty.
b. Minimum Opening Bids
201. In addition to proposing aggregate reserve prices, the Bureau
proposed in the 700 MHz Auction Public Notice to establish minimum
opening bids for each license, while retaining discretion to lower the
minimum opening bids. Specifically, for Auction 73, the Bureau proposed
to calculate minimum opening bid amounts as follows: (1) For licenses
covering geographic areas in the 50 states for which all of the
corresponding licenses offered in Auction 66 for the exact same
geographic area were sold, 25 percent of the dollars per MHz per
population (MHz-pop) of the net amounts of the Auction 66 winning bids
for licenses covering the same geographic license area, subject to a
minimum of $0.03/MHz-pop; (2) for licenses covering geographic areas
for which a corresponding Auction 66 license was unsold, $0.01/MHz-pop;
(3) for licenses covering the Gulf of Mexico, $1,000 per MHz; and
(4)for all remaining licenses, $0.01/MHz-pop. For all licenses, the
results of the above calculations are subject to a minimum of $500 per
license and are rounded using the Bureau's standard rounding procedure.
The Bureau proposed to calculate the minimum opening bid for any
package as the sum of the minimum opening bids for the licenses in the
package. The Bureau sought comment on this proposal and, in the
alternative, whether, consistent with Section 309(j), the public
interest would be served by having no minimum opening bids.
202. The Bureau received a range of comments concerning the
proposed minimum opening bids. One commenter supports the Bureau's
proposed method for establishing minimum opening bid amounts. However,
another commenter advocates calculating minimum opening bids on the
same basis that was used for Auction 66, rather than on one that uses
[[Page 62382]]
the winning bids from that auction. A third commenter opposes using
minimum opening bids based on Auction 66 results, arguing that the 700
MHz Band spectrum is not readily comparable to that offered in Auction
66. It maintains that some prices in that auction resulted from one-
time bidding wars, so that RSA minimum opening bids based on these
prices would be overly high and harm small and rural carriers. A
commenter also contends that the proposed minimum opening bids would
discourage these carriers from participating. It proposes that the
minimum opening bids from Auction 66 should generally be used. In
addition, the same commenter claims that reducing the minimum opening
bids would prevent the auction from proceeding at too rapid a pace. RTG
agrees that the proposed minimum opening bids for some RSAs are too
high, and proposes that these be reduced to either the same level as
the upfront payments or capped at 25 percent of the median net high bid
for all RSAs sold in Auction 66. Another commenter generally criticizes
as arbitrary the proposals to lower the minimum opening bids to the
value of the upfront payments, but agrees that certain RSA minimum
opening bids may be overly high. A commenter expresses support for the
argument that reducing the minimum opening bids will make the auction
less likely to proceed overly quickly.
203. The Bureau finds that the minimum opening bid amounts proposed
in the 700 MHz Auction Public Notice are generally appropriate. While
the record indicates that the proposed minimum opening bid amounts are
higher than many parties would like, the proposed amounts better enable
the Commission to meet the statutory objective of recovering for the
public a portion of the value of the spectrum resource made available
for commercial use. The proposed minimum opening bid amounts also will
help the Commission meet its statutory deadlines for auctioning this
spectrum.
204. In response to comments, however, the Bureau modifies the
proposed minimum opening bids for certain rural licenses. The Bureau
recognize concerns commenters raised regarding proposed minimum opening
bids and the potential for some licenses, particularly those in rural
areas, to remain unsold after the auction. Thus, for RSA licenses only
(CMAs 307-734), minimum opening bids will not be greater than $0.10/
MHz-pop. Accordingly, the Bureau adopts the revised minimum opening bid
amounts and set the minimum opening bids using the revised formulas as
follows: (1) For licenses covering geographic areas in the 50 states
for which all of the corresponding licenses offered in Auction 66 for
the exact same geographic area were sold, 25 percent of the dollars per
MHz per population (MHz-pop) of the net amounts of the Auction 66
winning bids for licenses covering the same geographic license area,
subject to a minimum of $0.03/MHz-pop, for RSA licenses only, subject
to a maximum of $0.10/MHz-pop; (2) for licenses covering geographic
areas for which a corresponding Auction 66 license was unsold, $0.01/
MHz-pop; (3)for licenses covering the Gulf of Mexico, $1,000 per MHz;
and (4) for all remaining licenses, $0.01/MHz-pop.
205. Two commenters suggest that the minimum opening bid for the D
Block should be set at its reserve price since it is only one license
and will not be assigned if the reserve is not met. Another commenter
opposes this suggestion, arguing that setting the D Block minimum
opening bid at the reserve bid would deny bidders the opportunity to
determine the relative value of the D Block, and may even hurt the
winning bidder's ability to finance its bid for the D Block. The Bureau
agrees that there may be value, to bidders and others, in accepting
bids for the D Block short of the reserve. Therefore, the Bureau adopts
the minimum opening bid for the D Block as proposed in the 700 MHz
Auction Public Notice.
206. The Commission did not receive any comments addressing the
proposal that the Bureau retain the discretion to reduce minimum
opening bid amounts. The Bureau adopts this proposal. The minimum
opening bid amounts are reducible at the discretion of the Bureau. The
Bureau emphasize, however, that such discretion will be exercised, if
at all, sparingly and early in the auction, i.e., before bidders lose
all activity waivers. During the course of the auction, the Bureau will
not entertain requests to reduce the minimum opening bid amount on
specific licenses or packages.
207. The specific minimum opening bid amounts for each license
available in Auction 73 calculated pursuant to the procedures set forth
in Attachment A of the Auctions 73 and 76 Procedures Public Notice.
iii. Bid Amounts
208. In the 700 MHz Auction Public Notice, the Bureau proposed that
in each round, eligible bidders be able to place a bid on a given
license or package using one or more predefined bid amounts. Under the
proposal, the FCC Auction System interface will list the acceptable bid
amounts for each license or package. A commenter proposed best and
final bid procedures to allow bidders a chance to enter their own bid
amounts, if they wish to bid more for a license but less than the
minimum acceptable bid increment would require. The commenter believes
adopting a best and final bid procedure would give bidders a better
opportunity to bid up to the full amount of their final license
valuations. Two commenters oppose creating this best and final bid
procedure because it may encourage gaming the auction system and would
be unfair to bidders that have a provisionally winning bid. The Bureau
recognize that there may be circumstances under which the proposed
procedure could enhance the economical efficiency of the auction, but
find that the costs in terms of increased auction complexity and
opportunity for anti-competitive signaling would outweigh the benefits
in Auction 73. The Bureau adopts the proposal set out in the 700 MHz
Auction Public Notice.
209. Minimum Acceptable Bids. Under the Bureau's proposed
procedures, the first of the acceptable bid amounts is called the
minimum acceptable bid amount. The minimum acceptable bid amount for a
license will be equal to its minimum opening bid amount until there is
a provisionally winning bid for the license or package that includes
the license. The minimum acceptable bid amount for a package will be
the sum of the minimum acceptable bid amounts for the licenses in the
package. Minimum acceptable bids are calculated based on current price
estimates and an activity-based formula.
210. Current Price Estimates. Under the proposed HPB auction
procedures, after there is a provisionally winning bid for a license,
the FCC will determine a current price estimate (CPE) for each license
in each round as a basis for calculating minimum acceptable bids. For
non-C Block licenses the CPE will be the provisionally winning bid
amount, so that minimum acceptable bids are based on provisionally
winning bid amounts, as in an SMR auction without package bidding. For
licenses in the C Block subject to HPB, if a bid on an individual
license is provisionally winning, the CPE for that license will be the
provisionally winning bid amount. If a package bid is provisionally
winning, the CPEs for individual licenses in the package will be
constructed by scaling up the bids on individual licenses so that the
sum of
[[Page 62383]]
the license CPEs equals the provisionally winning package bid. Bids are
scaled up by adding shares to the highest bid received so far in the
auction for each license in the package. These shares are proportional
to the bidding units associated with each license relative to the total
number of bidding units in the package. The proposed mechanism for
determining CPEs in an HPB auction format is described in more detail
in Attachment H of the Auctions 73 and 76 Procedures Public Notice.
211. Commenters disagree on the method for calculating the CPEs for
C Block packages. One commenter suggests using current high bids as
weights when scaling up bids. Another commenter advocates using
provisionally winning bids, not bidding units, to determine CPEs for C
Block bids while other commenters support the Bureaus proposed method
of calculating CPEs.
212. The Bureau does not agree that it should scale up license
prices using current bid amounts, since doing so may encourage
undesirable strategic bidding. Bidders would have an incentive to bid
up the prices of other licenses while holding back on the licenses they
are interested in, in order to force other license prices to bear a
larger share of the shortfall.
213. The Bureau also declines to adopt the suggestions of
commenters that it base the minimum acceptable bids for C Block REAG
licenses directly on the highest bids for those licenses. Scaling up
the minimum acceptable bid amounts for licenses in a package, so that
the sum of bids on individual licenses equals the minimum acceptable
bid on the package, mitigates the coordination or threshold problem
that may face bidders trying to compete with a large package bid in a
package bidding auction. Absent such a procedure, package bid prices
could become disproportionately large relative to the prices for the
package components, making it difficult for bidders on the individual
licenses to compete with the package bid, especially since bidders on
the individual licenses may bid cautiously, hoping that bidders on
other licenses will make up the difference required to catch up with
the package bid.
214. The Bureau does not believe that the proposed method of
calculating CPEs is overly complex. In fact, the Bureau will use HPB in
part because the mechanism for calculating CPEs is significantly
simpler than other package bidding pricing mechanisms that adequately
address coordination issues.
215. Activity-Based Formula. Under the Bureau's proposal, once CPEs
are calculated, minimum acceptable bids are then determined for each
license as the amount of the CPE plus a percentage of the CPE. The
percentage is calculated using the activity-based formula. In general,
the percentage will be higher when many bidders are bidding on a
license, or on a package containing a license, than when few bidders
are bidding on a license.
216. The percentage of the provisionally winning bid used to
establish the minimum acceptable bid amount (the additional percentage)
is calculated at the end of each round, based on an activity index
which is a weighted average of (a) the number of distinct bidders
placing a bid on the license, including package bids, in that round,
and (b) the activity index from the prior round. Specifically, the
activity index is equal to a weighting factor times the number of
bidders placing a bid covering the license in the most recent bidding
round plus one minus the weighting factor times the activity index from
the prior round. The additional percentage is determined as one plus
the activity index times a minimum percentage amount, with the result
not to exceed a given maximum. The additional percentage is then
multiplied by the CPE amount to obtain the minimum acceptable bid for
the next round.
217. The Bureau proposed initially to set the weighting factor at
0.5, the minimum percentage (floor) at 0.1 (10%), and the maximum
percentage (ceiling) at 0.2 (20%). At these initial settings, the
minimum acceptable bid for a license will be between ten percent and
twenty percent higher than the CPE (which for non-C Block licenses will
equal the provisionally winning bid), depending upon the bidding
activity covering the license. Equations and examples are shown in
Attachment G of the Auctions 73 and 76 Procedures Public Notice.
218. A number of commenters addressed the activity-based formula to
calculate minimum acceptable bids. One advocates increasing the
activity weight factor from 0.5 to, for example, 0.75, so that the
current round's activity has more weight in determining the next rounds
minimum acceptable bid and further advocates modifying the minimum
acceptable bid formula by decreasing the floor from the proposed 10
percent to 5 percent, and decreasing the ceiling from the proposed 20
percent to 10 percent. Other commenters express support for the change
in floor and ceiling percentages.
219. In the 700 MHz Auction Public Notice, the Bureau notes that it
retains discretion to limit the absolute amount by which a minimum
acceptable bid for a license may increase over the previous
provisionally winning bid--for example, the Bureau could set a $10
million cap on increases in minimum acceptable bid amounts over
provisionally winning bids--and the Bureau sought comment on the
circumstances under which the Bureau should employ such a limit. A
commenter suggested a cap on bid increments of $150 million per license
per round would help avoid problems associated with bids rising more
quickly than bidders, especially new entrants, can obtain approval for
the additional funds, and would not delay the auction significantly.
220. The Bureau recognize bidder concerns that very rapid increases
in minimum acceptable bids may potentially discourage bidder
participation, inhibit price discovery, and create bid approval issues,
especially since the minimum opening bids in Auction 73 are higher than
were the Bureau's starting bids, for example, in Auction 66. At the
same time, since the licenses initially offered in Auction 73 will not
be sold unless reserve prices are met, it will be useful for the
auction to move at a reasonably fast pace at least until reserve prices
are satisfied. The Bureau reiterates that it has the discretion to
modify minimum acceptable bid amounts--by changing the activity-based
formula parameters or by imposing or modifying a cap on the dollar
amount of bid increments--as it sees fit during the auction. Taking
commenter concerns into account, the Bureau determined that it will
retain initial floor and ceiling parameters at 10 and 20 percent,
respectively, as proposed, but the Bureau will begin the auction with a
$100 million cap on the amount of the bid increment. That is, minimum
acceptable bids for the next round generally will be between 10 and 20
percent higher than provisionally winning bids, but they will not
exceed provisionally winning bids by more than $100 million dollars.
221. Additional Bid Amounts. Any additional bid amounts are
calculated using the minimum acceptable bid amount and a bid increment
percentage. 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
ten percent, the calculation is (minimum acceptable bid amount) * (1 +
0. 1), rounded, or (minimum acceptable bid amount) * 1. 1, rounded;
[[Page 62384]]
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) * 1.2, rounded;
etc. The Bureau will round the results of these calculations and the
minimum acceptable bid calculations using the Bureau's standard
rounding procedures.
222. For Auction 73, the Bureau proposed to set the bid increment
percentage at 0. 1, so that any additional bid amounts above the
minimum acceptable bid would each be 10 percent 85 higher. For non-C
Block licenses, the Bureau proposed to begin the auction with one
acceptable bid amount per license (the minimum acceptable bid amount).
For C Block licenses subject to HPB, the Bureau proposed to begin the
auction with three acceptable bid amounts per license (the minimum
acceptable bid amount and two additional bid amounts) and one
acceptable bid amount per package (the minimum acceptable bid amount
and no additional bid amounts).
223. The Bureau received no comments on its proposal to set the bid
increment percentage at 0.1. The Bureaus adopts the proposal to begin
the auction with a bid increment percentage of 0.1.
224. Several commenters, however, advocate providing more than one
acceptable bid amount per license for the non-C Block licenses. The
Bureau is not persuaded that additional bid amounts provide bidders
with significantly more flexibility to express their valuations. The
Bureau experience with past auctions indicates that bidders rarely use
multiple increment bids as the commenters suggest--to express their
final valuations more precisely--but more frequently use jump bids as a
means of signaling other bidders. As noted in the 700 MHz Auction
Public Notice, the Bureau proposed that bidders on licenses in the C
Block be able to make multiple increment bids to ensure that bidders on
individual licenses can effectively compete with package bids, even
when there are not individual bids on one or more of the licenses in
the package. Absent that need for multiple increment bids in the non-
package bidding blocks, the Bureau will not modify its proposal.
Therefore, the Bureau will begin the auction with one acceptable bid
amount for each non-C Block license and C Block packages and three
acceptable bid amounts for each C Block license.
225. The Bureau retains the discretion to change the minimum
acceptable bid amounts, the additional bid amounts, the dollar cap on
bid increments, the number of acceptable bid amounts, and the
parameters of the formulas used to calculate minimum acceptable bid 86
amounts and additional bid amounts if it determines that circumstances
so dictate. Further, the Bureau retains the discretion to do so on a
license-by-license and package-by-package basis.
iv. Provisionally Winning Bids
226. At the end of each bidding round, a provisionally winning bid
will be determined based on which combination of bids together provides
the greatest aggregate gross amount. Provisionally winning bids at the
end of the auction become the winning bids, provided that applicable
reserve prices are met. For the 1,087 licenses not subject to package
bidding, the FCC Auction System determines a provisionally winning bid
for each license based on the highest bid amount received for the
license, taking into account the bids placed in the round and the
provisionally winning bids from the previous round. For licenses in the
C Block subject to HPB, the FCC Auction System will determine which
combination of individual and package bids yields the highest aggregate
gross bid amount, taking into consideration each bidder's highest bid
on each license or package submitted up to that point in the auction.
These bids become the provisionally winning bids for the round. Bidders
are reminded that provisionally winning bids count toward activity for
purposes of the activity rule.
227. In order to determine which combination of bids on licenses
and/or packages yields the highest aggregate bid amount in a HPB
auction, the FCC Auction System compares aggregate bid amounts across
the various levels in a recursive process. It first compares, for each
package in the second level, the sum of the highest individual license
bids from the first level with the highest bids on packages in the
second level containing those licenses. Those bids that generate the
maximum total bid amounts become provisionally winning. Attachment H of
the Auctions 73 and 76 Procedures Public Notice provides additional
detail on this procedure.
228. In the 700 MHz Auction Public Notice, the Bureau proposed to
break ties randomly. A commenter suggests that because there will be at
most a single acceptable bid amount for all but the individual C Block
licenses, there will be multiple ties, and that therefore, 87 the
Bureau should consider alternate means of breaking ties. Another
commenter opposes this proposal, arguing that adopting such a procedure
for breaking ties would result in bidders feeling pressure to submit
their bids hastily which would raise bidding costs, increase the
potential for bidding errors, and discourage proper analysis and review
before submitting bids.
229. In previous FCC auctions, even though up to nine acceptable
bid amounts were permitted, multiple increment bids accounted for only
a small fraction of the total number of bids placed. The Bureau does
not expect that the frequency of tied bids will be significantly
different than in past auctions, and the Bureau does not adopt any
changes to its tie-breaking procedures. Hence, the Bureau adopts the
proposal. The FCC Auction System will assign a random number to each
license in each bid upon submission. In the event of ties among bids
that generate the highest aggregate gross bid amount, the set of bids
with the highest sum of random numbers becomes provisionally winning.
Bidders, regardless of whether they hold a provisionally winning bid,
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 provisionally winning bid.
230. All bidding will take place remotely either through the FCC
Auction System or by telephonic bidding. There will be no on-site
bidding during Auction 73. Please note that telephonic bid assistants
are required to use a script when entering bids placed by telephone.
Telephonic bidders are therefore reminded to allow sufficient time to
bid by placing their calls well in advance of the close of a round. The
length of a call to place a telephonic bid may vary; please allow a
minimum of ten minutes.
231. A bidder's ability to bid on specific licenses or packages of
licenses is determined by two factors: (1) The licenses selected on the
bidder's FCC Form 175; and (2) the bidder's eligibility. The bid
submission screens will allow bidders to submit bids on only those
licenses the bidder selected on its FCC Form 175.
232. In order to access the bidding function of the FCC Auction
System, bidders must be logged in during the bidding round using the
passcode generated by the SecurID[supreg] token and a personal
identification number (PIN) created by the bidder. Bidders are strongly
encouraged to print a round summary for each round after they have
completed all of their activity for that round.
233. In each round, eligible bidders will be able to place bids on
a given license or package in one or more pre-defined bid amounts. For
each license
[[Page 62385]]
and package, the FCC Auction System will list the acceptable bid
amounts in a drop-down box. Bidders use the drop-down box to select
from among the acceptable bid amounts. The FCC Auction System also
includes an upload function that allows bidders to upload text files
containing bid information.
234. Until a bid has been placed on a license or a package that
includes the license, the minimum acceptable bid amount for that
license will be equal to its minimum opening bid amount. Once there are
bids on a license or a package that includes the license, minimum
acceptable bids for a license.
235. During a round, an eligible bidder may submit bids for as many
licenses as it wishes, remove bids placed in the current bidding round,
withdraw provisionally winning bids from previous rounds (in blocks
without package bidding), drop non-provisionally winning bids (C-Block
licenses or packages), or permanently reduce eligibility. If a bidder
submits multiple bids for the same license or package in the same
round--multiple bids on the exact same license or package, not one bid
on a package and one bid on a license in that package--the system takes
the last bid entered as that bidder's bid for the round. Bidders should
note that the bidding units associated with licenses for which the
bidder has removed, dropped, or withdrawn its bid do not count towards
the bidder's current activity.
236. For licenses subject to package bidding in HPB, the FCC
Auction System considers each bidder's highest bid on each license or
package when determining the 89 provisionally winning bids.
Consequently, for licenses in the C Block, an individual license or
package bid that does not become a provisionally winning bid at the
conclusion of the round in which it was placed may become a
provisionally winning bid at the conclusion of a subsequent round. This
may occur even if the bidder does not have the bidding eligibility to
cover the newly-provisionally winning bid. This contrasts with the SMR
procedure used for licenses not subject to package bidding, in which
only provisionally winning bids from the previous round and bids placed
during the round are considered when determining provisionally winning
bids.
237. A commenter requests that the Bureau clarify that a bidder can
win a license or package that becomes provisionally winning, after not
having been part of the winning set in the previous rounds; the Bureau
clarifies that point here. Another commenter opposes allowing a bidder
to win licenses with bidding units exceeding its eligibility at the
auction's end. The commenters argue that winning reactivated bids may
force bidders to win more licenses than they can afford. The Bureau
does not accept the proposal that it not allow bidders to win licenses
with bidding units that exceed its eligibility. The Bureau recognizes
that occasionally bidders may need to change bid strategies as prices
rise. Accordingly, the Bureau provide limited opportunities for bidders
to withdraw and drop bids, which if used carefully, allow bidders to
avoid winning licenses they no longer wish to win. Thus, the Bureau
finds that the requested restriction on winning bids that exceed
eligibility is unnecessary to protect bidders from winning more than
they wish to win.
238. The Bureau encourages bidders on licenses and packages in the
C Block to bear in mind that their highest bid on each package or
license will be considered every time the FCC Auction System determines
a new set of provisionally winning bids. This feature allows bidders on
individual licenses to compete more effectively with package bids,
since their individual license bid can combine with bids on other
individual licenses placed in previous rounds, and stabilizes CPEs.
Bidders will be able to evaluate the extent to which a bid placed in a
previous 90 round is likely to become winning by comparing the bid to
the other considered bids for the license or package.
239. Finally, bidders are cautioned to select their bid amounts
carefully because bidders that withdraw a provisionally winning bid
from a previous round, even if the bid was mistakenly or erroneously
made, are subject to bid withdrawal payments.
v. Bid Removal, Bid Withdrawal, and Dropped Bids
240. In the 700 MHz Auction Public Notice, the Commission proposed
bid removal, bid withdrawal, and dropped bids procedures. The Bureau
sought comment on permitting a bidder to remove a bid before the close
of the round in which the bid was placed. With respect to bid
withdrawals, the Commission proposed limiting each bidder to
withdrawals of provisionally winning bids on licenses not subject to
package bidding (i.e., all licenses except in the C Block) in no more
than two rounds during the course of the auction. The Bureau further
proposed that bidders be able to drop non-provisionally winning bids on
packages and on licenses subject to package bidding in no more than one
round of the auction.
241. Bid Removal. Before the close of a bidding round, a bidder has
the option of removing any bids placed in that round. By using the
remove bids function in the FCC Auction System, a bidder may
effectively unsubmit any bid placed within that round. A bidder
removing a bid placed in the same round is not subject to withdrawal
payments. Removing a bid will affect a bidder's activity for the round
in which it is removed, i.e., a bid that is removed does not count
toward bidding activity. These procedures will enhance bidder
flexibility during the auction, and therefore the Bureau adopts them
for Auction 73.
242. Bid Withdrawal. Once a round closes, a bidder may no longer
remove a bid. However, in a later round, a bidder may withdraw
provisionally winning bids from previous rounds for non-C Block
licenses using the withdraw bids function in the FCC Auction System. A
91 provisionally winning bidder that withdraws its provisionally
winning bid from a previous round during the auction is subject to the
bid withdrawal payments specified in 47 CFR 1.2104(g). Once a
withdrawal is submitted during a round, that withdrawal cannot be
unsubmitted even if the round has not yet ended.
243. If a provisionally winning bid is withdrawn, the minimum
acceptable bid amount will equal the amount of the second highest bid
received for the license, which may be less than, or in the case of
tied bids, equal to, the amount of the withdrawn bid. The Commission
will serve as a place holder provisionally winning bidder on the
license until a new bid is submitted on that license.
244. The 700 MHz Auction Public Notice proposed limiting each
bidder to withdrawals in no more than two rounds during the course of
the auction. The round in which withdrawals are used would be at each
bidder's discretion. The Bureau received no comments on the number of
proposed withdrawal rounds.
245. The Bureau has decided, in contrast to the proposal in the 700
MHz Auction Public Notice, to limit each bidder to withdrawing bids in
only one round of the auction. In recent auctions, the Bureau has
detected bidder conduct that, arguably, may have constituted
anticompetitive behavior through the use of bid withdrawals. While
continuing to recognize that bid withdrawals may reduce risk associated
with efforts to secure various licenses in combination, analysis of
previous auctions indicates that bidders rarely
[[Page 62386]]
need two withdrawal rounds to avoid aggregation risk. Therefore, the
Bureau concluded that, for Auction 73, adoption of a limit on the use
of withdrawals to one round per bidder will better balance the need for
bidding flexibility with the goal of discouraging anti-competitive
bidding behavior. The Bureau will therefore limit the number of rounds
in which bidders may place withdrawals to one round.
246. The Bureau received a number of comments and replies
addressing the proposal not to allow withdrawals on provisionally
winning bids for licenses in the C Block. One commenter urges that
bidders on C Block licenses should have the same withdrawal options as
other bidders. It asserts that this would reduce the exposure risk
concerns for C Block bidders. Another commenter asserts that the
Bureau's proposal to not allow withdrawals on C Block licenses creates
major financial risks for bidders. A third commenter contends that the
proposed bid withdrawal rules should be modified, because they could
discourage bidding in the C Block and restrict bidders from seeking
alternative licenses in later rounds of the auction. A commenter
maintains that the highest bids on individual C Block REAG licenses
should be subject to standard bid withdrawal rules, rather than those
for dropped bids.
247. The Bureau proposed not to permit withdrawals of provisionally
winning bids in the C Block because, with package bidding, a withdrawn
bid can affect the composition of the provisionally winning set of
bids, thus affecting the status of the bids of other bidders. In
addition, under the mechanism used to determine CPEs in HPB, a
withdrawn bid can affect the prices of other licenses. In SMR, in
contrast, license-by-license bidding ensures that a withdrawn bid
affects only the status of the bidder placing the withdrawal. Since
bidders would be able to use withdrawals in the C Block to affect other
bidders, permitting withdrawals would facilitate undesirable strategic
bidding behavior. Therefore, to avoid the potential for gaming, the
Bureau maintains its position not to permit withdrawals of
provisionally winning bids in the C Block.
248. A commenter suggests that withdrawals not be permitted in the
D Block. Because the D Block license is nationwide, bidders do not face
the risk of winning an incomplete aggregation of licenses in the block.
The Bureau will permit that each bidder have only one round in which to
withdraw bids, but it does not impose a special prohibition on
withdrawals in the D Block, recognizing that D Block bidders may also
need to consider their financial commitment to bids in the C Block,
where they are unable to withdraw provisionally winning bids.
249. Dropped Bids. A bid for a package or a license in the C Block
can become provisionally winning many rounds after it was placed, since
HPB considers bids made in previous rounds when determining
provisionally winning bids. These non-provisionally winning bids are
useful to the auction since they enhance the ability of bidders
interested in single licenses or smaller packages to combine their bids
with the bids of others to compete with a large package bid, and they
provide stability to the process for determining current price
estimates. It may be the case, however, that a bidder wishes to focus
on alternative licenses instead, and no longer wishes to win one of its
previous bids. In order to allow bidders to opt out of non-
provisionally winning bids that they no longer wish to win, the Bureau
proposed that under HPB, for licenses subject to package bidding,
bidders be allowed a limited number of opportunities to drop non-
provisionally winning bids from further consideration in the auction.
250. Eliminating non-provisionally winning bids from consideration
may affect the current price estimates of other licenses, thereby
affecting other bidders. This ability to affect the bids of other
bidders may lead to undesirable strategic use of dropped bids.
Therefore, the 700 MHz Auction Public Notice proposed to permit bidders
to drop non-provisionally winning bids on packages and on licenses
subject to package bidding in no more than one round of the auction. To
discourage bidders from dropping bids in order to disadvantage their
competitors, the 700 MHz Auction Public Notice also proposed the
following restrictions on the circumstances under which bids may be
dropped and on the bidder's subsequent bidding activity: (1) A bidder
that is a provisionally winning bidder on a package will not be
permitted to drop bids on licenses that are included in the package;
(2) a bidder that drops its bids on a license or package will not be
permitted to submit further bids on that particular license or package
during the auction; and (3) a bidder that drops its bids on a license
will not be permitted to submit any bids on packages containing that
license for the duration of the auction.
251. Under these proposals, if a bidder drops a bid on a package,
it will be permitted to bid individually on the licenses in the
package. When a bid is dropped, all of the bidder's previous bids on
that license or package are removed from consideration.
252. No payments are associated with dropped bids. The round in
which a bidder may drop non-provisionally winning bids from
consideration will be at the bidder's discretion. The Bureau sought
comment on these proposals, and on the possibilities of not allowing
dropped bids, of allowing dropped bids not subject to all the
restrictions proposed, and of imposing other restrictions than
proposed.
253. The Bureau received a number of comments and reply comments
addressing dropped bids. Several entities favor permitting bidders to
re-bid on licenses they previously dropped, some also suggested that
dropped bids should be subject to withdrawal payments that the Bureau
should consider disallowing dropped bids, and that dropped bids should
be announced in advance. A commenter argues that permitting dropped
bids in only one round favors package bidders, and may discourage
bidders interested in individual licenses from competing in the C
Block.
254. Another commenter maintains that the individual C Block REAG
licenses should be subject to standard bid withdrawal rules, rather
than those for dropped bids. It also proposes that bidders that are
outbid on individual REAG C Block licenses should not be committed to
their bids if the higher bidder withdraws or drops its bid. Instead,
the commenter recommends that the individual license should revert to
the Commission with a minimum acceptable bid equal to the second
highest bid price.
255. The Bureau also received several requests for clarification of
its intended procedures with respect to dropped bids. A commenter
suggests that the Bureau allow bidders who drop a package bid to be
able to bid on the individual licenses in the dropped package. The
Bureau clarifies that this is its intention. The Bureau is not
persuaded that it should modify the 95 proposed procedures on dropped
bids. Dropped bid procedures in a package bidding environment must be
designed to avoid creating disadvantages for other bidders--
intentionally or unintentionally--when bids are pulled out of
consideration, and the Bureau's rules are designed with that goal in
mind. For example, since withdrawn provisionally winning bids can
affect the winning bids of other bidders, the Bureau permit drops on
non-provisionally winning bids only. Because it is more difficult for
bidders on individual licenses to compete against a package bid when
only current
[[Page 62387]]
round bids are considered, the Bureau considers bids placed in all
rounds, including after a bid is dropped, in order not to give an undue
advantage to package bidders.
256. In addition, the Bureau finds that these dropped bids
procedures, and HPB procedures in general, strike a careful balance
between permitting bidders adequate bidding flexibility and
discouraging insincere and anti-competitive bidding behavior. For
example, the prohibition against rebidding on a license that has been
dropped will keep bidders from strategically shifting off of a license
so that its price will fall relative to the other licenses competing
against a package bid, and then rebidding at a lower relative price.
The Bureau adopts the proposal to permit bidders on licenses and
packages in the C Block to drop non-provisionally winning bids during
any one round of the auction.
257. Calculation of Bid Withdrawal Payment. Generally, the
Commission imposes payments on bidders that withdraw high bids during
the course of an auction. If a bidder withdraws its bid and there is no
higher bid in the same or subsequent auction(s), the bidder that
withdrew its bid is responsible for the difference between its
withdrawn bid and the provisionally winning bid in the same or
subsequent auction(s). In Auction 73, if a bid is withdrawn on a
license in a block that does not meet the reserve price in the initial
auction, withdrawal payments will be based on the provisionally winning
bid or bids for the license in Auction 76, or in any subsequent
auction, consistent with the Bureau's usual withdrawal payment rule. In
the case of multiple bid withdrawals on a single license, within the
same or subsequent auctions(s), the 96 payment for each bid withdrawal
will be calculated based on the sequence of bid withdrawals and the
amounts withdrawn. No withdrawal payment will be assessed for a
withdrawn bid if either the subsequent winning bid or any subsequent
intervening withdrawn bid, in either the same or subsequent
auctions(s), equals or exceeds that withdrawn bid. Thus, a bidder that
withdraws a bid will not be responsible for any final withdrawal
payment if there is a subsequent higher bid in the same or subsequent
auction(s).
258. Section 1.2104(g)(1) of the rules sets forth the payment
obligations of a bidder that withdraws a high bid on a license during
the course of an auction, and provides for the assessment of interim
bid withdrawal payments. No interim bid withdrawal payments will be
assessed until the conclusion of Auction 76. In the 700 MHz Auction
Public Notice, the Bureau proposed to establish the percentage at ten
percent (10%) for the 700 MHz Band auction and sought comment on the
proposal.
259. The Bureau received no comments on this issue and adopts its
proposal. The Commission will assess an interim withdrawal payment
equal to ten percent (10%) of the amount of the withdrawn bids. The ten
percent (10%) interim payment will be applied toward any final bid
withdrawal payment that will be assessed after subsequent auction of
the license. Assessing an interim bid withdrawal payment ensures that
the Commission receives a minimal withdrawal payment pending assessment
of any final withdrawal payment.
vi. Round Results
260. Limited information about the results of a round will be made
public after the conclusion of the round. Specifically, after a round
closes, the Bureau will make available for each license, its current
provisionally winning bid amount, the minimum acceptable bid amount for
the following round, the amounts of all bids placed on the license
during the round, and whether the license is FCC held. If the license
is provisionally winning and part of a larger package additional
details regarding the package that contains the specific license will
be 97 available. The system will also provide an entire license history
detailing all activity that has taken place on a license with the
ability to sort by round number. The reports will be publicly
accessible. Moreover, after the auction, the Bureau will make available
complete reports of all bids placed during each round of the auction,
including bidder identities.
vii. Auction Announcements
261. The Commission will use auction announcements to announce
items such as schedule changes and stage transitions. All auction
announcements will be available by clicking a link in the FCC Auction
System.
V. Auction 76
262. In the 700 MHz Second Report and Order, the Commission noted
the strong public interest in promptly assigning all 700 MHz Band
licenses for recovered analog spectrum. Accordingly, the Commission
concluded that if licenses for the A, B, C or E Blocks are not assigned
because the auction results do not satisfy the applicable aggregate
reserve price(s) in Auction 73, the public interest will be served by
offering alternative licenses for the relevant blocks in a subsequent
auction, as soon as possible after the initial auction. Similarly, if
the license for the D Block is not assigned because the reserve price
for that license is not met, the license for the D Block may be offered
again. For administrative purposes, the Bureau designates any such
subsequent bidding as Auction 76.
263. As detailed in the 700 MHz Second Report and Order, any
alternative A, B and E Block licenses will be subject to alternative
performance requirements. Alternative C Block licenses will be based on
different geographic areas and spectrum bandwidth. In addition, the
alternative C Block licenses will not be subject to the open platform
conditions applicable to the licenses initially offered for the C
Block.
264. The Commission concluded that the public interest in prompt
licensing of 700 MHz spectrum and the related nature of licenses in
Auctions 73 and 76 made it appropriate to adopt auction procedures
treating Auctions 73 and 76 as a single auction for purposes of
assessing bidders' qualifications and applying the Commission's anti-
collusion rule. The Commission directed the Bureau to permit only
qualified bidders in Auction 73, to participate in Auction 76, and to
use the same auction design, including the applicable aggregate reserve
price(s), insofar as possible. The Commission also required the Bureau
to establish procedures that give applicants an opportunity to obtain
bidding eligibility specifically for licenses offered in a contingent
subsequent auction. Accordingly, the Bureau sought comment on specific
procedures for contingent subsequent bidding. Generally, the Bureau
will apply the Commission's competitive bidding rules with a
presumption that Auctions 73 and 76 should be considered to be a single
auction, subject to explicit exceptions when necessary. With the
following detailed exceptions, the Bureau will apply all of the
previously discussed procedures for Auction 73 to Auction 76.
A. Announcement of Auction 76
265. If, at the close of bidding in Auction 73, the aggregate
reserve price for any block has not been met, the Bureau will issue an
announcement that bidding in Auction 73 has closed and that Auction 76
will commence on a date not later than three weeks following the
announcement. The announcement of Auction 76 will establish the
deadline by which Auction 73 qualified bidders that selected licenses
to be offered in Auction 76 may
[[Page 62388]]
obtain additional bidding eligibility for Auction 76 by supplementing
their upfront payments, if necessary. In the event that the reserve
price for the D Block license is met during Auction 73, a Closing
Public Notice will be released with respect to the D Block. In the
event that Auction 73 results meet the reserve prices in all blocks,
the Bureau will proceed to issue a Closing Public Notice and Auction 76
will not be held.
B. Licenses To Be Offered
266. Any licenses in the A, B, D and E Blocks available in Auction
76 will cover the same geographic areas and frequencies as such
licenses offered in Auction 73. However, the alternative C Block will
include C1 Block licenses offered in each of the 176 EAs and C2 Block
licenses offered in each of the 12 REAGs. A complete list of licenses
that may be available in Auction 76 is included as Attachment B of the
Auctions 73 and 76 Procedures Public Notice.
C. Auction Structure
i. Licenses for Blocks A, B, D and/or E
267. If Auction 76 offers licenses in blocks not subject to package
bidding in Auction 73--Blocks A, B, D, and/or E--those block will not
be subject to package bidding in Auction 76, and will be offered using
the Commission's standard SMR auction design. The procedures applicable
to the auction will be the same with respect to licenses for Blocks A,
B, D and E in Auction 73.
ii. Alternative Licenses for C Block--Available Packages
268. In the 700 MHz Auction Comment Public Notice, the Bureau
sought comment on whether to accept package bids for alternative
licenses for the C Block using the HPB auction design for the initial C
Block licenses. One commenter proposed that package bids be accepted on
three potential packages, one package of all C1 Block licenses, one
package of all C2 Block licenses, and one package of all C 1 and C2
Block licenses. Two other commenters argue against accepting any
package bids for alternative C Block licenses, contending that the
complexity that they believe should preclude package bidding with
respect to the original 12 C Block licenses will be further exacerbated
should the Commission offer 188 alternative C1 and C2 Block licenses in
subsequent bidding.
269. The Bureau concluded that it will use non-package bidding SMR
procedures for licenses in the C1 Block and HPB package bidding
procedures for C2 Block licenses. This approach balances the
Commission's interest in providing opportunities for new entrants
competing on a nationwide basis with its goal of offering alternative
licenses that may be of greater interest to a different mix of bidders,
including smaller entities.
270. Accordingly, if there is subsequent bidding on alternative
licenses in the C Block, the Bureau will employ the HPB auction design
for the C2 Block only, with package bids accepted on the packages. The
procedures applicable to the HPB auction of C2 Block licenses will be
the same as those with respect to C Block licenses in Auction 73,
subject to the differences.
271. Licenses in the C1 Block will be auctioned using the SMR
auction procedures for licenses in Blocks A, B, D and E in auctions 73
and 76. Bids for alternative C1 Block licenses will be accepted on
individual EA Block licenses only.
272. With respect to C2 Block licenses, bids will be accepted on
individual REAG licenses, and on three packages, consisting of a
package of REAGs 1-8 (the 50 States), REAGs 10 & 12 (the Atlantic
territories), and REAGs 9 & 11 (the Pacific territories). The
hierarchical package structure for the C2 licenses is the same as was
adopted for the C Block licenses in auction 73.
D. Bidder Qualification
273. As directed by the Commission, only applicants found qualified
to bid in Auction 73 may be eligible to bid in Auction 76. To be
eligible to bid in Auction 76, an Auction 73 qualified bidder also must
have selected a license offered in Auction 76 on the abbreviated
Auction 76 application filed together with its application to
participate in Auction 73. The announcement that Auction 73 bidding has
ended without one or more aggregate reserve prices 101 being met also
will announce the deadline by which such bidders may submit
supplemental upfront payments to purchase bidding eligibility in the
subsequent auction.
274. In response to the 700 MHz Auction Public Notice, a commenter
contends that the Commission's treatment of Auction 73 and any
contingent subsequent auction as a single auction for purposes of the
Commission's anti-collusion rule requires that applicants select all
licenses in which they may be interested, including potential
alternative licenses, prior to bidding in Auction 73. The commenter
contends that this result is compelled by the Sec. 1.2105(b)(2) of the
Commission's competitive bidding rules, which prohibits changes in
license selection after the initial application filing deadline.
Moreover, the commenter contends that requiring applicants to select
potential alternative licenses prior to Auction 73 will limit the
amount of time required between Auction 73 and any contingent
subsequent auction.
275. Given the presumption that Auction 73 and any contingent
subsequent bidding on licenses should be treated as a single auction,
the Bureau has concluded that applicants should select both licenses
offered in Auction 73 and licenses that may be offered in Auction 76 by
the initial deadline for filing an application to participate in
Auction 73. The Bureau concluded that bidders will be able to make
informed selections prior to Auction 73 of licenses, including
alternative licenses that may be offered in contingent subsequent
bidding. Bidders will have the opportunity to obtain additional bidding
eligibility for licenses to be offered subsequently. These procedures
will enable contingent subsequent bidding, if necessary, to proceed
with minimal delay.
i. Bidder Status
276. To participate in Auction 76, a potential bidder must: (1)
Have become qualified to bid for at least one license offered in
Auction 73 by selecting license(s) offered in Auction 73 and making an
upfront payment sufficient to establish eligibility to bid for at least
one of those license(s), and (2) file an abbreviated Auction 76
application and selected at least one license offered in Auction 76.
Qualified bidders in Auction 73 need not bid on the licenses offered in
Auction 73 in order to be able to become qualified to participate in
Auction 76.
ii. Auction 76 Initial Bidding Eligibility
277. For Auction 76, qualified bidders will have their initial
bidding eligibility based on their initial bidding eligibility in
Auction 73 and will also have an opportunity to purchase additional
bidding eligibility. However, qualified bidders'' initial bidding
eligibility for Auction 73 will be reduced for Auction 76 if they hold
winning bids for any licenses offered in Auction 73 in blocks for which
the reserve price was met in Auction 73. For winning bidders of
licenses in the A, B, C, or E Blocks, the amount of the reduction will
be equal to the number of bidding units associated with the licenses
won. For the winning bidder of the D Block license, the amount of the
reduction will be equal to the amount of any withdrawal payment owed
for withdrawn bid(s) on the D
[[Page 62389]]
Block license plus the amount of the net winning bid for the D Block
license, up to the amount of the winning bidder's initial Auction 73
bidding eligibility.
iii. Supplementing Upfront Payments To Obtain Additional Eligibility
278. All bidders qualified to participate in Auction 76 will have
an opportunity to purchase additional bidding eligibility. Bidders will
be able to purchase additional bidding eligibility for licenses to be
offered in Auction 76 by supplementing their upfront payments pursuant
to the procedures for making upfront payments by wire transfer set
forth in the Auction 73 and 76 Procedures Public Notice, subject to a
schedule to be announced following the close of bidding in Auction 73.
iv. Continuing Applicability of the Anti-Collusion Rule
279. In the 700 MHz Second Report and Order, the Commission
directed the Bureau to adopt any procedures that may enhance the
effectiveness of an auction of licenses in Auction 73 or any contingent
subsequent auction. In part, the Commission found that the Commission's
anti-collusion rule should treat Auction 73 and any such subsequent
auction as a single auction, given the related nature of the auctions.
Accordingly, the applicable down payment deadline marking the end of
the anti-collusion period for Auction 73 and any subsequent auction
shall be the down payment deadline established following the close of
the subsequent auction.
E. Bidding Procedures
i. Aggregate Reserve Prices
280. As required by the Commission, the licenses in subsequent
bidding will be subject to the same aggregate reserve price(s)
applicable in the initial auction. A commenter argues in its comments
that the licenses in the second auction should not be subject to any
reserve prices because using a reserve price in the contingent
subsequent auction runs the risk that the licenses will not be awarded
prior to the June 30, 2008, statutory deadline for filing auction
proceeds. As a commenter acknowledges in its comments, the Commission
decision in the 700 MHz Second Report and Order is binding, absent
reconsideration of that Order by the Commission as a whole.
Consequently, the commenters proposal is beyond the scope of the
present non-rulemaking auctions procedures process.
281. In the 700 MHz Second Report and Order, the Commission noted
that the Bureau has delegated authority to determine how to allocate
the C Block reserve price upon auction of alternative licenses.
Accordingly, in the 700 MHz Auction Comment Public Notice, the Bureau
proposed to apply the C Block aggregate reserve price of $4.637854
billion to all of the alternative C Block licenses. That is, the sum of
the gross bid amounts on the C1 and C2 Block licenses must equal or
exceed $4.637854 billion in order to meet the reserve price. No
commenters addressed this proposal.
282. The Bureau adopts its proposal, with one additional feature.
In the event that the sum of the gross bid amounts on the C1 and C2
Block licenses does not meet the reserve price 104 covering both
blocks, the Bureau then will apportion the aggregate reserve price
between the two blocks based on their respective bandwidth and apply
those aggregate reserve prices to the respective blocks separately.
More specifically, if the aggregate reserve price of $4.637854 billion
covering both Blocks C1 and C2 is not met, the Commission nevertheless
will assign licenses for the respective block based on the auction
results if the gross bid amounts on the C 1 Block licenses exceed
$2.529739 billion or the gross bid amounts on the C2 Block licenses
exceed $2.108115 billion. Applying these separate aggregate reserve
prices will increase the likelihood that licenses will be assigned for
the respective blocks in the contingent subsequent auction, while
continuing to apply the aggregate reserve price from the initial
auction to each block in proportion to the megahertz in each block.
ii. Minimum Opening Bids
283. For Auction 76, the Bureau will calculate minimum opening bid
amounts on a license-by-license basis using the same approach as in
Auction 73, drawing on the Auction 66 prices that were bid on licenses
for the exact same geographic areas. For any licenses that may be
offered in Auction 76, including alternative C1 and C2 Block licenses,
minimum opening bids are set forth in Attachment B of the Auction 73
and 76 Procedures Public Notice.
F. Additional Procedures
284. In the 700 MHz Auction Comment Public Notice, pursuant to
Commission direction, the Bureau sought comment on the possibility of
denying bidding eligibility in a contingent subsequent auction based on
bidder behavior in Auction 73, if that behavior appeared designed to
thwart the assignment of licenses. Specifically, the Bureau proposed
that bidders defaulting on winning bids in Auction 73 should be denied
eligibility in any subsequent auction. The Bureau declines to restrict
the circumstances under which it might deny bidding eligibility in a
contingent subsequent auction to an otherwise qualified bidder. The
Commission retains the authority to sanction bidders that are found to
have violated the antitrust laws or the 105 Commission's rules in
connection with competitive bidding by requiring forfeiture of any
upfront payments, down payment or full bid amounts, and by prohibiting
the bidders participation in future auctions. The Commission intends to
make full use of this authority, including banning participation in a
contingent subsequent auction, with respect to bidders that seek to
thwart the assignment of licenses in Auction 73.
VI. Post-Auction Procedures
A. Considerations Relating to Certain Post-Auction Payment Rules
i. Apportioning Package Bids
285. In package bidding, when a bidder places an all-or-nothing bid
on a package of licenses, there will be no identifiable bid amounts on
the individual licenses that comprise the package. However, the
Commission's competitive bidding rules and procedures assume that the
amount of each bid on an individual license always is known. For
example, rules for calculating the amount of small business, new
entrant, or tribal land bidding credits presume that the winning bid on
the license is known. Similarly, in determining the amount of a default
or withdrawal payment, which involves a comparison between the
withdrawing or defaulting bidder's bid and a subsequent bid, the rules
assume that there are bid amounts for individual licenses. Accordingly,
the Commission recently adopted a rule providing that, in advance of
each auction with package bidding, the Commission shall establish a
methodology for determining how to estimate the price or bid on an
individual license included in a package of licenses.
286. The Bureau proposed to apportion package bids when regulatory
calculations require individual license bid amounts by dividing the
package bid amount among the licenses comprising the package in
proportion to the number of bidding units for each license.
Alternatively, the Bureau proposed to use the final round CPEs for each
license to apportion package bids.
[[Page 62390]]
The Bureau sought comment on these proposals.
287. A commenter suggests that the Bureau use a measure more
closely related to relative license values, such as minimum opening bid
amounts, to apportion package bid amounts among the licenses in the
package. The Bureau accepts the commenter's recommendation that
relative license values be used to apportion package bids, but rather
than use a pre-auction estimate of value such as minimum opening bids,
the Bureau will use the final CPEs of the licenses in the package, as
in its alternative proposal. Final CPEs will reflect relative prices as
determined in Auction 73. Therefore, when regulatory calculations
require individual license bid amounts, the Bureau will divide the
package bid amount among the licenses comprising the package in
proportion to the final round CPEs for the licenses.
ii. Interim Withdrawal Payment Percentage
288. 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 a subsequent auction. However,
if a license for which a bid has been withdrawn does not receive a
subsequent higher bid or winning bid in the same auction, the final
withdrawal payment cannot be calculated until a corresponding license
receives a higher bid or winning bid in a subsequent auction. When that
final payment cannot yet be calculated, the bidder responsible for the
withdrawn bid is assessed an interim bid withdrawal payment, which will
be applied toward any final bid withdrawal payment that is ultimately
assessed.
289. The Commission recently amended its rules to provide that in
advance of the auction, the Commission shall establish a percentage
between three percent and twenty percent of the withdrawn bid to be
assessed as an interim bid withdrawal payment. When it adopted the new
rule, the Commission indicated that it would consider the nature of the
service and the inventory of the licenses being offered when
determining the level of the interim withdrawal payment in a particular
auction.
290. In the 700 MHz Auction Public Notice, the Bureau noted that
the 700 MHz auction will offer licenses under several different
geographic licensing schemes and bandwidth sizes, and it found that
bidders may have a legitimate interest in using withdrawals to
facilitate their efforts to aggregate licenses across potentially
substitutable blocks of licenses not subject to package bidding. The
Bureau also observed that the likely significant bid amounts for
licenses in this auction (and resulting absolute value of withdrawal
payments) will in themselves serve as a deterrent to unnecessary
withdrawals. Therefore, the Bureau did not propose to set the interim
bid withdrawal payment at the maximum rate of twenty percent. At the
same time, the Bureau noted that a rate above the minimum three percent
will help deter undesirable strategic use of withdrawals. Specifically,
the Bureau proposed to establish an interim bid withdrawal payment of
ten percent of the withdrawn bid in the 700 MHz auction and sought
comment on this issue.
291. No commenters suggested any alternative to the Bureau's
proposed percentage for interim withdrawal payments. For the reasons
set forth above and in the 700 MHz Auction Public Notice, the Bureau
adopts its proposal. The Commission will assess an interim withdrawal
payment equal to ten percent (10%) of the amount of the withdrawn bids.
The ten percent (10%) interim payment will be applied toward any final
bid withdrawal payment that will be assessed after subsequent auction
of the license. Assessing an interim bid withdrawal payment ensures
that the Commission receives a minimal withdrawal payment pending
assessment of any final withdrawal payment. Section 1.2104(g) provides
specific examples showing application of the bid withdrawal payment
rule.
iii. Additional Default Payment Percentage
292. 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 Sec. 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 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. Until recently this additional payment for non-
combinatorial auctions has been set at three percent of the defaulter's
bid or of the subsequent winning bid, whichever is less.
293. The percentage of the bid that a defaulting bidder must pay in
addition to the deficiency will depend on the auction format ultimately
chosen for a particular auction. In non-package auctions, the amount
can range from three percent up to a maximum of twenty percent,
established in advance of the auction and based on the nature of the
service and the inventory of the licenses being offered. In auctions
with package bidding, the additional payment is set, pursuant to Sec.
1.2104(g)(2)(ii), at 25 percent of the applicable bid. This higher
level reflects the fact that a defaulted winning bid in an auction with
package bidding may have affected which other bids were winning other
licenses.
294. The Bureau proposed to establish an additional default payment
of fifteen percent with respect to bids on licenses in Blocks A, B, D,
and E, which are not subject to package bidding. As previously noted by
the Commission, defaults weaken the integrity of the auction process
and impede the deployment of service to the public, and an additional
default payment of more than three percent will be more effective in
deterring defaults. Moreover, the Bureau concluded an additional
default payment greater than ten percent, which the Commission has
established in several recent auctions, is appropriate for the 700 MHz
auction. Because no licenses in Blocks A, B, or E will be sold unless
the aggregate reserve price for that block is met, bidders may have an
additional incentive to bid on a license and later default (after
determination that the reserve price has been met), in order to help
ensure that the reserve price is met and other initial licenses in the
block are assigned. The Bureau concluded that a higher additional
default 109 payment will help deter such behavior. With respect to the
D Block, for which there is a single nationwide license that will not
be assigned unless the D Block reserve price is met, a default by the
winning bidder will delay the especially time-sensitive process of
establishing a public-private partnership for the provision of public
safety services. Given the unusually large public interest benefits of
timely licensing the D Block, the Bureau proposed to deter defaults by
imposing a higher additional default payment in that block as well.
Accordingly, it proposed an additional default payment of fifteen
percent on licenses in the A, B, D, and E Blocks. The Bureau sought
comment on this proposal. The Bureau stated that for licenses in the C
Block, because they are subject to package bidding, the
[[Page 62391]]
additional default payment will be twenty-five percent as set forth in
Sec. 1.2104(g)(2)(ii). This additional default payment will apply to
all bids for packages and for licenses that are subject to package
bidding.
295. While no comments were filed in response to the 700 MHz
Auction Public Notice focused on the appropriate percentage for the
additional default payments, a commenter proposed in its comments that
the Commission impose no default penalty in connection with any
defaults on a winning bid for the D Block license. The commenter's
argument focused particularly on a scenario where the winning bidder is
unable to negotiate a Network Sharing Agreement with the Public Safety
Licensee, even while negotiating in good faith. Another commenter
opposed this proposal in its reply because it runs counter to the
Commission's decision in the 700 MHz Second Report and Order, which
held that [i]n the event that the long-form application filed by the
winning bidder for the D Block license is denied, the winning bidder of
the D Block licenses will be deemed to have defaulted * * * [and] it
will be liable for the default payment set forth in the Commission's
competitive bidding rules. Accordingly, the commenter's proposal is
beyond the scope of the current non-rulemaking auction procedures
process.
296. The Bureau adopts its proposal and sets the additional default
payment percentage at fifteen percent of the defaulted bid for licenses
in the A, B, D and E Blocks. Pursuant to existing Commission rules
regarding licenses subject to package bidding, the additional default
payment percentage will be twenty-five percent of the defaulted bid for
licenses in the C Block. These percentages are appropriate to reduce
the risk that bidders may default on their winning bids.
B. Down Payments
297. After bidding has ended in Auction 73 and Auction 76, the
Commission will issue a public notice declaring the auction(s) closed
and identifying winning bidders, down payments and final payments due.
In addition, if the D Block bidding satisfies the reserve price and
there is a winning bidder for the D Block license in Auction 73, the
Commission will issue a public notice identifying the winning bidder,
down payments and final payments due after bidding ends in Auction 73,
even if Auction 76 will be held for licenses in any other block(s).
298. Within ten business days after release of the auction closing
notice, each winning bidder must submit sufficient funds (in addition
to its upfront payment) to bring its total amount of money on deposit
with the Commission for licenses offered in Auction 73 and Auction 76
to 20 percent of the net amount of its winning bids (gross bids less
any applicable small business or very small business bidding credits).
C. Final Payments
299. Each winning bidder will be required to submit the balance of
the net amount of its winning bids within 10 business days after the
applicable deadline for submitting down payments.
D. Long-Form Application (FCC Form 601)
300. Within ten business days after release of the auction closing
notice, winning bidders must electronically submit a properly completed
long-form application (FCC Form 601) for each license won through
Auction 73 and/or Auction 76. Winning bidders that are small 111
businesses or very small businesses must demonstrate their eligibility
for a small business or very small business bidding credit. Further
filing instructions will be provided to auction winners at the close of
the auction.
301. The CSEA/Part 1 Report and Order, 71 FR 6214, February 7,
2006, modified the procedure by which a consortium that is a winning
bidder in Auction 73 and/or Auction 76 will apply for a license. In
particular, (a) each member or group of members of a winning consortium
seeking separate licenses will be required to file a separate long-form
application for its respective license(s) and, in the case of a license
to be partitioned or disaggregated, the member or group filing the
applicable long-form application shall provide the parties'
partitioning or disaggregation agreement in its long-form application;
(b) two or more consortium members seeking to be licensed together
shall first form a legal business entity; and (c) any such entity must
meet the applicable eligibility requirements for small business status.
Applicants applying as consortia should review the CSEA/Part 1 Report
and Order in detail and monitor any relevant future proceedings to
understand how the members of the consortia will apply for a license in
the event they are winning bidders.
E. Ownership Disclosure Information Report (FCC Form 602)
302. At the time it submits its long-form application (FCC Form
601), each winning bidder also must comply with the ownership reporting
requirements as set forth in 47 CFR 1.913, 1.919, and 1.2112. An
ownership disclosure record is automatically created in ULS for any
applicant that submits an FCC Form 175. However, winning bidders will
be required to review and confirm that it is complete and accurate as
of the date of filing Form 601. Further instructions will be provided
to winning bidders at the close of the auction.
F. Tribal Lands Bidding Credit
303. A winning bidder that intends to use its license(s) to deploy
facilities and provide services to federally recognized tribal lands
that are unserved by any telecommunications carrier or that have a
wireline penetration rate equal to or below 85 percent is eligible to
receive a tribal lands bidding credit as set forth in 47 CFR 1.2107 and
1.2110(f). A tribal lands bidding credit is in addition to, and
separate from, any other bidding credit for which a winning bidder may
qualify.
304. Unlike other bidding credits that are requested prior to the
auction, a winning bidder applies for the tribal lands bidding credit
after winning the auction when it files its long-form application (FCC
Form 601). When initially filing the long-form application, the winning
bidder will be required to advise the Commission whether it intends to
seek a tribal lands bidding credit, for each license won in the
auction, by checking the designated box(es). After stating its intent
to seek a tribal lands bidding credit, the applicant will have 180 days
from the close of the long-form filing window to amend its application
to select the specific tribal lands to be served and provide the
required tribal government certifications. Licensees receiving a tribal
lands bidding credit are subject to performance criteria as set forth
in 47 CFR 1.2110(f)(3)(vi).
305. For additional information on the tribal lands bidding credit,
including how the amount of the credit is calculated, applicants should
review the Commission's rule making proceeding regarding tribal lands
bidding credits and related public notices. Relevant documents can be
viewed on the Commission's Web site by going to http://wireless.fcc.gov/auctions
and clicking on the Tribal Land Credits link.
G. Default and Disqualification
306. Any winning bidder that defaults or is disqualified after the
close of the 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) will be subject to the payments
[[Page 62392]]
described in 47 CFR 1.2104(g)(2). The payments include both 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 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.
307. Pursuant to recent modifications to the rule governing default
payments, the percentage of the applicable bid to be assessed as an
additional payment for defaults in a particular auction is established
in advance of the auction. Accordingly, in the 700 MHz Auction Public
Notice, the Bureau proposed to set the additional default payment for
the auction of 700 MHz Band licenses at fifteen percent of the
applicable bid with respect to bids on licenses in Blocks A, B, D, and
E, which are not subject to package bidding. For licenses in the C
Block, because they are subject to package bidding, the additional
default payment will be twenty-five percent as set forth in Sec.
1.2104(g)(2)(ii).
308. The Commission will apportion package bids when regulatory
calculations require individual license bid amounts by dividing the
package bid amount among the licenses comprising the package in
proportion to the final round CPEs for the licenses. Accordingly, in
the event that a winning bidder defaults on a package bid for C Block
licenses and the licenses subsequently are won individually or in a
different combination, the Bureau will apportion the defaulted package
bid for the C Block licenses based on the ratio of the bidding units
for the relevant licenses to the bidding units for the entire package.
309. The Bureau adopted its proposal and sets the additional
default payment for the auction of 700 MHz Band licenses at fifteen
percent of the applicable bid for licenses in Blocks A, B, D, and E and
at twenty-five percent of the applicable bid for Block C packages and
licenses.
310. Finally, the Bureau notes that in the event of a default, the
Commission may re-auction the license or offer it to the next highest
bidder (in descending order) at its final bid amount. In addition, if a
default or disqualification involves gross misconduct,
misrepresentation, or bad faith by an applicant, the Commission may
declare the applicant and its principals ineligible to bid in future
auctions, and may take any other action that it deems necessary,
including institution of proceedings to revoke any existing licenses
held by the applicant.
H. Refund of Remaining Upfront Payment Balance
311. The Commission received two sets of comments addressing the
refund of upfront payments. One commenter urges that the Commission
clarify that it will promptly refund upfront payments after the close
of the initial auction, prior to Auction 76. It maintains that this
would promote full participation in the auction. Another commenter
advocates the adoption of procedures for the refund of upfront
payments, and other deposits, after they are deposited in the Digital
Television Transition and Public Safety Fund on June 30, 2008, pursuant
to the DTV Act. The commenter argues that the lack of such procedures
would discourage the participation of potential applicants.
312. The Commission concluded that Auction 73 and Auction 76 are a
single auction event for purposes of the Commission's anti-collusion
rule. Applicants in Auction 73 are prohibited from communicating bids
or bidding strategies prior to the conclusion of Auction 76. Disclosing
the activity of applicants in Auction 73 or Auction 76 by providing for
refunds of upfront payments prior to the conclusion of Auction 76 would
conflict with this conclusion. As a practical matter, the Bureau notes
that applicants in any Commission auction must take into account the
fact that the Commission's auctions are of indefinite duration. Thus,
even if Auction 76 should not prove necessary, applicants cannot
reasonably expect the return of funds by any specific date and
therefore cannot reasonably require that funds be refunded immediately
after the Commission announces that it will make alternative licenses
available for Auction 76. Moreover, bidders in Auction 73 subject to
any liabilities arising from Auction 73 may not have the extent of
their liability determined prior to the close of Auction 76. For
example a bidder that withdrew a provisionally winning bid in Auction
73 would be subject to a determination of the extent of its liability
only after the conclusion of Auction 76. The Commission has never
provided for refunds of upfront payments to such bidders. In the past,
the Commission has provided for refunds of upfront payment to bidders
that have no auction liabilities and no remaining bidding eligibility
prior to the competition of an auction. Nevertheless, the Commission
has not made any such refunds in auctions subject to anonymous bidding.
For all of these reasons, the Bureau concluded that bidders reasonably
should be required to maintain their upfront payments in Auction 73 and
Auction 76 on deposit with the Commission until the conclusion of any
contingent subsequent auction.
313. All upfront payments submitted by applicants in Auction 73 and
all upfront payments submitted by Auction 73 qualified bidders in
connection with Auction 76 may be available to be refunded after the
conclusion of any contingent subsequent auction; subject to any
required payments (i.e. winning bid, deficiency, withdrawal, and/or
default payments). All refunds will be returned to the payer of record,
as identified on the FCC Form 159, unless the payer submits written
authorization instructing otherwise.
314. Bidders are encouraged to file their refund information
electronically using the Refund Information icon found on the Auction
Application Manager page or through the Wire Transfer for Refund
Purposes link available in various locations throughout the FCC Auction
System. If an applicant has completed the refund instructions
electronically, the refund will be sent automatically. If an applicant
has not completed the refund instructions electronically, the applicant
may send a written request for the refund, including wire transfer
instructions and FCC Registration Number (FRN) by facsimile to the
Auctions Accounting Group at (202) 418-2843 or by mail to: Federal
Communications Commission, Financial Operations Center, Auctions
Accounting Group, Gail Glasser, 445 12th Street, SW., Room 1-C864,
Washington, DC 20554.
Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. E7-21528 Filed 11-1-07; 8:45 am]
BILLING CODE 6712-01-P