Federal Communications Commission.
This document announces the auction of Advanced Wireless Services licenses in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz (AWS-3) bands scheduled to commence November 13, 2014. This document also seeks comment on competitive bidding procedures for Auction 97.
Comments are due on or before June 9, 2014, and reply comments are due on or before June 23, 2014. Bidding for licenses in Auction 97 is scheduled to begin on November 13, 2014.
All filings in response to this notice must refer to AU Docket No. 14-78. The Wireless Telecommunications Bureau strongly encourages interested parties to file comments electronically, and requests that an additional copy of all comments and reply comments be submitted electronically to the following address: email@example.com. Comments may be submitted by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting comments.
Paper Filers: Parties who choose to file by paper must file an original and five copies of each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Attn: WTB/ASAD, Office of the Secretary, Federal Communications Commission. All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th Street SW., Room TW-A325, Washington, DC 20554. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW., Washington, DC 20554.
People with Disabilities: Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-0530 or TTY: 202-418-0432.
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FOR FURTHER INFORMATION CONTACT:
Wireless Telecommunications Bureau, Auctions and Spectrum Access Division: For auction legal questions: Valerie Barrish at (202) 418-0660; for general auction questions: Jeff Crooks at (202) 418-0660 or Linda Sanderson at (717) 338-2868. Broadband Division, WTB: For AWS-3 service rules questions: Nancy Zaczek (legal) or Janet Young (technical) at (202) 418-2487.
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This is a summary of the Auction 97 Comment Public Notice released on May 19, 2014. The complete text of the Auction 97 Comment Public Notice, including all attachments and related Commission documents, is available for public inspection and copying from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information Center, 445 12th Street SW., Room CY-A257, Washington, DC 20554. The Auction 97 Comment Public Notice and its attachments, as well as related Commission documents, also may be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone 202-488-5300, fax 202-488-5563, or you may contact BCPI at its Web site: http://www.BCPIWEB.com. When ordering documents from BCPI, please provide the appropriate FCC document number, for example, DA 14-669. The Auction 97 Comment Public Notice and related documents also are available on the Internet at the Commission's Web site: http://wireless.fcc.gov/auctions/97/, or by using the search function for AU Docket No. 14-78 on the Commission's Electronic Comment Filing System (ECFS) Web page at http://www.fcc.gov/cgb/ecfs/.
1. The Wireless Telecommunications Bureau (Bureau) announces an auction of 1,614 licenses in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz bands (the AWS-3 bands), and seeks comment on the procedures to be used for this auction. This auction, which is designated as Auction 97, is scheduled to commence on November 13, 2014.
2. The Commission is offering the licenses in Auction 97 pursuant to the Middle Class Tax Relief and Job Creation Act of 2012 (Spectrum Act). The Spectrum Act requires, among other things, that the Commission allocate for commercial use and license spectrum in certain specified frequency bands using a system of competitive bidding no later than February 2015. In February 2013, the National Telecommunications and Information Administration (NTIA) identified the 1695-1710 MHz band for reallocation from Federal use to non-Federal use in satisfaction of its Spectrum Act obligation. In the AWS-3 Report and Order, FCC 14-31, the Commission identified the 1755-1780 MHz band in satisfaction of the Spectrum Act's requirement that it identify fifteen megahertz of contiguous spectrum in addition to the bands specifically identified in the Spectrum Act.
II. Licenses To Be Offered in Auction 97
A. Description of Licenses
3. The 65 megahertz of AWS-3 spectrum available in Auction 97 will be licensed on a geographic area basis. Of the 1,614 licenses offered in Auction 97, 880 will be Economic Area (EA) licenses and 734 will be Cellular Market Area (CMA) licenses. The AWS-3 frequencies will be licensed in five and ten megahertz blocks, with each license having a total bandwidth of five, ten, or twenty megahertz.
4. The 1695-1710 MHz band will be licensed in an unpaired configuration for low-power mobile transmit (i.e., Start Printed Page 31328uplink) operations. The 1755-1780 MHz band will be licensed paired with the 2155-2180 MHz band, with the 1755-1780 MHz band authorized for low-power mobile transmit (i.e., uplink) operations and the 2155-2180 MHz band authorized for base station and fixed (i.e., downlink) operations. A complete list of the licenses offered in Auction 97 is available in Attachment A to the Auction 97 Comment Public Notice, available at http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=97.
B. Incumbency Issues
5. In the AWS-3 Report and Order, the Commission allocated the 1695-1710 MHz and 1755-1780 MHz bands for commercial use. Licenses in 1695-1710 MHz band are being made available on a shared basis with incumbent Federal meteorological-satellite (MetSat) data users. Licenses in 1755-1780 MHz band are being made available on a shared basis with a limited number of Federal incumbents indefinitely, while many of the Federal systems will over time relocate out of the band. Operations in the 1695-1710 MHz and 1755-1780 MHz bands are subject to successful coordination with Federal incumbents in the applicable Protection Zones adopted by the Commission in the AWS-3 Report and Order. Federal systems in the 1695-1710 MHz and 1755-1780 MHz bands that are located in these established Protection Zones will operate on a co-equal, primary basis with commercial AWS licensees. Licenses to operate in the 1695-1710 MHz and 1755-1780 MHz bands are subject to the condition that the licensee must not cause harmful interference to an incumbent Federal entity relocating from these bands under an approved Transition Plan. This condition remains in effect until NTIA terminates the applicable authorization of the incumbent Federal entity. The 2155-2180 MHz band is already allocated for exclusive non-Federal, commercial use. Although there are no Federal users currently licensed or operating in this band, there are non-Federal incumbent Fixed Microwave and Broadband Radio Service licensees in the band. AWS-3 licensees will have to protect or relocate and/or share in the cost of relocating such incumbent licensees.
C. Commercial Spectrum Enhancement Act/Spectrum Act Requirements
6. The spectrum in the 1695-1710 MHz and 1755-1780 MHz bands is covered by a Congressional mandate that requires that auction proceeds fund the estimated relocation or sharing costs of incumbent Federal entities. In 2004, the Commercial Spectrum Enhancement Act (CSEA) established a Spectrum Relocation Fund (SRF) to reimburse eligible Federal agencies operating on certain frequencies that have been reallocated from Federal to non-Federal use for the cost of relocating their operations. The SRF is funded with cash proceeds attributable to “eligible frequencies” in an auction of licenses involving such frequencies. The CSEA requires the NTIA to notify the Commission at least six months in advance of a scheduled auction of eligible frequencies of eligible Federal entities' estimated relocation or sharing costs and the timelines for such relocation or sharing.
7. On May 13, 2014, pursuant to the CSEA, the NTIA notified the Commission of the estimated relocation or sharing costs and relocation timelines for eligible Federal entities assigned to frequencies in the 1695-1710 MHz and 1755-1780 MHz bands. The NTIA reported that the total estimated relocation or sharing costs for the 1695-1710 MHz band equal $527,069,000, and that the total estimated relocation or sharing costs for the 1755-1780 MHz band equal $4,575,603,000. This information can be found at http://www.ntia.doc.gov/category/aws-3-transition.
8. In addition to requiring that specified auction proceeds be deposited in the SRF, the CSEA, as amended by the Spectrum Act, requires that the total cash proceeds from any auction of eligible frequencies must equal at least 110 percent of the estimated relocation or sharing costs provided to the Commission by NTIA, and prohibits the Commission from concluding any auction of eligible frequencies that falls short of this revenue requirement. The Commission previously determined that “total cash proceeds,” for purposes of meeting the CSEA's revenue requirement, means winning bids net of any applicable bidding credit discounts at the end of bidding. Thus, whether CSEA's revenue requirements regarding eligible frequencies have been met at the end of an auction involving such frequencies depends upon whether winning bids that are attributable to such spectrum, net of any applicable bidding credit discounts, equal at least 110 percent of estimated relocation costs. The Commission also previously modified its reserve price rule pursuant to the CSEA to ensure that the CSEA's revenue requirement would be met.
III. Due Diligence
9. Each potential bidder is solely responsible for investigating and evaluating all technical and marketplace factors that may have a bearing on the value of the licenses that it is seeking in this auction. Each bidder is responsible for assuring that, if it wins a license, it will be able to build and operate facilities in accordance with the Commission's rules. The Commission makes no representations or warranties about the use of this spectrum for particular services. Each applicant should be aware that a Commission auction represents an opportunity to become a Commission licensee, subject to certain conditions and regulations. A Commission auction does not constitute an endorsement by the Commission of any particular service, technology, or product, nor does a Commission license constitute a guarantee of business success.
10. An applicant should perform its due diligence research and analysis before proceeding, as it would with any new business venture. Each potential bidder should perform technical analyses and/or refresh any previous analyses to assure itself that, should it become a winning bidder for any Auction 97 license, it will be able to build and operate facilities that will fully comply with all applicable technical and regulatory requirements. The Bureau strongly encourages each applicant to inspect any prospective transmitter sites located in, or near, the geographic area for which it plans to bid; confirm the availability of such sites; and familiarize itself with the Commission's rules regarding the National Environmental Policy Act.
11. The Bureau strongly encourages each applicant to conduct its own research prior to Auction 97 in order to determine the existence of pending administrative, rulemaking, or judicial proceedings that might affect its decisions regarding participation in the auction.
12. The Bureau strongly encourages participants in Auction 97 to continue such research throughout the auction. The due diligence considerations mentioned in the Auction 97 Comment Public Notice do not constitute an exhaustive list of steps that should be undertaken prior to participating in this auction. As always, the burden is on the potential bidder to determine how much research to undertake, depending upon the specific facts and circumstances related to its interests.
13. In addition to the foregoing due diligence considerations, which the Bureau encourages in all auctions, the Start Printed Page 31329Bureau calls particular attention in this auction to the unique requirements presented by the occupancy of some of the available frequencies by incumbent Federal users. AWS-3 licensees can expect to share portions of the AWS-3 bands with various incumbent Federal users for a period of time as such users transition out of the bands, which may vary by geography and frequency. Moreover, some Federal users will remain in the AWS-3 bands, with shared use continuing indefinitely. The Commission and the NTIA intend to release additional information regarding the extent of sharing in the AWS-3 bands and the methods of coordination between commercial and Federal users. Additionally, the CSEA, as amended by the Spectrum Act, stipulates that Federal agencies that will receive reimbursement for their costs in relocating their operations from, or sharing, the “eligible frequencies” offered in this auction based on their approved transition plans, which the NTIA will make available to the public. The Bureau expects that all of this information will be material to an applicant's potential participation in Auction 97. Therefore, the Bureau strongly encourages each applicant to closely follow releases from the Commission and the NTIA concerning these issues and to carefully consider the technical and economic implications for commercial use of the AWS-3 bands.
IV. Bureau Seeks Comment on Auction Procedures
14. The Commission directed the Bureau, under its existing delegated authority, to seek comment on a variety of auction-specific procedures prior to the start of each auction. We therefore seek comment on the following issues relating to the conduct of Auction 97.
A. Auction Design
i. Simultaneous Multiple Round Auction
15. The Bureau proposes to conduct Auction 97 using a simultaneous multiple-round (SMR) auction format. An SMR auction offers every license for bid at the same time and consists of successive bidding rounds in which eligible bidders may place bids. Typically, bidding remains open on all licenses until bidding stops on every license. The Bureau seeks comment on this proposal.
ii. Anonymous Bidding
16. Consistent with past practice, the Bureau proposes to adopt procedures for limited information disclosure or “anonymous bidding” for Auction 97. Specifically, the Bureau proposes to withhold, until after the close of bidding, public release of (1) bidders' license selections on their short-form applications (FCC Form 175), (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.
17. Under these proposed limited information procedures, the amount of every bid placed and whether a bid was withdrawn (if withdrawals are permitted) would be disclosed after the close of every round, but the identities of bidders placing specific bids or withdrawals (if permitted) and the net bid amounts (reflecting bidding credits) would not be disclosed until after the close of the auction.
18. Bidders would have access to additional information about their own bids. For example, bidders would be able to view their own level of eligibility, before and during the auction, through the FCC Auction System.
19. Moreover, for the purpose of complying with 47 CFR 1.2105(c), which prohibits certain communications between applicants (formerly referred to as the “anti-collusion rule”), applicants would be made aware of other applicants with which they will not be permitted to cooperate, collaborate, or communicate—including discussing bids, bidding strategies, or post-auction market structure. Specifically, the Bureau would notify separately each applicant with a short-form application on file for participation in Auction 97 whether applicants with short-form applications to participate in a pending auction, including but not limited to Auction 97, have applied for licenses in any of the same or overlapping geographic areas as that applicant.
20. After the close of bidding, bidders' license selections, upfront payment amounts, bidding eligibility, bids, and other bidding-related actions would be made publicly available.
21. The Bureau seeks comment on the details of its proposal for implementing anonymous bidding in Auction 97. The Bureau also seeks comment on alternatives to the use of anonymous bidding procedures for Auction 97. When the Commission originally proposed limited information disclosure procedures, it did so in response to analysis suggesting that under certain circumstances the competitiveness and economic efficiency of a simultaneous multiple-round auction may be enhanced if such information is withheld until after the close of the auction. The Bureau encourages parties to provide information about the benefits and costs of complying with limited information procedures in this auction as compared with the benefits and costs of alternative procedures that would provide for the disclosure of more information on bidder identities and interests in the auction. If commenters believe that the Bureau should not adopt procedures to limit the disclosure of certain bidder-specific information in Auction 97 until after the auction, they should explain their reasoning.
iii. Acknowledgement for Auction 97 Applicants
22. There are Federal incumbent users in the 1695-1710 MHz and 1755-1780 MHz bands, and the Commission adopted rules in the AWS-3 Report and Order to address commercial operations in these bands in light of the temporary and indefinite sharing of the bands by Federal incumbent users and commercial licensees, including a requirement that commercial licensees operate on a co-equal, primary operations with Federal systems within specified geographic zones, and a requirement that licensees in the 1755-1780 MHz band accept interference from Federal systems as long as such systems remain in the band. To implement these rules, the Bureau proposes to require an Auction 97 applicant to submit with its short-form application a signed statement acknowledging that the applicant's operations in the 1755-1780 MHz band may be subject to interference from Federal systems in certain geographic zones, that the applicant must accept interference from such Federal systems in those zones, and that the applicant has considered these risks before submitting any bids for applicable licenses in Auction 97. The Bureau seeks comment on this proposal.
B. Auction Structure
i. Bidding Rounds
23. Auction 97 will consist of sequential bidding rounds. The initial bidding schedule will be announced in a public notice to be released at least one week before the start of the auction.
24. The Commission will conduct Auction 97 over the Internet using the FCC Auction System. Bidders will also have the option of placing bids by telephone through a dedicated, toll-free Auction Bidder Line. The toll-free telephone number for the Auction Bidder Line will be provided to Start Printed Page 31330qualified bidders prior to the start of the auction.
25. The Bureau proposes to retain the discretion to change the bidding schedule in order to foster an auction pace that reasonably balances speed with the bidders' need to study round results and adjust their bidding strategies. Under this proposal, the Bureau may change the amount of time for bidding rounds, the amount of time between rounds, or the number of rounds per day, depending upon bidding activity and other factors. The Bureau seeks comment on this proposal. Commenters should address the role of the bidding schedule in managing the pace of the auction, specifically discussing the tradeoffs in managing auction pace by bidding schedule changes, by changing the activity requirements or bid amount parameters, or by using other means.
ii. Stopping Rule
26. The Bureau has discretion to establish stopping rules before or during multiple round auctions in order to complete the auction within a reasonable time. The Bureau proposes to employ a simultaneous stopping rule approach in Auction 97, which means all licenses will remain available for bidding until bidding stops on every license. More specifically, bidding will close on all licenses after the first round in which no bidder submits any new bids, applies a proactive waiver, or withdraws any provisionally winning bids (if withdrawals are permitted). Thus, unless the Bureau announces alternative stopping procedures, the simultaneous stopping rule will be used in this auction, and bidding will remain open on all licenses until bidding stops on every license, regardless of whether bids are placed on individual licenses of licenses. Consequently, it is not possible to determine in advance how long Auction 97 will last.
27. The Bureau proposes to retain the discretion to exercise any of the following options during Auction 97: (a) Use a modified version of the simultaneous stopping rule that would close the auction 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 a license for which it is not the provisionally winning bidder. Thus, absent any other bidding activity, a bidder placing a new bid on a license for which it is the provisionally winning bidder would not keep the auction open under this modified stopping rule; (b) Use a modified version of the simultaneous stopping rule that would close the auction 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 a license that is not FCC-held. Thus, absent any other bidding activity, a bidder placing a new bid on a license that does not already have a provisionally winning bid (an “FCC-held” license) would not keep the auction open under this modified stopping rule; (c) Use a modified version of the simultaneous stopping rule that combines (a) and (b); (d) Declare that the auction will end after a specified number of additional rounds (special stopping rule). If the Bureau invokes this special stopping rule, it will accept bids in the specified final round(s), after which the auction will close; and (e) Keep the auction open even if no bidder places any new bids, applies a waiver, or withdraws (if withdrawals are permitted) any provisionally winning bids. In this event, the effect will be the same as if a bidder had applied a waiver. The activity rule will apply as usual, and a bidder with insufficient activity will either lose bidding eligibility or use a waiver.
28. The Bureau proposes to exercise these options only in certain circumstances, for example, where the auction is proceeding unusually slowly or quickly, there is minimal overall bidding activity, or it appears likely that the auction will not close within a reasonable period of time or will close prematurely. Before exercising these options, the Bureau is likely to attempt to change the pace of the auction by, for example, changing the number of bidding rounds per day and/or the minimum acceptable bids. The Bureau proposes to retain the discretion to exercise any of these options with or without prior announcement during the auction. The Bureau seeks comment on these proposals.
iii. Information Relating to Auction Delay, Suspension, or Cancellation
29. The Bureau proposes that it may delay, suspend, or cancel Auction 97 in the event of a 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. Additionally, the CSEA requires the Commission to cancel an auction of “eligible frequencies” if the total cash proceeds attributable to those frequencies do not meet CSEA's revenue requirement. The Bureau will notify participants of any such delay, suspension or cancellation by public notice and/or through the FCC Auction System's announcement function. If the auction is delayed or suspended, the Bureau may, in its sole discretion, elect to resume the auction starting from the beginning of the current round or 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 emphasizes that it will exercise this authority solely at its discretion, and note that the exercise of its authority in this regard is not intended to be a substitute for situations in which bidders may wish to apply their activity rule waivers. The Bureau seeks comment on this proposal.
C. Auction Procedures
i. Upfront Payments and Bidding Eligibility
30. The Bureau has delegated authority and discretion to determine an appropriate upfront payment for each license being auctioned, taking into account such factors as the efficiency of the auction process and the potential value of similar licenses. An upfront payment is a refundable deposit made by each bidder to establish its eligibility to bid on licenses. Upfront payments that are related to the specific licenses being auctioned protect against frivolous or insincere bidding and provide the Commission with a source of funds from which to collect payments owed at the close of the auction. For Auction 97, the Bureau proposes to make the upfront payments equal to approximately half the proposed minimum opening bids. The proposed upfront payments are similar to those used in the recent auction of H Block licenses in the 1915-1920 MHz and 1995-2000 MHz bands. The upfront payments for each license are set forth in Attachment A to the Auction 97 Comment Public Notice. The Bureau seeks comment on this proposal.
31. The Bureau further proposes that the amount of the upfront payment submitted by a bidder will determine its initial bidding eligibility in bidding units. The Bureau proposes to assign each license a specific number of bidding units, equal to one bidding unit per dollar of the upfront payment proposed for the license. The specific bidding units for each license are set forth in Attachment A to the Auction 97 Comment Public Notice. The number of bidding units for a given license is fixed and does not change during the auction as prices change. A bidder's upfront payment is not attributed to specific licenses of licenses. Rather, a bidder may place bids on any combination of the licenses it selected on its short-form Start Printed Page 31331application (FCC Form 175), provided that the total number of bidding units associated with those licenses does not exceed its current eligibility. A bidder cannot increase its eligibility during the auction; it can only maintain its eligibility or decrease its eligibility. Thus, in calculating its upfront payment amount and hence its initial bidding eligibility, an applicant must determine the maximum number of bidding units on which it may wish to bid (or hold provisionally winning bids) in any single round and submit an upfront payment amount covering that total number of bidding units. The Bureau seeks comment on these proposals.
ii. Activity Rule
32. An activity rule requires bidders to bid actively throughout the auction, rather than wait until late in the auction before participating. A bidder's activity in a round will be the sum of the bidding units associated with any licenses upon which it places bids during the current round and the bidding units associated with any licenses for which it holds provisionally winning bids placed in previous rounds. Bidders are required to be active on a specific percentage of their current bidding eligibility during each round of the auction. Failure to maintain the requisite activity level will result in the use of an activity rule waiver, if any remain, or a reduction in the bidder's eligibility, possibly curtailing or eliminating the bidder's ability to place additional bids in the auction.
33. The Bureau proposes to divide the auction into at least two stages, each characterized by a different activity requirement. The auction will start in Stage One. The Bureau proposes to advance the auction to the next stage by announcement during the auction. In exercising this discretion, the Bureau will consider a variety of measures of auction activity, including but not limited to the percentage of bidding units associated with licenses on which there are new bids, the number of new bids, and the increase in revenue. The Bureau seeks comment on these proposals.
34. The Bureau proposes the following activity requirements, while noting again that the Bureau retains the discretion to change stages unilaterally by announcement during the auction: Stage One—In each round of the first stage of the auction, a bidder desiring to maintain its current bidding eligibility is required to be active on bidding units associated with licenses representing at least 80 percent of its current bidding eligibility. Failure to maintain the required activity level will result in the use of an activity rule waiver or a reduction in the bidder's bidding eligibility for the next round of bidding. During Stage One, a bidder's reduced eligibility for the next round will be calculated by multiplying the bidder's current round activity by five-fourths (5/4); Stage Two—In each round of the second stage, a bidder desiring to maintain its current bidding eligibility is required to be active on 95 percent of its current bidding eligibility. Failure to maintain the required activity level will result in the use of an activity rule waiver or a reduction in the bidder's bidding eligibility for the next round of bidding. During Stage Two, a bidder's reduced eligibility for the next round will be calculated by multiplying the bidder's current round activity by twenty-nineteenths (20/19).
35. The Bureau seeks comment on these activity requirements. Under this proposal, the Bureau will retain the discretion to change the activity requirements during the auction. For example, the Bureau could decide to add an additional stage with a higher activity requirement, 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 proposed herein. If the Bureau exercises this discretion, it will alert bidders by announcement in the FCC Auction System.
iii. Activity Rule Waivers and Reducing Eligibility
36. When a bidder's eligibility in the current round is below the required minimum level, it may preserve its current level of eligibility through an activity rule waiver. An activity rule waiver applies to an entire round of bidding, not to a particular bid. Activity rule waivers, which can be either proactive or automatic, are principally a mechanism for a bidder to avoid the loss of bidding eligibility in the event that exigent circumstances prevent it from bidding in a particular round.
37. The FCC Auction System assumes that a bidder that does not meet the activity requirement would prefer to use 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 in which a bidder's activity level is below the minimum required unless (1) the bidder has no activity rule waivers remaining, or (2) the bidder overrides the automatic application of a waiver by reducing eligibility, thereby meeting the activity requirement. If a bidder has no waivers remaining and does not satisfy the required activity level, the bidder's current eligibility will be permanently reduced, possibly curtailing or eliminating the ability to place additional bids in the auction.
38. A bidder with insufficient activity may wish to reduce its bidding eligibility rather than use an activity rule waiver. If so, the bidder must affirmatively override the automatic waiver mechanism during the bidding round by using the “reduce eligibility” function in the FCC Auction System. In this case, the bidder's eligibility is permanently reduced to bring it into compliance with the activity rule described above. Reducing eligibility is an irreversible action; once eligibility has been reduced, a bidder will not be permitted to regain its lost bidding eligibility, even if the round has not yet closed.
39. Under the proposed simultaneous stopping rule, a bidder may apply an activity rule waiver proactively as a means to keep the auction open without placing a bid. If a bidder proactively applies an activity rule waiver (using the “apply waiver” function in the FCC Auction System) during a bidding round in which no bids are placed or withdrawn, the auction will remain open and the bidder's eligibility will be preserved. An automatic waiver applied by the FCC Auction System in a round in which there are no new bids, withdrawals (if permitted), or proactive waivers will not keep the auction open. A bidder cannot apply a proactive waiver after bidding in a round, and applying a proactive waiver will preclude it from placing any bids in that round. Applying a waiver is irreversible; once a proactive waiver is submitted, it cannot be unsubmitted, even if the round has not yet closed.
40. Consistent with recent Commission auctions, the Bureau proposes that each bidder in Auction 97 be provided with a total of three activity rule waivers that may be used as at the bidder's discretion during the course of the auction. The Bureau seeks comment on this proposal.
iv. Reserve Price and Minimum Opening Bids
41. The Commission has directed the Bureau to seek comment on the use of a minimum opening bid amount and/or reserve price prior to the start of each auction. Normally, a reserve price is an absolute minimum price below which an item or items will not be sold in a given auction. If a reserve price is utilized, the specific amount of the reserve price may be disclosed or undisclosed. A minimum opening bid, on the other hand, is the minimum bid Start Printed Page 31332price set at the beginning of the auction below which no bids are accepted. It is generally used to accelerate the competitive bidding process. It is possible for the minimum opening bid and the reserve price to be the same amount.
42. Among other factors the Bureau must consider in deciding whether to employ either or both of these mechanisms is 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.
a. Reserve Price
43. The Commission is statutorily obliged to consider and balance a variety of public interests and objectives when establishing service rules and licensing procedures with respect to the public spectrum resource. These objectives include promoting recovery for the public a portion of the value of that resource. Certain of the frequencies in the AWS-3 bands are “eligible frequencies” under the CSEA, and the CSEA requires that auction proceeds fund the estimated relocation or sharing costs of incumbent federal entities operating on these frequencies. In view of this, the Bureau will establish reserve prices for the AWS-3 licenses offered in Auction 97.
44. The CSEA requires that the total cash proceeds attributable to “eligible frequencies” be at least 110 percent of the total estimated relocation or sharing costs provided to the Commission pursuant to the CSEA before the Commission may conclude an auction involving such frequencies. If this condition is not met, the CSEA requires the Commission to cancel the auction. For purposes of determining whether the CSEA's revenue requirement has been met, the Commission has determined that “total cash proceeds” means winning bids net of any applicable bidding credit discounts at the end of bidding (e.g., exclusive of any Tribal lands bidding credit).
45. The NTIA has notified the Commission that the total estimated relocation or sharing costs for the 1695-1710 MHz band equal $527,069,000, and that the total estimated relocation or sharing costs for the 1755-1780 MHz band equal $4,575,603,000. Accordingly, the Bureau proposes one aggregate reserve price for the 1695-1710 MHz band and a separate aggregate reserve price for the paired 1755-1780/2155-2180 MHz band.
46. The Bureau proposes to establish an aggregate reserve price of $579,775,900 for the licenses in the 1695-1710 MHz band. This aggregate reserve price is 110 percent of total estimated relocation or sharing costs of $527,069,000 provided by the NTIA for this band and, therefore, the minimum reserve price required by the CSEA. Given that the 1695-1710 MHz band consists entirely of “eligible frequencies,” the Bureau proposes that the winning bid for each license in this band, net of any applicable bidding credit discounts at the end of bidding (e.g., exclusive of any Tribal lands bidding credit), will be counted toward meeting the reserve price for the band. Thus, the aggregate reserve price will be met if the total winning bids for the licenses in the 1695-1710 MHz band, net of any applicable bidding credit discounts at the end of bidding (e.g., exclusive of any Tribal lands bidding credit), is at least $579,775,900.
47. The 1755-1780 MHz band will be licensed paired with the 2155-2180 MHz band. The lower half of the frequencies in each paired license, i.e., those in the 1755-1780 MHz band, are “eligible frequencies” and are thus subject to CSEA requirements. To meet CSEA's requirements, the Bureau proposes to establish an aggregate reserve price of $5,033,163,300 for the 1755-1780 MHz frequencies. This aggregate reserve price is 110 percent of total estimated relocation or sharing costs of $4,575,603,000 for the 1755-1780 MHz band provided by the NTIA and, therefore, the minimum reserve price required by CSEA. Because these frequencies are one half of the frequencies authorized for use by each of the 1755-1780/2155-2180 MHz paired licenses, the Bureau proposes that one-half of each winning bid for each of the paired 1755-1780/2155-2180 MHz licenses, net of any applicable bidding credit discounts at the end of bidding, will be counted toward meeting the reserve price. The aggregate reserve price will be met if one half of the total winning bids for the paired 1755-1780/2155-2180 MHz licenses in, net of any applicable bidding credit discounts at the end of bidding (e.g., exclusive of any Tribal lands bidding credit), is at least $5,033,163,300. Therefore, the winning “net” bids for the paired 1755-1780/2155-2180 MHz licenses must be at least twice that amount, or $10,066,326,600, in order for the Commission to conclude the auction.
48. The Bureau seeks comment on its proposed reserve prices for Auction 97 and its proposals for implementing them. The Bureau encourages commenters to address any additional specific issues related to the use of reserve prices. The Bureau asks that commenters describe in detail the specific factors that lead them to their conclusions.
49. In light of the proposal to adopt procedures for limited information disclosure for Auction 97, if information regarding net bid amounts is not provided during the auction, the Bureau proposes to issue an announcement in the FCC Auction System, viewable by bidders and the general public, stating that a reserve price has been met immediately following the first round in which that occurs. However, due to factors such as bid withdrawals and the effect of bidding credits, an announcement that the reserve price has been met following a round of the auction does not guarantee that the reserve price will continue to be met. Accordingly, the Bureau will make a further announcement in the FCC Auction System after any round in which the reserve price status changes. The Bureau seeks comment this proposal.
b. Minimum Opening Bids
50. The Bureau proposes to establish minimum opening bid amounts for Auction 97. The Bureau believes a minimum opening bid amount, which has been used in other auctions, is an effective bidding tool for accelerating the competitive bidding process. The Bureau proposes minimum opening bids that should accelerate the progress of the auction toward meeting (1) the reserve prices established to meet CSEA requirements and (2) the Spectrum Act deadline for licensing identified frequencies. The proposed minimum opening bids are higher than the proposed upfront payments so that the competitive bidding process can be accelerated without increasing the cost of eligibility.
51. The Bureau proposes to calculate minimum opening bid amounts for Auction 97 on a license-by-license basis using a formula based on bandwidth and license area population, similar to its approach in many previous spectrum auctions. The Bureau proposes to use a calculation based on $0.15 per megahertz of bandwidth per population (per “MHz-pop”) for paired licenses and $0.05 per MHz-pop for unpaired licenses, adjusted for past geographic variations. Specifically, the Bureau proposes to incorporate pricing information from previous auctions to adjust the minimum opening bid calculations based on an index of relative winning bid amounts for licenses in each CMA and EA in Start Printed Page 31333Auctions 66, 73, and 96, subject to a minimum of $0.01 per MHz-pop. This modification results in amounts ranging from $0.01 per MHz-pop to $0.53 per MHz-pop. The Bureau further proposes a minimum of $2,500 per license. The Bureau proposes to set the minimum opening bid amounts for the licenses covering the Gulf of Mexico at $2,000 per megahertz.
52. The proposed minimum opening bid amount for each AWS-3 license available in Auction 97, calculated pursuant to these procedures is set forth in Attachment A to the Auction 97 Comment Public Notice.
53. The Bureau seeks comment on its proposals concerning minimum opening bids. If commenters believe that these minimum opening bid amounts will result in unsold licenses, or are not reasonable amounts, they should explain why this is so and comment on the desirability of an alternative approach. If a commenter requests an alternative approach for a specific frequency block or a lower minimum opening bid amount for a specific license, it should justify the requested change in detail. If commenters disagree with the Bureau's proposed use of $0.15 per MHz-pop and $0.05 per MHz-pop, its approach to tailoring minimum opening bid amounts to account for relative prices among the CMAs and EAs in past auctions, or its selection of which past results to consider, the Bureau asks commenters to support their claims with valuation analyses and suggested minimum opening bid amount levels or formulas.
54. In establishing minimum opening bid amounts, the Bureau particularly seeks comment on factors that could reasonably have an impact on valuation of the licenses being auctioned, including the amount of spectrum being auctioned, levels of incumbency, the availability of technology to provide service, the size of the service areas, the size of the geographic service areas, issues of interference with other spectrum bands and any other relevant factors. The Bureau also seeks comment on whether the public interest would be served by having no minimum opening bid amount.
55. Commenters may also wish to address the general role of minimum opening bids in managing the pace of the auction. For example, commenters could compare using minimum opening bids—e.g., by setting higher minimum opening bids to reduce the number of rounds it takes licenses to reach their final prices—to other means of controlling auction pace, such as changes to bidding schedules or activity requirements.
v. Bid Amounts
56. The Bureau proposes that, in each round, an eligible bidder will be able to place a bid on a given license using one or more pre-defined bid amounts. Under this proposal, the FCC Auction System interface will list the acceptable bid amounts for each license. The Bureau proposes to calculate bid amounts in the following manner.
a. Minimum Acceptable Bids
57. 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 on the license. The Bureau proposes to calculate minimum acceptable bids based on provisionally winning bids and an activity-based formula.
58. After there is a provisionally winning bid for a license, the minimum acceptable bid amount for that license will be equal to the amount of the provisionally winning bid plus a percentage of that bid amount calculated using an activity-based formula. In general, the percentage will be higher for a license receiving many bids than for a license receiving few bids. In the case of a license for which the provisionally winning bid has been withdrawn, the minimum acceptable bid amount will equal the second highest bid received for the license.
59. The percentage of the provisionally winning bid used to establish the minimum acceptable bid amount (“the additional percentage”) is calculated based on an activity index at the end of each round. The activity index is a weighted average of (a) the number of distinct bidders placing a bid on the license in that round, and (b) 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 provisionally winning bid amount to obtain the minimum acceptable bid for the next round. The Bureau proposes initially to set the weighting factor at 0.5, the minimum percentage at 0.1 (10%), and the maximum percentage at 0.3 (30%). Hence, at these initial settings, the minimum acceptable bid for a license will be between ten percent and thirty percent higher than the provisionally winning bid, depending upon the bidding activity for the license. Equations and examples are shown in Attachment B to the Auction 97 Comment Public Notice. The Bureau seeks comment on whether to use this activity-based formula or a different approach.
b. Additional Bid Amounts
60. The Bureau proposes to calculate any additional bid amounts using the minimum acceptable bid amount and a bid increment percentage—more specifically, by multiplying the minimum acceptable bid by one plus successively higher multiples of the bid increment percentage. If, for example, the bid increment percentage is 5 percent, the calculation of the first additional acceptable bid amount is (minimum acceptable bid amount) * (1 + 0.05), rounded, or (minimum acceptable bid amount) * 1.05, rounded; the second additional acceptable bid amount equals the minimum acceptable bid amount times one plus two times the bid increment percentage, rounded, or (minimum acceptable bid amount) * 1.10, rounded; etc. The Bureau will round the results using the Commission's standard rounding procedures for auctions. The Bureau proposes initially to set the bid increment percentage at 5 percent.
61. For Auction 97, the Bureau proposes to begin the auction with nine acceptable bid amounts per license (the minimum acceptable bid amount and eight additional bid amounts).
c. Bid Amount Changes
62. The Bureau retains the discretion to change the minimum acceptable bid amounts, the additional bid amounts, the number of acceptable bid amounts, and the parameters of the formulas used to calculate minimum acceptable bid amounts and additional bid amounts if the Bureau determines that circumstances so dictate. Further, the Bureau retains the discretion to do so on a license-by-license basis. The Bureau also retains the discretion to limit (a) the amount by which a minimum acceptable bid for a license may increase compared with the corresponding provisionally winning bid, and (b) the amount by which an additional bid amount may increase compared with the immediately preceding acceptable bid amount. For example, the Bureau could set a $10 million limit on increases in minimum acceptable bid amounts over provisionally winning bids. Thus, if the activity-based formula calculates a minimum acceptable bid amount that is $20 million higher than the provisionally winning bid on a license, the minimum acceptable bid amount would instead be capped at $10 million above the provisionally winning bid. Start Printed Page 31334The Bureau seeks comment on the circumstances under which it should employ such a limit, factors it should consider when determining the dollar amount of the limit, and the tradeoffs in setting such a limit or changing other parameters—such as changing the minimum acceptable bid percentage, the bid increment percentage, or the number of acceptable bid amounts. If the Bureau exercises this discretion, it will alert bidders by announcement in the FCC Auction System.
63. The Bureau seeks comment on these proposals. If commenters disagree with the proposal to begin the auction with nine acceptable bid amounts per license, they should suggest an alternative number of acceptable bid amounts to use at the beginning of the auction and an alternative number to use later in the auction. Commenters may wish to address the role of the minimum acceptable bids and the number of acceptable bid amounts in managing the pace of the auction and the tradeoffs in managing auction pace by changing the bidding schedule, activity requirements, or bid amounts, or by using other means.
vi. Provisionally Winning Bids
64. Provisionally winning bids are bids that would become final winning bids if the auction were to close in that given round. At the end of a bidding round, the FCC Auction System determines a provisionally winning bid for each license based on the highest bid amount received for the license. These bids become the provisionally winning bids for the round.
65. If identical high bid amounts are submitted on a license in any given round (i.e., tied bids), the FCC Auction System will use a random number generator to select a single provisionally winning bid from among the tied bids. (The Auction System assigns a random number to each bid when the bid is entered. The tied bid with the highest random number wins the tiebreaker.) The remaining bidders, as well as the provisionally winning bidder, can submit higher bids in subsequent rounds. However, if the auction were to end with no other bids being placed, the winning bidder would be the one that placed the provisionally winning bid.
66. The set of provisionally winning bids is determined after every round in which new bids are submitted. The provisionally winning bids at the end of the auction become winning bids, provided that any applicable reserve prices have been met. The Bureau reminds bidders that provisionally winning bids count toward activity for purposes of the activity rule.
vii. Bid Removal
67. For Auction 97, the Bureau proposes the following bid removal procedures. Before the close of a bidding round, a bidder has the option of removing any bid placed in that round. By removing a selected bid in the FCC Auction System, a bidder may effectively “undo” any bid placed within that round. Once a round closes, a bidder may no longer remove a bid. The Bureau seeks comment on this bid removal proposal.
viii. Bid Withdrawal
68. When permitted in an auction, bid withdrawals provide a bidder with the option of withdrawing bids placed in prior rounds that have become provisionally winning bids. The Commission has explained that allowing bid withdrawals facilitates efficient aggregation of licenses and the pursuit of backup strategies as information becomes available during the course of an auction, but has recognized that in some instances, bidders may seek to withdraw bids for improper reasons. The Bureau therefore has discretion in managing the auction to limit the number of withdrawals to prevent any bidding abuses. Applying this reasoning to Auction 97, the Bureau proposes to allow each bidder to withdraw provisionally winning bids in no more than two rounds during the course of the auction. To permit a bidder to withdraw bids in more than two rounds may encourage insincere bidding or the use of withdrawals for anti-competitive purposes. The two rounds in which a bidder may withdraw provisionally winning bids will be at the bidder's discretion, and there is no limit on the number of provisionally winning bids that a bidder may withdraw in either of the rounds in which it withdraws bids. Withdrawals must be in accordance with the Commission's rules, including the bid withdrawal payment provisions specified in 47 CFR 1.2104(g).
69. The Bureau seeks comment on this proposal. If commenters disagree with this proposal, the Bureau asks them to support their arguments by taking into account the licenses available, the impact on auction dynamics and the pricing mechanism, and the effects on the bidding strategies of other bidders.
D. Post-Auction Payments
i. Interim Withdrawal Payment Percentage
70. The Bureau seeks comment on the appropriate percentage of a withdrawn bid that should be assessed as an interim withdrawal payment in the event that a final withdrawal payment cannot be determined at the close of the auction. In general, the Commission's rules provide that a bidder that withdraws a bid during an auction is subject to a withdrawal payment equal to the difference between the amount of the withdrawn bid and the amount of the winning bid in the same or subsequent auction(s). If a bid is withdrawn and no subsequent higher bid is placed and/or the license is not won in the same auction, the final withdrawal payment cannot be calculated until after the close of a subsequent auction in which a higher bid for the license (or the equivalent to the license) is placed or the license is won. 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. 47 CFR 1.2104(g)(1) requires that the percentage of the withdrawn bid to be assessed as an interim bid withdrawal payment be between three percent and twenty percent and that it be set in advance of the auction.
71. The Commission has determined that the level of the interim withdrawal payment in a particular auction will be based on the nature of the service and the inventory of the licenses being offered. The Commission has noted that it may impose a higher interim withdrawal payment percentage to deter the anti-competitive use of withdrawals when, for example, bidders likely will not need to aggregate the licenses being offered in the auction, such as when few licenses are offered that are on adjacent frequencies or in adjacent areas, or when there are few synergies to be captured by combining licenses. With respect to the AWS-3 licenses being offered in Auction 97, the service rules permit a wide variety of advanced services, some of which may best be offered by combining licenses on adjacent frequencies or in adjacent areas, and the licenses will be offered under different geographic licensing schemes and bandwidth sizes. Balancing the potential need for bidders to use withdrawals to avoid winning incomplete combinations of licenses with the Bureau's interest in deterring undesirable strategic use of withdrawals, the Bureau proposes a percentage below the maximum twenty percent permitted under the current rules but above the three percent previously provided by the Commission's rules. Specifically, the Bureau proposes to establish an interim Start Printed Page 31335bid withdrawal payment of ten percent of the withdrawn bid for this auction. The Bureau seeks comment on this proposal.
ii. Additional Default Payment Percentage
72. 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 and timely final payment, or is otherwise disqualified) is liable for a default payment under 47 CFR 1.2104(g)(2). This payment consists of a deficiency payment, equal to the difference between the amount of the Auction 97 bidder's winning bid and the amount of the winning bid the next time a license covering the same spectrum is won in an auction, plus an additional payment equal to a percentage of the defaulter's bid or of the subsequent winning bid, whichever is less.
73. The Commission's rules provide that, in advance of each auction, it will establish a percentage between three and twenty percent of the applicable bid to be assessed as an additional default payment. As the Commission has indicated, the level of this additional payment in each auction will vary based on the nature of the service and the inventory of the licenses being offered.
74. Defaults weaken the integrity of the auction process and may impede the deployment of service to the public, however, the Bureau does not believe the detrimental effects of any defaults in Auction 97 are likely to be unusually great. Balancing these considerations, for Auction 97, the Bureau proposes to establish an additional default payment of fifteen percent of the applicable bid. The Bureau seeks comment on this proposal.
V. Ex Parte Rules
75. This proceeding has been designated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules. Persons making oral ex parte presentations are reminded that memoranda summarizing the presentations must contain summaries of the substance of the presentations and not merely a listing of the subjects discussed. More than a one or two sentence description of the views and arguments presented is generally required. Other provisions pertaining to oral and written ex parte presentations in permit-but-disclose proceedings are set forth in 47 CFR 1.1206(b).
End Supplemental Information
Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. 2014-12824 Filed 5-30-14; 8:45 am]
BILLING CODE 6712-01-P