Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedures, 6214-6229 [06-1100]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 71, Number 25 (Tuesday, February 7, 2006)]
[Rules and Regulations]
[Pages 6214-6229]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-1100]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 73, and 74

[WT Docket No. 05-211; FCC 06-4]


Implementation of the Commercial Spectrum Enhancement Act and 
Modernization of the Commission's Competitive Bidding Rules and 
Procedures

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document adopts several modifications to the Federal 
Communications Commission's competitive bidding rules. Some of the 
changes are necessitated by the Commercial Spectrum Enhancement Act and 
others are designed to enhance the Commission's competitive bidding 
program.

DATES: Effective April 10, 2006.

FOR FURTHER INFORMATION CONTACT: For legal questions: Audrey Bashkin or 
Erik Salovaara, Auctions Spectrum and Access Division, Wireless 
Telecommunications Bureau at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of the Implementation of 
the Commercial Spectrum Enhancement Act and Modernization of the 
Commission's Competitive Bidding Rules and Procedures Report and Order 
(Report and Order), released on January 24, 2006. The complete text of 
this Report and Order including attachments and related Commission 
documents, is available for public inspection and copying from 8 a.m. 
to 4:30 p.m. Monday through Thursday and 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. The Report and Order 
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, and e-mail 
fcc@bcpiweb.com. BCPI's Web site is https://www.bcpiweb.com. When 
ordering documents from BCPI, please provide the appropriate FCC 
document number, for example, FCC 06-xx. The Report and Order and 
related documents are also available on the Internet at the 
Commission's Web's site is: https://wireless.fcc.gov/auctions or on 
https://fcc.gov/ecfs.

I. Introduction and Background

    1. The Federal Communications Commission (Commission) adopts 
several modifications to the Commission's competitive bidding rules. 
The Commission sought comment on these changes in the recent Notice of 
Proposed Rule Making (NPRM), 70 FR 43372 (July 27, 2005), which, in 
combination with a Declaratory Ruling, 70 FR 43322 (July 27, 2005), 
began this proceeding. Some of the changes are required by the 
Commercial Spectrum Enhancement Act (CSEA); others are intended to 
enhance the effectiveness of the Commission's auctions program.

II. Implementation of CSEA

A. Background

    2. CSEA establishes a mechanism for reimbursing federal agencies 
out of spectrum auction proceeds for the cost of relocating their 
operations from certain eligible frequencies that have been reallocated 
from federal to non-federal use. Under CSEA, the total cash proceeds 
from any auction of eligible frequencies must equal at least 110 
percent of estimated relocation costs of eligible federal entities. 
CSEA prohibits the Commission from concluding any auction of eligible 
frequencies that falls short of this revenue requirement. Instead, if 
the auction does not raise the required revenue, it must be canceled.
    3. As explained in the NPRM, implementing CSEA necessitates that 
the Commission modify its tribal land bidding credit rules. In the 
Declaratory Ruling, the Commission determined that total cash proceeds 
for purposes of meeting CSEA's revenue requirement means winning bids 
net of any applicable bidding credit discounts. Accordingly, to 
determine whether CSEA's revenue requirements have been met at the end 
of a CSEA auction, the Commission will have to determine whether 
winning bids net of any applicable bidding credit discounts equal at 
least 110 percent of estimated relocation costs. However, under the 
Commission's current rules, the Commission may not know for at least 
180 days after the end of the auction the amount of tribal land bidding 
credits that will be awarded with respect to those winning bids. 
Consequently, being able to determine promptly after the close of 
bidding whether or not CSEA's revenue requirement has been met requires 
revision of the Commission's tribal land bidding credit rules.

B. CSEA's Reserve Price Requirement

    4. In the NPRM, the Commission sought comment on a proposed 
revision to its current reserve price rule. CSEA directs the Commission 
to revise its reserve price regulations to ensure that an auction of 
eligible frequencies raises at least 110 percent of the estimated 
relocation costs for federal users as determined pursuant to CSEA. The 
Commission's competitive bidding rules have, since their inception, 
allowed for the use of reserve prices, and, since 1997, section 309(j) 
of the Communications Act has required the Commission to prescribe 
methods by which a reasonable reserve price will be required, or a 
minimum bid will be established, to obtain any license or permit being 
assigned pursuant to the competitive bidding, unless the Commission 
determines that such a reserve price or minimum bid is not in the 
public interest. Section 1.2104(c) of the Commission's rules, 47 CFR 
1.2104(c), gives the Commission the discretion to employ a reserve 
price. This rule, however, does not satisfy the CSEA mandate that the 
reserve price rule ensure that an auction of eligible frequencies 
raises the revenue required by the statute. Accordingly, the Commission 
proposed a rule that conforms to the CSEA requirement.
    5. No commenter addressed this issue. Given the statutory mandate 
and the absence of opposition from commenters, the Commission will 
adopt the rule proposed in the NPRM.

C. Tribal Land Bidding Credits in CSEA Auctions

    6. In the NPRM, the Commission sought comment on three alternative 
methods of ensuring that, in auctions subject to CSEA, the Commission 
will be able to calculate total cash proceeds promptly after the 
completion of bidding, while still preserving its ability to award 
tribal land bidding credits to qualified license winners at some point 
after such proceeds have been

[[Page 6215]]

determined. The need for revision of the rules arises because the 
Commission allows applicants seeking tribal land bidding credits 180 
days after the long-form filing deadline in which to demonstrate their 
eligibility for such credits. To qualify for a tribal land bidding 
credit, a license winner must indicate on its long-form application 
(FCC Form 601) that it intends to serve a qualifying tribal land within 
a particular market. The applicant must then amend its long-form 
application within the 180-day period by attaching a certification from 
the tribal government authorizing the applicant to provide service on 
its tribal land, certifying that the area to be served by the winning 
bidder is indeed qualifying tribal land, and assuring that it has not 
and will not enter into an exclusive contract with the applicant and 
will not unreasonably discriminate among wireless carriers seeking to 
provide service on the qualifying tribal land. The applicant must also 
attach its own certification that it will comply with construction 
requirements for tribal land and consult with the tribal government 
regarding the siting of facilities and service deployment.
    7. The Commission clarifies that when a deadline for final payment 
of a winning bid occurs before an applicant's eligibility for a tribal 
land bidding credit is determined, the Commission requires the 
applicant to make full payment of the balance of its winning bid by 
that deadline. In other words, such an applicant receives no reduction 
in the balance due by the final payment deadline for any as yet un-
awarded tribal land bidding credit the applicant is seeking. When an 
applicant's eligibility for a tribal land bidding credit is established 
after final payment has been made, the Commission will refund the 
amount of the credit.
    8. As soon as the long-form applications have been submitted, the 
Commission can calculate the maximum amount of tribal land bidding 
credits for which auction winners could be eligible assuming full 
compliance with the certification requirements. However, because the 
deadline for submitting the required certifications is not until 180 
days after the filing deadline for long-form applications, the 
Commission may not know for 180 days or longer to what extent tribal 
land bidding credit applicants have actually qualified for such 
credits. Thus, when an auction that has a reserve price or prices 
includes licenses covering qualifying tribal lands, the Commission may 
not know for at least 180 days after the long-form deadline how much of 
a discount on the auction's winning bids it will have to allow for 
tribal land bidding credits. In auctions subject to CSEA, this 
situation could lead to a potentially substantial post-auction delay in 
calculating whether total cash proceeds meet the 110 percent revenue 
requirement. Thus, the Commission's current tribal land bidding credit 
procedures could prevent the Commission from concluding the auction 
expeditiously after the cessation of bidding and, should the award of 
the credits reduce the auction's net winning bids to below the 110 
percent revenue requirement, might even lead to cancellation of the 
auction long after the bidding has ended. Accordingly, the Commission 
sought comment on which of three possible modifications to the 
Commission's tribal land bidding credit rules would best enable it to 
meet the its dual objectives of facilitating CSEA compliance and 
continuing to encourage service on tribal lands. The Commission also 
invited commenters to propose other methods of accomplishing these 
objectives.
    9. The only commenter to address this issue supports either of the 
first two options on which the Commission sought comment. Under the 
first option, the Commission would award pro rata tribal land bidding 
credits out of the amount by which net winning bids at the close of 
bidding exceeded the reserve price(s) applicable to that auction. If 
this amount were insufficient to pay all of the tribal land bidding 
credits for which auction winners were eligible, then each eligible 
tribal land bidding credit applicant would receive a pro rata credit 
based on the credit the applicant would have received had the auction 
not been subject to a reserve price.
    10. The commenter also likes the second option, pursuant to which 
the Commission would award tribal land bidding credits on a first-come, 
first-served basis in auctions subject to CSEA. Winning bidders would, 
under this alternative, still have to file the certifications for a 
tribal land bidding credit no later than 180 days after the filing 
deadline for long-form applications. However, bidding credits up to the 
full amount determined by the existing formula would be awarded to 
eligible applicants in the order in which they had filed the 
certifications for such credits, to the extent that funds remained 
available. As with the first alternative, the money available for 
tribal land bidding credits would be limited to the net winning bids 
exceeding 110 percent of the total estimated relocation costs. The 
commenter believes that this option, by allowing early and final 
determination of outstanding tribal land bidding credit valuations, has 
an advantage over the pro rata option.
    11. Under the third option, the Commission would require applicants 
to specify on their short-form applications the licenses, if any, for 
which they intended to seek a tribal land bidding credit, should they 
win. The Commission would determine whether the CSEA reserve price had 
been met, insofar as tribal land bidding credits were concerned, by 
deducting the maximum amount of tribal land bidding credits for which 
winning bidders that had indicated on their short-form applications an 
interest in receiving such credits could be eligible. The commenter 
opines that neither adopting this option nor leaving the rules 
unchanged would serve the public interest.
    12. The Commission will adopt the first option, i.e., the pro rata 
approach. The time at which winning bidders are able to file their 
suitably amended long-forms is not completely within their control, 
given that applicants for tribal land bidding credits must depend on 
tribal governments to provide them with some of the required 
certifications. In light of these circumstances, the Commission 
believes that the pro rata option, rather than the first-come, first-
served option, is the preferable method of equitably apportioning 
tribal land bidding credits among the largest number of qualified 
applicants, while still allowing a speedy determination of whether the 
reserve price has been met in auctions of eligible frequencies. The 
Commission agrees with the commenter that neither the third option, 
i.e., requiring advance notification on the short-form, nor the status 
quo would adequately serve the interests of the public.
    13. Under the pro rata approach, if the reserve price limits the 
funds available for tribal land bidding credits to less than the full 
amount for which auction winners seeking tribal land bidding credits 
might qualify, each applicant eligible for a tribal land bidding credit 
will receive a pro rata portion of the available funds. The funds 
available equal the amount by which winning bids for licenses subject 
to the reserve price, net of discounts the Commission takes into 
account when reporting net bids in the public notice closing the 
auction, exceed the reserve price. For purposes of calculating pro-rata 
tribal land bidding credits, any repayments of tribal land bidding 
credit amounts pursuant to 47 CFR 1.2110(f)(3)(C)(viii), as amended, 
are not funds available for granting other pro-rata tribal land

[[Page 6216]]

bidding credits. The ratio of (a) each applicant's pro rata credit to 
(b) the total funds available for tribal land bidding credits will 
equal the ratio of (a) the applicant's full credit (the tribal land 
bidding credit for which that applicant would have qualified absent 
limitations resulting from the reserve price) to (b) the aggregate 
maximum amount of tribal land bidding credits for which all applicants 
might have qualified absent limitations resulting from the reserve 
price. In order to assure that funds are available for all applicants 
seeking tribal land bidding credits, the Commission will calculate the 
aggregate maximum amount of tribal land bidding credits for which all 
applicants might have qualified by assuming that any applicant seeking 
a tribal land bidding credit on its long-form application will be 
eligible for the largest tribal land bidding credit possible for its 
bid for its license, absent limitations resulting from the reserve 
price. The Commission will use this ratio to determine the pro rata 
credit awarded when it grants the license. When making any necessary 
refunds of already-made license payments, the Commission will continue 
to follow the usual Commission procedures, as set forth in the 
procedures public notice for the relevant auction.
    14. The Commission may be able to award each applicant proving 
eligibility for a pro rata tribal land bidding credit a larger amount 
in the event that any other applicant ultimately proves to be eligible 
for less than the largest possible tribal land bidding credit. Funds 
available for an applicant that proves to be eligible for less than the 
largest possible credit can be used to increase pro rata credits for 
other applicants. However, the Commission can determine the largest 
possible pro rata credit for an applicant only after all applications 
seeking a tribal land bidding credit with respect to licenses covered 
by a reserve price have been finally resolved. Accordingly, the 
Commission will recalculate pro rata tribal land bidding credits once 
all such applications have been finally resolved.
    15. Final resolution of all applications occurs only after any 
review or reconsideration of any such credit has been concluded and no 
opportunity remains for further review or reconsideration. The 
Commission notes that it is possible that final resolution of less than 
all applications seeking tribal land bidding credits may make it 
apparent that funds available for tribal land bidding credits equal or 
exceed the full amount for which all other applications seeking tribal 
land bidding credits might qualify. For example, the funds available 
may have been just short of the full amount for which all applicants 
might qualify. If one applicant withdraws its application for a tribal 
land bidding credit, the funds available subsequently may exceed the 
full amount for which all other applicants might qualify, even though 
it may be some time before all other applications are finally resolved. 
In light of this possibility, the Commission reserves the power to 
award full credits when available information makes it clear that funds 
available exceed the full amount for which all applicants might 
qualify, even though all applications have not yet been fully resolved. 
In such circumstances, the Commission will increase the amounts of any 
previously awarded pro rata credits to make them full credits as well.
    16. After all such applications have been finally resolved, the 
Commission will recalculate the amount of pro rata credits using the 
aggregate amount of actual full credits--i.e., the tribal land bidding 
credits for which the applicants would have qualified absent the 
limitations resulting from the reserve price--rather than the 
hypothetical maximum aggregate amount for which all applicants might 
have qualified. In other words, the ratio of (a) each applicant's 
recalculated pro rata credit to (b) the total funds available for 
tribal land bidding credits will equal the ratio of (a) the applicant's 
full credit (the tribal land bidding credit for which that applicant 
would have qualified absent limitations resulting from the reserve 
price) to (b) the aggregate amount of the actual full credits. In the 
event that the recalculated pro rata credit is larger than the initial 
pro rata credit, the Commission will award the difference. If the 
second calculation produces a different result from the first, it will 
reflect the fact that when the amount of any one applicant's portion of 
the fixed funds available for tribal land bidding credits decreases, 
the amounts of other applicants' portions should increase. An 
applicant's portion of the fixed funds might decrease, for example, if 
it reaches agreements with tribal governments regarding service for 
less than the full area of tribal land covered by the license. 
Consequently, that applicant may be eligible for a credit smaller than 
the largest credit possible.

III. Updating Competitive Bidding Rules and Procedures

A. Tribal Land Bidding Credits in Non-CSEA Auctions

    17. The Commission sought comment in the NPRM on whether the 
Commission should extend the same or a similar approach to the one the 
Commission selected for allocating tribal land bidding credits in 
auctions with a CSEA-mandated reserve price (or prices) to those non-
CSEA auctions for which the Commission established a reserve price or 
prices based on winning bids net of discounts. No commenter addressed 
this aspect of the issue. The Commission believes that, for the reasons 
discussed above, the pro rata approach the Commission adopted for 
auctions with a CSEA-mandated reserve price would, in non-CSEA 
auctions, best allow both a speedy auction conclusion and an equitable 
allocation of available tribal land bidding credits among all qualified 
applicants. Accordingly, the Commission adopts a rule extending the pro 
rata approach, at the discretion of the Commission, to non-CSEA 
auctions with reserve prices.

B. Default Rule Clarification

    18. In the NPRM, the Commission proposed two clarifications of its 
default payment rule. The first deals with the proper time to calculate 
the amount of the default payment when, in a subsequent auction, there 
is a higher withdrawn bid but no winning bid for a license that 
corresponds to the defaulted license. The second addresses an unusual 
situation in which it might not be clear whether net or gross bids 
should be used in calculating the default payment. Neither proposal 
prompted any response from commenters.
    19. Under 47 CFR 1.2104(g), a winning bidder that defaults or is 
disqualified after the close of an auction is subject to a deficiency 
payment (or deficiency portion) plus an additional payment equal to 3 
percent (or, in the case of defaults or disqualifications after the 
close of a package bidding auction, 25 percent) of the defaulting 
bidder's bid or the subsequent winning bid, whichever is less. Under 
existing rules, the deficiency payment for a default or 
disqualification following a package bidding auction (or in situations 
where the subsequent winning bid is for a license won as part of a 
package) is, in most instances, calculated differently from the way in 
which the deficiency payment is calculated when none of the relevant 
bids is part of a package bid. However, under rule changes the 
Commission adopts today, the Commission will use a single method of 
calculating deficiency payments across all auctions.
    20. The deficiency payment is calculated in the same manner as a 
payment owed following the withdrawal of bid. Section 1.2104(g) of the 
Commission's rules, 47 CFR

[[Page 6217]]

1.2104(g), provides that a bidder that withdraws a bid during the 
course of 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. In the event that a 
bidding credit applies to any of the bids, the bid withdrawal payment 
equals the difference between either the net withdrawn bid and the 
subsequent net winning bid or the gross withdrawn bid and the 
subsequent gross winning bid, whichever difference is less. For 
purposes of calculating the withdrawal payment amount, net bids do not 
include any discounts resulting from tribal land bidding credits. No 
withdrawal payment is assessed for a withdrawn bid if either the 
subsequent winning bid or any intervening subsequent withdrawn bid 
equals or exceeds the original withdrawn bid. The additional 3 (or 25) 
percent payment must be calculated using the same bid amounts and basis 
(i.e., net or gross bids) as used in calculating the deficiency 
payment.
    21. In the NPRM, the Commission described the anomaly that might 
result from calculating the additional 3 or 25 percent payment for a 
bidder that defaults or is disqualified after the close of an auction, 
when, in a subsequent auction, there is a higher withdrawn bid, but no 
winning bid, for a license corresponding to the defaulted license. By 
corresponding license, the Commission generally means a license with 
the same geographic and spectral components as those of the defaulted 
license or the license on which a bid was withdrawn. However, when, 
because of intervening partitioning, disagregration, or rule change, 
there is no single license with the same geographic and spectral 
components as the original license then corresponding license means a 
license covering any part of the geography or spectrum of the original 
license. Under these circumstances, an original license may have more 
than one corresponding license. In some instances, the Commission may 
designate as a corresponding license a license that shares no spectrum 
or geography with the original license.
    22. A selective reading of 47 CFR 1.2104(g) might indicate that, 
while the defaulter's deficiency obligation would be calculated as the 
difference between the defaulter's bid and the higher withdrawn bid in 
the subsequent auction (thus resulting in no deficiency payment), the 
defaulter's additional 3 or 25 percent payment obligation, which is 
based upon the lesser of the defaulter's bid or the subsequent winning 
bid, could not be calculated until the corresponding license had been 
won in a still later auction. However, as the Commission pointed out in 
the NPRM, such a reading would conflict with the assumption evident in 
the Commission's default payment rule that the deficiency payment and 
the additional payment are calculated using the same bids. This 
assumption is reflected, for example, in the rule's explanation of 
which basis--net bids or gross bids--should be used in calculating the 
interim bid withdrawal payment.
    23. To prevent the anomaly just described, the Commission proposed 
to clarify the default payment rule as follows. If, in a subsequent 
auction, there were a higher withdrawn bid but no winning bid for a 
license that corresponds to a defaulted license, the additional default 
payment would be determined as 3 percent (or 25 percent) of the 
defaulting bidder's bid. In this situation, because the applicable 
subsequent bid was higher, no deficiency payment would be required. In 
the event that there were no intervening subsequent withdrawn bids that 
were higher than the defaulted bid but there were intervening 
subsequent withdrawn bids that were higher than the subsequent winning 
bid, under the Commission's proposal the highest such intervening 
subsequent withdrawn bid would be used to calculate both portions of 
the final default payment. As noted, this proposal generated no 
comments. Because the Commission believes that the proposed 
clarification would simplify and accelerate the calculation of final 
default payments in applicable situations, the Commission adopts the 
proposal. As in the calculation of withdrawal payments, net bids for 
purposes of calculating default deficiency and additional payments do 
not include discounts resulting from tribal land bidding credits.
    24. The Commission also sought comment in the NPRM on a proposal to 
clarify the additional payment portion of the default payment rule in 
certain situations in which no deficiency payment is owed. The 
additional payment is, as noted, normally a percentage of either the 
defaulting bidder's bid or the subsequent applicable bid, whichever is 
less, using the same basis--net or gross bids--as used in calculating 
the deficiency payment. However, when the defaulted bid is subject to a 
bidding credit and the subsequent applicable bid equals or exceeds the 
defaulted bid, regardless of which basis--net or gross bids--is used, 
it is not clear whether the additional payment should be based on the 
net defaulted bid or on the gross defaulted bid. Accordingly, the 
Commission proposed that, in such a situation, the additional payment 
be 3 (or 25) percent of the net defaulted bid amount, thus basing the 
default payment on what the defaulter was obligated to pay at the close 
of bidding. Because the Commission believes that this clarification of 
the default rule is needed, and as no commenter opposed this aspect of 
the NPRM, the Commission adopts the proposal. The Commission also 
extends the clarification adopted here to determinations of the amount 
of default payments in situations where the initial bid, the subsequent 
winning bid, or any intervening withdrawn bid is for a license that is 
part of a package. Under the Commission's proposal, the additional 
payment would, as always, be calculated using the same basis, i.e., net 
or gross bids, as used in the calculation of the deficiency payment.

C. Withdrawal and Default Payment Percentages

    25. The Commission proposed in the NPRM to replace the current 
interim withdrawal and additional default payments of 3 percent of the 
relevant bid with an amount up to 20 percent of the relevant bid, with 
the precise amount for each auction established in advance of the 
auction.
i. Background
    26. Withdrawals. 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 
license for which there has been a withdrawn bid is neither subject to 
a subsequent higher bid nor won in the same auction, the final 
withdrawal payment cannot be calculated until a corresponding license 
is subject to a higher bid or won in a subsequent auction. When that 
final payment cannot yet be calculated, the bidder responsible for the 
withdrawn bid is assessed an interim bid withdrawal payment equal to 3 
percent of the amount of its withdrawn bid, and this interim payment is 
applied toward any final bid withdrawal payment that is ultimately 
assessed.
    27. The Commission adopted the withdrawal payment rules in 1994 to 
discourage insincere bidding, which, whether done for frivolous or 
strategic purposes, distorts price information generated by the auction 
process and may reduce the efficiency of the auction. The Commission 
anticipated

[[Page 6218]]

that strategic withdrawals--such as when a bidder attempts to deter a 
rival from acquiring a license by bidding up the price of the license 
and then withdrawing--would be particularly damaging to competitive 
bidding. The Commission added the 3 percent interim bid withdrawal 
payment to the rules to help ensure that the withdrawal payment could 
be collected if one ultimately were assessed.
    28. Defaults and Disqualifications. The Commission's rules provide 
that if, after the close of an auction, a winning bidder defaults on a 
down payment or final payment obligation or is disqualified, the bidder 
is liable for a default payment. This payment consists of a deficiency 
portion, 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 
3 percent (or, in the case of defaults or disqualifications after the 
close of a package bidding auction, 25 percent) of the defaulter's bid 
or of the subsequent winning bid, whichever is less. The rule as 
applied in non-combinatorial auctions has been in effect since 1994. In 
1997, the Commission extended to all auctionable services a policy, 
earlier adopted for broadband personal communications services (PCS), 
of assessing initial default deposits. In instances when the amount of 
a default payment cannot yet be determined, the Commission assesses an 
initial default deposit of between 3 percent and 20 percent of the 
defaulted bid amount.
    29. Requiring an additional payment in the case of post-auction 
defaults is intended to provide an incentive to bidders wishing to 
withdraw their bids to do so prior to the close of an auction, because 
a default or disqualification after an auction is generally more 
harmful to the auction process than a withdrawal during the auction. 
The Commission set the additional payment at 3 percent, estimating that 
amount as the transaction cost of selling a license in the after-
market. The Commission posited that if it were to establish a 
significantly higher additional default payment, bidders in a position 
to do so would opt to sell unwanted licenses individually in the 
secondary market rather than default. The Commission determined that 
such a result would not only be unfair to entities unable to rely on 
the after-market but also would be a less efficient mechanism for 
assigning defaulted licenses than would Commission auctions of such 
licenses.
    30. The Commission noted in the NPRM that there have been a 
disproportionate number of withdrawals late in the Commission's 
auctions, indicating that some bidders have been placing and then 
withdrawing bids primarily to discourage potential or existing market 
competitors from seeking to acquire licenses. The Commission noted 
further that bidders continue to default on their payment obligations. 
Because withdrawals and defaults weaken the integrity of the auctions 
process and impede the deployment of service to the public and could 
prove particularly troublesome in auctions with a specific cash 
proceeds or reserve price requirement, such as auctions subject to 
CSEA, the Commission proposed to deter such behavior more effectively 
by increasing to a maximum of 20 percent the current 3 percent limit on 
interim withdrawal payments and additional default payments.
ii. Discussion
    31. The Commission will adopt its proposal in the NPRM to determine 
the precise amount of interim withdrawal and additional default 
payments, up to 20 percent of the relevant bid, in advance of the 
auction. The comments the Commission received support its proposal and 
provide additional support for the observation in the NPRM that the 
Commission's rationale for limiting additional default payments to 3 
percent no longer holds the same validity that it did eleven years ago 
when the payment was established. Resale restrictions have since been 
reduced, and secondary market tools for the redistribution of access to 
spectrum have been rapidly developing. Consequently, the Commission is 
less concerned about potential negative effects resulting from a 
bidder's decision to pay for an unwanted license and resell it rather 
than default. Moreover, the Commission believes that raising the limit 
on the size of the payments may persuade bidders to be more realistic 
in their advance assessment of how much they can afford to pay for 
licenses. Accordingly, the Commission will modify 47 CFR 1.2104(g) of 
its rules to raise the current 3 percent limits on the interim 
withdrawal payment and the additional default payment to 20 percent 
each. The Commission will, as part of its determination of competitive 
bidding procedures in advance of each auction, establish the 
appropriate level, from 3 percent up to a maximum of 20 percent, at 
which to set each of the two payments. The level will be based on the 
nature of the service and the inventory of the licenses being offered.
    32. Adoption of the 3 to 20 percent range permits the Commission to 
use more than one percentage in an auction for either the interim 
withdrawal payment or the additional default payment, or both. The 
Commission did not propose to, nor will it, alter the size of the 25 
percent additional payment for defaults or disqualifications following 
combinatorial bidding auctions, as the Commission continues to believe 
that there is a greater potential for harm resulting from defaults 
following combinatorial bidding auctions than following other auctions.

D. Apportionment of Bid Amounts

i. Among the Licenses in a Package
    33. The Commission proposed in the NPRM to determine a stand-in to 
use for the bid on an individual license included as part of a package 
in a combinatorial (or package) bidding auction whenever an individual 
bid amount was needed for a regulatory calculation. The need for this 
change arises out of the assumption in the Commission's competitive 
bidding rules and procedures that the amount of each bid on an 
individual license will always be known. For example, the Commission's 
rules for calculating the amount of a small business, new entrant, or 
tribal land bidding credit, presume that the Commission knows the 
amount of the winning bid amount on the license or construction permit 
involved. 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 Commission needs 
to know the bid amounts for individual licenses. However, in package 
bidding, where bidders place single all-or-nothing bids on groups (or 
packages) of licenses, there will be no identifiable bid amounts on the 
individual licenses comprising packages of more than one license.
    34. Recognizing this problem in the context of default payments, 
the Commission established a rule, 47 CFR 1.2104(g)(3)(i), for 
calculating the deficiency portion of default payment obligations in 
connection with package bidding auctions. This provision accommodates 
situations in which all relevant licenses won in one or more subsequent 
auctions correspond to licenses originally made available in the same 
initial auction. However, it does not allow for situations in which the 
corresponding licenses are made available in one or more subsequent 
auctions that include licenses that were not won in the same initial 
auction.
    35. As a more comprehensive solution, the Commission proposed in

[[Page 6219]]

the NPRM to specify in advance of each auction that uses a 
combinatorial bidding design or includes spectrum previously subject to 
combinatorial bidding a method for apportioning the bid on a package 
among the individual licenses comprising the package. The Commission 
proposed further that the apportioned package bid (APB)--the portion of 
the total bid attributed to an individual license pursuant to the 
selected method--serve as a substitute for the bid on that license 
whenever the individual bid amount was needed for one of the 
Commission's regulatory calculations.
    36. There are at least two available methods by which the 
Commission could apportion package bids to the individual licenses 
comprising a package. One such method would be to use a MHz-pops ratio, 
just as is currently done for unjust enrichment calculations involving 
partitioning or disaggregating licenses. For Auction No. 51, the only 
auction conducted so far in which package bidding has been available, 
the Commission decided that MHz-pops would be used to determine a 
substitute individual bid amount should it be necessary to calculate a 
tribal land bidding credit for a license won as part of a package. In 
some cases, however, using a simple MHz-pops ratio to apportion a 
package bid to its component licenses might not reflect very well the 
relative values of the licenses in the package. For example, if a 
heavily encumbered license were packaged with an unencumbered license 
of the same bandwidth and in the same geographic area, the MHz-pops 
method would assign the same substitute price (half of the bid on the 
package) to each license, despite the possible effect on value of the 
encumbrance differential. An alternative method of calculating 
substitute prices would take into account information indicating the 
individual values of the licenses, including the minimum opening bid 
amounts (which may reflect differences in incumbency, for example) and 
all of the bids placed in the auction covering those licenses. The 
Commission has used a mathematical algorithm to calculate price 
estimates that takes these factors into account. These estimates of the 
prices of individual licenses covered in a single combinatorial bid are 
referred to as current price estimates (CPEs). The Commission developed 
a methodology for determining CPEs as part of the combinatorial bidding 
procedures established for Auction No. 51, as well as for Auction No. 
31, an upcoming auction of licenses in the Upper 700 MHz bands for 
which the Commission previously announced plans to use package bidding. 
CPEs were calculated after every round of Auction No. 51 as part of the 
mathematical optimization process used to determine the winning bids 
and were also used in determining the minimum acceptable bid amounts 
for each subsequent round. The same use of CPEs was also announced 
before the previously scheduled start of Auction No. 31.
    37. Although CPEs calculated after the final round of the auction 
are not needed to determine further minimum acceptable bids, final 
round CPEs (final price estimates or FPEs) can be interpreted as 
indicators of the individual value that a license covered by a package 
bid contributes to the winning bid amount for the package. FPEs reflect 
all available information about the relative demand for the licenses, 
since they are calculated using a mathematical algorithm that takes 
into account all the bids placed in the auction. In addition, the sum 
of the FPEs for the component licenses of a package is mathematically 
constrained to equal the winning bid for the package. Consequently, the 
ratios of these estimates to the package bid amount can be seen as 
indicators of the relative weights of the different licenses in the 
market value of the package. FPEs, therefore, may be useful in 
determining apportioned package bid amounts when an individual price is 
needed for a regulatory calculation.
    38. The sole commenter to address this issue supports both aspects 
of the Commission's proposal, including affording the Commission the 
flexibility to use either what the commenter refers to as a 
proportionate approach (i.e., MHz-pops) or an FPE approach to apportion 
bids among licenses in a package. The commenter believes, however, that 
in most cases the market approach would yield a better approximation of 
``the real cost of subsequent default, a bidding credit or an unjust 
enrichment obligation.''
    39. Given this support and the absence of opposition, the 
Commission adopts the proposal. Under this rule, the Commission will 
establish a methodology in advance of each auction with combinatorial 
bidding for determining APBs for licenses that are part of a package 
and will use the APB in place of the individual bid amount on a license 
included in a package whenever the amount of an individual bid on that 
license is needed for any determination required by the Commission's 
rules or procedures, such as determining the amount of a bidding credit 
or of a withdrawal or default payment. Adoption of this rule renders 
unnecessary 47 CFR 1.2104(g)(3)(i), the existing rule for calculating 
the deficiency portion of default payment obligations in connection 
with package bidding auctions. Accordingly, the Commission will 
eliminate this provision. However, as discussed above, the Commission 
will retain the substance of current 47 CFR 1.2104(g)(3)(ii), which 
provides 25 percent as the size of the additional payment for defaults 
or disqualifications following a combinatorial bidding auction.
ii. Among the Components of a License
    40. In the NPRM, the Commission proposed that, prior to auctions 
involving licenses which, due to a rule change, covered different 
geographic areas or bandwidths than did corresponding licenses made 
available at an earlier auction, the Commission specify, as necessary, 
a method for apportioning the bid on any such reconfigured license 
among the license's component parts (i.e., portions of the license's 
service area or bandwidth, or both). Implicit in the Commission's rules 
for determining the amount of a withdrawal or default payment--
determinations that involve a comparison between the withdrawing or 
defaulting bidder's bid and a subsequent bid--is the assumption that 
the subsequent bid will be for a license with the same geographic and 
spectral components as the original license. However, when there have 
been intervening rule changes involving the relevant spectrum, the 
second license may not be identical in geography and spectrum to the 
first. For example, both the geographic and spectral characteristics of 
what formerly were known as Multipoint Distribution Service (MDS) and 
the Instructional Television Fixed Service (ITFS) licenses in the 2495-
2690 MHz band and now are known as Broadband Radio Service (BRS) and 
Educational Broadband Service (EBS) licenses were changed last year 
when, in order to provide greater flexibility and a more functional 
band plan for licensees, the Commission restructured the rules 
governing these licenses. The Commission can expect that, as radio 
technology continues to evolve, there will be other instances where the 
Commission's band plans are updated. Therefore, for purposes of 
calculating a withdrawal or default payment--or for any comparison of a 
bid for one license with a bid for a corresponding license in a 
subsequent auction--the Commission needs a procedure for apportioning 
the bid placed on the reconfigured license(s).

[[Page 6220]]

    41. In discussing its proposal for apportioning individual bids, 
the Commission noted that using a MHz-pops ratio would be suitable for 
such an apportionment, as the Commission has successfully employed the 
ratio to apportion small business bidding credit amounts in order to 
calculate unjust enrichment payments when the relevant license has been 
partitioned or disaggregated. However, the Commission proposed to 
retain the flexibility to select another method of apportionment in the 
event the Commission identified a method it believed would better suit 
the particular licenses involved. Further, the Commission proposed to 
use methods for package bid apportionment and individual license bid 
apportionment in concert when circumstances warranted. The Commission 
received no comments on this issue.
    42. The Commission adopts its proposal with the following 
modification. Rather than specify a method for apportioning an 
individual bid among a license's component parts prior to auctions 
involving reconfigured licenses, the rule the Commission adopts will 
allow the Commission to apportion an individual bid amount whenever 
such an apportionment is necessary under Commission rules or 
procedures, such as when determining the amount of a withdrawal or a 
default payment. The Commission recognizes that past bids on original 
licenses, not just future bids on reconfigured licenses, might need to 
be apportioned in order to compare bids on the original licenses to 
bids on one or more other reconfigured licenses, or portions thereof. 
Accordingly, the Commission will use an apportioned individual bid 
(AIB) whenever it is necessary to allocate the bid on a license among 
its subparts, such as when comparing bids on licenses, at least one of 
which has been reconfigured. Under the Commission's rule, the 
Commission will retain the discretion to use a MHz-pops ratio or any 
other suitable method for the apportionment. Should it be necessary to 
apportion the bid on a license included as part of a package, the 
Commission will use both package bid apportionment and individual 
license bid apportionment together.

E. Payment Rules for Broadcast Construction Permits

    43. The Commission proposed in the NPRM to adopt for broadcast 
auctions the final payment procedures in the Commission's Part 1 rules. 
The Commission's Part 1 rules provide that, unless otherwise specified 
by public notice, auction winners are required to pay the balance of 
their winning bids in a lump sum within ten business days following the 
release of a public notice establishing the payment deadline. In recent 
wireless spectrum auctions, the Commission has required each winning 
bidder to submit the balance of the net amount of its winning bid(s) 
within ten business days after the deadline for submitting down 
payments; whereas, the Commission's prior practice was to require final 
payment ten business days after release of a public notice announcing 
that license applications were ready to be granted. This procedural 
change was necessary to limit the potential for post-auction 
bankruptcies to affect the payment obligations of winning bidders. 
Nevertheless, specific broadcast auction rules in Parts 73 and 74 
provide that winning bidders of broadcast construction permits need not 
render their final payment until after their long-form applications 
have been processed, any petitions to deny have been dismissed or 
denied, and the public notice announcing that broadcast construction 
permits are ready to be granted has been released. Recognizing the 
discrepancy between the broadcast auction payment procedure and that 
for all other auctions, the Commission, in the Auction No. 37 
Procedures Public Notice, 69 FR 136, July 16, 2004, noted that it would 
consider future changes to the broadcast rules to conform the broadcast 
final payment procedures to the analogous Part 1 requirements.
    44. The only commenter on this issue opposes the proposal. It 
recommends that the Commission instead conform its Part 1 final payment 
rule to the payment procedures for broadcast auctions or, 
alternatively, require only a 50 percent down payment, rather than 
payment in full. The commenter argues that the Part 1 final payment 
rule is disproportionately burdensome to smaller carriers. The 
commenter also contends that the proposed rule change is unnecessary, 
because the Supreme Court's decision in NextWave, 537 U.S. 293 (2003), 
which involved a licensee's failure to pay for a license that had 
already been awarded, does not apply to a winning bidder's failure to 
pay prior to license grant.
    45. The Commission will adopt the proposal. The Commission expects 
those entities that plan to participate in an auction to have their 
financing in place before the start of the auction. Consistent with 
this expectation, the new rule will apply in all auctions where the 
start of bidding occurs after the rule's effective date, pursuant to 
publication in the Federal Register. However, the new rule will not 
apply with respect to auction where the start of bidding occurs before 
the rule's effective date. In that case, the former rule regarding 
final payment will continue to apply. The Commission's goal is to 
ensure that only serious, financially qualified applicants receive 
licenses and construction permits so that the provision of service to 
the public is expedited. As the Commission noted in the NPRM, winning 
bidders, including small businesses, have been able to comply with the 
Commission's new final payment procedure without difficulty. The 
Commission therefore believes that, in broadcast auctions, winning 
bidders, regardless of size, should be able to comply with this change 
with similar ease. Further, the Commission believes that both the 
Commission and the public benefit by having, to the extent possible, a 
consistent set of auction procedures across services.
    46. Moreover, the Commission cannot be certain that the commenter's 
interpretation of NextWave would prevail should the issue be decided in 
the courts. In NextWave, the Supreme Court held that Section 525 of the 
Bankruptcy Code prevented the Commission from canceling NextWave's 
licenses solely because of NextWave's failure to make full and timely 
installment payments of its auction debt pursuant to the Commission's 
installment payment plan. Although NextWave involved a default by a 
licensee on installment payments, the Supreme Court's construction of 
Section 525 of the Bankruptcy Code could be argued to apply not just to 
licensees' installment debt but also to any debt dischargeable in the 
bankruptcy case, including a license applicant's obligation to pay a 
winning bid. Under the Commission's auction rules, a winning bidder 
becomes bound to pay its full winning bid immediately upon the close of 
the auction, rather than at the time of the license grant. Thus, the 
Commission is at risk for a bankruptcy filing as soon as the auction 
closes, and, under a broad reading of Section 525, the Commission could 
be forced to issue a license to a winning bidder in bankruptcy even 
though the winning bidder has not (and may not ever) pay its full 
winning bid. Accordingly, despite the commenter's argument, the 
Commission believes that it is in the public interest to complete the 
auction process and award licenses as expeditiously as possible 
including collecting the proceeds of each auction as soon as possible 
after the auction closes.
    47. The Commission will continue to make final determinations 
regarding an

[[Page 6221]]

applicant's eligibility to hold a permit or license, including 
eligibility for any bidding credits, such as new entrant bidding 
credits, when it is ready to grant the permit or license. In the event 
that an applicant's eligibility changes between the final payment 
deadline and the date on which the Commission is ready to grant the 
permit or license, the applicant will be required to make any 
additional payment prior to the issuance of the permit or license. If 
an event occurs that results in the loss or diminishment of a bidding 
credit between the final payment deadline and grant of the permit or 
license, the applicant must promptly report such event.

F. Consortium Exception for Designated Entities and Entrepreneurs

    48. The Commission sought comment in the NPRM on several options 
for facilitating use of the consortium exception to the designated 
entity and entrepreneur aggregation rule. Under the consortium 
exception, when an applicant or licensee is a consortium comprised 
exclusively of members eligible for small business bidding credits or 
broadband PCS entrepreneur status, or both, the gross revenues (and, 
when determining broadband PCS entrepreneur eligibility, the total 
assets) of the consortium members are not aggregated. In other words, 
so long as each member of a consortium individually meets the financial 
caps for small business bidding credits (or broadband PCS entrepreneur 
status), the consortium will be eligible for such credits (or for 
closed bidding in auctions of broadband PCS licenses), regardless of 
whether the gross revenues (or total assets) of all consortium members 
would, if aggregated, exceed the caps. The consortium exception, 
originally adopted on a service-by-service basis where capital costs of 
auction participation were expected to be high, is intended to enable 
small businesses or entrepreneurs to pool their resources to help them 
overcome this challenge to capital formation.
    49. The consortium exception has been seldom used, perhaps in part 
because of the lack of clear direction from the Commission as to how 
members of consortia that win licenses can be formally organized and 
how they can hold their licenses. When these structural questions are 
not resolved before licenses are awarded, contractual disputes may 
arise between members of consortia, particularly if any of the members 
file for bankruptcy protection. And if consortium members agree after 
the auction to divide among themselves the licenses they have won 
without first having applied for Commission approval, they may be held 
accountable for unauthorized assignments or transfers of control. Not 
only would such difficulties impede service to the public and consume 
Commission resources, they would prove expensive and time consuming for 
the small businesses involved.
    50. The Commission sought comment on three rule changes intended to 
minimize the likelihood of these problems. First, the Commission asked 
whether it should adopt a requirement that each member of a consortium 
file an individual long-form application for its respective, mutually 
agreed-upon license(s), following an auction in which the consortium 
has won one or more licenses. Second, the Commission sought comment on 
whether, in order for two or more consortium members to be licensed 
together for the same license(s), they should be required to form a 
legal business entity, such as a corporation, partnership, or limited 
liability company, after having disclosed this intention on their 
short-form and long-form applications. Third, the Commission asked for 
comment on whether such new entities would have to meet the 
Commission's small business or entrepreneur financial limits and, if 
not, whether allowing these entities to exceed the limits would be 
consistent with the Commission's existing designated entity and 
broadband PCS entrepreneur rules, as well as the Commission's 
obligations under the Communications Act. The Commission also 
encouraged commenters to express their views on how these approaches 
might work in the context of package bidding and to what extent 
adopting these proposals might encourage wider use of the consortium 
exception. No commenter opposed these possible changes.
    51. The Commission believes that if the consortium exception is to 
become a useful tool for smaller entities, while remaining faithful to 
the objectives and requirements of section 309(j) of the Communications 
Act the Commission should implement all of the changes the Commission 
discussed in the NPRM. Accordingly, the Commission adopts the following 
modifications to the consortium exception. First, the Commission will 
require consortium members to file individual long-form applications 
for their respective, mutually agreed-upon license(s) following an 
auction in which the consortium has won one or more licenses. Second, 
in order for two or more consortium members to be licensed together for 
the same license(s) (or disaggregated or partitioned portions thereof) 
the Commission will require them first to form a legal business entity, 
such as a corporation, partnership, or limited liability company. 
Third, the Commission will require any such entity to comply with the 
applicable small business or entrepreneur financial limits. A newly 
formed legal entity comprising two or more consortium members that do 
not qualify for as large a size-based bidding credit as that claimed by 
the consortium on its short-form application will be awarded a bidding 
credit, if at all, based on the entity's eligibility for such credit at 
the long-form filing deadline. A license won by the consortium in 
broadband PCS closed bidding will be granted only to a legal entity 
whose gross revenues and total assets do not, at the long-form filing 
deadline, exceed the financial limits for broadband PCS closed bidding.
    52. The dissolution of a consortium that applied to participate in 
an auction into its constituent members or groups of members for 
purposes of filing long-form applications will not constitute a change 
in control of the applicant for purposes of 47 CFR 1.927, 1.929, or 
1.2105. Because the Commission's application system requires that all 
long-form license applications for licenses won in an auction use the 
same FCC Registration Number (FRN) as the auction applicant/winning 
bidder, the members filing separate long-form applications will 
continue to use the consortium's FRN on their long-form applications. 
However, within ten business days after release of the public notice 
announcing grant of a long-form application, that licensee must update 
its filings in the Commission's Universal Licensing System (ULS) to 
substitute its individual FRN for that of the consortium. In addition, 
ULS accepts applications only for whole licenses won in an auction. 
Accordingly, if a consortium plans to partition or disaggregate a 
license among members after the auction, one member of the consortium 
will have to file the applicable long-form application and append the 
relevant partitioning or disaggregation agreement to the application. 
After the long-form application has been granted, members will have to 
file, pursuant to the Commission's existing rules, assignment 
applications to partition or disaggregate the license pursuant to the 
terms of the agreement attached to the original license application.
    53. The Commission believes that these modifications will invest 
the consortium exception with greater transparency, thereby promoting 
clearer planning by smaller entities, while

[[Page 6222]]

continuing to allow them to enhance their competitiveness with 
efficiencies of scale and strategy. Moreover, ensuring that licenses 
are granted only to consortium members that comprise legal business 
entities facilitates enforcement of the Communications Act and the 
Commission's policies and rules, particularly in the event of a 
disagreement among consortium members. For this reason, the Commission 
takes this opportunity to remove any previous ambiguity in its rules by 
clarifying that the consortium exception (and, indeed, the consortium 
structure) is available only to short-form applicants seeking a size-
based benefit for auction participation, and not to prospective 
lessees, assignees, or transferees.

IV. Procedural Matters

    54. As required by the Regulatory Flexibility Act, 5 U.S.C. 604, 
the Commission has prepared a Final Regulatory Flexibility Analysis, 
set forth in an appendix C to the Implementation of the Commercial 
Spectrum Enhancement Act and Modernization of the Commission's 
Competitive Bidding Rules and Procedures Report and Order.
    55. The Implementation of the Commercial Spectrum Enhancement Act 
and Modernization of the Commission's Competitive Bidding Rules and 
Procedures Report and Order contains no new or modified information 
collections subject to the Paperwork Reduction Act of 1995 (PRA), Pub. 
L. 104-13.
    56. The Commission will include a copy of the Implementation of the 
Commercial Spectrum Enhancement Act and Modernization of the 
Commission's Competitive Bidding Rules and Procedures Report and Order 
in a report it will send to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, 5 U.S.C. 801(a)(1)(A).

V. Final Regulatory Flexibility Analysis

    57. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated into the Notice 
of Proposed Rule Making (NPRM) in WT Docket No. 05-211, which, in 
combination with a Declaratory Ruling, began this proceeding. The 
Commission sought written public comment in the NPRM on possible 
changes to its competitive bidding rules, as well as on the IRFA. The 
Commission received three comments, one reply comment, and two ex parte 
comments on the NPRM, none of which addressed the IRFA. This Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
    58. This Report and Order adopts modifications to existing 
Commission rules for the purposes of implementing the recently enacted 
Commercial Spectrum Enhancement Act (CSEA). CSEA establishes a 
mechanism to use spectrum auction proceeds to reimburse federal 
agencies operating on certain frequencies that have been reallocated 
from federal to non-federal use for the cost of relocating their 
operations. The Report and Order also adopts a number of changes to the 
Commission's competitive bidding rules that are necessary, apart from 
CSEA, to enhance the effectiveness of the Commission's auctions 
program.
    59. Reserve Price Rule. CSEA requires the total cash proceeds from 
any auction of eligible frequencies to equal at least 110 percent of 
the total estimated relocation costs provided to the Commission by 
National Telecommunications and Information Administration (NTIA). To 
implement this requirement, CSEA directs the Commission to revise its 
reserve price regulations adopted pursuant to Section 309(j)(4)(F) of 
the Communications Act. Accordingly, the Commission has adopted a 
proposal, which received no comment, to add a requirement to its 
existing reserve price rule (47 CFR 1.2104(c)) such that, for any 
auction of eligible frequencies requiring the recovery of estimated 
relocation costs under CSEA, the Commission will establish a reserve 
price (or prices) that ensures that the total cash proceeds 
attributable to such spectrum will equal at least 110 percent of the 
total estimated relocation costs provided to the Commission by NTIA.
    60. Tribal land bidding credit rule for CSEA auctions. In an effort 
to encourage carriers to provide telecommunications services to tribal 
lands with low historical telephone service penetration rates, the 
Commission makes tribal land bidding credits available to auction 
winners that serve qualifying tribal lands. Under the Commission's 
current rules, in auctions that include spectrum covering qualifying 
tribal lands, the Commission may not know for at least 180 days after 
the long-form application deadline how much of a discount on the 
auction's winning bids it will have to allow for tribal land bidding 
credits. In auctions subject to CSEA, this timing could lead to 
substantial post-auction delay in calculating whether total cash 
proceeds meet the 110 percent revenue requirement. Accordingly, the 
Commission sought comments on three alternative methods of ensuring 
that it would be able to promptly calculate total cash proceeds while 
at the same time preserving the availability of tribal land bidding 
credits in auctions subject to CSEA. The only commenter to address 
these alternatives approve