Auction of 1.4 GHz Bands Licenses Scheduled for February 7, 2007; Comments Sought on Competitive Bidding Procedures for Auction No. 69, 51817-51822 [E6-14526]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 71, Number 169 (Thursday, August 31, 2006)]
[Notices]
[Pages 51817-51822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-14526]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-06-69-A (Auction No. 69); DA 06-1016; AU Docket No. 06-
104]


Auction of 1.4 GHz Bands Licenses Scheduled for February 7, 2007; 
Comments Sought on Competitive Bidding Procedures for Auction No. 69

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of 1.4 GHz Band licenses 
scheduled to commence on February 7, 2007 (Auction No. 69). This 
document also seeks comments on the competitive bidding procedures for 
Auction No. 69.

DATES: Comments are due on or before September 11, 2006 and reply 
comments are due on or before September 18, 2006.

ADDRESSES: You may submit comments, identified by AU Docket No. 06-104; 
DA 06-1016 by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: https://
www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. Filings can be sent by 
hand or messenger delivery, by commercial overnight courier, or by 
first-class or overnight U.S. Postal Service mail (although the Bureau 
continues to experience delays in receiving U.S. Postal Service mail). 
All filings must be addressed to the Commission's Secretary Attn: WTB/
ASAD, Office of the Secretary, Federal Communications Commission.
     The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Commercial overnight mail 
(other than U.S. Postal Service Express Mail and Priority Mail) must be 
sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554. 
The Bureau also requests that a copy of all comments and reply comments 
be submitted electronically to the following address: 
auction69@fcc.gov.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division, for legal questions: Howard 
Davenport at (202) 418-0660. For general auction questions: Roy Knowles 
or Barbara Sibert at (717) 338-2888.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 69 
Comment Public Notice released on August 28, 2006. The complete text of 
the Auction No. 69 Comment Public Notice, including attachments and 
related Commission documents is available for public inspection and 
copying from 8 a.m. to 4:30 p.m. Monday through Thursday or from 8 a.m. 
to 11:30 a.m. on Friday at the FCC Reference Information Center, 
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. 
The Auction No. 69 Comment Public Notice and related Commission 
documents may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th 
Street, SW., Room CY-B402, Washington, DC 20554, telephone 202-488-
5300, facsimile 202-488-5563, or you may contact BCPI at its Web site: 
https://www.BCPIWEB.com. When ordering documents from BCPI please 
provide the appropriate FCC document number for example, DA 06-1016. 
The Auction No. 69 Comment Public Notice and related documents are also 
available on the Internet at the Commission's Web site: https://
wireless.fcc.gov/ auctions/69/.

I. Licenses To Be Offered in Auction No. 69

    1. In Auction No. 69, two 3-megahertz blocks, each consisting of a 
pair of 1.5 megahertz segments in the 1392-1395 MHz and 1432-1435 MHz 
bands, will be offered in each of six regions known as Economic Area 
Groupings (EAGs). Additionally, one 2-megahertz block of unpaired 
spectrum in the 1390-1392 MHz band will be offered in each of 52 
geographic areas known as Major Economic Areas (MEAs). The licenses 
available in Auction No. 69 are also listed in Attachment A of the 
Auction No. 69 Comment Public Notice.
    2. Permissible Services. When adopting its service rules for these 
bands, the Commission established a flexible regulatory and licensing 
framework in order to promote the provision of new and technologically 
innovative services. Licensees may provide both fixed and mobile 
services including wireless internet, high speed data as well as 
advanced two-way mobile and paging services.
    3. International Coordination. Currently, the United States does 
not have international agreements with Canada and Mexico governing 
operations in the 1392-1395 MHz, 1432-1435 MHz or the 1390-1392 MHz 
bands. Licensees in these bands operating near the borders must protect 
stations in Canada and Mexico from harmful interference. The Bureau 
also notes that operation in these bands may be subject to future 
agreements with Canada and Mexico and therefore may be subject to 
further modification.
    4. Incumbency Issues. Potential applicants are advised that there 
are several government operations that will continue to operate in 
these bands:

1390-1392 MHz

    Radio astronomy observations may be assigned in the 1350-1400 MHz 
band on an unprotected basis at the 16 radio astronomy observatories. 
Government operations authorized as of March 22, 1995, at the 17 sites 
will continue to operate on a fully protected basis until January 1, 
2009. All other government operations, except for medical telemetry 
(1395-1400 MHz), will operate on a non-interference basis to authorized 
non-Government operations and shall not hinder implementation of any 
non-Government operations.

1392-1395 MHz and 1432-1435 MHz

    Government operations authorized as of March 22, 1995, at the 17 
sites will continue to operate on a fully protected basis until January 
1, 2009. All other government operations, except for medical telemetry 
(1395-1400 MHz), will operate on a non-interference basis to authorized 
non-Government operations and shall not hinder implementation of any 
non-Government operations. Government stations in the fixed and mobile 
services may operate indefinitely on a primary basis at the 23 sites. 
All other Government stations in

[[Page 51818]]

the fixed and mobile services shall operate on a primary basis until 
re-accommodated in accordance with the National Defense Authorization 
Act of 1999.
    5. Spectrum Relocation Fund. The upper half of paired frequencies 
for 1.4 GHz Bands licenses, i.e., 1432-1435 MHz, is spectrum covered by 
a Congressional mandate that requires that auction proceeds fund the 
estimated relocation costs of incumbent Federal entities. Specifically, 
the Commercial Spectrum Enhancement Act (CSEA) established a Spectrum 
Relocation Fund (SRF), to which the cash proceeds attributable to 
eligible frequencies in an auction of licenses involving such 
frequencies would be deposited.
    6. On December 27, 2005, pursuant to CSEA, NTIA notified the 
Commission that there are no costs associated with relocating Federal 
operations from the 1432-1435 MHz band.

II. Bureau Seeks Comment on Auction Procedures

    7. Section 309(j)(3) of the Communications Act of 1934, as amended, 
requires the Commission to ensure that, in the scheduling of any 
competitive bidding under this subsection, an adequate period is 
allowed before issuance of bidding rules, to permit notice and comment 
on proposed auction procedures. Consistent with the provisions of 
section 309(j)(3) and to ensure that potential bidders have adequate 
time to familiarize themselves with the specific rules that will govern 
the day-to-day conduct of an auction, the 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. The Bureau seeks comment on the following issues relating to 
Auction No. 69.

A. Auction Structure

i. Simultaneous Multiple-Round Auction Design
    8. The Bureau proposes to auction all licenses included in Auction 
No. 69 in a simultaneous multiple-round auction. This type of auction 
offers every license for bid at the same time and consists of 
successive bidding rounds in which eligible bidders may place bids on 
individual licenses. Typically, bidding remains open on all licenses 
until bidding stops on every license. The Bureau seeks comment on this 
proposal.
    9. Information Available to Bidders Before and During an Auction. 
The Bureau also seeks comment on whether to implement procedures that 
would limit the disclosure of information on bidder interests and 
identities relative to the information procedures that have typically 
been used for Commission auctions. Commenters should indicate what 
factors support the position they take on this issue. In particular, 
commenters should specifically address whether technological 
considerations or the likely level of competition in this auction 
weighs in favor of or against limiting the disclosure of information 
relative to most past Commission spectrum auctions.
    10. Package Bidding. The Bureau has considered the possibility of 
using a simultaneous multiple-round with package bidding (SMR-PB) 
format for this auction, but is not inclined to believe that SMR-
ndash;PB would be appropriate for the auction of these licenses. Under 
the Commission's package bidding rules, bidders can place bids on any 
groups of licenses they wish to win together, with the result that they 
win either all the licenses in a group or none of them. In the SMR-
ndash;PB auction format, each bidder can have at most a single winning 
bid. Consequently, because bidders cannot win a group of licenses 
unless they have explicitly placed a bid on that exact combination, 
package bidding may be more complex for bidders if they wish to 
aggregate any or all of a number of licenses. However, we seek comment 
on this issue. If commenters believe that an SMR-ndash;PB design should 
be implemented for this auction, they should indicate what specific 
factors lead them to that conclusion.
ii. Round Structure
    11. The Commission will conduct Auction No. 69 over the Internet. 
Alternatively, telephonic bidding will also be available via the 
Auction Bidder Line. The toll-free telephone number for telephonic 
bidding will be provided to qualified bidders.
    12. The auction 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.
    13. 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 increase 
or decrease the amount of time for the bidding rounds and review 
periods, or the number of rounds per day, depending upon bidding 
activity levels and other factors. The Bureau seeks comment on this 
proposal.
iii. Stopping Rule
    14. The Bureau has discretion to establish stopping rules before or 
during multiple round auctions in order to terminate the auction within 
a reasonable time. For Auction No. 69, the Bureau proposes to employ a 
simultaneous stopping rule approach. A simultaneous stopping rule means 
that all licenses remain available for bidding until bidding closes 
simultaneously on all licenses. More specifically, bidding will close 
simultaneously on all licenses after the first round in which no bidder 
submits any new bids, applies a proactive waiver, or submits a 
withdrawal. Thus, unless circumstances dictate otherwise, bidding will 
remain open on all licenses until bidding stops on every license.
    15. Further, the Bureau proposes to retain the discretion to 
exercise any of the following options during Auction No. 69: (a) Use a 
modified version of the simultaneous stopping rule. The modified 
stopping rule would close the auction for all licenses after the first 
round in which no bidder applies a waiver, places a withdrawal, or 
submits any new bids on any 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) Keep the auction open even if no bidder 
submits any new bids, applies a waiver, or submits a withdrawal. In 
this event, the effect will be the same as if a bidder had applied a 
waiver. The activity rule, therefore, will apply as usual and a bidder 
with insufficient activity will either lose bidding eligibility or use 
a remaining waiver; and (c) 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.
    16. The Bureau proposes to exercise these options only in certain 
circumstances, for example, where the auction is proceeding very 
slowly, there is minimal overall bidding activity, or it appears likely 
that the auction will not close within a reasonable period of time. 
Before exercising these options, the Bureau is likely to attempt to 
increase the pace of the auction by, for example, increasing the number 
of bidding rounds per day and/or changing the minimum acceptable bid 
percentage. The Bureau seeks comment on these proposals.

[[Page 51819]]

iv. Information Relating to Auction Delay, Suspension, or Cancellation
    17. For Auction No. 69, the Commission proposed that, by public 
notice or by announcement during the auction, the Bureau may delay, 
suspend, or cancel the auction in the event of natural disaster, 
technical obstacle, evidence of an auction security breach, unlawful 
bidding activity, administrative or weather necessity, or for any other 
reason that affects the fair and efficient conduct of competitive 
bidding. In such cases, the Bureau, in its sole discretion, may elect 
to resume the auction starting from the beginning of the current round, 
resume the auction starting from some previous round, or cancel the 
auction in its entirety. Network interruption may cause the Bureau to 
delay or suspend the auction. The Bureau emphasizes that exercise of 
this authority is solely within the discretion of the Bureau, and its 
use is not intended to be a substitute for situations in which bidders 
may wish to apply their activity rule waivers. The Bureau seeks comment 
on this proposal.

B. Auction Procedures

i. Upfront Payments and Bidding Eligibility
    18. The Bureau has delegated authority and discretion to determine 
an appropriate upfront payment for each license being auctioned. The 
upfront payment is a refundable deposit made by each bidder to 
establish eligibility to bid on licenses. Upfront payments related to 
the licenses for specific spectrum subject to auction protect against 
frivolous or insincere bidding and provide the Commission with a source 
of funds from which to collect payments owed at the close of the 
auction. With these factors in mind, the Bureau proposes to calculate 
upfront payments on a license-by-license basis using a formula based on 
bandwidth and license area population:

$0.005 * MHz * License Area Population with a minimum of $1,000 per 
license.

    19. The Bureau further proposes that the amount of the upfront 
payment submitted by a bidder will determine the bidder's initial 
bidding eligibility in bidding units. The Bureau proposes that each 
license be assigned a specific number of bidding units equal to the 
upfront payment listed in Attachment A of the Auction No. 69 Comment 
Public Notice, on a bidding unit per dollar basis. The number of 
bidding units for a given license is fixed and does not change during 
the auction as prices rise. A bidder's upfront payment is not 
attributed to specific licenses. Rather, a bidder may place bids on any 
combination of licenses it selected on its FCC Form 175 as long as the 
total number of bidding units associated with those licenses does not 
exceed its current eligibility. Eligibility cannot be increased during 
the auction; it can only remain the same or decrease. Thus, in 
calculating its upfront payment amount and hence its initial bidding 
eligibility, an applicant must determine the maximum number of bidding 
units it may wish to bid on (or hold provisionally winning bids on) in 
any single round, and submit an upfront payment amount covering that 
total number of bidding units. Provisionally winning bids are bids that 
would become final winning bids if the auction were to close in that 
given round.
    20. The proposed number of bidding units for each license and 
associated upfront payment amounts are listed in Attachment A of the 
Auction No. 69 Comment Public Notice. The Bureau seeks comment on these 
proposals.
ii. Activity Rule
    21. In order to ensure that the auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively 
throughout the auction, rather than wait until late in the auction 
before participating. 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. Bidders are 
required to be active on a specific percentage of their current bidding 
eligibility during each round of the auction. Failure to maintain the 
requisite activity level will result in the use of an activity rule 
waiver, if any remain, or a reduction in the bidder's eligibility, 
possibly curtailing or eliminating the bidder's ability to place bids 
in the auction.
    22. The Bureau proposes to divide the auction into two stages, each 
characterized by a different activity requirement. The auction will 
start in Stage One. The Bureau proposes that the auction generally will 
advance from Stage One to Stage Two when the auction activity level, as 
measured by the percentage of bidding units receiving new provisionally 
winning bids, is approximately 20 percent or below for three 
consecutive rounds of bidding. However, the Bureau further proposes 
that the Bureau retains the discretion to change stages unilaterally by 
announcement during the auction. In exercising this discretion, the 
Bureau will consider a variety of measures of bidder activity, 
including, but not limited to, the auction activity level, the 
percentage of licenses (as measured in bidding units) on which there 
are new bids, the number of new bids, and the percentage of increase in 
revenue. The Bureau seeks comment on these proposals.
    23. For Auction No. 69, the Bureau proposes the following activity 
requirements: Stage One: In each round of the first stage of the 
auction, a bidder desiring to maintain its current bidding eligibility 
is required to be active on licenses representing at least 80 percent 
of its current bidding eligibility. Failure to maintain the required 
activity level will result in a reduction in the bidder's bidding 
eligibility in the next round of bidding (unless an activity rule 
waiver is used). During Stage One, a bidder's reduced eligibility for 
the next round will be calculated by multiplying the bidder's current 
round activity by 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 a reduction in the bidder's bidding eligibility in the 
next round of bidding (unless an activity rule waiver is used). During 
Stage Two, a bidder's reduced eligibility for the next round will be 
calculated by multiplying the bidder's current round activity by 
twenty-nineteenths (20/19).
    24. The Bureau seeks comment on this proposal. Commenters that 
believe this activity rule should be modified should explain their 
reasoning and comment on the desirability of an alternative approach. 
Commenters are advised to support their claims with analyses and 
suggested alternative activity rules.
iii. Activity Rule Waivers and Reducing Eligibility
    25. Use of an activity rule waiver preserves the bidder's 
eligibility despite the bidder's activity in the current round being 
below the required minimum level. An activity rule waiver applies to an 
entire round of bidding, not to particular licenses. Activity rule 
waivers can be either proactive or automatic and are principally a 
mechanism for auction participants to avoid the loss of bidding 
eligibility in the event that exigent circumstances prevent them from 
placing a bid in a particular round.
    26. The FCC Auction System assumes that a bidder that does not meet 
the activity requirement would prefer to apply an activity rule waiver 
(if available) rather than lose bidding

[[Page 51820]]

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 
minimum requirement. If a bidder has no waivers remaining and does not 
satisfy the required activity level, its eligibility will be 
permanently reduced, possibly curtailing or eliminating the bidder's 
ability to place additional bids in the auction.
    27. 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 the bidder into compliance with the 
activity rule. 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.
    28. A bidder may apply an activity rule waiver proactively as a 
means to keep the auction open without placing a bid. If a bidder 
proactively applies an activity rule waiver (using the apply waiver 
function in the FCC Auction System) during a bidding round in which no 
bids or withdrawals are submitted, the auction will remain open and the 
bidder's eligibility will be preserved. An automatic waiver applied by 
the FCC Auction System in a round in which there are no new bids, 
withdrawals or proactive waivers will not keep the auction open. A 
bidder cannot submit a proactive waiver after submitting a bid in a 
round, and submitting a proactive waiver will preclude a bidder from 
placing any bids in that round. Applying a waiver is irreversible; once 
a proactive waiver is submitted, that waiver cannot be unsubmitted, 
even if the round has not yet closed.
    29. The Bureau proposes that each bidder in Auction No. 69 be 
provided with three activity rule waivers that may be used at the 
bidder's discretion during the course of the auction as set forth 
above. The Bureau seeks comment on this proposal.
iv. Reserve Price or Minimum Opening Bid
    30. Section 309(j) calls upon the Commission to prescribe methods 
for establishing a reasonable reserve price or a minimum opening bid 
amount when FCC licenses are subject to auction, unless the Commission 
determines that a reserve price or minimum opening bid amount is not in 
the public interest. Consistent with this mandate, 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.
a. Reserve Price
    31. In CSEA, Congress requires the Commission to prescribe methods 
by which the total cash proceeds from any auction of licenses 
authorizing use of eligible frequencies, such as 1432-1435 MHz, shall 
equal at least 110 percent of the total estimated relocation costs 
provided to the Commission pursuant to CSEA. For purposes of 
determining whether a CSEA 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. 
CSEA also requires that the total cash proceeds attributable to 
eligible spectrum must be at least 110 percent of the total estimated 
relocation costs before the Commission may conclude the auction. If 
this condition is not met, CSEA requires that the Commission shall 
cancel the auction. On December 27, 2005, pursuant to CSEA, NTIA 
notified the Commission that there are no costs associated with 
relocating Federal operations from the 1432-1435 MHz band. The Bureau 
does not propose any reserve price to cover relocation cost under CSEA.
b. Minimum Opening Bid
    32. In contrast to a reserve price, a minimum opening bid amount is 
the minimum bid price set at the beginning of the auction below which 
no bids are accepted. It is generally used to accelerate the 
competitive bidding process. The auctioneer, however, often has the 
discretion to lower the minimum opening bid amount during the course of 
the auction. It is also possible for the minimum opening bid amount and 
the reserve price to be the same amount.
    33. In light of section 309(j)'s requirements, the Bureau proposes 
to establish minimum opening bid amounts for Auction No. 69. 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 does not propose a separate reserve price 
for the licenses to be offered in Auction No. 69.
    34. Specifically, for Auction No. 69, the Bureau proposes to 
calculate minimum opening bid amounts on a license-by-license basis 
using a formula based on bandwidth and license area population:

$0.005 * MHz * License Area Population with a minimum of $1,000 per 
license.

This proposed minimum opening bid amount for each license available in 
Auction No. 69 is set forth in Attachment A of the Auction No. 69 
Comment Public Notice. The Bureau seeks comment on this proposal.

    35. If commenters believe that this minimum opening bid amount will 
result in unsold licenses, or is not a reasonable amount, or should 
instead operate as a reserve price, they should explain why this is so, 
and comment on the desirability of an alternative approach. Commenters 
are advised to support their claims with valuation analyses and 
suggested reserve prices or minimum opening bid amount levels or 
formulas. In establishing minimum opening bid amounts, the Bureau 
particularly seeks comment on such factors as the amount of spectrum 
being auctioned, levels of incumbency, the availability of technology 
to provide service, the size of the service areas, issues of 
interference with other spectrum bands and any other relevant factors 
that could reasonably have an impact on valuation of the 1.4 GHz Bands 
licenses being auctioned. The Bureau also seeks comment on whether, 
consistent with section 309(j), the public interest would be served by 
having no minimum opening bid amount or reserve price.
v. Bid Amounts
    36. The Bureau proposes that, in each round, eligible bidders be 
able to place a bid on a given license in any of nine different 
amounts. Under this proposal, the FCC Auction System interface will 
list the nine acceptable bid amounts for each license.
    37. The first of the nine acceptable bid amounts is called the 
minimum acceptable bid amount. The minimum acceptable bid amount for a 
license will be equal to its minimum opening bid amount until there is 
a provisionally winning bid for the license. 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 the formula described below. In general, the 
percentage will be higher for a license receiving many bids than for a 
license receiving few bids. In

[[Page 51821]]

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.
    38. The percentage of the provisionally winning bid used to 
establish the minimum acceptable bid amount (the additional percentage) 
is calculated at the end of each round, based on an activity index 
which is a weighted average of the number of bids in that round and the 
activity index from the prior round. Specifically, the activity index 
is equal to a weighting factor times the number of bids on the license 
in the most recent bidding round plus one minus the weighting factor 
times the activity index from the prior round. The additional 
percentage is determined as one plus the activity index times a minimum 
percentage amount, with the result not to exceed a given maximum. The 
additional percentage is then multiplied by the provisionally winning 
bid amount to obtain the minimum acceptable bid for the next round. The 
Commission will initially set the weighting factor at 0.5, the minimum 
percentage at 0.1 (10%), and the maximum percentage at 0.2 (20%). 
Hence, at these initial settings, the minimum acceptable bid for a 
license will be between 10% and 20% higher than the provisionally 
winning bid, depending upon the bidding activity for the license.
    39. The eight additional bid amounts are calculated using the 
minimum acceptable bid amount and a bid increment percentage. The first 
additional acceptable bid amount equals the minimum acceptable bid 
amount times one plus the bid increment percentage, rounded. If, for 
example, the bid increment percentage is 5 percent, the calculation 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) * 1.1, rounded; the third additional acceptable 
bid amount equals the minimum acceptable bid amount times one plus 
three times the bid increment percentage, rounded, or (minimum 
acceptable bid amount) * 1.15, rounded; etc. The Bureau will round the 
results of these calculations, as well as the calculations to determine 
the minimum acceptable bid amounts, using our standard rounding 
procedures. For Auction No. 69, the Bureau proposes to use a bid 
increment percentage of 5 percent to calculate the eight additional 
acceptable bid amounts.
    40. The Bureau retains the discretion to change the minimum 
acceptable bid amounts, the parameters of the formula to determine the 
percentage of the provisionally winning bid used to determine the 
minimum acceptable bid, and the bid increment percentage if it 
determines that circumstances so dictate. The Bureau will do so by 
announcement in the FCC Auction System during the auction. The Bureau 
seeks comment on these proposals.
vi. Provisionally Winning Bids
    41. Provisionally winning bids are bids that would become final 
winning bids if the auction were to close in that given round. At the 
end of a bidding round, a provisionally winning bid for each license 
will be determined based on the highest bid amount received for the 
license. In the event of identical high bid amounts being submitted on 
a license in a given round (i.e., tied bids), the Bureau will use a 
random number generator to select a single provisionally winning bid 
from among the tied bids. 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. If any bids are received on the license in a 
subsequent round, the provisionally winning bid again will be 
determined by the highest bid amount received for the license.
    42. A provisionally winning bid will remain the provisionally 
winning bid until there is a higher bid on the license at the close of 
a subsequent round, unless the provisionally winning bid is withdrawn. 
Bidders are reminded that provisionally winning bids count toward 
activity for purposes of the activity rule.
vii. Bid Removal and Bid Withdrawal
    43. For Auction No. 69, 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 
selected bids in the FCC Auction System, a bidder may effectively 
unsubmit any bid placed within that round. In contrast to the bid 
withdrawal provisions, a bidder removing a bid placed in the same round 
is not subject to a withdrawal payment. Once a round closes, a bidder 
may no longer remove a bid.
    44. A bidder may withdraw its provisionally winning bids using the 
withdraw bids function in the FCC Auction System. A bidder that 
withdraws its provisionally winning bid(s) is subject to the bid 
withdrawal payment provisions of the Commission rules. The Bureau seeks 
comment on these bid removal and bid withdrawal procedures.
    45. In the Part 1 Third Report and Order, 65 FR 13540, May 21, 
1997, the Commission 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. The Commission noted, however, 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. The Commission stated that 
the Bureau should assertively exercise its discretion, consider 
limiting the number of rounds in which bidders may withdraw bids, and 
prevent bidders from bidding on a particular market if the Bureau finds 
that a bidder is abusing the Commission's bid withdrawal procedures.
    46. Applying this reasoning, the Bureau proposes to limit each 
bidder to withdrawing 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 
withdrawals may be used will be at the bidder's discretion; withdrawals 
otherwise must be in accordance with the Commission's rules. There is 
no limit on the number of provisionally winning bids that may be 
withdrawn in either of the rounds in which withdrawals are used. 
Withdrawals will remain subject to the bid withdrawal payment 
provisions specified in the Commission's rules.

C. Post-Auction Procedures

i. Establishing the Interim Withdrawal Payment Percentage
    47. 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). However, if a license for which there has been a 
withdrawn bid is neither subject to a

[[Page 51822]]

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, which will be applied 
toward any final bid withdrawal payment that is ultimately assessed. 
The Commission recently amended its rules to provide that in advance of 
the auction, the Commission shall establish the percentage of the 
withdrawn bid to be assessed as an interim bid withdrawal payment 
between three percent (3%) and twenty percent (20%).
    48. When it adopted the new rule, the Commission indicated that the 
level of the interim withdrawal payment in a particular auction will be 
based on the nature of the service and the inventory of the licenses 
being offered. The Commission noted that it may impose a higher interim 
withdrawal payment percentage to deter the anti-competitive use of 
withdrawals when, for example, bidders likely will not need to 
aggregate licenses offered, such as when few licenses are offered that 
are not on adjacent frequencies or in adjacent areas, or there are few 
synergies to be captured by combining licenses.
    49. With respect to an auction of the licenses in the 1.4 GHz 
Bands, the service rules permit a variety of fixed and mobile services, 
some of which may best be offered by combining licenses on adjacent 
frequencies or in adjacent areas. Balancing the potential need for 
bidders to use withdrawals to avoid incomplete combinations of licenses 
with our interest in deterring strategic withdrawals, the Bureau 
proposes a percentage below the maximum 20 percent (20%) permitted 
under the current rules but above the 3 percent (3%) previously 
provided by the Commission's rules. Specifically, the Bureau proposes 
to establish the percentage of the withdrawn bid to be assessed as an 
interim bid withdrawal payment at ten percent (10%) for the 1.4 GHz 
Bands auction. The Bureau seeks comment on this proposal.
ii. Establishing the Additional Default Payment Percentage
    50. Any winning bidder that defaults or is disqualified after the 
close of an auction (i.e., fails to remit the required down payment 
within the prescribed period of time, fails to submit a timely long-
form application, fails to make full payment, or is otherwise 
disqualified) is liable for a default payment under 47 CFR 
1.2104(g)(2). This payment consists of a deficiency payment, equal to 
the difference between the amount of the bidder's bid and the amount of 
the winning bid the next time a license covering the same spectrum is 
won in an auction, plus an additional payment equal to a percentage of 
the defaulter's bid or of the subsequent winning bid, whichever is 
less. Until recently this additional payment for non-combinatorial 
auctions has been set at 3 percent of the defaulter's bid or of the 
subsequent winning bid, whichever is less.
    51. The CSEA/Part 1 Report and Order, 71 FR 6214, February 7, 2006, 
modified section 1.2104(g)(2) by, inter alia, increasing the 3 percent 
limit on the additional default payment for non-combinatorial auctions 
to 20 percent. Under the modified rule, the Commission will, in advance 
of each non-combinatorial auction, establish an additional default 
payment for that auction of 3 percent up to a maximum of 20 percent. As 
the Commission has indicated, the level of this payment in each case 
will be based on the nature of the service and the inventory of the 
licenses being offered.
    52. For Auction No. 69, the Bureau proposes to establish an 
additional default payment of 10 percent. As noted in the CSEA/Part 1 
Report and Order, defaults weaken the integrity of the auctions process 
and impede the deployment of service to the public, and an additional 
default payment of more than the previous 3 percent will be more 
effective in deterring defaults. At the same time, the Bureau does not 
believe the detrimental effects of any defaults in Auction No. 69 are 
likely to be unusually great. Balancing these considerations, the 
Bureau proposes an additional default payment of 10 percent of the 
relevant bid. The Bureau seeks comment on this proposal.

III. Conclusion

    53. Comments are due on or before September 11, 2006, and reply 
comments are due on or before September 18, 2006. All filings related 
to the auction of 1.4 GHz Bands licenses should refer to AU Docket No. 
06-104. Comments may be submitted using the Commission's Electronic 
Comment Filing System (ECFS) or by filing paper copies. The Bureau 
strongly encourages interested parties to file comments electronically, 
and requests submission of a copy via the Auction No. 69 e-mail box 
(auction69@fcc.gov).
    54. This proceeding has been designated as a permit-but-disclose 
proceeding in accordance with the Commission's ex parte rules. Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentations must contain summaries of the substance 
of the presentations and not merely a listing of the subjects 
discussed. More than a one or two sentence description of the views and 
arguments presented is generally required. Other rules pertaining to 
oral and written ex parte presentations in permit-but-disclose 
proceedings are set forth in Sec.  1.1206(b) of the Commission's rules.

Federal Communications Commission.
William W. Huber,
Associate Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. E6-14526 Filed 8-30-06; 8:45 am]
BILLING CODE 6712-01-P