Auction of AWS-1 and Broadband PCS Licenses Scheduled for July 29, 2008; Comment Sought on Competitive Bidding Procedures for Auction 78, 20664-20672 [E8-8178]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 73, Number 74 (Wednesday, April 16, 2008)]
[Notices]
[Pages 20664-20672]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-8178]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-08-78-A (Auction 78); AU Docket No. 08-46; DA 08-767]


Auction of AWS-1 and Broadband PCS Licenses Scheduled for July 
29, 2008; Comment Sought on Competitive Bidding Procedures for Auction 
78

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of AWS-1 and Broadband PCS 
licenses with bidding scheduled to commence on July 29, 2008 (Auction 
78). This document also seeks

[[Page 20665]]

comments on competitive bidding procedures for Auction 78.

DATES: Comments are due on or before April 18, 2008, and reply comments 
are due on or before April 25, 2008.

ADDRESSES: Comments and reply comments must be identified by AU Docket 
No. 08-46; DA 08-767. Comments may be filed electronically using the 
Internet by accessing the Federal Communications Commission's 
(Commission) Electronic Comment Filing System (ECFS) at https://
www.fcc.gov/cgb/ecfs. Filers should follow the instructions provided on 
the Web site for submitting comments. The Wireless Telecommunications 
Bureau (Bureau) requests that a copy of all comments and reply comments 
be submitted electronically to the following address: 
auction78@fcc.gov. In addition, comments and reply comments may be 
submitted by any of the following methods:
    * 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. Eastern Time (ET). All hand 
deliveries must be held together with rubber bands or fasteners. 
Commercial overnight mail (other than U.S. Postal Service Express Mail 
and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol 
Heights, MD 20743.
    * U.S. Postal Service first-class, Express, and Priority mail 
should be addressed to 445 12th Street, SW., Washington, DC 20554.
    * 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 telephone: 202-
418-0530 or TTY: 202-418-0432.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: For auction legal questions: 
Scott Mackoul or Stephen Johnson at (202) 418-0660. For general auction 
questions: Lisa Stover at (717) 338-2868. Mobility Division: For 
broadband PCS service rule questions: Erin McGrath or Michael Connelly 
(legal) or Keith Harper (technical) at (202) 418-0620. Broadband 
Division: For AWS-1 service rule questions: John Spencer at (202) 418-
2487.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction 78 Comment 
Public Notice released on April 4, 2008. The complete text of the 
Auction 78 Comment Public Notice, including attachments, and related 
Commission documents, are available for public inspection and copying 
from 8 a.m. to 4:30 p.m. ET Monday through Thursday or from 8 a.m. to 
11:30 a.m. ET on Fridays in the FCC Reference Information Center, 445 
12th Street, SW., Room CY-A257, Washington, DC 20554. The Auction 78 
Comment Public Notice and related Commission documents also may be 
purchased from the Commission's duplicating contractor, Best Copy and 
Printing, Inc. (BCPI), 445 12th Street, SW., Room CY-B402, Washington, 
DC 20554, telephone 202-488-5300, 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 08-767. The Auction 78 Comment Public Notice 
and related documents also are available on the Internet at the 
Commission's Web site: https://wireless.fcc.gov/auctions/78/ or by using 
the search function on the ECFS Web page at https://www.fcc.gov/cgb/
ecfs/.

I. Introduction

    1. The Wireless Telecommunications Bureau (Bureau) announces an 
auction of licenses in multiple radio services to commence on July 29, 
2008. This auction, which is designated Auction 78, will include 55 
licenses: 35 licenses in the Advanced Wireless Services (AWS) 1710-1755 
MHz and 2110-2155 MHz bands (AWS-1) and 20 licenses in the broadband 
Personal Communications Service (PCS).

II. Licenses To Be Offered in Auction 78

    2. The spectrum to be auctioned has been offered previously in 
other auctions but was unsold or returned to the Commission as a result 
of license cancellation or termination. A complete list of licenses 
available for Auction 78 is included as Attachment A of the Auction 78 
Comment Public Notice.

A. License Descriptions

    3. The Auction 78 Comment Public Notice displays informational 
tables (Tables 1, 2 & 3) regarding blocks, frequencies of licenses in 
these blocks, total bandwidth per block, geographic area type, and the 
number of each license type available.
i. AWS-1 Licenses
    4. Auction 78 will offer 35 AWS-1 licenses for which there were no 
winning bids in Auction 66. These licenses consist of six Regional 
Economic Area Grouping (REAG) licenses, seven Economic Area (EA) 
licenses, and 22 Cellular Market Area (CMA) licenses.
ii. Broadband PCS Licenses
    5. Auction 78 includes 20 Basic Trading Area (BTA) broadband PCS 
licenses. In broadband PCS, certain C and F block licenses have been 
subject to an eligibility restriction making them available only to 
entrepreneurs in closed bidding. In order to qualify as an 
entrepreneur, a bidder, along with its attributable investors and 
affiliates, must have had gross revenues of less than $125 million in 
each of the last two years and must have less than $500 million in 
total assets. In addition, C and F block licenses are divided into two 
tiers according to the population size, with Tier 1 comprising markets 
with population at or above 2.5 million, based on 2000 decennial census 
figures, and Tier 2 comprising the remaining markets. Only Tier 2 
licenses will be offered in Auction 78.
    6. Table 2 in the Auction 78 Comment Public Notice cross-references 
the general rules regarding block/eligibility status/frequencies of 
broadband PCS licenses in the C, D, E, and F blocks.
    7. As indicated in Table 2 of the Auction 78 Comment Public Notice, 
C1, C2, C3, and C4 block licenses in Tier 2 are generally available 
only to entrepreneurs at auction in closed bidding. The Commission 
decided, however, no longer to apply this eligibility restriction to 
any of these licenses that have been previously made available on a 
closed basis, but not won, in any auction beginning on or after March 
23, 1999. Such licenses are instead to be offered in open bidding. C5 
block licenses and all D, E, and F block licenses are also available in 
open bidding. Bidding credits for applicants that qualify as small or 
very small businesses will be available for C and F block licenses 
subject to open bidding. These size-based bidding credits are not, 
however, available for C block licenses subject to closed bidding or 
for broadband PCS licenses in the D or E blocks.
    8. The specific broadband PCS licenses to be offered in Auction 78 
are

[[Page 20666]]

listed in Table 3 of the Auction 78 Comment Public Notice.
    9. Because of the history of licenses for broadband PCS spectrum, 
certain of the licenses available in Auction 78 cover less bandwidth 
and fewer frequencies than noted in Table 3 of the Auction 78 Comment 
Public Notice. In addition, in some cases, licenses are available for 
only part of a market. Attachment A of the Auction 78 Comment Public 
Notice provides more details about the licenses that will be offered.

B. Incumbency Issues

i. AWS-1
    10. The AWS-1 bands are now being used for a variety of government 
and non-government services. The 1710-1755 MHz band is currently a 
government band. The 2110-2150 MHz band is used by private services 
(including state and local governmental public safety services) and 
common carrier fixed microwave services. The 2150-2155 MHz band 
contains incumbents in the Broadband Radio Service (BRS). The 
Commission previously provided information on incumbency issues for the 
AWS-1 bands in the Auction 66 Procedures Public Notice 71 FR 20672, 
April 21, 2006. While much of that information remains current, several 
updates follow.
    11. Spectrum Relocation Fund. The Commission established a reserve 
amount in Auction 66 in order to comply with a statutory requirement 
aimed at funding the relocation of federal government entities that 
currently operate in the 1710-1755 MHz band. In order for Auction 66 to 
close in compliance with the statute, the total winning bids in this 
auction, net of bidding credits applicable at the close of bidding, 
were required to equal or exceed a reserve amount of approximately 
$2.059 billion. At the close of Auction 66, the net total winning bids 
far exceeded the reserve amount. The Bureau proposes not to establish 
reserve prices for the 35 AWS-1 licenses being offered in Auction 78.
    12. Relocation of Government Incumbents. The Commission also issued 
guidance, along with the National Telecommunications and Information 
Administration, to assist AWS-1 licensees to begin implementing service 
during the transition of federal operations from the band while 
providing interference protection to incumbent federal government 
operations until they have been relocated to other frequency bands or 
technologies.
    13. Relocation of Non-Government Incumbents. On the same day it 
released the Auction 66 Procedures Public Notice, the Commission, among 
other things, adopted relocation procedures that AWS-1 licensees will 
follow when relocating incumbent BRS licensees from the 2150-2160/62 
MHz portion of the band.
ii. Broadband PCS
    14. While most of the private and common carrier fixed microwave 
services (FMS) formerly operating in the 1850-1990 MHz band (and other 
bands) have been relocated to available frequencies in higher bands or 
to other media, some FMS licensees may still be operating in the band. 
Any remaining FMS entities operating in the 1850-1990 MHz band, 
however, are secondary to PCS operations. FMS licensees, absent an 
agreement with the applicable PCS entities or an extension pursuant to 
47 CFR 101.79(b), must turn in their authorizations six months 
following written notice from a PCS entity that such entity intends to 
turn on a system within the interference range of the incumbent FMS 
licensee. Further, broadband PCS licensees are no longer responsible 
for costs associated with relocating an incumbent FMS operation.

III. Bureau Seeks Comment on Auction Procedures

    15. 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 therefore seeks comment on the following issues 
relating to Auction 78.

A. Auction Design

i. Anonymous Bidding
    16. Consistent with recent auctions, the Bureau proposes to 
withhold, until after the close of bidding, public release of: (1) 
Bidders' license selections on their short-form applications (FCC Form 
175); (2) the amounts of bidders' upfront payments and bidding 
eligibility; and (3) information that may reveal the identities of 
bidders placing bids and taking other bidding-related actions. The 
Bureau proposes to withhold this information irrespective of any pre-
auction measurement of likely auction competition.
    17. Under these proposed limited information procedures, the amount 
of every bid placed and whether a bid was withdrawn would be disclosed 
after the close of every round, but the identities of bidders placing 
specific bids or withdrawals and the net bid amounts would not be 
disclosed until after the close of the auction.
    18. Bidders will have access to additional information about their 
own bids. For example, bidders will be able to view their own level of 
eligibility, before and during the auction, through the Commission's 
Integrated Spectrum Auction System (ISAS or FCC Auction System).
    19. Moreover, for the purpose of complying with the Commission's 
anti-collusion rule, bidders will be made aware of other bidders with 
which they will not be permitted to cooperate, collaborate, or 
communicate, including discussing bids or bidding strategies. 
Specifically, the Bureau will notify separately each applicant with 
short-form applications for participation in a pending auction, 
including but not limited to Auction 78, whether applicants in Auction 
78 have applied for licenses in any of the same or overlapping 
geographic area as that applicant.
    20. After the close of bidding, bidders' license selections, 
upfront payment amounts, bidding eligibility, bids, and other bidding-
related actions will be made publicly available.
    21. The Bureau seeks comment on the details regarding its proposal 
for implementation of anonymous bidding in Auction 78, and on 
alternative proposals for the specific procedures to implement 
anonymous bidding.
ii. Auction Format
    22. The Bureau proposes to auction all licenses included in Auction 
78 using the Commission's standard simultaneous multiple-round (SMR) 
auction format. 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.
    23. Although package bidding was considered in Auction 66 and 
implemented for certain licenses made available in Auction 73, the 
Bureau

[[Page 20667]]

believes that a package bidding format is unlikely to offer significant 
advantages to bidders in Auction 78. This auction's inventory is 
composed of licenses in different services and frequency bands, and the 
geographic markets are generally not contiguous. As a result, it would 
not be possible to establish a significant regional or national 
footprint by acquiring several of these licenses as a package. 
Therefore, the Bureau believes that the use of the SMR format for 
Auction 78 would be the most appropriate means of auctioning the 
licenses in this inventory. Accordingly, the Bureau proposes to conduct 
the auction using its SMR auction format. However, if commenters 
believe that a package bidding design would offer significant benefits, 
the Bureau invites their comments and requests that they describe what 
specific factors lead them to that conclusion. If commenters believe 
that certain pre-defined packages should be offered in package bidding, 
they should describe those packages.

B. Auction Structure

i. Round Structure
    24. Auction 78 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.
    25. The Commission will conduct Auction 78 over the Internet, and 
telephonic bidding will be available as well. The toll-free telephone 
number for the Auction Bidder Line will be provided to qualified 
bidders.
    26. The Bureau proposes to retain the discretion to change the 
bidding schedule in order to foster an auction pace that reasonably 
balances speed with the bidders' need to study round results and adjust 
their bidding strategies. Under this proposal, the Bureau may change 
the amount of time for bidding rounds, the amount of time between 
rounds, or the number of rounds per day, depending upon bidding 
activity and other factors. The Bureau seeks comment on this proposal. 
Commenters may wish to address the role of the bidding schedule in 
managing the pace of the auction and the tradeoffs in managing auction 
pace by bidding schedule changes, by changing the activity requirements 
or bid amount parameters, or by using other means.
ii. Stopping Rule
    27. 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 78, 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 withdraws any 
provisionally winning bids. Thus, unless the Bureau announces 
alternative stopping procedures, bidding will remain open on all 
licenses until bidding stops on every license. Consequently, it is not 
possible to determine in advance how long the auction will last.
    28. Further, the Bureau proposes to retain the discretion to 
exercise any of the following options during Auction 78: (1) 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, withdraws a provisionally 
winning bid, or places 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; (2) declare that the auction will end after a 
specified number of additional rounds (special stopping rule). If the 
Bureau invokes this special stopping rule, it will accept bids in the 
specified final round(s) after which the auction will close; and (3) 
keep the auction open even if no bidder submits any new bids, applies a 
waiver, or withdraws any provisionally winning bids. 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 
waiver.
    29. The Bureau proposes to exercise these options only in certain 
circumstances, for example, where the auction is proceeding unusually 
slowly or quickly, there is minimal overall bidding activity, or it 
appears likely that the auction will not close within a reasonable 
period of time or will close prematurely. Before exercising certain of 
these options, the Bureau is likely to attempt to change the pace of 
the auction by, for example, changing the number of bidding rounds per 
day and/or changing minimum acceptable bids. The Bureau proposes to 
retain the discretion to exercise any of these options with or without 
prior announcement during the auction. The Bureau seeks comment on 
these proposals.
iii. Information Relating to Auction Delay, Suspension, or Cancellation
    30. For Auction 78, the Bureau proposes that, by public notice or 
by announcement during the auction, the Bureau may delay, suspend, or 
cancel the auction in the event of natural disaster, technical 
obstacle, administrative or weather necessity, evidence of an auction 
security breach or unlawful bidding activity, or for any other reason 
that affects the fair and efficient conduct of competitive bidding. 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.

C. Auction Procedures

i. Upfront Payments and Bidding Eligibility
    31. The Bureau has delegated authority and discretion to determine 
an appropriate upfront payment for each license being auctioned. A 
bidder's upfront payment is a refundable deposit 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.
    32. The Bureau 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, 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 short-form application (FCC Form 175) as 
long as the total number of bidding

[[Page 20668]]

units associated with those licenses does not exceed its current 
eligibility.
    33. 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.
    34. The Bureau proposes to calculate upfront payments in Auction 78 
on a license-by-license basis, calculated by bandwidth and license area 
population, with a minimum of $500 per license. The Bureau proposes to 
use upfront payment formulas similar to those used in the most recent 
auctions for AWS-1 licenses (Auction 66) and broadband PCS licenses 
(Auction 71).
a. AWS-1
    35. For AWS-1 licenses offered in Auction 78, the Bureau proposes 
upfront payments as follows: (1) For licenses covering CMAs or EAs in 
the 50 states, upfront payment amounts will be calculated as $0.03 per 
MHz per population (MHz-pop); (2) for the one available license that 
covers the Gulf of Mexico, the upfront payment amount will be $20,000; 
and (3) for all remaining licenses, upfront payment amounts will be 
calculated as $0.01/MHz-pop.
    36. The proposed upfront payment amount and associated bidding 
units for each AWS-1 license available in Auction 78, calculated 
pursuant to these procedures, are set forth in Attachment A of the 
Auction 78 Comment Public Notice.
b. Broadband PCS
    37. For broadband PCS licenses offered in Auction 78, the Bureau 
proposes upfront payments as follows: (1) For licenses covering BTAs in 
the 50 states, upfront payment amounts will be calculated as $0.03/MHz-
pop; and (2) for all remaining licenses, upfront payment amounts will 
be calculated as $0.01/MHz-pop.
    38. The proposed upfront payment amount and associated bidding 
units for each broadband PCS license available in Auction 78 are listed 
in Attachment A of the Auction 78 Comment Public Notice.
    39. The Bureau seeks comment on the above proposals concerning 
upfront payment amounts and bidding units.
ii. Activity Rule
    40. 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 
additional bids in the auction.
    41. The Bureau proposes to divide the auction into at least two 
stages, each characterized by a different activity requirement. The 
auction will start in Stage One. The Bureau proposes to advance the 
auction to the next stage by announcement during the auction. In 
exercising this discretion, the Bureau will consider a variety of 
measures of auction activity, including but not limited to the 
percentage of licenses (as measured in bidding units) on which there 
are new bids, the number of new bids, and the increase in revenue. The 
Bureau seeks comment on these proposals.
    42. The Bureau proposes the following activity requirements, while 
noting again that the Bureau retains the discretion to change stages 
unilaterally by announcement during the auction:
    43. 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 the use of an activity rule waiver or a reduction 
in the bidder's bidding eligibility for the next round of bidding. 
During Stage One, a bidder's reduced eligibility for the next round 
will be calculated by multiplying the bidder's current round activity 
by five-fourths (5/4).
    44. Stage Two: In each round of the second stage, a bidder desiring 
to maintain its current bidding eligibility is required to be active on 
95 percent of its current bidding eligibility. Failure to maintain the 
required activity level will result in the use of an activity rule 
waiver or a reduction in the bidder's bidding eligibility for the next 
round of bidding. During Stage Two, a bidder's reduced eligibility for 
the next round will be calculated by multiplying the bidder's current 
round activity by twenty-nineteenths (20/19).
    45. Under this proposal, the Bureau will retain the discretion to 
change the activity requirements during the auction. For example, the 
Bureau could decide to add an additional stage with a higher activity 
requirement, not to transition to Stage Two if it believes the auction 
is progressing satisfactorily under the Stage One activity requirement, 
or to transition to Stage Two with an activity requirement that is 
higher or lower than the 95 percent proposed herein. If the Bureau 
exercises this discretion, it will alert bidders by announcement in the 
FCC Auction System.
iii. Activity Rule Waivers and Reducing Eligibility
    46. 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 bidders to avoid the loss of bidding eligibility in the 
event that exigent circumstances prevent them from bidding in a 
particular round.
    47. The FCC Auction System assumes that a bidder not meeting the 
activity requirement would prefer to apply an activity rule waiver (if 
available) rather than lose bidding eligibility. Therefore, the system 
will automatically apply a waiver at the end of any bidding round in 
which a bidder's activity level is below the minimum required unless: 
(1) the bidder has no activity rule waivers remaining; or (2) the 
bidder overrides the automatic application of a waiver by reducing 
eligibility, thereby meeting the activity requirement. If a bidder has 
no waivers remaining and does not satisfy the required activity level, 
its eligibility will be permanently reduced, possibly curtailing or 
eliminating the bidder's ability to place additional bids in the 
auction.
    48. 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 as

[[Page 20669]]

described above. Reducing eligibility is an irreversible action. Once 
eligibility has been reduced, a bidder will not be permitted to regain 
its lost bidding eligibility, even if the round has not yet closed.
    49. Under the proposed simultaneous stopping rule, a bidder may 
apply an activity rule waiver proactively as a means to keep the 
auction open without placing a bid. If a bidder proactively applies an 
activity rule waiver (using the apply waiver function in the FCC 
Auction System) during a bidding round in which no bids are placed or 
withdrawn, the auction will remain open and the bidder's eligibility 
will be preserved. An automatic waiver applied by the FCC Auction 
System in a round in which there are no new bids, withdrawals, or 
proactive waivers will not keep the auction open. A bidder cannot apply 
a proactive waiver after bidding in a round, and applying a proactive 
waiver will preclude 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.
    50. Consistent with recent auctions of wireless spectrum, the 
Bureau proposes that each bidder in Auction 78 be provided with three 
activity rule waivers that may be used as set forth above at the 
bidder's discretion during the course of the auction. The Bureau seeks 
comment on this proposal.
    iv. Reserve Prices and Minimum Opening Bids
    51. 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.
    52. Normally, a reserve price is an absolute minimum price below 
which an item will not be sold in a given amount. Reserve prices can be 
either published or unpublished. A minimum opening bid, on the other 
hand, is the minimum bid price set at the beginning of the auction 
below which no bids are accepted. It is generally used to accelerate 
the competitive bidding process. Also, the auctioneer often has the 
discretion to lower the minimum opening bid amount later in the 
auction. It is also possible for the minimum opening bid and the 
reserve price to be the same amount.
a. Reserve Prices
    53. The Commission adopted a reserve price for the auction of AWS-1 
licenses in Auction 66, but not for the auction of broadband PCS 
licenses in Auction 71. The reserve price in Auction 66 was adopted 
pursuant to 47 CFR 1.2104(c) and the Commercial Spectrum Enhancement 
Act (CSEA), which required the Commission to prescribe methods by which 
the total cash proceeds from any auction of licenses authorizing the 
use of eligible frequencies, such as 1710 to 1755 MHz, would equal at 
least 110 percent of the total estimated relocation costs of eligible 
federal entities. Given that one-half of the frequencies authorized for 
use by each license were CSEA eligible frequencies, one-half of each 
winning bid, net of any applicable bidding credit discounts at the end 
of bidding, was counted toward meeting the reserve price. At the 
conclusion of Auction 66, the net total winning bids exceeded the 
reserve amount established by the Commission.
    54. Given that net winning bids exceeded the reserve price in 
Auction 66 and that there was no separate reserve price in Auction 71, 
the Bureau believes the public interest does not warrant establishing 
reserve prices for the licenses being offered in Auction 78. Therefore, 
the Bureau does not propose a reserve price for any licenses to be 
offered in Auction 78. However, if commenters believe that a reserve 
price would be in the public interest, the Bureau invites their 
comments and request that they describe what specific factors lead them 
to that conclusion.
b. Minimum Opening Bids
    55. In light of Section 309(j)'s requirements, the Bureau proposes 
to establish minimum opening bid amounts for Auction 78. 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.
    56. As in the most recent auctions, the Bureau proposes to 
calculate minimum opening bids in Auction 78 on a license-by-license 
basis, calculated by bandwidth and license area population, with a 
minimum of $500 per license. The Bureau proposes minimum opening bid 
formulas similar to those used in the most recent auctions for AWS-1 
licenses (Auction 66) and broadband PCS licenses (Auction 71).
(i) AWS-1
    57. For AWS-1 licenses offered in Auction 78, the Bureau proposes 
minimum opening bids as follows: (1) For licenses covering CMAs or EAs 
in the 50 states, minimum opening bid amounts will be calculated as 
$0.03/MHz-pop; (2) for the one available license that covers the Gulf 
of Mexico, the minimum opening bid amount will be $20,000; and (3) for 
all remaining licenses, minimum opening bid amounts will be calculated 
as $0.01/MHz-pop.
    58. The proposed minimum opening bid amount for each AWS-1 license 
available in Auction 78, calculated pursuant to these procedures, is 
set forth in Attachment A of the Auction 78 Comment Public Notice.
(ii) Broadband PCS
    59. For broadband PCS licenses offered in Auction 78, the Bureau 
proposes minimum opening bids as follows: (1) For licenses covering 
BTAs in the 50 states, minimum opening bid amounts will be calculated 
as $0.03/MHz-pop; and (2) for all remaining licenses, minimum opening 
bid amounts will be calculated as $0.01/MHz-pop.
    60. The proposed minimum opening bid amount for each broadband PCS 
license available in Auction 78 is set forth in Attachment A of the 
Auction 78 Comment Public Notice.
    61. The Bureau seeks comment on all of the above proposals 
concerning minimum opening bids. If commenters believe that these 
minimum opening bid amounts will result in unsold licenses, or are not 
reasonable amounts, 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.
    62. 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 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.
    63. Commenters may also wish to address the general role of minimum

[[Page 20670]]

opening bids in managing the pace of the auction. For example, 
commenters could compare using minimum opening bids--e.g., by setting 
higher minimum opening bids to reduce the number of rounds it takes 
licenses to reach their final prices--to other means of controlling 
auction pace, such as changes to bidding schedules or activity 
requirements.
v. Bid Amounts
    64. The Bureau proposes that, in each round, eligible bidders be 
able to place a bid on a given license using one or more pre-defined 
bid amounts. Under this proposal, the FCC Auction System interface will 
list the acceptable bid amounts for each license.
a. Minimum Acceptable Bids
    65. The first of the acceptable bid amounts is called the minimum 
acceptable bid amount. The minimum acceptable bid amount for a license 
will be equal to its minimum opening bid amount until there is a 
provisionally winning bid on the license. 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. In general, the percentage will be higher 
for a license receiving many bids than for a license receiving few 
bids. In the case of a license for which the provisionally winning bid 
has been withdrawn, the minimum acceptable bid amount will equal the 
second highest bid received for the license.
    66. 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. The 
activity index is a weighted average of: (a) The number of distinct 
bidders placing a bid on the license; and (b) the activity index from 
the prior round. Specifically, the activity index is equal to a 
weighting factor times the number of bidders placing a bid 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 by adding one to the activity index, and 
multiplying that sum by a minimum percentage, with the result not to 
exceed a maximum percentage. The additional percentage is then 
multiplied by the provisionally winning bid amount to obtain the 
minimum acceptable bid for the next round. The Bureau proposes 
initially to set the weighting factor at 0.5, the minimum percentage at 
0.1 (10%), and the maximum percentage at 0.2 (20%). Hence, at these 
initial settings, the minimum acceptable bid for a license will be 
between ten percent and twenty percent higher than the provisionally 
winning bid, depending upon the bidding activity for the license. 
Equations and examples are shown in Attachment C of the Auction 78 
Comment Public Notice.
b. Additional Bid Amounts
    67. Any additional bid amounts are calculated using the minimum 
acceptable bid amount and a bid increment percentage--more 
specifically, by multiplying the minimum acceptable bid by one plus 
successively higher multiples of the bid increment percentage. If, for 
example, the bid increment percentage is five percent, the calculation 
of the first additional acceptable bid amount is (minimum acceptable 
bid amount) * (1 + 0.05), or (minimum acceptable bid amount) * 1.05; 
the second additional acceptable bid amount equals the minimum 
acceptable bid amount times one plus two times the bid increment 
percentage, or (minimum acceptable bid amount) * 1.1, etc. The Bureau 
will round the results of these calculations and the minimum acceptable 
bid calculations using the Bureau's standard rounding procedures. The 
Bureau proposes to set the bid increment percentage at 0.05.
    68. For Auction 73, the Bureau determined that it would generally 
not provide, in that auction, for additional bid amounts for licenses 
not subject to package bidding, in light of the limited flexibility 
provided by additional bid amounts and the possibility that additional 
bid amounts could be used for signaling. The Bureau seeks comment on 
whether to start with no additional bid amounts or with eight 
additional bid amounts (for a total of nine bid amounts) for Auction 
78. In particular, commenters should address the issue of additional 
bid amounts in light of particular circumstances of Auction 78, 
including the nature of the license inventory. The Bureau retains the 
discretion to change the minimum acceptable bid amounts, the additional 
bid amounts, the number of acceptable bid amounts, and the parameters 
of the formulas used to calculate minimum acceptable bid amounts and 
additional bid amounts if it determines that circumstances so dictate. 
Further, the Bureau retains the discretion to do so on a license-by-
license basis.
    69. The Bureau also retains the discretion to limit: (a) The amount 
by which a minimum acceptable bid for a license may increase compared 
with the corresponding provisionally winning bid; and (b) the amount by 
which an additional bid amount may increase compared with the 
immediately preceding acceptable bid amount. For example, the Bureau 
could set a $1 million limit on increases in minimum acceptable bid 
amounts over provisionally winning bids. Thus, if the activity-based 
formula calculates a minimum acceptable bid amount that is $2 million 
higher than the provisionally winning bid on a license, the minimum 
acceptable bid amount would instead be capped at $1 million above the 
provisionally winning bid. The Bureau seeks comment on the 
circumstances under which the Bureau should employ such a limit, 
factors it should consider when determining the dollar amount of the 
limit, and the tradeoffs in setting such a limit or changing parameters 
of the activity-based formula, such as changing the minimum percentage. 
If the Bureau exercises this discretion, it will alert bidders by 
announcement in the FCC Auction System.
    70. The Bureau seeks comment on the above proposals. If commenters 
disagree with the Bureau's proposal to begin the auction with one 
acceptable bid amount per license, they should suggest an alternative 
number of acceptable bid amounts to use at the beginning of the 
auction, an alternative number to use later in the auction, and whether 
the same number of bid amounts should be used for each of the blocks, 
licenses, and services. Commenters may wish to address the role of the 
minimum acceptable bids and the number of acceptable bid amounts in 
managing the pace of the auction and the tradeoffs in managing auction 
pace by bidding schedule changes, by changing the activity requirements 
or bid amount parameters, or by using other means.
vi. Provisionally Winning Bids
    71. 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. (Each bid is assigned a random number, and 
the tied bid with the highest random number wins the tiebreaker.) The 
remaining bidders, as well as the provisionally winning bidder, can 
submit higher bids in subsequent rounds. However, if the auction were 
to

[[Page 20671]]

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.
    72. 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
    73. For Auction 78, the Bureau proposes and seeks comment on 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 undo any of its bids placed within that round. In contrast 
to the bid withdrawal provisions described in subsection viii, 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.
viii. Bid Withdrawal
    74. 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.
    75. In the Part 1 Third Report and Order, 63 FR 2315, January 15, 
1998, 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.
    76. For Auction 78, the Bureau proposes to allow each bidder to 
withdraw provisionally winning bids in only one round during the course 
of the auction. To permit a bidder to withdraw bids in more than one 
round may encourage insincere bidding or the use of withdrawals for 
anti-competitive purposes. The round in which withdrawals may be used 
will be at the bidder's discretion, and there is no limit on the number 
of provisionally winning bids that may be withdrawn during that round. 
Otherwise, withdrawals must be in accordance with the Commission's 
rules, including the bid withdrawal payment provisions specified in 47 
CFR 1.2104(g). The Bureau seeks comment on these bid withdrawal 
procedures. If commenters believe that each bidder should be allowed to 
withdraw provisionally winning bids in more than one round during the 
course of the auction, they should state how many bid withdrawal rounds 
they seek and explain what specific factors lead them to that 
conclusion.

D. Post-Auction Procedures

i. Interim Withdrawal Payment Percentage
    77. 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. Balancing the potential need for bidders to 
use withdrawals to avoid winning incomplete combinations of licenses 
with its interest in deterring abuses of its bidding procedures, the 
Bureau proposes an interim bid withdrawal payment level of fifteen 
percent for Auction 78.
    78. The Commission's rules provide that a bidder that withdraws a 
bid during an auction is subject to a withdrawal payment equal to the 
difference between the amount of the withdrawn bid and the amount of 
the winning bid in the same or subsequent auction(s). If a bid is 
withdrawn and no subsequent higher bid is placed and/or the license is 
not won in the same auction, the final withdrawal payment cannot be 
calculated until after the close of a subsequent auction in which a 
higher bid for the license (or the equivalent to the license) is placed 
or the license is won. When that final payment cannot yet be 
calculated, the bidder responsible for the withdrawn bid is assessed an 
interim bid withdrawal payment, which will be applied toward any final 
bid withdrawal payment that is ultimately assessed. 47 CFR 1.2104(g)(1) 
requires that the percentage of the withdrawn bid to be assessed as an 
interim bid withdrawal payment be between three percent and twenty 
percent and that it be set in advance of the auction.
    79. The Commission has determined that the level of the interim 
withdrawal payment in a particular auction will be based on the nature 
of the service and the inventory of the licenses being offered. The 
Commission has noted that it may impose a higher interim withdrawal 
payment percentage to deter the anti-competitive use of withdrawals 
when, for example, bidders likely will not need to aggregate the 
licenses being offered in the auction, such as when few licenses are 
offered that are on adjacent frequencies or in adjacent areas, or when 
there are few synergies to be captured by combining licenses. Under 
this rationale, the Bureau chose an interim bid withdrawal payment 
level of fifteen percent for Auction 71, while the Bureau adopted a 
level of ten percent in Auction 66.
    80. For Auction 78, the opportunities for combining licenses on 
adjacent frequencies or in adjacent areas are more limited than was the 
case in Auction 66, and thus, there is likely to be little need to use 
withdrawals to protect against incomplete aggregations. Therefore, the 
Bureau proposes to establish the percentage of the withdrawn bid to be 
assessed as an interim bid withdrawal payment at fifteen percent for 
this auction for licenses in both services. The Bureau seeks comment on 
this proposal.
ii. Additional Default Payment Percentage
    81. Any winning bidder that, after the close of an auction, 
defaults--by, for example, failing to remit the required down payment 
within the prescribed period of time, to submit a timely long-form 
application, or 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.
    82. Under 47 CFR 1.2104(g)(2), the Commission will, in advance of 
each non-combinatorial auction, establish an additional default payment 
for that auction of three percent up to a maximum of twenty percent. 
The level of this payment in each case will be based on the nature of 
the service and

[[Page 20672]]

the inventory of the licenses being offered.
    83. In the recent auctions of AWS-1 and broadband PCS licenses 
(Auctions 66 and 71), the additional default payment was ten percent.
    84. 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 three 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 78 are 
likely to be unusually great. Balancing these considerations, the 
Bureau proposes an additional default payment of ten percent of the 
relevant bid for Auction 78. The Bureau seeks comment on this proposal.

IV. Deadlines and Filing Procedures

    85. This proceeding has been designated as a permit-but-disclose 
proceeding in accordance with the Commission's ex parte rules. Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentations must contain summaries of the substance 
of the presentations and not merely a listing of the subjects 
discussed. More than a one or two sentence description of the views and 
arguments presented is generally required. Other rules pertaining to 
oral and written ex parte presentations in permit-but-disclose 
proceedings are set forth in 47 CFR 1.1206(b).

Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
 [FR Doc. E8-8178 Filed 4-15-08; 8:45 am]
BILLING CODE 6712-01-P