Auction of H Block Licenses in the 1915-1920 MHz and 1995-2000 MHz Bands; Comment Sought on Competitive Bidding Procedures for Auction 96, 45524-45533 [2013-18184]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 78, Number 145 (Monday, July 29, 2013)]
[Notices]
[Pages 45524-45533]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18184]


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FEDERAL COMMUNICATIONS COMMISSION

[AU Docket No. 13-178; DA 13-1540]


Auction of H Block Licenses in the 1915-1920 MHz and 1995-2000 
MHz Bands; Comment Sought on Competitive Bidding Procedures for Auction 
96

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the intention to hold an auction of H 
Block licenses in the 1915-1920 and 1995-2000 MHz bands. This document 
also seeks comment on competitive bidding procedures for Auction 96.

DATES: Comments are due on or before August 5, 2013, and reply comments 
are due on or before August 16, 2013.

ADDRESSES: All filings in response to this public notice must refer to 
AU Docket No. 13-178. The Wireless Telecommunications Bureau strongly 
encourages interested parties to file comments electronically, and 
request that an additional copy of all comments and reply comments be 
submitted electronically to the following address: auction96@fcc.gov. 
Comments may be submitted by any of the following methods:
    [squf] Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    [squf] Federal Communications Commission's Web site: https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
    [squf] 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. All filings must be 
addressed to the Commission's Secretary, Attn: WTB/ASAD, Office of the 
Secretary, Federal Communications Commission.
    [squf] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th Street SW., Room TW-A325, Washington, DC 20554. All hand 
deliveries must be held together with rubber bands or fasteners. Any 
envelopes must be disposed of before entering the building.
    [squf] 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.
    [squf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    [squf] People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: For auction legal questions: 
Valerie Barrish at (202) 418-0660; for general auction questions: Jeff 
Crooks at (202) 4188-0660 or Debbie Smith or Linda Sanderson at (717) 
338-2868. Broadband Division: For H Block service rule questions: 
Matthew Pearl (legal) or Janet Young (technical) at (202) 418-2487.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction 96 Comment 
Public Notice released on July 15, 2013. The complete text of the 
Auction 96 Comment Public Notice, including all attachments and related 
Commission documents, is available for public inspection and copying 
from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday 
or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference 
Information Center, 445 12th Street SW., Room CY-A257, Washington, DC 
20554. The Auction 96 Comment Public Notice and its attachments, as 
well as related Commission documents, also may be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc. 
(BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone 202-488-5300, fax 202-488-5563, or you may contact BCPI at 
its Web site: https://www.BCPIWEB.com. When ordering documents from 
BCPI, please provide the appropriate FCC document number, for example, 
DA 13-1540. The Auction 96 Comment Public Notice and related documents 
also are available on the Internet at the Commission's Web site: https://wireless.fcc.gov/auctions/96/, or by using the search function for AU 
Docket No. 13-178 on the Commission's Electronic Comment Filing System 
(ECFS) Web page at https://www.fcc.gov/cgb/ecfs/.

I. Introduction

    1. The Wireless Telecommunications Bureau (Bureau) announces its 
intention to hold an auction of licenses in the 1915-1920 MHz (Lower H 
Block) and 1995-2000 MHz (Upper H Block) bands (collectively, the H 
Block), and seeks comment on the procedures to be used for this 
auction. The staff will be prepared to conduct this auction, which will 
be designated as Auction 96, by or as early as January 14, 2014.
    2. The Commission is offering the licenses in Auction 96 pursuant 
to the Middle Class Tax Relief and Job Creation Act of 2012 (Spectrum 
Act). The Spectrum Act requires, among other things, that the 
Commission allocate for commercial use and license spectrum in the H 
Block using a system of competitive bidding no later than February 23, 
2015.

II. Licenses To Be Offered In Auction 96

A. Description of Licenses

    3. In the H Block Report and Order, FCC 13-88, the Commission 
concluded that licenses for H Block spectrum should be awarded on an 
Economic Areas (EA) basis in all areas, including the Gulf of Mexico. 
Auction 96 will offer one license for each of the 176 EAs. The Lower H 
Block and Upper H Block frequencies will be licensed as

[[Page 45525]]

paired 5 megahertz blocks, with each license having a total bandwidth 
of 10 megahertz; 1915-1920 MHz for mobile and low power fixed (i.e., 
uplink) operations and 1995-2000 MHz for base station and fixed (i.e., 
downlink) operations. A complete list of the licenses offered in 
Auction 96 is available in Attachment A to the Auction 96 Comment 
Public Notice.

B. Cost-Sharing Obligations

    4. The spectrum in the Lower H Block and the Upper H Block is 
subject to cost-sharing requirements related to the past clearing and 
relocation of incumbent users from these bands. Consistent with its 
long-standing policy that cost-sharing obligations for both the Lower H 
Block and the Upper H Block be apportioned on a pro rata basis against 
the relocation costs attributable to the particular band, the 
Commission adopted cost-sharing rules in the H Block Report and Order 
that require H Block licensees to pay a pro rata share of expenses 
previously incurred by UTAM, Inc. (UTAM) and by Sprint Nextel, Inc. 
(Sprint) in clearing incumbents from the Lower H Block and the Upper H 
Block, respectively.
    5. Under the cost sharing formula adopted in the H Block Report and 
Order, the reimbursement amount owed to UTAM with respect to the 1915-
1920 MHz band will be determined by dividing the gross winning bid for 
an H Block license by the sum of the gross winning bids for all H Block 
licenses won in Auction 96 and then multiplying that result by 
$12,629,857--the total amount owed to UTAM for clearing the Lower H 
Block. The H Block Report and Order adopted the same cost-sharing 
formula for the Upper H Block (1995-2000 MHz band) related to Sprint's 
clearing costs of $94,875,516.
    6. Winning bidders are required to pay UTAM and Sprint, as 
applicable, the reimbursement amounts owed within thirty days after the 
grant of the winning bidders' long-form license applications.
    7. The Commission also adopted a contingency plan in the H Block 
Report and Order that will be triggered in the unlikely event that 
licenses won in this auction cover less than forty percent of the U.S. 
population. If such an event occurs, winning bidders--in this auction 
and in subsequent H Block auctions--will be required to timely pay UTAM 
and Sprint, respectively, their pro rata share calculated by dividing 
the population of the individual EA by the total U.S. population and 
then multiplying this quotient by $12,629,857 for UTAM and by 
$94,875,516 for Sprint.
    8. The cost-sharing rules and contingency plan adopted in the H 
Block Report and Order are designed to ensure that UTAM and Sprint 
receive full reimbursement after this auction by effectively 
apportioning the reimbursement costs associated with any unsold H Block 
licenses among the winning bidders, except in cases where the 
contingency plan is triggered or a successful bidder's long-form 
application is not filed or granted. If any of the licenses won in this 
auction are not awarded, the license at issue will be deemed to have 
triggered a reimbursement obligation that will be paid by the licensee 
acquiring the license in a subsequent auction.

III. Due Diligence

    9. Each potential bidder is solely responsible for investigating 
and evaluating all technical and marketplace factors that may have a 
bearing on the value of the licenses that it is seeking in this 
auction. Each bidder is responsible for assuring that, if it wins a 
license, it will be able to build and operate facilities in accordance 
with the Commission's rules. The Commission makes no representations or 
warranties about the use of this spectrum for particular services. Each 
applicant should be aware that a Commission auction represents an 
opportunity to become a Commission licensee, subject to certain 
conditions and regulations. A Commission auction does not constitute an 
endorsement by the Commission of any particular service, technology, or 
product, nor does a Commission license constitute a guarantee of 
business success.
    10. An applicant should perform its due diligence research and 
analysis before proceeding, as it would with any new business venture. 
Each potential bidder should perform technical analyses and/or refresh 
any previous analyses to assure itself that, should it become a winning 
bidder for any Auction 96 license, it will be able to build and operate 
facilities that will fully comply with all applicable technical and 
regulatory requirements. The Bureau strongly encourages each applicant 
to inspect any prospective transmitter sites located in, or near, the 
geographic area for which it plans to bid; confirm the availability of 
such sites; and familiarize itself with the Commission's rules 
regarding the National Environmental Policy Act.
    11. The Bureau strongly encourages each applicant to conduct its 
own research prior to Auction 96 in order to determine the existence of 
pending administrative, rulemaking, or judicial proceedings that might 
affect its decisions regarding participation in the auction.
    12. The Bureau strongly encourages participants in Auction 96 to 
continue such research throughout the auction. The due diligence 
considerations mentioned in the Auction 96 Comment Public Notice do not 
constitute an exhaustive list of steps that should be undertaken prior 
to participating in this auction. As always, the burden is on the 
potential bidder to determine how much research to undertake, depending 
upon the specific facts and circumstances related to its interests.

IV. Bureau Seeks Comment on Auction Procedures

    13. 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 the conduct of 
Auction 96.

A. Auction Design

i. Simultaneous Multiple-Round Auction--With or Without Package Bidding
    14. The Bureau proposes to conduct Auction 96 using a simultaneous 
multiple-round (SMR) auction format. An SMR auction offers every 
license for bid at the same time and consists of successive bidding 
rounds in which eligible bidders may place bids. Typically, bidding 
remains open on all licenses until bidding stops on every license.
    15. The Bureau additionally proposes to incorporate provisions for 
a simple form of package bidding into the simultaneous multiple-round 
auction. In particular, the Bureau proposes to use a form of package 
bidding called hierarchical package bidding (HPB) in which, in addition 
to being able to bid on individual licenses, bidders would also be able 
to bid on certain tiered, non-overlapping packages of licenses. The 
Commission concluded in the H Block Report and Order that the H Block 
spectrum should be licensed on an EA basis. Consistent with that 
conclusion, the Bureau proposes that the basic bidding tier under HPB 
be individual EA licenses. The H Block Report and Order also noted that 
the decision to license at the EA level would facilitate aggregations 
at the larger Major Economic Area (MEA) and Regional Economic Area 
Grouping (REAG) levels. The Bureau therefore seeks comment on the use 
of predefined packages of EAs in MEAs and potentially larger packages 
such as REAGs, as well as a package

[[Page 45526]]

comprising all markets in the contiguous 48 states. The Bureau seeks 
more detailed comment on its proposals and on various alternatives.
    16. By permitting only non-overlapping packages at each tier (for 
example, a given EA could be included in only one MEA, which in turn 
could be included in only one REAG), HPB considerably simplifies bidder 
strategy and computational complexity compared to some other forms of 
package bidding. The pricing rules used with HPB are transparent and 
make it clear to bidders how package bids are evaluated relative to 
individual bids, hence making it easier than in more complex package 
bidding formats for bidders interested in individual licenses to 
compete with bidders interested in packages. As a result of these and 
other advantages, HPB and similar packaging formats have performed well 
in tests of overall auction efficiency. Auction 96 is the first H Block 
auction and a single complete set of nationwide EA licenses is 
available. Consequently, offering predefined packages might allow for 
significant economies of scale that may well correspond to a variety of 
business plans. Bidders that wish smaller or more tailored aggregations 
than the allowable predefined packages would be able to bid on 
individual EAs instead of or in addition to the predefined packages.
    17. The Bureau used a variant of HPB in Auction 73 under 
considerably different circumstances. Most notably, in Auction 73 the 
Bureau implemented SMR bidding across the five available blocks of 
licenses and determined that package bidding would be permitted in only 
one of the blocks. Further, if the aggregate reserve price that was 
applicable to the package bidding block in Auction 73 was not met, the 
performance and public interest requirements pertaining to the licenses 
in the block would change significantly. As a result, special 
procedures were needed to allow bidders to shift their bidding across 
the multiple available blocks, the rest of which were subject to a 
different bidding format. Those complicating factors--and their 
implications for bidder strategies--are not present in Auction 96, 
which includes only a single block of licenses. Hence, the bidding 
rules implementing HPB would be considerably simpler than those for 
Auction 73.
    18. Briefly, HPB as proposed for Auction 96 could be implemented as 
follows. The Bureau would determine the predefined packages according 
to a non-overlapping hierarchical structure, with an initial tier 
consisting of individual EA licenses. The Bureau could adopt a two-tier 
structure composed simply of the initial tier of EAs and MEA packages. 
Any subsequent tiers could consist of non-overlapping packages of the 
licenses in the initial tier and all subsidiary tiers. For example, if 
the Bureau were to adopt MEA, REAG, and nationwide packages, these 
packages would all nest accordingly (e.g., EAs nest to MEAs, MEAs nest 
to REAGs, and REAGs nest to the national package). The winning set of 
bids could consist of bids from various tiers, as long as each license 
is included in only one winning bid. That is, in the four-tier 
construct, the winning set could potentially include individual 
licenses in one part of the country, MEA packages in other areas, and 
potentially REAG packages as well, provided the value of all of these 
individual and package bids exceeds a bid on a nationwide package. A 
bidder may place bids on any combination of individual licenses or 
packages.
    19. After each round, the Commission would determine the 
combination of package and/or single license bids that yields the 
highest gross amount, and those bids would become provisionally 
winning. When determining provisionally winning bids, the FCC Auction 
System would consider each bidder's highest bid on each license or 
package placed up to that point in the auction, regardless of whether 
the bids were provisionally winning after the rounds in which they were 
placed. Considering these bids from previous rounds makes it possible 
for new bids on individual licenses to combine with other bids in order 
to compete with bids on packages. The provisionally winning bids would 
be determined by comparing aggregate gross bid amounts, at each tier, 
for various combinations of package and individual license bids.
    20. The Bureau seeks comment generally on its proposed simultaneous 
multiple-round auction format with hierarchical package bidding. Would 
HPB balance aggregation needs with tractability, transparency, and 
simplicity? The Bureau seeks comment also on what packages should be 
available for various tiers. Should the Bureau allow a simple structure 
of EAs and MEAs, or some other set of tiers of MEAs, REAGs, and/or a 
nationwide package? Alternatively, would the Bureau standard SMR 
auction format without package bidding sufficiently accommodate 
economies of scale or other complementarities? If the Bureau does not 
implement package bidding for Auction 96, it proposes to conduct the 
auction using standard SMR procedures.
    21. The Bureau proposes to conduct Auction 96 as a single round 
sealed bid auction. While not as common for spectrum auctions as the 
SMR format, the Bureau has previously used the single round sealed bid 
format. The Bureau proposes this alternative because Auction 96 offers 
licenses in only a single spectrum block and a single round auction may 
simplify the process for bidders and reduce the costs of auction 
participation. In a single round format the Bureau could also offer one 
or more tiers of non-overlapping packages for HPB. The Bureau seeks 
comment on any design features of the sealed bid format (e.g., first-
price or second-price). The Bureau seeks comment on this alternative 
proposal and on any other auction formats it should consider for 
Auction 96.
ii. Anonymous Bidding
    22. In several prior Commission auctions, the Bureau has adopted 
procedures to limit the disclosure of certain bidder-specific 
information until after the auction. Consistent with that practice, the 
Bureau proposes to adopt certain procedures for limited information 
disclosure or anonymous bidding for Auction 96. Specifically, the 
Bureau proposes to withhold, until after the close of bidding, public 
release of (1) bidders' license selections on their short-form 
applications (FCC Form 175), (2) the amounts of bidders' upfront 
payments and bidding eligibility, and (3) information that may reveal 
the identities of bidders placing bids and taking other bidding-related 
actions.
    23. 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 (if permitted) and the net bid amounts 
would not be disclosed until after the close of the auction.
    24. Bidders would have access to additional information about their 
own bids. For example, bidders would be able to view their own level of 
eligibility, before and during the auction, through the FCC Auction 
System.
    25. Moreover, for the purpose of complying with 47 CFR 1.2105(c), 
which prohibits certain communications between applicants (formerly 
referred to as the anti-collusion rule), applicants would be made aware 
of other applicants with which they will not be permitted to cooperate, 
collaborate, or communicate--including discussing bids, bidding 
strategies, or post-auction market structure. Specifically, the Bureau 
would notify separately each applicant with a short-form application

[[Page 45527]]

on file for participation in Auction 96 whether applicants with short-
form applications to participate in a pending auction, including but 
not limited to Auction 96, have applied for licenses in any of the same 
or overlapping geographic areas as that applicant.
    26. After the close of bidding, bidders' license selections, 
upfront payment amounts, bidding eligibility, bids, and other bidding-
related actions would be made publicly available.
    27. The Bureau seeks comment on the details of its proposal for 
implementing anonymous bidding in Auction 96. The Bureau also seeks 
comment on alternatives to the use of anonymous bidding procedures for 
Auction 96. When the Commission originally proposed limited information 
disclosure procedures, it did so in response to analysis suggesting 
that under certain circumstances the competitiveness and economic 
efficiency of a simultaneous multiple-round auction may be enhanced if 
such information is withheld until after the close of the auction. The 
Bureau encourages parties to provide information about the benefits and 
costs of complying with limited information procedures as compared with 
the benefits and costs of alternative procedures that would provide for 
the disclosure of more information on bidder identities and interests 
in the auction. If commenters believe that the Bureau should not adopt 
procedures to limit the disclosure of certain bidder-specific 
information until after the auction, they should explain their 
reasoning.

B. Auction Structure

i. Bidding Rounds
    28. Under the Bureau's proposal to use an SMR format, Auction 96 
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.
    29. The Commission will conduct Auction 96 over the Internet using 
the FCC Auction System. Bidders will also have the option of placing 
bids by telephone through a dedicated, toll-free Auction Bidder Line. 
The toll-free telephone number for the Auction Bidder Line will be 
provided to qualified bidders prior to the start of the auction.
    30. 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 on this issue should address the role of the bidding 
schedule in managing the pace of the auction, specifically discussing 
the tradeoffs in managing auction pace by bidding schedule changes, by 
changing the activity requirements or bid amount parameters, or by 
using other means.
ii. Stopping Rule
    31. The Bureau has discretion to establish stopping rules before or 
during multiple round auctions in order to complete the auction within 
a reasonable time. For Auction 96, under its SMR proposal, the Bureau 
proposes to employ a simultaneous stopping rule approach. Using a 
simultaneous stopping rule means all licenses remain available for 
bidding until bidding stops on every license. More specifically, 
bidding will close on all licenses and packages after the first round 
in which no bidder submits any new bids, applies a proactive waiver, or 
withdraws any provisionally winning bids (if withdrawals are 
permitted). Thus, under the Bureau's SMR proposal, unless the Bureau 
announces alternative stopping procedures, the simultaneous stopping 
rule will be used in this auction, and bidding will remain open on all 
licenses until bidding stops on every license, regardless of whether 
bids are placed on individual licenses or packages of licenses. 
Consequently, it is not possible to determine in advance how long 
Auction 96 will last.
    32. Further, the Bureau proposes to retain the discretion to 
exercise any of the following options during Auction 96: (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, withdraws a provisionally 
winning bid, or places any new bids on a license or package for which 
it is not the provisionally winning bidder. Thus, absent any other 
bidding activity, a bidder placing a new bid on a license or package 
for which it is the provisionally winning bidder would not keep the 
auction open under this modified stopping rule; (b) Use a modified 
version of the simultaneous stopping rule that would close the auction 
for all licenses after the first round in which no bidder applies a 
waiver, withdraws a provisionally winning bid, or places any new bids 
on a license or package that is not FCC held. Thus, absent any other 
bidding activity, a bidder placing a new bid on a license that does not 
already have a provisionally winning bid (an FCC-held license) would 
not keep the auction open under this modified stopping rule; (c) Use a 
modified version of the simultaneous stopping rule that combines (a) 
and (b); (d) Declare that the auction will end after a specified number 
of additional rounds (special stopping rule). If the Bureau invokes 
this special stopping rule, it will accept bids in the specified final 
round(s), after which the auction will close; or (e) Keep the auction 
open even if no bidder places any new bids, applies a waiver, or 
withdraws (if withdrawals are permitted) any provisionally winning 
bids. In this event, the effect will be the same as if a bidder had 
applied a waiver. The activity rule will apply as usual, and a bidder 
with insufficient activity will either lose bidding eligibility or use 
a waiver.
    33. The Bureau proposes to exercise these options only in certain 
circumstances, for example, where the auction is proceeding unusually 
slowly or quickly, there is minimal overall bidding activity, or it 
appears likely that the auction will not close within a reasonable 
period of time or will close prematurely. Before exercising these 
options, the Bureau is likely to attempt to change the pace of the 
auction by, for example, changing the number of bidding rounds per day 
and/or the minimum acceptable bids. The Bureau proposes to retain the 
discretion to exercise any of these options with or without prior 
announcement during the auction. The Bureau seeks comment on these 
proposals.
iii. Information Relating to Auction Delay, Suspension, or Cancellation
    34. For Auction 96, the Bureau proposes that it may delay, suspend, 
or cancel the auction in the event of a natural disaster, technical 
obstacle, administrative or weather necessity, evidence of an auction 
security breach or unlawful bidding activity, or for any other reason 
that affects the fair and efficient conduct of competitive bidding. The 
Bureau will notify participants of any such delay, suspension or 
cancellation by public notice and/or through the FCC Auction System's 
announcement function. If the auction is delayed or suspended, the 
Bureau may, in its sole discretion, elect to resume the auction 
starting from the beginning of the current round or from some previous 
round, or cancel the auction in its entirety. Network interruption may 
cause the Bureau to delay or suspend the auction. The

[[Page 45528]]

Bureau emphasize that it will exercise this authority solely at its 
discretion, and note that the exercise of the Bureau's authority in 
this regard is not intended to be a substitute for situations in which 
bidders may wish to apply their activity rule waivers. The Bureau seeks 
comment on this proposal.

C. Auction Procedures

i. Upfront Payments and Bidding Eligibility
    35. The Bureau has delegated authority and discretion to determine 
an appropriate upfront payment for each license being auctioned, taking 
into account such factors as the efficiency of the auction process and 
the potential value of similar licenses. An upfront payment is a 
refundable deposit made by each bidder to establish its eligibility to 
bid on licenses. Upfront payments that are related to the specific 
licenses being auctioned protect against frivolous or insincere bidding 
and provide the Commission with a source of funds from which to collect 
payments owed at the close of the auction. For Auction 96, the Bureau 
proposes to make the upfront payments equal to the proposed minimum 
opening bids. The upfront payments for each license are set forth in 
Attachment A to the Auction 96 Comment Public Notice. The Bureau seeks 
comment on this proposal.
    36. The Bureau further proposes that the amount of the upfront 
payment submitted by a bidder will determine its initial bidding 
eligibility in bidding units. The Bureau proposes to assign each 
license a specific number of bidding units, equal to one bidding unit 
per dollar of the upfront payment proposed for the license. The 
specific bidding units for each license are set forth in Attachment A 
to the Auction 96 Comment Public Notice. The number of bidding units 
for a given license is fixed and does not change during the auction as 
prices change. A bidder's upfront payment is not attributed to specific 
licenses or packages of licenses. Rather, a bidder may place bids on 
any combination of the licenses it selected on its short-form 
application (FCC Form 175), provided that the total number of bidding 
units associated with those licenses does not exceed its current 
eligibility. A bidder cannot increase its eligibility during the 
auction; it can only maintain its eligibility or decrease its 
eligibility. Thus, in calculating its upfront payment amount and hence 
its initial bidding eligibility, an applicant must determine the 
maximum number of bidding units on which it may wish to bid (or hold 
provisionally winning bids) in any single round and submit an upfront 
payment amount covering that total number of bidding units. The Bureau 
requests comment on these proposals.
    37. Under HPB procedures, the number of bidding units for a package 
equals the sum of the bidding units for the licenses in that package. 
The bidding units for a license and a package including that license 
will be counted only once in determining bidding eligibility. Thus, 
when an applicant calculates its upfront payment amount by determining 
the maximum number of bidding units on which it may wish to bid in any 
single round (in addition to its current provisionally winning bids), 
it should count the bidding units associated with each license only 
once even if it may wish to bid on an individual license and a package 
containing that license. The Bureau seeks comment on these proposals.
ii. Activity Rule
    38. In order to ensure that an SMR 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 placed 
in previous rounds. The bidding units associated with a given license 
will be counted only once in a bidder's activity calculation for the 
round, even if the bidder places multiple bids including the license--
for example, places a bid on a license and a bid on a package including 
that license. 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.
    39. The Bureau proposes to divide the auction into at least two 
stages, each characterized by a different activity requirement. The 
auction will start in Stage One. The Bureau proposes to advance the 
auction to the next stage by announcement during the auction. In 
exercising this discretion, the Bureau will consider a variety of 
measures of auction activity, including but not limited to the 
percentage of bidding units associated with licenses on which there are 
new bids, the number of new bids, and the increase in revenue. The 
Bureau seeks comment on these proposals.
    40. The Bureau proposes the following activity requirements, while 
noting again that the Bureau retains the discretion to change stages 
unilaterally by announcement during the auction. Stage One: In each 
round of the first stage of the auction, a bidder desiring to maintain 
its current bidding eligibility is required to be active on bidding 
units associated with licenses representing at least 80 percent of its 
current bidding eligibility, counting the bidding units associated with 
a bid on an individual license and a package including that license 
only once. Failure to maintain the required activity level will result 
in the use of an activity rule waiver or a reduction in the bidder's 
bidding eligibility for the next round of bidding. During Stage One, a 
bidder's reduced eligibility for the next round will be calculated by 
multiplying the bidder's current round activity by five-fourths (\5/
4\). Stage Two: In each round of the second stage, a bidder desiring to 
maintain its current bidding eligibility is required to be active on 95 
percent of its current bidding eligibility. Failure to maintain the 
required activity level will result in the use of an activity rule 
waiver or a reduction in the bidder's bidding eligibility for the next 
round of bidding. During Stage Two, a bidder's reduced eligibility for 
the next round will be calculated by multiplying the bidder's current 
round activity by twenty-nineteenths (20/19).
    41. The Bureau requests comment on these activity requirements. 
Under this proposal, the Bureau will retain the discretion to change 
the activity requirements during the auction. For example, the Bureau 
could decide to add an additional stage with a higher activity 
requirement, not to transition to Stage Two if it believes the auction 
is progressing satisfactorily under the Stage One activity requirement, 
or to transition to Stage Two with an activity requirement that is 
higher or lower than the 95 percent proposed herein. If the Bureau 
exercises this discretion, it will alert bidders by announcement in the 
FCC Auction System.
iii. Activity Rule Waivers and Reducing Eligibility
    42. When a bidder's eligibility in the current round is below the 
required minimum level, it may preserve its current level of 
eligibility through an activity rule waiver. An activity rule waiver 
applies to an entire round of bidding, not to a particular bid. 
Activity rule waivers, which can be either proactive or automatic, are 
principally a

[[Page 45529]]

mechanism for a bidder to avoid the loss of bidding eligibility in the 
event that exigent circumstances prevent it from bidding in a 
particular round.
    43. The FCC Auction System assumes that a bidder that does not meet 
the activity requirement would prefer to use an activity rule waiver 
(if available) rather than lose bidding eligibility. Therefore, the 
system will automatically apply a waiver at the end of any bidding 
round in which a bidder's activity level is below the minimum required 
unless (1) the bidder has no activity rule waivers remaining, or (2) 
the bidder overrides the automatic application of a waiver by reducing 
eligibility, thereby meeting the activity requirement. If a bidder has 
no waivers remaining and does not satisfy the required activity level, 
the bidder's current eligibility will be permanently reduced, possibly 
curtailing or eliminating the ability to place additional bids in the 
auction.
    44. A bidder with insufficient activity may wish to reduce its 
bidding eligibility rather than use an activity rule waiver. If so, the 
bidder must affirmatively override the automatic waiver mechanism 
during the bidding round by using the reduce eligibility function in 
the FCC Auction System. In this case, the bidder's eligibility is 
permanently reduced to bring it into compliance with the activity rule. 
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.
    45. 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 it from placing any bids in that round. Applying a 
waiver is irreversible; once a proactive waiver is submitted, it cannot 
be unsubmitted, even if the round has not yet closed.
    46. Consistent with recent Commission auctions, the Bureau proposes 
that each bidder in Auction 96 be provided with a total of three 
activity rule waivers that may be used at the bidder's discretion 
during the course of the auction. The Bureau seeks comment on this 
proposal.
iv. Reserve Price and Minimum Opening Bids
    47. 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.
    48. Normally, a reserve price is an absolute minimum price below 
which an item or items will not be sold in a given auction. If a 
reserve price is utilized, the specific amount of the reserve price may 
be disclosed or undisclosed. A minimum opening bid, on the other hand, 
is the minimum bid price set at the beginning of the auction below 
which no bids are accepted. It is generally used to accelerate the 
competitive bidding process. It is possible for the minimum opening bid 
and the reserve price to be the same amount.
    49. Among other factors the Bureau must consider in deciding 
whether to employ either or both of these mechanisms is the amount of 
spectrum being auctioned, levels of incumbency, the availability of 
technology to provide service, the size of the geographic service 
areas, the extent of interference with other spectrum bands, and any 
other relevant factors that could have an impact on the spectrum being 
auctioned.
a. Reserve Price
    50. The Commission is statutorily obliged to consider and balance a 
variety of public interests and objectives when establishing service 
rules and licensing procedures with respect to the public spectrum 
resource. These objectives include promoting recovery for the public a 
portion of the value of that resource. With respect to the H Block 
licenses being offered in Auction 96, the Spectrum Act specifically 
directs that proceeds from an auction of H Block spectrum be deposited 
into the Public Safety Trust Fund and be used for, among other things, 
funding (or reimbursement to the U.S. Treasury for the funding) of the 
nationwide, interoperable public safety broadband network by the First 
Responder Network Authority. In view of the various public interest 
objectives it must consider, the Bureau proposes to establish a reserve 
price for the H Block licenses offered in Auction 96. The Bureau 
further proposes to utilize an aggregate reserve price based on the 
aggregate of the gross bids for the H Block licenses, rather than 
license-by-license reserve prices. The Bureau seeks comment on these 
proposals.
    51. The Bureaus seeks comment on the implementation of a reserve 
price. What factors should the Bureau consider in determining the 
amount of the reserve? Should the Bureau disclose the amount of the 
reserve price publicly prior to the auction, or should the reserve 
price amount remain undisclosed? The Bureau also seeks comment on how 
to evaluate unsold licenses in determining whether an aggregate reserve 
price has been met. The Bureau encourages commenters to address any 
additional specific issues related to the use of reserve prices. The 
Bureau asks that commenters describe in detail the specific factors 
that lead them to their conclusions.
b. Minimum Opening Bids
    52. The Bureau proposes to establish minimum opening bid amounts 
for Auction 96. 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.
    53. For Auction 96 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, similar to the Bureau's approach 
in many previous spectrum auctions. The Bureau proposes to use a 
calculation based on $0.07 per megahertz of bandwidth per population 
(per MHz-pop). Additionally, the Bureau proposes to incorporate pricing 
information from previous auctions to tailor the results of its 
calculation to the relative prices for each EA. For this the Bureau 
proposes to create an index of the relative price of each EA using the 
winning bid amounts for the EA licenses of paired spectrum from 
Auctions 66 and 73. This modification to the use of $0.07 per MHz-pop 
results in amounts ranging from less than $0.01 per MHz-pop to $0.16 
per MHz-pop. The Bureau further proposes a minimum of $1,000 per 
license. For the license covering the Gulf of Mexico, the Bureau 
proposes to set the minimum opening bid at $20,000. The minimum opening 
bid amount for a package will equal the sum of the minimum opening bid 
amounts for all of the licenses in that package.
    54. The proposed minimum opening bid amount for each H Block 
license available in Auction 96, calculated pursuant to these 
procedures, is set forth in Attachment A of the Auction 96 Comment 
Public Notice. For packages, the Bureau proposes that the minimum 
opening bid amount of a package will equal the sum of the minimum 
opening

[[Page 45530]]

bid amounts for all of the licenses in that package.
    55. The Bureau seeks comment on all of these proposals concerning 
minimum opening bids. If commenters believe that these minimum opening 
bid amounts will result in unsold licenses, or are not reasonable 
amounts, they should explain why this is so and comment on the 
desirability of an alternative approach. If a commenter requests a 
lower minimum opening bid amount for a specific license, it should 
justify the requested change in detail. If commenters disagree with the 
Bureau's proposed use of $0.07 per MHz-pop, its approach to tailoring 
minimum opening bid amounts to account for relative prices among the 
EAs in past auctions, or its selection of which past results to 
consider, the Bureau asks commenters to support their claims with 
valuation analyses and suggested minimum opening bid amount levels or 
formulas.
    56. In establishing minimum opening bid amounts, the Bureau 
particularly seeks comment on factors that could reasonably have an 
impact on valuation of the licenses being auctioned, including the 
amount of spectrum being auctioned, levels of incumbency, the 
availability of technology to provide service, the size of the service 
areas, the size of the geographic service areas, issues of interference 
with other spectrum bands and any other relevant factors. The Bureau 
also seeks comment on whether the public interest would be served by 
having no minimum opening bid amount.
    57. Commenters may also wish to address the general role of minimum 
opening bids in managing the pace of the auction. For example, 
commenters could compare using minimum opening bids--e.g., by setting 
higher minimum opening bids to reduce the number of rounds it takes 
licenses to reach their final prices--to other means of controlling 
auction pace, such as changes to bidding schedules or activity 
requirements.
v. Bid Amounts
    58. The Bureau proposes that, in each round, an eligible bidder 
will be able to place a bid on a given license or package 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 
and package. The Bureau proposes to calculate bid amounts in the 
following manner.
a. Minimum Acceptable Bids
    59. 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 itself or on a package that 
includes the license. The minimum acceptable bid amount for a package 
will be the sum of the minimum acceptable bid amounts for the licenses 
in the package. The Bureau proposes to calculate minimum acceptable 
bids based on current price estimates and an activity-based formula.
    60. After there is a provisionally winning bid covering a license, 
the FCC Auction System will determine a current price estimate (CPE) 
for each license in each round as a basis for calculating minimum 
acceptable bids. The CPE is the provisionally winning bid for the 
license, or--if the provisionally winning bid covering the license is a 
package bid--a proxy for an individual license bid calculated as a 
share of the provisionally winning package bid. Attachment B to the 
Auction 96 Comment Public Notice describes in more detail the proposed 
mechanism for determining CPEs in an HPB auction format.
    61. Once CPEs are calculated, minimum acceptable bids are then 
determined for each license as the amount of the CPE plus a percentage 
of the CPE. The percentage is calculated using an activity-based 
formula. In general, the percentage will be higher when many bidders 
are bidding on a license, or on a package containing a license, than 
when few bidders are bidding on a license.
    62. The percentage of the CPE used to establish the minimum 
acceptable bid amount is calculated based on an activity index at the 
end of each round. The activity index is a weighted average of (a) the 
number of distinct bidders placing a bid on the license, including 
package bids, in that round, and (b) the activity index from the prior 
round. Specifically, the activity index is equal to a weighting factor 
times the number of bidders placing a bid covering the license in the 
most recent bidding round plus one minus the weighting factor times the 
activity index from the prior round. The additional percentage is 
determined as one plus the activity index times a minimum percentage 
amount, with the result not to exceed a given maximum. The additional 
percentage is then multiplied by the CPE amount to obtain the minimum 
acceptable bid for the next round. The Bureau proposes initially to set 
the weighting factor at 0.5, the minimum percentage at 0.1 (10%), and 
the maximum percentage at 0.25 (25%). Hence, at these initial settings, 
the minimum acceptable bid for a license will be between ten percent 
and twenty-five percent higher than the CPE, depending upon the bidding 
activity covering the license. Equations and examples are shown in 
Attachment C of the Auction 96 Comment Public Notice. The Bureau seeks 
comment on whether to use this activity-based formula or a different 
approach. For example, should the Bureau use a fixed percentage above 
the CPE?
b. Additional Bid Amounts
    63. The Bureau proposes to calculate any additional bid amounts 
using the minimum acceptable bid amount and a bid increment 
percentage--more specifically, by multiplying the minimum acceptable 
bid by one plus successively higher multiples of the bid increment 
percentage. If, for example, the bid increment percentage is 5 percent, 
the calculation of the first additional acceptable bid amount is 
(minimum acceptable bid amount) * (1 + 0.05), rounded, or (minimum 
acceptable bid amount) * 1.05, rounded; the second additional 
acceptable bid amount equals the minimum acceptable bid amount times 
one plus two times the bid increment percentage, rounded, or (minimum 
acceptable bid amount) * 1.10, rounded; etc. The Bureau will round the 
results using the Commission's standard rounding procedures for 
auctions. The Bureau proposes initially to set the bid increment 
percentage at 5 percent.
    64. For Auction 96 the Bureau proposes to begin the auction with 
three acceptable bid amounts per license (the minimum acceptable bid 
amount and two additional bid amounts) and one acceptable bid amount 
per package (the minimum acceptable bid amount and no additional bid 
amounts). More acceptable bidding amounts are proposed for licenses 
than for packages to help ensure that bids on individual licenses or on 
smaller packages can compete with bids on larger packages, even when 
there may not be active competition on all the separate components of 
the large package.
c. Bid Amount Changes
    65. The Bureau retains the discretion to change the minimum 
acceptable bid amounts, the additional bid amounts, the number of 
acceptable bid amounts, and the parameters of the formulas used to 
calculate minimum acceptable bid amounts and additional bid amounts if 
the Bureau determines that circumstances so dictate. Further, the 
Bureau retains the discretion to do so on a license-by-license and 
package-by-package basis. The Bureau also retains the discretion to 
limit (a) the amount by

[[Page 45531]]

which a minimum acceptable bid for a license may increase compared with 
the corresponding CPE, and (b) the amount by which an additional bid 
amount may increase compared with the immediately preceding acceptable 
bid amount. For example, the Bureau could set a $10 million limit on 
increases in minimum acceptable bid amounts over CPEs. Thus, if the 
activity-based formula calculates a minimum acceptable bid amount that 
is $20 million higher than the CPE on a license, the minimum acceptable 
bid amount would instead be capped at $10 million above the CPE. The 
Bureau seeks comment on the circumstances under which it should employ 
such a limit, factors it should consider when determining the dollar 
amount of the limit, and the tradeoffs in setting such a limit or 
changing other parameters--such as changing the minimum acceptable bid 
percentage, the bid increment percentage, or the number of acceptable 
bid amounts. If the Bureau exercises this discretion, it will alert 
bidders by announcement in the FCC Auction System.
    66. The Bureau seeks comment on its proposals. If commenters 
disagree with the Bureau's proposed acceptable bid amounts, 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 
both licenses and packages. Commenters may wish to address the role of 
the minimum acceptable bids and the number of acceptable bid amounts in 
managing the pace of the auction and the tradeoffs in managing auction 
pace by changing the bidding schedule, activity requirements, or bid 
amounts, or by using other means.
vi. Provisionally Winning Bids
    67. Provisionally winning bids are bids that would become final 
winning bids if the auction were to close in that given round. At the 
end of a bidding round, the FCC Auction System determines which 
combination of individual and package bids together yields the highest 
aggregate gross bid amount, taking into consideration each bidder's 
highest bid on each license or package submitted up to that point in 
the auction. These bids become the provisionally winning bids for the 
round.
    68. If identical high bid amounts are submitted on a license or 
package in any given round (i.e., tied bids), the FCC Auction System 
will use a random number generator to select a single provisionally 
winning bid from among the tied bids. (The Auction System assigns a 
random number to each bid when the bid is entered. The tied bid with 
the highest random number wins the tiebreaker.) The remaining bidders, 
as well as the provisionally winning bidder, can submit higher bids in 
subsequent rounds. However, if the auction were to end with no other 
bids being placed, the winning bidder would be the one that placed the 
provisionally winning bid.
    69. The set of provisionally winning bids is determined after every 
round in which new bids are submitted. The provisionally winning bids 
at the end of the auction become winning bids provided that any 
applicable reserve prices have been met. The Bureau reminds bidders 
that provisionally winning bids count toward activity for purposes of 
the activity rule.
vii. Bid Removal
    70. For Auction 96, the Bureau proposes the following bid removal 
procedures. Before the close of a bidding round, a bidder has the 
option of removing any bid placed in that round. By removing a selected 
bid in the FCC Auction System, a bidder may effectively undo any bid 
placed within that round. Once a round closes, a bidder may no longer 
remove a bid. The Bureau seeks comment on this bid removal proposal.
viii. Bid Withdrawal
    71. Under the Bureau's proposal to use SMR with HPB procedures, the 
Bureau proposes not to permit any bids, provisionally winning or 
otherwise, to be dropped or withdrawn from consideration in Auction 96. 
The benefits that bidders may realize from withdrawing bids in a 
typical SMR auction are minimized under the proposed package bidding 
format. In addition, in an SMR auction with package bidding there are 
significant risks associated with bid withdrawals that are not present 
in an SMR auction without package bidding. As the Commission has 
previously explained, under its typical SMR auction format without 
package bidding, 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.
    72. Under the HPB auction format that the Bureau proposes for 
Auction 96, the potential benefits of withdrawn or dropped bids in 
facilitating aggregations are far lower than they would be in a typical 
SMR auction. While the predetermined packages may not coincide with the 
all or nothing aggregation needs of all bidders, the hierarchical 
packages should significantly reduce the overall risk that bidders will 
win only some of the licenses in a desired set. Therefore, to the 
extent that package bids allow bidders to avoid such risk, withdrawals 
are less useful to bidders. Further, because the licenses available in 
Auction 96 consist of a single frequency block, bidders will not need 
to use withdrawals to pursue backup strategies in other blocks, as they 
sometimes have in other Commission spectrum auctions conducted with SMR 
procedures. At the same time, in an auction with package bidding, 
dropping bids from consideration can have negative effects that would 
not arise in a typical SMR auction. Withdrawals by one bidder on 
licenses subject to package bidding can be more disruptive to the 
bidding strategies of others than withdrawals on licenses not subject 
to package bidding. In a non-package bidding auction, whether a bid on 
a license becomes provisionally winning depends only upon the bids 
submitted for that license. In contrast, whether a bid becomes 
provisionally winning on a license subject to package bidding depends 
upon the bids submitted for that license, the bids submitted for the 
packages containing that license, and the bids submitted for other 
licenses in those packages. Consequently, a withdrawn bid on a license 
subject to package bidding has the potential to alter the composition 
of the provisionally winning set of bids, and may adversely affect 
other bidders. Moreover, because bidders interested in single licenses 
or smaller packages need their bids to combine with the bids by other 
bidders in order to be competitive with bids on larger packages, having 
even non-provisionally winning bids withdrawn from consideration can 
adversely affect their ability to compete. In addition, because CPEs 
for a license depend in part on package bids including the license, the 
process for determining current price estimates is more stable--and 
less subject to undesirable manipulation--if bids cannot be withdrawn 
from consideration. Hence, because of the potential under the proposed 
package bidding auction format for withdrawn bids, provisionally 
winning or not, to affect auction dynamics and the bidding strategies 
of other bidders, the Bureau

[[Page 45532]]

proposes not to allow any bids to be withdrawn after the round in which 
they were placed has closed.
    73. The Bureau seeks comment on this proposal not to allow bids to 
be withdrawn or removed from consideration under its proposed HPB 
auction procedures. If bidders disagree with this proposal, the Bureau 
asks them to support their arguments by taking into account the 
structure of the H Block inventory, the impact on auction dynamics and 
the pricing mechanism, and the effects on the bidding strategies of 
other bidders. In the event the Bureau does not utilize HPB procedures 
with an SMR format, should it allow bid withdrawals? In the past, when 
the Bureau has allowed bid withdrawals in SMR auctions, it typically 
limited withdrawn bids to a maximum of three rounds, and sometimes set 
a lower limit on the number of withdrawal rounds. What would be the 
appropriate number of rounds in Auction 96 if the Bureau permits bid 
withdrawals?

D. Post-Auction Payments

i. Apportioning Package Bids
    74. In package bidding, when a bidder places an all-or-nothing bid 
on a package of licenses, there will be no identifiable bid amounts on 
the individual licenses that compose the package. However, the 
Commission's competitive bidding rules and procedures assume that the 
amount of each bid on an individual license always is known. For 
example, rules for calculating the amount of small business, new 
entrant, or tribal land bidding credits presume that the winning bid on 
the license is known. Similarly, in determining the amount of a default 
or withdrawal payment, which involves a comparison between the 
withdrawing or defaulting bidder's bid and a subsequent bid, the rules 
assume that there are bid amounts for individual licenses. Accordingly, 
the Commission adopted a rule providing that, in advance of each 
auction with package bidding, the Commission shall establish a 
methodology for determining how to estimate the price or bid on an 
individual license included in a package of licenses.
    75. The Bureau proposes that under its HPB procedures, it will use 
final CPEs as an estimate of the price or bid on an individual license 
for the purpose of later apportioning package bids. Therefore, when 
regulatory calculations require individual license bid amounts, the 
Bureau will divide the package bid amount among the licenses composing 
the package in proportion to the final round CPEs for the licenses. The 
Bureau seeks comment on this proposal.
ii. Interim Withdrawal Payment Percentage
    76. The Bureau seeks comment related to its proposal to use HPB 
procedures on not permitting any bids, provisionally winning or 
otherwise, to be withdrawn or dropped from consideration in Auction 96. 
Under the Bureau's proposal, it would have no need to determine an 
appropriate interim withdrawal payment percentage.
    77. The Bureau seeks comment, however, on the appropriate interim 
withdrawal payment percentage to apply if it allows withdrawals under 
procedures for an SMR auction without package bidding for Auction 96. 
Specifically, the Bureau seeks comment on the percentage of a withdrawn 
bid that should be assessed as an interim withdrawal payment in the 
event that a final withdrawal payment cannot be determined at the close 
of the auction. In general, the Commission's rules provide that a 
bidder that withdraws a bid during an auction is subject to a 
withdrawal payment equal to the difference between the amount of the 
withdrawn bid and the amount of the winning bid in the same or 
subsequent auction(s). If a bid is withdrawn and no subsequent higher 
bid is placed and/or the license is not won in the same auction, the 
final withdrawal payment cannot be calculated until after the close of 
a subsequent auction in which a higher bid for the license (or the 
equivalent to the license) is placed or the license is won. When that 
final payment cannot yet be calculated, the bidder responsible for the 
withdrawn bid is assessed an interim bid withdrawal payment, which will 
be applied toward any final bid withdrawal payment that is ultimately 
assessed. 47 CFR 1.2104(g)(1) requires that the percentage of the 
withdrawn bid to be assessed as an interim bid withdrawal payment be 
between three percent and twenty percent and that it be set in advance 
of the auction.
    78. 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. However, 
as the Bureau has discussed in connection with its proposal to use 
package bidding for Auction 96, there may be significant benefits for 
some bidders from aggregating EA licenses. Hence, if the Bureau does 
not use package bidding, withdrawals may be useful to protect bidders 
against incomplete aggregations in Auction 96. Balancing the potential 
need for bidders to use withdrawals to avoid winning incomplete 
combinations of licenses with the Bureau's interest in deterring 
undesirable strategic use of withdrawals, the Bureau proposes a 
percentage below the maximum twenty percent permitted under the current 
rules but above the three percent previously provided by the 
Commission's rules. Specifically, the Bureau proposes to establish an 
interim bid withdrawal payment of fifteen percent of the withdrawn bid 
for this auction. The Bureau seeks comment on this proposal.
iii. Additional Default Payment Percentage
    79. Any winning bidder that defaults or is disqualified after the 
close of an auction (i.e., fails to remit the required down payment 
within the prescribed period of time, fails to submit a timely long-
form application, fails to make full and timely final payment, or is 
otherwise disqualified) is liable for a default payment under 47 CFR 
1.2104(g)(2). This payment consists of a deficiency payment, equal to 
the difference between the amount of the Auction 96 bidder's winning 
bid and the amount of the winning bid the next time a license covering 
the same spectrum is won in an auction, plus an additional payment 
equal to a percentage of the defaulter's bid or of the subsequent 
winning bid, whichever is less.
    80. The percentage of the bid that a defaulting bidder must pay in 
addition to the deficiency will depend on the auction format ultimately 
chosen for a particular auction. In auctions with package bidding, as 
the Bureau propose to use in Auction 96, the additional payment is set, 
pursuant to 47 CFR 1.2104(g)(2)(ii), at twenty-five percent of the 
applicable bid. This higher level reflects the fact that a defaulted 
winning bid in an auction with package bidding may affect multiple 
licenses and perhaps all of the other licenses being offered.
    81. In non-package auctions, the amount can range from three 
percent up to a maximum of twenty percent, established in advance of 
the auction

[[Page 45533]]

and based on the nature of the service and the inventory of the 
licenses being offered, and so, the Bureau seeks comment on an 
appropriate additional default payment percentage in the event it does 
not conduct Auction 96 with package bidding procedures. Defaults weaken 
the integrity of the auction process and may impede the deployment of 
service to the public, and an additional default payment of up to 
twenty percent will be more effective in deterring defaults than the 
three percent used in some earlier auctions. At the same time, the 
Bureau does not believe the detrimental effects of any defaults in 
Auction 96 are likely to be unusually great. Balancing these 
considerations, the Bureau proposes to establish an additional default 
payment for Auction 96 of fifteen percent of the applicable bid. The 
Bureau seeks comment on this proposal.

V. Ex Parte Rules

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

Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. 2013-18184 Filed 7-26-13; 8:45 am]
BILLING CODE 6712-01-P